SkyWater(US:SKYT)2025-05-07 21:30Financial Data and Key Metrics Changes - First quarter revenue was $61.3 million, slightly above the midpoint of guidance, with combined ATS and Wafer Services revenue at $60.1 million and Tools revenue at $1.2 million [22] - Q1 gross margin exceeded expectations at 24.2%, benefiting from a $2 million favorable reversal of a warranty accrual [22] - Adjusted EBITDA for Q1 was $4 million, stronger than forecast due to favorable gross margin performance and lower operating expenses [22][23] - The company ended the quarter with $51 million in cash, an increase of $32 million from year-end, primarily driven by advanced payments for tool purchases [23] Business Line Data and Key Metrics Changes - Wafer Services revenue was driven by the newly launched ThermoView platform, which is expected to fuel most of Wafer Services' growth in 2025 [6][7] - New products accounted for over half of Q1's wafer services revenue, with a shift from a 90% legacy mix to an expected 60% new and 40% legacy mix by year-end [7][51] - ATS experienced a softer quarter due to budget delays and extended negotiations in Washington, impacting near-term revenue outlook [7][14] Market Data and Key Metrics Changes - Advanced compute grew to become the second largest end market after aerospace and defense, with over 90% of revenues from this segment related to quantum technology development [12] - The company expects solid ATS growth beginning in Q3, driven by anticipated funding releases [17] Company Strategy and Development Direction - The acquisition of Infineon's Fab 25 is a strategic move to expand 200mm foundry capacity in the U.S., aimed at enhancing domestic semiconductor manufacturing capabilities [9][10] - The company is focused on diversifying its revenue base and advancing its mission as an essential enabler of America's semiconductor onshoring strategy [11] - The company aims for positive non-GAAP EPS for the year, with expectations for significant gross margin expansion in the second half of 2025 [21][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of ATS revenue in the second half of 2025, despite current budgetary uncertainties [14][17] - The company is proactively managing costs and aligning execution plans to capitalize on anticipated second-half growth [20] - Management noted that the current tariff policy has not led to downward revisions in demand forecasts from major customers [18][25] Other Important Information - The company plans to participate in three investor conferences in Q2 and is in the early stages of planning a Capital Markets Day at Fab 25 in Austin [4][5] - The expected revenue range for Q2 is $55 million to $60 million, with ATS revenues projected between $49 million and $53 million [20][30] Q&A Session Summary Question: Confidence in ATS recovery amid budget volatility - Management highlighted the $300 million investment by the U.S. government in capability creation, aligning with national security agendas, as a source of confidence for program funding [34][36] Question: Timeline for government funding recovery - Management expects good transparency regarding funding by the end of Q2, with discussions around an omnibus bill ongoing [39] Question: Size of advanced computing market - Advanced computing currently represents about 10% of the business, with 90% tied to quantum computing [40][43] Question: Ramp of ThermoView business - ThermoView is expected to drive growth in wafer services, with a projected market size of $9 billion [51] Question: Impact of packaging facility on revenue - The majority of tools revenue in 2025 will come from the Florida facility, with traditional ATS revenue expected to begin in 2026 [60] Question: Update on RadHard program - The technology is evolving towards qualification, with government funding reassessed in terms of priority [70][71]