Core Insights - SkyWater (SKYT) shares surged 58.7% following the release of its second-quarter 2025 results, driven by better-than-expected performance and strong third-quarter guidance, particularly from the acquisition of Infineon's Fab 25 in Austin, TX [1][9] Financial Performance - In Q2 2025, SkyWater reported a non-GAAP loss of $0.11 per share, exceeding the Zacks Consensus Estimate by 35.29%. This compares to earnings of $0.02 in the same quarter last year and a loss of $0.08 in Q1 2025 [2][9] - Revenues for Q2 2025 were $59.1 million, a decline of 36.7% year-over-year but above the consensus estimate by 3.08%. Sequentially, revenues fell 3.4% [6] - ATS Development revenues, which accounted for 89% of total revenues, decreased 14.7% year-over-year to $52.6 million, while Wafer Services revenues fell 6.9% year-over-year and 28% quarter-over-quarter to $5.4 million [6] Future Guidance - SkyWater anticipates that Fab 25 will approximately double its annual revenue to $300 million and adjusted EBITDA, generating immediate positive free cash flow. For Q3 2025, the company expects revenues between $130 million and $141 million, with Wafer Services revenues projected between $80 million and $86 million [3][9] - The Zacks Consensus Estimate for Q3 revenues is currently $135.5 million, indicating a 44.4% growth compared to the same quarter last year [4] Margin and Expense Outlook - The non-GAAP operating margin for Q3 2025 is expected to be between 11% and 14%, with non-GAAP operating expenses projected to be between $18 million and $20 million. The company expects a loss between $0.20 and $0.14 per share for the same quarter [10] Balance Sheet Overview - As of June 29, 2025, SkyWater had cash and cash equivalents of $49.4 million and long-term debt of $42.1 million. The acquisition of Fab 25 was fully funded by a new senior secured revolving credit facility with a borrowing capacity of up to $350 million [8]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on SkyWater Technology, Inc. (SKYT), and emphasizes the importance of validating these recommendations with other indicators like the Zacks Rank [1][5]. Group 1: Brokerage Recommendations - SkyWater Technology has an average brokerage recommendation (ABR) of 1.60, indicating a position between Strong Buy and Buy, with 60% of recommendations being Strong Buy and 20% being Buy [2]. - The article suggests that while the ABR indicates a buying opportunity, investors should not rely solely on this information due to the limited success of brokerage recommendations in predicting stock price increases [5][10]. Group 2: Zacks Rank vs. ABR - The Zacks Rank is presented as a more reliable indicator of a stock's near-term price performance, driven by earnings estimate revisions, and is classified into five groups from Strong Buy to Strong Sell [8][11]. - The Zacks Rank is updated more frequently than the ABR, making it a timely tool for predicting future stock prices, as it reflects changes in earnings estimates quickly [13]. Group 3: SkyWater Technology's Performance - The Zacks Consensus Estimate for SkyWater Technology has remained unchanged at -$0.01 over the past month, suggesting steady analyst views on the company's earnings prospects [14]. - Due to the unchanged consensus estimate and other factors, SkyWater Technology holds a Zacks Rank of 3 (Hold), indicating a cautious approach despite the Buy-equivalent ABR [15].

[Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section details the nature of forward-looking statements, their inherent risks, and the Company's policy on public updates - Forward-looking statements are subject to various **risks, uncertainties, and assumptions**, including business development, financial condition, operational capacity, technological changes, customer relationships, and economic conditions[10](index=10&type=chunk)[12](index=12&type=chunk) - The Company does not undertake to publicly update any forward-looking statements to conform to changes in expectations or actual results, except as legally required[11](index=11&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents SkyWater Technology's unaudited condensed consolidated financial statements and related notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 29, 2025 | December 29, 2024 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $49,373 | $18,844 | $30,529 | 162.0% | | Total current assets | $155,938 | $132,077 | $23,861 | 18.1% | | Total assets | $334,693 | $313,775 | $20,918 | 6.7% | | Total current liabilities | $147,596 | $154,327 | $(6,731) | -4.4% | | Total liabilities | $282,727 | $250,285 | $32,442 | 13.0% | | Total shareholders' equity | $51,966 | $63,490 | $(11,524) | -18.1% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Three-Month Period, in thousands) | Metric (in thousands) | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Change | % Change | | :-------------------- | :------------------------------------- | :------------------------------------- | :----- | :------- | | Revenue | $59,063 | $93,329 | $(34,266) | -36.7% | | Gross profit | $10,899 | $17,114 | $(6,215) | -36.3% | | Operating (loss) income | $(6,478) | $1,400 | $(7,878) | -562.7% | | Net loss | $(8,857) | $(955) | $(7,902) | 827.4% | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(1,897) | $(8,081) | 426.0% | | Net loss per share, basic and diluted | $(0.21) | $(0.04) | $(0.17) | 425.0% | Condensed Consolidated Statements of Operations (Six-Month Period, in thousands) | Metric (in thousands) | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | Change | % Change | | :-------------------- | :----------------------------------- | :----------------------------------- | :----- | :------- | | Revenue | $120,359 | $172,965 | $(52,606) | -30.4% | | Gross profit | $25,156 | $30,094 | $(4,938) | -16.4% | | Operating (loss) income | $(10,499) | $(802) | $(9,697) | -1209.1% | | Net loss | $(15,075) | $(5,587) | $(9,488) | 170.0% | | Net loss attributable to SkyWater Technology, Inc. | $(17,323) | $(7,626) | $(9,697) | 127.1% | | Net loss per share, basic and diluted | $(0.36) | $(0.16) | $(0.20) | 125.0% | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Metric (in thousands) | Balance at June 29, 2025 | Balance at June 30, 2024 | Change | % Change | | :-------------------- | :----------------------- | :----------------------- | :----- | :------- | | Common Stock Amount | $485 | $474 | $11 | 2.3% | | Additional Paid-in Capital | $194,070 | $183,817 | $10,253 | 5.6% | | Accumulated Deficit | $(149,319) | $(132,829) | $(16,490) | 12.4% | | Total Shareholders' Equity, SkyWater Technology, Inc. | $45,236 | $51,462 | $(6,226) | -12.1% | | Noncontrolling Interests | $6,730 | $5,358 | $1,372 | 25.6% | | Total Shareholders' Equity | $51,966 | $56,820 | $(4,854) | -8.5% | - Equity-based compensation expense for the six-month period ended June 29, 2025, was **$4,220 thousand**, contributing to the increase in additional paid-in capital[21](index=21&type=chunk) - Net loss attributable to SkyWater Technology, Inc. for the six-month period ended June 29, 2025, was **$(17,323) thousand**, significantly increasing the accumulated deficit[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | Change | % Change | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :----- | :------- | | Net cash provided by operating activities | $54,300 | $5,423 | $48,877 | 901.3% | | Net cash used in investing activities | $(18,773) | $(3,218) | $(15,555) | 483.4% | | Net cash used in financing activities | $(4,998) | $(2,225) | $(2,773) | 124.6% | | Net change in cash and cash equivalents | $30,529 | $(20) | $30,549 | -152745.0% | | Cash and cash equivalents, end of period | $49,373 | $18,362 | $31,011 | 169.1% | - Significant increase in cash provided by operating activities in 2025 was primarily due to a **$45.1 million increase in contract liabilities**, including a **$52.0 million cash receipt** from a customer for tool installation[24](index=24&type=chunk)[160](index=160&type=chunk) - Increased cash used in investing activities in 2025 was driven by higher capital spending on property and equipment, with purchases totaling **$17,407 thousand**[24](index=24&type=chunk)[161](index=161&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1 Nature of Business](index=11&type=section&id=Note%201%20Nature%20of%20Business) SkyWater is a U.S.-based independent technology foundry, recently acquiring Infineon's 200 mm fab in Austin - SkyWater operates a **technology-as-a-service model**, co-developing process technology IP with customers through Advanced Technology Services (ATS) and supporting volume production via Wafer Services[29](index=29&type=chunk) - On June 30, 2025, the Company completed the **acquisition of Infineon Technologies AG's 200 mm fab in Austin, Texas**, financed through debt[31](index=31&type=chunk) [Note 2 Basis of Presentation and Principles of Consolidation](index=11&type=section&id=Note%202%20Basis%20of%20Presentation%20and%20Principles%20of%20Consolidation) This note details financial statement presentation, liquidity assessment, and net loss per share computation - The Company incurred net losses attributable to SkyWater Technology, Inc. of **$9,978 thousand** for the three-month period and **$17,323 thousand** for the six-month period ended June 29, 2025[36](index=36&type=chunk) - Management believes the Company has **sufficient liquidity** to fund operations for the next twelve months, supported by cash on hand and available borrowings from the Revolver, which was amended to increase capacity to **$350 million**[41](index=41&type=chunk) Net Loss Per Common Share (in thousands, except per share data) | Metric (in thousands, except per share data) | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :------------------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(1,897) | $(17,323) | $(7,626) | | Weighted average common shares outstanding, basic and diluted | 48,091 | 47,395 | 47,943 | 47,247 | | Net loss per common share, basic and diluted | $(0.21) | $(0.04) | $(0.36) | $(0.16) | [Note 3 Summary of Significant Accounting Policies](index=14&type=section&id=Note%203%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines new accounting standards and confirms no significant changes to existing policies during the period - The Company will adopt **ASU 2023-09 (Income Taxes)** for its fiscal year ending January 3, 2027, and **ASU 2024-03 (Expense Disaggregation Disclosures)** for its fiscal year ending January 2, 2028, as an emerging growth company[47](index=47&type=chunk)[48](index=48&type=chunk) - No significant changes were made to the Company's accounting policies and estimates during the three- and six-month periods ended June 29, 2025[49](index=49&type=chunk) [Note 4 Revenue](index=15&type=section&id=Note%204%20Revenue) This note disaggregates revenue by type, highlighting decreased Tools revenue, and details contract assets and liabilities Revenue by Type (Three-Month Period, in thousands) | Revenue Type (in thousands) | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Change | % Change | | :-------------------------- | :------------------------------------- | :------------------------------------- | :----- | :------- | | ATS development | $52,605 | $61,669 | $(9,064) | -14.7% | | Wafer Services | $5,411 | $5,780 | $(369) | -6.4% | | Tools | $1,047 | $25,880 | $(24,833) | -96.0% | | Total Revenue | $59,063 | $93,329 | $(34,266) | -36.7% | Revenue by Type (Six-Month Period, in thousands) | Revenue Type (in thousands) | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | Change | % Change | | :-------------------------- | :----------------------------------- | :----------------------------------- | :----- | :------- | | ATS development | $105,140 | $122,853 | $(17,713) | -14.4% | | Wafer Services | $12,938 | $15,773 | $(2,835) | -18.0% | | Tools | $2,281 | $34,339 | $(32,058) | -93.4% | | Total Revenue | $120,359 | $172,965 | $(52,606) | -30.4% | - Contract liabilities increased from **$107,067 thousand** at December 29, 2024, to **$152,137 thousand** at June 29, 2025, primarily due to increased payments received from customers[57](index=57&type=chunk)[58](index=58&type=chunk) - Remaining performance obligations for contracts with original expected durations of one year or more totaled **$133,821 thousand** as of June 29, 2025, primarily related to ATS development and tools revenue[59](index=59&type=chunk) [Note 5 Balance Sheet Information](index=20&type=section&id=Note%205%20Balance%20Sheet%20Information) This note provides detailed breakdowns and changes for key balance sheet accounts across reporting periods Balance Sheet Accounts (in thousands) | Account (in thousands) | June 29, 2025 | December 29, 2024 | Change | % Change | | :--------------------- | :------------ | :---------------- | :----- | :------- | | Total inventory | $18,286 | $19,282 | $(996) | -5.2% | | Total prepaid assets and other current assets | $41,914 | $23,476 | $18,438 | 78.5% | | Total property and equipment, net | $161,582 | $165,431 | $(3,849) | -2.3% | | Total intangible assets, net | $8,441 | $7,779 | $662 | 8.5% | | Total accrued expenses | $40,627 | $36,829 | $3,798 | 10.3% | - Prepaid expenses and other current assets significantly increased by **$18,438 thousand**, primarily due to an increase in tools purchased for customers, rising from **$16,923 thousand to $34,423 thousand**[67](index=67&type=chunk) - Depreciation expense for property and equipment was **$8,002 thousand** for the six-month period ended June 29, 2025, primarily classified as cost of revenue[69](index=69&type=chunk) [Note 6 Debt](index=24&type=section&id=Note%206%20Debt) This note details the Company's debt structure, including Revolver, VIE, and Tool Financing, and maturity schedule Debt Components (in thousands) | Debt Component (in thousands) | June 29, 2025 | December 29, 2024 | Change | % Change | | :---------------------------- | :------------ | :---------------- | :----- | :------- | | Revolver outstanding balance | $25,803 | $30,171 | $(4,368) | -14.5% | | Total short-term financing, net | $23,614 | $27,669 | $(4,055) | -14.7% | | VIE Financing | $34,106 | $34,671 | $(565) | -1.6% | | Tool financing loans | $9,935 | $7,253 | $2,682 | 37.0% | | Total long-term debt, excluding current portion | $35,316 | $34,704 | $612 | 1.8% | - As of June 29, 2025, the Revolver had an outstanding balance of **$25,803 thousand** at an **8.7% interest rate**, with **$104,196 thousand** remaining availability[80](index=80&type=chunk)[198](index=198&type=chunk) - The VIE Financing, fixed at **3.44% interest**, had a balance of **$34,106 thousand** and is repayable in monthly installments until October 2030[79](index=79&type=chunk)[81](index=81&type=chunk) Future Principal Payments of Long-Term Debt (in thousands) | Future Principal Payments of Long-Term Debt (in thousands) | | :------------------------------------------------------- | | Remainder of 2025 | $3,370 | | 2026 | $5,975 | | 2027 | $2,808 | | 2028 | $2,008 | | 2029 | $1,307 | | Thereafter | $28,573 | | Total | $44,041 | [Note 7 Income Taxes](index=26&type=section&id=Note%207%20Income%20Taxes) This note explains effective tax rates, influenced by state taxes and valuation allowances, and upcoming tax law changes Effective Tax Rate | Effective Tax Rate | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :----------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Effective Tax Rate | (8.04)% | 11.7% | (7.0)% | 1.5% | - The One Big Beautiful Bill Act, signed July 4, 2025, increases the Section 48D credit for semiconductor manufacturing facilities from **25% to 35%** for property placed in service after 2025. The Company will record the effect of these tax law changes in the third quarter of 2025, anticipating **no material impact** to overall tax expense[119](index=119&type=chunk) [Note 8 Equity-Based Compensation](index=26&type=section&id=Note%208%20Equity-Based%20Compensation) This note details equity-based compensation expense recognized across various categories for the reporting periods Equity-Based Compensation Expense (in thousands) | Expense Category (in thousands) | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :------------------------------ | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Cost of revenue | $626 | $504 | $1,193 | $959 | | Research and development expense | $113 | $90 | $196 | $197 | | Selling, general and administrative expense | $1,543 | $1,422 | $2,831 | $2,932 | | Total equity-based compensation expense | $2,282 | $2,016 | $4,220 | $4,088 | [Note 9 Commitments and Contingencies](index=27&type=section&id=Note%209%20Commitments%20and%20Contingencies) This note outlines the Company's commitments and contingencies, including capital expenditures, leases, and grants - The Company has **$5,470 thousand** in contractual capital expenditure commitments outstanding as of June 29, 2025, expected to be paid in the next twelve months[92](index=92&type=chunk) - Under the CfN Lease, SkyWater is obligated to bring the facility to full production capacity within **five years** and operate it for an additional **15 years**, with potential termination payment of up to **$15,000 thousand**[93](index=93&type=chunk) - SkyWater committed to a **20% matching share contribution** of approximately **$9,100 thousand** for the Build Back Better Grant, with **$1,000 thousand** obligated in the subsequent quarter[95](index=95&type=chunk) [Note 10 Related Party Transactions](index=28&type=section&id=Note%2010%20Related%20Party%20Transactions) This note describes related party transactions, including funding support, consulting, and a facility sale-leaseback - Oxbow Industries provides a support letter for up to **$12,500 thousand** in funding, if necessary, extended through March 18, 2026[97](index=97&type=chunk) - Consulting expenses with Oxbow Industries totaled **$212 thousand** for the three-month period and **$416 thousand** for the six-month period ended June 29, 2025[98](index=98&type=chunk) - The Company leases its Minnesota facility from Oxbow Realty with monthly payments of **$426 thousand**, subject to annual **2% increases**[99](index=99&type=chunk) [Note 11 Variable Interest Entity](index=29&type=section&id=Note%2011%20Variable%20Interest%20Entity) This note explains Oxbow Realty's consolidation as a VIE, detailing its assets, liabilities, revenue, and net income - Oxbow Realty is consolidated as a VIE because it lacks sufficient equity to finance its activities, and SkyWater is the **primary beneficiary**[102](index=102&type=chunk) Oxbow Realty Assets (in thousands) | Oxbow Realty Assets (in thousands) | June 29, 2025 | December 29, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total assets | $43,150 | $42,885 | | Total liabilities | $36,420 | $37,009 | Oxbow Realty Financials (in thousands) | Oxbow Realty Financials (in thousands) | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :------------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | Revenue | $1,438 | $1,423 | $2,872 | $2,842 | | Net income | $1,121 | $942 | $2,248 | $2,039 | [Note 12 Leases](index=29&type=section&id=Note%2012%20Leases) This note details SkyWater's lease arrangements, including its lessor role and a recent failed sale-leaseback - SkyWater acts as a lessor for a portion of its Minnesota facility, recognizing **$21,000 thousand** in operating lease revenue over **4.5 years**, prepaid by the customer[106](index=106&type=chunk)[107](index=107&type=chunk) - In June 2025, the Company entered into a failed sale-leaseback transaction for a furnace, receiving **$4,599 thousand cash** and recording a financial obligation with monthly lease payments of **$142 thousand** over **36 months**[108](index=108&type=chunk) [Note 13 Reportable Segment and Geographic Information](index=30&type=section&id=Note%2013%20Reportable%20Segment%20and%20Geographic%20Information) This note confirms SkyWater's single segment operation and details revenue by country and customer concentration - SkyWater operates and manages its business as **one reportable segment**[46](index=46&type=chunk) Revenue by Country (in thousands) | Revenue by Country (in thousands) | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------------------- | :----------------------------------- | | United States | $53,780 | $90,598 | $111,026 | $166,822 | | Canada | $3,030 | $1,647 | $560 | $637 | | Hong Kong | $293 | $32 | $5,342 | $3,880 | | United Kingdom | $560 | $352 | $767 | $79 | | All others | $1,400 | $700 | $2,663 | $1,547 | | Total | $59,063 | $93,329 | $120,359 | $172,965 | - One customer accounted for **43% of revenue** for the three-month period and **41%** for the six-month period ended June 29, 2025[111](index=111&type=chunk) [Note 14 Subsequent Events](index=31&type=section&id=Note%2014%20Subsequent%20Events) This note details significant post-period events, including the Fab 25 acquisition, loan amendment, and tax act - On June 30, 2025, SkyWater completed the acquisition of Spansion Fab 25, LLC for approximately **$93 million in cash**, expected to enhance foundational semiconductor manufacturing and strengthen its strategic position[112](index=112&type=chunk)[113](index=113&type=chunk) - In connection with the acquisition, the Loan and Security Agreement was amended to increase the revolving line of credit to **$350 million** (from $130 million) and extend the maturity date to **June 30, 2030**[116](index=116&type=chunk)[118](index=118&type=chunk) - The One Big Beautiful Bill Act, signed July 4, 2025, increases the Section 48D credit for semiconductor manufacturing facilities from **25% to 35%** for property placed in service after 2025, with effects to be recorded in Q3 2025[119](index=119&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses SkyWater's financial condition, operational results, key trends, and performance metrics for Q2 and H1 2025 [Overview](index=33&type=section&id=Overview) SkyWater is a U.S.-based independent technology foundry, offering ATS and Wafer Services for high-growth markets - SkyWater is a U.S.-based, independent, pure-play technology foundry with **Defense Microelectronics Activity Category 1A Trusted Accreditation**, offering enhanced IP security and secure U.S. domestic supply chain access[124](index=124&type=chunk) - The Company focuses on high-growth end markets including advanced compute, aerospace and defense, automotive, bio-health, and industrial, specializing in advanced solutions like infrared imaging and quantum computing ICs[125](index=125&type=chunk) [Factors and Trends Affecting our Business and Results of Operations](index=34&type=section&id=Factors%20and%20Trends%20Affecting%20our%20Business%20and%20Results%20of%20Operations) Key factors include the Fab 25 acquisition, macroeconomic conditions, CHIPS Act funding, and increased indebtedness - The acquisition of Spansion Fab 25, LLC on June 30, 2025, is expected to enhance SkyWater's capabilities in **foundational semiconductor manufacturing**[127](index=127&type=chunk) - The CHIPS Act provides significant incentives and funding for onshore semiconductor development and manufacturing; SkyWater received a preliminary memorandum of terms for up to **$16 million in federal funding** and **$19 million in state incentives**[129](index=129&type=chunk) - Customer-funded capital investment is a **significant driver**, enabling the development of technology platforms for future growth[129](index=129&type=chunk) [Financial Performance Metrics](index=34&type=section&id=Financial%20Performance%20Metrics) Management reviews key financial metrics like revenue, gross profit, net loss, and Adjusted EBITDA for operational decisions - Key financial performance metrics reviewed by management include **revenue, gross profit, net loss, and adjusted EBITDA**[130](index=130&type=chunk)[131](index=131&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section compares Q2 and H1 2025 operating results to 2024, showing decreased revenue and increased net loss [Second Quarter of 2025 Compared to the Second Quarter of 2024](index=35&type=section&id=Second%20Quarter%20of%202025%20Compared%20to%20the%20Second%20Quarter%20of%202024) Q2 2025 revenue decreased by 37% to $59.1 million, driven by declines in customer-funded tools and ATS Second Quarter Financial Performance (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change | % Change | | :-------------------- | :------ | :------ | :----- | :------- | | Revenue | $59,063 | $93,329 | $(34,266) | -36.7% | | Cost of revenue | $48,164 | $76,215 | $(28,051) | -36.8% | | Gross profit | $10,899 | $17,114 | $(6,215) | -36.3% | | Operating (loss) income | $(6,478) | $1,400 | $(7,878) | -562.7% | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(1,897) | $(8,081) | 426.0% | - ATS development revenue decreased by **$9.1 million**, primarily driven by a **$9.3 million decrease** in aerospace and defense industry revenue due to shifts in U.S. government policy and delayed contract awards[134](index=134&type=chunk) - Selling, general and administrative expense increased by **$1.7 million**, primarily due to **$2.2 million** in expenses related to the acquisition of Fab 25[137](index=137&type=chunk) [First Six Months of 2025 Compared to the First Six Months of 2024](index=36&type=section&id=First%20Six%20Months%20of%202025%20Compared%20to%20the%20First%20Six%20Months%20of%202024) H1 2025 revenue decreased by 30.4% to $120.4 million, with net loss increasing by 127% to $17.3 million First Six Months Financial Performance (in thousands) | Metric (in thousands) | H1 2025 | H1 2024 | Change | % Change | | :-------------------- | :------ | :------ | :----- | :------- | | Revenue | $120,359 | $172,965 | $(52,606) | -30.4% | | Cost of revenue | $95,203 | $142,871 | $(47,668) | -33.4% | | Gross profit | $25,156 | $30,094 | $(4,938) | -16.4% | | Operating loss | $(10,499) | $(802) | $(9,697) | -1209.1% | | Net loss attributable to SkyWater Technology, Inc. | $(17,323) | $(7,626) | $(9,697) | 127.1% | - Tools revenue decreased by **$31.9 million**, and ATS revenue decreased by **$17.7 million**, primarily due to an **$18.1 million decrease** in aerospace and defense industry revenue[141](index=141&type=chunk)[142](index=142&type=chunk) - Cost of revenue decreased by **$47.7 million**, driven by a **$31.2 million decrease** from completion of tool procurement and the absence of an **$8.0 million charge** for estimated future losses on a customer program recorded in the prior year[144](index=144&type=chunk) - Selling, general and administrative expense increased by **$5.5 million**, mainly due to **$2.2 million** in acquisition-related consulting fees for the Fab 25 transaction[146](index=146&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by cash and an expanded Revolver, despite increased indebtedness from the Fab 25 acquisition - As of June 29, 2025, SkyWater had **$49.4 million in cash and cash equivalents** and **$104.2 million available** under its Revolver. Post-Fab 25 acquisition, Revolver availability increased to **$213.0 million**[153](index=153&type=chunk)[158](index=158&type=chunk) - Net cash provided by operating activities significantly increased to **$54.3 million** for the first six months of 2025, up from **$5.4 million** in 2024, primarily due to increased contract liabilities and improved cash collection[158](index=158&type=chunk)[160](index=160&type=chunk) - Capital expenditures for the first six months of 2025 were **$18.8 million**, up from **$5.2 million** in 2024, reflecting increased investment in development and manufacturing capabilities[155](index=155&type=chunk)[158](index=158&type=chunk)[161](index=161&type=chunk) - Total debt on a consolidated basis was **$179.1 million** as of June 29, 2025 (pro forma for the Fab 25 acquisition), including **$137.1 million** under the Loan Agreement[209](index=209&type=chunk)[215](index=215&type=chunk) [Non-GAAP Financial Measure](index=45&type=section&id=Non-GAAP%20Financial%20Measure) This section defines and reconciles Adjusted EBITDA, a non-GAAP measure for evaluating operating performance - Adjusted EBITDA is defined as net (loss) income before interest expense, income tax (benefit) expense, depreciation and amortization, net income attributable to noncontrolling interests, equity-based compensation expense, and transaction costs[189](index=189&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------- | :------ | :------ | :------ | :------ | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(1,897) | $(17,323) | $(7,626) | | EBITDA | $(3,298) | $4,522 | $(4,088) | $6,288 | | Adjusted EBITDA | $2,276 | $8,144 | $6,361 | $13,079 | - Adjusted EBITDA decreased by **72% to $2.3 million** in Q2 2025 and by **51% to $6.4 million** in H1 2025, primarily due to headwinds in the ATS business from U.S. government policy impacts on defense spending[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses SkyWater's market risks, focusing on credit risk and interest rate risk from its Revolver - The Company's market risks are limited to potential changes in the fair value of debt due to fluctuations in market interest rates[196](index=196&type=chunk) - Credit risk is managed by monitoring financial institutions for cash balances and performing ongoing credit evaluations for accounts receivable and contract assets[197](index=197&type=chunk) - A **100 basis point increase** in the interest rate on the Revolver (outstanding balance of **$25.8 million** at June 29, 2025) would increase annual interest expense by **$0.3 million**[198](index=198&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective due to a revenue accounting material weakness, though financial statements are fairly presented - Disclosure controls and procedures were deemed **ineffective** as of June 29, 2025, due to a **material weakness** in the revenue accounting process[200](index=200&type=chunk) - Despite the material weakness, management concluded that the condensed consolidated financial statements for the periods presented are **fairly presented** in conformity with GAAP[201](index=201&type=chunk) - Remediation plans involve designing and implementing system improvements to monitor and evaluate changes processed via privileged access to the manufacturing application and its databases[203](index=203&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) SkyWater is not involved in any legal proceedings expected to materially adversely affect its business or financial condition - The Company is not a party to any litigation that is believed to have a **material adverse effect** on its business, operating results, cash flows, or financial condition[206](index=206&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, emphasizing Fab 25 acquisition uncertainties, increased leverage, and capital needs - The Company may not realize the anticipated benefits of the Fab 25 acquisition, and integration delays or difficulties could **adversely affect business and financial results**[208](index=208&type=chunk) - Increased leverage, totaling **$179.1 million** pro forma for the Fab 25 acquisition, could harm financial condition by increasing interest payments, vulnerability to economic changes, and limiting flexibility for future financing and acquisitions[209](index=209&type=chunk)[211](index=211&type=chunk)[215](index=215&type=chunk)[218](index=218&type=chunk) - The Company may need to raise **additional capital** through equity or debt financings, which could result in **significant dilution**, increased fixed payment obligations, or relinquishing valuable rights to technologies[212](index=212&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds occurred during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[219](index=219&type=chunk) [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred during the reporting period[220](index=220&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[221](index=221&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) This item discloses a director's adoption of a Rule 10b5-1 trading arrangement for common stock sales - On June 13, 2025, director Loren A. Unterseher adopted a **Rule 10b5-1 trading arrangement** for the sale of up to **480,370 shares of common stock**, expiring by September 10, 2026[222](index=222&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This item lists all filed exhibits, including acquisition and loan agreements, and officer certifications - Key exhibits include the **Membership Interest Purchase Agreement** for the Fab 25 acquisition and the **Amended and Restated Loan and Security Agreement**[224](index=224&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer are furnished pursuant to Exchange Act Rules and 18 U.S.C. Section 1350[224](index=224&type=chunk)

Company Performance - SkyWater Technology, Inc. reported a quarterly loss of $0.11 per share, which was better than the Zacks Consensus Estimate of a loss of $0.17, representing an earnings surprise of +35.29% [1] - The company posted revenues of $59.06 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.08%, but down from $93.33 million in the same quarter a year ago [2] - Over the last four quarters, SkyWater Technology has exceeded consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Performance - SkyWater Technology shares have declined approximately 34.3% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The current consensus EPS estimate for the upcoming quarter is $0.09 on revenues of $87.75 million, and for the current fiscal year, it is -$0.01 on revenues of $307.15 million [7] Industry Outlook - The Electronics - Semiconductors industry, to which SkyWater Technology belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact SkyWater Technology's stock performance [5]

Financial Data and Key Metrics Changes - Revenues for Q2 2025 were reported at just over $59 million, at the upper end of the outlook provided in May [7] - Q2 gross margin exceeded expectations at 19.5%, with adjusted EBITDA of $2.3 million also stronger than forecast [27] - The company ended Q2 with $49.4 million in cash and total debt outstanding of $65.7 million, with a net increase in borrowings of $5.5 million during the quarter [28] Business Line Data and Key Metrics Changes - The acquisition of Fab 25 is expected to double revenue scale and adjusted EBITDA immediately, with strong free cash flow generation from the outset [10] - Wafer Services revenue from Fab 25 is expected to be in the range of $75 million to $80 million for Q3 [30] - ATS revenue for Q3 is projected at approximately $50 million, with Wafer Services revenue of $5 million to $6 million [31] Market Data and Key Metrics Changes - The company anticipates revenue growth exceeding 30% in the quantum computing segment for 2025, with continued growth expected into 2026 [18] - The advanced packaging operation in Florida is expected to contribute to sequential growth in ATS business in Q4 [13] Company Strategy and Development Direction - The acquisition of Fab 25 establishes the company as the largest U.S.-based pure play foundry service provider, enhancing its capacity and strategic positioning [9] - The company aims to leverage cost optimization across its Minnesota and Texas fabs to drive synergies in engineering and operations [10] - The strategy focuses on enabling the semiconductor industry's evolution through scaled open access 200mm manufacturing paired with high-value IP and specialized process capabilities [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential in the semiconductor industry, particularly in light of national security concerns and the need for domestic production [21] - The company expects to see continued momentum in quantum computing applications and advanced packaging, which are key growth areas moving into 2026 [18][20] - Management acknowledged challenges in the aerospace and defense sectors due to government funding delays but remains optimistic about future funding increases [15] Other Important Information - The company has revised its financial supplement to reflect expected revenue and gross margin disclosures starting in Q3 [4] - The acquisition of Fab 25 was finalized with an upfront payment of $93 million, fully funded through a new debt facility [7] Q&A Session Summary Question: Future milestones for Fab 25 margin expansion - Management indicated that activities are underway to expand margins, including bringing in ATS engineering revenue and new product introductions [38][39] Question: Revenue guidance and fab loadings for Infineon business - The fab is currently running at target utilization, and management expects to maintain output while bringing in new customers and capabilities [46][47] Question: Customer targeting for Fab 25 - The company is targeting hybrid semiconductor manufacturers and those valuing U.S.-based sourcing, particularly in industrial and automotive sectors [62][63]

Q2 2025 Financial Performance - Total revenue for Q2 2025 was $591 million, a decrease of 37% year-over-year[59] - ATS development revenue in Q2 2025 was $526 million, a 15% decrease year-over-year[59] - Wafer Services revenue in Q2 2025 was $54 million, a 6% decrease year-over-year[59] - Tools revenue in Q2 2025 was $11 million, a 96% decrease year-over-year[59] - GAAP gross margin for Q2 2025 was 185%, a 20 basis points increase year-over-year[62] - Non-GAAP gross margin for Q2 2025 was 195%, a 60 basis points increase year-over-year[62] - Adjusted EBITDA for Q2 2025 was $23 million, a 72% decrease year-over-year[63] Fab 25 Acquisition and Outlook - The acquisition of Infineon's Fab 25 in Austin, TX was completed on June 30, funded by a $350 million credit facility[11] - The final purchase price of Fab 25 was approximately $93 million, including cash payment and working capital adjustment[11] - Fab 25 is expected to approximately double the company's annual revenue and adjusted EBITDA[11] - Q3 2025 Wafer Services revenue from Texas (Fab 25) is forecasted to be $75 million to $80 million[56]

[Executive Summary & Business Highlights](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Business%20Highlights) The company highlights the transformative Fab 25 acquisition and strong momentum in emerging technologies despite potential DOD funding delays [CEO Commentary](index=1&type=section&id=1.1%20CEO%20Commentary) The CEO highlights strong Q2 results, the transformative Fab 25 acquisition, and future growth drivers despite potential DOD program delays - The Fab 25 acquisition is expected to contribute at least **$300 million in annual revenue** and generate strong adjusted EBITDA and free cash flow starting in Q3[2](index=2&type=chunk) - The timing of federal funding for certain DOD programs is likely to impact the expected return to ATS revenue growth in 2025[3](index=3&type=chunk) - Strong momentum in quantum computing and advanced packaging, combined with Fab 25's contribution, positions SkyWater for **strong growth in 2026**[3](index=3&type=chunk) [Recent Business Highlights](index=1&type=section&id=1.2%20Recent%20Business%20Highlights) Key developments include the fully funded Fab 25 acquisition, which is expected to double revenue, and progress in quantum computing and advanced packaging - The Fab 25 acquisition was completed on June 30, funded by a new senior secured revolving credit facility with up to **$350 million** in borrowing capacity[4](index=4&type=chunk) - The acquisition is backed by a projected greater-than **$1 billion multi-year supply agreement** and is expected to approximately double annual revenue and adjusted EBITDA[4](index=4&type=chunk) - The company is expanding its quantum computing capabilities and preparing for an expected **revenue ramp in advanced packaging in the second half of 2025**[4](index=4&type=chunk) [Financial Performance & Outlook](index=2&type=section&id=2.%20Financial%20Performance%20%26%20Outlook) The company reports a significant year-over-year revenue decline in Q2 2025 but projects a strong revenue rebound in Q3 driven by the Fab 25 acquisition [Q2 2025 Financial Summary](index=2&type=section&id=2.1%20Q2%202025%20Financial%20Summary) Q2 2025 saw a significant year-over-year decline in revenue and net income, primarily driven by a sharp decrease in Tools revenue Q2 2025 GAAP Financial Summary | In millions, except per share data | Q2 2025 | Q2 2024 | Y/Y * | Q1 2025 | Q/Q * | | :--- | :--- | :--- | :--- | :--- | :--- | | ATS development revenue | $52.6 | $61.7 | (15)% | $52.5 | —% | | Wafer Services revenue | $5.4 | $5.8 | (7)% | $7.5 | (28)% | | Combined ATS development and Wafer Services revenue | $58.0 | $67.4 | (14)% | $60.1 | (3)% | | Tools revenue | $1.1 | $25.9 | (96)% | $1.2 | (8)% | | Total revenue | $59.1 | $93.3 | (37)% | $61.3 | (4)% | | Gross profit | $10.9 | $17.1 | (36)% | $14.3 | (24)% | | Gross margin | 18.5% | 18.3% | 20 bps | 23.3% | (480) bps | | Net loss to shareholders | $(10.0) | $(1.9) | (426)% | $(7.3) | (37)% | | Basic and diluted loss per share | $(0.21) | $(0.04) | (425)% | $(0.15) | (40)% | | Net income (loss) margin to shareholders | (16.9)% | (2.0)% | (1,490) bps | (12.0)% | (490) bps | Q2 2025 Non-GAAP Financial Summary | In millions, except per share data | Q2 2025 | Q2 2024 | Y/Y * | Q1 2025 | Q/Q * | | :--- | :--- | :--- | :--- | :--- | :--- | | Non-GAAP gross profit | $11.5 | $17.6 | (35)% | $14.8 | (22)% | | Non-GAAP gross margin | 19.5% | 18.9% | 60 bps | 24.2% | (470) bps | | Non-GAAP net income (loss) to shareholders | $(5.5) | $0.8 | (675)% | $(3.7) | 49% | | Non-GAAP basic income (loss) per share | $(0.11) | $0.02 | (600)% | $(0.08) | 38% | | Non-GAAP diluted income (loss) per share | $(0.11) | $0.02 | (600)% | $(0.08) | 38% | | Adjusted EBITDA | $2.3 | $8.1 | (72)% | $4.0 | (43)% | | Adjusted EBITDA margin | 3.9% | 8.7% | (480) bps | 6.6% | (270) bps | [Q2 2025 Results Analysis](index=2&type=section&id=2.2%20Q2%202025%20Results%20Analysis) Q2 revenue fell 37% year-over-year to $59.1 million due to a drop in Tools revenue, leading to a wider net loss and lower Adjusted EBITDA - Total revenue was **$59.1 million**, a decrease of **(37)%** year-over-year, primarily due to a **(96)%** decline in Tools revenue[7](index=7&type=chunk) - GAAP gross profit decreased **(36)%** to **$10.9 million**, representing a gross margin of **18.5%**[7](index=7&type=chunk) - GAAP net loss to shareholders widened to **$10.0 million**, and Adjusted EBITDA decreased **(72)%** to **$2.3 million**[7](index=7&type=chunk)[8](index=8&type=chunk) [Q3 2025 Financial Outlook](index=3&type=section&id=2.3%20Q3%202025%20Financial%20Outlook) The company projects a significant Q3 revenue increase to $130-$141 million, driven by the Fab 25 acquisition's contribution to Wafer Services Q3 2025 Financial Outlook (in thousands) | Metric | Low-End | High-End | | :--- | :--- | :--- | | Wafer Services revenue (MN) | $5,000 | $6,000 | | Wafer Services revenue (TX) | $75,000 | $80,000 | | Total Wafer Services revenue | $80,000 | $86,000 | | ATS development revenue | $48,000 | $52,000 | | Combined ATS development and Wafer Services revenue | $128,000 | $138,000 | | Tools revenue | $2,000 | $3,000 | | Total revenue | $130,000 | $141,000 | | GAAP Gross Margin % | 10.5% | 13.5% | | Non-GAAP Gross Margin % | 11.0% | 14.0% | | GAAP Operating Expenses | $21,500 | $23,500 | | Non-GAAP Operating Expenses | $18,000 | $20,000 | | GAAP diluted loss per share | $(0.28) | $(0.22) | | Non-GAAP diluted loss per share | $(0.20) | $(0.14) | - The non-GAAP outlook excludes approximately **$2.3 million** in equity-based compensation and **$2.0 million** in transaction costs[8](index=8&type=chunk) [Company Information & Disclosures](index=3&type=section&id=3.%20Company%20Information%20%26%20Disclosures) This section provides an overview of the company's business, cautionary statements regarding forward-looking information, and contact details [About SkyWater Technology](index=3&type=section&id=3.1%20About%20SkyWater%20Technology) SkyWater is a U.S.-based, trusted semiconductor supplier operating a Technology as a Service model for critical domestic markets - The company is a U.S.-based semiconductor manufacturer and **DMEA-accredited Category 1A Trusted Supplier**[10](index=10&type=chunk) - It operates on a **Technology as a Service (TaaS)** model, offering development, high-volume production, and integration solutions[10](index=10&type=chunk) - Key markets served include aerospace & defense, automotive, biomedical, industrial, and quantum computing[10](index=10&type=chunk) [Cautionary & Forward-Looking Statements](index=3&type=section&id=3.2%20Cautionary%20%26%20Forward-Looking%20Statements) The report contains preliminary, unaudited results and forward-looking statements subject to risks and uncertainties detailed in SEC filings - The Company's Q2 2025 results are **preliminary, unaudited**, and subject to finalization[11](index=11&type=chunk) - This press release contains **forward-looking statements** about future business and financial performance, which are not guarantees[12](index=12&type=chunk) - These statements are subject to various **risks and uncertainties**, including Fab 25 integration, supply chain, and market demand, as discussed in SEC filings[13](index=13&type=chunk) [Investor & Media Contacts](index=4&type=section&id=3.3%20Investor%20%26%20Media%20Contacts) Contact information for investor relations and media inquiries for SkyWater Technology is provided - Investor Contact: Claire McAdams | Claire@HeadgatePartners.com[14](index=14&type=chunk) - Media Contact: Tammy Swanson | Tammy.Swanson@SkyWaterTechnology.com[14](index=14&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=4.%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated balance sheets, statements of operations, and statements of cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=4.1%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 29, 2025, shows increased total assets and liabilities compared to the end of fiscal year 2024 Condensed Consolidated Balance Sheets (Unaudited, in thousands) | | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $49,373 | $18,844 | | Accounts receivable (net) | $32,016 | $54,332 | | Total current assets | $155,938 | $132,077 | | Property and equipment, net | $161,582 | $165,431 | | Total assets | $334,693 | $313,775 | | **Liabilities and shareholders' equity** | | | | Current portion of long-term debt | $6,752 | $5,073 | | Accounts payable | $15,353 | $29,590 | | Total current liabilities | $147,596 | $154,327 | | Long-term debt, less current portion | $35,316 | $34,704 | | Total liabilities | $282,727 | $250,285 | | Total shareholders' equity | $51,966 | $63,490 | | Total liabilities and shareholders' equity | $334,693 | $313,775 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=4.2%20Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations for Q2 2025 reflects lower revenue and gross profit, resulting in a significantly wider net loss year-over-year Condensed Consolidated Statements of Operations (Unaudited, in thousands) | | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $59,063 | $93,329 | $120,359 | $172,965 | | Cost of revenue | $48,164 | $76,215 | $95,203 | $142,871 | | Gross profit | $10,899 | $17,114 | $25,156 | $30,094 | | Operating income (loss) | $(6,478) | $1,400 | $(10,499) | $(802) | | Net income (loss) | $(8,857) | $(955) | $(15,075) | $(5,587) | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(1,897) | $(17,323) | $(7,626) | | Net loss per share, basic and diluted | $(0.21) | $(0.04) | $(0.36) | $(0.16) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=4.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities increased significantly, boosting the company's cash position Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $54,300 | $5,423 | | Net cash used in investing activities | $(18,773) | $(3,218) | | Net cash used in financing activities | $(4,998) | $(2,225) | | Net change in cash and cash equivalents | $30,529 | $(20) | | Cash and cash equivalents, end of period | $49,373 | $18,362 | [Supplemental Financial Information](index=8&type=section&id=5.%20Supplemental%20Financial%20Information) This section provides preliminary balance sheet adjustments for the Fab 25 acquisition and a quarterly breakdown of revenue trends [Preliminary Supplemental Balance Sheet Information](index=8&type=section&id=5.1%20Preliminary%20Supplemental%20Balance%20Sheet%20Information) Preliminary adjustments for the Fab 25 acquisition show significant increases in property, equipment, and total debt Preliminary Supplemental Balance Sheet Information (Fab 25 Transaction Adjustments, in thousands) | | June 29, 2025 | Preliminary Transaction Adjustments | June 30, 2025 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $49,373 | $7,000 | $56,373 | | Property and equipment, net | $161,582 | $364,000 | $525,582 | | Short term financing, net of unamortized debt issuance costs | $23,614 | $113,400 | $137,014 | | Total debt | $65,730 | $113,400 | $179,130 | - Note: The preliminary transaction adjustment for property and equipment is based on an initial draft valuation and is subject to change[21](index=21&type=chunk) [Supplemental Financial Information by Quarter](index=8&type=section&id=5.2%20Supplemental%20Financial%20Information%20by%20Quarter) Quarterly data reveals a significant decline in Tools revenue over the past year, impacting overall financial performance Total Revenue by Quarter (in thousands) | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | ATS development revenue | $52,605 | $52,535 | $59,401 | $56,390 | $61,669 | $61,185 | | Wafer Services revenue | $5,411 | $7,527 | $4,371 | $6,718 | $5,780 | $9,992 | | Combined ATS development and Wafer Services revenue | $58,016 | $60,062 | $63,772 | $63,108 | $67,449 | $71,177 | | Tools revenue | $1,047 | $1,234 | $11,715 | $30,709 | $25,880 | $8,459 | | Total revenue | $59,063 | $61,296 | $75,487 | $93,817 | $93,329 | $79,636 | - **Tools revenue significantly decreased** from $30.7 million in Q3 2024 to $1.0 million in Q2 2025[25](index=25&type=chunk) - In Q3 2024, a **$5.6 million loss accrual was released**, which reduced cost of revenue and favorably impacted gross profit[24](index=24&type=chunk)[25](index=25&type=chunk) [Non-GAAP Financial Measures & Reconciliation](index=9&type=section&id=6.%20Non-GAAP%20Financial%20Measures%20%26%20Reconciliation) This section explains the company's use of non-GAAP measures and provides detailed reconciliations to their nearest GAAP equivalents [Non-GAAP Financial Measures Explanation](index=9&type=section&id=6.1%20Non-GAAP%20Financial%20Measures%20Explanation) The company uses non-GAAP measures to provide additional insight into core operating results, though they are not substitutes for GAAP - Non-GAAP measures are intended to **provide additional insight** to investors and are used by management for strategic planning and performance evaluation[26](index=26&type=chunk)[27](index=27&type=chunk) - These measures **should not be viewed as an alternative to GAAP results** and may not be comparable to those of other companies[26](index=26&type=chunk)[27](index=27&type=chunk) - **Adjusted EBITDA** is defined as net income (loss) before interest, taxes, depreciation, amortization, and other specified adjustments[27](index=27&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=10&type=section&id=6.2%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) Reconciliation tables detail adjustments for items like equity-based compensation and transaction costs from GAAP to non-GAAP figures GAAP to Non-GAAP Reconciliation (Three-Month Periods, in thousands) | | June 29, 2025 (GAAP) | June 29, 2025 (Non-GAAP) | March 30, 2025 (GAAP) | March 30, 2025 (Non-GAAP) | June 30, 2024 (GAAP) | June 30, 2024 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $48,164 | $47,538 | $47,039 | $46,472 | $76,215 | $75,711 | | Gross profit | $10,899 | $11,525 | $14,257 | $14,824 | $17,114 | $17,618 | | Gross margin | 18.5% | 19.5% | 23.3% | 24.2% | 18.3% | 18.9% | | Research and development expense | $3,368 | $3,255 | $3,249 | $3,166 | $3,382 | $3,292 | | Selling, general, and administrative expense | $14,009 | $10,295 | $15,030 | $11,991 | $12,332 | $10,246 | | Net loss to shareholders | $(9,978) | $(5,525) | $(7,345) | $(3,656) | $(1,897) | $783 | - Key adjustments for Q2 2025 net loss include **$2,282 thousand in equity-based compensation** and **$2,171 thousand in transaction costs**[31](index=31&type=chunk)[32](index=32&type=chunk) Net Loss Per Common Share Reconciliation (Three-Month Periods, in thousands, except per share data) | | June 29, 2025 (GAAP) | June 29, 2025 (Non-GAAP) | March 30, 2025 (GAAP) | March 30, 2025 (Non-GAAP) | June 30, 2024 (GAAP) | June 30, 2024 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(5,525) | $(7,345) | $(3,656) | $(1,897) | $783 | | Weighted-average common shares outstanding | 48,091 | 48,091 | 47,791 | 47,791 | 47,395 | 47,395 | | Net loss per common share, basic and diluted | $(0.21) | $(0.11) | $(0.15) | $(0.08) | $(0.04) | $0.02 | [Adjusted EBITDA Reconciliation](index=13&type=section&id=6.3%20Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for Q2 2025 was $2.3 million, a significant decrease from Q2 2024, with reconciliations provided from GAAP net loss Adjusted EBITDA Reconciliation (Three-Month Periods, in thousands) | | June 29, 2025 | March 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Net loss to shareholders (GAAP) | $(9,978) | $(7,345) | $(1,897) | | Interest expense | $1,637 | $1,812 | $2,482 | | Income tax expense (benefit) | $742 | $384 | $(127) | | Depreciation and amortization, net | $4,301 | $4,358 | $4,064 | | EBITDA | $(3,298) | $(791) | $4,522 | | Equity-based compensation expense | $2,282 | $1,879 | $2,016 | | Management transition expense | — | — | $664 | | Transaction costs | $2,171 | $1,810 | — | | Net income attributable to noncontrolling interests | $1,121 | $1,127 | $942 | | Adjusted EBITDA | $2,276 | $4,025 | $8,144 | | Adjusted EBITDA margin | 3.9% | 6.6% | 8.7% | - Transaction costs of **$2,171 thousand in Q2 2025** are associated with the acquisition of Fab 25[35](index=35&type=chunk)[36](index=36&type=chunk) - Net income attributable to noncontrolling interests is added back to align with the add-back of interest expense in the Adjusted EBITDA calculation[35](index=35&type=chunk)[37](index=37&type=chunk)

Core Viewpoint - SkyWater Technology (SKYT) is expected to report second-quarter 2025 results on August 6, with anticipated revenues between $55 million and $60 million and a loss per share between 16 and 22 cents [1][8]. Revenue Expectations - The Zacks Consensus Estimate for second-quarter revenues is $57.3 million, reflecting a 38.6% decrease from the previous year [2]. - Advanced Technology Services (ATS) revenues are projected to be in the range of $49 million to $53 million, while Wafer Services revenues are expected to be between $5 million and $6 million [1][4]. Earnings Performance - The consensus estimate for loss is 17 cents per share, unchanged over the past 30 days, compared to earnings of 2 cents in the same quarter last year [2]. - SkyWater has consistently beaten earnings estimates in the past four quarters, with an average earnings surprise of 203.9% [2]. Market and Competitive Position - SkyWater shares have declined 36.4% year-to-date, underperforming the broader Zacks Computer and Technology sector, which has returned 9.1% [6]. - The company is trading below its 50-day and 200-day moving averages, indicating a bearish trend [10]. Product and Market Developments - The strong adoption of the ThermaView platform is expected to support Wafer Services, contributing significantly to revenues [4][8]. - The ATS segment is anticipated to face challenges due to budget delays and sluggish federal spending, but a recovery is expected in the second half of 2025 [5][18]. Strategic Acquisitions - The acquisition of Fab 25 is expected to enhance SkyWater's capabilities, adding approximately 400,000 wafer starts annually and generating immediate revenues supported by a four-year supply agreement valued at over $1 billion [19][18]. Future Growth Potential - SkyWater's prospects are bolstered by its strong portfolio and growing presence in the quantum computing market, with over 90% of revenues from advanced computing related to quantum technology development [17]. - The company aims to capture a significant share of the projected $9 billion global thermal imaging market by 2027, driven by the ThermaView platform [16].

Company Performance - SkyWater Technology, Inc. (SKYT) closed at $10.26, reflecting a -4.02% change from the previous day, underperforming the S&P 500's 0.06% gain [1] - The stock has increased by 17.86% over the past month, outperforming the Computer and Technology sector's gain of 9.6% and the S&P 500's gain of 5.88% [1] Upcoming Earnings - The upcoming earnings report for SkyWater Technology is scheduled for August 6, 2025, with an expected EPS of -$0.17, indicating a 950% decline compared to the same quarter last year [2] - Revenue is anticipated to be $57.3 million, down 38.6% from the prior-year quarter [2] Fiscal Year Projections - For the entire fiscal year, the Zacks Consensus Estimates project an EPS of -$0.01 and revenue of $307.15 million, representing changes of -116.67% and -10.26% respectively from the prior year [3] Analyst Estimates - Recent adjustments to analyst estimates for SkyWater Technology are noteworthy, as positive revisions are seen as a favorable indicator for business outlook [4] - The Zacks Rank system, which evaluates these estimate changes, currently ranks SkyWater Technology at 3 (Hold) [6] Industry Context - The Electronics - Semiconductors industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 58, placing it in the top 24% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Core Insights - SkyWater Technology (SKYT) and Semtech Corporation (SMTC) are positioned to benefit from the growing semiconductor market, particularly as the U.S. increases domestic chip production [1][2] - Semiconductor sales are projected to grow 11.2% year over year, reaching $700.9 billion in 2025 and $760.7 billion in 2026, driven by demand for AI hardware, electric vehicles, and industrial automation [2] SkyWater Technology (SKYT) - SkyWater is enhancing its market position through product innovation and expanded manufacturing capabilities, with a focus on its ThermaView platform for thermal imaging [4] - The company reported Q1 2025 revenues of $61.3 million and a gross margin of 24.2%, with advanced computing now accounting for 10% of total revenues [5] - The acquisition of Infineon's Fab 25 is expected to significantly increase SkyWater's capacity, adding approximately 400,000 wafer starts per year and making it the largest U.S.-based pure-play foundry service provider [6] Semtech Corporation (SMTC) - Semtech is experiencing growth in next-gen data center infrastructure, reporting record data center revenue of $51.6 million in Q1 fiscal 2026, a 143% increase year over year [7] - The CopperEdge product line offers over 90% power savings and is designed for high-density AI/ML data centers, with new ICs launched to support advanced connectivity [8] - Semtech's collaboration with major cloud platforms positions its technologies at the core of next-generation compute infrastructure, enhancing its growth potential in AI-centric markets [9][10] Market Performance and Valuation - Both SKYT and SMTC shares have declined year-to-date, with drops of 25.8% and 21.3% respectively, attributed to a challenging macroeconomic environment [11] - SMTC shares are currently overvalued with a Value Score of D, while SKYT holds a Value Score of B; SMTC's Price/Sales ratio is 3.87X compared to SKYT's 1.43X [13] - Earnings estimates indicate a projected loss of one cent per share for SKYT in 2025, while SMTC's earnings for fiscal 2026 are estimated at $1.66 per share, reflecting an 88.64% year-over-year increase [16] Conclusion - Both companies are well-positioned to capitalize on long-term growth trends in the semiconductor market, with SkyWater benefiting from its unique foundry status and Semtech showing stronger near-term visibility due to record data center performance [17][18]