Earning Date, Transcript Summary & Report

Acquisition of Fab 25: SkyWater announced the acquisition of Infineon’s Fab 25 in Austin, expanding its domestic manufacturing capabilities and positioning itself as a leading pure-play domestic foundry service provider for foundational semiconductors.

Q4 Revenue Performance: Total revenue for Q4 reached $75 million, exceeding expectations and reflecting strong performance in the ATS and Wafer Services business, with tools revenue contributing $12 million.

Gross Margin Performance: The company reported a gross margin of nearly 27% in Q4, surpassing guidance and contributing to a positive EPS of $0.04 for the quarter and $0.06 for the full year.

Record Revenue Increase: Full year revenues totaled a record $342 million, marking a 19% increase from fiscal 2023, driven by strong growth in the ATS business and significant customer-funded CapEx investments.

Quantum Computing Revenue Surge: SkyWater's advanced compute sector saw over 90% of its revenues related to quantum computing technologies, indicating strong demand and engagement with well-funded customers.

Thermal Imaging Market Positioning: The launch of ThermaView Solutions positions SkyWater as a key supplier in a rapidly growing $9 billion market for thermal imaging applications, enhancing its strategic focus on growth markets.

Wafer Services Revenue Surge: The company anticipates a significant increase in Wafer Services revenue in 2025, driven by new products and conversions from ATS, with expectations for new products to account for approximately 60% of Wafer Services revenue.

Advanced Packaging Growth: SkyWater's advanced packaging business is expected to grow throughout 2025, with a $120 million contract to develop a fan-out wafer level packaging platform, contributing to revenue growth.

Wafer Services Revenue Growth: The acquisition of Fab 25 is expected to generate approximately $300 million in annual Wafer Services revenue, secured by a 4-year strategic supply agreement with Infineon, enhancing financial stability and growth potential.

Foundry Model Transition: The transition of Fab 25 to a customer-driven foundry model is expected to drive profitability improvements and position SkyWater as a leading domestic provider of 200-millimeter wafer foundry capacity.

Wafer Services Revenue Decline: The Wafer Services business experienced a significant decline due to prolonged weakness in the automotive and industrial segments, which negatively impacted overall revenue growth.

Revenue Concerns in Wafer Services: Despite a record revenue of $342 million for the full year, the decline in Wafer Services revenue was a notable concern, indicating vulnerability in certain market segments.

Gross Margin Decline: The gross margin for the full year decreased to 21% from 22% in 2023, primarily due to the impact of tools revenue, which negatively affected gross margin by 480 basis points compared to only 50 basis points in the previous year.

Conservative Revenue Outlook: The company anticipates a conservative revenue outlook for Q1 2025, projecting total revenue between $59 million to $63 million, which reflects uncertainty in the market and potential challenges in achieving growth targets.

Projected EPS Loss: The expected EPS loss for Q1 2025 is projected to be between $0.10 to $0.16 per share, indicating potential financial struggles in the near term as the company navigates market conditions.

Tools Revenue Impact on Margin: The anticipated negative impact of tools revenue on gross margin for 2025 is expected to be close to 300 basis points, which could hinder overall profitability despite growth in other areas.