SkyWater Technology, Inc Q1 FY2024 earnings call

• ATS development revenue exceeded expectations at $61.2 million, driven by aerospace, defense, quantum computing, and biomedical programs, up 28% YOY. • Wafer Services revenue declined but was $10 million, higher than forecast. • Tool revenue was $8.5 million, impacted by transitory equipment delivery delays. • A $8 million charge was recorded in Q1 for additional costs to complete A&D program milestones. • Advanced packaging is a new growth vector, with Florida operations receiving $120 million award to develop 2.5D and 3D packaging. • Customer-funded CapEx is a key driver, with $70 million expected in 2024 and $200 million anticipated through 2026.

SkyWater's first quarter 2024 revenue reached a record $79.6 million, up 1% from Q4 and 20% from Q1 2023. ATS development revenue was a standout at $61.2 million, up 28% YOY, representing 77% of total revenue. Wafer Services revenue was $10 million, a decline from prior run rates but higher than forecast. Tool revenue was $8.5 million, lower than expected due to equipment delivery delays.

• Q2 revenue forecast is in the low to mid $80 million range, with ATS development expected in the high $50 million range, tool revenue at least $20 million, and Wafer Services revenue $4-5 million. • Full-year ATS development growth expected 10%-20% over 2023, tool sales to increase, and legacy Wafer Services revenue to decline. • Depreciation is expected to remain low due to customer-funded CapEx funding 80% or more of planned CapEx needs.

• Supply chain delays causing tool revenue to be lower than expected. • Macro-economic softness in the broader industrial market impacting Wafer Services revenue. • Uncertainty around the timing and impact of government budget approvals on DoD program funding.

Q: Expand on the $8 million A&D accrual.

A: It reflects additional engineering costs needed to complete a strategic A&D program, recognized in Q1 under government accounting rules.

Q: Shape of tool revenue over the next couple of years?

A: Tool revenue expected to average around $70 million in 2024, with a 3-year pipeline of $200 million, with supply chain delays potentially causing slight timing variations.

Q: Utilization rate in Minnesota front-end and Orlando back-end fabs?

A: SkyWater doesn't quote utilization, but focuses on running at target levels for ATS business and using Wafer Services downtime to accelerate ATS programs.

Q: Front-end customers using Florida back-end fab?

A: Multiple A&D and commercial customers using Florida fab for development, with $120 million DoD program to develop fan-out wafer packaging technology ramping throughout 2024.