SKYT - Earnings call transcript Q1 2021 | SkyWater Technology, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the SkyWater Technology First Quarter Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your first speaker today Heather Davis. Please go ahead.

Heather Davis

welcome fiscal conference XXXX. and first for everyone of quarter morning to call SkyWater's the Good and Financial With SkyWater President Officer; are on Thomas Manko, me the Sonderman, and call Chief Officer. today from Steve Chief Executive I'd webcast Relations on being call live remind like ir.SkyWatertechnology.com. SkyWater’s you to at our is that website Investor available shortly available will after year. one The for concludes call be webcast the for replay remain and will

are forward-looking materially. subject results future During risks financial about results statements. any These expectations business to call, that statements this uncertainties our are to actual and could statements and our made cause differ

For uncertainties, Commission April filings including our these our Form discussion Exchange release XX, with XXXX. earnings and of on on filed risks please refer filed our and X-K and the Securities yesterday to perspective

made forward-looking of no statements. our we assume any are to of and statements obligation today update such as All

financial will call, we During discuss this non-GAAP measures.

is financial year Relations With over to our comparables me You first earnings non-GAAP let financial that prior note are can measures referenced of fiscal which quarter call on the that, reconciliation turn these all today find to versus measures in of the I must available the get or Tom. our a release, XXXX. website. Investor

Thomas Sonderman

margin briefly cover Steve the financial in Good to the quarter, We in completion to ATS record to been Heather. company is appreciate about XX.X%. your formation will Gross believe million on were over last quarter's successful an joining is an of the that technology earnings our testament or interest. strategy of incredible first March Today, our detail of at driven XX% you, Thank last morning to XXXX I'll revenue and working. XXX our this our of by our basis improved a increase XXXX. It's IPO SkyWater QX then $XX.X million, business. everyone points of call first net grew Technology. We journey sales XX% from acceleration ahead. further we're $XX.X reinforce our ATS highlights into opportunities growth advanced optimistic why services, an sales financials. month. In go the

$X.X net to $X.X Our attributable and million. shareholders adjusted was million the EBITDA loss was

Our is o the because world it focused waiting happen on for realization of impatient we're revolutionizing SkyWater promise by technology vision the to we're faster improve at tomorrow, making today.

a the co-create automotive our Our with are protection. to development our of announce This next-generation partnership an to customers. technology photonics customers, industry Since development market model a their first to multi-year aggressively committed transforming SkyWater technology product moving us as been we to extensive and I next-wave and time TaaS both our manufacturing milestone technologies of for technologies are IP we accelerating today, exciting am volume has companies service, with our one to After allows the reset Photonics. accelerating in with proud now business confidence is their quality and proud platform have to those of production. Rockley inception, collaboration, together.

with ATS also across platforms customer wins technology we the During verticals. to quarter, several our and pipeline continue fill new

emerging our platforms. both technology leveraged engagements and customer active Our feature-rich

customer is business world-class by strong Our and a acquisition supported sales capability development team.

technology In a continue strong base partners, to customer with of while the core expanding expect grow we strategic We our existing our add have built talent industry I we the to best would as four to we growth for customers. programs with in foundation collaboration next that like well the company significant service through differentiated these in offering. as our drive over they years as positioned revenue more to discuss technology a are our platforms of believe detail. several transitioned our

October, expansion awarded United Lincoln with technology in The the good depleted public Labs. fab of as October of Since progress extreme partnership fully private States is XX qualifying nanometer SkyWater last silicon-on-insulator Department MIT million Defense XXXX. our first partnership a completing towards made of $XXX part in we've our The microelectronics. Minnesota environment, of

our from were platform being with fabricated houses of is wafers process multiple our achieved space-based through copper USG access electronics for first and enablement direct Dual-Damascene radiation also quarter. Interconnect The design this successfully hardened program. The during rapid engagement early the price through

of second is area The growth packaging. advanced

Department execute programs of and reactivated. are to This the continue actively new We clean fab at room on fab The have our the hiring new employees, process County, packaging old advanced qualifications. Osceola who working XX includes both Florida. of startup existing Defense in been tool SkyWater

both their design several have as towards customers, also chains customer make new consolidating These brand who SkyWater new include existing are exciting well engagements. at that wins. value engagements good progress We continue to as

significant Skywalker customers. expect bring is advanced packaging to future current both value capabilities differentiated and domestically We sourced to highly and

epidemiologist The move to is technologies volumes technology, as microfluidic bio-health. expertise point new market we proud over years. these solutions. continue robust these accelerate potential also next are several customers. the ramping the Leveraging to Many based devices, on support realization third capacity area few MEMS into high technology executing management in diagnostic of for existing is the continue one-time couple and use power of our our technology. providing on for remains our of new of the expansion long performance, of legacy care of SkyWater plans. platforms. applications This SXXX a connectivity COVID-XX sequencing feature-rich mixed our IoT our our on and the with DNA includes comments focused platform to work Minnesota producing Budding signal automotive a And fab finally,

of products highly bring to for continue their our new to differentiated working including, market. company with also a SXXX We example, platform, telecommunications customers to rapidly is us new that attract one with

with power second planned differentiated power MOSFETs pace moved two into discrete keeping have management our half in addition ramp customers our year. qualification, this the these of product of of In

assembly is worldwide Minnesota partnerships adoption the many trends increasing the importance of advantage and only sourced exciting new time in directly adoption evident to when a reinforce and domestically is our business the possible private is in a SkyWater greater in recent programs Our fuel semiconductor from of public nation's nation our At our to to XX% advanced the Florida. on manufacturing our of manufacturing, the We SkyWater in carbon further to we're for honored development change. the call Advanced packaging R&D to the financial at been of focus turn Osceola Currently, is strong importance We States. funded fabrication, co-creating with in of semiconductors information XDSoC has believer affecting in wafer the chain. nanotube believe to semiconductors and across manufacturing of the across United our County domestically and rad-hard model the the final performance for research, DOD appetite remains domestic very the of as Century. encouraging. by entire test. occurs able Technology-as-a-Service semiconductor mega uniquely semiconductors This summit SkyWater the to Packaging, XXst semiconductors now value of the President was is critical which entire take believe commit to positioned It to are chip importance represent renaissance and this I over customer-driven, the increase on must be of to industry. value Biden's partnership sourced coinciding with our semiconductor chain. Steve never will for excited I accelerate of quarter.

Steve Manko

team growth to grew increase as to has Tom. first XX% of we results execute a related XX% XX% $XX.X the million. driven a sales on was customers million XXXX. ATS revenue public quarter versus the million. $XX customer financial million, Services need. were funded call purchases. ATS’ share revenue first in for Thank earnings company. SkyWater recognized decreased disruptive $XX from by you, the of sales for built tool And excited Wafer opportunities on an our to the tool first to technologies am I quarter that Net growth $XX.X

the increase are the to in tool in QX part million our $X.X additional in increase $X.X quarter we developing new $X.X and gross by making XX.X%, and of April, margin last our ATS sales, throughout EBITDA including business. Adjusted from $X.X was million million improvement IT initial recognize enablement and slightly used Cost our our funded supply usual. the primarily ended is our corporate of and including in And We attributable QX to The is XX% tactical Cash the anticipate As $X.X The approximately and XXXX. government to to related was driven $XX.X And year. was from already marketing sales. Wafer prior QX and offset security under tools debt results tools $X.X million $X.X equipment spent business, operations ATS our with related CapEx The the we anticipate lapping Total in higher $XXX sales year. by We our our an customer gross and $X.X XXX and of million, increasing cash general million facilities expenses numbers business. expanded level investments customers. sales existing in which Cost and services XX%. outstanding depreciated gross proceeds first of services in employees, year. in such, added SG&A million, function. IPO and development Total increase of of as our the building in ramp improved high margin increases We IPO customers engineers sales technology Net we working million. and decline revenue by CapEx inorganic in The was growth we offering needed capital to increase in is equivalents. was support using services $X.X foundry and last capacity agreement capabilities our QX Services of original as million, operating compared other up improvement SG&A the mostly quarter, than financing, was model, were proceeds in investments and quarter quarter from the million led their our at was of profit depreciation including cash million. funded was year. ownership. to $XX.X million. further basis included primarily $X.X for million to requirements. points. to profit offer of Margin We're procure strategic cash $X.X purchase related accelerate improved platforms. fully in was at this these organization. in relations for qualify SaaS accounting of million last first million sales $X.X technologies XXXX. first public We upgrades, leadership, our offering the for as of an the purposes, the customer design development before R&D quarter

$XX.X that to $XX.X our XXXX compared had building and year quarter in April teens, end next of changing and the generation outperform semiconductor QX growth semiconductors we world-class are way We're this million As customers, beyond. at expect the XXXX. anticipate industry we available We and of first X, in with XXXX and $XX.X XXXX. live. our inventory million was strong growth co-create the do the backdrop Packaging growth in business to year-over-year a services a our manufacturing on industry revenue of of Total to revolver. expected development of the With the million, we team Advanced in

utilization by degree our Excluding significantly We customer we impact growth, new sales which revenue, and acquisition. programs improving anticipate tool our achieve driven year customer grow existing expect healthy Wafer has to to ATS full as Services of the over sales variance XXXX. high a customer is quarter-to-quarter, of both

partnership Wafer transition customers Services. anticipate to also Wafer into volume a key as and grow We we expand high ATS Services

which our environment, growth We and online, have an our being capacity now anticipate also operation biohealth, with incremental year Packaging, long-term, Advanced outperforming Advanced Florida connectivity line driven technology SkyWater which extreme revenue growth already platforms markets adds microelectronics, detailed, power Tom and the be to opportunity platforms. by We high-performance industry. to management and and full our Packaging top are

depreciated growth, In Equipment acquired margin the fully time These Minnesota annually. and were million we scale fiscal the years. become our over there prior by the the facility are our improve addition our of to $XX believe several XXXX, and at quarter creation of depreciation ownership. expense of gross fully depreciated will first next in SkyWater revenue opportunities reducing under already to assets

planning through our space kicking we as Services, automation improve By clean initiatives. Minnesota our Wafer operational have implemented are Wafer Services customers a and for off fab We our ATS our to transitioning mix. Services utilization actions successfully believe room will margin mix excellence improved and Wafer we to transitions production in higher expanding margin

the for Packaging in We our are investing grow Florida platform SkyWater long-term. new to Advanced

in margins XXXX. dilutive However, we will to anticipate be this gross

We rad-hard to expansion beyond. our expect program support XXXX in and margin gross

qualification related through summary, of investments diluted are into and the margin. We this goes to goal to investing the and and we our production Until in revenue, gross lot to tools our shareholder SkyWater. long-term progress rad-hard to will back be Heather calls. anticipate turn fab, your and technology. There's generates With excited questions top-line these to to be processes the look forward create of about I on SkyWater also expansion you is our In welcome value that, earnings growth. on I'll on and a call future at updating

Heather Davis

Steve. please on you, on Time. is conference X:XX website Needham the open the Thursday, the at ir.skywatertechnology.com. at XX & will Conference SkyWater for Thank p.m. be for line presenting May Webcast available Eastern at questions. Media Operator, Technology our information

Operator

your Mark with the line from with Your Jefferies. Instructions] [Operator proceed comes question question. first of Please today Lipacis

Mark Lipacis

taking for my Thanks Hi. questions.

for started XX your You process interconnects. rad-hard copper running

that you recognize plan going expecting. forward, Packaging we from out in on a Wafer And Services? think ATS breaking March earlier I bit this separate quarter? Did little from were and do Advanced revenues the was than then you revenue

Thomas Sonderman

Yes. for voice. joining Good call, to the Mark. hear Thanks your

what development, copper backend. rad-hard Labs. with the we're still technology is the fully as We're then done being on technology Lincoln doing qualification. far interconnect the front SOI That's depleted proceeding call it of is parallel, And our we as As end the which in starting up MIT process, planned.

it's until So qualification, right no all revenue get really now into XXXX. generation we technology

AP, it the be the breaking out. as far not As will on question we

again, we're offering. engagements ATS Wafer that into Services another ultimately type and will is technology model. capability our alignment It think evolve AP with both service of have I a that as

Mark Lipacis

– on you on the today that had Osceola you or Florida XX what's facility, is also And on taking arrangement And you the XX was mentioned the – us of you regarding have operations of to that that Got with of equipment what the understand I you. employees revenues support I could based a of on can kind of County think part as of facility then capital the couple added And acquisition follow-ups. operation? just level with the in This equipment. there. employees. took kind And the those this additional help new new

Thomas Sonderman

Yes. Again good questions, Mark.

employees we as you far employees the and were essentially know for last start SkyWater. As the the hired with that question work new backwards,

over. the Florida, from partner Central them of before County Some over of carried the University with Osceola which had took SkyWater been

So offer employees did those over a They're all up few starting to transfer the we SkyWater. facility. of to actively engaged with

As projecting it's far as qualification. projections, would say to currently It's the revenue of really too out early revenues facility. in I start the

our the capabilities to the for when qualifying working in restarting awarded equipment programs it And existing generating while to we're programs, DOD advanced three been are took over. then customers revenues start programs. had Those There with to that existing additional been the packaging. have We to facility bring be was those our actively able from already restarted. we

expansion as multiple So chain, well well. supply customers as with this new the was of as essentially talking an

chip I the have funding facility relates of is the believe in packaging, industry. to as path is we we advantage thing do other reality. source and chips government fully we're domestic that to fastest the wants to that it positioned expect that U.S. to and take the advanced a the a mention for that have act The And we do like becomes

Mark Lipacis

Got you.

for had. give announcement the Okay. around Google-sponsored Last us you. shuttle? are that may. that's XXX Can nanometer multi-project and the what And some I all open-source the program Thank is question What you you if color guys? I wafer implications on

Thomas Sonderman

Mark. Thanks, Okay.

engagements. with offering for XXX markets disruptive develop computing was immediate advanced nanometer really open-source an specific markets. and XX to SkyWater platform IoT SkyWater Google for approach applications our using has customer create to on yeah, partnered this The result the a So of new

The a IC miner first platform. five variety and has customer designs of as is oversubscribed. on It's it. running the was capabilities. different process a chip. shuttle course system risks multiple cryptocurrency has on through which another got XX It got again or several It's fab a open is It using unique It speak. we open-source other designs unique

leveraging that but also other only I'll is thing circuit mention IC existing The is not developers. designers, software

a program. the works, approach terms of but and what industry in We're it a disruptive not open-source still say particular about but can provide SkyWater, as will about benefit potential out the the excited So I'll this it's be excited data the we're really the opportunity the if whole. only

Mark Lipacis

very you much. Thank it. That's

Operator

line the question Sankar Krish Cowen question. proceed with comes and next your from Your Company. of Please with

Krish Sankar

the and a my of Yes. Hi, had for congrats I the on first taking Steve few call gate. And Tom thanks earnings question. questions.

gross is, split between Can expected. you we on the wafer and stronger one gross than in what give the First the some solutions quarter? margins color ATS came during margin

Thomas Sonderman

joining but Yes. margin to we Good XXXX our grow for break at us. as it's Yes, gross Services and plan Wafer between morning, the and beyond. in don't ATS, margins thanks and and expand our

to business, our as business, perspective. is we margin higher ATS as an can growing expand from expect margin in communicate revenue line ATS top successful we're our gross we Our

Krish Sankar

Got for capacity of And I have then in Or you the data other it. factory is it. and then just just stocks terms the is today? for the what follow-ups. Got what is, today? say, two wafer One minute the per utilization can

Thomas Sonderman

optimize this our this not focus atypical up. Thanks, as I'm SkyWater It's is based activity foundry. the mix on ATS Again Yes. actually per and Krish. mix. is margin glad we as recognize we important Wafer Services What that, on mix. you brought to is which well

to do milestones, commitments. optimize per is well customer obviously focusing that delivery done meet production by the to This need activity. what as Our margin to is as we maximize goal on to development

target that above are running we our so And is utilization. I'll what say

because we and his – focused direction year, real our general, per on specifically quarter we're about is the And were focus last in Steve we opening As moving that margin that's accelerating confident remarks, activity. ATS. underutilized last said But excited very in on in.

Krish Sankar

curious, of how the it, grow customers Got mentioned about just onward to us just That's you XX% And to you it, increasing understand of of let's your Tom. helpful. improve today question then I for of kind is ATS like from gross down from end, from kind list driver big one that the ATS, going levers increasing got margin the you're I'm your and can last have to margin gross of big kind give kind the XX% that. a say you road.

Steve Manko

really to sure you understand sure. Happy Yes, simple we're that And what do so. I really there's make to on want do plans if that. our to levers are. focusing

already mentioned, we drive to I we margins higher as expect grow revenues. ATS gross As

we Another lever costs that is facility. manufacturing our covering can obviously pull within our fixed

about ATS high number customers coming a having keeping moving Tom that to as some another of we continue alluded high successful production. richer that will And that, a and our the into as So we we're healthier we have margin through mix doing to as from Services believe high Wafer expand Tom volume efficiently Wafer excited margin facility can running mentioned, manufacturing of be be lever. activities in there volume from Services, our we

Krish Sankar

helpful. it. Got Super

you revenue one do What in the feel quarter? tool housekeeping. Just last the was

Steve Manko

the and the tool typical was tool on that's quarterly revenue $XX higher The rate in run quarter a revenue for million basis. than clearly

Krish Sankar

Thanks, Steve. Tom. Thanks,

Thomas Sonderman

Thanks.

Operator

Your with proceed Harsh comes Kumar with from Piper Please next line question. question your Sandler. the of

Harsh Kumar

solid call on results. first and Steve first, Yes. public two a Congratulations and then Tom. company, Hey, as secondly, things,

And the us times the Maybe you anything for of confidence confidence with do really for could business? as where sure. have I a for growth growth Tom see is progression you that. the noted, and a several had lot the about, questions, or the appreciate processing ATS year. in you one, you talk business coming Any the of one that from. how help call, you we for like numbers second couple in of investors ATS backlog the activity, – qualitatively, can rest So

Thomas Sonderman

is innovate to obviously allows exciting parts, very ATS, it us Yes, question. because with good customers. our Again,

that innovation tying it’s for course it I the growing the think of to lot going refer MEMS I of on, of devices, This as to what which as are there’s to some platforms. appetite we’re whether emerging a is relates a trends getting mega of many traction.

We we’re with in the with we’re is get Infineon to our SXXX some getting program. about our traction capabilities rad-hard ability space. Obviously, some very also our excited adopter well. that unique The of progressing capabilities early partnership have in beyond

actually because your would degree as do as a those do ATS, say, about into of out we far of I to very book-to-bill, as healthy backlog. going Some then a offer And have customization we production. other, question start prior the just

that expand to the a confident working with engagements customers that we’re are their We’re of with lot us. going

to continue traction, really our said, just we that’s to is grow industry. get new So important. customers. get business. service in We as model can customers the expand our really with have of technologies That to don’t existing business – resonating I We relationships think more the

would to – so do And we about not committed production. wrapping selective say really we’re we’re capability, together. very them good we come bring customers ultimately I ATS but that’s all volume through – And that we when our but to just how bringing on, about feel the them

Harsh Kumar

thanks, Tom. on one then that Hey, topic. for another you And

one the expanded what you Wafer quarter your you this Services help to metric margin I us of maybe kind with give engagement can of you that? us or saw many of customers Wafer think conversion of ATS that mentioned to in any ATS quarter? Services. the drivers Could is for around Steve How gross

Thomas Sonderman

are so about first this excited And question. we really paths of transition It’s customers great Wafer out – those last mentioned where ATS by Services. and multiple customers it’s of year. have Three quarter. Again, in the of other then the will really into total customers, ours. I in transitioning this moving the I year as And Services quarter, sorry. Yes. this – also mean partner XX Wafer we multiple as And my that year another opening They’re Photonics Rockley is remarks, long-term be for moving unfolds. year year, have

Harsh Kumar

Cypress got a spin from Okay, and came out has one, great. Cypress by you taken as And off then of last Infineon. a set the

a done just of this curious if had Curious, down customer – But sort of customers how scale job XX% quarter on an you’ve you’ve up year, your abnormal some quarter. concentration you each maybe great us update many, and top customer. bringing that give where and there. number each a had your plus So you could largest

Steve Manko

you’ll out I’ll the file of this question. our QX when talked XX% concentration looking broken And were customer our our of had that we that Form revenue about customers customer take From was the Yes, three we see the XX-Q. revenues. at overall for earlier concentration revenue, call. a in sure. One XXXX that above we standpoint significantly higher given tool

So concentration that’s customers the revenues. had of more QX XX% were forward, going not of we indicative XXXX our but three or that

Harsh Kumar

I appreciate you. Thank it.

Thomas Sonderman

Harsh. Thanks,

Operator

question next Your proceed the Lipacis with Mark question. Instructions] from line Jefferies. with Please of [Operator your comes

Mark Lipacis

working into queue. the for me back thanks Hi,

saw second staying or I on Services supply Wafer talk material the passive your So are constraints business? and or else you thinking impact, about raw industry. layering of any about is times in customer lot how experiencing maybe the a supply into your impacting at the about hearing order constraints we’re they’re Can anywhere you are – that’s

Thomas Sonderman

question. that we’re Yes. believe we good whether any chain Thanks, wafers current it’s gases in really Good raw chemicals, Mark. silicon terms or At constraints transparency. of challenges experiencing time, supply not this supply have we

not we’re as us. but it, seeing concern that issues now, watching any of actively We’re

Mark Lipacis

can – us And sense your are you. breaking vertical the by out then market? down of ramping automotive guys called you related a and you provide Do revenues Got production how you IoT activities.

Steve Manko

question, the Mark. for Thanks Yes.

right and the then the generating we’ve And our don’t sensitivity market we the Services, DoD, primarily talked like with vertical give we’re making lot which as what we’re of of we’re what give clearly what We from partnerships you have generating about with announcements been the customers, Given aerospace past, Wafer doing our defense some also revenues. we’re and we now. with on information with automotive we’re market the how revenue well. doing going the to the breakdown funding and a of we in can IoT the in with

Mark Lipacis

does Got credits this? then this plays extent do where what of – versus out you you. You choose act, expect SkyWater? the give how like, this? you mentioned this To from think funding. And this tax us to a had Tom, direct for be is SkyWater? you chips benefit How sense expect manifest to Can you how

Thomas Sonderman

Yes. a leading Again, few the summit back. Secretary Intel. Department meeting gathering Biden semiconductors information come to President on edge there’s that advance another say end dialogue activities, all know value is been is amplifying the node required And follow to had certainly I’ll on Raimondo of actually technologies, message chip which an entire a innovation that lot the of weeks tomorrow we to law great investment a I’ve related just are just across they’re based we’re from a driving is Commerce. And other going where timely, to whole I which the with lot lot There’s going that believe eventually of question. Very TSMC, on going physics. of displace, Samsung, about lot There’s of chain. Moore’s a the But we the and the on. Obviously, can’t needs focus occur. is a

patient of excited within independence result fracking focus. we're when these I believe the going to is technologies. for So believe to be some in the only got we're our of why that that's through waiting in but well and are to industry. resonating. It's type certainly we're petrochemical R&D doing lot traditional basically transformation. manufacturing a to reestablish our us as technology that way not will in message in really to differentiating disruptive leadership, nation created approaches and as of more same really That's And is And reestablish analogous I allow the the that, things a on focused

Mark Lipacis

attributed questions that non-controlling Got in I modeling it. interest of there's how forward? And for is that the statement. think of about income Steve, What line a item to, then we about $XXX,XXX going should think couple the

Steve Manko

Yeah, sure. question. Good

have see a related in interest to the and we're are more you'll that XX-Q Bloomington, for issued. we So leaseback information entity But on our the approximation to facility of and what VIE statements when the good variable that the that see Minnesota, financial that Form footnotes likely seeing triggered relates for those what XXXX. and as sale the of the you're in guidance, of a amount we remainder with accounting transaction that's That's you'll that primary of through.

stuck VIE that is time not take but a is in the are the when to point We away, near-term. not there that in accounting go forever could place likely with

Mark Lipacis

on is an accounting a And – it. – there is of interest item? cash flow that a Got implication is a standpoint that from there non-controlling line

Steve Manko

related significant a now. not flow that to cash There's

Mark Lipacis

the $X.X And it. this year? drop million rest amortization, it for in expect go we got to we that as of the then bit? XXXX into do that And to is then think quarter. a down depreciation about the How Okay, was

Steve Manko

Sure. Yes.

really be depreciation and from a see goods basically through investment So range on before be we're that's that's amortization, and $XX the related million sold. facility putting of facilities really and technology. through will And depreciation to that online see it's is million XXXX. coming $XX for of year the coming to Minnesota our and rad-hard gross depreciation drag of What in we're to communicate the primarily increased you'll another targeting margins that as our we going cost approximately we will in a making our depreciation

Mark Lipacis

an Got then do it. the share the count June estimate you have last And in question, for quarter?

Steve Manko

outstanding. and XX Yes. quarter, go just to filed The was shares that what one of million June the that’s count back communicated was share around for

Mark Lipacis

All you. had. right. all I That's it. Got Thank

Operator

Raji proceed comes with Needham line next of Company. your from with & question. Gill Our Please question the

Raji Gill

IPO own talk Yes. in results Steve you and the Thank power strategy was and In you. congratulations and about capability MOSFETs the with past, your you I U.S. demand your the wondering seems a developing and could great focus needs IGBTs. to management be strong if Thomas, as growth, about your management. of area sourcing. particularly And on on power for well. That talked

So I of get growth as want part your on strategy. thoughts of that long-term to kind your

Thomas Sonderman

for is us MOSFET joining real Yes, differentiation. great the Raji. question, strategy call thanks in for The

a different we design of expertise our translating So ironically, on platforms CMOS using have MOSFET several and into that been kind our technology. working grounds-up and for

a design. bringing typical So we're going not to MOSFET be

based differentiation. GaN not domestic actually to drive also Obviously, film-based just sourcing like solutions. solutions, things move important. is leveraging is but real are silicon into again to The We based long-term technologies also objective

So eventually capabilities a strong solutions I into GaN with believe for which our space. based in unique create our to is and that demand then we really customers strategy domestic evolve think there's innovate, technologies,

So second definitely bringing half a excited us, new in for in of remarks. year, my of focus production area of two the we're and it's those programs to I buying mentioned to as opening be this

Raji Gill

Very Yes. good.

the XX kind think adding additional of I XX lower rad-hard XXX in profitable. both more past, mentioned adding nanometer of terms additional the but capacity nanometer nanometer, you volume, In is capacity, on and

to get flows? So terms relates just or a in that it the as capacity overall process sense you're I margin to to add as wanted of – of how activity, you well intend balancing mix as per

Thomas Sonderman

Yes.

The our existing XXX we So below out think you carbon nanotube have. as very mixed to signal We're of again XX on also program. is we at That's and today. install always in read-out the of have kind of base paths our have offering how platform. being and looking one, get that technologies ICS more three path our we rad-hard focused

do Cypress that So around plan we're clean platform equipment. draw but capacity. expansion that'll excellence focused specifically converting to to in very that'll and using on more just we expanding capabilities, to And room XX, not that we'll beyond That in further to for used other and traditional, said, we have targeted operational XXX interconnect the having our activities be and test be on around, floor existing not again without And that actually what just add automation facility. rad-hard. have copper more an run we drive

Raji Gill

point clarification, on this, maybe me your Steve, than wrong Very and the lower I'm if margins are services ATS wafer And of a but correct good. revenue.

lower that of You margins, had is pruning and over. strategy Wafer the some margin? you to expect, How customers to mentioned that gross grow sales of if Wafer significantly has utilization Services in transitioning terms of kind fit as kind overall Services the does expand

Steve Manko

Right.

newer in way fit will solve into that average expansion, also that would enhanced drive we technologies price be and get for gross into an expect Wafer higher production margins lever would as Services. to So would as the sale we bring margin

Raji Gill

Okay.

Wafer margins So Services, inherent in the it's expanding growth

Steve Manko

Right.

bring production. As things into we new

Raji Gill

it. Got

with expect broadly, – from of innovative be these start domestic conjunction U.S. last they have model, And that assembly proposition controlling feedback are great. innovative kind the kind What's been business new of value to advanced of the basically move the push just just in the you. been I'm providing as Okay, more learn seems operation, more would about customers a packaging, business that the business Thank the to good the customers the to and wondering I model has that for whole to advantages manufacturing to question, timing. your this test. you're kind fab and on getting semiconductor what customers model? process wafer that will nano them

Thomas Sonderman

thanks question. for Again, Yes. And asking. great

doing think the important to that the engage it's think gives then creates message. the to it's we're get equipment, product do but process the we a their product The to virtual I creation we way on working production same their the them the a ability optimized process same it And with customers IDM. that obviously facility, more together, engineering same all – I team, of time because same on And on during the robust like an optimize the that We have again team. opportunity while to accelerate volume. to we're design. gets our that

core quality, of there's decades. a a of And so for the They that automotive literally get and is time business of been market advantage. assurance has because to ours level

of relationship same is Cypress our enjoy trusted that other when facility to relates back to our We owned IP. and protect the all U.S. benefit. IP Going commercial get customers as the and to government it

the along So the the to and of it's market, the have time all with about their along ability ability protection process domestic IP optimize the to and simultaneously, product sourcing assurance to way.

I going happening that's times IP at where of think here R&D a there's domestic the protection in the on beauty at Skywater. do especially in this And renaissance real things, question. that's of a on, is reluctance lot manufacturing especially new to innovative products

Raji Gill

Yes. Thank you very much. Appreciate it.

Thomas Sonderman

Thanks.

Operator

Your Harsh question. with proceed Please Kumar your next question comes from with the Sandler. of Piper line

Harsh Kumar

Thank you follow-up. for Hey ask a to guys. opportunity the

So point, both customer the U.S., you at center Tom, kind the there's that Europe a if a by two and for play or here on to the to then around the of seen of at color macro a There's customer conversations, U.S. things those. with pointing you forces fit push higher activity, in any of are at have to I'm kind problems, level? going this powerful and geopolitical curious that there and work wanting make level.

Thomas Sonderman

again, COVID when and sourcing appetite China great There's And do repositioning to that timely. out And the wars tariff of out started were back again, the an of question. of our lot Yes, on that the United then supply before States. hit. definitely has when going very this a again of chains

we're think of unique position that. so And I a take advantage certainly to in

is technologies getting their with U.S. concentrated around many relationship Our us our some with with Infineon some example out as a great we've other of sourcing us. well years chain who made the are of as they're where for customers value expanding

here our facility. to do that have doing AP Florida customers are that at that want now We overseas

already is momentum underway. the believe we so And

gets center chains the that. I is this the the And that's think about excited this future. making right certainly the what of of decades is Skywater really going supply and be us in to recalibration at

Harsh Kumar

Thanks guys.

Operator

with Company. comes Sankar from of next and line Krish Cowen question. Your proceed question your the with Please

Krish Sankar

about nanometer of copper I seen ones to in for I at follow-up? at do Or have kind haven't Tom. IoT Do two you follow-up. customers to while you, XX? your Thanks for One a is point migrating stay you QX. XXX and solidating have a XX going for my then taking Yes. think out auto quick I just [ph] the you mentioned copper some start we're this think

Thomas Sonderman

to it's we XXX today. interconnects. include offers point over it's certainly aluminum our of not advantages Obviously, and be aluminum. Copper those evolving But that lot expect to Yes. all would We at evolve copper unexpected to capabilities. some XX nanometer a platforms

we to platforms for So time both as have expect both offerings evolves.

focus Of we for is once our aluminum it play expect platform, up that to course, interconnects complement can our alluded I now capability right for copper standing but our backend. adding as to be capacity rad-hard to, a

Krish Sankar

bumping facility bonding final packaging. And it. is or my it Tom then is for traditional question while Are Florida Got or you XXX% any all there, doing packaging? advanced the truly advanced

Thomas Sonderman

it's say advanced today Yes. I traditional all would packaging.

it's AP United our to et fabrication, with within we Skywater directly you're partners leveraging to final provide assembly And and done that's wafer or capabilities. our a comprehensive supply cetera. in test provide vision chain, not to but is whether U.S. we here of just have So talking and the that are traditional part partnerships. more the to That interposers, States do through said,

a that our from believe strategy. appetite certainly there's for Now base. customer that's strong we the And very

Krish Sankar

Tom. Thanks, Terrific. Thanks, Steve.

Thomas Sonderman

Thank you.

Operator

I’d in back There for are turn to the at questions closing this time. call queue no further presenters remarks. the

Thomas Sonderman

we're in We're thank for again, partnerships transformation in proven excited to to private you this I joining a call we while just country's on want of model we expect joining importance expect our Thank the continue service to at again to a us. public, the recognition be work, continue time exploit about future inaugural Skywater leader believe industry. we a the in sourcing. our of the as enjoying, for and And that technologies domestic to the everyone has and today. unique importance manufacturing, us our of of semiconductor at Obviously, very Skywater. recognition

Operator

you your And conference this Thank concludes participation. call. for today's

may You now disconnect.

SkyWater Technology (SKYT) 19 May 212021 Q1 Earnings call transcript