SkyWater(SKYT) - 2026 Q2 - Quarterly Results

Executive Summary & Business Highlights The company highlights the transformative Fab 25 acquisition and strong momentum in emerging technologies despite potential DOD funding delays CEO Commentary 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] - The timing of federal funding for certain DOD programs is likely to impact the expected return to ATS revenue growth in 2025[3] - Strong momentum in quantum computing and advanced packaging, combined with Fab 25's contribution, positions SkyWater for strong growth in 2026[3] Recent Business Highlights 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] - 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] - 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] Financial Performance & Outlook 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 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 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] - GAAP gross profit decreased (36)% to $10.9 million, representing a gross margin of 18.5%[7] - GAAP net loss to shareholders widened to $10.0 million, and Adjusted EBITDA decreased (72)% to $2.3 million[7][8] Q3 2025 Financial Outlook 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] Company Information & Disclosures This section provides an overview of the company's business, cautionary statements regarding forward-looking information, and contact details About SkyWater Technology 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] - It operates on a Technology as a Service (TaaS) model, offering development, high-volume production, and integration solutions[10] - Key markets served include aerospace & defense, automotive, biomedical, industrial, and quantum computing[10] Cautionary & Forward-Looking Statements 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] - This press release contains forward-looking statements about future business and financial performance, which are not guarantees[12] - These statements are subject to various risks and uncertainties, including Fab 25 integration, supply chain, and market demand, as discussed in SEC filings[13] Investor & Media Contacts Contact information for investor relations and media inquiries for SkyWater Technology is provided - Investor Contact: Claire McAdams | Claire@HeadgatePartners.com[14] - Media Contact: Tammy Swanson | Tammy.Swanson@SkyWaterTechnology.com[14] Consolidated Financial Statements This section presents the unaudited condensed consolidated balance sheets, statements of operations, and statements of cash flows Condensed Consolidated Balance Sheets 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 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 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 This section provides preliminary balance sheet adjustments for the Fab 25 acquisition and a quarterly breakdown of revenue trends Preliminary Supplemental Balance Sheet Information 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] Supplemental Financial Information by Quarter 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] - In Q3 2024, a $5.6 million loss accrual was released, which reduced cost of revenue and favorably impacted gross profit[24][25] Non-GAAP Financial Measures & Reconciliation 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 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][27] - These measures should not be viewed as an alternative to GAAP results and may not be comparable to those of other companies[26][27] - Adjusted EBITDA is defined as net income (loss) before interest, taxes, depreciation, amortization, and other specified adjustments[27] Reconciliation of GAAP to Non-GAAP Financial Measures 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][32] 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 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][36] - Net income attributable to noncontrolling interests is added back to align with the add-back of interest expense in the Adjusted EBITDA calculation[35][37]