SkyWater Technology, Inc Q2 FY2025 earnings call

• Revenues for Q2 were at the upper end of the May outlook, with close cost management leading to upside in gross margin, adjusted EBITDA, and non-GAAP EPS. • Successfully completed acquisition of Infineon's Fab 25 in Texas, with an upfront payment of $93 million, fully funded through new debt facility. • Strategically, Fab 25 establishes SkyWater as the largest U.S.-based pure-play foundry, offering dual-source support for 200-millimeter foundry capacity and aligns with U.S. semiconductor onshoring strategy. • Financially, acquisition expected to double revenue scale and adjusted EBITDA immediately, with strong free cash flow generation. • Quantum computing shows momentum with progress in superconducting film, interposers, etc., and plans to announce new customer engagements and superconducting design platform in second half of 2025. • Advanced packaging in Florida has progress with tools revenue expected in Q4, ramping ahead of schedule despite tariff uncertainties. • Aerospace and defense programs face funding headwinds but support strategic national security initiatives, with potential for ATS revenue recognition if funding increases are approved.

Second quarter revenues for SkyWater came in at just over $59 million, which was at the upper end of the outlook provided in May. The company successfully completed the acquisition of Infineon's Fab 25 in Austin, Texas. Fab 25 brings strategic benefits such as establishing SkyWater as the largest exclusively U.S.-based pure-play foundry service provider and boosting 200-millimeter foundry business capacity by 4x in the U.S. Financially, the acquisition is expected to roughly double revenue scale and adjusted EBITDA immediately. Quantum computing shows strong momentum with progress in superconducting film development, interposers, etc. Advanced packaging in Florida continues to build momentum with tools revenue expected to be back half loaded in 2025, with majority of tools revenue recognition in Q4. Aerospace and defense programs face funding headwinds but have strategic value.

• Q3 outlook includes full contribution from Fab 25, with Wafer Services revenue from Fab 25 expected in the range of $75 million to $80 million. • Q3 ATS revenue expected to be approximately $50 million, Wafer Services revenue $5 million to $6 million, and tool revenue $2 million to $3 million. • Q3 consolidated non-GAAP gross margin expected in the range of 11% to 14%. • Q4 expected consolidated revenue run rate of approximately $140 million before tools. • 2026 expected revenue of at least $600 million and adjusted EBITDA of at least $60 million, with quantum computing expected to generate revenue growth exceeding 30% in 2025 and continue into 2026.

• Forward-looking statements are subject to risks and uncertainties detailed in the company's filings with the Securities and Exchange Commission, including those in the fiscal 2024 Form 10-K and the Q2 2025 Form 8-K. • Risks related to actual results differing from forward-looking statements due to factors such as geopolitical uncertainties, supply chain disruptions, and changes in customer demand.

Q: Regarding margins for Fab 25, are there any future milestones that can unlock future margin expansion? And if so, what are the timing regarding those?

A: Yes, activities such as bringing in ATS engineering revenue immediately, and as new products and platforms are brought in, charging market prices will unlock margin expansion. Cost optimization through synergies across operations and engineering to drive efficiencies is also a key milestone.

Q: On the Fab 25 revenue guidance and expectations going forward from the Infineon business, what does that imply for fab loadings and how much capacity is there for external customers to bring in incremental wafer demand? And how soon could that start?

A: Fab 25 is running close to target utilization. Efficiencies will be driven to maintain Infineon output and bring in new customers. With the IP license agreement from Infineon, discussions with customers regarding transfers into Fab 25 can start immediately as the IP is integrated into design enablement capability.

Q: On the packaging side, what is the status of business development and on the quantum side, the degree to which other modalities are contributing to long-term contributions?

A: On advanced packaging, there is traction with the defense industrial base and ongoing engagement with commercial segments. Prototype availability is expected a year from now. In quantum, focus is on superconducting base film technology, but engagement with SiQuantum (combining superconducting and photonics) and consideration of other modalities like ion trap continue.

Q: What kinds of customers are being targeted to fill Fab 25 outside of Infineon and if those conversations have begun to happen just yet?

A: Target customers include hybrid semiconductor manufacturers, companies valuing U.S. sourcing for industrial, automotive, and defense verticals. Conversations have begun with companies like NXP, STMicroelectronics, ROHM, Renesas, Microchip, etc., as there is a megatrend in domestic sourcing.