SkyWater Technology Reports First Quarter 2024 Results

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 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, 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.

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

 

March 31, 2024

 

December 31, 2023

 

April 2, 2023

 

 

 

 

 

 

 

(in thousands)

GAAP revenue

$

79,636

 

 

$

79,154

 

 

$

66,094

 

 

 

 

 

 

 

GAAP cost of revenue

$

66,656

 

 

$

67,143

 

 

$

49,626

 

Equity-based compensation (1)

 

(455

)

 

 

(313

)

 

 

(513

)

Restructuring costs (2)

 

 

 

 

(679

)

 

 

 

Business transformation costs (3)

 

 

 

 

(806

)

 

 

 

Non-GAAP cost of revenue

$

66,201

 

 

$

65,345

 

 

$

49,113

 

 

 

 

 

 

 

GAAP gross profit

$

12,980

 

 

$

12,011

 

 

$

16,468

 

GAAP gross margin

 

16.3

%

 

 

15.2

%

 

 

24.9

%

Equity-based compensation (1)

$

455

 

 

$

313

 

 

$

513

 

Restructuring costs (2)

 

 

 

 

679

 

 

 

 

Business transformation costs (3)

 

 

 

 

806

 

 

 

 

Non-GAAP gross profit

$

13,435

 

 

$

13,809

 

 

$

16,981

 

Non-GAAP gross margin

 

16.9

%

 

 

17.4

%

 

 

25.7

%

 

 

 

 

 

 

GAAP research and development expense

$

4,012

 

 

$

2,872

 

 

$

2,668

 

Equity-based compensation (1)

 

(107

)

 

 

134

 

 

 

(162

)

Restructuring costs (2)

 

 

 

 

(655

)

 

 

 

Non-GAAP research and development expense

$

3,905

 

 

$

2,351

 

 

$

2,506

 

 

 

 

 

 

 

GAAP selling, general, and administrative expense

$

11,169

 

 

$

15,092

 

 

$

14,895

 

Equity-based compensation (1)

 

(1,510

)

 

 

(1,008

)

 

 

(1,178

)

Restructuring costs (2)

 

 

 

 

(587

)

 

 

 

Business transformation costs (3)

 

 

 

 

(5,341

)

 

 

 

Non-GAAP selling, general, and administrative expense

$

9,659

 

 

$

8,156

 

 

$

13,717

 

 

 

 

 

 

 

GAAP net loss to shareholders

$

(5,729

)

 

$

(10,325

)

 

$

(4,273

)

Equity-based compensation (1)

 

2,072

 

 

 

1,187

 

 

 

1,853

 

Restructuring costs (2)

 

 

 

 

1,921

 

 

 

 

Business transformation costs (3)

 

 

 

 

6,147

 

 

 

 

Non-GAAP net loss to shareholders

$

(3,657

)

 

$

(1,070

)

 

$

(2,420

)

 

Three-Month Period Ended

 

March 31, 2024

 

December 31, 2023

 

April 2, 2023

 

 

 

 

 

 

 

(in thousands)

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

 

 

 

 

 

Cost of revenue

$

455

 

$

313

 

 

$

513

Research and development expense

 

107

 

 

(134

)

 

 

162

Selling, general, and administrative expense

 

1,510

 

 

1,008

 

 

 

1,178

 

$

2,072

 

$

1,187

 

 

$

1,853

 

 

 

 

 

 

Restructuring costs allocation in the consolidated statements of operations (2):

 

 

 

 

 

Cost of revenue

$

 

$

679

 

 

$

Research and development expense

 

 

 

655

 

 

 

Selling, general, and administrative expense

 

 

 

587

 

 

 

 

$

 

$

1,921

 

 

$

 

 

 

 

 

 

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

 

 

 

 

 

Cost of revenue

$

 

$

806

 

 

$

Selling, general, and administrative expense

 

 

 

5,341

 

 

 

 

$

 

$

6,147

 

 

$

 

 

 

Three-Month Period Ended

March 31, 2024

 

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.

$

(5,729

)

 

$

(3,657

)

Denominator:

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

47,099

 

 

 

47,099

 

Net loss per common share, basic and diluted

$

(0.12

)

 

$

(0.08

)

 

 

 

 

 

Three-Month Period Ended

December 31, 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.

$

(10,325

)

 

$

(1,070

)

Denominator:

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

47,020

 

 

 

47,020

 

Net loss per common share, basic and diluted

$

(0.22

)

 

$

(0.02

)

 

 

 

 

 

Three-Month Period Ended

April 2, 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.

$

(4,273

)

 

$

(2,420

)

Denominator:

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

43,817

 

 

 

43,817

 

Net loss per common share, basic and diluted

$

(0.10

)

 

$

(0.06

)

 

Three-Month Period Ended

 

March 31, 2024

 

December 31, 2023

 

April 2, 2023

 

 

 

 

 

 

 

(in thousands)

Net loss to shareholders (GAAP)

$

(5,729

)

 

$

(10,325

)

 

$

(4,273

)

Net loss margin to shareholders

 

(7.2

)%

 

 

(13.0

)%

 

 

(6.5

)%

Interest expense

$

2,390

 

 

$

2,898

 

 

$

2,471

 

Income tax expense (benefit)

 

41

 

 

 

(450

)

 

 

 

Depreciation and amortization

 

5,065

 

 

 

7,279

 

 

 

7,352

 

EBITDA

 

1,767

 

 

 

(598

)

 

 

5,550

 

Equity-based compensation (1)

 

2,072

 

 

 

1,187

 

 

 

1,853

 

Restructuring costs (2)

 

 

 

 

1,921

 

 

 

 

Business transformation costs (3)

 

 

 

 

6,147

 

 

 

 

Net income attributable to noncontrolling interests (4)

 

1,097

 

 

 

1,924

 

 

 

707

 

Adjusted EBITDA

$

4,936

 

 

$

10,581

 

 

$

8,110

 

Adjusted EBITDA margin

 

6.2

%

 

 

13.4

%

 

 

12.3

%

__________________

(1)

Represents non-cash equity-based compensation expense.

(2)

Represents severance and other costs related to the reorganization of our resources.

(3)

Represents expenses related to long-term transformation activities focused on improvement in automation and operational efficiency and includes project-based management consulting fees and the write-off of abandoned software assets.

(4)

Represents net income attributable to our VIE, which was formed for the purpose of purchasing the land and building of our primary operating facility in Bloomington, Minnesota. Since interest expense is added back to net loss to shareholders in our adjusted EBITDA financial measure, we also add back the net income attributable to the VIE as its net income is derived from interest the VIE charges SkyWater.


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