Year-over-Year Revenue Growth of 6%

SkyWater Technology (NASDAQ: SKYT), the trusted technology realization partner today announced financial results for the third quarter of 2021, ended October 3, 2021.

• Revenue grew 6% year-over-year to $35.0 million
• Net loss to shareholders of $13.9 million, or (40)% of revenue
• Adjusted EBITDA of $(2.7) million, or (7.7)% of revenue

“We made important progress on our Radiation Hardened and Power Management platform qualifications while adding eight new Advanced Technology Services customers in the quarter, for a total of 25 in the past twelve months,” said SkyWater president and CEO Thomas Sonderman. “Supply chain challenges and hiring constraints plus continued delays in the funding of existing United States Government programs had a magnified near-term effect on the company. This resulted in delayed revenue for certain Advanced Technology Services and Wafer Services programs in the amount of approximately $15 million for the third and fourth quarter of 2021. Despite these headwinds, the company continued to aggressively ramp our Advanced Technology Services and Wafer Services businesses and sustainably grew our overall sales pipeline. All of these factors give us a strong conviction in our long-term growth model of 25% annual top line growth.”

Q3 2021 Summary:

Q3 2021 Results:

• Revenue: Revenue of $35.0 million increased 6% year-over-year. Advanced Technology Services revenue of $22.4 million decreased 8% year-over-year due to delayed revenue. Wafer Services revenue of $12.7 million increased 44% compared to the third quarter of 2020 driven by increased wafer output.
• Gross Profit (Loss): GAAP gross loss was $1.8 million, or (5.2)% of revenue, compared to gross profit of $7.3 million, or 22.1% of revenue, in the third quarter of 2020. Non-GAAP gross loss was $0.5 million, or (1.4)% of revenue, compared to gross profit of $7.4 million, or 22.4% of revenue, in the third quarter of 2020.
• Net Loss: GAAP net loss to shareholders of $13.9 million, or $(0.36) per share, compared to a net loss to shareholders of $1.7 million, or $(0.09), in the third quarter of 2020. Non-GAAP net loss to shareholders of $11.5 million, or $(0.29) per share, compared to a net loss to shareholders of $0.8 million, or $(0.04), in the third quarter of 2020.
• Adjusted EBITDA: Adjusted EBITDA was $(2.7) million, or (7.7)% of revenue, compared to $5.3 million or 16.1% of revenue in the third quarter of 2020.
• Balance Sheet: Cash and cash equivalents of $8.5 million compared to $7.4 million from January 3, 2021.

A reconciliation between historical GAAP and non-GAAP information is contained in the tables below in the section titled, “Non-GAAP Financial Measures.”

Recent Business Updates:

• Wafer Services output increased nearly 60% in the third quarter of 2021, compared to third quarter 2020.
• Completed the transition of two customers from Advanced Technology Services to Wafer Services with an additional five transitions currently underway.
• Won eight new Advanced Technology Services programs in the third quarter of 2021.
• Produced the first test wafers with copper back-end processing for the company’s radiation hardened (RH90) platform.
• Signed agreement with Carillon to produce solid-state Holographic Optical Beam Steering (HOBS) chips for satellite and other free-space optical communications (FSOC) applications.
• Initiated process transfers and license agreement for Weebit Nano’s innovative Resistive RAM (ReRAM) technology for volume production with SkyWater’s customers’ designs.
• Signed agreement for Deca’s second generation M-Series™ fan-out wafer-level packaging (FOWLP) with Adaptive Pattering® for SkyWater’s advanced packaging facility in Florida.
• Revised schedule for a significant complex multi-year Advanced Technology Services program originally estimated to be completed in 2021 to early 2022, causing revenue to be pushed similarly from 2021 to 2022.
• Adapted hiring strategies and pay scales to address the challenges of a highly competitive market for technology and operations resources, an important ingredient to enable revenue recognition for the company.
• Implemented contingency strategies to adapt to the ongoing supply chain disruptions the company is experiencing for substrates, chemicals and spare parts while adapting to similar constraints being seen by our customers in an attempt to minimize the effect on revenue output in the second half of 2021.

Investor Webcast

SkyWater will host a conference call on Wednesday, November 3, 2021, at 9:00 a.m. CT to discuss its third quarter financial results. A live webcast of the call will be available online at IR.SkyWaterTechnology.com.

About SkyWater Technology

SkyWater (NASDAQ: SKYT) is a U.S.-owned semiconductor manufacturer and a DOD-accredited Trusted supplier. SkyWater’s Technology as a Service^SM model streamlines the path to production for customers with development services, volume production and advanced packaging solutions in its world-class U.S. facilities. This pioneering model enables innovators to co-create the next wave of technology with diverse categories including mixed-signal CMOS, read-out ICs, rad-hard, power discretes, MEMS, superconducting ICs, photonics, carbon nanotubes and interposers. SkyWater serves growing markets including aerospace & defense, automotive, biomedical, cloud & computing, consumer, industrial and IoT. For more information, visit: www.skywatertechnology.com.

SkyWater Technology Forward-Looking Statements

This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that are based on the Company’s current expectations or forecasts of future events, rather than past, events and outcomes, and such statements are not guarantees of future performance. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information or predictions concerning the Company’s future business, results of operations, financial performance, plans and objectives, competitive position, market trends, and potential growth and market opportunities. In some cases, you can identify forward-looking statements by words such as “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “targets,” “projects,” “seeks” or the negative of these terms or other comparable terminology.

Forward-looking statements are subject to risks, uncertainties and assumptions, which may cause the Company’s actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Key factors that could cause the Company’s actual results to be different than expected or anticipated include, but are not limited to: our goals and strategies; our future business development, financial condition and results of operations; our ability to continue operating our sole semiconductor foundry at full capacity; our ability to appropriately respond to changing technologies on a timely and cost-effective basis; our customer relationships and our ability to retain and expand our customer relationships; our ability to accurately predict our future revenues for the purpose of appropriately budgeting and adjusting our expenses; our ability to diversify our customer base and develop relationships in new markets; our expectations regarding dependence on our largest customer; the performance and reliability of our third-party suppliers and manufacturers; our ability to procure tools, materials, and chemicals amid industry-wide supply chain shortages; our ability to control costs, including our operating and capital expenses; the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets; the level of demand in our customers’ end markets; our ability to attract, train and retain key qualified personnel in a competitive labor market; adverse litigation judgments, settlements or other litigation-related costs; changes in trade policies, including the imposition of tariffs; our ability to raise additional capital or financing; our ability to accurately forecast demand; the impact of the COVID-19 pandemic on our business, results of operations and financial condition; the impact of the COVID-19 pandemic on the global economy; our ability to maintain compliance with certain U.S. Government contracting requirements; vaccine mandates may have an impact on our business and results of operations; regulatory developments in the United States and foreign countries; our ability to protect our intellectual property rights; and other factors discussed in the “Risk Factors” section of the prospectus the Company filed with the SEC on April 22, 2021 and in other documents that the Company files with the SEC, which are available at http://www.sec.gov. The Company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

SKYT-IR

Non-GAAP Financial Measures

We provide supplemental non-GAAP financial information that our management utilizes to evaluate our ongoing financial performance and provide additional insight to investors as supplemental information to our U.S. GAAP results. We provide non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss to shareholders, and non-GAAP net loss per share. We provide these non-GAAP financial measures because we believe this non-GAAP presentation provides a baseline for analyzing trends in our business and to exclude certain items that may not be indicative of our core operating results and for the other reasons described in the footnotes to the tables below. The non-GAAP financial measures disclosed in this earnings press release should not be viewed as an alternative to, or more meaningful than, the reported results prepared in accordance with GAAP. In addition, because our non-GAAP measures are not determined in accordance with U.S. GAAP, these measures are susceptible to differing calculations, and not all comparable to peer companies that may calculate their non-GAAP measures in the same manner.

We also provide adjusted EBITDA and adjusted EBITDA margin as supplemental non-GAAP measurements. We define adjusted EBITDA as net income or loss before interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including Paycheck Protection Program loan forgiveness, corporate conversion and initial public offering costs, SkyWater Florida start-up costs, management transition expense, fair value changes in contingent consideration, fair value changes in warrants and management fees. We believe adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.

The following tables present a reconciliation of the most directly comparable financial measures, calculated and presented in accordance with U.S. GAAP, to our non-GAAP financial measures.

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