SKYT - Earnings call transcript Q2 2021 | SkyWater Technology, Inc.

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Operator

Good day. Thank you for standing by and welcome to SkyWater Technology's Second 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] Please be advised, that today's conference is being recorded. you. Thank Instructions] [Operator like Ms. the now your over speaker today, to would conference hand to I Davis. Heather please Ma'am, ahead. go

Heather Davis

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

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

uncertainties, the release filings made All to XX, no any such and today For yesterday forward-looking statements. please Form refer Securities to and April update are we Exchange earnings our a our with discussion filed including on and XXXX. statements Commission, X-K our these filed and obligation of of prospective as assume risks

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

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

Thomas Sonderman

of briefly capabilities. cover specific strategy. business a of financial disruptive providing Heather. morning review of I'll into the quarter's Thank Today to your last up good dive further a start And I'll and on deeper also you, growth knowledge to a our then SkyWater's everyone results exciting our broader area have call.

attributable second Wafer Gross advanced Steve increases year, Florida, compared net Services by into and This quarter, progress Advanced to to million recognition in and was then included the margin SkyWater, funding remains million tied the last shareholders sales Services. our on occur, our on government we X.X%. experienced go the and to quarter, difficult financials. made was delays. $X XX% on grew solid adjusted fronts executing both $XX.X packaging also loss during In Technology but existing EBITDA that SkyWater expect I'll timing to programs revenue US fab. new but further Net multiple details driven some to This negative forecast. will was $XXX,XXX. focus to quarter, solid

wafers due dynamics We also delay experienced the monitoring produced of put tied of market being recognition a inventory a alternative an These wearable in to the the for the wearable the to rapid health for vaccines. detection repurposed of application. COVID-XX early in are majority temperature introduction for related revenue and for now wafers new

significant for customer. restructured is an the the revenue program for Lastly, ATS with that XXXX forecasted being company XXXX, was and generated in

We expect very our revenue in it year-over-year of with SkyWater's beyond. and to and growth top pleased am XXXX. line confident performance approximately in long-term I for resume XXXX XX% target remain

realization the tomorrow. SkyWater at improve is world for because technology vision waiting we're by of revolutionizing Our promise the impatient, to

So today. happen we're it making on focused faster

allows model, business and to protection. IP time with with extensive customers, their of TaaS our our us confidence accelerating Service, manufacturing a market quality next-generation as Technology the transforming automotive co-create industry Our technologies to

and TaaS growth in potential artificial offering. corresponding for quantum a expand expect market intelligence, computing, technologies, unique management to the As continues we see for power sensing to demand various our

with we long-term because the manufacturing, multiple of intimate to buying been the our characteristics a customers ATS established key have During has This model. customers. wafer multiyear R&D a in TaaS the the making to we the of testament years is achievement transition of quarter, of microelectronics began literally attribute business the relationships and

term. these they create in do value, expect a the shareholder J-curve long-term effect transitions will we near While drive significant

as We Services see RHXX, our to continue and scopings address extreme on to Wafer with are us progress first and multi the our necessary deliver companies announced enhancements by anticipate needs [ph] substantial project multiple platform and environment, this US for the We radiation-hardened ATS growth launch and rad-hard interconnects devices interconnect to the future continues copper satellite runs. shuttles new existing for edge also make using shuttle microelectronics, mission-critical which for We SkyWater engage strong mix technology, on in defense aluminum wafer enabled program technology. leading pipeline the in government our systems. leverage RHXX of will technology. recently RHXX shuttle interim further with speed to performance

ecosystem access milestones We that support this design work the of our and also we key support market necessary of partnership engagement, technology development the our RHXX enablement achieve enable will realization applications. Through the together radiation-hardened CAES to qualification to announced design to to with strategic platform.

against we very as ASIC bring industry continued excited realization rad-hard are to testing. working with extensive they in like rad-hard product We leader our qualification SkyWater's technology as RHXX prepare execute experience be an their milestones RHXX platform. also CAES to for SkyWater to

a expect near on qualify screening are growth new to the drag We but co-develop genome develop ATS area win the to this years of diagnostics important and health our critically gross in technology disease program several technologies nation. seeking space. to we quarter, continue to a term technologies our across to industry. microfluidic they our as second be margins investments care protein for over long-term SkyWater, anticipated and performer bio-medical and Customers is other the business In with for rapid the sequencing the a business SkyWater. strong platform be as rad-hard in continue proliferate next This for driver demand we MEMS-based are

growing the business. and SkyWater ramped the fab to our Minnesota automotive support the IoT segments quarter, aggressively of During

was built programs we into high University selecting of for Florida by fab business the in This Wafer competitive operator, great the management into begin in COVID-XX a company value the Osceola the new process. a in year. the space and Central After second XXXX. February Center the sourced advanced County searched multiple Kissimmee, entry our packaging XXXX opportunity platform. Osceola advanced highly power in SkyWater changes the the and slowdown ultimately SkyWater addition, as semiconductor Services, NeoVation advanced created bid at half Florida. priority its is progress ATS for after This domestically growth of funding which done a in transitioning operators expanded reach our made by across County our related packaging silicon-based comprehensive ramp to significant differentiated including packaging In will platform, chain overseas. customers Today to for a offering of primarily expand UCF,

part a chain. secure dedicated solution nation's and our create domestic States fab one in packaging few United is to the advanced supply facilities Our of is to the be anticipated of

customers architectures, expanding plan also existing new both the fab. capabilities their Rockley with also from intent fab. programs X.XD is technology in which with at us Florida We heterogeneous integration that Florida, enabling most advanced advanced engagements are I partner, size move the am announce to product SkyWater, XD including long-term packaging our dye performance. reduces Minnesota and customer to SkyWater's industry programs component to two It current our excited to will and Photonics. enable to density, Florida bring capabilities our improvements while improving our

our as room In aggressively allowing is we with customers. in to space packaging clean addition, solutions currently Florida, co-create expand there new advanced open us

talent with qualifying advanced focused be with in is continue in expertise. SkyWater. hiring deep out year, build for and key experience this on the NeoVation fab place organization. the proven we foundry second An fab key now packaging operations and director to operations the facility, existing differentiator offering Center the of a We to restarting the for In expect tools we quarter this

these Senate's our is of existing Florida term. the space. for long-term efficiently to of expand Our the in long the partnerships. marketing half margins the existing in team to multiple we now and the chain confident infrastructure, Representative constraints pressure as solutions over three our Phillips By business and fab sales, and our advanced discuss facility, supply including recently types has the have semiconductor potential The We with year on revenue improve programs company further long-term started Senator but highly SkyWater the passage the packaging stream Minnesota have finance, of able we another the contractors. these US we and about Klobuchar high-margin further executing gross held Innovation at of first resolve began our investments leveraging and executing microelectronics into will applaud to a put been advanced into hosted of capabilities public on output. DoD to SkyWater our for private remain packaging Act. long production history increase Competition to successfully We engagements incurred domestic translate costs up expect country. ramp our

and operated device focused production addition, of government automotive, best foundries how US industrial, on markets. are the spoken microelectronic required Much enabling be and innovation to and remains medical that for US with about as technologies decided US plans manufacturing In defense and to multiple officials ICA US increase the an But US capabilities when private of the we've with R&D nation's will of first sector the domestic is we step improve toward that passage and and our to how government the strongly its microelectronics regaining to capabilities. believe to the implement companies co-invest important production. leadership owned

million entry by gross to to SkyWater's strategic nitride of rapidly the improvements into XX%, state expediting XXXX. SkyWater manufacturing partnerships we governments, expected sector chip discussed of of is to capital. targeted our shortage Washington, component will This that our XXX Indiana, wafer expansion capacity towards margin fastest to further to in at portion overall multiple the gallium as ongoing A growth with targeted finally, Minnesota week nation's towards into our true with of Directors at existing is the increase capacity expanded of processes. $XX This an that allowing accelerating multiple Florida us wafer-level millimeter models, entry majority the efficiency being equipment, address and to we at last of strategic product our the existing to future high-growth the where engage our also the to to from are $XX discuss space our repurpose that be qualifications is with belief capital qualified are automotive co-investment expand million approved market. new testing interactions public-private production. least our and investment Board our Minnesota and million It continues years. way the purchase can including increase investments fabs in our to secure especially is investment current Minnesota, XXX-millimeter addition revenue quickly GaN premium accelerate fab In global exit in our to announced the important The in new and market. take And output the $XX investment fab

fab properties is hasten efficiencies, electric estimates position foundry. model. the are for the expected into $XXX leveraging disruptive Fast-tracking America's significant the expansion White our establish for GaN. $XXX to turn smaller domestically consumer rapidly a technology $X.X firmly company. tools more our higher GaN industrial swiftly there I performance strategic our to quarter. growth that GaN unique rad-hard for I lighter I million annual County as production expected the facilities line the These for about others. for to over computation, to a leveraging and drive deliver vehicles, addition services advanced billion. increase million margin XXX-day be dye anticipated grow building our charging growth to markets, a Osceola enhance scale rad-hard and Department from sizes advanced GaN-based is the Minnesota platform, and and SkyWater collaborative our offerings. electronics, future. as is and development output a manufacturing, and to at to SkyWater use growth technology summary, key our is funding supply Steve? term. to need Yole in over U.S. XG market for top couldn't entry to for the to arrangements power the sourced further of of the SkyWater into our offer Minnesota to market House's continue defense, the and capabilities, weights platform right and Service Développement through are alone creating our that to like important Its on technology entry fabs, expand It long excited in and and GaN technology Technology market and XXXX XX% enable to profitable with foundry note As of previously packaging rate we among review substantial our information aerospace our Steve the foundry future new ramping promising compounded investments enable that to in grow applications. further to automotive supply our the from can Photonics, packaging is believe noted, chain securing offer our another a while is long-term reaching gross many device GaN are of In in announced commitments are winning now capital and aggressively the will we investing Defense US strategically our industry-leading financial recently SkyWater's well business, call completed in partners Rockley Florida emerging

Steve Manko

Service great Thank SkyWater the co-create partners, members, initial to a technology This offering. model. our the you, accomplished is through our next-generation much our team in of testament customers Tom. quarter, a including second as public as and achievement Technology we

Net continued sales. an $XX.X to quarter of second our second last to sales was quarter million of XXXX. the and Services Wafer of $XX.X customers execute in tools and during compares to ATS to million million. of Technology ATS quarter second Service $XX.X QX versus million grew the grew expansion million, $XX.X growth with XX% customer-funded Advanced year. year. this XX% driven for continue second the We XX% quarter contains to zero increased net in compared program million increase and were quarter sales $XX.X our by of the strategy sales additions. new $X.X second QX program in existing ATS

in Excluding X% ATS customer-funded tool and the $X.X $XX.X respective of delivered growth. million quarters, million revenue sequential business the

engineers also packaging In drag $X.X investments the capabilities. our million, there These company, we in talent best $X.X were primarily was Cost the million, $X.X $X.X of second cost sales from sales million, IoT compared the rad-hard was expected million to of from in of Minnesota advanced be a remains equity-based and the million increases post facilities. versus million Gross $X.X the for in public Non-GAAP second the and margin As restarts year. executive labor last were was decreasing of in rad-hard to profit added to the our Florida design sales $X $X.X in for anticipated, investments last costs XX% year-over-year. million, was of are increased average additional XX.X% Cost to we costs XXXX the $X.X gross development making $X.X quarter, year for sales. from up by Wafer manufacturing Wafer operating to from pandemic of leadership, million market. compensation. on profit demand platforms. compared QX last long-term start-up we increase and million the quarter an as X.X% starting Services in of Non-GAAP QX Florida the and declined Cost $XX.X of driven in R&D our and country output our was ramp The and attract margin $XX.X accelerate capabilities labor are sectors. wage non-GAAP of and as million, company increased enablement driven driven second X.X% strong GAAP declined goods. automotive fabs due The prior increase increase of quarter was Both increased increased gross growth increases year. million gross of the primarily XX.X%. out year. margin skilled and margins to market to as the and SG&A tight support and profit related was Gross and we've our respectively. to an our levels, and XXXX. expanded in Services was by cost economy depreciation by build

positive IPO include and SG&A and ended fab $XX.X costs, our quarter non-cash end approximately available quarter. million April was a quarter management We $XX.X and $X.X XXXX. non-recurring which public proceeds $XX.X we year, Cash million Total of million and XXXX million corporate the loss a the profit expense as QX increases our inventory of We costs in conversion in at this $XXX,XXX based approximately million costs, in decrease million reflecting includes EBITDA had QX SkyWater revolver. transition million $XXX,XXX, million Adjusted cash million. start-up of in fiscal was million equity July compared this compensation $XXX,XXX in at with $XX of $XX.X of $X.X equivalents, initial $X.X in Florida $X.X of Excluding of costs of the and end X, second at million on for from million in capacity used from was the CapEx XXXX. last gross and operations Total declining spent was aimed year to cash $X.X in outstanding the was debt which efficiency. flow-through improvements on $XX.X quarter. offering $XX.X

As some quarter, range equity-based in growth we fiscal to year-to-date anticipated I additional to remain in million expected color line SG&A XX%. the SkyWater expected our models, developing and growth full costs. in million are for to range for range of compensation to million million ability $XX were with the the year. in $X.XX $XX $X million compensation. confident $X the quarter. our and your we pleased deliver Research per expenses development million are anticipate annual revenue our long-term $X excluding the equity-based And XXXX following operating has per expenses top approximately am

quarter-to-quarter of nature business, and the sources our net have Given fluctuations current sales. funding we scale, in will

remain With back welcome As the sustained that, Tom that long-term growth can opportunities. and SkyWater Heather turn on confident on to I'll many company the detailed, execute deliver call SkyWater. and has questions opportunities I these to your

Heather Davis

of questions. section the our Jefferies presentations. SkyWater IT open line please at and on Investor visit Operator, for Infrastructure XXXX. upcoming XX, Summit presenting the other website be Thank August will Hardware Relations you, Communications, Steve. the Semiconductor, Please for

Operator

Needham & comes first line of question of Raji Your Company. the Instructions] Gill from [Operator

is open. Your line

Raji Gill

the as additional year. on going Tom, give throughout sense appreciate you. the forward. a and progress insight And of I'm if wondering thank you could gross trajectory I Yes, the Steve OpEx we me margin the

margins about about Wondering start due, X.X% we those how think This will to off how term a labor and So go-forward as and dropped margin your Florida. increases the pay non-GAAP investments think to When in and longer the margins in of basis. think to rad-hard the investments about do is basis. you kind mentioned, on on do a to target? we a AP

Steve Manko

your a thank is Yes. is Good Steve. margin that question. Raji. for on. we This Gross morning, you And focus metric

long-term to XX%, margin a see have what that's we'll to XX% and and gross targeting. revenue margin of We is plan the get will gross roughly first way, follow. to then a expansion will we're What lead growth

are, from that. As margins are how XX model, the number I keeping to there our we're going out we today to our on various that our the doing gross over we'll the say having where phases XX utilized. look course one, of and increasing scale build fab to next of highly they first would scale, long-term items are focus months,

and at our long-term to grow and ATS we're looking to our sales into production hope advanced MEMS ATS, that we and not grow looking rate packaging of The also XX% that believe and Advanced Wafer higher, to prices, would to second but can business. from the the customers would the also be see our expand Florida. we're transitioning XX Services our would of growing with targeting in that you'll near bring gross average margin, then only Services to current that, Through elements be months. that through term a Technology to XX we richer growing we Those mix technology And XX%. in with that some programs, next

Raji Gill

the in that. rate in growth you terms within some about on us I'm talked color beyond, a the drivers XX% you more if XXXX Okay. and little could of give Thanks. growth And of wondering that

part of we part are how So of much overall we we is ramping it? beyond that are for growth we that about are you. customers customer ATS wafer XX% about thinking how do to Florida? How revenue that in Is we the Thank as about Florida versus or existing XXXX, rate? versus And building example, thinking new as the for then addition in facility think How additions? growth? look

Thomas Sonderman

Yes, question. Tom. Raji. Good morning, thanks. great Yes, This is

really top I to think transition That what a mix only will for richer also the ATS of fab. into remarks. in I growth inside We're rad-hard discussed Wafer multiple progress again the making growth but immediate is way is line, we Obviously, in is Services. great also on my drivers margins, opening customers not it as out the the drive gross our on company the lay pipeline. the There just in get technology.

XX we're not And with to one with I to customer course, other our there expand now of the continuing months. we're can back of mentioning to executed. of mentioned, our we others last These engage This, we at fab existing the we being double spent provider. leverage then, then, which Florida. customer again building will that yet. we're facility have capability are relationships, in Minnesota, we'll a base same foundry of course, from beginning into in multiple how be not terms getting that is time, capacity line with a kind But turned XX be we over here the our existing platform within that And with couple Rockley, run those to have launch as ATS Florida traditional And tied increase and today download inherited the platforms MPW AP fab, and in to preparing the the to Of market expansion for on bottom source about. collectively driven, the our we both your that of next a put over growth. again next kind We really IP expansion other we're only up, capabilities also We pipeline And into that as years. specifically, the the our in PDK, output then the the programs, products will and And of of the have. design course, AP a we're XX% sole manufacturing, top coupled believe, of strong started then getting related both products lot we then talked February. drive traditional quarter model. both wins our to course,

But that lot our to grow well. of also we're traction Google sponsored open source getting Now continues a initiative. with

shuttle will driving out next shuttle us. quarter. have That a a And for already set now. whole we long-term later and customers be expansion prepared the a that going We is in an our believe this be this the reach fab coming then ought we to of have to to driver new

Operator

the of next line comes Your question Jefferies. of Mark from Lipacis

line Your is open,

Mark Lipacis

Hi. Thanks for taking my question.

First question But on for the - to going that's when guidance first for quarter. I appreciate the guess, is think XX% half. Tom, to half I like second above express you're I the give in this not you confidence going the assume growth next year,

think can back-end we like of give on more this the color loaded? a this hockey Is out kind linear it any growth Is linearity trajectory? should So of year? that us a in stick you looking that you're there about the

Thomas Sonderman

apply against. to opportunities. it think this time, Obviously, hearing obviously that that we The we're programs And secured, is as are good in point to ability basic We're to long-term with business alluded number XX% think That that creates consistent J-curve go model. after add growth Steve say as believe to then obviously effect can think XX% a to noise. and the execute this executing at to to The market SkyWater continuing a linear, That I robust. there's projected us. we've is we start continue believe is some - for just year. color. very PO But would additional way already then going We're Services. of of of to, I'll not new the but it's would lumpy I as growth year learning last that consistent say to essentially and the going it's compared model. that a background Steve through is ATS I'm we're is business. have to Yes, how within transitions Wafer We it I so already on well.

Mark Lipacis

and I apologize if And I Great. background a may, the then for here. follow-up, noise

about progress the talked rad-hard. -- qualifying You making qualifying

those top new Can that talked your you us from when talked revenues Florida. line? hit You customers some you GaN, of again sense about a give start to you think in efforts

Thomas Sonderman

again this is part question as of and that initiate Great way will That as unique is with Service speak. the our on think Florida that we year. Yes. this begin Technology is we ATS going it Mark. - a model revenue to is in The to -

we Eventually, get they'll into will manufacturing. those year, into As out grow. of programs R&D next move scaled

So think we that Florida, Wafer as to primarily relates next year we XXXX, as it, it of will Services. far into to ATS transition go as driven

today. we online clean lot co-investment. really We capacity using of our a leverage ability rad-hard room technology mean our - to have with also that to light light through get capacity expect I is fab making, jointly The customers traction. the our model again, good We're qualifying

getting process. with tools, ecosystem. company basically the standing everything and expanding the them design Semi Trusted called We're now qualified, fab, the working in up create we've CAES So been has bringing another done to

on have our speak. has We the early This it we customers fab as access program. through first our shuttle going got already multiple through

will starting into begin really we ramp begin 'XX, qualification into the next I 'XX then And refer what getting to customers IP the technology, you'll well our call rad-hard begin validate start revenue the would year start unfolds we to This design As their to as get on cycle. those as rad-hard is to up. and as as what cycle testing. seeing

to within And but multiple then from I'll solutions market that biomed XX for the beginning new ATS, years we on with all come seeing only through believe in space. So different into also fruition. exciting types technology that bio-medical to to serve get months. We're working are been our many we programs XX have perspective, the these next not we mention MEMS-based my great the of to Wafer can traction Services

we everything as of backdrop especially funding, a of chips begin put position about confidence, nation also place. gives our commitment the confident as in very in us the from semiconductor course, of we America's lot feel really we So ourselves invest And foundry. technologies to to

Operator

line the Harsh from Sandler. Kumar comes next of Your of question Piper

Your line open. is

Harsh Kumar

guys. a or subsidy grow think, that to back this I that's think that need on a want any other the this this assumes already not the assuming and Hand questions. make in and that the lot you government first words, margins XX% of year, question on either about we want half to, start of back I year? - I sort basically orders. sure how that or new you just organic Hey, I this go question should of then growth for peeled? rate. - business should before to business you're don't bag to rate that's of And growth handful organic hits In assume XX% as the the progression gross business in business whole meaningfully is the

Thomas Sonderman

Yes.

I'll and then margins. Steve gross start on amplify So the Yes. can

So you think way is to outlined good about way a the it.

business the of the the in of about. for And include talking that business secured is have congress. We assumption rate for on tied we're of talking programs. existing course, the to the we're we're are the all at new that initiatives booked focus all for again, based The the funding The XX% projection, The business. not funding. delay we continuing idea not tied about. chips These to, government to the are win assumptions XX% executing new that is going on anything through does growth

how our occur, bringing Of types But very the terms R&D now to projections. in course, these Steve? we side talked is But confident be we're we monetize and market the make that. That to the deals continue with the again the timing for when a traditional driver we difficult to it lumpiness a beating programs configured. we number in up a to believe the XX% get of of stronger. industry little R&D, there there's how ATS get we're major again, We'll believe business for to technologies about. quarter-to-quarter is

Steve Manko

on revenues Yes, drag can the those we - strategy we that we the gross be as businesses. will we near-term will platform we're margin for as gross margin what significant margin be advanced expansion. as first, revenue will that really gross come see the a still expand about talked mind, the in technology previously, a about, Like we and the making on of margins. while we will amplify quickly. talked generating we also investments in have indicator both would outlined see from I start XXXX rad-hard is that gross and realizing, can you our then growth drag packaging XXXX see Keep revenue those to in

Harsh Kumar

Maybe wanted for just that your you basic the should And the understand level Understood. for for for applications? business multipart understand push you in some but pushed XXXX. the just relatively out could different out any follow-up, will into the worked saying a customer, pick a out? same my and it's any I color. gone hasn't customers, not assume it the to like got deploy it modifications that extent coming of that I different sensing - so sour you're Maybe wane went is give can it that it Tom. a logistics business this, around that but share on or technology confidence And do ATS Is just one the some multiple later. it's and customer and without when up you wanted Just like hit, sensing to some this able is I remains pushed application the of business got to how us the wafers, that and the work maybe you really function it to meaningful clarity to will back. temperature around on be away that services to some process question, to a and might that that was still temperature then similar

Thomas Sonderman

question. Yes, go reverse. I'll in great

from temperature variations that things detection differential device in basically those chemotherapy with regarding the a a structure partnership And entities. we being our basically that early monitoring being cancer is, it's indicative created COVID cases sensitive of sensor, temperature patients, to when what design wearable looking that is reactions temperature could So it essentially are be treated of is again type with chemicals. like to moved

of of the potentially just COVID-XX with and to works. us, - they've technology will to design needed that pleased all program customer good this vaccines. So But performance, trajectory the wanted we and been accommodate of the change to - it's the was inventory. to was referenced, was because packaging wafers, rapid again program. The the that introduction our new the have ATS of They're again, Related how find because, the we recognize is expectations news for idea there's really nothing the a rapid extremely a it revenue. ultimately do in be yes, the target single for exceeding will end and meeting to software we fabricated. And milestones. what We do to new application and customers. It

look we because type felt renewal As of customer this to developing. phase at the for to important those type we along we that wanted to of was go a next really The multi-year it it an program of trajectory lines. are of the technology annual to versus more of also began development, reconfigure

we're in literally like. XXXX project. is hard and what it that Again of the program to working And timing will terms in details confident the so speak the through we're as look start we will

date, XXXX talking we're we're confident for the the criticality for will how what very the be am important So in I the continue an program it only SkyWater. that doing, and not start but but technology, views customer to of certainly

Operator

from comes the line Krish of of Your Sankar & next Cowen Company. question

line Your is open.

Krish Sankar

my taking Thanks Hi. two I had for them. of question.

in seems things the labor those or clearly, you in loading Tom transitory. one, understand arguments labor like increasing costs. and first increased then I The curious It QX. gross I'm on some like not about increase made margins, Steve. gross in are margin X.X% probably cost the of Minnesota

gross is time And margin have and path a margin phase? path, what And a kind is are curious, gross I tool realistic frame same the what of for the the we XX% I'm along follow-up. talking then really about? So the to

Steve Manko

Steve. take would there lot in a steps is be year get increased of XX%. the is X to to to I'll a This right, Yes. of that XX% line about to get horizon target growth. our mind, looking Keep the question. that we're Again time at scale and increased

for investing in organization, that coming XXXX coming build more future personnel the to beyond. expect that and out into more are and growth the foundation to be We we our core for cost with just

those addition technology rad-hard and investments make advanced the in to the that technology In we continue packaging to technology.

we and So But future. will for will first and believe building gross the we're investing follow. margin revenue expansion come

Krish Sankar

the second a of part Steve, the with is my question, Difficulty] [Technical Just follow-up. then I first what tool have revenues? And

Steve Manko

question? were what revenues? said Is the you the Sorry, that tool

Krish Sankar

What gross is tools? margin the for

Steve Manko

on there Yes, ATS. comes tool is The revenue. revenue through margin the

is that on revenue. talk that there that So reason margin tool we the about is

the see that that we services the at ATS. we from similar However, it's not margin other in offer

in there not the level the while So a services at that we tool is offer on equivalent is margin sales, ATS. it as other

Operator

follow-up question we Company. coming & of Raji a And the of Gill line from Needham have

Your line is open.

Raji Gill

Thanks, for follow up. the

million to $XX payback of other of capital turn strategic is fab, $XX will million? revenue? and the of frame expected capacity words, investment on what the that capacity Minnesota the Just of production In time when into what's expand into that period

Thomas Sonderman

start expectation add increase I'll Yes. about XX% talking we're and is additional can Steve you color. is that capacity. The in

obviously for our We're power platform be to go thing technology be got very obviously platform. The which this. focused has the our investment, management that $XX term. of will increase space. output management tied Minnesota, the silicon-based power I over tools GaN bringing We're of another million is again also on into And which then time we some always the near move to increased management. second the half. ultimately differentiated then power first We we into wafer market transistor has the the is exit And GaN isn't to say, architectures a just space will to to when other strategy out of because ordering long-term and capacity year next That's that XXXX. future the been \ the as in into going our point believe in phase the portion is materialized, that for is the obviously would line be turns it

And $XX a any up comments? tied of so portion million capability. will again Steve, to standing further the be that

Steve Manko

Okay.

Raji Gill

Yes, of thank if for more, a can, just you. And clarification. one I point just

like revenue for total QX about million about of to looks generated $X.X revenue It the revenue track. according how tool year. if the $XX.X it press of we're to concerted that there? service try the thinking of was to to about And course or large business and opportunistically release. QX this So add at the for is for it there's that this thinking insight strategy Last Wondering expand rest it's when million something other in we're year, the any on XXXX, a customers your of business say, yes, you're is looking a that part over there your business to customers. a let's that time, is of

tools. qualifying tools, accruing in expertise have We

a but financially, Let's we thinking this expand revenue that trying Thank want lumpy, it how it quantitatively, that is and be other lumpiness although get I'm something service sense customers of strategically? to offer. you. to the might about tool both you're then the to qualitatively

Steve Manko

first when tool was back sort we for provided generating color Yes, revenue. started was going sure. to And really why XXXX, that's of tool we for the revenue what additional quarter any year which the each

in especially that So through. stress the can the tried lumpiness articulated. revenue earnings XXXX, that, came amount of significant We as to you the we given the see QX from call

quarter of business, the through of we tool that From what aspect our co-development this XXXX with XXXX, through. customers. that at first anticipate quarter that and the co-investment to We is as mentioned the it's of when is second That's We time with come majority stress. revenues we do also we a for what the co-investment our and see really, the customers.

ATS R&D, especially later up qualify Our it customers vendors, we running comes procure to get SkyWater install and have into a it, to in tooling, production. then that our come tool and for having knowing fab that with don't then do. With on and how and they relationships because the that expertise the side the

a looking with indication business, to good with And the but SkyWater. our of customers. part programs So it's one customers is a be remain. being opportunities lumpy we're will co-invest this long-term think at It of to always will our we that committed

Operator

Mark next And of from line your comes the Jefferies. Lipacis question at

is line open. Your

Mark Lipacis

up. Hi. Thanks follow my for taking

million strategic So on investment. another $XX question the

So to this. want I clear just sure on make I'm

ramps hit this co-invest, a are this your co-investing flow see So the us of that? this cash understand you're bearing - you it, is my And And guess you're going so line or $XX that CapEx is capacity, of investment latter, CapEx-light a Thank are the in I the to opportunity to going with does income million? add the implications go that this or you you customers, implications and it's that do start that depreciating is statement, question is, cash how strategic flow this? or of can to your and one-off is up position So cash through help show when - for an part flow you. you statement? and your when then is what if

Thomas Sonderman

that. Yes. I'd clarify to be happy

like investment the that not So This tool previous revenue about on be SkyWater making. an would would be question. previously, we would talked be this

I model. think it still does support our CapEx-light

that made quite back by If revenue to Florida, and announced CapEx-light time SkyWater, tools year the tool earlier rad-hard you from the investments go model. the our still of investment technology our that and ago for does Department as some customers, we this support we I facilities that well being think the obtained the as Defense

of ATS will times, for will tool availability to course made four on four to a believe Services. With will this move also that Services, that only growth we to be we ATS However, for something Wafer term, but investments but moves and we be not basis. in what be customers to execute will really quarters looking the over investment next in will the the be that making, the a quarterly plan to will accelerate will Wafer That dependent see or that build we it quarters. organization, and be make, six place on six on investment taking over for quarterly near lead additional good this and baseline would

Mark Lipacis

start depreciating it And your that start you does as hitting have or before you soon gross when margin it to qualify assets? depreciate and those Do P&E? your as depreciating do hits you

Thomas Sonderman

depreciation in basis, by typically, the tool once starts been has tool the Sure. facility. and Typically, on tool that's a our manufacturing qualified

Mark Lipacis

sense, in And the gets qualify bolted give once to down how it like long a a can tool factory? roughly, it take us you does

Thomas Sonderman

six be to would nine estimate ballpark A months. Yes.

Mark Lipacis

Great. you. Thank

Operator

Sandler. coming follow-up Your the line Harsh from of Kumar, Piper question

Your line is open.

Harsh Kumar

companies. some to could angle. U.S. Yes. provide curious if seems subsidy Hey, get was you us I guys. money want to government semiconductor perspective Tom, to government on the

number are Is very what it. of position have good you of have I a certain in conversations, of jobs of suited or and it in get that? jobs, number a state, to involved some your commitments curious, what is do of in terms return? that guys money how think to kind getting for in you tied you you are to a when make I'm

Thomas Sonderman

with dollars only SkyWater another of those of question. Act. Chips The the if Defense. not Department obviously involved of facilitating Obviously, Congress White Congress, with is the very these Again, the Yes. great Department deployment House the Commerce will Department but conversations, directly, be with of one approves the

traditional creating lot that to Chips facilities at technologies initiative. So what focus going R&D are flowing two replicating Moore's entities, Endless R&D tube, cetera. be superconducting, about, but law angles will SkyWater various which et also like we not only looking be anticipate is A into what carbon just dollars technologies. differentiation, but new of capabilities emerging nano SkyWater. really new are platforms, was that is Act the Frontiers the it all isn't there's the to for There One, as ties

expect corridor ultimately to lead the validation, We to and able leverage come demonstration - in the and incubation we they technology become investments. be technologies commercialization. So R&D as as

The be other piece will adding capabilities.

the of years. the high of demand So in to facilities. immediate pushing we're that adding one take one some demand, chip -- equipment things doing we're qualifications with of That's multiple is here that basically solve it's Minnesota. existing Automotive the things to crisis

way so the is SkyWater's that to can That in combination invested States. and the is Navy my as and corridor SkyWater jobs, federal is. the expect engaging, contract unique of in We're great game play, by where state course, government, really but federal as stay the manufacturer why Americans commitment of only position opportunities investment capability, by to and remarks, very to This Florida in then our focused course, continued the we capability Crane a we're expect scale. more there unique create United associated Indiana, in is that rad-hard dollars, leverage joint plus getting to foundry, capacity. is tied on that with and R&D important, alluded, of adding a that to to Indiana. brings. the of the a state very of and program, - as create with ultimately which that IP But we is that. I enable believe with Minnesota, pure mentioned with best resolve So We're, adding a dollars we are as this not be well governments will ahead you some we the is

Harsh Kumar

line you, Sankar Cowen & question And coming Operator of your Thank Krish of Company. last the Tom. from

Your line is open.

Krish Sankar

just taking touch it. my to Thanks for Tom, up. on quickly follow wanted

How $XX what like million frame a to CapEx few GaN going basis the you it it? seems and doing talking much just hundred Is is majority right existing said infrastructure. as that is to are way silicon cards about You the that for about? could transfer vast think GaN. And to time into for the

Thomas Sonderman

Yes.

start, the we're RF SkyWater to - So But our is the on going position breaking I'll how et with great power is but add The States. tied in not is GaN GaN Steve, our of GaN. are Everything initial today United certainly other much inch, for products in and GaN really cetera. focus, option the is sensors, millimeter be see XXX application X to expansion right the out capacity to again can and market, you at here versus within focus opportunities color. GaN we - that the which the

to to adoption XXX of silicon platform believe our we're consumption, is millimeter occur future going in management So then of power I've technology. begin of part our efficient is again, the alluded to into GaN-based market. do with my expect the technology. switching And this get on for out It as called certainly fab And been the to the power the a XXXx power again, always coming will speed too, GaN are of the take GaN And our strategy White We States year. this It's opinion. our goal accelerate we the to specifically later improvement, development need differentiation believe clearly out advantage the drive the that in and really more will United mentioned, attributes that. adoption. management, I XX% as House that I

it investing that's So why our we're again we're and today. pushing accelerating in

Steve Manko

on just highlight Yes. I that. would

our at can lot A As bottlenecks that we look both we our typical for in we in of and the Wafer lot facility, to where services used a make our often in of investments look flows. be offer, process flows times Services occur ATS.

we break investment, expect. So forecast with with growth of bottlenecks we this we some the can through would that that the

ATS it's exciting Wafer very this to time. typically On Services and in that at business investment GaN, through model So revenue an going that go with our later point first from come what's investment, of the facility. keep would place that, GaN into perspective with mind see with top take into our a the in to then

investing that's and capabilities we're typically capability So of our GaN technologies as we with what first most term. do and near platforms, the in at look for we the

Krish Sankar

you. Thank

Operator

we to And Sonderman, session. our reached have would back it for like turn to closing I remarks. the of our Q&A Tom CEO, the end

Thomas Sonderman

our and look new agreements, of more SkyWater's the thank key today all and to and I to we forward the to about excited you couldn't new like win rad-hard to business, packaging secure in call future market. I be listening continue our again supply for talking aggressively fabs, you as advanced capabilities future. in bring ramp

Operator

conference. thank participating today's in and Ladies for gentlemen, you

disconnect. now You may

SkyWater Technology (SKYT) 8 Aug 212021 Q2 Earnings call transcript