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SkyWater Technology, Inc (SKYT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $75.5M, down 5% YoY and 20% QoQ, but gross margin expanded materially (GAAP 25.6%, non-GAAP 26.6%) and non-GAAP diluted EPS was positive at $0.04, above internal guidance; adjusted EBITDA was $10.2M (13.5% margin) .
  • Mix: ATS development revenue rose 4% YoY to $59.4M, Wafer Services fell 64% YoY to $4.4M, and Tools revenue grew 18% YoY to $11.7M; tools negatively impacted non-GAAP gross margin by 170 bps in Q4 .
  • Management guided Q1 2025 revenue of $59–$63M (tools ≈$1M), non-GAAP diluted EPS loss of $(0.10)–$(0.16), gross margin 19–23%, and OpEx ≈$15.7M; they expect ATS rebound in Q2 and profitability in H2 2025 with ATS+WS margins expanding into the 30s .
  • Strategic catalyst: planned acquisition of Infineon’s Fab 25 (Austin) with a 4-year supply agreement expected to add ~$300M annual Wafer Services revenue, ~$40M annual cash gross profit, immediate adjusted EBITDA accretion, and broaden SkyWater’s 200mm portfolio (65nm, copper interconnect); closing targeted in 90–120 days .

What Went Well and What Went Wrong

What Went Well

  • Gross margin and profitability beat internal expectations: “Reported gross margin of nearly 27% in Q4 exceeded the high end of our guidance range, driving $0.04 positive EPS for the quarter…” — CEO .
  • Continued ATS momentum and record FY results: “Record revenues and profitability for SkyWater in 2024… multiple ATS customers beginning initial phases of production” — CEO .
  • Tools co-investment strengthening capacity with limited SkyWater CapEx: ~$77M tools revenue FY24 (record), including installation of a first-of-its-kind Multibeam system in Minnesota .

What Went Wrong

  • Wafer Services pressure: Q4 Wafer Services revenue fell 64% YoY to $4.4M on weakness in automotive/industrial segments .
  • Sequential revenue decline: total revenue fell 20% QoQ as tools dropped to $11.7M from $30.7M; adjusted EBITDA dipped to $10.2M from $11.0M .
  • Conservative near-term outlook tied to U.S. federal budget process: Q1 guide embeds ATS caution under continuing resolutions, EPS loss of $(0.10)–$(0.16) and gross margin 19–23% .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total revenue ($USD Millions)$79.2 $93.8 $75.5
GAAP diluted EPS ($)$(0.22) $0.03 $(0.01)
Non-GAAP diluted EPS ($)$(0.02) $0.08 $0.04
GAAP gross margin (%)15.2% 21.6% 25.6%
Non-GAAP gross margin (%)17.4% 22.3% 26.6%
Adjusted EBITDA ($USD Millions)$10.6 $11.0 $10.2
Adjusted EBITDA margin (%)13.4% 11.7% 13.5%
Segment ($USD Millions)Q4 2023Q3 2024Q4 2024
ATS development revenue$57.2 $56.4 $59.4
Wafer Services revenue$12.0 $6.7 $4.4
Tools revenue$9.9 $30.7 $11.7
Total revenue$79.2 $93.8 $75.5
KPIs / Operating MetricsQ4 2023Q3 2024Q4 2024
Tools gross profit ($USD Millions)$0.382 $0.232 $2.041
Non-GAAP operating expenses ($USD Millions)$10.5 $14.1 $14.8
Non-GAAP gross margin impact from Tools (bps)-130 -1050 -170

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total revenue ($M)Q4 2024$72–$76 Actual $75.5 Met (upper end)
Tools revenue ($M)Q4 2024≈$11 Actual $11.7 Slight beat
GAAP diluted EPS ($)Q4 2024$(0.12)–$(0.06) Actual $(0.01) Beat
Non-GAAP diluted EPS ($)Q4 2024$(0.10)–$(0.04) Actual $0.04 Beat
Gross margin (%)Q4 202419–23 (guided on call) Actual 25.6 (GAAP), 26.6 (non-GAAP) Beat
Total revenue ($M)Q1 2025—$59–$63 New
Tools revenue ($M)Q1 2025—≈$1 New
Gross margin (%)Q1 2025—19–23 New
Non-GAAP OpEx ($M)Q1 2025—≈$15.7 ± $0.2 New
Interest expense ($M)Q1 2025—$2.0–$2.5 New
VIE income ($M)Q1 2025—≈$1 New
GAAP diluted EPS ($)Q1 2025—$(0.14)–$(0.20) New
Non-GAAP diluted EPS ($)Q1 2025—$(0.10)–$(0.16) New

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Advanced packaging (Florida)First fan-out tool delivery; $120M funding; ATS ramp in 2025 Continued tool orders; revenue ramp weighted to H2 2025 Tool deliveries mid-’25; ATS revenue ramp late ’25; contribute to ATS growth Building momentum into H2’25
A&D program/fundingStrong ATS demand; pull-ins; rad-hard, thermal imaging Budget constraints near gov’t FY-end; ATS softer Conservative Q1 under CRs; rebound Q2; strong pipeline Temporary softness → recovery expected
Wafer Services trajectoryDeclined on industrial weakness Slightly above forecast at $6.7M; still soft Bottomed in Q4; new products to drive 2025 growth; ~60% of WS from new products Mix shift to new products, improving
Tools co-investmentTools $25.9M; ~80M FY; ~$200M ’24–’26 plan Record $30.7M; ~$76M FY; ’25 $40–$50M, back-end loaded FY’24 $76.8M; ’25 ≈$30M (little GP) Peak in ’24; lower in ’25
Quantum computing engagementQuantum‑Si transition; next-gen medical Advanced compute #2 end market; >90% quantum >90% advanced compute tied to quantum; customers like D-Wave, SiQuantum Sustained strength
CHIPS / ME CommonsCHIPS PMT up to $16M; MN Forward Fund $19M ME Commons performer for AI hardware hubs CHIPS accelerant; outside funding now >$350M Policy tailwinds
Gross margin trajectoryNon-GAAP 18.9% (tools impact) Non-GAAP 22.3% aided $5.6M accrual reversal Non-GAAP 26.6%; cost tailwinds $~2M won’t repeat; plan ATS+WS margins into 30s in H2’25 Structural improvement despite one-offs
Fab 25 acquisition——Planned purchase; ~$300M WS revenue; ~$40M cash GP; ~$24M purchase accounting depreciation; 90–120 day closing New strategic growth vector

Management Commentary

  • “Our financial results for fiscal year 2024 demonstrate the strength of our highly differentiated, technology foundry business model… supported record revenues and profitability for SkyWater in 2024.” — Thomas Sonderman, CEO .
  • “We expect the growing revenue momentum through the year will result in the expansion of our gross margins, continued strong adjusted EBITDA, and another positive year for non-GAAP EPS for fiscal 2025.” — Thomas Sonderman, CEO .
  • “Q4 gross margin exceeded our expectations at 26.6%… effective 28.3% gross margin for our combined ATS and Wafer Services… driven by ~$2M of cost tailwinds (non-repeating), cost savings and deferrals.” — Steve Manko, CFO .
  • “Our current forecast reflects gross margins on the core ATS and Wafer Services business expanding into the 30s in the second half [2025]… reported non-GAAP gross margin for the full fiscal year [2025] is in the mid-20s (23–27%).” — Steve Manko, CFO .
  • “Fab 25… expected to contribute approximately $300 million of annual Wafer Services revenue… and generate approximately $40 million annually of cash gross profit dollars.” — Steve Manko, CFO .

Q&A Highlights

  • Fab 25 supply agreement structure and economics: 4-year agreement aimed at full utilization; ~$40M annual cash gross profit; immediate adjusted EBITDA accretion; take-or-pay parameters; ability to backfill capacity over time; Infineon becomes the largest customer .
  • Technology roadmap at Fab 25: 130nm mixed-signal ASIC with copper interconnect; 65nm on 200mm; potential PMICs/microcontrollers; NOR flash capabilities; AP synergies longer term .
  • Wafer Services mix shift: new products to drive 2025 (≈60% of WS) vs legacy ≈40%; Q1 WS guided ~ $6M; Minnesota fab transitioning multiple ATS programs into production .
  • Gross margin drivers and repeatability: Q4 upside not driven by WS; included non-repeating cost tailwinds; margin increase expected in ’25 even with lower tools mix .
  • Budget dynamics: conservative stance due to continuing resolutions/new administration timing; programs considered critical and funded; ATS rebound expected Q2 .

Estimates Context

S&P Global consensus estimates were unavailable at the time of this analysis due to a provider limit, so we cannot quantify beat/miss versus Street for Q4 2024. Company results are compared against internal guidance and prior periods above .

  • Consensus metrics (Primary EPS, Revenue) for Q4 2024: Unavailable (S&P Global data not accessible today).
  • Actuals: Revenue $75.5M; GAAP diluted EPS $(0.01); non-GAAP diluted EPS $0.04 .
    Where estimates may adjust: continued ATS growth and margin expansion guidance into H2 2025, plus the Fab 25 transaction should prompt upward revisions to revenue/EBITDA trajectory once closed .

Key Takeaways for Investors

  • Margin quality improved: non-GAAP gross margin 26.6% and positive non-GAAP EPS despite softer top line; Q4 upside included some non-repeating cost tailwinds, but structural ATS+WS margin expansion is guided into the 30s in H2 2025 .
  • Mix matters: Wafer Services has likely bottomed; 2025 WS growth to be driven primarily by higher-ASP new products (ThermaView, ATS conversions), while tools revenue normalizes to ≈$30M with little GP contribution .
  • Near-term caution, medium-term positive skew: Q1 2025 guides to a loss and 19–23% gross margin under continuing resolutions, but management expects ATS rebound in Q2 and H2 profitability .
  • Strategic scale-up: Fab 25 acquisition adds secured, high-volume WS revenue (~$300M) with ~$40M cash GP, accelerates portfolio breadth (65nm, copper), and rebalances ATS/WS mix; expect valuation re-rating as deal closes/executes .
  • Policy tailwinds: CHIPS PMT (~$16M) plus MN Forward Fund ($19M) and ME Commons engagement bolster capacity, funding visibility, and domestic “Trusted Foundry” positioning .
  • Operational leverage: adjusted EBITDA margins held double-digit in Q4; FY24 adjusted EBITDA $34.3M; interest expense management aided by customer cash advances; watch OpEx drift up modestly in ’25 .
  • Trading setup: Q1 softness headline risk vs H2 margin/profit narrative and Fab 25 catalyst; dips on Q1 guide could be opportunities ahead of Q2 rebound and deal closing .