SkyWater(US:SKYT)2025-11-12 21:03Financial Performance - Revenue for the third quarter of 2025 was $150.7 million, a 61% increase from $93.8 million in the third quarter of 2024[154] - Gross profit for the third quarter of 2025 was $36.2 million, representing a 79% increase from $20.2 million in the same period last year[153] - Operating income increased by 67% to $7.9 million in the third quarter of 2025, compared to $4.7 million in the third quarter of 2024[153] - Net income attributable to SkyWater Technology increased by $142.5 million in Q3 2025 compared to Q3 2024, driven by the impacts of the aforementioned changes[169] - Net income increased to $26.5 million in the third quarter of 2025, up from $2.6 million in the same quarter of 2024, representing a 1,019% increase[197] - For the first nine months of 2025, net income rose to $11.4 million from a net loss of $3.0 million in the same period of 2024, marking a 484% increase[197] - Adjusted EBITDA increased by $14.8 million or 135% in Q3 2025 compared to Q3 2024, supported by expansion in the advanced compute end market and the addition of Fab 25[170] - Adjusted EBITDA for the three-month period ended September 28, 2025, was $25.8 million, compared to $11.0 million for the same period in 2024[243] Acquisition and Investments - The acquisition of Fab 25 was completed on June 30, 2025, for a total purchase consideration of $206.5 million, enhancing SkyWater's semiconductor manufacturing capabilities[150] - SkyWater Texas wafer services revenue increased by $86.6 million due to the Fab 25 acquisition, with $8.6 million attributed to non-cash purchase accounting adjustments[158] - A bargain purchase gain of $110.8 million was recognized in conjunction with the Fab 25 acquisition, reflecting the excess of fair value over purchase consideration[167] - The company incurred transaction and integration costs of $7.1 million related to the acquisition of Fab 25 on June 30, 2025[244] Expenses - Cost of revenue increased by $40.9 million, or 56%, primarily due to the inclusion of Fab 25 operations[160] - Advanced Technology Services (ATS) development revenue decreased by $2.2 million, mainly due to an $8.1 million reduction in revenue from aerospace and defense markets[154] - Research and development expenses rose to $4.4 million, a 27% increase from $3.4 million in the prior year[153] - Selling, general and administrative expense rose by $11.9 million or 98% in Q3 2025 compared to Q3 2024, primarily due to $6.0 million related to the Fab 25 acquisition[164] - Interest expense increased by $3.3 million or 168% in Q3 2025 compared to Q3 2024, mainly due to higher amounts outstanding on the revolving lending facility[166] Tax and Compliance - Income tax expense decreased by $31.9 million in Q3 2025 compared to Q3 2024, resulting from the realization of deferred tax assets related to the Fab 25 acquisition[168] - The company expects customer-funded capital investment to be a significant driver of future growth[151] - The company was in compliance with the covenants of the Amended Loan Agreement and expects to maintain compliance over the next twelve months[221] Cash Flow and Liquidity - Cash and cash equivalents increased to $30.9 million as of September 28, 2025, from $18.8 million as of December 29, 2024[210] - Net cash provided by operating activities was $7.1 million during the first nine months of 2025, a decrease of $12.6 million from $19.7 million in the same period of 2024[211] - Net cash used in investing activities was $107.0 million during the first nine months of 2025, compared to $9.2 million in the same period of 2024, primarily due to the acquisition of Fab 25[212] - The outstanding balance of the Revolver was $155.0 million, with remaining availability of $65 million as of September 28, 2025[217] - The company maintains a liquidity requirement of at least $70 million following certain transactions[220] Financing and Risk - The VIE Financing amounts to $39 million with a fixed interest rate of 3.44%, repayable in equal monthly installments of $0.2 million over 10 years[223] - The VIE Financing is secured by a security interest in the land and building of the SkyWater Minnesota facility[225] - Market risk exposure is primarily related to potential changes in the fair value of debt due to fluctuations in market interest rates[246] - Credit risk is associated with cash and cash equivalents, accounts receivable, and contract assets, with no losses experienced in maintained accounts[247] - As of September 28, 2025, the outstanding balance of the Revolver was $155.0 million at a variable interest rate of 8.6%[248] - A 100 basis point increase in the interest rate would result in an annual increase of $1.6 million in interest expense based on the outstanding balance of the Revolver[248] Regulatory and Reporting - The CHIPS Act provides $52.7 billion for American semiconductor research and development, with SkyWater applying for funding to modernize its Minnesota facility[151] - The company qualifies as an "emerging growth company" and a "smaller reporting company," allowing it to take advantage of certain reporting exemptions[229] - The net income attributable to noncontrolling interests from the variable interest entity (VIE) is included in the adjusted EBITDA financial measure[245] - The preliminary bargain purchase gain from the acquisition of Fab 25 on June 30, 2025, is recognized, with total consideration paid being less than the fair value of net assets acquired[245]