SkyWater Technology, Inc. (SKYT) Bundle
Understanding SkyWater Technology, Inc. (SKYT) Revenue Streams
Understanding SkyWater Technology, Inc.’s Revenue Streams
SkyWater Technology, Inc. reported total revenue of $266.8 million for the first nine months of 2024, a 29% increase from $207.5 million for the same period in 2023. For the third quarter of 2024, revenue was $93.8 million, up 31% from $71.6 million in the third quarter of 2023.
Breakdown of Primary Revenue Sources
The company’s revenue is primarily derived from three segments: ATS development, Wafer Services, and Tools. The following table summarizes the revenue by service type for the third quarter and the first nine months of 2024 compared to 2023:
| Service Type | Third Quarter 2024 (in thousands) | Third Quarter 2023 (in thousands) | First Nine Months 2024 (in thousands) | First Nine Months 2023 (in thousands) |
|---|---|---|---|---|
| ATS Development | $56,390 | $53,891 | $179,244 | $153,735 |
| Wafer Services | $6,718 | $14,490 | $22,490 | $49,079 |
| Tools | $30,709 | $3,243 | $65,048 | $4,715 |
| Total Revenue | $93,817 | $71,624 | $266,782 | $207,529 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates are highlighted below:
- Third Quarter 2024 vs. Third Quarter 2023: 31% increase
- First Nine Months 2024 vs. First Nine Months 2023: 29% increase
Contribution of Different Business Segments to Overall Revenue
For the first nine months of 2024, ATS development accounted for 67.1% of total revenue, while Wafer Services represented 8.4%, and Tools comprised 24.5% of the total. The increase in ATS development revenue was attributed to ongoing U.S. government programs aimed at enhancing the domestic semiconductor supply chain.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- ATS development revenue grew by $25.5 million or 17% in the first nine months of 2024 compared to the same period in 2023.
- Tools revenue surged by $60.3 million from the first nine months of 2023 to 2024, driven by increased customer investments.
- Wafer Services revenue saw a significant decline, dropping 54% from both the third quarter and first nine months of 2023 to 2024, principally due to decreased activity in the automotive sector.
The overall increase in revenue was primarily driven by strong performance in ATS development and Tools, which offset the declines observed in Wafer Services revenue due to market conditions.
A Deep Dive into SkyWater Technology, Inc. (SKYT) Profitability
Profitability Metrics
Gross Profit: For the first nine months of 2024, gross profit was $50,329,000, compared to $47,282,000 for the same period in 2023, reflecting a growth of 6%. In the third quarter of 2024, gross profit was $20,235,000, up from $14,147,000 in the third quarter of 2023, an increase of 43%.
Operating Profit: The operating income for the first nine months of 2024 was $3,906,000, a significant improvement from an operating loss of $(8,835,000) in 2023. In the third quarter of 2024, operating income stood at $4,709,000, compared to an operating loss of $(4,191,000) in the third quarter of 2023.
Net Profit Margin: The net loss for the first nine months of 2024 was $(6,114,000), compared to $(20,431,000) in the same period of 2023, resulting in a reduction of net loss by 70%. The net income for the third quarter of 2024 was $1,512,000, improving from a net loss of $(7,568,000) in the third quarter of 2023.
Trends in Profitability Over Time
The following table summarizes the key profitability metrics over the last two years:
| Period | Gross Profit ($) | Operating Income ($) | Net Income ($) | Net Profit Margin (%) |
|---|---|---|---|---|
| Q3 2024 | 20,235,000 | 4,709,000 | 1,512,000 | 1.6% |
| Q3 2023 | 14,147,000 | (4,191,000) | (7,568,000) | (10.6%) |
| 9M 2024 | 50,329,000 | 3,906,000 | (6,114,000) | (2.3%) |
| 9M 2023 | 47,282,000 | (8,835,000) | (20,431,000) | (9.8%) |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the profitability ratios for the company indicate positive trends. For example, the gross margin is approximately 18.8% for the first nine months of 2024, compared to industry averages of around 15% for similar companies in the semiconductor sector. The operating margin is showing a recovery trajectory, moving from negative margins in 2023 to about 1.5% in 2024.
Analysis of Operational Efficiency
Cost management has improved significantly, with total operating expenses for the first nine months of 2024 at $46,423,000, a reduction from $56,117,000 in the same period of 2023. This reflects a 17.2% decrease in expenses, primarily driven by reduced selling, general, and administrative expenses, which fell from $48,821,000 to $35,598,000.
Gross margin trends are also favorable, with gross margins increasing due to higher revenue recognition from ATS development and tools revenue, despite a decline in wafer services revenue. The operational efficiency is indicated by the adjusted EBITDA for the first nine months of 2024, which was $24,067,000, compared to $26,666,000 in the same period of 2023.
Debt vs. Equity: How SkyWater Technology, Inc. (SKYT) Finances Its Growth
Debt vs. Equity: How SkyWater Technology, Inc. Finances Its Growth
As of September 29, 2024, SkyWater Technology, Inc. reported total liabilities of $246.5 million, which includes both short-term and long-term debt. The current portion of long-term debt stands at $5.1 million, while the long-term debt, net of unamortized debt issuance costs, is $36.2 million.
The company's debt-to-equity ratio is calculated at 4.39, significantly higher than the semiconductor industry average of approximately 1.5. This indicates a heavier reliance on debt financing compared to its equity funding.
SkyWater undertook a revolving line of credit, with an outstanding balance of $21.3 million and availability under the Revolver of $75.6 million as of September 29, 2024. The interest expense for the first nine months of 2024 was $6.9 million, compared to $7.9 million in the same period of the previous year.
Recent Debt Issuances and Credit Ratings
In 2024, SkyWater did not issue any new debt but maintained its existing credit facilities. The company has received a support letter from Oxbow Industries, providing funding up to $12.5 million to support its obligations. The current credit rating reflects a commitment to managing its debt levels, although specific ratings were not disclosed in the recent filings.
Balancing Debt Financing and Equity Funding
SkyWater has managed to balance debt and equity funding through various financing activities. In the first nine months of 2024, the company generated $25.1 million through its at-the-market (ATM) offering program, although it did not sell any shares under this program during the same period.
The following table summarizes SkyWater's debt and equity structure as of September 29, 2024:
| Category | Amount (in thousands) |
|---|---|
| Total Liabilities | $246,525 |
| Current Portion of Long-Term Debt | $5,099 |
| Long-Term Debt | $36,179 |
| Total Shareholders' Equity | $68,554 |
| Debt-to-Equity Ratio | 4.39 |
| Cash and Cash Equivalents | $20,684 |
| Availability under Revolver | $75,600 |
This data illustrates the company's financial structure and its strategic approach to financing growth through a combination of debt and equity.
Assessing SkyWater Technology, Inc. (SKYT) Liquidity
Assessing SkyWater Technology, Inc.'s Liquidity
Current and Quick Ratios
The current ratio as of September 29, 2024, is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $139,981,000 | $160,043,000 | 0.87 |
The quick ratio, which excludes inventory from current assets, is:
| Current Assets (Excluding Inventory) | Current Liabilities | Quick Ratio |
|---|---|---|
| $125,552,000 | $160,043,000 | 0.78 |
Analysis of Working Capital Trends
Working capital is defined as current assets minus current liabilities. The working capital trend for the first nine months of 2024 is:
| Period | Current Assets | Current Liabilities | Working Capital |
|---|---|---|---|
| September 29, 2024 | $139,981,000 | $160,043,000 | ($20,062,000) |
| December 31, 2023 | $146,375,000 | $144,197,000 | $2,178,000 |
Cash Flow Statements Overview
The cash flow from operating activities for the nine-month period ended September 29, 2024, is as follows:
| Cash Flow Type | Amount (in thousands) |
|---|---|
| Net cash provided by operating activities | $19,739 |
| Net cash used in investing activities | ($15,792) |
| Net cash used in financing activities | ($1,645) |
Potential Liquidity Concerns or Strengths
As of September 29, 2024, the company has cash and cash equivalents totaling $20,684,000. The outstanding balance on the revolving credit facility is $21,300,000, with remaining availability of $75,600,000. The company has also secured a support letter from Oxbow Industries for funding up to $12,500,000 if necessary. Overall, liquidity appears constrained but manageable with available credit and cash reserves.
Is SkyWater Technology, Inc. (SKYT) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether SkyWater Technology, Inc. is overvalued or undervalued, a comprehensive analysis of key financial metrics such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios is essential.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical indicator of a company's valuation relative to its earnings. As of the latest financial data for the nine months ending September 29, 2024, the net loss attributable to SkyWater Technology, Inc. was $6,114,000, with a weighted average of 47,339 shares outstanding. This results in a basic net loss per share of approximately ($0.13). Given that the company is currently in a net loss position, the P/E ratio cannot be computed in a meaningful way.
Price-to-Book (P/B) Ratio
The P/B ratio offers insight into how the market values a company's equity compared to its book value. As of September 29, 2024, the total shareholders' equity was $56,164,000. With a current stock price of approximately $9.96 per share (average sale price under the ATM program), the book value per share can be calculated as follows:
- Total Shares Outstanding: 47,523
- Book Value Per Share: $56,164,000 / 47,523 ≈ $1,182.56
- P/B Ratio: $9.96 / $1,182.56 ≈ 0.0084
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides a measure of a company's overall value compared to its earnings before interest, taxes, depreciation, and amortization. For the third quarter of 2024, the adjusted EBITDA was $10,990,000. The enterprise value (EV) can be approximated by considering the market capitalization plus total debt minus cash and equivalents. As of September 29, 2024:
- Market Capitalization: $9.96 47,523 ≈ $474,000
- Total Debt: $21,300,000 (outstanding balance on the Revolver)
- Cash and Cash Equivalents: $20,684,000
- Enterprise Value: $474,000 + $21,300,000 - $20,684,000 ≈ $1,090,000
- EV/EBITDA Ratio: $1,090,000 / $10,990,000 ≈ 0.099
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly. The current price of approximately $9.96 reflects a decrease from its peak of $12.50 in early 2024. This trend indicates volatility, which could signal investor uncertainty regarding the company's future performance.
Dividend Yield and Payout Ratios
SkyWater Technology, Inc. does not currently pay dividends, which means the dividend yield is 0%. Therefore, no payout ratios can be calculated, reflecting the company's focus on reinvesting in growth rather than returning cash to shareholders.
Analyst Consensus on Stock Valuation
The consensus among analysts regarding SkyWater Technology, Inc. is mixed, with some recommending a hold position due to the company's ongoing operational challenges and recent financial losses. Others suggest a buy rating based on potential recovery in the semiconductor market and government support through initiatives like the CHIPS Act.
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Net Loss) |
| P/B Ratio | 0.0084 |
| EV/EBITDA Ratio | 0.099 |
| Current Stock Price | $9.96 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold/Buy |
Key Risks Facing SkyWater Technology, Inc. (SKYT)
Key Risks Facing SkyWater Technology, Inc.
The financial health of SkyWater Technology, Inc. is influenced by various internal and external risk factors. These risks can significantly impact the company's operational performance, market position, and overall financial stability.
Industry Competition
SkyWater operates in the highly competitive semiconductor industry. The company faces competition from established players such as Intel, TSMC, and GlobalFoundries. As of September 29, 2024, two customers accounted for approximately 69% of total revenue for the three-month period ended, highlighting the risk of dependency on major clients. The loss of a major customer could have an adverse effect on the company’s operating results and financial condition.
Regulatory Changes
Changes in regulations can pose challenges to SkyWater. The enactment of the CHIPS Act in August 2022 introduced both opportunities and risks. While it provides incentives for domestic semiconductor manufacturing, compliance with new requirements may increase operational costs. The company has recorded a valuation allowance of $27.7 million against its deferred tax assets as of September 29, 2024.
Market Conditions
Fluctuations in market demand for semiconductor products can affect revenue streams. The company reported a 29% increase in revenue for the first nine months of 2024, but also noted a decrease in wafer services revenue by 54%, indicating variability in market conditions. Economic downturns or shifts in consumer preferences could negatively impact sales.
Operational Risks
Operational challenges include supply chain disruptions and increased costs associated with raw materials. The cost of revenue for the first nine months of 2024 was $216.5 million, representing a 35% increase compared to the previous year. Such increases can erode profit margins and affect overall profitability.
Financial Risks
SkyWater's financial health is also at risk due to high levels of debt. The company had a long-term debt balance of $36.2 million as of September 29, 2024. Interest expense for the first nine months of 2024 was reported at $6.9 million, which reflects a 13% decrease from the previous year. However, any rise in interest rates could further strain financial resources.
Strategic Risks
The ability to execute its growth strategy is critical for SkyWater. The company has faced challenges in securing additional financing, having not sold shares under its ATM program in 2024. This lack of liquidity could hinder growth initiatives and capital expenditures, which totaled $15.8 million for the first nine months of 2024.
Mitigation Strategies
SkyWater has implemented several strategies to mitigate these risks. The company has a support letter from Oxbow Industries for funding up to $12.5 million if necessary, expiring March 18, 2026. Additionally, management believes that cash on hand, along with availability under its revolving credit facility of $75.6 million, will be sufficient to meet operational needs.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | Dependence on major customers | 69% of revenue from two customers |
| Regulatory Changes | Compliance with CHIPS Act | Valuation allowance of $27.7 million |
| Market Conditions | Fluctuations in demand | 29% revenue increase, 54% drop in wafer services |
| Operational Risks | Supply chain disruptions | Cost of revenue at $216.5 million |
| Financial Risks | High debt levels | Long-term debt of $36.2 million |
| Strategic Risks | Challenges in securing financing | No shares sold under ATM in 2024 |
Future Growth Prospects for SkyWater Technology, Inc. (SKYT)
Future Growth Prospects for SkyWater Technology, Inc.
SkyWater Technology, Inc. is positioned for significant growth driven by several key factors:
Key Growth Drivers
- Product Innovations: The company leverages its Technology-as-a-Service model, co-developing process technology with customers, which is expected to enhance its semiconductor offerings significantly.
- Market Expansions: The recent enactment of the CHIPS Act has allocated $52.7 billion for semiconductor R&D, which will likely benefit SkyWater as it aims to modernize its facilities and expand production capabilities.
- Acquisitions: Strategic partnerships, such as the agreement with Oxbow Industries, provide essential funding and resources to meet operational demands and expand service offerings.
Future Revenue Growth Projections and Earnings Estimates
For the first nine months of 2024, SkyWater reported revenue of $266.8 million, a 29% increase from $207.5 million in the same period of 2023. This growth is largely attributed to increased demand in Advanced Technology Services (ATS) and tools revenue.
| Period | Revenue (in millions) | Percentage Change |
|---|---|---|
| Q3 2024 | $93.8 | 31% |
| First 9 months 2024 | $266.8 | 29% |
| First 9 months 2023 | $207.5 | N/A |
Strategic Initiatives and Partnerships
The company has submitted an application for funding through the CHIPS Act for modernization and equipment upgrades, which could enhance production capabilities. Additionally, SkyWater has a commitment to a 20% matching share contribution of project costs to Osceola totaling $9.1 million, with a limit of $1 million in any single calendar quarter.
Competitive Advantages
- Trusted Accreditation: The company holds Defense Microelectronics Activity Category 1A Trusted Accreditation from the U.S. Department of Defense, enhancing its appeal to government and defense clients.
- Integrated Services: By combining development and manufacturing, SkyWater can rapidly transition new processes to high-yield production, reducing time and costs associated with third-party fabs.
- Diverse Market Focus: SkyWater serves high-growth markets including advanced computing, aerospace and defense, automotive, bio-health, and industrial sectors, positioning itself for sustained demand across various industries.
As of September 29, 2024, the company had cash and cash equivalents of $20.7 million and total liabilities of $37.2 million, indicating a solid financial footing to support its growth initiatives.
| Financial Metrics | Value |
|---|---|
| Cash and Cash Equivalents | $20.7 million |
| Total Liabilities | $37.2 million |
| Net Income (Q3 2024) | $1.5 million |
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Resources:
- SkyWater Technology, Inc. (SKYT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SkyWater Technology, Inc. (SKYT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View SkyWater Technology, Inc. (SKYT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.