SkyWater (SKYT) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 2024 revenue of $93.8 million, up 31% year-over-year, marking the ninth consecutive record revenue quarter, driven by strong ATS and tools revenue and robust customer co-investment.

• Net income was $1.5 million GAAP ($0.03 per diluted share) and $3.6 million non-GAAP ($0.08 per diluted share), reversing a net loss in Q3 2023.

• Gross margin improved to 21.6% GAAP (22.3% non-GAAP), exceeding expectations due to operational efficiencies and reversal of a prior cost accrual.

• Adjusted EBITDA reached $11.0 million (11.7% of revenue), up from $8.3 million (11.6%) in Q3 2023.

• Customer-funded CapEx investments exceeded $30 million in Q3, supporting future growth and capacity expansion in Minnesota and Florida.

Financial highlights

• ATS development revenue grew 5% year-over-year to $56.4 million, while Wafer Services revenue declined 54% to $6.7 million.

• Tools revenue hit a record $30.7 million, up 19% sequentially and over 800% year-over-year, reflecting unprecedented customer co-investment.

• Operating income was $6.8 million, and free cash flow was positive at $14.3 million.

• Cash and cash equivalents stood at $20.7 million at quarter end, with $75.6 million available under the Revolver.

• Net income margin improved to 1.6% from -10.6% year-over-year.

Outlook and guidance

• Q4 2024 revenue expected between $72–$76 million, with ATS revenue of $58–$61 million, wafer services of $3–$4 million, and tools revenue around $11 million.

• 2024 revenue growth projected at 18%–20% year-over-year; ATS growth expected at 12%–14% over 2023.

• 2025 tools revenue expected at $40–$50 million, mostly recognized in the second half.

• Gross margin for Q4 expected in the 19%–23% range, with similar ATS and wafer services margin as Q3.

• Management expects sufficient liquidity for the next twelve months, supported by cash on hand, available borrowings, and potential cost reduction measures.