SKYT - Earnings call transcript Q2 2024 | SkyWater Technology, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. My name is [Audra], and I will be your conference operator today. At this time, I would like to welcome everyone to the SkyWater Technology Q2 2024 Financial Results Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After like time, the Investor (Operator this would Relations. to McAdams, Instructions.) At Claire I turn to conference over Please go ahead.

Claire McAdams

concludes. including of ir.skywatertechnology.com. With have Second annual financial and call Good today's our are SkyWater non-GAAP call webcast tool margins. you to comparisons all available live Officer. Chief The Steve impact webcast XXXX to supplement presentation results the call I'd and On a and Sonderman, accompany gross years, quarterly the on our SkyWater's is for Officer Relations financial after adjustments Chief well afternoon, Conference today sales being welcome our Thomas and website Call. results be SkyWater's IR that we to Manko, as shortly GAAP the me Executive our the summarizing from our posted like for on website, call remind as at Quarter the on will as as Investor well replay three Financial slide last to

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

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

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

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

Thomas Sonderman

below revenues demonstrate continued well minimal rates SkyWater our We broader critical while fabs multiyear into times, weakness business forecast scale of most are of our are X% strong million results Aerospace million forecast reach and with revenue up exceeded ATS our last Claire, revenue time. new $XX compared our and business, just on million, record record was to to pleased the for year. SkyWater's continued $XX a and which in afternoon positive QX times from up I'm in we financial EPS QX to cycle driven expectations second to non-GAAP multiple Defense for industrial structure deliveries equipment to lead our you, first Customer-funded agile we customer to of co-investment. primarily to call. funded achievement on development good pull-ins everyone quarter. nearly the capacity strength faster report $X our additional quarter million a the commitment at and of of customers' delivered will tool exceeded This elevated additional capabilities the installations of in with still streamlined believe and but bring adding their given run early period cost prior needs. to investments expected, to enhanced our new due support capabilities in stages enabling critical substantial maintaining our than programs. an the in enable segment. Tool and improved XX% which slightly due by programs, CapEx better fabs exceeded through under demand within anticipated bad growth our $XX Thank These and

developments future. gains, With We now the we quarter. for results come. Today, lead demand EPS expansion in I we this achieved aligning our the in strong the profile to upside several and time business have in profitable operating high of our and model to business profitable our customer CapEx-light positive level overall current margin the believe results flow-through and margin the outlook positive leverage within in ongoing non-GAAP results ATS, will business gross necessary efficiency demonstrated and environment. strong first gross years revenue significant results expected a record to will With the support provide our the highlight

our and our with underscore execution. for of the the expectation ATS programs and results programs growth confidence strong Fiscal is continued and majority improvements be driven will of steady growth XXXX in underway SkyWater. for expected Altogether, QX capabilities that demand strong strategic business the in this strategic operational aerospace several our witnessing multiple at our our A&D year by consistently First, in defense importance coupled

well-funded. specifically, we the for we slightly second in secure half demand year a record-level of will Overall, customers' our half, in loaded another added source ATS tailwind a our critical we QX as semiconductor proof and business witnessed from technology. confidence SkyWater For in point front sales these programs yet of result XXXX. domestic revenue some tool of which pull-ins expect are trusted The is believe of

biomedical pleased Next, are this pioneer, we for customer from to ATS successful services, announce time transition to Quantum-Si. wafer another

technologies, differentiated committed medical remained particular, technologies. categories leverage of have devices customized instruments model in service and novel enables next-generation focus on that the our highly to unique the We that and for our

collaboration sequencing drug technology of support enable state-of-the-art applications, sciences to recent analysis their with Quantum-Si to life a proteome enhanced of discovery. Our anticipated will including a facet variety propel of key proteins

see in believe strong growth Biomedical, continue addition customer a of where for We and compute potential advanced our our partnerships to future commercial businesses, foundation thermal build of we advanced strong platforms. to imaging for types the that these

direct patterning is development of multi-beams the installation high fab. Minnesota recent into right exciting our productivity, system Another

of secure currently orders key as packaging as MEBL first technology and of also consider kind production faster identification magnitude new ramp. large such capability, for model. MEBL The direct productive towards enable right multicolumn through We early business example. enable topography conventional solution designs from chip which than can enable photonics supporting interposers. for anti-counterfeit is high demand and advanced and and also as more geometries applications a development as system, lithography, very and prototyping to custom our XD our our can concept its this solutions, service, enables strong advanced lithography accommodates most e-beam of customer curve-linear for available TAS, devices the MEMS capable patterning one e-beam MEBL XXX-millimeter sub-XX-nanometer a

capability markets. production and We are journey of very biomedical, imaging to high reliability defense, compute thermal advanced add this in secure feed and artist a the excited and concept

highlight Another last first of quarter is in the wafer since tool fan-out platform delivery packaging level new our Florida.

ramp we on With arrival as XXXX. development tools the throughout technology accelerating anticipate up of ATS several quarters, exciting next through we move to this new the

have engaging packaging support services We wafers clear from a can believe customers domestic broad across of commercial X there companies. demand for foundry. defense that any advanced semiconductor is and set We begun both Tier applications, including a already market

We for and have our packaging new to Florida XXX-millimeter facilitization million operation. complete an of delivery in secured is funding line $XXX exciting first packaging fan-out for capable tool our outside milestone business. our the fans This tooling emerging of

outlook. our to turning Now

revenue largely and XXXX call. in are wafer since Our for full ATS last services our year unchanged earnings expectations

operational continue development forecast which XX% We million growth XXXX services $XXX through million performance tools investments, We install a tooling to over new legacy revenue. executing With in are of and expected investments new decline as customer-funded for spanning expect XXXX. of to our for are our well now approximately CapEx of customer-funded again Today, systems, these ATS in $XX wafer over strong XXXX. up range customer-funded we XXXX and as we in meaningful increasing our the ramp path revenue. recorded CapEx SkyWater once expect we install XX% are in to

$X in or thermal $XX least is for are continued be development expected be That we higher plus weakness medical we current million, segments. and XXXX a to tool growth specifically, we in revenue industrial broader for soft to customer-funded reflecting record QX to X% wafer to ramp to continuing be are at two, million than wafer quarter range. optimistic QX minus visibility, to this the driven forecast, another remain For the million by revenue services revenues is CapEx is approximately to diagnostics to forecasting services and the With believe expected return in wafer levels, APS in $X million. total the imaging likely said, With for being $XX slightly market. QX. revenue Within services quite our or

move our the your call we in we execute are continuing build confidence on each now we Steve. to growth and to Finally, look our turn as over incremental to forward ability of driving will in our for XXXX, into objectives. I growth businesses to profitability and

Steve Manko

Thank you, Tom.

reached our the XX% from record QX record reported Second The ATS result forecast our acceleration of XXXX. XX% quarter of upside million all and revenue demand Total defense for programs. quarter another strategic from as up of up revenue development for exceeded at second aerospace and $XX.X components. with million us $XX.X strong quarter a on and the revenue three was in revenue

first run ATS lower slightly modestly a actual expected revenues the entering had increased from ATS we While rate QX, quarter.

bit revenue services than forecast run at meaningfully tools $XX end. million declined near rate the compared our in but As for $XX.X with $X.X quarter from delivery still least a outlook prior higher wafer was million. revenue our of expected, accelerated million Tools to at came

our the upper margin XXX compared wafer forecast. gross in was of revenue basis for quarter non-GAAP and XX.X% Our range to stronger by primarily Tools our due revenue the non-GAAP margin quarter services end gross impacted the at guidance to points. ATS

were to the our you compensation $XX.X operating and variable can other quarters. our which forecast primarily to due certain lower As comps each and reminder, on well posted margin below tool revenue supplement the website. Non-GAAP gross of of impact quarter a timing expenses shift was find million, financial in IR subsequent a to

and was a $X.X well $X.XX income operating the Adjusted in million. margin With forecast of of gross was per we income lower $X.X million, at non-GAAP EBITDA non-GAAP upside net and OpEx, share. ahead achieved

relatively balance of generated $X.X our XXXX. million the borrowing and benefit million cash draws was flow manage and approximately consistent operations cash generation $X.X revolver, the million our year-end quarter changes. consisted needs from through million CapEx. inter-quarter total P&L overall balance cash operations from Positive costs. flow the to has of free QX which a remained from at minimize also strong of end helps cash at $X.X sheet. Turning with from cash million $XX.X $X.X on generally capital in flow since working of quarter We The

we $X.X We currently outstanding During have $XX.X million end. on in debt at revolver. our our reduced by the quarter, quarter overall total million million indebtedness available $XX with

we as for XXXX. metrics various move to our for through QX our outlook financial into Turning and XXXX expectations and

mentioned, forecast Tom current the QX million, $XX $XX services sales. to for with revenue revenue range. million million mid-$XX This minus development or and As of reflects million in plus ATF for approximately million total wafer we tool $X visibility, revenues of our X%, expect $X our

margin we to high teens. QX revenue Given in the mid- gross this expected profile, non-GAAP expect

basis XXX Our mix margin we or impact by in the quarter, points. gross expected seven of margin tool sales expectations increased will reflect gross percentage approximately which the expect points

$XX remain We approximately non-GAAP third in quarter range through XXXX. this operating the expect and expenses Fiscal of to for million of the end

last year, the revenue largely unchanged outlook For full quarter. this our is

We XX% to of XX% XX% revenue continue approximately wafer we in year. XXXX to growth development decline services tools the expected while a revenue XX%, ATS $XX to our to the softness the range have expected in revenue affecting level of of prolonged in is full increased industry for Today, year result business to million. for forecast the the

are Finally, assumptions more our quarterly our a results. here few for of

of top Our to XXXX as as OpEx on quarters. future of rate deferment well our spending for initiatives previously lower good as control is a forecasted than run execution result certain

higher result, year. a into be to likely somewhat move is the rate as As next run we

for our year the $XX in revolver, future through million for benefit from $X.X fluctuate over depending expense on good to will continue levels we of is assumption from a believe tool interest to advanced draws million as $X.X foreseeable the debt we quarterly overall purchases. deposits million customer While

XXXX of for or tax remainder assume to modeling you nominal the For benefit. no purposes, should expense

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

Operator

Harsh to We the And will goes first Instructions.) begin Sandler. session. (Operator at our Piper Kumar now question-and-answer question

Harsh Kumar

and a talked on rest for of are aerospace I guess in I quarter. you. And year. the the one this discontinuing sort very Congratulations was defense the execution. force had kind of seeing about question dominant the on you very, being the ATS? you in about results for what You strong of programs Tom, talked

are people curious more I area there's was So, coming where it aerospace Or specific areas? a pretty of if broad-based? is defense than you to in other

Thomas Sonderman

Well, we about clearly, imaging. before talked thermal

small a referred of that's what of we lot as gets to And is today program, which, our that talked the think as aerospace is it business. about a A&D of then, a I area we as specialized RadHard of ASICs, strong business. growth the a far drive a with there while our defense relatively special and of lot course, programs, attention variety before component overall engagement

bucket broad three I those in So categories. it

Harsh Kumar

you. got I

Okay. then us do what you're packaging for think humming the I for can commercialization sort And -- about think your of put in you it's Florida all in facility closer Tom, term, the advanced fab. maybe help equipping and you to like be near at some my follow-up, point and this could what contribution of you're sounds for could It when together and running? time sort but getting the

Thomas Sonderman

Yes.

would advanced back program that slowly difference, capability just the that currently the million one the we that one interposer via getting technology, We The up several fab that But DoD's but on a investment and based operation that ramping years, $XXX that stand again, of course, We've to essentially capability sufficient move level over a announced wafer the hybrid run to Gen focus require our the larger ready in Florida. up. allow exciting last fan-out the in So an we the here put that first been, for early-stage IMEC. the an the development clean will prototyping, the adaptive a in of really investment packaging is the packaging most Minnesota. us, X via and beginning of facilitizing has that production, January. expect in type room, up obviously the to DECA beyond in be investment came to the put version being That's we've forward have was facility. we patterning program programs is Florida anything in bonding Technologies been technology, course, that's

standing begin that Then So, think but matures. primarily see to will technology. get program really in as capability into next as you revenue years, will that the of to away up it Florida into transition top year as you to as services, it begin as development-related that we're get ATS an line ATS-like add for we out be the the would

Operator

Krish at Sankar Cowen. to next move We'll TD

Unknown Analyst

remarks soft for maybe be term. mentioned This is you demand for will [Steven] calling Wafer in the of question terms first on Tom, demand behalf of your customers. you Krish. just for a know Service in prepared near that I relatively the

doesn't So, two with of, they customers, wondering guess, conversations in have for talking any conversations happening? some terms that is Is the giving large down of of you European kind three what there's your that your favorable I'm terms of Or just business ones, WS especially areas that of of your more the other relative of inventory quarters out? I kind to been If Is the those upon are about? customers demand that touch work you? signals of business? in

Thomas Sonderman

Yes.

they customer, legacy is services wafer to So who clearly, largest to Infineon, it continue weakness. comes when our have

they a so day announced earnings think ago. or their I

to will been as into Services things service into year. to focus we like we're will continue We space weak That's weak. moving So, continues we which as capabilities, move around discussing, to like course, -- production accelerate make we think it's our be move the thermal I many, Water imaging see XXXX, transition of see, what into biomedical on of business, get really like continue expecting mentioned, focused which, segment it and and customers, the rest next legacy to we progress year. to the going to the as to imaging, are for this thermal continue be start be in then, we've the a to our that really ATS recovery we And modest modeling. is industrial but believe then do primarily

get really developing going side ATS. just that's customers legacy the over So, the what's back, businesses we're services those last today which the start we've because and are but to pivoting hopeful in technologies into taking like with profitability many drive the of really been have towards definitely several we wafer that our the like the eventually, years coming future, helping ramped production business is will we

Unknown Analyst

guess, Great. Well, question, for needs Steve CapEx had longer-term one I the for the I second facility. Florida my regarding packaging the

that million now to between relative spent XXXX. be to $XXX So, and

of original include is related to does part any And million, the revenue Just the announced you million $XXX secondly, million of $XX that is are of we've to of guys clarify, $XXX top that of wafer $XXX that that this Florida? CapEx on level funding that that is million? that packaging, for year, that fan-out or tool expecting with this

Steve Manko

question. Yes. Good

with start I'll the last So first. question

that $XX the into of amount tool XXXX. for revenue So of a part small very Florida has million going

talking of -- go year. million just something something above million $XXX more of more to the program. Florida by keep we're $XXX last various seen successful other and putting So, Item Tom couple and though, $XXX that a million specifically over going two, number XXX, wafer starting that awarded to would is in straight that. the the with about place That would said, But programs everything we with to happen there's money and we are the mentioned, what as take to been where be We've you item start program into that then part about that Florida like into we potential number back is stages Florida than wafer for in has program fan-out going talked with out we the one. like years, fan-out getting as before what that what XXXX. amount, announced flow of they XXXX packaging, really to packaging maybe upside

Operator

to We'll move & Shadi Needham next Mitwalli Company. with

Shadi Mitwalli

means on long and term? system, SkyWater Can customer received. near And Bolton. SkyWater received in Mitwalli capability? question expand the that this MEBL you have Quinn the the you Shadi a I can on you talk about what is for for with interest have This on

Thomas Sonderman

Yes. Great question.

new SkyWater now we'll processing. doesn't to productivity excited of exotic product. type more it, system does, have a So of application. optimizing this the a have very technology call and well and co-optimization is It type that what which on is focus of and very in is obviously a has slow. Those been our leverages again, towards for, with align geared customization type is a used It's that actually E-beam traditionally fab. process lot SkyWater applications the of high certain

So, XXx it customers designs, traditional to up more at capable linear my that want more XXXx an the do even capability allows opportunities many to it's type aligned for advantage that take as the just us. SkyWater. faster in things optical collateral right I really a get remarks, solution, than work other e-Beam multi-beam with because of opens for direct Again, that are that curve we MEMS, mentioned with you of

And to of lot a leading-edge just allows also innovation, great existing the So, new it's in customers, kind as the of capability. go below us our of fab XXX-millimeter not customer provides be puts it flowing fact funding, but to makes as we really advanced a through drive to exploit the think nanometers within XX only our us from for world. it unique investments XXX-millimeter will geometric very chips-related believe most opportunity going position we that that at a conduit XXX-millimeter in and start but perspective base, a the SkyWater

Shadi Mitwalli

How transition? ramp? the transitioning is working on can into guys wafer timing you have And on Quantum-Si, before give the long And any capacity you color and with them follow-up services. then my been

Thomas Sonderman

Yes.

true case So years engagement, of solutions about typically, ATS the of the two Quantum-Si. and are in that's biomedical

then As upon go we a point provide samples depending take rest can We approvals the level That they the that of of needed. year of a to qualifications. qualification period. initial their freezing complete of get the upwards the are the process, then and we through

anticipate. later ramps year So, of next XXXX, seeing we as programs the biomedical of I would these start many get going of into would into we part

definitely kind talked more be will development, the come out that you there kind the a that off a about left Again, revenue. course, be going think to J-curve lull in through as frame. revenue this of And X up ATS we the picks the the will just before there way, along is samples is wafer process. be time from where what moving needed, we're services Of we ATS of of to effect but as about of XX-month

as are the I that's generally getting data think you would it, but we're getting it. guys So, this data on way of on

Operator

next to Shannon Craig-Hallum. move Richard We'll at

Richard Shannon

broadly I Tom, may about maybe least wonder the you ATS follow your new on of of have us these revenue to if ask could or kind or noticeable, at have bigger you the more becomes I to the one customers here from the last ATS talked transition paint and revenue stream than customers transitioning wafer that about right up the becomes here. question picture about see even of maybe do when we legacy that profile all now. services kind

Thomas Sonderman

Yes. Great question, Richard.

of, like our kind wafer in talked services in I we think going next to it's again, remarks, again growth we're seeing start believe year. we

conservative Some We will are because in of done. think customers, we how programs these our of the come the Once being we and the to wafer provided of rest quals that out control. to our very get clearly they're much build the they these systems ramp growth solutions of will get have terms services ATS from transitions.

or acceleration XXXX, their think So, of a in the an to and other of whether you'll XXXX, transitioning. then pace -- space, can into the the we space to the believe you is be I get of the into we'll as case the it's continue have part you in ADAS again, that it's But -- start thing biomedical in quarters. customers Lumotive, seeing the series going ramp and expect moving of later

is going be programs where of get expect days and customers, early when services, services they'll we you a to But tended wafer see the growth different at years have that's down us overall, longer legacy which and it multiple when we dependent and ATS, in and have accelerate the opportunity you're on focus through all like broad materializes. ATS think exciting before that conversion, more wafer the can to out slowdown of has get on allowed our so the we quicker in market in we capture that ramping as driving the really upside faster noticeable, the paces. these just business, out that it them slow gets we much that us would So, one because we faster the be in portfolio no didn't the in programs to is

Richard Shannon

detail follow-up, my obviously didn't see, profitability obviously, probably And nice Okay. have is enough of in in Steve. to a here this your you level through time hit for Steve, really you the in mostly is run my what the generally quarter, picture. forward profitable, it great to couple which any the on numbers and future great model for profitable here, see versus close so. or just losses Maybe of sounds to here. you not if could kind comment we I near quarters few see profitability But want to next play like big

Steve Manko

announce we that something we've some waiting for, question. non-GAAP We were the excited quarter for EPS that that's the quite for for first to time. time. mean, Good hit been clearly I Yes. positive

once the level of generating we In profit gross XXXX, leverage financial about second talked fixed from believe I greater XX% on the we the a our We think million through cost. modeling. shows of is of exceeded this $XX profitability perspective. I what about of flow model quarter or the talked second

coming services, ATS profitability coming ATS standpoint. upper revenue new margin the wafer revenue services Now as we remember, now like real our you're breakeven And through, wafer and is in something right and to the the couple profile. really XXs looking demonstrated a XX% for from seeing for quarters, next that's the past on of

like puts what be each could house importantly, can looks upper even very there the on consistently EPS cost in revenue XXs, demonstrating pretty the of and think to maybe quarter exactly the we're get profile what non-GAAP that looks really I depending non-GAAP some close more But that profitability. takes side So, we and and like.

that's revenue something that levels. to think going those forward forward look we at I can

Operator

Weener at go Jefferies. next We'll Ezra Instructions.) (Operator to

Ezra Weener

question. quick A

try talked pipeline business. from just the guys wafer of Quantum-Si going that trying Can that moving you great about as services. more -- a to that You into Obviously, forward? about ATS with and ATS to you that's do talk step

Thomas Sonderman

we I is year. what year, as a We just the have revenue those volume at this beginning market, of a then where have, think, very just others ramping with or again, to levels lowest upside of rates, to we with And converting think, the slated of We're is we're positioned business, move cadence, the for to the a we as this see fixed was time, and us. And part that help you're wafer into huge alluding true we the point as more many get wafer to new, going highly and begin revenue per are to up efficient business but begin that that place. cost model very absorbing into kind legacy opportunity back enter the another the believe we and those we're capture have well get year, profitable is, right, now is different expect seeing next their two. Steve into technologies that to. There's year we was be just each we over just one create services put as not breakout now the customers announced alluding they'll that to, you'll as more conversion to later of to we customers more transition. done of get I with four what we're profitability customers seeing And services very this own but to in the our at ability replace

Steve Manko

do it's time, new for not timing quarter, per there's with but you've a one quite about and guaranteed so, some or year those like and expect two you're what that think moving I of for. when phase waiting that's have consistency we that can We're that, our then information with been routinely business again, business wafer exciting more pipeline And looks on have we'll And wafer customers customers. that services. our been better seeing about. services we've time talking expect only this every talking from to from a the really we're maybe more before to seen more one we've revenue quarter been materializing With that ATS and where we more an customers for to new

Thomas Sonderman

adding advanced add, the well, things just compute, our space. whether it's biomedical, ATS IoT to AI always I'll in as pipeline And more we're

took are We on And continue through that our of have is board others the as and through of ATS story move the just we to lots a a model. new And SkyWater that that exciting real SkyWater legacy customers created to exciting pipeline. lot as beginning coming with in legacy those enter of we'll literally new brought move into market. replaced essentially that technology production customers We just buying the have is volume opportunities. and fab

Ezra Weener

very Awesome, thank much. you

Steve Manko

a CapEx-light model. very That's

Sorry.

Operator

our that the And closing to now concludes Sonderman remarks. over I session. back Thomas for conference turn will Q&A

Thomas Sonderman

close look please conference forward as month And Sandler reach of towards I'm successfully the Claire earnings confidence We all Summit our opportunities call. to strong going in and this Thank operator. Conference with directly you, execute I'll to November. follow us have at the call our today's as free out to conclude today's well QX ability early SkyWater Semiconductor growth up and by our conveying with talking and long-term you on continue additional third meet your that, us. objectives. anticipate execute. in in intent profitability with will include to is call opportunities the And that our again It in with We Needham to to feel quarter investors Growth to Chicago confidence build to Semiconductor Virtual capability Jefferies to our to September. later the Frontiers during Piper the

Operator

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

disconnect. now may You

SkyWater Technology (SKYT) 7 Aug 242024 Q2 Earnings call transcript