Exhibit 99.1
SkyWater Technology Reports Fourth Quarter and Full Year 2022 Results
Record Revenues for both Q4 and Fiscal Year
BLOOMINGTON, Minn., – February 13, 2023 – SkyWater Technology (NASDAQ: SKYT), the trusted technology realization partner, today announced financial results for the fourth quarter and full year 2022, ended January 1, 2023.
Highlights for Q4 2022:
•Revenue increased 69% year-over-year to a record $65.1 million.
•Gross margin increased to 25.4% on a GAAP basis, compared to (43.1)% in Q4 2021, and increased to 26.2% on a non-GAAP basis, compared to (6.1)% in Q4 2021.
•Net loss to shareholders of $3.0 million, or $(0.07) per share on a GAAP basis, and net loss to shareholders of $1.5 million, or $(0.03) per share on a non-GAAP basis.
•Adjusted EBITDA of $10.3 million, or 15.9% of revenue.
Highlights for Fiscal 2022:
•Revenue increased 31% year-over-year to a record $212.9 million.
•Gross margin increased to 12.2% on a GAAP basis, compared to (4.6)% in 2021, and increased to 13.7% on a non-GAAP basis, compared to 2.0% in 2021.
•Net loss to shareholders of $39.6 million, or $(0.97) per share on a GAAP basis, and net loss to shareholders of $30.3 million, or $(0.74) per share on a non-GAAP basis.
•Adjusted EBITDA of $7.7 million, or 3.6% of revenue.
“We are pleased to enter 2023 with growing momentum,” said Thomas Sonderman, SkyWater president and chief executive officer. “2022 was a year in which we achieved a number of our key strategic objectives, including strong revenue growth exceeding our long-term target of 25%, the significant expansion and improved visibility of our pipeline of ATS programs and partnerships and improved operational execution. As these materialized in 2022, we were able to demonstrate the significant operating leverage of our model, generating strong gross margin flow-through and positive adjusted EBITDA.”
Sonderman continued, “As we look ahead, we have a new expected baseline for quarterly revenues of approximately $60 million from which to grow. This is a significant achievement compared to this time last year, a testament to the team’s improved execution driving increased factory efficiency and productivity, along with better pricing in our Wafer Services business. This new baseline, as we enter a challenging macroeconomic environment in 2023, provides the foundation for yet another strong growth year in which we believe we can again achieve revenue growth approaching our long-term target of 25% annually. We believe the growth we expect to achieve in 2023 is largely de-coupled from areas of macroeconomic weakness, as we expect to expand our revenue base above the $60 million level with established, funded and relatively secure ATS programs.”
2022 Business Highlights:
•Significant progress on the RH90 program, including completion of the base prototype phase, receipt of the $99 million Phase 2 award for productization and qualification, and the securing of additional options and partnerships that firmly establish SkyWater’s role in the important RadHard ecosystem.
•Landmark partnership announced with the State of Indiana and Purdue University to build advanced $1.8 billion semiconductor fab .
•Receipt of a $36 million grant awarded to Osceola County by the U.S. Economic Development Administration to complete facilitization of our Florida facility, with SkyWater the only semiconductor company beneficiary of this Build Back Better award.
•Strong momentum toward building a stronger domestic semiconductor ecosystem through the CHIPS Act, which successfully passed in August, and for which SkyWater expects to be a key beneficiary for years to come.
•The execution of more favorable terms with our largest historical customer, including increased pricing, improved predictability and visibility and a larger, more profitable base of business from which to grow.
•Important new customer partnerships and progress announced with Google, NanoDX, Weebit Nano, Trusted Semiconductor, Quicklogic, and others as well as in heterogeneous integration programs such as IBAS and our partnerships with DECA and Adeia.
•Conclusion of a fixed revenue government program in Q4, ahead of the original schedule, resulted in a one-time non-cash revenue recognition event of $4.7 million, driving upside in ATS revenue and, given no associated cost of revenue, flowed through directly to gross profit and EBITDA for Q4.
•Record results for both ATS and Wafer Services, driving revenues to $213 million for the year, with a significantly expanded gross margin profile and positive adjusted EBITDA generation.
•Expansion of our access to capital through $250 million shelf registration (with $19 million in net equity proceeds raised to date) and new $100 million senior secured revolving credit facility that expands our available borrowing capacity.
Q4 2022 Summary:
| GAAP | |||||||||||||||||||||||||||||
| In USD millions, except per share data | Q4 22 | Q4 21 | Y/Y | Q3 22 | Q/Q | ||||||||||||||||||||||||
| Advanced Technology Services revenue | $47.9 | $24.4 | 97% | $35.2 | 36% | ||||||||||||||||||||||||
| Wafer Services revenue | $17.2 | $14.2 | 21% | $17.2 | 0% | ||||||||||||||||||||||||
| Revenue | $65.1 | $38.5 | 69% | $52.3 | 24% | ||||||||||||||||||||||||
| Gross profit (loss) | $16.6 | $(16.6) | nm | $8.3 | 100% | ||||||||||||||||||||||||
| Gross margin | 25.4% | (43.1)% | 6,850 bps | 15.8% | 960 bps | ||||||||||||||||||||||||
| Net loss to shareholders | $(3.0) | $(27.0) | 89% | $(6.9) | 56% | ||||||||||||||||||||||||
| Basic loss per share | $(0.07) | $(0.69) | 90% | $(0.17) | 59% | ||||||||||||||||||||||||
| Non-GAAP | |||||||||||||||||||||||||||||
| In USD millions, except per share data | Q4 22 | Q4 21 | Y/Y | Q3 22 | Q/Q | ||||||||||||||||||||||||
| Non-GAAP gross profit (loss) | $17.0 | $(2.3) | nm | $8.8 | 94% | ||||||||||||||||||||||||
| Non-GAAP gross margin | 26.2% | (6.1)% | 3,230 bps | 16.8% | 940 bps | ||||||||||||||||||||||||
| Non-GAAP net loss to shareholders | $(1.5) | $(11.2) | 87% | $(5.1) | 72% | ||||||||||||||||||||||||
| Non-GAAP basic loss per share | $(0.03) | $(0.28) | 89% | $(0.13) | 77% | ||||||||||||||||||||||||
| Adjusted EBITDA | $10.3 | $(4.7) | nm | $3.8 | 171% | ||||||||||||||||||||||||
| Adjusted EBITDA margin | 15.9% | (12.3%) | 2,820 bps | 7.3% | 860 bps | ||||||||||||||||||||||||
nm - Not meaningful
2022 Summary:
| GAAP | |||||||||||||||||
| In USD millions, except per share data | FY22 | FY21 | Y/Y | ||||||||||||||
| Advanced Technology Services revenue | $139.4 | $111.7 | 25% | ||||||||||||||
| Wafer Services revenue | $73.5 | $51.2 | 44% | ||||||||||||||
| Revenue | $212.9 | $162.8 | 31% | ||||||||||||||
| Gross profit (loss) | $26.0 | $(7.5) | nm | ||||||||||||||
| Gross margin | 12.2% | (4.6)% | 1,680 bps | ||||||||||||||
| Net loss to shareholders | $(39.6) | $(50.7) | 22% | ||||||||||||||
| Basic loss per share | $(0.97) | $(1.76) | 45% | ||||||||||||||
| Non-GAAP | |||||||||||||||||
| In USD millions, except per share data | FY22 | FY21 | Y/Y | ||||||||||||||
| Non-GAAP gross profit | $29.0 | $2.8 | 931% | ||||||||||||||
| Non-GAAP gross margin | 13.7% | 2.0% | 1,170 bps | ||||||||||||||
| Non-GAAP net loss to shareholders | $(30.3) | $(30.0) | (1)% | ||||||||||||||
| Non-GAAP basic loss per share | $(0.74) | $(1.05) | 30% | ||||||||||||||
| Adjusted EBITDA | $7.7 | $(2.6) | nm | ||||||||||||||
| Adjusted EBITDA margin | 3.6% | (1.6%) | 520 bps | ||||||||||||||
nm - Not meaningful
Q4 2022 Results:
•Revenue: Revenue of $65.1 million increased 69% year-over-year. Advanced Technology Services revenue of $47.9 million increased 97% year-over-year reflecting the momentum we are gaining with several key customers, as well as a non-recurring, non-cash revenue recognition of $4.7 million for the early completion of a fixed-fee program. Advanced Technology Services revenue contained $0.03 million of tool revenue in fourth quarter 2022 and $1.1 million in fourth quarter 2021. Wafer Services revenue of $17.2 million increased 21% compared to the fourth quarter of 2021 driven by more favorable pricing and increased volumes.
•Gross Profit (Loss): GAAP gross profit was $16.6 million, or 25.4% of revenue, compared to gross loss of $16.6 million, or (43.1)% of revenue, in the fourth quarter of 2021. GAAP gross loss for the fourth quarter of 2021 included a $13.4 million inventory write-down charge for temperature differential sensing wafers. Cost of revenues in the fourth quarter of 2022 contained $2.7 million for heterogeneous integration and $1.4 million in depreciation for the radiation hardened facility. Non-GAAP gross profit was $17.0 million, or 26.2% of revenue, compared to gross loss of $2.3 million, or (6.1)% of revenue, in the fourth quarter of 2021.
•Net Loss: GAAP net loss to shareholders of $3.0 million, or $(0.07) per share, compared to a net loss to shareholders of $27.0 million, or $(0.69) per share, in the fourth quarter of 2021. Non-GAAP net loss to shareholders of $1.5 million, or $(0.03) per share, compared to a net loss to shareholders of $11.2 million, or $(0.28) per share, in the fourth quarter of 2021.
•Adjusted EBITDA: Adjusted EBITDA was $10.3 million, or 15.9% of revenue, compared to $(4.7) million or (12.3)% of revenue in the fourth quarter of 2021.
•Balance Sheet: Cash and cash equivalents of $30.0 million compared to $12.9 million from January 2, 2022.
A reconciliation between historical GAAP and non-GAAP information is contained in the tables below in the section titled, “Non-GAAP Financial Measures.”
Investor Webcast
SkyWater will host a conference call on Monday, February 13, 2023, at 3:30 p.m. CT to discuss its fourth quarter and full year 2022 financial results. A live webcast of the call will be available online at IR.SkyWaterTechnology.com.
About SkyWater Technology
SkyWater (NASDAQ: SKYT) is a U.S. investor-owned semiconductor manufacturer and a DMEA-accredited Category 1A Trusted Foundry. SkyWater’s Technology as a Service model streamlines the path to production for customers with development services, volume production and heterogeneous integration solutions in its world-class U.S. facilities. This pioneering model enables innovators to co-create the next wave of technology with diverse categories including mixed-signal CMOS, ROICs, rad-hard ICs, power management, MEMS, superconducting ICs, photonics, carbon nanotubes and interposers. SkyWater serves growing markets including aerospace & defense, automotive, biomedical, cloud & computing, consumer, industrial and IoT. For more information, visit: www.skywatertechnology.com.
Cautionary Statement Regarding Preliminary Results
The Company’s results for the fiscal quarter and year ended January 1, 2023 are preliminary, unaudited and subject to the finalization of the Company’s fourth quarter review and full-year audit and should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. The Company cautions you that actual results may differ materially from those described in this press release.
SkyWater Technology Forward-Looking Statements
This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that are based on the Company’s current expectations or forecasts of future events, rather than past, events and outcomes, and such statements are not guarantees of future performance. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information or predictions concerning the Company’s future business, results of operations, financial performance, plans and objectives, competitive position, market trends, and potential growth and market opportunities. In some cases, you can identify forward-looking statements by words such as “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “targets,” “projects,” “seeks” or the negative of these terms or other comparable terminology.
Forward-looking statements are subject to risks, uncertainties and assumptions, which may cause the Company’s actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Key factors that could cause the Company’s actual results to be different than expected or anticipated include, but are not limited to: our goals and strategies; our future business development, financial condition and results of operations; our ability to continue operating our sole semiconductor foundry at full capacity; our ability to appropriately respond to changing technologies on a timely and cost-effective basis; our customer relationships and our ability to retain and expand our customer relationships; our ability to accurately predict our future revenues for the purpose of appropriately budgeting and adjusting our expenses; our expectations regarding dependence on our largest customers; our ability to diversify our customer base and develop relationships in new markets; the performance and reliability of our third-party suppliers and manufacturers; our ability to procure tools, materials, and chemicals amid industry-wide supply chain shortages; our ability to control costs, including our operating and capital expenses; the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets; the level of demand in our customers’ end markets; our ability to attract, train and retain key qualified personnel in a competitive labor market; adverse litigation judgments, settlements or other litigation-related costs; changes in trade policies, including the imposition of tariffs; our ability to raise additional capital or financing; our ability to accurately forecast demand; the impact of the COVID-19 pandemic on our business, results of operations and financial condition and our customers, suppliers and workforce; the impact of the COVID-19 pandemic on the global economy; the level and timing of U.S. government program funding; our ability to maintain compliance with certain U.S. government contracting requirements; regulatory developments in the United States and foreign countries; our ability to protect our intellectual property rights; our ability to meet our long-term growth targets; and other factors discussed in the “Risk Factors” section of the annual report on Form 10-K the Company filed with the SEC on March 10, 2022 and in other documents that the Company files with the SEC, which are available at http://www.sec.gov. The Company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
Source String: SkyWater Technology (SKYT-IR)
SkyWater Investor Contact: Claire McAdams | claire@headgatepartners.com
SkyWater Media Contact: Lauri Julian | Media@SkyWaterTechnology.com
SKYWATER TECHNOLOGY, INC.
Consolidated Balance Sheets
(Unaudited)
| January 1, 2023 | January 2, 2022 | ||||||||||
| (in thousands, except share data) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 30,025 | $ | 12,917 | |||||||
| Accounts receivable, net | 62,670 | 39,381 | |||||||||
| Inventories | 13,397 | 17,500 | |||||||||
| Prepaid expenses and other current assets | 10,290 | 3,854 | |||||||||
| Income tax receivable | 169 | 745 | |||||||||
| Total current assets | 116,551 | 74,397 | |||||||||
| Property and equipment, net | 179,915 | 180,475 | |||||||||
| Intangible assets, net | 5,608 | 3,891 | |||||||||
| Other assets | 3,690 | 4,835 | |||||||||
| Total assets | $ | 305,764 | $ | 263,598 | |||||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | 1,855 | $ | 1,021 | |||||||
| Accounts payable | 21,102 | 7,637 | |||||||||
| Accrued expenses | 25,212 | 17,483 | |||||||||
| Short-term financing, net of unamortized debt issuance costs (11) | 55,817 | — | |||||||||
| Current portion of contingent consideration | — | 816 | |||||||||
| Deferred revenue - current | 28,186 | 20,808 | |||||||||
| Total current liabilities | 132,172 | 47,765 | |||||||||
| Long-term liabilities: | |||||||||||
| Long-term debt, less current portion and net of unamortized debt issuance costs | 35,181 | 58,428 | |||||||||
| Long-term incentive plan | 1,643 | 4,039 | |||||||||
| Deferred revenue - long-term | 67,967 | 88,094 | |||||||||
| Deferred income tax liability, net | 1,239 | 995 | |||||||||
| Other long-term liabilities | 13,585 | 4,350 | |||||||||
| Total long-term liabilities | 119,615 | 155,906 | |||||||||
| Total liabilities | 251,787 | 203,671 | |||||||||
| Commitments and contingencies | |||||||||||
| Shareholders’ equity: | |||||||||||
| Preferred stock, $0.01 par value per share (80,000,000 and zero shares authorized, none issued and outstanding) | — | — | |||||||||
| Common stock, $0.01 par value per share (200,000,000 shares authorized; 43,704,876 and 39,836,038 shares issued and outstanding) | 437 | 398 | |||||||||
| Additional paid-in capital | 147,304 | 115,208 | |||||||||
| Accumulated deficit | (94,072) | (54,479) | |||||||||
| Total shareholders’ equity, SkyWater Technology, Inc. | 53,669 | 61,127 | |||||||||
| Non-controlling interests | 308 | (1,200) | |||||||||
| Total shareholders’ equity | 53,977 | 59,927 | |||||||||
| Total liabilities and shareholders’ equity | $ | 305,764 | $ | 263,598 | |||||||
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||
| January 1, 2023 | January 2, 2022 | January 1, 2023 | January 2, 2022 | ||||||||||||||||||||
| (in thousands, except share data) | |||||||||||||||||||||||
| Revenue | $ | 65,087 | $ | 38,533 | $ | 212,941 | $ | 162,848 | |||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Cost of revenue, before inventory write-down | 48,536 | 41,714 | 186,974 | 156,878 | |||||||||||||||||||
| Inventory write-down (1) | — | 13,442 | — | 13,442 | |||||||||||||||||||
| Total cost of revenue | 48,536 | 55,156 | 186,974 | 170,320 | |||||||||||||||||||
| Gross profit (loss) | 16,551 | (16,623) | 25,967 | (7,472) | |||||||||||||||||||
| Research and development | 2,208 | 1,228 | 9,431 | 8,747 | |||||||||||||||||||
| Selling, general and administrative expenses | 13,040 | 9,951 | 46,303 | 43,595 | |||||||||||||||||||
| Change in fair value of contingent consideration | — | (154) | — | (2,710) | |||||||||||||||||||
| Operating income (loss) | 1,303 | (27,648) | (29,767) | (57,104) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Paycheck Protection Program loan forgiveness | — | — | — | 6,453 | |||||||||||||||||||
| Loss on debt extinguishment | (1,101) | — | (1,101) | — | |||||||||||||||||||
| Interest expense | (1,794) | (839) | (5,194) | (3,542) | |||||||||||||||||||
| Total other income (expense) | (2,895) | (839) | (6,295) | 2,911 | |||||||||||||||||||
| Loss before income taxes | (1,592) | (28,487) | (36,062) | (54,193) | |||||||||||||||||||
| Income tax expense (benefit) | 852 | (2,322) | 809 | (6,790) | |||||||||||||||||||
| Net loss | (2,444) | (26,165) | (36,871) | (47,403) | |||||||||||||||||||
| Less: net income attributable to non-controlling interests | 597 | 871 | 2,722 | 3,293 | |||||||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (3,041) | $ | (27,036) | $ | (39,593) | $ | (50,696) | |||||||||||||||
| Net loss per share attributable to common shareholders, basic and diluted: | $ | (0.07) | $ | (0.69) | $ | (0.97) | $ | (1.76) | |||||||||||||||
| Weighted average shares used in computing net loss per common share, basic and diluted: | 42,612,763 | 39,324,851 | 40,835,186 | 29,038,174 | |||||||||||||||||||
SKYWATER TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
| Twelve Months Ended | |||||||||||
| January 1, 2023 | January 2, 2022 | ||||||||||
| (in thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (36,871) | $ | (47,403) | |||||||
| Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 28,192 | 27,368 | |||||||||
| Inventory write-down (1) | — | 13,442 | |||||||||
| Gain on Paycheck Protection Program loan forgiveness | — | (6,453) | |||||||||
| Gain on sale of property and equipment | (3) | (2,012) | |||||||||
| Amortization of debt issuance costs included in interest expense | 1,430 | 621 | |||||||||
| Long-term incentive and stock-based compensation | 8,610 | 12,533 | |||||||||
| Change in fair value of contingent consideration | — | (2,710) | |||||||||
| Cash paid for contingent consideration in excess of initial valuation | (816) | (7,374) | |||||||||
| Deferred income taxes | 244 | (7,063) | |||||||||
| Loss on debt extinguishment | 1,101 | — | |||||||||
| Non-cash revenue related to customer equipment | — | (2,481) | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (12,846) | (9,387) | |||||||||
| Inventories | (5,894) | (3,773) | |||||||||
| Prepaid expenses and other assets | (5,288) | 5,098 | |||||||||
| Accounts payable | 18,458 | (6,481) | |||||||||
| Deferred revenue | (12,749) | (17,150) | |||||||||
| Income tax receivable and payable | 576 | (2,455) | |||||||||
| Net cash used in operating activities | (15,856) | (55,680) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of software and licenses | (400) | (1,220) | |||||||||
| Proceeds from sale of property and equipment | — | 2,159 | |||||||||
| Purchases of property and equipment | (14,981) | (30,762) | |||||||||
| Net cash used in investing activities | (15,381) | (29,823) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net (repayment) proceeds on Revolver | (22,328) | (6,081) | |||||||||
| Proceeds from Financing | 58,838 | — | |||||||||
| Repayment of Financing | (1,469) | (990) | |||||||||
| Cash paid for debt issuance costs | (4,168) | (250) | |||||||||
| Proceeds from issuance of common stock pursuant to the initial public offering, net of underwriting discounts and commissions | — | 104,212 | |||||||||
| Proceeds from the issuance of common stock pursuant to the employee stock purchase plan | 1,800 | — | |||||||||
| Proceeds from the issuance of common stock, net of underwriting discounts and commissions | 16,168 | — | |||||||||
| Cash paid for offering costs | (5) | (1,867) | |||||||||
| Cash paid for capital leases | (1,603) | (1,115) | |||||||||
| Proceeds from the ATM program, net of commissions | 3,476 | — | |||||||||
| Cash paid on license technology obligations | (1,150) | — | |||||||||
| Distributions to VIE member | (1,214) | (2,925) | |||||||||
| Net cash provided by financing activities | 48,345 | 90,984 | |||||||||
| Net change in cash and cash equivalents | 17,108 | 5,481 | |||||||||
| Cash and cash equivalents - beginning of period | 12,917 | 7,436 | |||||||||
| Cash and cash equivalents - end of period | $ | 30,025 | $ | 12,917 | |||||||
Supplemental Revenue Information by Quarter
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wafer Services revenue | $ | 10,019 | $ | 14,312 | $ | 12,652 | $ | 14,174 | $ | 51,157 | $ | 21,546 | $ | 17,584 | $ | 17,154 | $ | 17,211 | $ | 73,495 | |||||||||||||||||||||||||||||||||||||||
| Advanced Technology Services revenue | 38,082 | 26,877 | 22,373 | 24,359 | 111,691 | 26,575 | 29,823 | 35,172 | 47,876 | 139,446 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 48,101 | $ | 41,189 | $ | 35,025 | $ | 38,533 | $ | 162,848 | $ | 48,121 | $ | 47,407 | $ | 52,326 | $ | 65,087 | $ | 212,941 | |||||||||||||||||||||||||||||||||||||||
| Tool revenue (included in ATS revenue) | $ | 15,405 | $ | 2,346 | $ | 281 | $ | 1,127 | $ | 19,159 | $ | 984 | $ | 313 | $ | 219 | $ | 30 | $ | 1,546 | |||||||||||||||||||||||||||||||||||||||
| Tool cost of revenue | $ | 9,873 | $ | 1,223 | $ | 281 | $ | 701 | $ | 12,078 | $ | 984 | $ | 200 | $ | 152 | $ | 46 | $ | 1,382 | |||||||||||||||||||||||||||||||||||||||
| Revenue impact of new contract with significant customer (included in Wafer Services revenue) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 8,230 | $ | — | $ | — | $ | — | $ | 8,230 | |||||||||||||||||||||||||||||||||||||||
| Cost of revenue impact of new contract with significant customer | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 10,887 | $ | — | $ | — | $ | — | $ | 10,887 | |||||||||||||||||||||||||||||||||||||||
Non-GAAP Financial Measures
We provide supplemental non-GAAP financial information that our management utilizes to evaluate our ongoing financial performance and provide additional insight to investors as supplemental information to our U.S. GAAP results. We provide non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss to shareholders, and non-GAAP net loss per share. We provide these non-GAAP financial measures because we believe this non-GAAP presentation provides a baseline for analyzing trends in our business and to exclude certain items that may not be indicative of our core operating results. The non-GAAP financial measures disclosed in this earnings press release should not be viewed as an alternative to, or more meaningful than, the reported results prepared in accordance with GAAP. In addition, because our non-GAAP measures are not determined in accordance with U.S. GAAP, these measures are susceptible to differing calculations, and not all comparable or peer companies may calculate their non-GAAP measures in the same manner. As a result, the non-GAAP financial measures presented in this earnings press release may not be directly comparable to similarly titled measures presented by other companies.
We also provide adjusted EBITDA and adjusted EBITDA margin as supplemental non-GAAP measurements. We define adjusted EBITDA as net income (loss) before interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including fair value changes in contingent considerations, fair value changes in warrants and management fees, inventory write-down, corporate conversion and IPO related costs, Paycheck Protection Program loan forgiveness, SkyWater Florida start-up costs, net income attributable to non-controlling interests, and management transition expense. We believe adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.
The following tables present a reconciliation of the most directly comparable financial measures, calculated and presented in accordance with U.S. GAAP, to our non-GAAP financial measures.
SKYWATER TECHNOLOGY, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||
| January 1, 2023 | January 2, 2022 | October 2, 2022 | January 1, 2023 | January 2, 2022 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| GAAP revenue | $ | 65,087 | $ | 38,533 | $ | 52,326 | $ | 212,941 | $ | 162,848 | |||||||||||||||||||
| Tool revenue (10) | (30) | (1,127) | (219) | (1,546) | (19,160) | ||||||||||||||||||||||||
| GAAP cost of revenue | $ | 48,536 | $ | 55,156 | $ | 44,049 | $ | 186,974 | $ | 170,320 | |||||||||||||||||||
| Inventory write-down (1) | — | (13,442) | — | — | (13,442) | ||||||||||||||||||||||||
| Equity-based compensation (2) | (452) | (1,130) | (456) | (2,578) | (3,042) | ||||||||||||||||||||||||
| SkyWater Florida start-up costs (3) | (14) | (187) | (114) | (582) | (879) | ||||||||||||||||||||||||
| Cost of tool revenue (10) | $ | (46) | $ | (701) | $ | (152) | $ | (1,382) | $ | (12,078) | |||||||||||||||||||
| Non-GAAP cost of revenue | $ | 48,024 | $ | 39,696 | $ | 43,327 | $ | 182,432 | $ | 140,879 | |||||||||||||||||||
| GAAP gross profit (loss) | $ | 16,551 | $ | (16,623) | $ | 8,277 | $ | 25,967 | $ | (7,472) | |||||||||||||||||||
| GAAP gross margin | 25.4 | % | (43.1) | % | 15.8 | % | 12.2 | % | (4.6) | % | |||||||||||||||||||
| Inventory write-down (1) | — | 13,442 | — | — | 13,442 | ||||||||||||||||||||||||
| Equity-based compensation (2) | 452 | 1,130 | 456 | 2,578 | 3,042 | ||||||||||||||||||||||||
| SkyWater Florida start-up costs (3) | 14 | 187 | 114 | 582 | 879 | ||||||||||||||||||||||||
| Tool Revenue (10) | $ | (30) | $ | (1,127) | $ | (219) | $ | (1,546) | $ | (19,160) | |||||||||||||||||||
| Cost of Tool Revenue (10) | 46 | 701 | 152 | 1,382 | 12,078 | ||||||||||||||||||||||||
| Non-GAAP gross profit (loss) | $ | 17,033 | $ | (2,290) | $ | 8,780 | $ | 28,963 | $ | 2,809 | |||||||||||||||||||
| Non-GAAP gross margin | 26.2 | % | (6.1) | % | 16.8 | % | 13.7 | % | 2.0 | % | |||||||||||||||||||
| GAAP research and development | $ | 2,208 | $ | 1,228 | $ | 2,580 | $ | 9,431 | $ | 8,747 | |||||||||||||||||||
| Equity-based compensation (2) | (126) | 655 | (115) | (596) | (1,182) | ||||||||||||||||||||||||
| Non-GAAP research and development | $ | 2,082 | $ | 1,883 | $ | 2,465 | $ | 8,835 | $ | 7,565 | |||||||||||||||||||
| GAAP selling, general and administrative expenses | $ | 13,040 | $ | 9,951 | $ | 10,778 | $ | 46,303 | $ | 43,595 | |||||||||||||||||||
| SkyWater Florida start-up costs (3) | 2 | (22) | — | (104) | (268) | ||||||||||||||||||||||||
| Management transition expense (5) | — | — | — | — | (435) | ||||||||||||||||||||||||
| Equity-based compensation (2) | (995) | (1,655) | (1,128) | (5,432) | (8,303) | ||||||||||||||||||||||||
| Management fees (7) | — | — | — | — | (332) | ||||||||||||||||||||||||
| Non-GAAP selling, general and administrative expenses | $ | 12,047 | $ | 8,274 | $ | 9,650 | $ | 40,767 | $ | 34,257 | |||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||
| January 1, 2023 | January 2, 2022 | October 2, 2022 | January 1, 2023 | January 2, 2022 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| GAAP net loss to shareholders | $ | (3,041) | $ | (27,036) | $ | (6,939) | $ | (39,593) | $ | (50,696) | |||||||||||||||||||
| Inventory write-down (1) | — | 13,442 | — | — | 13,442 | ||||||||||||||||||||||||
| Paycheck Protection Program loan forgiveness | — | — | — | — | (6,453) | ||||||||||||||||||||||||
| Corporate conversion and initial public offering related costs (4) | — | 205 | — | — | 1,934 | ||||||||||||||||||||||||
| SkyWater Florida start-up costs (3) | 12 | 209 | 114 | 686 | 1,147 | ||||||||||||||||||||||||
| Management transition expense (5) | — | — | — | — | 435 | ||||||||||||||||||||||||
| Fair value changes in contingent consideration (6) | — | (154) | — | — | (2,710) | ||||||||||||||||||||||||
| Equity-based compensation (2) | 1,573 | 2,130 | 1,699 | 8,606 | 12,527 | ||||||||||||||||||||||||
| Management fees (7) | — | — | — | — | 332 | ||||||||||||||||||||||||
| Non-GAAP net loss to shareholders | $ | (1,456) | $ | (11,204) | $ | (5,126) | $ | (30,301) | $ | (30,042) | |||||||||||||||||||
| Equity-based compensation allocation in the consolidated statements of operations (2): | |||||||||||||||||||||||||||||
| Cost of revenue | $ | 452 | $ | 1,130 | $ | 456 | $ | 2,578 | $ | 2,578 | $ | 3,042 | |||||||||||||||||
| Research and development | 126 | (655) | 115 | 596 | 1,182 | ||||||||||||||||||||||||
| Selling, general and administrative expenses | 995 | 1,655 | 1,128 | 5,432 | 8,303 | ||||||||||||||||||||||||
| $ | 1,573 | $ | 2,130 | $ | 1,699 | $ | 8,606 | $ | 12,527 | ||||||||||||||||||||
| SkyWater Florida start-up costs allocation in the consolidated statements of operations (3): | |||||||||||||||||||||||||||||
| Cost of revenue | $ | 14 | $ | 187 | $ | 114 | $ | 582 | $ | 879 | |||||||||||||||||||
| Selling, general and administrative expenses | (2) | 22 | — | 104 | 268 | ||||||||||||||||||||||||
| $ | 12 | $ | 209 | $ | 114 | $ | 686 | $ | 1,147 | ||||||||||||||||||||
| Three Months Ended January 1, 2023 | Twelve Months Ended January 1, 2023 | ||||||||||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | ||||||||||||||||||||
| Computation of net loss per common share, basic and diluted: | (in thousands, except per share data) | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (3,041) | $ | (1,456) | $ | (39,593) | $ | (30,301) | |||||||||||||||
| Undistributed preferred return to Class B preferred unitholders | — | — | — | — | |||||||||||||||||||
| Net loss attributable to common shareholders | $ | (3,041) | $ | (1,456) | $ | (39,593) | $ | (30,301) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 42,613 | 42,613 | 40,835 | 40,835 | |||||||||||||||||||
| Net loss per common share, basic and diluted | $ | (0.07) | $ | (0.03) | $ | (0.97) | $ | (0.74) | |||||||||||||||
| Three Months Ended January 2, 2022 | Twelve Months Ended January 2, 2022 | ||||||||||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | ||||||||||||||||||||
| Computation of net loss per common share, basic and diluted: | (in thousands, except per unit data) | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (27,036) | $ | (11,204) | $ | (50,696) | $ | (30,042) | |||||||||||||||
| Undistributed preferred return to Class B preferred unitholders | — | — | (398) | (398) | |||||||||||||||||||
| Net loss attributable to common shareholders | $ | (27,036) | $ | (11,204) | $ | (51,094) | $ | (30,440) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 39,325 | 39,325 | 29,038 | 29,038 | |||||||||||||||||||
| Net loss per common share, basic and diluted | $ | (0.69) | $ | (0.28) | $ | (1.76) | $ | (1.05) | |||||||||||||||
| Three Months Ended October 2, 2022 | |||||||||||||||||||||||
| GAAP | Non-GAAP | ||||||||||||||||||||||
| Computation of net loss per common share, basic and diluted: | (in thousands, except per share data) | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss attributable to SkyWater Technology, Inc. | $ | (6,939) | $ | (5,126) | |||||||||||||||||||
| Undistributed preferred return to Class B preferred unitholders | — | — | |||||||||||||||||||||
| Net loss attributable to common shareholders | $ | (6,939) | $ | (5,126) | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 40,669 | 40,669 | |||||||||||||||||||||
| Net loss per common share, basic and diluted | $ | (0.17) | $ | (0.13) | |||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||
| January 1, 2023 | January 2, 2022 | January 1, 2023 | January 2, 2022 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net loss to shareholders | $ | (3,041) | $ | (27,036) | $ | (39,593) | $ | (50,696) | |||||||||||||||
| Interest expense (9) | 2,895 | 839 | 6,295 | 3,542 | |||||||||||||||||||
| Income tax (benefit) expense | 852 | (2,322) | 809 | (6,790) | |||||||||||||||||||
| Depreciation and amortization | 7,451 | 7,068 | 28,192 | 27,368 | |||||||||||||||||||
| EBITDA | 8,157 | (21,451) | (4,297) | (26,576) | |||||||||||||||||||
| Inventory write-down (1) | — | 13,442 | — | 13,442 | |||||||||||||||||||
| Paycheck Protection Program loan forgiveness | — | — | — | (6,453) | |||||||||||||||||||
| Corporate conversion and initial public offering related costs (4) | — | 205 | — | 1,934 | |||||||||||||||||||
| SkyWater Florida start-up costs (3) | 12 | 209 | 686 | 1,147 | |||||||||||||||||||
| Management transition expense (5) | — | — | — | 435 | |||||||||||||||||||
| Fair value changes in contingent consideration (6) | — | (154) | — | (2,710) | |||||||||||||||||||
| Equity-based compensation (2) | 1,573 | 2,130 | 8,606 | 12,527 | |||||||||||||||||||
| Management fees (7) | — | — | — | 332 | |||||||||||||||||||
| Net income attributable to non-controlling interests (8) | 597 | 871 | 2,722 | 3,293 | |||||||||||||||||||
| Adjusted EBITDA | $ | 10,339 | $ | (4,748) | $ | 7,717 | $ | (2,629) | |||||||||||||||
__________________
(1)Represents the full write-down for inventory to cost of revenue for inventory in which we were contracted to manufacture for a specific customer. The customer's financing for its COVID-19 related business was not obtained and the customer was unable to meet its contractual payment obligations.
(2)Represents non-cash equity-based compensation expense.
(3)Represents start-up costs associated with our 200 mm heterogeneous integration facility in Kissimmee, Florida, which includes legal fees, recruiting expenses, retention awards and facility start-up expenses. These expenses are not indicative of our ongoing costs and will be discontinued following the start-up of SkyWater Florida.
(4)Represents expenses directly associated with the corporate conversion and IPO, such as professional, consulting, legal and accounting services. This also includes bonus awards granted to employees upon the completion of the IPO. These expenses are not indicative of our ongoing costs and were discontinued following the completion of our initial public offering.
(5)Represents expense for the departure of our former Chief Administrative Officer, which includes primarily severance benefits.
(6)Represents non-cash valuation adjustment of contingent consideration to fair market value during the period.
(7)Represents a related party transaction with Oxbow Industries, our principal stockholders. As these fees are not part of the core business, did not continue after our IPO and are excluded from management’s assessment of the business, we believe it is useful to investors to view our results excluding these fees.
(8)Represents net income attributable to our VIE, which was formed for the purpose of purchasing our land, building with the proceeds of a bank loan. Since depreciation and interest expense are excluded from net loss in our adjusted EBITDA financial measure, we also exclude the net income attributable to the VIE.
(9)Includes losses related to the extinguishment of our revolving credit agreement.
(10)Tool revenue and cost of tool revenue represent the revenue and external costs related to the services we provide to qualify customer funded tool technologies as our customers invest in our capabilities to expand our technology platforms.
(11)The Company entered into a revolving credit agreement on December 28, 2022. Our revolving credit arrangement is considered short-term as it requires that the loan be serviced with working capital.