SkyWater Technology, Inc Q4 FY2024 earnings call

• Announced the planned acquisition of Infineon’s Fab 25 in Austin, a 200-millimeter fab that is expected to add significant Wafer Services revenue and strengthen SkyWater’s financial foundation.
• Q4 2024 total revenue was $75.5 million, exceeding guidance, with gross margin at 26.6%. Fiscal 2024 total revenue was a record $342 million, up 19% from 2023.
• ATS business grew 13% in 2024, driven by aerospace/defense and advanced compute (quantum). Wafer Services declined, but BioHealth grew. Tools revenue was a record $77 million in 2024.
• Launched ThermaView Solutions, a brand for thermal imaging applications, positioning SkyWater as a key supplier in a growing market. Advanced packaging business expected to grow in 2025 with a $120 million contract for fan-out wafer level packaging.
• Received a CHIPS award for modernizing the Minnesota fab, bringing outside co-investment to over $350 million, accelerating growth plans.

In fiscal 2024, total revenues reached a record $342 million, up 19% from 2023. The ATS business saw 13% revenue growth, driven by aerospace/defense and advanced compute (with over 90% of advanced computing revenues in 2024 related to quantum computing). Wafer Services declined due to prolonged weakness in automotive and industrial segments. Tools revenue was a record $77 million in 2024. The acquisition of Infineon’s Fab 25 in Austin is expected to contribute approximately $300 million of annual Wafer Services revenue, secured by a 4-year strategic supply agreement with Infineon.

• For 2025, combined ATS and Wafer Services revenue is expected to grow ~5% ±2% compared to 2024's $266 million. Tools revenue in 2025 is estimated at ~$30 million, mostly weighted to the second half.
• Q1 2025 total revenue guidance is $59 million to $63 million, with Wafer Services ~$6 million, ATS ~$52 million to $56 million. Gross margin guidance for Q1 is 19% to 23%. Full-year 2025 non-GAAP gross margin expected in the mid-20s (23%-27%), with profitable results anticipated in the second half and slightly positive non-GAAP EPS.

• Uncertainties related to government budget dynamics, which led to a conservative outlook for Q1 2025 ATS revenues. - Potential changes in Infineon demand and the ability to backfill capacity in Fab 25 if needed. - General risks associated with forward-looking statements and market uncertainties affecting semiconductor business performance.

Q: Clarification on Fab 25 gross profit and customer mix.

A: Thomas Sonderman explained that the supply agreement with Infineon is secure, with plans to diversify output over time while running the fab at full utilization for Infineon initially.

Q: Products and applications for Fab 25.

A: Thomas Sonderman discussed that Fab 25 can run ASIC designs, PMICs, microcontrollers, and has capabilities in 65-nanometer production, copper interconnect, and high-voltage products, serving applications like industrial, automotive, and more.

Q: Supply agreement details and capacity fungibility.

A: Thomas Sonderman noted the supply agreement includes take-or-pay terms, with plans to leverage efficiencies and backfill capacity if needed, but expecting to execute well for Infineon initially.

Q: Gross margin momentum and 2025 outlook.

A: Steve Manko explained that Q4 gross margin was boosted by various factors, with a conservative outlook for 2025 but expectations of gross margin expansion in the second half.

Q: Defense budget impact and Infineon fab efficiencies.

A: Thomas Sonderman addressed the conservative outlook due to government budget dynamics and discussed plans to drive efficiencies in Fab 25 to create excess capacity for new revenues over time.