SkyWater Technology's Q4 2024: Contradictions in Wafer Services, Tool Revenue, and Quantum Growth

These are the key contradictions discussed in SkyWater Technology's latest 2024Q4 earnings call, specifically including: Wafer Services revenue expectations, tool revenue trajectory, Quantum Computing revenue growth, and Fab 25's role in SkyWater's strategy:



Strong Financial Results and Gross Margin Tailwinds:
- SkyWater reported total revenue of $75.5 million for Q4 2024, reaching the upper end of guidance, with a combined ATS and Wafer Services revenue of $63.8 million.
- The reported gross margin of nearly 27% in Q4 exceeded the high end of guidance, driving $0.04 positive EPS for the quarter.
- Growth was driven by several gross margin tailwinds occurring late in the year and strong performance in the ATS business.

Planned Acquisition of Fab 25:
- SkyWater announced the acquisition of Infineon's Fab 25 in Austin, expected to contribute approximately $300 million of annual Wafer Services revenue.
- The acquisition represents a capital-efficient transaction with an $80 million purchase price plus the assumption of working capital, funded by new senior secured debt financing.
- This acquisition is expected to enhance SkyWater's revenue mix, expand its technology portfolio, and strengthen its financial foundation.

Outlook for 2025 and Fab25 Contribution:
- SkyWater anticipates a growth year for 2025, with combined ATS and Wafer Services revenue forecast to reflect modest year-over-year growth of about 5%.
- The acquisition of Fab 25 is expected to generate immediate incremental free cash flow and strong adjusted EBITDA, with the supply agreement contributing approximately $40 million annually of cash gross profit dollars.
- This acquisition is projected to provide significant additional capacity and market diversification for SkyWater.

Quantum Computing and Advanced Compute Growth:
- Over 90% of SkyWater's advanced computing revenues in 2024 were related to quantum computing technologies, with customers like SiQuantum and D-Wave.
- Growth in the quantum computing sector was a significant contributor to SkyWater's revenue, highlighting its role in the development of next-generation computing technologies.
- The company anticipates continued growth in this sector, supported by strategic partnerships with well-funded customers.