SkyWater Technology Reports Third Quarter 2024 Results

Q3 2024 Results:

  • 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,
2024

 

December 31,
2023

 

 

 

 

 

(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,
2024

 

June 30,
2024

 

October 1,
2023

 

September 29,
2024

 

October 1,
2023

 

 

 

 

 

 

 

 

 

 

 

(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,
2024

 

October 1,
2023

 

 

 

 

 

(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.


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