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Share Name | Share Symbol | Market | Type |
---|---|---|---|
SkyWater Technology Inc | NASDAQ:SKYT | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 7.54 | 7.30 | 7.58 | 6 | 12:00:06 |
Record Revenues and Continued Year-over-Year Increase in Gross Margin
SkyWater Technology, Inc. (NASDAQ: SKYT), the trusted technology realization partner, today announced financial results for the third quarter of 2023, ended October 1, 2023.
Financial Highlights for Q3 2023:
“SkyWater again achieved revenue upside and sequential growth in what was a very strong third quarter for our ATS business,” commented Thomas Sonderman, SkyWater chief executive officer. “The outperformance we’ve achieved in 2023 to date is largely driven by increased demand – and strong operational execution – as we continue to drive improvements in fab efficiency, velocity, linearity, and output. We are also starting to see an increasing contribution of customer-funded capital expenditures, which is a trend we expect to continue, as our customers are significantly increasing their investments in SkyWater. The transformative process currently underway is proceeding well and is accelerating, especially now that John Sakamoto is on board as our new president and COO. We anticipate another year of revenue growth and continued strong financial results ahead for 2024.”
Recent Business Highlights:
Q3 2023 Summary:
GAAP
In millions, except per share data
Q3 2023
Q3 2022
Y/Y
Q2 2023
Q/Q
ATS revenue
$57.1
$35.2
62%
$53.0
8%
Wafer Services revenue
$14.5
$17.2
(16)%
$16.8
(14)%
Total revenue
$71.6
$52.3
37%
$69.8
3%
Gross profit
$14.1
$8.3
71%
$16.7
(15)%
Gross margin
19.8%
15.8%
400 bps
23.9%
(410) bps
Net loss to shareholders
$(7.6)
$(6.9)
(9)%
$(8.6)
NM
Basic loss per share
$(0.16)
$(0.17)
NM
$(0.19)
NM
Net loss margin to shareholders
(10.6)%
(13.3)%
270 bps
(12.3)%
170 bps
Non-GAAP
In millions, except per share data
Q3 2023
Q3 2022
Y/Y
Q2 2023
Q/Q
Non-GAAP gross profit
$14.6
$8.8
65%
$17.7
(17)%
Non-GAAP gross margin
20.4%
16.9%
350 bps
25.3%
(490) bps
Non-GAAP net loss to shareholders
$(2.2)
$(5.1)
57%
$(2.0)
(11)%
Non-GAAP basic loss per share
$(0.05)
$(0.13)
62%
$(0.04)
(25)%
Adjusted EBITDA
$8.3
$3.8
117%
$10.3
(19)%
Adjusted EBITDA margin
11.6%
7.3%
430 bps
14.7%
(310) bps
NM - Not meaningful
Q3 2023 Results:
A reconciliation between historical GAAP and non-GAAP information is contained in the tables below in the section titled, “Non-GAAP Financial Measures.”
Investor Webcast
SkyWater will host a conference call on Wednesday, November 8, 2023, at 3:30 p.m. CT to discuss its third quarter 2023 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 Foundry. 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 world-class U.S. facilities. This pioneering model enables innovators to co-create the next wave of technology with diverse categories including mixed-signal CMOS, read-out ICs, rad-hard ICs, power management, MEMS, superconducting ICs, photonics, carbon nanotubes and interposers. SkyWater serves growing markets including aerospace & defense, automotive, biomedical, cloud & computing, consumer, industrial and IoT. For more information, visit: www.skywatertechnology.com.
Cautionary Statement Regarding Preliminary Results
The Company’s results for the third quarter of 2023 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 sole semiconductor foundry 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, 2023 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.
Consolidated Balance Sheets
(Unaudited)
October 1, 2023
January 1, 2023
(in thousands, except share data)
Assets
Current assets
Cash and cash equivalents
$
17,346
$
30,025
Accounts receivable (net of allowance for credit losses of $4,699 and $1,638, respectively)
43,492
28,045
Contract assets (net of allowance for credit losses of $227 and $0, respectively)
37,733
34,625
Inventory
16,648
13,397
Prepaid expenses and other current assets
8,654
10,290
Income tax receivable
122
169
Total current assets
123,995
116,551
Property and equipment, net
165,818
179,915
Intangible assets, net
4,843
5,608
Other assets
5,053
3,690
Total assets
$
299,709
$
305,764
Liabilities and shareholders' equity
Current liabilities
Current portion of long-term debt
$
4,241
$
1,855
Accounts payable
14,378
21,102
Accrued expenses
39,381
25,212
Short-term financing, net of unamortized debt issuance costs
45,253
55,817
Contract liabilities
24,674
28,186
Total current liabilities
127,927
132,172
Long-term liabilities
Long-term debt, less current portion and net of unamortized debt issuance costs
37,729
35,181
Long-term incentive plan
—
1,643
Long-term contract liabilities
55,636
67,967
Deferred income tax liability, net
1,121
1,239
Other long-term liabilities
9,466
13,585
Total long-term liabilities
103,952
119,615
Total liabilities
231,879
251,787
Shareholders' equity
Preferred stock, $0.01 par value per share (80,000,000 shares authorized, zero shares issued and outstanding)
—
—
Common stock, $0.01 par value per share (200,000,000 shares authorized; 47,006,694 and 43,704,876 shares issued and outstanding)
470
437
Additional paid-in capital
177,286
147,304
Accumulated deficit
(114,878
)
(94,072
)
Total shareholders' equity, SkyWater Technology, Inc.
62,878
53,669
Noncontrolling interests
4,952
308
Total shareholders' equity
67,830
53,977
Total liabilities and shareholders' equity
$
299,709
$
305,764
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Operations
(Unaudited)
Three-Month Period Ended
Nine-Month Period Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
(in thousands, except share data)
Revenue
$
71,624
$
69,811
$
52,326
$
207,529
$
147,854
Cost of revenue
57,477
53,144
44,049
160,247
138,437
Gross profit
14,147
16,667
8,277
47,282
9,417
Research and development expense
2,233
2,396
2,580
7,296
7,223
Selling, general, and administrative expense
16,105
17,820
10,778
48,821
33,263
Operating loss
(4,191
)
(3,549
)
(5,081
)
(8,835
)
(31,069
)
Interest expense
(2,507
)
(2,950
)
(1,331
)
(7,928
)
(3,400
)
Loss before income taxes
(6,698
)
(6,499
)
(6,412
)
(16,763
)
(34,469
)
Income tax (benefit) expense
(96
)
25
87
(71
)
(44
)
Net loss
(6,602
)
(6,524
)
(6,499
)
(16,692
)
(34,425
)
Less: net income attributable to noncontrolling interests
966
2,066
440
3,739
2,125
Net loss attributable to SkyWater Technology, Inc.
$
(7,568
)
$
(8,590
)
$
(6,939
)
$
(20,431
)
$
(36,550
)
Net loss per share attributable to common shareholders, basic and diluted
$
(0.16
)
$
(0.19
)
$
(0.17
)
$
(0.45
)
$
(0.91
)
Weighted average shares used in computing net loss per common share, basic and diluted
46,445,309
44,743,269
40,669,322
45,001,998
40,245,736
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Nine-Month Period Ended
October 1, 2023
October 2, 2022
(in thousands)
Cash flows from operating activities
Net loss
$
(16,692
)
$
(34,425
)
Adjustments to reconcile net loss to net cash flows used in operating activities
Depreciation and amortization
21,651
20,740
Amortization of debt issuance costs included in interest expense
1,349
521
Long-term incentive and equity-based compensation
5,673
7,033
Cash paid for contingent consideration in excess of initial valuation
—
(816
)
Deferred income taxes
(118
)
(30
)
Cash paid for operating leases
(37
)
—
Cash paid for interest on finance leases
(649
)
—
Provision for credit losses
4,133
—
Changes in operating assets and liabilities
Accounts receivable and contract assets
(23,063
)
773
Inventory
(3,251
)
(4,686
)
Prepaid expenses and other assets
270
(1,212
)
Accounts payable and accrued expenses
4,868
16,705
Contract liabilities, current and long-term
(15,843
)
(10,612
)
Income tax receivable and payable
47
1
Net cash used in operating activities
(21,662
)
(6,008
)
Cash flows from investing activities
Purchase of software and licenses
(612
)
(400
)
Purchases of property and equipment
(3,864
)
(11,325
)
Net cash used in investing activities
(4,476
)
(11,725
)
Cash flows from financing activities
Draws on revolving line of credit
182,763
—
Paydowns of revolving line of credit
(194,396
)
—
Net proceeds on Revolver
—
14,522
Proceeds from tool financings
6,492
—
Repayment of VIE financing
(1,839
)
(765
)
Cash paid for principal on finance leases
(818
)
(1,158
)
Proceeds from the issuance of common stock pursuant to the employee stock purchase plan
2,305
1,800
Proceeds from the issuance of common stock, net of commissions
20,397
2,186
Cash paid on license technology obligations
(2,350
)
(1,150
)
Net contributions (distributions) from (to) noncontrolling interest
905
(1,297
)
Net cash provided by financing activities
13,459
14,138
Net uses of cash and cash equivalents
(12,679
)
(3,595
)
Cash and cash equivalents - beginning of period
30,025
12,917
Cash and cash equivalents - end of period
$
17,346
$
9,322
Supplemental Financial Information by Quarter
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Q1 2022
(in thousands)
ATS revenue
$
57,134
$
53,009
$
48,306
$
47,876
$
35,172
$
29,823
$
26,575
Wafer Services revenue
14,490
16,802
17,788
17,211
17,154
17,584
21,546
Total revenue
$
71,624
$
69,811
$
66,094
$
65,087
$
52,326
$
47,407
$
48,121
Tool revenue (1)
$
3,243
$
936
$
536
$
30
$
219
$
313
$
984
Tool cost of revenue (1)
2,861
290
484
46
152
200
984
Tool gross profit (loss)
$
382
$
646
$
52
$
(16
)
$
67
$
113
$
—
Revenue impact of modified customer contracts
$
—
$
3,601
$
—
$
4,685
$
—
$
—
$
8,230
Cost of revenue impact of modified customer contracts
—
—
—
—
—
—
10,887
Gross profit (loss) impact of modified customer contracts
$
—
$
3,601
$
—
$
4,685
$
—
$
—
$
(2,657
)
__________________
(1)Tool revenue and cost of tool revenue arise from the purchase, installation, and qualification of equipment for our customers. This equipment is used to complete ATS customer programs. Tool revenue is recorded in ATS revenue.
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, certain management consulting fees, CHIPS Act specialist fees, management transition expense, and SkyWater Florida start-up 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:
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
October 1, 2023
July 2, 2023 (Revised)
October 2, 2022 (Revised)
(in thousands)
GAAP revenue
$
71,624
$
69,811
$
52,326
GAAP cost of revenue
$
57,477
$
53,144
$
44,049
Equity-based compensation (1)
(438
)
(291
)
(456
)
Management transition expense (2)
—
(705
)
—
SkyWater Florida start-up costs (3)
—
—
(114
)
Non-GAAP cost of revenue
$
57,039
$
52,148
$
43,479
GAAP gross profit
$
14,147
$
16,667
$
8,277
GAAP gross margin
19.8
%
23.9
%
15.8
%
Equity-based compensation (1)
$
438
$
291
$
456
Management transition expense (2)
—
705
—
SkyWater Florida start-up costs (3)
—
—
114
Non-GAAP gross profit
$
14,585
$
17,663
$
8,847
Non-GAAP gross margin
20.4
%
25.3
%
16.9
%
GAAP research and development expense
$
2,233
$
2,396
$
2,580
Equity-based compensation (1)
(218
)
(217
)
(115
)
Non-GAAP research and development expense
$
2,015
$
2,179
$
2,465
GAAP selling, general, and administrative expense
$
16,105
$
17,820
$
10,778
Equity-based compensation (1)
(1,197
)
(1,459
)
(1,128
)
Management transition expense (2)
—
(130
)
—
Management consulting fees (4)
(3,522
)
(2,500
)
—
CHIPS Act specialist fees (5)
—
(1,320
)
—
Non-GAAP selling, general, and administrative expense
$
11,386
$
12,411
$
9,650
Three-Month Period Ended
October 1, 2023
July 2, 2023 (Revised)
October 2, 2022 (Revised)
(in thousands)
GAAP net loss to shareholders
$
(7,568
)
$
(8,590
)
$
(6,939
)
Equity-based compensation (1)
1,853
1,967
1,699
Management transition expense (2)
—
835
—
SkyWater Florida start-up costs (3)
—
—
114
Management consulting fees (4)
3,522
2,500
—
CHIPS Act specialist fees (5)
—
1,320
—
Non-GAAP net loss to shareholders
$
(2,193
)
$
(1,968
)
$
(5,126
)
Equity-based compensation allocation in the consolidated statements of operations (1):
Cost of revenue
$
438
$
291
$
456
Research and development expense
218
217
115
Selling, general, and administrative expense
1,197
1,459
1,128
$
1,853
$
1,967
$
1,699
Management transition expense allocation in the consolidated statements of operations (2):
Cost of revenue
$
—
$
705
$
—
Selling, general, and administrative expense
—
130
—
$
—
$
835
$
—
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 July 2, 2023 (Revised)
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.
$
(8,590
)
$
(1,968
)
Denominator:
Weighted-average common shares outstanding, basic and diluted
44,743
44,743
Net loss per common share, basic and diluted
$
(0.19
)
$
(0.04
)
Three-Month Period Ended October 2, 2022
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.
$
(6,939
)
$
(5,126
)
Denominator:
Weighted-average common shares outstanding, basic and diluted
40,669
40,669
Net loss per common share, basic and diluted
$
(0.17
)
$
(0.13
)
Three-Month Period Ended
Nine-Month Period Ended
October 1, 2023
July 2, 2023 (Revised)
October 2, 2022
October 1, 2023
October 2, 2022
(in thousands)
Net loss to shareholders (GAAP)
$
(7,568
)
$
(8,590
)
$
(6,939
)
$
(20,431
)
$
(36,550
)
Net loss margin to shareholders
(10.6
)%
(12.3
)%
(13.3
)%
(9.8
)%
(24.7
)%
Interest expense (6)
$
2,507
$
2,950
$
1,331
$
7,928
$
3,400
Income tax (benefit) expense
(96
)
25
87
(71
)
(44
)
Depreciation and amortization
7,092
7,207
7,083
21,651
20,740
EBITDA
1,935
1,592
1,562
9,077
(12,454
)
Equity-based compensation (1)
1,853
1,967
1,699
5,673
7,033
Management transition expense (2)
—
835
—
835
—
SkyWater Florida start-up costs (3)
—
—
114
—
674
Management consulting fees (4)
3,522
2,500
—
6,022
—
CHIPS Act specialist fees (5)
—
1,320
—
1,320
—
Net income attributable to noncontrolling interests (7)
966
2,066
440
3,739
2,125
Adjusted EBITDA
$
8,276
$
10,280
$
3,815
$
26,666
$
(2,622
)
Adjusted EBITDA margin
11.6
%
14.7
%
7.3
%
12.8
%
(1.8
)%
__________________
(1)Represents non-cash equity-based compensation expense.
(2)Represents severance and other costs related to the reorganization of the manufacturing and operations leadership team.
(3)Represents start-up costs associated with our 200 mm heterogeneous integration facility in Kissimmee, Florida, which includes legal fees, recruiting expenses, retention awards and facility start-up expenses. These expenses are not representative of our expected ongoing costs. Effective 2023, our Kissimmee, Florida plant is up and running and no longer in its start-up phase.
(4)Represents project-based management consulting fees related to long-term transformation activities focused on improvement in automation and operational efficiency.
(5)Represents project-based specialist fees related to our CHIPS Act application process.
(6)Includes losses related to the extinguishment of our revolving credit agreement in 2022.
(7)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 depreciation and interest expense are excluded from net loss in our adjusted EBITDA financial measure, we also exclude the net income attributable to the VIE.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231108444761/en/
SkyWater Investor Contact: Claire McAdams | claire@headgatepartners.com
SkyWater Media Contact: Lauri Julian | Media@SkyWaterTechnology.com
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