8-K
SkyWater Technology, Inc (SKYT)
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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 22, 2022
___________________________
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 22, 2022, SkyWater Technology, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and full fiscal year ended January 2, 2022. 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 22, 2022. |
| 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 22, 2022 | /s/ Thomas J. Sonderman | |
| Name: | Thomas J. Sonderman | |
| Title: | President and Chief Executive Officer |
Document
Exhibit 99.1
SkyWater Technology Reports Fourth Quarter and Full Year 2021 Results
2021 Record Revenue of $162.8 Million
BLOOMINGTON, Minn., – February 22, 2022 – SkyWater Technology (NASDAQ: SKYT), the trusted technology realization partner, today announced financial results for the fourth quarter and full year 2021, ended January 2, 2022.
•Record annual revenue increased 16% year-over-year to $162.8 million. Quarterly revenue decreased 3% year-over-year to $38.5 million.
• Annual net loss to shareholders of $50.7 million, or (31)% of revenue. Quarterly net loss to shareholders of $27.0 million, or (70)% of revenue, includes a $13.4 million one-time inventory write-down.
•Annual adjusted EBITDA of $(2.6) million, or (1.6)% of revenue. Quarterly adjusted EBITDA of $(4.9) million, or (12.6)% of revenue.
“SkyWater made great progress this year toward our vision of accelerating the path from ideation to commercialization in the semiconductor industry,” said SkyWater President and CEO Thomas Sonderman. “SkyWater continued to make important advancements on our long-term strategic platforms. Our radiation hardened technology recently achieved a critical qualification milestone and we made significant progress in power management with the introduction of our highly differentiated high-speed switching power MOSFET technology. We remain convinced that SkyWater’s unique model for timely and efficient technology realization is ideally positioned to drive increased shareholder value as our nation commits to enhancing domestic semiconductor manufacturing.”
Sonderman concluded, “Fourth quarter revenue grew 15% year-over-year, excluding the extra operating week in Q4 2020 and tool revenue. Labor market inflation and supply chain challenges persisted throughout the quarter, and we expect to continue to navigate these constraints, while investing strategically for growth. In 2022, we expect revenue growth near our long-term growth target of 25% and gross margin expansion. This is supported by our 2021 pipeline growth, new and expected program wins, and the expected movement of our radiation hardened technology to the productization phase.”
Recent Business Updates:
•Won nine new Advanced Technology Services programs in the fourth quarter of 2021.
•Achieved a critical radiation hardened (rad-hard) technology qualification milestone.
•Established presence in Indiana at WestGate@Crane Technology Park, adjacent to the Naval Surface Warfare Center, Crane Division (NSWC Crane) as part of the company’s rad-hard technology roadmap.
•Introduced a breakthrough silicon power MOSFET device with Applied Novel Devices, Inc. (AND) enabling improved energy efficiency for power conversion applications.
•Continued to make strong progress at the company’s heterogeneous integration fab in Florida including the fabrication of the company’s first full flow interposer within the first year after taking over operations.
•Increased activities, a common measure of productivity, in the Minnesota facility by 12% year-over-year led by strong Advanced Technology Services execution.
•Continued to amplify the company’s unique capabilities within all levels of government to support our nation’s commitment to invest strategically in domestic semiconductor manufacturing.
•Announced technology development to rapidly enable the production ramp of nanoscale sensors with NanoDx to enhance and expand accurate, rapid testing for several indications, including COVID-19, traumatic brain injury, sepsis and stroke.
•Lauded the U.S. House of Representatives in the passage of the America COMPETES Act, which includes funding of $52 billion for the CHIPS for America Act.
•Continued to navigate a dynamic supply chain for substrates, chemicals, and gases as well as inflationary pressures pervasive in the markets.
•Achieved AS9100 certification, the standardized quality management system for organizations that design, develop, or provide aviation, space and defense products and services, at Minnesota facility.
•Expanded Board of Directors with appointments of independent directors Nancy Fares, Amy Leong and Greg Graves.
Q4 2021 Summary:
| GAAP | |||||
|---|---|---|---|---|---|
| In USD millions, except per share data | Q4 21 | Q4 20 | Y/Y | Q3 21 | Q/Q |
| Advanced Technology Services revenue | $24.4 | $26.3 | (7)% | $22.4 | 9% |
| Wafer Services revenue | $14.2 | $13.4 | 5% | $12.7 | 12% |
| Revenue | $38.5 | $39.8 | (3)% | $35.0 | 10% |
| Gross profit (loss) | $(16.6) | $3.5 | (571)% | $(1.8) | 810% |
| Gross margin | (43.1)% | 8.9% | (5,200) bps | (5.2)% | (3,790) bps |
| Net loss to shareholders | $(27.0) | $(12.3) | (120)% | $(13.9) | (95)% |
| Basic loss per share | $(0.69) | $(0.68) | (1)% | $(0.36) | (92)% |
| Non-GAAP | |||||
| --- | --- | --- | --- | --- | --- |
| In USD millions, except per share data | Q4 21 | Q4 20 | Y/Y | Q3 21 | Q/Q |
| Non-GAAP gross profit (loss) | $(1.9) | $4.8 | (139)% | $(0.5) | 284% |
| Non-GAAP gross margin | (4.8)% | 12.2% | (1,700) bps | (1.4)% | (340) bps |
| Non-GAAP net loss to shareholders | $(11.2) | $(11.4) | 2% | $(11.5) | 3% |
| Non-GAAP basic loss per share | $(0.28) | $(0.63) | 56% | $(0.29) | 3% |
| Adjusted EBITDA | $(4.9) | $1.3 | (478)% | $(2.7) | (80)% |
| Adjusted EBITDA margin | (12.6%) | 3.2% | (1,580) bps | (7.7%) | (490) bps |
2021 Summary:
| GAAP | |||
|---|---|---|---|
| In USD millions, except per share data | FY21 | FY20 | Y/Y |
| Advanced Technology Services revenue | $111.7 | $94.0 | 19% |
| Wafer Services revenue | $51.2 | $46.4 | 10% |
| Revenue | $162.8 | $140.4 | 16% |
| Gross profit (loss) | $(7.5) | $22.7 | (133)% |
| Gross margin | (4.6)% | 16.2% | (2,080) bps |
| Net loss to shareholders | $(50.7) | $(20.6) | (146)% |
| Basic loss per share | $(1.76) | $(1.15) | (54)% |
| Non-GAAP | |||
| --- | --- | --- | --- |
| In USD millions, except per share data | FY21 | FY20 | Y/Y |
| Non-GAAP gross profit (loss) | $9.9 | $24.3 | (59)% |
| Non-GAAP gross margin | 6.1% | 17.3% | (1,120) bps |
| Non-GAAP net loss to shareholders | $(30.0) | $(15.8) | (90)% |
| Non-GAAP basic loss per share | $(1.05) | $(0.88) | (19)% |
| Adjusted EBITDA | $(2.6) | $14.4 | (118)% |
| Adjusted EBITDA margin | (1.6%) | 10.3% | (1,190) bps |
Q4 2021 Results:
•Revenue: Revenue of $38.5 million decreased 3% year-over-year. Advanced Technology Services revenue of $24.4 million decreased 7% year-over-year due to less non-recurring tool revenue. Advanced Technology Services revenue contains $1.1 million of tool revenue in fourth quarter 2021 and $4.9 million in fourth quarter 2020. Wafer Services revenue of $14.2 million increased 5% compared to the fourth quarter of 2020 driven by increased revenue from a large customer contract.
•Gross Profit (Loss): GAAP gross loss was $16.6 million, or (43.1)% of revenue, compared to gross profit of $3.5 million, or 8.9% of revenue, in the fourth quarter of 2020. GAAP gross loss for the fourth quarter of 2021 includes a $13.4 million inventory write-down charge for temperature differential sensing wafers. Cost of revenues in fourth quarter of 2021 contained $2.7 million for heterogeneous integration and $1.7 million in depreciation for the radiation hardened facility. Non-GAAP gross loss was $1.9 million, or (4.8)% of revenue, compared to gross profit of $4.8 million, or 12.2% of revenue, in the fourth quarter of 2020.
•Net Loss: GAAP net loss to shareholders of $27.0 million, or $(0.69) per share, compared to a net loss to shareholders of $12.3 million, or $(0.68) per share, in the fourth quarter of 2020. Non-GAAP net loss to shareholders of $11.2 million, or $(0.28) per share, compared to a net loss to shareholders of $11.4 million, or $(0.63) per share, in the fourth quarter of 2020.
•Adjusted EBITDA: Adjusted EBITDA was $(4.9) million, or (12.6)% of revenue, compared to $1.3 million or 3.2% of revenue in the fourth quarter of 2020.
•Balance Sheet: Cash and cash equivalents of $12.9 million compared to $7.4 million from January 3, 2021.
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 Wednesday, February 23, 2022, at 9:00 a.m. CT to discuss its fourth quarter and full year 2021 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. investor-owned semiconductor manufacturer and a DOD-accredited Trusted supplier. SkyWater’s Technology as a ServiceSM 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, power discretes, 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 fiscal quarter and year ended January 2, 2022 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 you 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 sole semiconductor foundry 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 amid industry-wide supply chain shortages; 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 impact of the COVID-19 pandemic on our business, results of operations and financial condition and our customers, suppliers and workforce; the impact of the COVID-19 pandemic on the global economy; 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; and other factors discussed in the “Risk Factors” section of the prospectus the Company filed with the SEC on April 22, 2021 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: Heather Davis | Investor@SkyWaterTechnology.com
SkyWater Media Contact: Lauri Julian | Media@SkyWaterTechnology.com
SKYWATER TECHNOLOGY, INC.
Consolidated Balance Sheets
(Unaudited)
| January 2, 2022 | January 3, 2021 | |||
|---|---|---|---|---|
| (in thousands, except share and unit data) | ||||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 12,917 | $ | 7,436 |
| Accounts receivable, net | 39,381 | 29,995 | ||
| Inventories | 17,500 | 27,169 | ||
| Prepaid expenses and other current assets | 3,854 | 11,972 | ||
| Income tax receivable | 745 | — | ||
| Total current assets | 74,397 | 76,572 | ||
| Property and equipment, net | 180,475 | 178,078 | ||
| Intangible assets, net | 3,891 | 4,561 | ||
| Other assets | 4,835 | 3,998 | ||
| Total assets | $ | 263,598 | $ | 263,209 |
| Liabilities and Shareholders’ Equity (Deficit) | ||||
| Current liabilities: | ||||
| Current portion of long-term debt | $ | 1,021 | $ | 2,772 |
| Accounts payable | 7,637 | 16,792 | ||
| Accrued expenses | 17,483 | 25,496 | ||
| Income taxes payable | — | 1,710 | ||
| Current portion of contingent consideration | 816 | 8,904 | ||
| Deferred revenue - current | 20,808 | 30,653 | ||
| Total current liabilities | 47,765 | 86,327 | ||
| Long-term liabilities: | ||||
| Long-term debt, less current portion and unamortized debt issuance costs | 58,428 | 69,828 | ||
| Contingent consideration, less current portion | — | 1,996 | ||
| Long-term incentive plan | 4,039 | 3,185 | ||
| Deferred revenue - long-term | 88,094 | 95,399 | ||
| Deferred income tax liability, net | 995 | 8,058 | ||
| Other long-term liabilities | 4,350 | — | ||
| Total long-term liabilities | 155,906 | 178,466 | ||
| Total liabilities | 203,671 | 264,793 | ||
| Commitments and contingencies | ||||
| Shareholders’ equity (deficit): | ||||
| Preferred stock, $0.01 par value per share (80,000,000 and zero shares authorized; zero issued and outstanding) | — | — | ||
| Common stock, $0.01 par value per share (200,000,000 and zero shares authorized, 39,836,038 and zero shares issued and outstanding) | 398 | — | ||
| Additional paid-in capital | 115,208 | — | ||
| Class A preferred units (zero and 2,000,000 units authorized; zero issued and outstanding) | — | — | ||
| Class B preferred units (zero and 18,000,000 units authorized; zero and 18,000,000 units issued and outstanding) | — | — | ||
| Common units (zero and 5,000,000 units authorized; zero and 3,057,344 units issued; zero and 2,107,452 outstanding) | — | 3,767 | ||
| Accumulated deficit | (54,479) | (3,783) | ||
| Total shareholders’ equity (deficit), SkyWater Technology, Inc. | 61,127 | (16) | ||
| Non-controlling interests | (1,200) | (1,568) | ||
| Total shareholders’ equity (deficit) | 59,927 | (1,584) | ||
| Total liabilities and shareholders’ equity | $ | 263,598 | $ | 263,209 |
The accompanying notes are an integral part of these consolidated financial statements.
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| January 2, 2022 | January 3, 2021 | January 2, 2022 | January 3, 2021 | |||||
| (in thousands, except share, unit and per share and unit data) | ||||||||
| Revenue | $ | 38,533 | $ | 39,772 | $ | 162,848 | $ | 140,438 |
| Cost of revenue: | ||||||||
| Cost of revenue, before inventory write-down | 41,714 | 36,244 | 156,878 | 117,746 | ||||
| Inventory write-down (1) | 13,442 | — | 13,442 | — | ||||
| Total cost of revenue | 55,156 | 36,244 | 170,320 | 117,746 | ||||
| Gross profit (loss) | (16,623) | 3,528 | (7,472) | 22,692 | ||||
| Research and development | 1,228 | 1,672 | 8,747 | 4,208 | ||||
| Selling, general and administrative expenses | 9,951 | 6,713 | 43,595 | 25,032 | ||||
| Change in fair value of contingent consideration | (154) | 741 | (2,710) | 2,094 | ||||
| Operating loss | (27,648) | (5,598) | (57,104) | (8,642) | ||||
| Other income (expense): | ||||||||
| Paycheck Protection Program loan forgiveness | — | — | 6,453 | — | ||||
| Change in fair value of warrant liability | — | 1,680 | — | 780 | ||||
| Loss on debt extinguishment | — | (1,434) | — | (1,434) | ||||
| Interest expense | (839) | (1,412) | (3,542) | (5,499) | ||||
| Total other expense | (839) | (1,166) | 2,911 | (6,153) | ||||
| Loss before income taxes | (28,487) | (6,764) | (54,193) | (14,795) | ||||
| Income tax expense (benefit) | (2,322) | 4,631 | (6,790) | 4,919 | ||||
| Net loss | (26,165) | (11,395) | (47,403) | (19,714) | ||||
| Less: net income attributable to non-controlling interests | 871 | 903 | 3,293 | 903 | ||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (27,036) | $ | (12,298) | $ | (50,696) | $ | (20,617) |
| Net loss per share attributable to common shareholders, basic and diluted: | $ | (0.69) | $ | (1.76) | ||||
| Net loss per unit attributable to Class B preferred unitholders, basic and diluted: | $ | (0.68) | $ | (1.15) | ||||
| Weighted average shares used in computing net loss per common share, basic and diluted: | 39,324,851 | 29,038,174 | ||||||
| Weighted average units used in computing net loss per Class B preferred unit, basic and diluted: | 18,000,000 | 18,000,000 |
The accompanying notes are an integral part of these consolidated financial statements.
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
| Twelve Months Ended | ||||
|---|---|---|---|---|
| January 2, 2022 | January 3, 2021 | |||
| (in thousands) | ||||
| Cash flows from operating activities: | ||||
| Net loss | $ | (47,403) | $ | (19,714) |
| Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities: | ||||
| Depreciation and amortization | 27,368 | 18,866 | ||
| Inventory write-down (1) | 13,442 | — | ||
| Gain on Paycheck Protection Program loan forgiveness | (6,453) | — | ||
| Foundry services obligation | — | (3,732) | ||
| Gain on sale of property and equipment | (2,012) | (1,124) | ||
| Amortization of debt issuance costs included in interest expense | 621 | 1,661 | ||
| Long-term incentive and stock-based compensation | 12,533 | 2,640 | ||
| Change in fair value of warrant liability | — | (780) | ||
| Change in fair value of contingent consideration | (2,710) | 2,094 | ||
| Cash paid for contingent consideration in excess of initial valuation | (7,374) | (7,296) | ||
| Deferred income taxes | (7,063) | 2,387 | ||
| Non-cash revenue related to customer equipment | (2,481) | — | ||
| Loss on debt extinguishment | — | 1,434 | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (9,387) | 31,452 | ||
| Inventories | (3,773) | (11,175) | ||
| Prepaid expenses and other assets | 5,098 | (9,411) | ||
| Accounts payable | (1,198) | 483 | ||
| Accrued expenses | (569) | 11,601 | ||
| Deferred revenue | (17,150) | 74,578 | ||
| Income tax payable and receivable | (2,455) | 2,231 | ||
| Net cash (used in) provided by operating activities | (50,966) | 96,195 | ||
| Cash flows from investing activities: | ||||
| Purchase of software and licenses | (1,220) | (4,085) | ||
| Proceeds from sale of property and equipment | 2,159 | 1,676 | ||
| Purchases of property and equipment | (35,476) | (85,768) | ||
| Net cash used in investing activities | (34,537) | (88,177) | ||
| Cash flows from financing activities: | ||||
| Proceeds from issuance of common stock pursuant to the initial public offering, net of underwriting discounts and commissions | 104,212 | — | ||
| Cash paid for offering costs | (1,867) | (2,183) | ||
| Proceeds from Paycheck Protection Program loan | — | 6,453 | ||
| Repayment of term loan | — | (38,270) | ||
| Cash paid for term loan extinguishment | — | (405) | ||
| Net repayment on line of credit | — | (12,380) | ||
| Net repayment on Revolver | (6,081) | 32,303 | ||
| Proceeds from Financing | — | 39,000 | ||
| Repayment of Financing | (990) | — | ||
| Cash paid for capital leases | (1,115) | — | ||
| Cash paid for debt issuance costs | (250) | (5,182) | ||
| Repurchase of warrants | — | (14,000) | ||
| Repurchase of common units | — | (4,085) | ||
| Cash paid for contingent consideration | — | (3,998) | ||
| Proceeds from exercise of common unit options | — | 31 | ||
| Distributions to VIE member | (2,925) | (2,471) | ||
| Net cash provided by (used in) financing activities | 90,984 | (5,187) | ||
| Net change in cash and cash equivalents | 5,481 | 2,831 | ||
| Cash and cash equivalents - beginning of period | 7,436 | 4,605 | ||
| Cash and cash equivalents - end of period | $ | 12,917 | $ | 7,436 |
The accompanying notes are an integral part of these consolidated financial statements.
Supplemental Revenue Information by Quarter
| Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | 2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | ||||||||||||||||||||
| Wafer Services revenue | $ | 13,318 | $ | 10,896 | $ | 8,762 | $ | 13,442 | $ | 46,418 | $ | 10,019 | $ | 14,312 | $ | 12,652 | $ | 14,174 | $ | 51,157 |
| Advanced Technology Services revenue | 23,586 | 19,863 | 24,241 | 26,330 | 94,020 | 38,082 | 26,877 | 22,373 | 24,359 | 111,691 | ||||||||||
| Revenue | $ | 36,904 | $ | 30,759 | $ | 33,003 | $ | 39,772 | $ | 140,438 | $ | 48,101 | $ | 41,189 | $ | 35,025 | $ | 38,533 | $ | 162,848 |
| Tool revenue (included in ATS revenue) | $ | 3,173 | $ | — | $ | 360 | $ | 4,895 | $ | 8,428 | $ | 15,405 | $ | 2,346 | $ | 281 | $ | 1,127 | $ | 19,159 |
Non-GAAP Financial Measures
We provide supplemental non-GAAP financial information that our management utilizes to evaluate our ongoing financial performance and provide additional insight to investors as supplemental information to our U.S. GAAP results. We provide non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss to shareholders, and non-GAAP net loss per share. We provide these non-GAAP financial measures because we believe this non-GAAP presentation provides a baseline for analyzing trends in our business and to 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 our non-GAAP measures are not determined in accordance with U.S. GAAP, these measures are susceptible to differing calculations, and not all comparable or peer companies may calculate their non-GAAP measures in the same manner. 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 EBITDA and adjusted EBITDA margin as supplemental non-GAAP measurements. We define adjusted EBITDA as net income (loss) before interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including fair value changes in contingent considerations, fair value changes in warrants and management fees, inventory write-down, corporate conversion and IPO related costs, Paycheck Protection Program loan forgiveness, SkyWater Florida start-up costs, net income attributable to non-controlling interests, and management transition expense. We believe adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. 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 costs 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 presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.
The following tables present a reconciliation of the most directly comparable financial measures, calculated and presented in accordance with U.S. GAAP, to our non-GAAP financial measures.
SKYWATER TECHNOLOGY, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| January 2,<br>2022 | January 3,<br>2021 | October 3,<br>2021 | January 2,<br>2022 | January 3,<br>2021 | |||||||||||
| (in thousands) | |||||||||||||||
| GAAP revenue | $ | 38,533 | $ | 39,772 | $ | 35,025 | $ | 162,848 | $ | 140,438 | |||||
| Estimated impact of additional operating week | — | (2,491) | — | — | (2,491) | ||||||||||
| Tool revenue | (1,127) | (4,895) | (281) | (19,160) | (8,428) | ||||||||||
| Non-GAAP revenue | $ | 37,406 | $ | 32,386 | $ | 34,744 | $ | 143,688 | $ | 129,519 | |||||
| GAAP cost of revenue | $ | 55,156 | $ | 36,244 | $ | 36,852 | $ | 170,320 | $ | 117,746 | |||||
| Inventory write-down (1) | (13,442) | — | — | (13,442) | — | ||||||||||
| Equity-based compensation (2) | (1,130) | (1,308) | (967) | (3,042) | (1,644) | ||||||||||
| SkyWater Florida start-up costs (3) | (187) | — | (374) | (879) | — | ||||||||||
| Non-GAAP cost of revenue | $ | 40,397 | $ | 34,936 | $ | 35,511 | $ | 152,957 | $ | 116,102 | |||||
| GAAP gross profit (loss) | $ | (16,623) | $ | 3,528 | $ | (1,827) | $ | (7,472) | $ | 22,692 | |||||
| GAAP gross margin | (43.1) | % | 8.9 | % | (5.2) | % | (4.6) | % | 16.2 | % | |||||
| Inventory write-down (1) | 13,442 | — | — | 13,442 | — | ||||||||||
| Equity-based compensation (2) | 1,130 | 1,308 | 967 | 3,042 | 1,644 | ||||||||||
| SkyWater Florida start-up costs (3) | 187 | — | 374 | 879 | — | ||||||||||
| Non-GAAP gross profit (loss) | $ | (1,864) | $ | 4,836 | $ | (486) | $ | 9,891 | $ | 24,336 | |||||
| Non-GAAP gross margin | (4.8) | % | 12.2 | % | (1.4) | % | 6.1 | % | 17.3 | % | |||||
| GAAP research and development | $ | 1,228 | $ | 1,672 | $ | 2,253 | $ | 8,747 | $ | 4,208 | |||||
| Equity-based compensation (2) | 655 | (39) | (341) | (1,182) | (56) | ||||||||||
| Non-GAAP research and development | $ | 1,883 | $ | 1,633 | $ | 1,912 | $ | 7,565 | $ | 4,152 | |||||
| GAAP selling, general and administrative expenses | $ | 9,951 | $ | 6,713 | $ | 9,626 | $ | 43,595 | $ | 25,032 | |||||
| SkyWater Florida start-up costs (3) | (22) | — | (60) | (268) | — | ||||||||||
| Management transition expense (5) | — | — | — | (435) | — | ||||||||||
| Equity-based compensation (2) | (1,655) | (242) | (2,086) | (8,303) | (940) | ||||||||||
| Management fees (8) | — | (235) | — | (332) | (879) | ||||||||||
| Non-GAAP selling, general and administrative expenses | $ | 8,274 | $ | 6,236 | $ | 7,480 | $ | 34,257 | $ | 23,213 | |||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| January 2,<br>2022 | January 3,<br>2021 | October 3,<br>2021 | January 2,<br>2022 | January 3,<br>2021 | |||||||||||
| (in thousands) | |||||||||||||||
| GAAP net loss to shareholders | $ | (27,036) | $ | (12,298) | $ | (13,870) | $ | (50,696) | $ | (20,617) | |||||
| Inventory write-down (1) | 13,442 | — | — | 13,442 | — | ||||||||||
| Paycheck Protection Program loan forgiveness | — | — | — | (6,453) | — | ||||||||||
| Corporate conversion and initial public offering related costs (4) | 205 | — | 208 | 1,934 | — | ||||||||||
| SkyWater Florida start-up costs (3) | 209 | — | 434 | 1,147 | — | ||||||||||
| Management transition expense (5) | — | — | — | 435 | — | ||||||||||
| Fair value changes in contingent consideration (6) | (154) | 741 | (1,670) | (2,710) | 2,094 | ||||||||||
| Equity-based compensation (2) | 2,130 | 1,589 | 3,394 | 12,527 | 2,640 | ||||||||||
| Fair value changes in warrants (7) | — | (1,680) | — | — | (780) | ||||||||||
| Management fees (8) | — | 235 | — | 332 | 879 | ||||||||||
| Non-GAAP net loss to shareholders | $ | (11,204) | $ | (11,413) | $ | (11,504) | $ | (30,042) | $ | (15,784) | |||||
| Equity-based compensation allocation in the consolidated statements of operations: | |||||||||||||||
| Cost of revenue | $ | 1,130 | $ | 1,308 | $ | 967 | $ | 3,042 | $ | 1,644 | |||||
| Research and development | (655) | 39 | 341 | 1,182 | 56 | ||||||||||
| Selling, general and administrative expenses | 1,655 | 242 | 2,086 | 8,303 | 940 | ||||||||||
| $ | 2,130 | $ | 1,589 | $ | 3,394 | $ | 12,527 | $ | 2,640 | ||||||
| SkyWater Florida start-up costs allocation in the consolidated statements of operations: | |||||||||||||||
| Cost of revenue | $ | 187 | $ | — | $ | 374 | $ | 879 | $ | — | |||||
| Selling, general and administrative expenses | 22 | — | 60 | 268 | — | ||||||||||
| $ | 209 | $ | — | $ | 434 | $ | 1,147 | $ | — | ||||||
| Three Months Ended<br>January 2, 2022 | Twelve Months Ended<br>January 2, 2022 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| 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. | $ | (27,036) | $ | (11,204) | $ | (50,696) | $ | (30,042) | |||||||
| Undistributed preferred return to Class B preferred unitholders | — | — | (398) | (398) | |||||||||||
| Net loss attributable to common shareholders | $ | (27,036) | $ | (11,204) | $ | (51,094) | $ | (30,440) | |||||||
| Denominator: | |||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 39,325 | 39,325 | 29,038 | 29,038 | |||||||||||
| Net loss per common share, basic and diluted | $ | (0.69) | $ | (0.28) | $ | (1.76) | $ | (1.05) | |||||||
| Three Months Ended<br>January 3, 2021 | Twelve Months Ended<br>January 3, 2021 | ||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | ||||||||||||
| Computation of net loss per Class B preferred unit, basic and diluted: | (in thousands, except per unit data) | ||||||||||||||
| Numerator: | |||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (12,298) | $ | (11,413) | $ | (20,617) | $ | (15,784) | |||||||
| Denominator: | |||||||||||||||
| Weighted-average Class B preferred units outstanding, basic and diluted | 18,000 | 18,000 | 18,000 | 18,000 | |||||||||||
| Net loss per Class B preferred unit, basic and diluted | $ | (0.68) | $ | (0.63) | $ | (1.15) | $ | (0.88) | |||||||
| Three Months Ended <br>October 3, 2021 | |||||||||||||||
| 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. | $ | (13,870) | $ | (11,504) | |||||||||||
| Undistributed preferred return to Class B preferred unitholders | — | — | |||||||||||||
| Net loss attributable to common shareholders | $ | (13,870) | $ | (11,504) | |||||||||||
| Denominator: | |||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 39,060 | 39,060 | |||||||||||||
| Net loss per common share, basic and diluted | $ | (0.36) | $ | (0.29) | |||||||||||
| Three Months Ended | Twelve Months Ended Quarter Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| January 2,<br>2022 | January 3,<br>2021 | January 2,<br>2022 | January 3,<br>2021 | ||||||||||||
| (in thousands) | |||||||||||||||
| Net loss to shareholders | $ | (27,036) | $ | (12,298) | $ | (50,696) | $ | (20,617) | |||||||
| Interest expense | 839 | 1,412 | 3,542 | 5,499 | |||||||||||
| Income tax expense (benefit) | (2,322) | 4,631 | (6,790) | 4,919 | |||||||||||
| Depreciation and amortization | 6,957 | 5,753 | 27,368 | 18,866 | |||||||||||
| EBITDA | (21,562) | (502) | (26,576) | 8,667 | |||||||||||
| Inventory write-down (1) | 13,442 | — | 13,442 | — | |||||||||||
| Paycheck Protection Program loan forgiveness | — | — | (6,453) | — | |||||||||||
| Corporate conversion and initial public offering related costs (4) | 205 | — | 1,934 | — | |||||||||||
| SkyWater Florida start-up costs (2) | 209 | — | 1,147 | — | |||||||||||
| Management transition expense (4) | — | — | 435 | — | |||||||||||
| Fair value changes in contingent consideration (5) | (154) | 741 | (2,710) | 2,094 | |||||||||||
| Equity-based compensation (1) | 2,130 | 1,589 | 12,527 | 2,640 | |||||||||||
| Fair value changes in warrants (6) | — | (1,680) | — | (780) | |||||||||||
| Management fees (7) | — | 235 | 332 | 879 | |||||||||||
| Net income attributable to non-controlling interests (9) | 871 | 903 | 3,293 | 903 | |||||||||||
| Adjusted EBITDA | $ | (4,859) | $ | 1,286 | $ | (2,629) | $ | 14,403 |
__________________
(1)Represents the full write-down for inventory to cost of revenue for inventory in which we were contracted to manufacture for a specific customer. The customer's financing for its COVID-19-related business fell through and the customer was unable to meet its contractual payment obligations.
(2)Represents non-cash equity-based compensation expense.
(3)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 indicative of our ongoing costs and will be discontinued following the start-up of SkyWater Florida.
(4)Represents expenses directly associated with the corporate conversion and IPO, such as professional, consulting, legal and accounting services. This also includes bonus awards granted to employees upon the completion of the IPO. These expenses are not indicative of our ongoing costs and were discontinued following the completion of our initial public offering.
(5)Represents expense for the departure of our former Chief Administrative Officer, which includes primarily severance benefits.
(6)Represents non-cash valuation adjustment of contingent consideration to fair market value during the period.
(7)Represents non-cash valuation adjustment of warrants to fair market value during the period.
(8)Represents a related party transaction with Oxbow Industries, our principal stockholders. As these fees are not part of the core business, did not continue after our IPO and are excluded from management’s assessment of the business, we believe it is useful to investors to view our results excluding these fees.
(9)Represents net income attributable to our VIE, which was formed for the purpose of purchasing our land, building with the proceeds of a bank loan. Since depreciation and interest expense are excluded from net loss in our adjusted EBITDA financial measure, we also exclude the net income attributable to the VIE.