SkyWater (SKYT) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 revenue of $93.3 million, up 17% sequentially and 34% year-over-year, driven by strong ATS development and tools revenue, with all revenue components exceeding forecasts.

• ATS development revenue reached $61.7 million, up 1% sequentially and 18% year-over-year, reflecting robust aerospace and defense demand.

• Tools revenue hit a record $25.9 million, exceeding expectations due to improved equipment lead times and accelerated deliveries.

• Wafer services revenue was $5.8 million, slightly above forecast but down 66% year-over-year due to industrial market weakness.

• Positive adjusted EBITDA, non-GAAP net income, and strong operating cash flow were achieved, supported by cost-control initiatives.

Financial highlights

• Non-GAAP gross margin was 18.9%, at the upper end of guidance, while GAAP gross margin was 18.3%, both down from prior year due to higher tool procurement and facility expansion costs.

• Adjusted EBITDA was $8.1 million (8.7% margin), up 65% sequentially but down from $10.3 million (14.7% margin) in Q2 2023.

• Non-GAAP net income was $0.02 per share; GAAP net loss narrowed to $1.9 million ($0.04/share) from $8.6 million ($0.19/share) in Q2 2023.

• Free cash flow was $9.3 million in Q2 2024; cash and cash equivalents at quarter-end were $18.4 million.

• Total debt reduced to $66.3 million; $74 million available on revolver.

Outlook and guidance

• Full-year 2024 ATS development revenue expected to grow 10%-20% over 2023; tools revenue projected at ~$80 million; wafer services revenue expected to decline 60%-65% year-over-year.

• Q3 2024 total revenue forecast in the mid-$90 million range, with ATS at ~$60 million, wafer services at $4-$5 million, and tool sales at ~$30 million.

• Customer-funded CapEx investments for 2024 now expected at ~$80 million, with over $200 million planned through 2026 and $320 million expected from 2020–2026.

• Wafer services expected to remain soft for another quarter or two, with recovery anticipated in 2025.

• Management expects customer-funded capital investment and U.S. government program momentum to continue driving growth.