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SkyWater Technology, Inc (SKYT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $61.3M declined 23% YoY and 19% QoQ, but came in just above guidance midpoint; gross margin improved YoY (GAAP 23.3%, non-GAAP 24.2%) despite ATS softness, while adjusted EBITDA was $4.0M and non-GAAP EPS was $(0.08) .
  • Wafer Services rebounded 70% QoQ to $7.5M on strong demand for the newly launched ThermaView platform with defense primes; ATS decreased 12% QoQ to $52.5M due to DOD budget delays, tools revenue fell to $1.2M .
  • Q2 2025 guidance: total revenue $55–$60M, GAAP EPS $(0.20)–$(0.26), non-GAAP EPS $(0.16)–$(0.22); ATS $49–$53M, Wafer Services $5–$6M, tools under $1M; gross margin 16–19% and OpEx ~$15.7M ±$0.2M .
  • Management maintained FY 2025 targets for combined ATS+Wafer Services growth (~5% ±2%), mid-20s non-GAAP GM, positive non-GAAP EPS and ≥10% adjusted EBITDA margin; notably lowered FY tools revenue outlook to ~$30M from prior $40–$50M, a margin tailwind .

What Went Well and What Went Wrong

What Went Well

  • Wafer Services growth: revenue rose 70% QoQ to $7.5M, driven by ThermaView traction with two defense prime customers; CEO: “strong traction... for our ThermaView℠ platform” .
  • Gross margin expansion YoY: GAAP gross margin 23.3% (vs 16.3% LY), non-GAAP 24.2% (vs 16.9% LY), aided by lower tools mix and cost improvements; CFO noted a ~$2M favorable warranty accrual reversal boosting Q1 GM .
  • Strategic momentum: continued progress toward acquiring Infineon’s Fab 25 (mid-2025 closing anticipated) and validation of quantum strategy via partner D‑Wave’s quantum supremacy announcement leveraging SkyWater-fabricated qubits .

What Went Wrong

  • ATS softness: ATS revenue fell 12% QoQ to $52.5M, reflecting federal budget delays and continuing resolutions holding spending at FY2024 levels; management expects a back-half snapback contingent on funding .
  • EPS and EBITDA decline QoQ: GAAP diluted EPS fell to $(0.15) vs $(0.01) in Q4; adjusted EBITDA declined to $4.0M vs $10.2M in Q4, reflecting lower ATS mix and reduced tools gross profit .
  • Tools revenue drop: Tools slid to $1.2M from $11.7M in Q4 and $30.7M in Q3, removing a gross profit contributor (though tools generally carry minimal margin) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$93.817 $75.487 $61.296
GAAP Gross Margin %21.6% 25.6% 23.3%
Non-GAAP Gross Margin %22.3% 26.6% 24.2%
GAAP Diluted EPS ($)$0.03 $(0.01) $(0.15)
Non-GAAP Diluted EPS ($)$0.08 $0.04 $(0.08)
Adjusted EBITDA ($USD Millions)$10.990 $10.213 $4.025
Adjusted EBITDA Margin %11.7% 13.5% 6.6%

Segment and revenue mix:

MetricQ3 2024Q4 2024Q1 2025
ATS Development Revenue ($USD Millions)$56.390 $59.401 $52.535
Wafer Services Revenue ($USD Millions)$6.718 $4.371 $7.527
Combined ATS + Wafer Services ($USD Millions)$63.108 $63.772 $60.062
Tools Revenue ($USD Millions)$30.709 $11.715 $1.234

KPIs and balance sheet highlights:

MetricQ3 2024Q4 2024Q1 2025
Cash and Cash Equivalents ($USD Millions)$20.684 $18.844 $51.234
Contract Liabilities – Current ($USD Millions)$73.353 $55.166 $61.215
Contract Liabilities – Long-term ($USD Millions)$41.145 $51.901 $97.264

Q1 2025 YoY and QoQ comparisons (as disclosed):

  • Total revenue: $(23)% YoY and $(19)% QoQ .
  • GAAP gross margin: +700 bps YoY; −226 bps QoQ .
  • ATS revenue: $(14)% YoY; $(12)% QoQ .
  • Wafer Services revenue: $(25)% YoY; +70% QoQ .
  • Tools revenue: $(86)% YoY; $(90)% QoQ .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)Q2 2025N/A$55–$60 New
ATS Revenue ($USD Millions)Q2 2025N/A$49–$53 New
Wafer Services Revenue ($USD Millions)Q2 2025N/A$5–$6 New
Tools Revenue ($USD Millions)Q2 2025N/A< $1 New
GAAP Diluted EPS ($)Q2 2025N/A$(0.20)–$(0.26) New
Non-GAAP Diluted EPS ($)Q2 2025N/A$(0.16)–$(0.22) New
Gross Margin % (reported)Q2 2025N/A16–19% New
Operating Expenses ($USD Millions)Q2 2025N/A~$15.7 ±$0.2 New
Interest Expense ($USD Millions)Q2 2025N/A~$2.0 New
Tax Expense ($USD Millions)Q2 2025N/A~$0.4 New
VIE Income ($USD Millions)Q2 2025N/A~$1.0 New
Tools Revenue ($USD Millions)FY 2025$40–$50 ~$30 Lowered
Combined ATS+Wafer Services Revenue Growth (%)FY 2025~5% ±2% ~5% ±2% Maintained
Non-GAAP Gross Margin %FY 202523–27 Mid-20s (23–27) Maintained
Non-GAAP EPSFY 2025Slightly positive Positive targeted Maintained
Adjusted EBITDA Margin %FY 2025≥10 ≥10 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Wafer Services product mix (ThermaView, new products)WS beat; conversion momentum; record tools; accrual reversal assisted margins Expect WS to improve to ~$6M in Q1; new products to drive 2025 WS growth WS +70% QoQ; ThermaView is main growth driver; targeting 60% new / 40% legacy by year-end Improving mix; platform traction strengthening
ATS demand and DOD fundingATS softer due to FY-end constraints; rebound expected Q4 Conservative 2025 view; ATS sequential growth Q2 onward Continuing resolutions held spending at FY24; back-half snapback expected contingent on budget resolution Near-term headwinds; back-half recovery dependent on funding
Advanced Packaging (Florida)Orders placed; leadership appointment; funding ramp Fan-out platform ramp; tools back-half 2025; ATS rev late-2025 Tools revenue primarily Florida in 2H; ATS contribution building into 2026 Execution progressing; revenue more in 2H/2026
Quantum computing initiativesStrong engagement; accrual reversal related program progress Advanced compute second-largest end market; ~10% of business; quantum focus D-Wave quantum supremacy using SKYT qubits; quantum growth >30% in 2025; platform plans ahead Strengthening momentum and visibility
Tariffs/supply chainNot a focusNot a focusLimited exposure; tools largely exempt; ~$2M/qtr ancillary risk mitigatable; no demand downgrades from customers Manageable risk; proactive mitigation
Fab 25 acquisition (Infineon)N/AAnnounced; ~$300M annual WS, $40M cash GP, accretive EBITDA/FCF Proceeding to anticipated mid-2025 closing; strategic rationale reiterated Transformational capacity and cash flow (post-close)

Management Commentary

  • CEO on Q1 cadence and ThermaView: “Our revenues for the first quarter were closely aligned with the outlook… Gross margin and non-GAAP EPS both exceeded guidance… The upside achieved in Wafer Services… was driven by strong traction from our recently launched ThermaView platform” .
  • ATS outlook tied to DOD funding: “We are prepared to execute aggressively and expect a strong snapback in ATS revenue in the second half of 2025” .
  • Strategic vision: “Fab 25… delivers the output scale, quality standards, and process flexibility… firmly aligned with secure, U.S.-based supply chain goals” .
  • CFO on Q1 levers: “Q1 gross margin benefited from a roughly $2 million favorable reversal of a warranty accrual recorded last year” and OpEx control toward lower end of +10–15% FY increase .

Q&A Highlights

  • ATS funding confidence: Despite CRs, management cited ~$300M of prior U.S. investment and mission-critical alignment, expecting clarity by end of Q2 and funding-driven ATS rebound in H2 .
  • ThermaView sizing and mix: Mid-single-digit million contribution inferred in Q1; new products expected ~60% of Wafer Services by YE vs 10% in 2024 .
  • Advanced Packaging timing: 2025 impact mainly tools; traditional ATS revenue ramp primarily in 2026 after tool installations and qualifications .
  • Rad-hard program: Technology maturation toward qualification; program priority reassessment ongoing but model aligned with DoD foundry approach .
  • Tariff exposure: No customer demand cuts; tooling largely exempt; ancillary exposure ~$2M/qtr with mitigation options .

Estimates Context

  • Q1 2025 vs S&P Global consensus: Revenue $61.30M vs $61.04M*; Primary EPS $(0.08)* vs $(0.13); Adjusted EBITDA $4.03M vs $1.43M (beats across metrics). Values retrieved from S&P Global.
  • Q2 2025 setup: Management guided conservatively; tools minimal; ATS expected to rebound in H2 contingent on funding .
MetricQ1 2025 ConsensusQ1 2025 Actual
Revenue ($USD Millions)$61.04*$61.296
Primary EPS ($)$(0.13)*$(0.08)*
Adjusted EBITDA ($USD Millions)$1.43*$4.025

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Wafer Services inflection driven by ThermaView is tangible; expect lumpiness but structurally higher mix of new products supporting margin progression in Minnesota .
  • Near-term ATS headwinds are timing-related; model a back-half recovery with funding resolution; Q2 guided down, H2 rebound anticipated .
  • FY 2025 margin outlook intact with tools revenue lowered to ~$30M (vs $40–$50M prior), reducing tools’ negative GM impact and supporting mid-20s reported GM; positive non-GAAP EPS still targeted .
  • Cash strengthened to $51.2M, aided by customer advances; balance sheet positioned to navigate timing volatility and fund operations .
  • Post-close Fab 25 is transformational: steady revenue and EBITDA, accretive FCF, and strategic U.S. 200mm capacity; model step-change from Q3 onward when consolidated .
  • Tariff risk manageable; focus on exempt tooling and alternate sourcing; no observed customer demand downgrades .
  • Trading: Near-term sensitivity to headlines on DOD funding and tariffs; catalysts include additional ThermaView wins, quantum platform updates, and Fab 25 closing milestones .

Appendix: Additional Q1 2025 Details and Press Releases

  • ThermaView launch (Jan 15, 2025): S90LN 90nm CMOS ROIC platform with high-density routing, targeting a $9B thermal cameras market; early traction with Raytheon Vision Systems .
  • D‑Wave quantum supremacy announcement leveraged SKYT-fabricated superconducting qubits, underscoring SKYT’s quantum enablement position .