8-K
SkyWater Technology, Inc (SKYT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 8-K
___________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 2024
___________________________
SkyWater Technology, Inc.
(Exact name of registrant as specified in its charter)
___________________________
| Delaware | 001-40345 | 37-1839853 | |||
|---|---|---|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) | 2401 East 86th Street<br><br>Bloomington, Minnesota | 55425 | |
| --- | --- | ||||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (952) 851-5200
___________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered under Section 12(b) of the Exchange Act:
| Title of Each Class | Trading<br><br>Symbol | Name of Each Exchange<br><br>on Which Registered |
|---|---|---|
| Common stock, par value $0.01 per share | SKYT | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | x |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition
On February 26, 2024, SkyWater Technology, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and full fiscal year ended December 31, 2023. The press release is furnished herewith as Exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in that filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following documents are filed as exhibits to this report:
| Exhibit Number | Description of Exhibit |
|---|---|
| 99.1 | Press release dated February 26, 2024. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SkyWater Technology, Inc. | ||
|---|---|---|
| Date: February 26, 2024 | /s/ Thomas J. Sonderman | |
| Name: | Thomas J. Sonderman | |
| Title: | Chief Executive Officer |
Document
Exhibit 99.1
SkyWater Technology Reports Fourth Quarter and Full Fiscal Year 2023 Results
Sixth Straight Quarter of Record Revenue Culminates in 35% Growth Year for Fiscal 2023
BLOOMINGTON, Minn., – February 26, 2024 – SkyWater Technology, Inc. (NASDAQ: SKYT), the trusted technology realization partner, today announced financial results for the fourth quarter and full fiscal year 2023 ended December 31, 2023.
Financial Highlights for Q4 2023:
•Revenue increased 22% year-over-year to a record $79.2 million.
•Gross margin decreased to 15.2% on a GAAP basis, compared to 25.4% in Q4 2022, and decreased to 17.4% on a non-GAAP basis, compared to 26.1% in Q4 2022.
•Net loss to shareholders of $10.3 million, or $(0.22) per share on a GAAP basis, and net loss to shareholders of $1.1 million, or $(0.02) per share on a non-GAAP basis, compared to net loss to shareholders of $3.0 million, or $(0.07) per share on a GAAP basis, and net loss to shareholders $1.5 million, or $(0.03) per share on a non-GAAP basis in Q4 2022.
•Adjusted EBITDA of $10.6 million, or 13.4% of revenue, compared to $10.3 million, or 15.9% of revenue in Q4 2022.
Financial Highlights for Fiscal Year 2023:
•Revenue increased 35% year-over-year to a record $286.7 million.
•Gross margin increased to 20.7% on a GAAP basis, compared to 12.2% in fiscal year 2022, and increased to 22.0% on a non-GAAP basis, compared to 13.7% in fiscal year 2022.
•Net loss to shareholders of $30.8 million, or $(0.68) per share on a GAAP basis, and net loss to shareholders of $7.7 million, or $(0.17) per share on a non-GAAP basis, compared to net loss to shareholders of $39.6 million, or $(0.97) per share on a GAAP basis, and net loss to shareholders $30.3 million, or $(0.74) per share on a non-GAAP basis in fiscal year 2022.
•Adjusted EBITDA of $37.2 million, or 13.0% of revenue, compared to $7.7 million, or 3.6% of revenue in fiscal year 2022.
“We are pleased to deliver a solid finish to fiscal 2023, with revenue growth exceeding our earlier expectations as a result of strong customer demand for our differentiated Advanced Technology Services (ATS) business,” commented Thomas Sonderman, SkyWater president and chief executive officer. “We are now entering a multi-year stage of increased levels of customer investments in our production capacity and capabilities, and we anticipate these investments will enable SkyWater to achieve another year of revenue growth in 2024. The continued robust demand for our ATS business demonstrates that our customers’ innovation investments remain strong.”
Recent Business Highlights:
•Significantly exceeded long-term growth targets in fiscal 2023, led by strong growth in ATS development revenue, which exceeded 50% year-over-year.
•Secured customer commitments for capital investment over the next several years, supporting continued year-over-year revenue growth ahead.
•Announced a Department of Defense award of up to $190 million for our Florida operation, reflecting the significant effort underway to expand advanced packaging capabilities domestically.
•Submitted our full CHIPS application during Q4, targeting modernization and equipment upgrades to enhance production at our Bloomington, Minnesota manufacturing facility.
•Continued momentum in bio-medical diagnostic applications culminated in the recent milestone announcement that Nautilus Biotech will be transitioning from ATS to Wafer Services for supply of its silicon-based microfluidic bio chips for proteome analysis.
•Our strategic business transformation initiatives of 2023 are enabling us to deploy a leaner and more efficient organization toward delivering consistent, continuous enhancements in productivity and output in our ATS business.
Q4 2023 Summary:
| GAAP | |||||
|---|---|---|---|---|---|
| In millions, except per share data | Q4 2023 | Q4 2022 | Y/Y | Q3 2023 | Q/Q |
| ATS development revenue (1) | $57.2 | $47.8 | 19% | $53.9 | 6% |
| Tool revenue (2) | $9.9 | $0.0 | nm | $3.2 | 206% |
| Total ATS revenue | $67.1 | $47.9 | 40% | $57.1 | 17% |
| Wafer Services revenue | $12.0 | $17.2 | (30)% | $14.5 | (17)% |
| Total revenue | $79.2 | $65.1 | 22% | $71.6 | 11% |
| Gross profit | $12.0 | $16.6 | (27)% | $14.1 | (15)% |
| Gross margin | 15.2% | 25.4% | (1,020) bps | 19.8% | (460) bps |
| Net loss to shareholders | $(10.3) | $(3.0) | 240% | $(7.6) | (36)% |
| Basic loss per share | $(0.22) | $(0.07) | 214% | $(0.16) | (38)% |
| Net loss margin to shareholders | (13.0)% | (4.7)% | (830) bps | (10.6)% | (240) bps |
nm - Not meaningful
| Non-GAAP | |||||
|---|---|---|---|---|---|
| In millions, except per share data | Q4 2023 | Q4 2022 | Y/Y | Q3 2023 | Q/Q |
| Non-GAAP gross profit | $13.8 | $17.0 | (19)% | $14.6 | (5)% |
| Non-GAAP gross margin | 17.4% | 26.1% | (870) bps | 20.4% | (300) bps |
| Non-GAAP net loss to shareholders | $(1.1) | $(1.5) | 27% | $(2.2) | 51% |
| Non-GAAP basic loss per share | $(0.02) | $(0.03) | 33% | $(0.05) | 60% |
| Adjusted EBITDA | $10.6 | $10.3 | 2% | $8.3 | 28% |
| Adjusted EBITDA margin | 13.4% | 15.9% | (250) bps | 11.6% | 180 bps |
Fiscal Year 2023 Summary:
| GAAP | |||
|---|---|---|---|
| In millions, except per share data | FY 2023 | FY 2022 | Y/Y |
| ATS development revenue (1) | $210.9 | $137.9 | 53% |
| Tool revenue (2) | $14.7 | $1.5 | 848% |
| Total ATS revenue | $225.6 | $139.4 | 62% |
| Wafer Services revenue | $61.1 | $73.5 | (17)% |
| Total revenue | $286.7 | $212.9 | 35% |
| Gross profit | $59.3 | $26.0 | 128% |
| Gross margin | 20.7% | 12.2% | 850 bps |
| Net loss to shareholders | $(30.8) | $(39.6) | (22)% |
| Basic loss per share | $(0.68) | $(0.97) | (30)% |
| Net loss margin to shareholders | (10.7)% | (18.6)% | 790 bps |
| Non-GAAP | |||
| --- | --- | --- | --- |
| In millions, except per share data | FY 2023 | FY 2022 | Y/Y |
| Non-GAAP gross profit | $63.0 | $29.1 | 116% |
| Non-GAAP gross margin | 22.0% | 13.7% | 830 bps |
| Non-GAAP net loss to shareholders | $(7.7) | $(30.3) | 75% |
| Non-GAAP basic loss per share | $(0.17) | $(0.74) | 77% |
| Adjusted EBITDA | $37.2 | $7.7 | 383% |
| Adjusted EBITDA margin | 13.0% | 3.6% | 940 bps |
(1)ATS development revenue represents GAAP revenue primarily derived from process development services, tool installation and qualification services, facility and tool access, and security services.
(2)Tool revenue primarily represents GAAP revenue that arises from the purchase of equipment for our customers. This equipment is used to complete ATS customer programs.
Q4 2023 Results:
•Revenue: Revenue of $79.2 million increased 22% year-over-year. Total ATS revenue of $67.1 million increased 40% year-over-year. Total ATS revenue included $9.9 million of tool revenue in the fourth quarter of 2023 and $0.0 million in the fourth quarter of 2022. Wafer Services revenue of $12.0 million decreased 30% compared to the fourth quarter of 2022.
•Gross Profit: GAAP gross profit was $12.0 million, or 15.2% of total revenue, compared to gross profit of $16.6 million, or 25.4% of total revenue, in the fourth quarter of 2022. Non-GAAP gross profit was $13.8 million, or 17.4% of total revenue, compared to non-GAAP gross profit of $17.0 million, or 26.1% of total revenue, in the fourth quarter of 2022.
•Operating Expenses: GAAP operating expenses were $18.0 million, compared to $15.2 million in the fourth quarter of 2022, and included $5.3 million of project-based management consulting transformation fees related to long-term improvement in automation and operational efficiency that were not a component of operating expenses in the fourth quarter of 2022.
•Net Loss: GAAP net loss to shareholders of $10.3 million, or $(0.22) per share, compared to a net loss to shareholders of $3.0 million, or $(0.07) per share, in the fourth quarter of 2022. Non-GAAP net loss to shareholders of $1.1 million, or $(0.02) per share, compared to a non-GAAP net loss to shareholders of $1.5 million, or $(0.03) per share, in the fourth quarter of 2022.
•Adjusted EBITDA: Adjusted EBITDA was $10.6 million, or 13.4% of total revenue, compared to $10.3 million, or 15.9% of total revenue, in the fourth quarter of 2022.
A reconciliation between historical GAAP and non-GAAP information is contained in the tables below in the section titled, “Non-GAAP Financial Measures.”
Investor Webcast
SkyWater will host a conference call on Monday, February 26, 2024, at 3:30 p.m. CT to discuss its fourth quarter and fiscal year 2023 financial results. A live webcast of the call will be available online at IR.SkyWaterTechnology.com.
About SkyWater Technology
SkyWater (NASDAQ: SKYT) is a U.S.-based semiconductor manufacturer and a DMEA-accredited Category 1A Trusted Foundry. SkyWater’s Technology as a Service model streamlines the path to production for customers with development services, volume production and heterogeneous integration solutions in its world-class U.S. facilities. This pioneering model enables innovators to co-create the next wave of technology with diverse categories including mixed-signal CMOS, read-out ICs, rad-hard ICs, power management, MEMS, superconducting ICs, photonics, carbon nanotubes and interposers. SkyWater serves growing markets including aerospace & defense, automotive, biomedical, cloud & computing, consumer, industrial and IoT. For more information, visit: www.skywatertechnology.com.
Cautionary Statement Regarding Preliminary Results
The Company’s results for the fourth quarter and fiscal year ended December 31, 2023 are preliminary, unaudited and subject to the finalization of the Company’s fourth quarter review and full-year audit and should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. The Company cautions that actual results may differ materially from those described in this press release.
SkyWater Technology Forward-Looking Statements
This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that are based on the Company’s current expectations or forecasts of future events, rather than past events and outcomes, and such statements are not guarantees of future performance. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information or predictions concerning the Company’s future business, results of operations, financial performance, plans and objectives, competitive position, market trends, and potential growth and market opportunities. In some cases, you can identify forward-looking statements by words such as “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “targets,” “projects,” “seeks” or the negative of these terms or other comparable terminology.
Forward-looking statements are subject to risks, uncertainties and assumptions, which may cause the Company’s actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Key factors that could cause the Company’s actual results to be different than expected or anticipated include, but are not limited to: our goals and strategies; our future business development, financial condition and results of operations; our ability to continue operating our fabrication facilities at full capacity; our ability to appropriately respond to changing technologies on a timely and cost-effective basis; our customer relationships and our ability to retain and expand our customer relationships; our ability to accurately predict our future revenues for the purpose of appropriately budgeting and adjusting our expenses; our expectations regarding dependence on our largest customers; our ability to diversify our customer base and develop relationships in new markets; the performance and reliability of our third-party suppliers and manufacturers; our ability to procure tools, materials, and chemicals; our ability to control costs, including our operating and capital expenses; the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets; the level of demand in our customers’ end markets; our ability to attract, train and retain key qualified personnel in a competitive labor market; adverse litigation judgments, settlements or other litigation-related costs; changes in trade policies, including the imposition of tariffs; our ability to raise additional capital or financing; our ability to accurately forecast demand; the level and timing of U.S. government program funding; our ability to maintain compliance with certain U.S. government contracting requirements; regulatory developments in the United States and foreign countries; our ability to protect our intellectual property rights; our ability to meet our long-term growth targets; and other factors discussed in the “Risk Factors” section of the annual report on Form 10-K the Company filed with the SEC on March 15, 2023 and in other documents that the Company files with the SEC, which are available at http://www.sec.gov. The Company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
Source String: SkyWater Technology (SKYT-IR)
SkyWater Investor Contact: Claire McAdams | claire@headgatepartners.com
SkyWater Media Contact: Lauri Julian | Media@SkyWaterTechnology.com
SKYWATER TECHNOLOGY, INC.
Consolidated Balance Sheets
(Unaudited)
| December 31, 2023 | January 1, 2023 | |||
|---|---|---|---|---|
| (in thousands, except share data) | ||||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 18,382 | $ | 30,025 |
| Accounts receivable (net of allowance for credit losses of $180 and $1,638, respectively) | 65,961 | 28,045 | ||
| Contract assets (net of allowance for credit losses of $99 and $0, respectively) | 29,666 | 34,625 | ||
| Inventory | 15,341 | 13,397 | ||
| Prepaid expenses and other current assets | 16,853 | 10,290 | ||
| Income tax receivable | 172 | 169 | ||
| Total current assets | 146,375 | 116,551 | ||
| Property and equipment, net | 159,367 | 179,915 | ||
| Intangible assets, net | 5,672 | 5,608 | ||
| Other assets | 5,342 | 3,690 | ||
| Total assets | $ | 316,756 | $ | 305,764 |
| Liabilities and shareholders’ equity | ||||
| Current liabilities | ||||
| Current portion of long-term debt | $ | 3,976 | $ | 1,855 |
| Accounts payable | 19,614 | 21,102 | ||
| Accrued expenses | 48,291 | 25,212 | ||
| Short-term financing, net of unamortized debt issuance costs | 22,765 | 55,817 | ||
| Contract liabilities | 49,551 | 28,186 | ||
| Total current liabilities | 144,197 | 132,172 | ||
| Long-term liabilities | ||||
| Long-term debt, less current portion and net of unamortized debt issuance costs | 36,098 | 35,181 | ||
| Long-term incentive plan | — | 1,643 | ||
| Long-term contract liabilities | 65,754 | 67,967 | ||
| Deferred income tax liability, net | 679 | 1,239 | ||
| Other long-term liabilities | 9,327 | 13,585 | ||
| Total long-term liabilities | 111,858 | 119,615 | ||
| Total liabilities | 256,055 | 251,787 | ||
| Shareholders’ equity | ||||
| Preferred stock, $0.01 par value per share (80,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2023 and January 1, 2023) | — | — | ||
| Common stock, $0.01 par value per share (200,000,000 shares authorized; 47,028,159 and 43,704,876 shares issued and outstanding as of December 31, 2023 and January 1, 2023, respectively) | 470 | 437 | ||
| Additional paid-in capital | 178,473 | 147,304 | ||
| Accumulated deficit | (125,203) | (94,072) | ||
| Total shareholders’ equity, SkyWater Technology, Inc. | 53,740 | 53,669 | ||
| Noncontrolling interests | 6,961 | 308 | ||
| Total shareholders’ equity | 60,701 | 53,977 | ||
| Total liabilities and shareholders’ equity | $ | 316,756 | $ | 305,764 |
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Operations
(Unaudited)
| Three-Month Period Ended | Fiscal Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2023 | October 1, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||
| (in thousands, except share data) | ||||||||||
| Revenue | $ | 79,154 | $ | 71,624 | $ | 65,087 | $ | 286,682 | $ | 212,941 |
| Cost of revenue | 67,143 | 57,477 | 48,536 | 227,390 | 186,974 | |||||
| Gross profit | 12,011 | 14,147 | 16,551 | 59,292 | 25,967 | |||||
| Research and development expense | 2,872 | 2,233 | 2,208 | 10,169 | 9,431 | |||||
| Selling, general, and administrative expense | 15,092 | 16,105 | 13,040 | 63,911 | 46,303 | |||||
| Operating (loss) income | (5,953) | (4,191) | 1,303 | (14,788) | (29,767) | |||||
| Other expense | ||||||||||
| Loss on debt extinguishment | — | — | (1,101) | — | (1,101) | |||||
| Interest expense | (2,898) | (2,507) | (1,794) | (10,826) | (5,194) | |||||
| Total other expense | (2,898) | (2,507) | (2,895) | (10,826) | (6,295) | |||||
| Loss before income taxes | (8,851) | (6,698) | (1,592) | (25,614) | (36,062) | |||||
| Income tax (benefit) expense | (450) | (96) | 852 | (521) | 809 | |||||
| Net loss | (8,401) | (6,602) | (2,444) | (25,093) | (36,871) | |||||
| Less: net income attributable to noncontrolling interests | 1,924 | 966 | 597 | 5,663 | 2,722 | |||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (10,325) | $ | (7,568) | $ | (3,041) | $ | (30,756) | $ | (39,593) |
| Net loss per share attributable to common shareholders, basic and diluted | $ | (0.22) | $ | (0.16) | $ | (0.07) | $ | (0.68) | $ | (0.97) |
| Weighted average shares used in computing net loss per common share, basic and diluted | 47,020,395 | 46,445,309 | 42,612,763 | 45,506,598 | 40,835,186 |
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
| Fiscal Year Ended | ||||
|---|---|---|---|---|
| December 31, 2023 | January 1, 2023 | |||
| (in thousands) | ||||
| Cash flows from operating activities | ||||
| Net loss | $ | (25,093) | $ | (36,871) |
| Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities | ||||
| Depreciation and amortization | 28,930 | 28,192 | ||
| Gain on sale of property and equipment | — | (3) | ||
| Write-off of capital projects in process | 1,262 | — | ||
| Amortization of debt issuance costs included in interest expense | 1,755 | 909 | ||
| Long-term incentive and equity-based compensation | 6,860 | 8,610 | ||
| Cash paid for contingent consideration in excess of initial valuation | — | (816) | ||
| Deferred income taxes | (560) | 244 | ||
| Cash paid for operating leases | (49) | (49) | ||
| Cash paid for interest on finance leases | (848) | (757) | ||
| Provision for credit losses | 38 | 1,638 | ||
| Loss on debt extinguishment | — | 1,101 | ||
| Changes in operating assets and liabilities | ||||
| Accounts receivable and contract assets | (33,371) | (11,596) | ||
| Inventories | (1,944) | (9,225) | ||
| Prepaid expenses and other assets | (8,218) | (5,288) | ||
| Accounts payable and accrued expenses | 22,296 | 21,787 | ||
| Contract liabilities, current and long-term | 19,152 | (12,749) | ||
| Income tax receivable and payable | (3) | 576 | ||
| Net cash provided by (used in) operating activities | 10,207 | (14,297) | ||
| Cash flows from investing activities | ||||
| Purchase of software and licenses | (1,871) | (400) | ||
| Purchases of property and equipment | (8,618) | (17,053) | ||
| Net cash used in investing activities | (10,489) | (17,453) | ||
| Cash flows from financing activities | ||||
| Draws on revolving line of credit | 259,350 | 63,006 | ||
| Paydowns of revolving line of credit | (297,649) | — | ||
| Net repayment on Revolver | — | (26,220) | ||
| Proceeds from tool financings | 9,012 | — | ||
| Principal payments on long-term debt | (2,482) | (1,224) | ||
| Cash paid for debt issuance costs | — | (4,168) | ||
| Proceeds from the issuance of common stock in secondary offering | — | 16,168 | ||
| Cash paid for offering costs | — | (456) | ||
| Cash paid for principal on finance leases | (935) | (1,603) | ||
| Proceeds from the issuance of common stock pursuant to equity compensation plans | 2,305 | 1,800 | ||
| Proceeds from the issuance of common stock under the ATM | 20,398 | 3,919 | ||
| Cash paid on licensed technology obligations | (2,350) | (1,150) | ||
| Net contributions (distributions) from (to) noncontrolling interest | 990 | (1,214) | ||
| Net cash (used in) provided by financing activities | (11,361) | 48,858 | ||
| Net change in cash and cash equivalents | (11,643) | 17,108 | ||
| Cash and cash equivalents - beginning of period | 30,025 | 12,917 | ||
| Cash and cash equivalents - end of period | $ | 18,382 | $ | 30,025 |
Supplemental Financial Information by Quarter
| Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | ||||||||||||||||
| ATS development revenue (1) | $ | 57,170 | $ | 53,891 | $ | 52,073 | $ | 47,770 | $ | 47,846 | $ | 34,953 | $ | 29,510 | $ | 25,591 |
| Tool revenue (2) | 9,936 | 3,243 | 936 | 536 | 30 | 219 | 313 | 984 | ||||||||
| Total ATS revenue | $ | 67,106 | $ | 57,134 | $ | 53,009 | $ | 48,306 | $ | 47,876 | $ | 35,172 | $ | 29,823 | $ | 26,575 |
| Wafer Services revenue | 12,048 | 14,490 | 16,802 | 17,788 | 17,211 | 17,154 | 17,584 | 21,546 | ||||||||
| Total revenue | $ | 79,154 | $ | 71,624 | $ | 69,811 | $ | 66,094 | $ | 65,087 | $ | 52,326 | $ | 47,407 | $ | 48,121 |
| Tool revenue (2) | $ | 9,936 | $ | 3,243 | $ | 936 | $ | 536 | $ | 30 | $ | 219 | $ | 313 | $ | 984 |
| Tool cost of revenue (2) | 9,125 | 2,861 | 290 | 484 | 46 | 152 | 200 | 984 | ||||||||
| Tool gross profit (loss) | $ | 811 | $ | 382 | $ | 646 | $ | 52 | $ | (16) | $ | 67 | $ | 113 | $ | — |
| Revenue impact of modified customer contracts | $ | — | $ | — | $ | 3,601 | $ | — | $ | 4,685 | $ | — | $ | — | $ | 8,230 |
| Cost of revenue impact of modified customer contracts | — | — | — | — | — | — | — | 10,887 | ||||||||
| Gross profit (loss) impact of modified customer contracts | $ | — | $ | — | $ | 3,601 | $ | — | $ | 4,685 | $ | — | $ | — | $ | (2,657) |
__________________
(1)ATS development revenue represents GAAP revenue primarily derived from process development services, tool installation and qualification services, facility and tool access, and security services.
(2)Tool revenue and cost of tool revenue primarily represent GAAP amounts that arise from the purchase of equipment for our customers. This equipment is used to complete ATS customer programs.
Non-GAAP Financial Measures
We provide supplemental, non-GAAP financial information that our management regularly evaluates to provide additional insight to investors as supplemental information to our results reported using U.S. generally accepted accounting principles (GAAP). We provide non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss to shareholders, and non-GAAP net loss to shareholders per share. Our management uses these non-GAAP financial measures to make informed operating decisions, complete strategic planning, prepare annual budgets, and evaluate Company and management performance. We believe these non-GAAP financial measures are useful performance measures to our investors because they provide a baseline for analyzing trends in our business and exclude certain items that may not be indicative of our core operating results. The non-GAAP financial measures disclosed in this earnings press release should not be viewed as an alternative to, or more meaningful than, the reported results prepared in accordance with GAAP. In addition, because these non-GAAP financial measures are not determined in accordance with GAAP, other companies, including our peers, may calculate their non-GAAP financial measures differently than we do. As a result, the non-GAAP financial measures presented in this earnings press release may not be directly comparable to similarly titled measures presented by other companies.
We also provide adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA margin as supplemental non-GAAP measures. We define adjusted EBITDA as net (loss) income before net interest expense, income tax (benefit) expense, depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including net income attributable to noncontrolling interests, business transformation costs, CHIPS Act specialist fees, management transition expense, SkyWater Florida start-up costs, and restructuring costs. Our management uses adjusted EBITDA and adjusted EBITDA margin to make informed operating decisions, complete strategic planning, prepare annual budgets, and evaluate Company and management performance. We believe adjusted EBITDA is a useful performance measure to our investors because it allows for an effective evaluation of our operating performance when compared to other companies, including our peers, without regard to financing methods or capital structures. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because the amounts of these items can vary substantially within our industry depending on the accounting methods and policies used, book values of assets, capital structures, and the methods by which assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net (loss) income determined in accordance with GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost bases of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP financial measures should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.
We continuously evaluate the non-GAAP financial measures we use, the manner in which non-GAAP financial measures are calculated, and the adjustments we make to GAAP results to derive our non-GAAP financial measures. In the third quarter of 2023, we made the following changes to our non-GAAP financial measures and revised prior period non-GAAP financial measures to conform the calculation of non-GAAP financial measures across all periods and provide comparability:
•Tool sales have historically been infrequent and viewed by management as secondary to ATS development programs. Accordingly, prior to the third quarter of 2023, we excluded the margin on tool sales when calculating non-GAAP gross profit, non-GAAP gross margin, non-GAAP earnings to shareholders and non-GAAP earnings to shareholders per basic share. Recently, our ATS customers have increasingly contracted with us to purchase tools on their behalf and we expect this trend to continue going forward. Accordingly, we no longer believe tool sales are infrequent and therefore do not exclude the impact of tool revenue and tool cost of revenue in the calculation of our non-GAAP financial measures.
•Since the second quarter of 2023, we have incurred expenses related to long-term transformation activities focused on improvement in automation and operational efficiency. Prior to the fourth quarter of 2023, these expenses consisted of project-based consulting fees; however, in the fourth quarter of 2023, the write-off of abandoned software assets associated with our business transformation activities is also included. Similarly, we have also incurred project-based specialist fees associated with our CHIPS Act application. Neither of these types of fees are required to run our business and, therefore, are incremental to our ongoing operations and are not a normal operating expense. Beginning in the third quarter of 2023, we began excluding these fees in the calculation of non-GAAP earnings, non-GAAP earnings to shareholders per share, and adjusted EBITDA.
The following tables present a reconciliation of the most directly comparable financial measures, calculated and presented in accordance with GAAP, to our non-GAAP financial measures.
SKYWATER TECHNOLOGY, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
| Three-Month Period Ended | Fiscal Year Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2023 | October 1, 2023 | January 1, 2023<br><br>(Revised) | December 31, 2023 | January 1, 2023<br>(Revised) | |||||||||||
| (in thousands) | |||||||||||||||
| GAAP revenue | $ | 79,154 | $ | 71,624 | $ | 65,087 | $ | 286,682 | $ | 212,941 | |||||
| GAAP cost of revenue | $ | 67,143 | $ | 57,477 | $ | 48,536 | $ | 227,390 | $ | 186,974 | |||||
| Equity-based compensation (1) | (313) | (438) | (452) | (1,555) | (2,578) | ||||||||||
| SkyWater Florida start-up costs (2) | — | — | (14) | — | (582) | ||||||||||
| Restructuring costs (3) | (679) | — | — | (679) | — | ||||||||||
| Business transformation costs (4) | (806) | — | — | (806) | — | ||||||||||
| Management transition expense (5) | — | — | — | (705) | — | ||||||||||
| Non-GAAP cost of revenue | $ | 65,345 | $ | 57,039 | $ | 48,070 | $ | 223,645 | $ | 183,814 | |||||
| GAAP gross profit | $ | 12,011 | $ | 14,147 | $ | 16,551 | $ | 59,292 | $ | 25,967 | |||||
| GAAP gross margin | 15.2 | % | 19.8 | % | 25.4 | % | 20.7 | % | 12.2 | % | |||||
| Equity-based compensation (1) | $ | 313 | $ | 438 | $ | 452 | $ | 1,555 | $ | 2,578 | |||||
| SkyWater Florida start-up costs (2) | — | — | 14 | — | 582 | ||||||||||
| Restructuring costs (3) | 679 | — | — | 679 | — | ||||||||||
| Business transformation costs (4) | 806 | — | — | 806 | — | ||||||||||
| Management transition expense (5) | — | — | — | 705 | — | ||||||||||
| Non-GAAP gross profit | $ | 13,809 | $ | 14,585 | $ | 17,017 | $ | 63,037 | $ | 29,127 | |||||
| Non-GAAP gross margin | 17.4 | % | 20.4 | % | 26.1 | % | 22.0 | % | 13.7 | % | |||||
| GAAP research and development expense | $ | 2,872 | $ | 2,233 | $ | 2,208 | $ | 10,169 | $ | 9,431 | |||||
| Equity-based compensation (1) | 134 | (218) | (126) | (464) | (596) | ||||||||||
| Restructuring costs (3) | (655) | — | — | (655) | — | ||||||||||
| Non-GAAP research and development expense | $ | 2,351 | $ | 2,015 | $ | 2,082 | $ | 9,050 | $ | 8,835 | |||||
| GAAP selling, general, and administrative expense | $ | 15,092 | $ | 16,105 | $ | 13,040 | $ | 63,911 | $ | 46,303 | |||||
| Equity-based compensation (1) | (1,008) | (1,197) | (995) | (4,841) | (5,432) | ||||||||||
| SkyWater Florida start-up costs (2) | — | — | 2 | — | (104) | ||||||||||
| Restructuring costs (3) | (587) | — | — | (587) | — | ||||||||||
| Business transformation costs (4) | (5,341) | (3,522) | — | (11,363) | — | ||||||||||
| Management transition expense (5) | — | — | — | (130) | — | ||||||||||
| CHIPS Act specialist fees (6) | — | — | — | (1,320) | — | ||||||||||
| Non-GAAP selling, general, and administrative expense | $ | 8,156 | $ | 11,386 | $ | 12,047 | $ | 45,670 | $ | 40,767 | |||||
| Three-Month Period Ended | Fiscal Year Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| December 31, 2023 | October 1, 2023 | January 1, 2023<br><br>(Revised) | December 31, 2023 | January 1, 2023<br>(Revised) | |||||||||||
| (in thousands) | |||||||||||||||
| GAAP net loss to shareholders | $ | (10,325) | $ | (7,568) | $ | (3,041) | $ | (30,756) | $ | (39,593) | |||||
| Equity-based compensation (1) | 1,187 | 1,853 | 1,573 | 6,860 | 8,606 | ||||||||||
| SkyWater Florida start-up costs (2) | — | — | 12 | — | 686 | ||||||||||
| Restructuring costs (3) | 1,921 | — | — | 1,921 | — | ||||||||||
| Business transformation costs (4) | 6,147 | 3,522 | — | 12,169 | — | ||||||||||
| Management transition expense (5) | — | — | — | 835 | — | ||||||||||
| CHIPS Act specialist fees (6) | — | — | — | 1,320 | — | ||||||||||
| Non-GAAP net loss to shareholders | $ | (1,070) | $ | (2,193) | $ | (1,456) | $ | (7,651) | $ | (30,301) | |||||
| Equity-based compensation allocation in the consolidated statements of operations (1): | |||||||||||||||
| Cost of revenue | $ | 313 | $ | 438 | $ | 452 | $ | 1,555 | $ | 2,578 | |||||
| Research and development expense | (134) | 218 | 126 | 464 | 596 | ||||||||||
| Selling, general, and administrative expense | 1,008 | 1,197 | 995 | 4,841 | 5,432 | ||||||||||
| $ | 1,187 | $ | 1,853 | $ | 1,573 | $ | 6,860 | $ | 8,606 | ||||||
| SkyWater Florida start-up costs allocation in the consolidated statements of operations (2): | |||||||||||||||
| Cost of revenue | $ | — | $ | — | $ | 14 | $ | — | $ | 582 | |||||
| Selling, general and administrative expenses | — | — | (2) | — | 104 | ||||||||||
| $ | — | $ | — | $ | 12 | $ | — | $ | 686 | ||||||
| Restructuring costs allocation in the consolidated statements of operations (3): | |||||||||||||||
| Cost of revenue | $ | 679 | $ | — | $ | — | $ | 679 | $ | — | |||||
| Research and development expense | 655 | — | — | 655 | — | ||||||||||
| Selling, general, and administrative expense | 587 | — | — | 587 | — | ||||||||||
| $ | 1,921 | $ | — | $ | — | $ | 1,921 | $ | — | ||||||
| Business transformation costs allocation in the consolidated statements of operations (4): | |||||||||||||||
| Cost of revenue | $ | 806 | $ | — | $ | — | $ | 806 | $ | — | |||||
| Selling, general, and administrative expense | 5,341 | 3,522 | — | 11,363 | — | ||||||||||
| $ | 6,147 | $ | 3,522 | $ | — | $ | 12,169 | $ | — | ||||||
| Management transition expense allocation in the consolidated statements of operations (5): | |||||||||||||||
| Cost of revenue | $ | — | $ | — | $ | — | $ | 705 | $ | — | |||||
| Selling, general, and administrative expense | — | — | — | 130 | — | ||||||||||
| $ | — | $ | — | $ | — | $ | 835 | $ | — | ||||||
| Three-Month Period Ended<br><br>December 31, 2023 | Fiscal Year Ended<br><br>December 31, 2023 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | ||||||||||||
| Computation of net loss per common share, basic and diluted: | (in thousands, except per share data) | ||||||||||||||
| Numerator: | |||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (10,325) | $ | (1,070) | $ | (30,756) | $ | (7,651) | |||||||
| Denominator: | |||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 47,020 | 47,020 | 45,507 | 45,507 | |||||||||||
| Net loss per common share, basic and diluted | $ | (0.22) | $ | (0.02) | $ | (0.68) | $ | (0.17) | |||||||
| Three-Month Period Ended<br><br>October 1, 2023 | |||||||||||||||
| GAAP | Non-GAAP | ||||||||||||||
| Computation of net loss per common share, basic and diluted: | (in thousands, except per share data) | ||||||||||||||
| Numerator: | |||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (7,568) | $ | (2,193) | |||||||||||
| Denominator: | |||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 46,445 | 46,445 | |||||||||||||
| Net loss per common share, basic and diluted | $ | (0.16) | $ | (0.05) | |||||||||||
| Three-Month Period Ended<br><br>January 1, 2023 | Fiscal Year Ended<br><br>January 1, 2023 | ||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | ||||||||||||
| Computation of net loss per common share, basic and diluted: | (in thousands, except per share data) | ||||||||||||||
| Numerator: | |||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (3,041) | $ | (1,456) | $ | (39,593) | $ | (30,301) | |||||||
| Denominator: | |||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 42,613 | 42,613 | 40,835 | 40,835 | |||||||||||
| Net loss per common share, basic and diluted | $ | (0.07) | $ | (0.03) | $ | (0.97) | $ | (0.74) | |||||||
| Three-Month Period Ended | Fiscal Year Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| December 31, 2023 | October 1, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||
| (in thousands) | |||||||||||||||
| Net loss to shareholders (GAAP) | $ | (10,325) | $ | (7,568) | $ | (3,041) | $ | (30,756) | $ | (39,593) | |||||
| Net loss margin to shareholders | (13.0) | % | (10.6) | % | (4.7) | % | (10.7) | % | (18.6) | % | |||||
| Interest expense (8) | $ | 2,898 | $ | 2,507 | $ | 2,895 | $ | 10,826 | $ | 6,295 | |||||
| Income tax (benefit) expense | (450) | (96) | 852 | (521) | 809 | ||||||||||
| Depreciation and amortization | 7,279 | 7,092 | 7,451 | 28,930 | 28,192 | ||||||||||
| EBITDA | (598) | 1,935 | 8,157 | 8,479 | (4,297) | ||||||||||
| Equity-based compensation (1) | 1,187 | 1,853 | 1,573 | 6,860 | 8,606 | ||||||||||
| SkyWater Florida start-up costs (2) | — | — | 12 | — | 686 | ||||||||||
| Restructuring costs (3) | 1,921 | — | — | 1,921 | — | ||||||||||
| Business transformation costs (4) | 6,147 | 3,522 | — | 12,169 | — | ||||||||||
| Management transition expense (5) | — | — | — | 835 | — | ||||||||||
| CHIPS Act specialist fees (6) | — | — | — | 1,320 | — | ||||||||||
| Net income attributable to noncontrolling interests (7) | 1,924 | 966 | 597 | 5,663 | 2,722 | ||||||||||
| Adjusted EBITDA | $ | 10,581 | $ | 8,276 | $ | 10,339 | $ | 37,247 | $ | 7,717 | |||||
| Adjusted EBITDA margin | 13.4 | % | 11.6 | % | 15.9 | % | 13.0 | % | 3.6 | % |
__________________
(1)Represents non-cash equity-based compensation expense.
(2)Represents start-up costs associated with our 200 mm heterogeneous integration facility in Kissimmee, Florida, which includes legal fees, recruiting expenses, retention awards and facility start-up expenses. These expenses are not representative of our expected ongoing costs. Effective 2023, our Kissimmee, Florida plant is up and running and no longer in its start-up phase.
(3)Represents severance and other costs related to the reorganization of our resources.
(4)Represents expenses related to long-term transformation activities focused on improvement in automation and operational efficiency and includes project-based management consulting fees and the write-off of abandoned software assets.
(5)Represents severance and other costs related to the reorganization of the manufacturing and operations leadership team.
(6)Represents project-based specialist fees related to our CHIPS Act application process.
(7)Represents net income attributable to our VIE, which was formed for the purpose of purchasing the land and building of our primary operating facility in Bloomington, Minnesota. Since interest expense is added back to net loss to shareholders in our adjusted EBITDA financial measure, we also add back the net income attributable to the VIE as its net income is derived from interest the VIE charges SkyWater.
(8)Includes losses related to the extinguishment of our revolving credit agreement in 2022.
14