0001819974-25-000028
SEC filingSkyWater's Q2 2025 revenue fell 37% YoY to $59.1M, driven by a $24.7M decline in customer-funded tool revenue, resulting in a net loss attributable to the company of $10.0M.
SkyWater Technology's second quarter of fiscal 2025 reflected a significant revenue decline, with total revenue falling 37% year-over-year to $59.1 million from $93.3 million in Q2 2024. The primary driver was a $24.7 million decrease in customer-funded tool revenue, which fell to $1.0 million from $25.9 million. Advanced Technology Services (ATS) development revenue also declined by $9.1 million, or 15%, to $52.6 million, largely due to a $9.3 million drop in aerospace and defense industry revenue attributed to changes in U.S. government policy and defense spending. Wafer Services revenue decreased slightly by $0.4 million to $5.4 million.
Gross profit decreased 36% to $10.9 million, but gross margin improved slightly to 18.5% from 18.3% in the prior year, reflecting margin stability despite the significant revenue decline. Operating income swung to a loss of $6.5 million from a profit of $1.4 million in Q2 2024, driven by a $1.7 million increase in selling, general, and administrative expenses, which included $2.2 million in acquisition-related costs for Fab 25. Net loss attributable to SkyWater Technology, Inc. widened to $10.0 million from $1.9 million, resulting in a loss per share of $0.21 compared to $0.04 in the prior year.
As of June 29, 2025, SkyWater held $49.4 million in cash and cash equivalents, a significant increase from $18.8 million at December 29, 2024. Total assets grew to $334.7 million from $313.8 million, while total liabilities increased to $282.7 million from $250.3 million. The company's revolving credit facility had an outstanding balance of $25.8 million at an interest rate of 8.7%, with remaining availability of $104.2 million. Subsequent to quarter-end, on June 30, 2025, the company entered into an amended loan agreement increasing the facility to $350 million to finance the Fab 25 acquisition.
Shareholders' equity decreased to $52.0 million from $63.5 million, primarily due to the net loss and distributions to noncontrolling interests. The company's accumulated deficit grew to $149.3 million from $132.0 million at year-end 2024.
Operating cash flow improved dramatically to $54.3 million in the first six months of 2025 from $5.4 million in the same period of 2024. This improvement was driven by a $45.1 million increase in contract liabilities, including a $52.0 million cash receipt from a customer for tool installation, and a $23.6 million decrease in accounts receivable and contract assets due to improved collection efforts. Free cash flow (operating cash flow less capex) was $35.5 million, compared to $2.2 million in the prior year period.
Capital expenditures increased to $17.4 million from $2.1 million, reflecting continued investment in development and manufacturing capabilities. Financing activities used $5.0 million, primarily due to net repayments on the revolving credit facility.
Management attributed the revenue decline to changes in U.S. government policy and defense spending, which impacted program funding and slowed the pipeline for aerospace and defense contracts. The company expects to fulfill these contracts in the second half of the year. The acquisition of Fab 25 on June 30, 2025, is expected to enhance SkyWater's capabilities in foundational semiconductor manufacturing and strengthen its strategic position within North America's semiconductor ecosystem.
The company signed a preliminary memorandum of terms for up to $16 million in CHIPS Act funding, expected in 2026, in addition to $19 million in state incentives from Minnesota expected to start in Q4 2025. Management believes sufficient liquidity exists to fund operations for the next twelve months.
SkyWater operates as a single reportable segment. One customer accounted for 43% of revenue in Q2 2025 and 41% for the first six months. Contract liabilities increased to $152.1 million from $107.1 million at year-end 2024, driven by customer prepayments. Remaining performance obligations totaled $133.8 million, expected to be recognized over up to 4.0 years.
Equity-based compensation expense was $2.3 million in Q2 2025, compared to $2.0 million in Q2 2024. The company identified a material weakness in internal control over financial reporting related to the revenue accounting process, which remains unremediated as of June 29, 2025.