- Revenue: Revenue of $93.8 million increased 31% year-over-year. ATS development revenue of $56.4 million increased 5% year-over-year. Wafer Services revenue of $6.7 million decreased 54% compared to the third quarter of 2023. Tools revenue was $30.7 million in the third quarter of 2024 compared to $3.2 million in the third quarter of 2023.
- Gross Profit: GAAP gross profit was $20.2 million, or 21.6% of total revenue, compared to gross profit of $14.1 million, or 19.8% of total revenue, in the third quarter of 2023. Non-GAAP gross profit was $20.9 million, or 22.3% of total revenue, compared to non-GAAP gross profit of $14.6 million, or 20.4% of total revenue, in the third quarter of 2023. In the third quarter of 2024 we successfully modified a significant customer contract that resulted in a decrease in our estimate of future costs to complete their program. Gross margin for the third quarter of 2024 benefited from the $5.6 million reversal of the remaining loss accrual, which was initially established at $8.0 million in the first quarter of 2024 for this program.
- Operating Expenses: GAAP operating expenses were $15.5 million, compared to $18.3 million in the third quarter of 2023. Non-GAAP operating expenses were $14.1 million, compared to $13.4 million in the third quarter of 2023.
- Net Income (Loss): GAAP net income to shareholders was $1.5 million, or $0.03 per diluted share, compared to a net loss to shareholders of $7.6 million, or $(0.16) per diluted share, in the third quarter of 2023. Non-GAAP net income to shareholders was $3.6 million, or $0.08 per diluted share, compared to a non-GAAP net loss to shareholders of $2.2 million, or $(0.05) diluted per share, in the third quarter of 2023.
- Adjusted EBITDA: Adjusted EBITDA was $11.0 million, or 11.7% of total revenue, compared to $8.3 million, or 11.6% of total revenue, in the third quarter of 2023.
A reconciliation between GAAP and non-GAAP financial measures is contained in the tables included in the section titled “Non-GAAP Financial Measures.”
Q4 2024 Financial Outlook
For the fourth quarter of 2024, we expect total revenue to be in the range of $72 million to $76 million, of which approximately $11 million is expected to be tools revenue. We expect GAAP diluted EPS to be in the range of $(0.12) to $(0.06) and non-GAAP diluted EPS to be in the range of $(0.10) to $(0.04).
This outlook for non-GAAP diluted EPS excludes anticipated equity-based compensation expense of approximately $2.0 million. Non-GAAP diluted EPS should be considered in addition to, but not as a substitute for, our financial information presented in accordance with GAAP.
Investor Webcast
SkyWater will host a conference call on Thursday, November 7, 2024, at 3:30 p.m. CT to discuss its third quarter 2024 financial results. A live webcast of the call will be available online at IR.SkyWaterTechnology.com.
About SkyWater Technology
SkyWater (NASDAQ: SKYT) is a U.S.-based semiconductor manufacturer and a DMEA-accredited Category 1A Trusted Supplier. SkyWater’s Technology as a Service model streamlines the path to production for customers with development services, volume production and heterogeneous integration solutions in its U.S. facilities. This pioneering model enables innovators to co-create the next wave of technology within diverse categories including mixed-signal CMOS, read-out ICs, rad-hard ICs, MEMS, superconducting ICs, photonics and advanced packaging. SkyWater serves the growing markets of aerospace & defense, automotive, biomedical, industrial and quantum computing. For more information, visit: www.skywatertechnology.com.
Cautionary Statement Regarding Preliminary Results
The Company’s results for the third quarter ended September 29, 2024 are preliminary, unaudited and subject to the finalization of the Company’s third quarter review and full-year audit and should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. The Company cautions that actual results may differ materially from those described in this press release.
SkyWater Technology Forward-Looking Statements
This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that are based on the Company’s current expectations or forecasts of future events, rather than past events and outcomes, and such statements are not guarantees of future performance. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information or predictions concerning the Company’s future business, results of operations, financial performance, plans and objectives, competitive position, market trends, and potential growth and market opportunities. In some cases, you can identify forward-looking statements by words such as “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “targets,” “projects,” “seeks” or the negative of these terms or other comparable terminology.
Forward-looking statements are subject to risks, uncertainties and assumptions, which may cause the Company’s actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Key factors that could cause the Company’s actual results to be different than expected or anticipated include, but are not limited to: our goals and strategies; our future business development, financial condition and results of operations; our ability to continue operating our fabrication facilities at full capacity; our ability to appropriately respond to changing technologies on a timely and cost-effective basis; our customer relationships and our ability to retain and expand our customer relationships; our ability to accurately predict our future revenues for the purpose of appropriately budgeting and adjusting our expenses; our expectations regarding dependence on our largest customers; our ability to diversify our customer base and develop relationships in new markets; the performance and reliability of our third-party suppliers and manufacturers; our ability to procure tools, materials, and chemicals; our ability to control costs, including our operating and capital expenses; the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets; the level of demand in our customers’ end markets; our ability to attract, train and retain key qualified personnel in a competitive labor market; adverse litigation judgments, settlements or other litigation-related costs; changes in trade policies, including the imposition of tariffs; our ability to raise additional capital or financing; our ability to accurately forecast demand; the level and timing of U.S. government program funding; our ability to maintain compliance with certain U.S. government contracting requirements; regulatory developments in the United States and foreign countries; our ability to protect our intellectual property rights; our ability to meet our long-term growth targets; and other factors discussed in the “Risk Factors” section of the annual report on Form 10-K the Company filed with the SEC on March 15, 2024 and in other documents that the Company files with the SEC, which are available at http://www.sec.gov. The Company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
SKYWATER TECHNOLOGY, INC. Condensed Consolidated Balance Sheets (Unaudited)
|
|||||||
|
September 29,
|
|
December 31,
|
||||
|
|
|
|
||||
|
(in thousands, except per share data) |
||||||
Assets |
|
|
|
||||
Current assets |
|
|
|
||||
Cash and cash equivalents |
$ |
20,684 |
|
|
$ |
18,382 |
|
Accounts receivable (net of allowance for credit losses of $378 and $180, respectively) |
|
60,562 |
|
|
|
65,961 |
|
Contract assets (net of allowance for credit losses of $42 and $99, respectively) |
|
29,179 |
|
|
|
29,666 |
|
Inventory |
|
14,429 |
|
|
|
15,341 |
|
Prepaid expenses and other current assets |
|
15,127 |
|
|
|
16,853 |
|
Income tax receivable |
|
— |
|
|
|
172 |
|
Total current assets |
|
139,981 |
|
|
|
146,375 |
|
Property and equipment, net |
|
162,972 |
|
|
|
159,367 |
|
Intangible assets, net |
|
7,220 |
|
|
|
5,672 |
|
Other assets |
|
4,906 |
|
|
|
5,342 |
|
Total assets |
$ |
315,079 |
|
|
$ |
316,756 |
|
|
|
|
|
||||
Liabilities and shareholders’ equity |
|
|
|
||||
Current liabilities |
|
|
|
||||
Current portion of long-term debt |
$ |
5,099 |
|
|
$ |
3,976 |
|
Accounts payable |
|
30,217 |
|
|
|
19,614 |
|
Accrued expenses |
|
31,430 |
|
|
|
48,291 |
|
Income taxes payable |
|
392 |
|
|
|
— |
|
Short-term financing, net of unamortized debt issuance costs |
|
19,552 |
|
|
|
22,765 |
|
Contract liabilities |
|
73,353 |
|
|
|
49,551 |
|
Total current liabilities |
|
160,043 |
|
|
|
144,197 |
|
Long-term liabilities |
|
|
|
||||
Long-term debt, less current portion and net of unamortized debt issuance costs |
|
36,179 |
|
|
|
36,098 |
|
Long-term contract liabilities |
|
41,145 |
|
|
|
65,754 |
|
Deferred income tax liability, net |
|
378 |
|
|
|
679 |
|
Other long-term liabilities |
|
8,780 |
|
|
|
9,327 |
|
Total long-term liabilities |
|
86,482 |
|
|
|
111,858 |
|
Total liabilities |
|
246,525 |
|
|
|
256,055 |
|
Shareholders’ equity |
|
|
|
||||
Preferred stock, $0.01 par value per share (80,000 shares authorized, zero shares issued and outstanding as of September 29, 2024 and December 31, 2023) |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value per share (200,000 shares authorized; 47,643 and 47,028 shares issued and outstanding as of September 29, 2024 and December 31, 2023, respectively) |
|
477 |
|
|
|
470 |
|
Additional paid-in capital |
|
187,004 |
|
|
|
178,473 |
|
Accumulated deficit |
|
(131,317 |
) |
|
|
(125,203 |
) |
Total shareholders’ equity, SkyWater Technology, Inc. |
|
56,164 |
|
|
|
53,740 |
|
Noncontrolling interests |
|
12,390 |
|
|
|
6,961 |
|
Total shareholders’ equity |
|
68,554 |
|
|
|
60,701 |
|
Total liabilities and shareholders’ equity |
$ |
315,079 |
|
|
$ |
316,756 |
|
SKYWATER TECHNOLOGY, INC. Condensed Consolidated Statements of Operations (Unaudited)
|
|||||||||||||||||||
|
Three-Month Period Ended |
|
Nine-Month Period Ended |
||||||||||||||||
|
September 29,
|
|
June 30,
|
|
October 1,
|
|
September 29,
|
|
October 1,
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands, except per share data) |
||||||||||||||||||
Revenue |
$ |
93,817 |
|
$ |
93,329 |
|
|
$ |
71,624 |
|
|
$ |
266,782 |
|
|
$ |
207,529 |
|
|
Cost of revenue |
|
73,582 |
|
|
|
76,215 |
|
|
|
57,477 |
|
|
|
216,453 |
|
|
|
160,247 |
|
Gross profit |
|
20,235 |
|
|
|
17,114 |
|
|
|
14,147 |
|
|
|
50,329 |
|
|
|
47,282 |
|
Research and development expense |
|
3,431 |
|
|
|
3,382 |
|
|
|
2,233 |
|
|
|
10,825 |
|
|
|
7,296 |
|
Selling, general, and administrative expense |
|
12,095 |
|
|
|
12,332 |
|
|
|
16,105 |
|
|
|
35,598 |
|
|
|
48,821 |
|
Operating income (loss) |
|
4,709 |
|
|
|
1,400 |
|
|
|
(4,191 |
) |
|
|
3,906 |
|
|
|
(8,835 |
) |
Interest expense |
|
1,988 |
|
|
|
2,482 |
|
|
|
2,507 |
|
|
|
6,859 |
|
|
|
7,928 |
|
Income (loss) before income taxes |
|
2,721 |
|
|
|
(1,082 |
) |
|
|
(6,698 |
) |
|
|
(2,953 |
) |
|
|
(16,763 |
) |
Income tax expense (benefit) |
|
93 |
|
|
|
(127 |
) |
|
|
(96 |
) |
|
|
7 |
|
|
|
(71 |
) |
Net income (loss) |
|
2,628 |
|
|
|
(955 |
) |
|
|
(6,602 |
) |
|
|
(2,960 |
) |
|
|
(16,692 |
) |
Less: net income attributable to noncontrolling interests |
|
1,116 |
|
|
|
942 |
|
|
|
966 |
|
|
|
3,154 |
|
|
|
3,739 |
|
Net income (loss) attributable to SkyWater Technology, Inc. |
$ |
1,512 |
|
|
$ |
(1,897 |
) |
|
$ |
(7,568 |
) |
|
$ |
(6,114 |
) |
|
$ |
(20,431 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) per share attributable to common shareholders, basic |
$ |
0.03 |
|
|
$ |
(0.04 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.45 |
) |
Weighted average shares outstanding, basic |
|
47,523 |
|
|
|
47,395 |
|
|
|
46,445 |
|
|
|
47,339 |
|
|
|
45,002 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) per share attributable to common shareholders, diluted |
$ |
0.03 |
|
|
$ |
(0.04 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.45 |
) |
Weighted average shares outstanding, diluted |
|
47,640 |
|
|
|
47,395 |
|
|
|
46,445 |
|
|
|
47,339 |
|
|
|
45,002 |
|
SKYWATER TECHNOLOGY, INC. Condensed Consolidated Statements of Cash Flows (Unaudited)
|
|||||||
|
Nine-Month Period Ended |
||||||
|
September 29,
|
|
October 1,
|
||||
|
|
|
|
||||
|
(in thousands) |
||||||
Cash flows from operating activities |
|
|
|
||||
Net loss |
$ |
(2,960 |
) |
|
$ |
(16,692 |
) |
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities |
|
|
|
||||
Depreciation and amortization |
|
13,295 |
|
|
|
21,651 |
|
Gain on sale of property and equipment |
|
(55 |
) |
|
|
— |
|
Amortization of debt issuance costs included in interest expense |
|
1,322 |
|
|
|
1,349 |
|
Equity-based compensation expense |
|
6,105 |
|
|
|
5,673 |
|
Deferred income taxes |
|
(301 |
) |
|
|
(118 |
) |
Provision for credit losses |
|
262 |
|
|
|
4,133 |
|
Changes in operating assets and liabilities |
|
|
|
||||
Accounts receivable and contract assets, net |
|
5,624 |
|
|
|
(23,063 |
) |
Inventories |
|
911 |
|
|
|
(3,251 |
) |
Prepaid expenses and other assets |
|
2,164 |
|
|
|
270 |
|
Accounts payable and accrued expenses |
|
(6,386 |
) |
|
|
4,182 |
|
Contract liabilities, current and long-term |
|
(806 |
) |
|
|
(15,843 |
) |
Income tax receivable and payable |
|
564 |
|
|
|
47 |
|
Net cash provided by (used in) operating activities |
|
19,739 |
|
|
|
(21,662 |
) |
|
|
|
|
||||
Cash flows from investing activities |
|
|
|
||||
Purchase of software and technology licenses |
|
(1,953 |
) |
|
|
(612 |
) |
Proceeds from sale of property and equipment |
|
55 |
|
|
|
— |
|
Purchases of property and equipment |
|
(13,894 |
) |
|
|
(3,864 |
) |
Net cash used in investing activities |
|
(15,792 |
) |
|
|
(4,476 |
) |
|
|
|
|
||||
Cash flows from financing activities |
|
|
|
||||
Proceeds from draws on the revolving line of credit |
|
251,000 |
|
|
|
182,763 |
|
Repayment of draws on the revolving line of credit |
|
(251,463 |
) |
|
|
(194,396 |
) |
Proceeds from tool financings |
|
1,298 |
|
|
|
6,492 |
|
Repayment of tool financing advanced payments |
|
(920 |
) |
|
|
— |
|
Principal payments on long-term debt |
|
(3,248 |
) |
|
|
(1,839 |
) |
Cash paid for principal on finance leases |
|
(520 |
) |
|
|
(818 |
) |
Proceeds from the issuance of common stock pursuant to equity compensation plans |
|
2,433 |
|
|
|
2,305 |
|
Proceeds from the issuance of common stock under the ATM |
|
— |
|
|
|
20,397 |
|
Cash paid on licensed technology obligations |
|
(2,500 |
) |
|
|
(2,350 |
) |
Contributions from noncontrolling interest |
|
6,957 |
|
|
|
— |
|
Distributions to noncontrolling interest |
|
(4,682 |
) |
|
|
905 |
|
Net cash provided by (used in) financing activities |
|
(1,645 |
) |
|
|
13,459 |
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents |
|
2,302 |
|
|
|
(12,679 |
) |
Cash and cash equivalents, beginning of period |
|
18,382 |
|
|
|
30,025 |
|
Cash and cash equivalents, end of period |
$ |
20,684 |
|
|
$ |
17,346 |
|
Supplemental Financial Information by Quarter
|
|||||||||||||||||||||||||||
|
Q3 2024 |
|
Q2 2024 |
|
Q1 2024 |
|
Q4 2023 |
|
Q3 2023 |
|
Q2 2023 |
|
Q1 2023 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(in thousands) |
||||||||||||||||||||||||||
ATS development revenue (1) |
$ |
56,390 |
|
|
$ |
61,669 |
|
$ |
61,185 |
|
$ |
57,170 |
|
$ |
53,891 |
|
$ |
52,073 |
|
$ |
47,770 |
||||||
Wafer Services revenue |
|
6,718 |
|
|
|
5,780 |
|
|
|
9,992 |
|
|
|
12,048 |
|
|
|
14,490 |
|
|
|
16,802 |
|
|
|
17,788 |
|
Combined ATS development and Wafer Services revenue |
|
63,108 |
|
|
|
67,449 |
|
|
|
71,177 |
|
|
|
69,218 |
|
|
|
68,381 |
|
|
|
68,875 |
|
|
|
65,558 |
|
Tools revenue (2) |
|
30,709 |
|
|
|
25,880 |
|
|
|
8,459 |
|
|
|
9,936 |
|
|
|
3,243 |
|
|
|
936 |
|
|
|
536 |
|
Total revenue |
$ |
93,817 |
|
|
$ |
93,329 |
|
|
$ |
79,636 |
|
|
$ |
79,154 |
|
|
$ |
71,624 |
|
|
$ |
69,811 |
|
|
$ |
66,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Tools revenue (2) |
$ |
30,709 |
|
|
$ |
25,880 |
|
|
$ |
8,459 |
|
|
$ |
9,936 |
|
|
$ |
3,243 |
|
|
$ |
936 |
|
|
$ |
536 |
|
Cost of tools revenue (2) |
|
30,477 |
|
|
|
24,869 |
|
|
|
8,260 |
|
|
|
9,125 |
|
|
|
2,861 |
|
|
|
290 |
|
|
|
484 |
|
Tools gross profit |
$ |
232 |
|
|
$ |
1,011 |
|
|
$ |
199 |
|
|
$ |
811 |
|
|
$ |
382 |
|
|
$ |
646 |
|
|
$ |
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Revenue impact of modified customer contracts |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,601 |
|
|
$ |
— |
|
Cost of revenue impact of modified customer contracts (3) |
|
(5,616 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Favorable gross profit impact of modified customer contracts |
$ |
5,616 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,601 |
|
|
$ |
— |
|
__________________ |
|
(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) |
Tools revenue and cost of tools revenue represents GAAP revenue and cost primarily derived from the procurement and subsequent sale of equipment to our customers. While this equipment is owned by our customers, the equipment is retained in one of our fabs and is used to complete ATS customer programs. |
(3) |
In the first quarter of 2024, we recorded a $8,004 charge to recognize future estimated losses for one significant customer program based on anticipated cost increases to complete the customer’s program. In the third quarter of 2024 we successfully modified the customer contract, which resulted in a decrease in our estimate of future costs to complete their program. The remaining $5,616 loss accrual recorded at the time the contract was modified was released, which reduced cost of revenue for the three- and nine-months ended September 29, 2024. |