SkyWater(US:SKYT)2023-05-09 02:04Financial Data and Key Metrics Changes - The company reported record quarterly revenues of $66.1 million, which is a 2% increase from the previous quarter and a 37% increase year-over-year [36][81]. - Non-GAAP gross margin for Q1 was 25.8%, exceeding expectations, while the previous quarter's gross margin was 26.2% [54][17]. - Adjusted EBITDA for the quarter was $8.1 million, representing 12.3% of revenues [83]. Business Line Data and Key Metrics Changes - Wafer services revenue was $17.8 million, up 3% from Q4 but down 17% from Q1 of the previous year [81]. - ATS revenue reached a record $48.3 million, up 82% compared to Q1 of last year, driven by increased demand in aerospace and defense programs [68]. Market Data and Key Metrics Changes - The automotive and industrial markets continue to show robust performance, offsetting weaknesses in the consumer sector, which constitutes about 20% of overall revenue [89][121]. - The company anticipates continued growth in wafer services driven by improved productivity and additional ATS customers transitioning to production [44]. Company Strategy and Development Direction - The company aims to achieve gross margins in the high 20s to low 30s by the end of 2024, with expectations for 2025 to be a pivotal year for achieving long-term financial goals [50][67]. - The company is focused on expanding its capabilities through strategic government programs and partnerships, particularly in the defense sector [38][64]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to achieve targeted financial objectives despite macroeconomic challenges in the semiconductor industry [58][51]. - The company is optimistic about the CHIPS Act funding, viewing it as an accelerant for growth, although it does not rely on it to meet long-term goals [80][104]. Other Important Information - The company ended the quarter with $13.8 million in cash and cash equivalents, a decrease from year-end as planned [18]. - Operating expenses on a GAAP basis were $17.6 million, up 15% from Q4, while non-GAAP operating expenses were $16.2 million [25]. Q&A Session Summary Question: What is the updated gross margin range for the rest of the year? - Management indicated a revised gross margin range of high-teens to low 20% for the year, influenced by cost optimization and revenue levels [1][55]. Question: What is the anticipated revenue level to achieve the gross margin target? - Management refrained from providing specific revenue numbers but noted that fixed costs for certain programs would not be fully absorbed until 2025 [5][111]. Question: How is the capacity split between Minnesota and Florida facilities? - The majority of capacity remains in Minnesota, with Florida focused on early-stage development programs [22][8]. Question: What is the outlook for the automotive and industrial markets? - Management reported robust performance in automotive and industrial sectors, compensating for consumer market weaknesses [89][121]. Question: How does the company view the CHIPS Act funding? - Management sees the CHIPS Act as a potential growth accelerant but emphasizes that it is not essential for achieving long-term financial goals [104][105].