SkyWater Technology (SKYT) 7 Nov 24 2024 Q3 Earnings call transcript
AInvestFriday, Nov 8, 2024 9:52 am ET
1min read
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SkyWater Technology reported a record quarter of $94 million in revenue and $0.08 positive non-GAAP EPS in the third quarter of 2024. The company's CEO, Thomas Sonderman, highlighted a significant increase in customer co-investment, which has driven their combined ATS and Wafer Services revenue to $63 million, with tools revenue reaching an all-time high of $31 million. This growth is a result of the company's operational efficiencies and strategic focus on meeting customer demands, particularly in the aerospace and defense sector.

Key Investor Questions and Management's Responses

During the earnings call, investors asked about the company's gross margin performance and expectations for the future. Steve Manko, CFO, provided detailed insights, explaining that the company's gross margin exceeded expectations, driven by improved operational efficiencies and a reversal of a significant cost accrual recorded in Q1. He also discussed the company's outlook for 2025, expecting a robust pipeline of secure A&D demand, growing momentum across multiple commercial programs, and the initial ramp of their advanced packaging business.

Impact of Tools Revenue and Customer Co-investment

The call highlighted the significant impact of customer co-investment on the company's growth, with approximately $200 million of total customer co-investment expected between 2024 and 2026. This co-investment is a testament to SkyWater's position as a trusted domestic source of critical semiconductor technology. The company also announced a multiyear supply agreement with NanoDx, a pioneer in in vitro diagnostics and biosensor applications, further strengthening their commercial Wafer Services business.

Operational Excellence and Strategic Partnerships

SkyWater continues to demonstrate operational excellence, with a focus on executing key programs and driving gross margin upside despite temporary softening in ATS revenue. The company's strategic partnerships, such as the Microelectronics Commons Initiative, further position them as a leader in critical semiconductor technologies and strengthen national security. The appointment of Bassel Haddad as Senior Vice President and General Manager of Advanced Packaging underscores SkyWater's commitment to building a strong manufacturing presence in the United States.

Outlook and Future Growth

Looking ahead, SkyWater expects double-digit revenue growth in their ATS business in 2024, with a midpoint of 35% 3-year CAGR. The company's strategic investments in advanced packaging and its growing role within the Microelectronics Commons Initiative are expected to fuel continued growth into 2025. Despite challenges, such as budget constraints in the A&D sector, SkyWater remains confident in its ability to execute on its programs and make them successful.

In conclusion, SkyWater Technology's earnings call presented a positive outlook for the company, with a focus on operational excellence, strategic partnerships, and customer co-investment driving growth. The company's ability to navigate challenges and execute on key programs positions them well for future success.

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