Strong Progress Toward 2022 Revenue Growth Objectives; Continued Gross Margin Expansion

BLOOMINGTON, Minn. — (BUSINESS WIRE) — August 15, 2022 — SkyWater Technology (NASDAQ: SKYT), the trusted technology realization partner, today announced financial results for the second quarter of 2022, ended July 3, 2022.

• Total revenue of $47.4 million, up 15% year over year.
• Net loss to shareholders of $13.0 million, or (27)% of revenue.
• Adjusted EBITDA of $(1.6) million, or (3.4)% of revenue.

“We are pleased to report second-quarter 2022 revenues of over $47 million and increasing momentum toward our margin expansion and profitability objectives,” said Thomas Sonderman, SkyWater president and chief executive officer. “Our year-over-year revenue growth demonstrates both the recent successes in winning new ATS customers as well as the more favorable contract terms reflected in our wafer services business. Excluding tool sales, ATS revenues grew 20% year-over-year and wafer services revenue grew 23%, and with the continued growth of ATS along with better pricing and predictability in our wafer services business, we achieved very strong levels of flow-through and reported positive gross margins in the quarter. We also achieved sequential quarterly revenue growth with nearly every key ATS customer, offsetting the expected quarterly decline from wafer services, which came as a result of the accounting treatment pull-in of $8 million of WIP into our first-quarter wafer services revenues. Finally, since last quarter we have announced new awards and partnerships that provide meaningful revenue opportunities in support of our long-term growth and profitability targets. For 2022, our performance year to date and expected second-half revenue ramp in multiple ATS programs provides increasing confidence that we will achieve growth this year approaching our long-term annual target of 25%.”

Recent Business Updates:

• Announced partnership with the State of Indiana and Purdue University to build advanced $1.8 billion semiconductor fab on Purdue’s campus in the Discovery Park District
• Significant progress in RH90 program, driving an expected second-half 2022 revenue ramp:
  • Successful Q2 completion of base prototype phase with the Department of Defense (DOD)
  • Recent award of additional $27 million Phase 1 option has been funded and launched in support of continued development
  • Continued progress toward anticipated Phase 2 productization and qualification
  • Recent partnership with Mobile Semiconductor to provide SRAM compilers, which will help our customers design new devices on our RH90 platform
• Announced $15 million of investment from the DOD, funding the facilitation of open source design of SkyWater’s SKY90-FD process technology in partnership with Google, creating an IP pipeline and pathway to commercial volume manufacturing
• In heterogeneous integration, entered license agreement with Xperi, providing our customers access to Adeia’s ZiBond® direct bonding and DBI® hybrid bonding technology and IP to enhance next-generation devices for commercial and government applications
• Work with bio-health customer Rockley Photonics enabling their revolutionary wrist-worn biomarker sensor continues to progress towards a production ramp
• Significant gross margin improvement in the quarter was driven primarily by favorable revenue mix, with another sequential increase in ATS revenues along with improved pricing in Wafer Services
• Successful passage of the CHIPS and Science Act, which is landmark legislation that will strengthen the domestic semiconductor manufacturing ecosystem, within which we believe SkyWater will play an increasingly important role, across each of our existing and planned fab locations in Minnesota, Florida, and Indiana
• Increased confidence in 2022 revenue expectations approaching long-term annual growth objective of 25%

Q2 2022 Summary: