SkyWater Technology Reports Fourth Quarter and Full Fiscal Year 2023 Results

__________________

(1)

ATS development revenue represents GAAP revenue primarily derived from process development services, tool installation and qualification services, facility and tool access, and security services.

(2)

Tool revenue and cost of tool revenue primarily represent GAAP amounts that arise from the purchase of equipment for our customers. This equipment is used to complete ATS customer programs.

Non-GAAP Financial Measures

We provide supplemental, non-GAAP financial information that our management regularly evaluates to provide additional insight to investors as supplemental information to our results reported using U.S. generally accepted accounting principles (GAAP). We provide non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss to shareholders, and non-GAAP net loss to shareholders per share. Our management uses these non-GAAP financial measures to make informed operating decisions, complete strategic planning, prepare annual budgets, and evaluate Company and management performance. We believe these non-GAAP financial measures are useful performance measures to our investors because they provide a baseline for analyzing trends in our business and exclude certain items that may not be indicative of our core operating results. The non-GAAP financial measures disclosed in this earnings press release should not be viewed as an alternative to, or more meaningful than, the reported results prepared in accordance with GAAP. In addition, because these non-GAAP financial measures are not determined in accordance with GAAP, other companies, including our peers, may calculate their non-GAAP financial measures differently than we do. As a result, the non-GAAP financial measures presented in this earnings press release may not be directly comparable to similarly titled measures presented by other companies.

We also provide adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA margin as supplemental non-GAAP measures. We define adjusted EBITDA as net (loss) income before net interest expense, income tax (benefit) expense, depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including net income attributable to noncontrolling interests, business transformation costs, CHIPS Act specialist fees, management transition expense, SkyWater Florida start-up costs, and restructuring costs. Our management uses adjusted EBITDA and adjusted EBITDA margin to make informed operating decisions, complete strategic planning, prepare annual budgets, and evaluate Company and management performance. We believe adjusted EBITDA is a useful performance measure to our investors because it allows for an effective evaluation of our operating performance when compared to other companies, including our peers, without regard to financing methods or capital structures. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because the amounts of these items can vary substantially within our industry depending on the accounting methods and policies used, book values of assets, capital structures, and the methods by which assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net (loss) income determined in accordance with GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost bases of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP financial measures should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.

We continuously evaluate the non-GAAP financial measures we use, the manner in which non-GAAP financial measures are calculated, and the adjustments we make to GAAP results to derive our non-GAAP financial measures. In the third quarter of 2023, we made the following changes to our non-GAAP financial measures and revised prior period non-GAAP financial measures to conform the calculation of non-GAAP financial measures across all periods and provide comparability:

  • Tool sales have historically been infrequent and viewed by management as secondary to ATS development programs. Accordingly, prior to the third quarter of 2023, we excluded the margin on tool sales when calculating non-GAAP gross profit, non-GAAP gross margin, non-GAAP earnings to shareholders and non-GAAP earnings to shareholders per basic share. Recently, our ATS customers have increasingly contracted with us to purchase tools on their behalf and we expect this trend to continue going forward. Accordingly, we no longer believe tool sales are infrequent and therefore do not exclude the impact of tool revenue and tool cost of revenue in the calculation of our non-GAAP financial measures.
  • Since the second quarter of 2023, we have incurred expenses related to long-term transformation activities focused on improvement in automation and operational efficiency. Prior to the fourth quarter of 2023, these expenses consisted of project-based consulting fees; however, in the fourth quarter of 2023, the write-off of abandoned software assets associated with our business transformation activities is also included. Similarly, we have also incurred project-based specialist fees associated with our CHIPS Act application. Neither of these types of fees are required to run our business and, therefore, are incremental to our ongoing operations and are not a normal operating expense. Beginning in the third quarter of 2023, we began excluding these fees in the calculation of non-GAAP earnings, non-GAAP earnings to shareholders per share, and adjusted EBITDA.

The following tables present a reconciliation of the most directly comparable financial measures, calculated and presented in accordance with GAAP, to our non-GAAP financial measures.

SKYWATER TECHNOLOGY, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

Three-Month Period Ended

 

Fiscal Year Ended

 

December 31, 2023

 

October 1, 2023

 

January 1, 2023

(Revised)

 

December 31, 2023

 

January 1, 2023
(Revised)

 

(in thousands)

GAAP revenue

$

79,154

 

 

$

71,624

 

 

$

65,087

 

 

$

286,682

 

 

$

212,941

 

 

 

 

 

 

 

 

 

 

 

GAAP cost of revenue

$

67,143

 

 

$

57,477

 

 

$

48,536

 

 

$

227,390

 

 

$

186,974

 

Equity-based compensation (1)

 

(313

)

 

 

(438

)

 

 

(452

)

 

 

(1,555

)

 

 

(2,578

)

SkyWater Florida start-up costs (2)

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(582

)

Restructuring costs (3)

 

(679

)

 

 

 

 

 

 

 

 

(679

)

 

 

 

Business transformation costs (4)

 

(806

)

 

 

 

 

 

 

 

 

(806

)

 

 

 

Management transition expense (5)

 

 

 

 

 

 

 

 

 

 

(705

)

 

 

 

Non-GAAP cost of revenue

$

65,345

 

 

$

57,039

 

 

$

48,070

 

 

$

223,645

 

 

$

183,814

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

12,011

 

 

$

14,147

 

 

$

16,551

 

 

$

59,292

 

 

$

25,967

 

GAAP gross margin

 

15.2

%

 

 

19.8

%

 

 

25.4

%

 

 

20.7

%

 

 

12.2

%

Equity-based compensation (1)

$

313

 

 

$

438

 

 

$

452

 

 

$

1,555

 

 

$

2,578

 

SkyWater Florida start-up costs (2)

 

 

 

 

 

 

 

14

 

 

 

 

 

 

582

 

Restructuring costs (3)

 

679

 

 

 

 

 

 

 

 

 

679

 

 

 

 

Business transformation costs (4)

 

806

 

 

 

 

 

 

 

 

 

806

 

 

 

 

Management transition expense (5)

 

 

 

 

 

 

 

 

 

 

705

 

 

 

 

Non-GAAP gross profit

$

13,809

 

 

$

14,585

 

 

$

17,017

 

 

$

63,037

 

 

$

29,127

 

Non-GAAP gross margin

 

17.4

%

 

 

20.4

%

 

 

26.1

%

 

 

22.0

%

 

 

13.7

%

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

$

2,872

 

 

$

2,233

 

 

$

2,208

 

 

$

10,169

 

 

$

9,431

 

Equity-based compensation (1)

 

134

 

 

 

(218

)

 

 

(126

)

 

 

(464

)

 

 

(596

)

Restructuring costs (3)

 

(655

)

 

 

 

 

 

 

 

 

(655

)

 

 

 

Non-GAAP research and development expense

$

2,351

 

 

$

2,015

 

 

$

2,082

 

 

$

9,050

 

 

$

8,835

 

 

 

 

 

 

 

 

 

 

 

GAAP selling, general, and administrative expense

$

15,092

 

 

$

16,105

 

 

$

13,040

 

 

$

63,911

 

 

$

46,303

 

Equity-based compensation (1)

 

(1,008

)

 

 

(1,197

)

 

 

(995

)

 

 

(4,841

)

 

 

(5,432

)

SkyWater Florida start-up costs (2)

 

 

 

 

 

 

 

2

 

 

 

 

 

 

(104

)

Restructuring costs (3)

 

(587

)

 

 

 

 

 

 

 

 

(587

)

 

 

 

Business transformation costs (4)

 

(5,341

)

 

 

(3,522

)

 

 

 

 

 

(11,363

)

 

 

 

Management transition expense (5)

 

 

 

 

 

 

 

 

 

 

(130

)

 

 

 

CHIPS Act specialist fees (6)

 

 

 

 

 

 

 

 

 

 

(1,320

)

 

 

 

Non-GAAP selling, general, and administrative expense

$

8,156

 

 

$

11,386

 

 

$

12,047

 

 

$

45,670

 

 

$

40,767

 

 

Three-Month Period Ended

 

Fiscal Year Ended

 

December 31, 2023

 

October 1, 2023

 

January 1, 2023

(Revised)

 

December 31, 2023

 

January 1, 2023
(Revised)

 

(in thousands)

GAAP net loss to shareholders

$

(10,325

)

 

$

(7,568

)

 

$

(3,041

)

 

$

(30,756

)

 

$

(39,593

)

Equity-based compensation (1)

 

1,187

 

 

 

1,853

 

 

 

1,573

 

 

 

6,860

 

 

 

8,606

 

SkyWater Florida start-up costs (2)

 

 

 

 

 

 

 

12

 

 

 

 

 

 

686

 

Restructuring costs (3)

 

1,921

 

 

 

 

 

 

 

 

 

1,921

 

 

 

 

Business transformation costs (4)

 

6,147

 

 

 

3,522

 

 

 

 

 

 

12,169

 

 

 

 

Management transition expense (5)

 

 

 

 

 

 

 

 

 

 

835

 

 

 

 

CHIPS Act specialist fees (6)

 

 

 

 

 

 

 

 

 

 

1,320

 

 

 

 

Non-GAAP net loss to shareholders

$

(1,070

)

 

$

(2,193

)

 

$

(1,456

)

 

$

(7,651

)

 

$

(30,301

)

 

 

 

 

 

 

 

 

 

 

Equity-based compensation allocation in the consolidated statements of operations (1):

 

 

 

 

 

 

 

 

 

Cost of revenue

$

313

 

 

$

438

 

 

$

452

 

 

$

1,555

 

 

$

2,578

 

Research and development expense

 

(134

)

 

 

218

 

 

 

126

 

 

 

464

 

 

 

596

 

Selling, general, and administrative expense

 

1,008

 

 

 

1,197

 

 

 

995

 

 

 

4,841

 

 

 

5,432

 

 

$

1,187

 

 

$

1,853

 

 

$

1,573

 

 

$

6,860

 

 

$

8,606

 

 

 

 

 

 

 

 

 

 

 

SkyWater Florida start-up costs allocation in the consolidated statements of operations (2):

 

 

 

 

 

 

 

 

 

Cost of revenue

$

 

 

$

 

 

$

14

 

 

$

 

 

$

582

 

Selling, general and administrative expenses

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

104

 

 

$

 

 

$

 

 

$

12

 

 

$

 

 

$

686

 

 

 

 

 

 

 

 

 

 

 

Restructuring costs allocation in the consolidated statements of operations (3):

 

 

 

 

 

 

 

 

 

Cost of revenue

$

679

 

 

$

 

 

$

 

 

$

679

 

 

$

 

Research and development expense

 

655

 

 

 

 

 

 

 

 

 

655

 

 

 

 

Selling, general, and administrative expense

 

587

 

 

 

 

 

 

 

 

 

587

 

 

 

 

 

$

1,921

 

 

$

 

 

$

 

 

$

1,921

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Business transformation costs allocation in the consolidated statements of operations (4):

 

 

 

 

 

 

 

 

 

Cost of revenue

$

806

 

 

$

 

 

$

 

 

$

806

 

 

$

 

Selling, general, and administrative expense

 

5,341

 

 

 

3,522

 

 

 

 

 

 

11,363

 

 

 

 

 

$

6,147

 

 

$

3,522

 

 

$

 

 

$

12,169

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Management transition expense allocation in the consolidated statements of operations (5):

 

 

 

 

 

 

 

 

 

Cost of revenue

$

 

 

$

 

 

$

 

 

$

705

 

 

$

 

Selling, general, and administrative expense

 

 

 

 

 

 

 

 

 

 

130

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

835

 

 

$

 

 

Three-Month Period Ended

December 31, 2023

 

Fiscal Year Ended

December 31, 2023

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

Numerator:

 

 

 

 

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(10,325

)

 

$

(1,070

)

 

$

(30,756

)

 

$

(7,651

)

Denominator:

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

47,020

 

 

 

47,020

 

 

 

45,507

 

 

 

45,507

 

Net loss per common share, basic and diluted

$

(0.22

)

 

$

(0.02

)

 

$

(0.68

)

 

$

(0.17

)

 

 

 

 

 

 

 

 

 

Three-Month Period Ended

October 1, 2023

 

 

 

GAAP

 

Non-GAAP

 

 

 

 

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

 

 

 

 

Numerator:

 

 

 

 

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(7,568

)

 

$

(2,193

)

 

 

 

 

Denominator:

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

46,445

 

 

 

46,445

 

 

 

 

 

Net loss per common share, basic and diluted

$

(0.16

)

 

$

(0.05

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Month Period Ended

January 1, 2023

 

Fiscal Year Ended

January 1, 2023

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

Numerator:

 

 

 

 

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(3,041

)

 

$

(1,456

)

 

$

(39,593

)

 

$

(30,301

)

Denominator:

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

42,613

 

 

 

42,613

 

 

 

40,835

 

 

 

40,835

 

Net loss per common share, basic and diluted

$

(0.07

)

 

$

(0.03

)

 

$

(0.97

)

 

$

(0.74

)

 

Three-Month Period Ended

 

Fiscal Year Ended

 

December 31, 2023

 

October 1, 2023

 

January 1, 2023

 

December 31, 2023

 

January 1, 2023

 

(in thousands)

Net loss to shareholders (GAAP)

$

(10,325

)

 

$

(7,568

)

 

$

(3,041

)

 

$

(30,756

)

 

$

(39,593

)

Net loss margin to shareholders

(13.0

)%

 

 

(10.6

)%

 

 

(4.7

)%

 

 

(10.7

)%

 

 

(18.6

)%

Interest expense (8)

$

2,898

 

 

$

2,507

 

 

$

2,895

 

 

$

10,826

 

 

$

6,295

 

Income tax (benefit) expense

 

(450

)

 

 

(96

)

 

 

852

 

 

 

(521

)

 

 

809

 

Depreciation and amortization

 

7,279

 

 

 

7,092

 

 

 

7,451

 

 

 

28,930

 

 

 

28,192

 

EBITDA

 

(598

)

 

 

1,935

 

 

 

8,157

 

 

 

8,479

 

 

 

(4,297

)

Equity-based compensation (1)

 

1,187

 

 

 

1,853

 

 

 

1,573

 

 

 

6,860

 

 

 

8,606

 

SkyWater Florida start-up costs (2)

 

 

 

 

 

 

 

12

 

 

 

 

 

 

686

 

Restructuring costs (3)

 

1,921

 

 

 

 

 

 

 

 

 

1,921

 

 

 

 

Business transformation costs (4)

 

6,147

 

 

 

3,522

 

 

 

 

 

 

12,169

 

 

 

 

Management transition expense (5)

 

 

 

 

 

 

 

 

 

 

835

 

 

 

 

CHIPS Act specialist fees (6)

 

 

 

 

 

 

 

 

 

 

1,320

 

 

 

 

Net income attributable to noncontrolling interests (7)

 

1,924

 

 

 

966

 

 

 

597

 

 

 

5,663

 

 

 

2,722

 

Adjusted EBITDA

$

10,581

 

 

$

8,276

 

 

$

10,339

 

 

$

37,247

 

 

$

7,717

 

Adjusted EBITDA margin

 

13.4

%

 

 

11.6

%

 

 

15.9

%

 

 

13.0

%

 

 

3.6

%


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