SkyWater Technology Reports Fourth Quarter and Full Year 2022

SkyWater Technology Reports Fourth Quarter and Full Year 2022 Results

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.

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

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