SkyWater(US:SKYT)2023-08-08 01:10Financial Data and Key Metrics Changes - The company reported record Q2 revenues of $69.8 million, which was 6% higher than Q1 and up 47% year-over-year [35][77] - Trailing 12-month revenue reached $253 million, demonstrating a growth of 50% over the prior 12-month period [10] - Adjusted EBITDA for the quarter was $6.5 million, or 9.3% of revenues, with a cash flow generation of $3.2 million after interest expense and CapEx [55][56] Business Line Data and Key Metrics Changes - Wafer Services revenue was $16.8 million, down 6% sequentially and 4% year-over-year, with a non-GAAP gross margin of 24.7% [26] - ATS revenue reached a record $53 million, up 10% from Q1 and 78% compared to Q2 last year [52] - The company is focusing on transitioning several ATS programs to production in 2024, which is expected to enhance productivity and revenue [22] Market Data and Key Metrics Changes - The company is experiencing strong demand in the biohealth and advanced computing markets, with several customers potentially contributing millions in revenue in 2023 [15][42] - The U.S. government's commitment to strategic Rad-Hard investments is seen as a vital component of the company's revenue growth trajectory [39] Company Strategy and Development Direction - The company aims to be a $1 billion pure-play semiconductor technology foundry within a decade, leveraging CHIPS funding to accelerate growth [50] - A focus on operational efficiency and automation is being emphasized to enhance productivity and margins, with expectations of gross margins reaching the high-20s to low-30s by 2024 [49][46] - The company is not pursuing high-volume, low-mix foundry business but is instead focusing on high-value, low-volume technologies [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving long-term growth objectives despite macroeconomic challenges in the semiconductor industry [37][23] - The company anticipates continued revenue growth and margin expansion driven by strategic investments and operational improvements [48][19] Other Important Information - The company incurred $5.2 million in additional operating expenses due to management consulting fees, which are expected to impact future earnings positively [28][79] - The company ended the quarter with $16.2 million in cash and cash equivalents, reflecting a positive cash flow generation [30] Q&A Session Summary Question: Cross-selling opportunities with Florida Advanced Packaging operations - Management highlighted strong interest from customers in consolidating supply chains around SkyWater, with multiple cross-site interactions underway [62] Question: Impact of China's policy changes on gallium and germanium supply - Management indicated that they have a handle on supply and do not foresee significant near-term impacts from China's policy changes [63][64] Question: Update on advanced packaging technologies - Management provided updates on three advanced packaging platforms, including Interposer and hybrid wafer bonding technologies, aimed at high-performance computing [66] Question: Efficiency gains and transformation goals - Management discussed ongoing efforts to enhance efficiency and the expected benefits from consulting fees related to business transformation [75] Question: Wafer Services business outlook - Management noted that while Wafer Services has been flat, the demand for ATS services remains high, and they are investing to capture opportunities [109]