Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SkyWater Technology Inc (SKYT, Financial) reported a record revenue of $94 million for the third quarter, driven by strong customer co-investment.
- The company achieved a 22% gross margin, surpassing expectations due to operational efficiencies and improved execution on key programs.
- SkyWater Technology Inc (SKYT) announced a multiyear supply agreement with Nanotx, enhancing its position in the biosensor and diagnostics market.
- The company is expanding its leadership in semiconductor technologies through its involvement in the Microelectronics Commons initiative, which supports national security and innovation.
- SkyWater Technology Inc (SKYT) is poised for double-digit revenue growth in its ATS segment, with a three-year CAGR exceeding 35%.
Negative Points
- ATS development revenue declined by 9% from the previous quarter due to funding constraints from aerospace and defense customers.
- The company anticipates a sequential decline in total revenue for the fourth quarter, with expectations set between $72 million and $76 million.
- Tools revenue guidance for 2025 has been adjusted downward, with a significant portion expected in the second half of the year.
- SkyWater Technology Inc (SKYT) faces challenges in the timing of tool deliveries, which are dependent on supplier schedules.
- The company expects a non-GAAP EPS loss of 4¢ to 10¢ per share for the fourth quarter, indicating potential profitability challenges.
Q & A Highlights
Q: Can you clarify the gross margin guidance of 19% to 23% for Q4? Is it mainly due to the impact of tool revenue?
A: Yes, the gross margin guidance reflects a flat quarter-to-quarter performance for ATS and wafer services revenue. The 19% to 23% range accounts for the impact of tool revenue, which is expected to be similar to the previous quarter.
Q: How should we think about the seasonality and growth for ATS and wafer services in 2025?
A: We anticipate overall growth in 2025, driven by ATS to wafer services conversions. While we typically see seasonality in Q3 due to government fiscal year-end, we expect combined growth in ATS and wafer services next year.
Q: The tool revenue guidance for Q4 and 2025 seems softer than expected. Can you explain the reasons behind this?
A: The timing of tool deliveries is dependent on our suppliers, which affects our projections. For 2025, we expect most tool revenue to be recognized in the second half, particularly from our Florida facility, aligning with our $200 million co-investment plan over three years.
Q: Have any additional customers transitioned to wafer services, and what is the visibility for 2025?
A: We recently concluded a long-term supply agreement with Nano DX. The timing of production transitions depends on customer qualification schedules, but we remain confident in our conversions and expect wafer services growth next year.
Q: Can you provide more details on the accrual reversal from Q1 and its impact on the related program?
A: The $8 million accrual recorded in Q1 has been fully reversed, indicating resolution of technical issues. The program, particularly our rad-hard initiative, is progressing well, with a PDK release expected early next year and production several years away.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
