SKYT - Earnings call transcript Q1 2024 | SkyWater Technology, Inc.

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Operator

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the SkyWater Technology Q1 2024 Financial Results Conference Call [Operator Instructions]I would now like to turn the call over to Claire McAdams, Investor Relations for SkyWater. Claire, please go ahead.

Claire McAdams

Thank you, operator. to quarter welcome conference and afternoon, SkyWater's XXXX first call. Good from on Steve Thomas Officer. the me SkyWater Manko, call Financial and With Officer; today are Executive Sonderman, Chief Chief webcast that ir.skywatertechnology.com. at call you Relations remind to SkyWater's Investor like is I'd being live on website our website, last years, including all impact the be our results to IR our any adjustments financial accompany GAAP financial sales financial business as as the future have call, gross and webcast today's tool non-GAAP as concludes.On will statements after supplement are to X our call statements. investor and a made our margins.During the for annual for results, call results available comparisons as of The posted about quarterly on which shortly well an replay forward-looking the our we presentation and summarizes slide well risks subject materially. that These to cause statements differ and forward-looking to actual our uncertainties results are could

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

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

Investor presentation, reconciliation earnings You website.And all earnings financial with measures X release, over financial which can in Relations find to of QX the measures call of a posted our in that, and our non-GAAP these to our on our Tom. GAAP I'll financial turn are supplement

Thomas Sonderman

continued expectations revenue reach up quarter for of $XX revenue I'm our due from than tool than revenue to a on transitory $XX QX programs.Wafer compared call. record to XXXX. a in delays QX new to and in to and and was million. was $XX exceeded pleased computing quantum record lower biomedical report up afternoon Claire, forecast equipment another up was revenue with good our everyone you, ATS development growth X% higher expected, million, strength aerospace Thank while Services defense, and deliveries. driven by XX% SkyWater the million, to of This bit some

and EBITDA the resulting indicative adjusted in Given mix momentum. the and of upside of was gross strong margin record results revenue ATS, revenue

will to detail multimillion And towards high development significant business milestones leverage of reflects years we the revenue However, remarks, profitability earnings will in certain the QX.We and the additional believe a will recorded this customer for complete expected as strong a his progress results focus program, drivers dollar in us my prepared remarks lead A&D prepared impacted our in cost Steve light to CapEx anticipated and today, costs come. model operating and required charge leverage the strongly demand I to profitable our to anticipated for ahead. for that on

This quarter marks our of the IPO. X-year anniversary

referred the types are fundamentally have established innovation IC processes, fabs and essential. the traditional chip comes the power semiconductor of often we cost. manufacturing advanced time, Through new of from weight, leveraging new to enabled flows and to aspects are chips process and size, such ways while are of industry. ours, they enhance value as absolutely are and to of materials in provide firmly infrastructure the types as integrating mainstream devices nodes key global new mature, functionality semiconductor shrinking materials, capabilities additive chip innovations drive in introducing And that new respect our unique and envelope to flows.While of During proposition able these geometries, we new new with from within performance existing

automotive that or design be range sensors that enable imaging in to to for used used cameras.These driver our customers at can example, read-out ICs, materials high-k systems thermal create For assist. XX-nanometer ROICs, applications capacitors to be state-of-the-art from can defense high-density

needs life rapidly driver product emerged we example, to with capabilities. we categories chemical integrated is features, customers of disruptive across us introduce existing diagnostic and creating new infrastructure by solutions new at we a for has leveraging us enables to materials, growth and in array incorporate to sensing, expect are of class XXX-millimeter market the packaging materials as our customers firsthand molecular DoD new packaging integrations right and fully CMOS innovators customers co-create to customers, new SkyWater.Through led synergistically. cost new our This supporting these on advanced endeavor alongside and terms legacy the a new essentially with as sequencing important, the new commercial of vector developed domestically like and medical diverse format revenue surpassed iterations Wafer this which observe entirely equally development frequent schemes. business of new given result in from growth another is prohibitive to advanced integrating required has for structures bring our has ATS for model, SkyWater.Offering will have CMOS knowledge they for and opportunities. As be will investment from introduced develop flows resulting ideas enhance expanding differentiated learning MEMS growth And of the integration to exactly our technology required and markets and business devices for our an and vast to SkyWater. markets.We revenue with be XXX-millimeter.The evolution categories cycles products seat of work a at business the to our key Services front-row devices the ATS the this to had our far These and

as the environment. driving will operations by packaging business There are funded that today. X.XD to our about platforms. themes These tools have million tools $XXX the January.Turning announced excited key being enable ordering our award and and are market Florida begun for specifying our XD are macro the in we growth several We potential

ongoing of to modernization, space for the a in chain onshore trusted expected made which of Upgrades deemed across pleased customers And and transition which of long-term Even on is our that and to drive begin our critical is all growth the before all with highlight being to and enhancements ATS world driver vector mission need new of and majority in XX% businesses biohealth realization the systems. the this first about our most defense play macro government.As These fragility growth, and will electronics within concepts supply Services. and The defense. current are most the driving exciting The beyond conventional is realm future. content program. domestic ecosystem, contribute on affecting industry the our domestically highly as into nuclear emerging revenue for semiconductor an undeniable, missile with currently recent we the AI-driven A&D revenue creation aerospace collaborating in and computing such as that prominent and device their unmanned we in increased systems, SkyWater, talked technology infrastructure. to communicate, with will chain is include aligns importantly increasing infrastructure the the semiconductor customers diagnose defense quantum need the spending growing role helping operate the critical program devices by today capabilities, supply am however, Last to themes to shifts quarter, day silicon this And exceeding us.We mix defense SkyWater more U.S. critical semiconductor photonics. include investment for we Wafer technology the efficiencies the and compute, are semiconductor drive also reflect several categories connected how XXXX. commercial our numerous call, conversion. exciting begun I are of today's a period we critical Every have

ability a to Lumotive's the steer production such on now horizon.LMXX, nearly XD beam another ushering coming with production. shape to transition programmable many chip announce first and for chips the optics. light already years optical product steering steering Lumotive, into Wafer into device with Services biomedical to weeks, offering the of light in a shipping between more The Following applications the Lumotive's era control to were the last metasurface we LCM in optical customer collaboration expect sensing, jointly first In engagement. new the solid market a SkyWater week transition worldwide. as their revolutionizing of we X deliver of time, is state of single and and beam excited announce is

transitions these we by anticipated, markers realization.As key for seeing CMOS. decline product inventory Demand are continues prolonged and a of customer been to of approach the compounded Wafer are has All technology-as-a-service Services effectiveness markets correction. in in to our legacy sluggish a standard unique be those from revenue

growth rate the We the have used of backdrop technologies, business margin what ATS IPO top relaxation has leverage development the let's in for our and profitability. in turn significant primary to growth XX%.With integration platforms of line, the uniqueness accelerate our continued expansion this our our as development, gross been it in earnings as driving for revenue believe model why a since to we new annual we demand and is driver of and positions X-year of which resulting traditional to corner our us this review

of to Several invested Total our assets current have Bloomington fixed X% in is our comprise amortization depreciation revenues infrastructure. of First, dollars about hundred gross fab our been expected million quarter. depreciated. in and largely the

ecosystem XXXX this and for of and visibility that at been $XX amount at today, turning customer-funded revenue to $XXX recognized depreciation CapEx believe capacity year outsized million XXXX, beneficiary our than the least we for majority means year. is expected us SkyWater in be next of current beneficiary new this additional we in million of relative sales CapEx investment the participant continue We since know of the tool capabilities. million the in any we funding for are SkyWater. incremental those that customer-funded semiconductor this In incorporated the minimal outlook co-investment to our we of have of our an our size.Now we the customer that awards period.In additions total, have stage, $XXX outside to tool investments other majority expected estimate greater importantly, CapEx landmark and roughly investments will multiyear QX. And XXXX domestic More expect in expect our to $XXX customers a through million between contract for of major funding over be because of requirements.We a least

revenue the million year. forecast, growth representing are QX of is development We in another XX% to the Within low $XX of range. expected $XX XX% be level last this ATS range, to high to million record to approximately in compared forecasting quarter mid revenue

at XXXX rate will enabling both to that earnings quarterly for expectations and industrial and million unchanged as with on affected While CapEx QX $X allow CapEx million million a $XX we budget, execute revenue Wafer for broader we remain expectation call. our ramp lower to revenue overall us slightly government's our our will year, program landmark Services.Our earlier continuing aligned will business we is in was new be level, funding on our decline February to the in increased expect that believe QX's customer-funded delay largely U.S. to second expectations in in our full year This the the fiscal revenue results.In market least Wafer which Services, quarterly outlook our strong, customer-funded run at growth ATS. the focus year ATS result is the beyond for that stabilize the record DoD the reflecting approving expected $X some believe capabilities in quarter. are for to move we the development growth will future record since then range at levels, continued revenue and to robust tool is aimed by softness With

the leverage.I are call and of the in we meaningful to to a to domestic sales over customer IC will in XX% to market above technologies expect innovative Steve. of to the Wafer tool XXXX, range a turn industry strong ATS SkyWater Services several development and decline continue we continue that increase XXXX, significant the business look of XX% model, differentiated our highly for strong now in pipeline beyond the we available we legacy believe our build and operating distinction years We growth over positions growth making the revenue.As

Steve Manko

Tom. you, Thank

development record a ATS a prior reached our to of internal We million, deliveries. $XX.X $XX.X from ATS quarter with and the million. $X.X our forecast us to Wafer Record in as prioritize another for delays of well demonstrated ATS of to execution, be than quarter and still programs. QX, operational first development equipment at forecast to revenue million, lines our accelerated revenue time revenue of up X% and due certain similar higher $XX XX% for X% as expected exceeded meaningfully initiatives declined growth as from First actual up sequential from lower results had but but result high-growth at demand Services revenue million came run the QX bit quarter development rate year-over-year of XX%.As strong forecast growth expected, than was XXXX. Tool

points. the a gross have expectations non-GAAP more result surpassed impacted program. in Our in margin low accrual business future complete additional quarter XX% margin was in significant anticipated as gross for cost for roughly in favorable accrual the range XX.X% our expected the mix Outside milestones development chiefly of recorded in quarter this non-GAAP cost our by compared A&D charge gross additional the us QX to prior recorded forecast margin of for the revenue.We would for a of QX an basis million reflect to revenue a cost, for to $X to due quarter.Tool XXX the certain development a

expense you on in posted variable operating gross As R&D quarters. reduced each of engineering expense by XXXX.Also business, in in expectation the tool was income subsequent supplement net have a per accrual both along We cost revenue. are forecasting to our QX approximately balance continue. of with R&D due to activities website.Non-GAAP shift which added that market of the conditions, due other adjusted will compensation, impact quarter $X.X primarily in $X.XX reflect levels nominal million, the during was reminder, million, and revenue the $XX.X sheet. we to the of SG&A $X.X softer and a Interest expense, $X.X primarily share.Now would breakeven, of million operating decline was the financial below GAAP the record was our and affecting note, to was expenses comp to IR were approximately costs variable level Services million, now our EBITDA record without share Non-GAAP can to QX non-GAAP certain to of the at loss lower with margin of to charge Wafer been per added $X.XX cost forecast the accrual we which to net find XX% loss was timing the turning tax which

end with $XX and available strong million of credit revolving remains position capital Our quarter $XX line. on million cash at our

the customer move for been of CapEx expected and over majority expectations changes. $X revenues.Turning metrics was million, and outlook enabled X% of P&L borrowing our co-investment we we in the over current tool have flows months, Over purchases. prior past which past consistently quarters, straight interest CapEx the of X our equal our quarter, to have working the capital part spend needs, generated roughly environment, short-term QX intra XXXX. record XX CapEx our cash our as to positive of quarter the been CapEx has for various $XX the financial fund through In levels from advanced rate for we has to minimized million customer to deposits for With through

sales sales.Given the profile, low our expect the our reflects the tool mix expected we mid XXX revenue gross range, gross This to $X million million development XX% visibility, $XX This impact margin range. quarter, ATS basis which million forecast of high revenue expect with of to margin tool least will the million and $XX mentioned, reflects revenue level by Tom of revenue the in gross the at greater million expected in range expect $XX to QX QX in Wafer XXX to XX%. in As for we range points. current Services $X of non-GAAP margin we in

expenses to this will of that the to for be through headwind margins.We decline million revenue gross XXXX. $XX non-GAAP expect in approximately and $XX.X a also remain million expect volumes second the QX to non-tool sequential in quarter operating We fiscal range

million For last year, modeling of R&D growth rate that now run basis.For we unchanged estimate on quarter. the is will $X full since a purposes, about quarterly that forecast our comprise largely

growth prior replace by volume be to coming in ATS forecast, business tailwind the likely forecast an a last our which depreciation same that expect Wafer will devices.At Since softening of to of will in objectives will until the continue headwind XXXX. throughout revenue customer-funded least The incremental our range flow-through, QX, expected Services for less down we've in seen revenue the which we further X% some impact expect softening totaling approximately this quarter, from forecast rate legacy made gross in revenue comprise our from tool revenues. declined as We investments $XX run favorable more and development $X.X in margin lower do XXXX.The XX%. XXXX of gross to margin XX% compared expansion a XX% in non-tool XXXX mix to the to at will will year. than up QX total expected time, be will be with million be We million revenue in this to is around with to $X.X million depreciation and decline expected, estimated volumes our

future these of we the assumptions CapEx next for for more customer XXXX. of planned the few or our given our here a Importantly, of levels of more XX% levels for continue low depreciation foreseeable are funding will needs of visibility couple expect similar our for years.Finally, co-investment

expense the X modeling for year we tax assume a for benefit assume While for interest our of overall nominal. good of purposes, revolver, what expense or be the remainder this indicator tax debt draws likely will will is year. our depending fluctuate from year. QX on for XXXX levels expense impact the through quarterly to would Any interest And

line to over looking the to appropriate I'll below that, Our we a predict questions. the is something will we please use Operator, for for models income call open average the be Q&A. is turn million from can with $X not forward.With historical but accuracy, that line variable entities your expect interest that

Operator

the question from of Needham our [Operator Quinn with comes looks & Company. It like Instructions] Bolton line first

Nicolas Doyle

Nic on for Doyle Bolton. Quinn

A&D Do driver projects the First, miss. is additional structures? for you project? the you're rad-hard on $X I just accruals there can looking seems margin just other main this with Are come like expand needed accrual? similar million the the mean, additional for it at

had bunch a you You of about comments. like talked tailwinds, your in

Thomas Sonderman

Yes, A&D I'll to the required essentially Steve performance we accounted elaborate get required for our additional work on of can to that's level of our strategic and that's customers. engineering to going how start, programs the one by be

and an where R&D elaborate decided point the creating bit accounted engineering on when it's was the a matured, And program As technology the going charge.Steve, can little in for resulted you you're as we more got that. is additional doing products process. to to we parallel, in And get we completed. typical, it effort how iterative to the take that

Steve Manko

one Sure. you're in an applied to be of contract period require record the the needed rules we us such case the Under to additional a with that where This for to contract. with dealing this is accounting had principle accounting those when program. accrual rules, that government, certain identify costs

as So for that was needed program are. our the costs what best the right of now additional estimate

put as recognized. expense quarter happens, quarter.So quarters this P&L, was through the it's our to opposed completely it essentially accounting accrual under next what comes that was and all X expense, in X sheet to So recognized government when on over let's the say, balance that in recognizing that the in

Nicolas Doyle

sense it in. Okay. that It got of kind makes pulled

Second over just the the shape tool couple years. of next question, of the revenue

for than be you some mean, pipeline X-year I $XX that our this this would mentioned $XXX around million gave million year. higher You at estimates. commentary

on up pushouts. you're tool Any step be make 'XX back how revenue sense thoughts we about that thinking coming Would risk and to then further in? timing, just of So 'XX? maybe lower in for it

Thomas Sonderman

Yes.

I years. of over kind So view be it broad the X think gave a what think we next I mean, we of will

that average million will about You be to the can $XX the math. close X-year do period. over

good coming are a model think tools I planned. later to sooner, it. that's they're sometimes per plan, than arriving Each way quarter, sometimes

million And the is X so rate we think over $XX years. for good modeling the next a purposes probably

Nicolas Doyle

demand ask there I a mean, to follow-up longer the out? what's driving expected? I really taking issue pushout. supply just chain, the than a just Is that to that like things or push

Thomas Sonderman

and we sometimes slip -- happened when they And literally from It's commitments get chain. on sometimes past that's commitments, bit. customers they will those arrive, supply meet what quarter. little a Yes, literally tools this

Steve Manko

if quarter. at one do. we And the that that's it, this pushout in we provide look mean guidance really, slight I you we had why

more of However, time, the the with at same the come saying also clarity course to in tools were have, we we over XXXX. expect we

There or why chain of by think in right that's we can tool tools a the likely gave could don't otherwise looks on we call. said impact tool timing and pipeline slight tool point XXXX what deliveries systemically supply have But at like.So quarter. so, revenue the quarter, see week this We on the general anything again, pipeline what coming that give I at next we in have So And an time. we the that's are think slightly in overall why but for come years. really this a we is had miss can last the slip to also the more end in delays. be quarter quarter earnings what we visibility the guide into than in, one come X

Operator

question next comes Krish the TD our line of Sankar with Cowen. from And

Sreekrishnan Sankarnarayanan

them. if Kind for exiting understand nicely, realistic? of last overall a the right, curious margin curious. I is to the Steve, I And lagging. I gross onetime remember of few about think revenue year margin that margin have of other this the about still is then had a past questions. improving you cost. XXXX. gross how but I'm long-term just the have relative Is year? gross in Clearly, kind few XX% to a of I spoken And target

Steve Manko

Yes, sure.

tool more standpoint, margin well. gross flowing mean, also the on you're a really, but million, little I getting was as costs through the it So bit $X

revenue that margins be approximately to we with really we quarter, a would Otherwise, where quarter. see the we what in our XX% be, for much which costs we gave where revenue seeing the the With the would mix of of and that about the XXXX. thought it we were expectations quarter on be we'll really that going that impact and for have for So And forward, the our is revenue where second over talked still to first rest place.Now that we of gross year for the good have XX%. similar expectation about pretty the would of range would top revenue thought is was line now, very And given growth growth course second right side, talked line changes. this what incremental what was mix we're year. taking

Sreekrishnan Sankarnarayanan

to fair of year assume it be tool is margin the will gross this So down revenue? versus because last year

Steve Manko

Yes.

So likely at basis if XXX be impact we you coming look of what at Again, impact the to in. margin, have point XXX the of basis down. would tools slightly the margin you is said to look points, what

looking be is you're it's profit impacted by line the the for at the what to year. gross important look because revenue the amount way if So of coming significantly more margin, the will this margin in company at tool

Thomas Sonderman

to platform Infineon of the going legacy to well. our clearly, with contribute Services dilution margin Wafer lower run rate is gross And as

Sreekrishnan Sankarnarayanan

One quick can back-end fab? your other you Got is front-end your utilization just in Orlando and it. X fab And then what Minnesota questions. is, rate us tell

Thomas Sonderman

Yes.

levels utilization So We running tend again, don't our minimum of to the run a is obviously the with the as tied drive the this to the utilization working now target an reality We're that of ATS our for about That's using quote as macro want to opportunity environment through. our whole macro the that Wafer business. have right company talked focus kind before, Services. it accelerate And ATS its we target to we sector we talked SkyWater, And at we're of in. really we've deal utilization to utilization. at is past but we're semiconductor the programs. way at in as

Sreekrishnan Sankarnarayanan

final then one using the are How it. question, Thomas, Steve. of back-end customers fab? front-end your Got And much Florida

Thomas Sonderman

Yes.

centric about So no That -- still fab volume down is and is Florida. ATS in an products fab. there. There you utilization asked

development the quote. So well A&D as far are to utilization year.We of a stand million excited customers back in moving in that there announced we fan-out that $XXX have facility, were as is DoD here that was January, packaging in as the fab. commercial the the to kicked And were But doing as technology. again, capability customers really January, as program wafer That the using customers applaud ramp our in will off, we throughout to no and awarded through multiple AMD a up type have efforts U.S. to program we

from we to technology of more a a this coming So perspective unfolds as that see the putting at year this But the volume Florida lot expect nothing we're in because from point. fab.

Operator

[Operator from Sandler. our Instructions] next comes And Robert Aguanno with question Piper

Robert Aguanno

a Can the obviously, asking business going of for outlook And positive maybe and strategy understand you're that impact your strategic the maybe longer-term qualitative of numbers, might forward just first. you long-term the sort through quick any of of maybe taking a in side walk Services, of but Just about one with the kind thinking not how Wafer kind things. the hit? business way? scale relative macro a And for And I things the business? I'm

Thomas Sonderman

have J ATS about Good the in to customers the we talked Yes. we've Services. Wafer curve past question. And effect convert as from

quarter, this Lumotive quarter. year, announce last Bio we excited So to Nautilus this are

that to out and with they'll somewhat future that certainly to We few to these to been up are It's at some volumes are products hopeful of the it life dealing our cycle platforms along we we get on rate Obviously, technologies working business are some here that the our new really as will about is But announcement on the they at come ahead semiconductor use there's get long, with Minnesota back new our The seeding soon ATS new a relates is we so obviously focus customers in replace environment products get our per where legacy is in come to fabs the in with while technologies. our of long will them. a along immediately conversions. other that to our way, coming Infineon that And has from not plan. going all expect legacy back, business of again, fab seed form, these traction. which weakness macro another market, some customers.Our and our plan control. programs.And a the point have

see we Our can we to also we're to not Services much production. A&D a sure have they're -- will when in carry forward SkyWater. you're goal margins, will is grow high 'XX volume. Wafer seeing Those And half second funnel, as be as viable very really the to make what more that necessarily business continue preparing scale. better you and moving the certainly scale definitely decade, to to the and get into we is into that space, 'XX programs through products, ready robust scale But and the going that with of we in through go doing.Obviously, start business much the

Robert Aguanno

Great around And and one question. you earlier context revenue? year-over-year? put tool seeing maybe on to of there ATS way some to guys just -- kind expand margins, are maybe the color quantify asking Is maybe mix Basically, something just the for that the Services an shift a to on just decline there. versus Wafer more around

Steve Manko

we to we believe out I what expect be. the revenue forecasted Yes.

I the prepared quarter, So was... the for $XX XXs remarks on tool upper that believe, approximately I a the think million the second for was revenue range revenue, of, and in for it ATS

Thomas Sonderman

$X to million. million $X

Steve Manko

to for Wafer million $X $X million Services.

the mix can see that QX. change significant there's in the revenue compared the you So a to of

Robert Aguanno

color Any around there? margins

Thomas Sonderman

say, So tool I'd margin. similar to relatively, margins Services Wafer are

Steve Manko

to see we different XX% of being between all that the somewhere the on on the are tools that's that X% Yes, the But sold. tool revenue margins are we -- -- tool say basically depending sizes. can you

break the and would if margin be look you of couple So supplemental years. really, where information, can back we revenue tool at out over see our -- you tool past cost the

of goal see generate we the can raise and profit, not tool on even but capital though to do what limit slight get to you side profit, is we tools. the whole necessarily gross expense need do to it's So those our a really the for depreciation gross

Operator

will And over Sonderman Thomas? with the call back to for that, remarks. closing Thomas turn I now

Thomas Sonderman

growth that want long-term by our to operator. profitability. have close all at of I Thank you, achieve SkyWater to ability in the us and confidence reinforcing

your We will in to keep working build us. confidence

Claire conclude contact month, August and Craig-Hallum for that, look during further our this again follow-up.We call. We and will Cowen With can speaking will conferences QX forward be the to webcast. I in today's you you with attending

Operator

today's And disconnect. and concludes for now may all you gentlemen, that ladies and Thank joining, call. you

SkyWater Technology (SKYT) 8 May 242024 Q1 Earnings call transcript