• Total Revenue: $75.5 million for Q4 2024, at the upper end of guidance.
• Tools Revenue: $11.7 million for Q4 2024.
• Combined ATS and Wafer Services Revenue: $63.8 million for Q4 2024.
• Gross Margin: 26.6% for Q4 2024, exceeding expectations.
• EPS: $0.04 positive for Q4 2024; $0.06 positive for full year 2024.
• Full Year Revenue: $342 million for 2024, up 19% from 2023.
• ATS Revenue Growth: 13% increase in 2024 compared to 2023.
• Tools Revenue for Full Year: $77 million in 2024.
• Adjusted EBITDA: $34.3 million for full year 2024, 10% of total revenue.
• Cash Flow from Operations: Over $15 million in 2024.
• Total Debt: $67 million at year-end 2024.
• Q1 2025 Revenue Guidance: $59 million to $63 million.
• Q1 2025 Gross Margin Guidance: 19% to 23%.
• Fab 25 Acquisition: Expected to contribute approximately $300 million of annual Wafer Services revenue.
• Fab 25 Purchase Price: $80 million plus assumption of working capital.

• Warning! GuruFocus has detected 4 Warning Signs with SKYT.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SkyWater Technology Inc (NASDAQ:SKYT) announced the acquisition of Infineon's Fab 25, which is expected to significantly expand its domestic manufacturing capabilities.
• The company reported strong financial results for Q4 2024, with total revenue exceeding $75 million, driven by higher-than-expected gross margins.
• SkyWater Technology Inc (NASDAQ:SKYT) achieved a record $342 million in full-year revenues for 2024, marking a 19% increase from 2023.
• The aerospace and defense sector showed significant strength, contributing to the majority of ATS revenue growth in 2024.
• The launch of ThermaView Solutions positions SkyWater Technology Inc (NASDAQ:SKYT) as a key supplier in the growing $9 billion thermal imaging market.

Negative Points

• The Wafer Services business experienced a significant decline due to prolonged weakness in the automotive and industrial segments.
• The company is taking a conservative view on ATS revenues for Q1 2025 due to ongoing federal budget resolutions and extended budget negotiations.
• SkyWater Technology Inc (NASDAQ:SKYT) anticipates a slight EPS loss for Q1 2025, with expected revenue between $59 million and $63 million.
• The acquisition of Fab 25 involves a significant financial commitment, including $80 million in purchase price and new senior secured debt financing.
• The company faces challenges in transitioning Fab 25 from an IDM to a customer-driven foundry model, which requires careful integration and customer expansion.

Q & A Highlights

Q: Can you clarify the expected gross profit from the Fab 25 acquisition and its impact on SkyWater's overall gross margin? A: The initial supply agreement with Infineon is expected to generate $40 million in gross profit dollars. The agreement ensures Infineon receives the current output, running at full capacity. Over time, SkyWater aims to diversify and bring in new ATS business and customers, which will help balance the ATS and Wafer Services business.

Q: What are the potential applications for products manufactured at Fab 25? A: Fab 25 currently supports 130-nanometer mixed signal ASIC technology with copper interconnect, suitable for ASIC designs and various applications. The 65-nanometer dimension will be introduced to the 200-millimeter foundry space, expanding opportunities in industrial, automotive, and other sectors.

Q: How will the acquisition of Fab 25 affect the mix between ATS and Wafer Services revenue? A: The acquisition will likely result in a more Wafer Services-loaded revenue mix due to the $300 million annual revenue from Fab 25. However, SkyWater anticipates growth in ATS as well, particularly with new technologies being qualified and moving into Wafer Services in Minnesota.

Q: Are there take-or-pay contracts in the supply agreement with Infineon, and how flexible is the capacity? A: The supply agreement includes parameters like take-or-pay, ensuring full utilization for Infineon. SkyWater plans to leverage additional capacity through efficiencies and bring in new customers over time, especially as the multi-year agreement progresses.

Q: What factors contributed to the strong combined ATS and Wafer Services gross margin in Q4, and can this momentum continue? A: The strong gross margin was due to a favorable ATS mix and cost deferrals/reductions. While some cost savings may continue, the same levels of gross margin are not expected to repeat in the upcoming quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.