SkyWater Technology, Inc Q2 FY2024 earnings call

• Strong Q2 financial results with record $93 million revenue and first non-GAAP positive EPS. • ATS development revenue of nearly $62M driven by aerospace and defense, up 18% y-o-y. • Wafer Services revenue ~$6M, below prior rates. • Tools revenue $26M, exceeding forecast due to faster deliveries. • Successful customer transition from ATS to Wafer Services with QuantumPsi. • Installation of multi-beam e-beam lithography system in Minnesota. • First tool delivery of fan-out wafer level packaging platform in Florida, with $120M funding secured. • Confidence in growth from strategic A&D programs and new capabilities.

ATS development revenue was nearly $62 million, a new record, up 1% from Q1 and 18% compared to Q2 last year, contributing significantly. Wafer Services revenue was just under $6 million, still below prior run rates. Tools revenue was $26 million, exceeding forecast. ATS development revenue contribution was substantial, Wafer Services was lower, and Tools contributed a notable amount.

• Full-year revenue expectations for ATS and Wafer Services largely unchanged. • ATS development expected to grow 10%-20% in 2024. • Wafer Services revenue expected to decline 60%-65% in 2024. • Increased tool revenue forecast to ~$80M in 2024. • Q3 total revenues expected in mid-$90M range, with ATS dev ~$60M, Wafer Services $4M-$5M, tool sales ~$30M. • Q3 non-GAAP gross margin expected in mid to high teens.

Q: What kind of programs are seen in ATS?

A: Thermal imaging, specialized ASICs, and Rad-Hard program, broadly bucketed into three categories.

Q: About Florida fabs for advanced packaging?

A: Florida fab has fan-out wafer level packaging capability, $120M investment, expected to add ATS development related revenue next year as technology matures.

Q: Demand from Wafer Services customers?

A: Industrial segment weak, expected to remain weak in 2024, modest recovery in 2025 with thermal imaging and biomedical focus.

Q: MEBL system for SkyWater?

A: Multi-beam e-beam system is 10x-100x faster, opens opportunities for MEMS, curvilinear designs, making SkyWater a leading 200mm fab in geometric perspective.

Q: QuantumPsi transition to Wafer Services?

A: ~2 years of ATS engagement, qualification period, ramps expected in late 2024 to 2026, 9-18 month timeframe for Wafer Services revenue pickup.

Q: ATS customers transitioning to Wafer Services?

A: 4 customers converted this year, more slated, with profitability from new technologies replacing legacy volume, and more customers expected to transition.