SkyWater(US:SKYT)2025-05-07 21:32Financial Data and Key Metrics Changes - The 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 [24] - Q1 gross margin exceeded expectations at 24.2%, benefiting from a $2 million favorable reversal of a warranty accrual recorded last year [24] - Adjusted EBITDA for Q1 was $4 million, stronger than forecast due to favorable gross margin performance and lower operating expenses [24][25] - 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 [25] Business Line Data and Key Metrics Changes - Wafer Services revenue was driven by the recently launched ThermoView platform, which contributed significantly to Q1's revenue [7][9] - New products accounted for over half of Q1's wafer services revenue, indicating a shift from a 90% legacy mix to an expected 60% new and 40% legacy mix by year-end [9][54] - ATS experienced a softer quarter due to budget delays and extended negotiations in Washington, impacting near-term revenue outlook [9][17] Market Data and Key Metrics Changes - The advanced compute segment became the second largest end market after aerospace and defense, with over 90% of revenues from this segment related to quantum technology development [14][15] - The company expects solid ATS growth beginning in Q3, driven by anticipated funding releases later in 2025 [19] 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 [11][12] - The company is focused on transitioning technologies efficiently to production, particularly in the advanced thermal imaging market [8][9] - The strategic rationale includes meeting the multidimensional needs of semiconductor sovereignty in the U.S. and supporting high-growth sectors like automotive and medical devices [12][13] 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 [19][20] - The company anticipates a strong second half of 2025 with significant sequential growth in both Q3 and Q4, driven by ongoing ramp-up of the Advanced Packaging business [22][30] - Management remains optimistic about achieving positive non-GAAP EPS for the year, with expectations for gross margins to expand into the 30s in the second half [23][31] 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 [5][6] - The impact of tariffs is being monitored, with no significant downward revisions in demand forecast from major customers [20][27] Q&A Session Summary Question: Confidence in ATS recovery amid budget volatility - Management highlighted the $300 million investment by the U.S. government and the alignment of programs with national security as key factors for confidence in funding approval [36][38] Question: Size of advanced computing market and collaboration with SciQuantum - Advanced computing currently represents about 10% of the business, with 90% tied to quantum computing [42][44] Question: Ramp of ThermoView business and market size - ThermoView is expected to drive growth in wafer services, with a projected market size of $9 billion [53] Question: Update on RadHard program and budget impact - The RadHard program continues to evolve, with technology gaining robustness, but is subject to reassessment due to budgetary stalemate [71][74]