SkyWater Technology, Inc.

or the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Claire McAdams, Investor Relations. Please go ahead.

Good afternoon, and welcome to Skywater's second quarter 2024 conference call. With me on the call today from Skywater are Thomas Sonderman, Chief Executive Officer, and Steve Manko, Chief Financial Officer. I'd like to remind you that our call is being webcast live on Skywater's Investor Relations website at ir.skywatertechnology.com. The webcast will be available for replay shortly after the call concludes. On our IR website, we have posted a slide presentation to accompany today's call, as well as the financial supplement summarizing our quarterly and annual financial results for the last three years, including all non-GAAP adjustments and comparisons to our GAAP results as well as the impact of tool sales on our gross margins. During the call, any statements made about future financial results and business are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially. For a discussion of these risks and uncertainties, please refer to our filings with the Securities and Exchange Commission, including our earnings release filed on Form 8K today, and our fiscal 2023 Form 10-K. All forward-looking statements are made as of today, and we assume no obligation to update any such statements. During this call, we will discuss non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings release, our financial supplement, and in our Q2 earnings presentation, all three of which are posted on our investor relations website. With that, I'll turn the call over to Tom.

Thank you, Claire, and good afternoon to everyone on the call. I'm pleased to report strong financial results for Skywater's second quarter with a record $93 million in revenue and our achievement of non-GAAP positive EPS for the first time. ATS development revenue of nearly $62 million exceeded our expectations to reach a new record of 1% from Q1 and up 18% compared to Q2 of last year. This growth was driven primarily by continued strength in our aerospace and defense business, which exceeded forecasts due to pull-ins of demand on multiple programs, which we delivered through improved fab cycle times and agile engineering execution. Wafer services revenue was just under $6 million, slightly better than expected, but still well below prior run rates due to continued weakness in the broader industrial segment. Tool revenues exceeded our forecast at $26 million with enhanced equipment lead times enabling faster deliveries within the quarter. Customer-funded tool installations demonstrate our customers' commitment to bring additional capabilities and capacity into our fabs to support their most critical programs. We believe we are in the early stages of an anticipated multi-year period of elevated customer co-investment. These investments are adding critical new capabilities in our fabs and will enable substantial additional scale to our business while maintaining our streamlined cost structure given minimal Skywater-funded CapEx needs. With the record results and the revenue upside in ATS, we achieved non-GAAP EPS positive results for the first time this quarter. With strong gross margin flow through and ongoing efficiency gains, we have now demonstrated the expected business level necessary to support profitable results in the future. We believe our CapEx Lite and high operating leverage business model will lead to significant expansion of our gross margin profile allowing strong profitable results in the years to come. Today, I will highlight several positive developments in our business and provide our current outlook within the overall customer demand environment. First, our strong results for Q2 and continued confidence in the growth expected in our ATS business for fiscal 2024 underscored the strategic importance of multiple aerospace and defense programs underway at Skywater. Altogether, our expectation is that the majority of our growth this year will be driven by several strategic A&D programs witnessing consistently strong demand coupled with steady improvements in our capabilities and operational execution. For Q2 specifically, we witnessed some pull-ins of demand from the second half, which we expect will result in a slightly front-half loaded year for our ATS business in 2024. Overall, we believe these programs are secure and well-funded. The added revenue tailwind of record-level tool sales is yet another proof point of our customers' confidence in Skywater as a trusted domestic source of critical semiconductor technology. Next, we are pleased to announce another successful customer transition from ATS to Wafer Services, this time for biomedical pioneer QuantumSci. We have remained committed to our focus on next generation medical technologies, in particular for the novel categories of instruments and devices that leverage our unique service model that enables highly differentiated and customized technologies. Our recent collaboration with QuantumSci will support a key facet of their state-of-the-art proteome sequencing technology to enable enhanced analysis of proteins, anticipated to propel a variety of life sciences applications, including drug discovery. We continue to believe that these types of customer partnerships build a strong foundation for the future growth of our commercial businesses, where in addition to advanced biomedical, we see strong potential for our advanced compute and thermal imaging platforms. Another exciting development is the recent installation of MultiBeam's high-productivity direct-write patterning system into our Minnesota FAFSA. The first-of-its-kind multi-column e-beam lithography, our MEBL system, enables the most advanced 200-millimeter patterning solution capable of sub-50-nanometer geometries currently available from early concept prototyping through production ramps. We consider this new direct write lithography capability, which is orders of magnitude faster and more productive than conventional e-beam solutions, as a key development towards supporting strong customer demand for our technology as a service, our task business model. MEBL accommodates high topography and curvilinear designs to enable 3D devices such as MEMS and photonics, and also can enable secure chip identification for anti-conference applications, as one example. MEBL can also enable advanced packaging for very large and custom interposers. We are very excited to add this capability in order to speed the concept of production journey in secure defense, biomedical, thermal imaging, and the high reliability and advanced compute markets. Another highlight since last quarter is the first tool delivery of our new fan-out wafer-level packaging platform in Florida. With the arrival of tools accelerating as we move through the next several quarters, we anticipate ATS development on this exciting new technology to ramp up throughout 2025. We have already begun engaging a broad set of customers across both defense and commercial applications, including Tier 1 semiconductor companies. We believe there is a clear market demand for domestic advanced packaging services that can support wafers from any foundry. We have secured $120 million in outside funding to complete the tooling and facilitation of our Florida operation. This first new tool delivery for our 300 millimeter capable fan-out packaging line is an exciting milestone for our emerging advanced packaging business. Now turning to our outlook. Our full year revenue expectations for ATS and wafer services in 2024 are largely unchanged since our last earnings call. We continue to expect ATS development growth in the range of 10% to 20% over 2023 and a meaningful decline in our legacy wafer services revenue. Today, we are once again increasing our forecast for customer-funded CapEx investments, which for Skywater are recorded as tools revenue. We now expect approximately $80 million of customer-funded CapEx investments in 2024. With strong operational performance as we install and ramp up these new systems, We are executing well in our expected path to install over $200 million of new customer-funded tooling spanning 2024 through 2026. For Q3 specifically, we are forecasting total revenues to be slightly higher than Q2. Within this forecast, ATS development revenue is expected to be $60 million plus or minus 3% and wafer services revenue in the $4 to $5 million range. With our current visibility, we believe wafer services is likely to remain quite soft for at least another quarter or two, reflecting the continued weakness in the broader industrial market. That being said, we are optimistic for a return to growth for wafer services in 2025, driven by the thermal imaging and medical diagnostic segments. With customer-funded CAPEX continuing to ramp to record levels, Tool revenue in Q3 is expected to be approximately $30 million. Finally, we are driving for incremental growth in each of our businesses as we move into 2025, and we look forward to continuing to build your confidence in our ability to execute on our growth and profitability objectives. I will now turn the call over to Steve.