Q4 2021 Skywater Technology Inc Earnings 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, which is available on our Investor Relations website.
Unless noted all comparable referenced today are versus the prior year, our fourth quarter of fiscal 2020 with that let me turn the call over to Tom.
Thank you Heather and good morning to everyone on the call today I will briefly cover our high level Q4 financial results and then highlight the exciting dynamics, we see in our business, including the progress we're making on some of the emerging technologies expected to drive our long term growth.
Total revenue in the fourth quarter was up 50% year over year, excluding the $2 5 million benefit of the extra operating week in Q4, 2020 and tool revenue in both Q4 this year and last year on a reported basis total revenue of $38 $5 million decreased 3% year over year.
Here.
Sky water continues to win new business, signing nine new advanced technology programs in the fourth quarter, our customer count has increased by over 70% from our IPO in April . In addition, our sales pipeline grew by over 50% in 2021.
non-GAAP cost of revenue of $40 4 million decreased 16% year over year. This increase was driven by more activities labor inflation supply chain constraints and investments in our strategic platforms.
As demand for our technology as a service model increases we have continued to hire at our Fabs to support increased activities. In addition to head count increases sky water like others in the semiconductor industry is seeing wage inflation.
The supply chain for substrates equipment chemicals, and gases remains congested with rising prices in Q4 for both wafers and nitrogen we added additional sources at a higher cost to complement the output from our primary suppliers.
Our cost of revenue also contains strategic long term investments in our radiation hardened and heterogeneous integration platforms.
In addition, we have continued R&D investments to build capabilities in our targeted growth platforms, including power.
We also continued to aggressively expand our sales team and transition to a public company both of which increased SG&A adjust.
Adjusted EBITDA was negative $4 9 million in the fourth quarter.
Now I will provide an update on our four growth areas.
The six style health programs one in Q2 of this year continue to move rapidly through our task funnel in preparation for market entry.
These programs are expected to enable novel innovations and rapid diagnostics genetic sequencing and various consumer and clinical medical device applications last month, Rackley Photonics announced the results of a study demonstrating their noninvasive risk warrants sensor.
This is a major milestone towards incorporation of Broccoli's unique biomarker platform into consumer health Wearables devices.
Several of our other bio hub customers have significant commercial and regulatory milestones planned for 2022, we remain highly enthusiastic about our strong pipeline for Biopharma as we continued to demonstrate sky waters differentiated capabilities in this rapidly growing market.
Earlier this year, we announced that through an Ats collaboration with our customer applied novel devices. Our A&D, we achieved an industry breakthrough in power MOSFET performance.
By using a novel channel engaged structure that substantially reduces parasitic switching losses, we have co created a new class of power MOSFET that pushes the viability of silicon based switching to a higher frequency range often written off as only serviceable by wide bandgap technologies. This new technology will deliver higher.
CNC for voltage and signal conversion and a wide range of industrial power management applications, including switch mode power supplies.
We're currently working with A&D and their initial customer to prepare for the production ramp of these new devices and the expected new revenue for our wafer services business.
As part of our technology licensing agreement with A&D Sky waters building, a reference design platform using this new device class with this capability sky water can directly engage with a host of other power management companies, allowing us to hasten the adoption of this exciting new green technology across the industry.
We continue to make good progress in all three elements of our heterogeneous integration technology roadmap, which we previously referred to as advanced packaging.
This includes silicon enter posers wafer bonding and fan out wafer level packaging.
We achieved first full flow production earlier, this month and important customer milestone for our Silicon Air Poser program, we expect to achieve the full qualification of our phase one <unk> in the first half of 2022.
We are also planning for our phase II and phase III milestones this year, which include TSV and RTL incorporation to.
The production readiness at our Florida facility, including the launch of our ISO 9000, and trusted accreditations continues to rapidly advance after only one year of taking over the operation.
A number of exciting new engagements are also progressing well through our customer onboarding process driving additional revenue for the site in 2022.
In November we established our presence in Indiana at Westgate at Crane Technology Park adjacent to Crane Naval Center.
Crane is a naval laboratory and a field activity of Naval Sea systems command centers responsible for multi domain multi spectral full lifecycle supportive technologies and system enhancing capabilities, while serving as the lead in the United States is trusted assured microelectronics program.
Physical proximity to Navy Crane at this growing epicenter for the department of Defense's Microeconomics community continues to cement <unk> role as the trusted foundry partner.
During the fourth quarter, we achieved an important milestone with our <unk> 90 technology platform by delivering encouraging aviation performance test results on our first fully integrated wafers with copper interconnects. The eventual production of these highly valued Rad hard Asics is up national importance for both space space and defense.
Occasions, and skywalk continues to play a crucial role in this enablement.
On Tuesday January 25th the United States House of Representatives took an important action and advancing the federal funding for re shoring in the semiconductor industry that had previously been passed by the U S Senate and referred to as the chips Act. We are encouraged by the government's continued focus on incentives for domestic microchip.
<unk> research and development and heterogeneous integration.
The Sky water team continue to assist the U S government by responding to the department of Commerce is request for input and administering a chips like grant program.
Additionally, we continue to enjoy increased support from our state leaders in Minnesota, Florida, and Indiana, where we have ongoing dialogues with the governors in these states to articulate sky waters requirements for expanding in states dim talent and creating a vigorous hi tech business environment, we intend to be a leader in rebuilding our nation.
Manufacturing infrastructure for the advanced technologies that will be the major drivers in our industry for years to come.
The amazing work being done by the employees of Sky water is critical to our customers our shareholders and our nation. We will continue to decisively invest in a rad hard power and heterogeneous integration platforms to fuel future growth and further our ability to co create the technologies of the future with our customers.
In a post Moore's law era.
For 2022, we expect revenue growth near our long term goal of 25%. This is supported by 50% year over year growth in our sales pipeline strong program design wins throughout 2021, and the expected movement of our radiation hardened platform later this year to the prioritization phase the.
We expected revenue growth in 2022, coupled with the company's robust strategies to mitigate current supply chain dynamics are expected to position us well for gross margin expansion later this year.
I will now turn the call over to Steve for more information on <unk> financial performance and our recently completed quarter.
Steve.
Thank you Tom total revenue for the fourth quarter of 2021 was 38 5 million year over year revenue grew 15% when excluding tool sales in both Q4 s and the extra operating week in Q4 2020.
Advanced Technology services revenue was $24 4 million and wafer services revenue was $14 2 million.
Ats revenue was again impacted by the customer program that was being reconstructed and is expected to recommence. In 2022. This is the same program that we previously discussed during our second and third quarter earnings calls. This contract contributed $2 4 million in fourth quarter, 2020, and $23 million in fiscal <unk>.
$1 20.
Also as previously communicated we have a large multi year Ats program originally scheduled to be completed in the fourth quarter of 2021 that was pushed out into early 2022. This new revenue recognition from the third and fourth quarter of 2021 into 2022.
Customer funded tool revenue, which is included in our Ats revenue in the fourth quarter of 2021 was $1 1 million compared to $4 9 million in the fourth quarter of last year.
As anticipated wafer services revenue of $14 2 million increase from 2020, as we continue to ramp production.
GAAP cost of revenue was $55 2 million, an increase of 52% year over year. However cost of revenue includes a $13 4 million inventory write down for temperature differential sensing wafers. We continue to seek an alternative buyer for these wafers Sky order does not have any remaining finance.
Exposure for this one off contract.
non-GAAP cost of revenue was $40 4 million compared to $34 9 million in the fourth quarter of 2020.
GAAP gross loss was $16 6 million decreasing from gross profit of $3 5 million in the fourth quarter last year.
Gross margin of negative 43, 1% declined versus prior year of eight 9%.
non-GAAP gross loss was $1 9 million compared to gross profit of $4 8 million in the fourth quarter last year.
non-GAAP gross margin was negative four 8% and 12, 2% respectively.
Cost of revenue increases were driven by three primary factors.
Labor supply chain and continued investments for long term growth.
In addition to hiring ahead of the volume ramp at our Minnesota Fab, we've seen wage pressure for manufacturing roles. We've increased our hourly wage in July to attract and retain talent and there is additional wage pressure in the manufacturing labor market, we expect to persist throughout 2022 labor increases accounted for half of the sequential increase in non <unk>.
<unk> cost of revenue in the fourth quarter.
Supply chain remains tight in many areas of sky water like other semiconductor companies is growing to meet market demand and chip shortages. As a result, we are experiencing higher cost for starting materials utilities in freight.
In Q4 freight costs were up over 50% compared to the prior four quarter average our expectation is that these higher costs will continue in 2022.
We continue to make investments for the long term growth of the company by building out our Rad hard and heterogeneous integration capabilities. Both programs are expected to be a long term growth drivers, but our near term headwind on profitability in the fourth quarter of 2021 depreciation related to the Rad hard program was one <unk>.
<unk> million dollars, and we incurred $2 7 million in cost of revenue for Florida.
In 2021 these investments in Rad hard and heterogeneous integration were $14 5 million combined of our cost of revenue.
GAAP R&D in the fourth quarter was $1 2 million compared to $1 7 million in the fourth quarter 2020.
Adjusting for equity based compensation non-GAAP R&D was $1 9 million in the fourth quarter 2021 versus $1 6 million in the prior year's fourth quarter.
GAAP SG&A was $10 million compared to $6 7 million in the fourth quarter last year. The increase was driven primarily by public company costs and stock based compensation.
non-GAAP SG&A was $8 3 million in the fourth quarter of 2021 compared to $6 2 million last year.
Adjusted EBITDA was a loss of $4 9 million declining from a positive $1 3 million last year, reflecting the decrease in gross profit flow through this quarter.
Cash used in operations during Q4 was $13 7 million.
We invested $5 6 million in Capex this quarter on fab maintenance and improvements.
We ended the quarter with $12 $9 million in cash and cash equivalents total debt outstanding was $59 4 million as of January 2022, which includes $24 8 million for our revolver and $34 9 million for our variable interest entities totaled.
Total inventory at the end of Q4 was $17 5 million compared to $27 2 million at the end of fiscal year 2020.
Q4, 2021, ending inventory reflects the $13 $4 million write down of the temperature differential sensing wafers.
As you update your Skywalker models to following some additional color for our expected operating costs for the first quarter of 2022.
Research and development expenses are anticipated in the 2% to $2 $2 million range, excluding stock based compensation.
SG&A expenses are expected to be approximately $10 million, excluding stock based compensation and finally, we anticipate annual stock based compensation to be approximately $9 million.
With that I'll turn the call back to Heather and welcome your questions on Sky water.
Thank you, Steve Sky water will be participating.
<unk> Technology conference on March 4th please visit the Investor Relations section of our web site for other upcoming presentations.
Operator, please open the line for questions.
Thank you at this time I'd like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster. We will take our first question from Krish <unk> with Cowen <unk> company.
Okay.
Okay.
Youre guiding for 'twenty.
Revenue.
How should we think about <unk>.
<unk> growth relative.
So that 25% compared to last year.
Can you say how much of this revenue growth was driven by volume and pricing dynamics.
Yes, so good question.
The way I would think of it as that wafer services, obviously continues.
To increase our activity level.
We have been driving a lot of productivity improvements and hiring in Nevada to continue to not only produce more volume from our legacy programs, but also ramp the programs, including power and some of the others that transitioned out of Etfs in the wafer services.
This past year. So I continue to believe that wafer services will become.
Increasing the large component of the overall revenue stream, but that said, we did grow our customer base by 70% last year, we have a lot of new Ats programs that began ramping last year and will continue to ramp this year and we expect Ats to also.
Grow at a very healthy pace that zero unfolds, so it's really going to be that combination.
Both that will drive the revenue for this I mean, this coming year, Steve you got anything to add good answer.
Got it.
That's very helpful. Tom as a quick follow up I understand demand is strong but.
How should we think about seasonality in the current Q1.
Can you guys give any color on how to think about capex for the full year. Thank you.
On the seasonality I would say that we we really don't see too much in terms of seasonality, obviously, we do have some.
Government programs that can be somewhat cyclical in terms of when timing occurs.
Occurs and then in the automotive sector, we tend to see.
A little bit of cyclicality, there, but for the most part.
I think we're somewhat immune to those dynamics that you would see more of the consumer markets.
For us it's all about execution frankly, we have a very strong portfolio of programs that customers are very eager to move not only through our etfs funnel, but ultimately to value manufacturing and I think this this drive for more electronics is just.
Really accelerating the adoption of our model. So we feel really good that we're somewhat immune to maybe some of the traditional seasonality effects.
Plagued our industry for many years.
The only item I'd add on to that would be remember in Q1 of 2020. We also had approximately $15 million of tool revenue that came through as you remember that was a pretty unique opportunity for us we were thankful for that opportunity, we hope to get some gains off of that in 2022, but we don't expect that to be repeatable in Q1 of 2022.
Got it and then I think on that.
Catholic side.
Yes on the Capex side of course, well I think we have a targeted we'll call it internal R&D.
What is it $10 million this year.
The investment side as we look at it from an overall investment perspective, so what the numbers that were provided on the call. You can see that we are slightly increasing our R&D investment over the course of 2022, we still are looking for targeted capex spend that fits within our strategy, but we also invested approximately $35 million over the core.
A 2021 that we would have leverage against the return on starting in 2022. So again a lot of investments made over the course of 2021 that should start with generating return in 2022.
Something to say on that one thing thats important to understand about sky water as we get access to capital at a very different.
Investment rate than some of our competitors and we have been taking those investments getting them put inside the fab and have been essentially up making them operational over the last 12 months to 18 months as those tools become.
Active in not only adding output on the wafer services side, but also accelerating our ats programs, we expect to see a very nice return on invested capital.
For the investments that our partners make with us so that.
The capex that that we make internally coupled with a lot of the investment that we make through our Ats programs really gives us kind of a strong R&D pipeline that will drive future growth in years to come.
Thanks, Tom.
And next we'll go to Rajiv Gill with Needham <unk> company.
Yes, thanks for taking my questions.
I appreciate it just wanted to get a sense.
The $15 million of revenue.
Pushed out.
From Q3 Q4 in Q2 this year.
In the past you've broken it down into kind of three.
Three components.
Had a power MOSFET program revenue.
You had a multi year NPS program.
Net.
Did you book revenue in the quarter, but we'll.
We're supposed to kind of move through the.
The development and then last one.
$105 million government contract, which the funding was awarded but it wasn't released yet.
We're kind of three components.
<unk>.
Millions are pushing out that had different.
Kind of timing diner.
Dynamics related to each of those so my first question is.
If you could maybe give us an update on those three components and kind of where we are in terms of kind of recognizing that revenue.
And then Steve.
Talked about the margin expansion later in the year I was wondering if you could kind of describe that a little bit more detail.
Margin expansion really going to come from.
Obviously more volume.
Fab.
Are you getting kind of a better fixed.
The absorption of fixed cost.
Just curious how you're thinking about the margin.
Expansion, if there's any kind of way.
Provide a sense of the magnitude of the expansion I appreciate that thank you.
Yes, great great questions I'll start with the <unk>.
$50 million, so you nailed the three.
There was the multi year program.
We again had push some of the milestones into 2022 that is continuing to execute per plan the end customer as well as sky water and our other partners are driving this far and we are very confident that everything is moving forward. So that we can complete.
The initial program scoping and move onto the next phase of that particular engagement in terms of the power management as I alluded to in my remarks.
We're really excited about what's happening in empower.
Have the A&D technology that we continue to prepare to ramp with our A&D and varying customer. This year and then we also have several other I would call more traditional power platforms that we continue to.
Progress on as we prepare to ramp those and then as we've talked before we're also.
Strategically looking at again market that is a longer term play for us, but we're doing a lot of exciting things laying the foundation. So that ultimately we will have traditional power MOSFET, coupled with our new A&D technology, which what I would call a bridge technology to ultimately getting to Gan and then in terms of the government push.
Obviously, we've all heard that the government has not yet closed on the budget. The expectation is that will occur in early March, but that's kind of the gating item forgetting.
The release of the awarded funds that we referenced in the last meeting.
And then I would like to just point out on the wafer services ramp.
We really are making great progress in terms of the execution and the fab we're navigating.
Labor market challenges increases and what you have to pay to get employees inside the fab, but a lot of things that I talked about last quarter are coming to fruition and we feel really.
Strong that not only is the wafer services portion beginning to execute much better but also the integration of Ats and wafer services into a holistic operating model.
Allowing us to accelerate the transition of customers as they move through our funnel, Steve anything to add on the gross margins.
So to answer your question on the gross margin that's something that we're looking at.
Expecting in the second half of this year you saw the increased cost of revenue coming through in the fourth quarter with some of the constraints that we're dealing with in supply chain. The labor increases in the market. So we expect that to be remaining with us in Q1 and over the course of 2022, However, as Tom mentioned earlier in the call the combination of <unk>.
Topline revenue in both wafer services and Acs once we get to certain levels of revenues Thats really when you start to see the margins expanding so it will be a combination of a better cost absorption on the.
Wafer services side, but also the high margin business on the ATI ETS side drilling that's what will lead to a combination of topline revenue growth that will lead to gross margin flow through.
Great.
I understand.
So when you when you're thinking about.
Your near term target of 25% year, Youre, hoping to achieve that and just a follow up.
Previous question.
Does that include.
That $15 million.
Number that was pushed out.
Q3, Q4 into this year does that assume that that level of revenue will be recognized.
And then let me just if you can.
Could you help me parse that out versus some of the new customer programs that youre talking about and kind of ramping through the whole process.
So just again just curious.
When you're talking about the near 25% number does that include.
The assumption that you will be able to recognize the revenue of that $50 million in and what will be above and beyond that.
Yes.
Would say Oh go ahead sorry.
No no go ahead.
Yeah, I'll start and Steve you can amplify the the way I would think of it is obviously the $15 million push out as I. Just articulated is going to continue to flow into 2022, obviously some of these programs. They don't go away, but the timeline shifts a little bit, but it's really going to be a combination of that plus.
The increased customer base, the strong pipeline, 50% increase in the size of our pipeline. Those we expect to have some conversions, we expect to see more strength coming out of our Florida operation as those programs.
Continue to ramp and then again, we have been adding a lot of capacity and of the fab and our <unk>.
End of line copper drove Amazon flow.
We've been strategically investing in adding other capabilities I've mentioned before we have a new twin scan.
From ASML that is now installed and being put into production. So all of those variables combined is what gives us confidence that we can maintain the long term growth model of 25% and of course.
We're operating against a backdrop of a lot of excitement about.
This technology as a service approach that we are bringing to.
To the industry and that's what's really driving the growth in our customer base and we become the sole source provider for these customers and every one of them wants to get to market as quickly as possible I get asked all the time, what can we do to move faster and Thats clearly one of the things that we work on every day.
I appreciate that.
Yes.
Next we'll go to Natalia Winkler with Jefferies.
Hey, guys. Thanks, so much for taking my question.
I guess the question.
Steve you just mentioned that Theres, some kind of level of revenue.
Thanks.
You better fixed cost absorption. So I'm just curious if you could possibly share with us some more color on that.
Got it.
Yes, clearly the financials that we've seen on the revenue side coming through we're showing.
<unk> gross margin forward.
On a quarterly basis over the course of 2021 I'll remember within that we are making significant investments for the Rad hard technology, and the heterogeneous integration and our sky water, Florida location as well.
But with that with the cost coming through.
We need to be at a level that would be in the mid forty's for revenue for one that really has start generating some positive gross margin for the organization, while continuing to invest for the long term growth of the company.
That's very helpful. Thank you and then if I if I may just to follow up.
One is on.
And again, our program would you guys mind sharing kind of a little bit more on your progress and I guess, when we think about that Capex program that you've announced the $50 million.
Can you share with us like how far are you through that program is there left in it or the bulk of it.
Thank you Brian .
Yes, so as Steve said, we did invest $35 million in Capex last year, we got strategic approval from the board to do targeted investments.
We have others that we're continuing to evaluate in terms of again driving wafer services and <unk>.
Ats program acceleration.
<unk> Gan component of it again as I just alluded to is very strategic Vars, we're looking at both the technology side as well as the put in the manufacturing capability in place we have active discussions going on.
With multiple technology partners and end customers and again, we're linking this to our overall again strategy I mean, our overall power strategy with Gan being kind of.
The final component.
As I alluded to with power MOSFET traditional power MOSFET today, leading to the end.
Technology that we'll be introducing.
This year.
Again kind of a bridge technology allows us to attack a portion of the market that you cant with traditional silicon and also do it in a much more cost competitive way than you can with Gan, but ultimately again, we see being a player that will have more color around as this year unfolds.
Thank you and then sorry my last follow up is just on the labor costs.
You mentioned that price increase.
Their labor force by 70%.
And then just.
Can you give me a little bit more color on how does that leave an increase.
Our key to weather.
Footprint.
Do you have to extend the Florida facility or the.
Packaging.
Yes, so just to be clear the customer increased by 70% since our IPO, we have hired a lot of new personnel in the company.
The cost of labor.
The real driver that we've been dealing with.
50% of the Cogs increase for the last quarter the beyond the prior quarter was driven by the cost of labor. So it is just.
Requiring more dollars to get people.
Two.
Work in places like Sky water, it's a very competitive market.
So we've had to put in some changes in terms of our salary structure, especially within the fab. So that we can create good sticky relationships with our employees. So I would say that is going well.
The ability.
For us to make those employees effective is something that we're also very focused on a lot of exciting things that we've been doing in the company.
Not only hire people that gets them to a high level of productivity as quickly as possible.
You have anything to add.
Excuse me just to reiterate the 70% was talking about the customer count increasing that was not referring to head count or labor spend increases.
Yes, sorry.
Thank you.
No problem.
Okay.
Next we'll go to harsh Kumar with Piper Sandler.
Yes, Hey, guys.
Thanks for hosting this call I had a couple of questions. One question, we're getting from a lot of investors is just the confidence level on the 25% growth rate that you're citing for 2022 could.
Could you maybe I don't expect to devote to the detail could you maybe give us some color on how confident you feel about achieving that sort of a growth rate and <unk>.
One of the earlier questions was China again at the component of growth <unk> versus <unk>, maybe you could just highlight for us, which one you think will be the bigger portion of that 25% notes.
Yes, So again I think what gives me confidence is what I keep reiterating.
And it's something that I think is somewhat unique is that we are bringing in a lot of new customers.
A lot of interest in the types of capabilities that we're bringing to the market I think our model is very different than the traditional foundry approach, we're working with a lot of customers, who like the common I'll call. It the combinatorial effect of being able to take Mems technology Cmos technologies other.
Things that we do and combine them into solutions through heterogeneous integration platforms. These are all things that.
Make us feel very confident that we are building the customer base. We have a unique model we are improving the execution of Etfs and wait for services in the fab and of course, we have several exciting programs I mentioned, the Rad hard program that we expect to move to <unk> later this year.
And so all of those factors are coming together and Thats what.
This is.
Make statements like we feel like we can continue to grow with the long term model of the 25% that we alluded to the other thing is that we really do.
Like the.
The dynamic in a lot of the activity that's been going on.
Around the U S government investing in semiconductor manufacturing the excitement that we see at the state level. We will also continue to drive the industry forward in and we fully expect to take advantage of that.
So it's really that combination and then related to Ats versus wafer services.
Is the engine of growth for our company right now because that is the thing that is filling our pipeline with a lot of new differentiated technologies. So we certainly expect to continue to see growth there, but as those programs move through the funnel into wafer services youre going to expect to see wafer services.
<unk> as well, so it's really going to be that combination.
And as you get beyond 2022 into 'twenty, three you'll see more and more growth in wafer services as those programs progress, but as we've said before we also have a backlog where we want to bring new customers through the final. So overall youll see growth in both areas.
Got it thank you and then my.
A follow up.
Ats customer that was I guess the contract was to be renewed or even expanded possibly pending some qualifications I was curious if you could talk about the status of that customers and the extent that it's possible publicly.
Yes, I would just say that because that we expect that customer to.
To begin to engage with us this quarter.
That's about all we can say again the.
Don't think of it as just immediate replacement the customers coming back we're working on a longer term.
<unk> from them.
But we are definitely in dialogue with that customer and expect to start generating Ats revenue again for them this quarter.
So you will you will start to generate revenues to them from them. This quarter, Tom is that how I should look at it yes.
Yes, but again don't assume that it will be at the rate that it <unk>.
<unk> last quarter I think our last year. So they are they will be starting up again.
Being reconfigured.
Again around a longer kind of timeline.
But that customer is actively engaged with us.
We expect to start doing work for them.
Before this quarter zone.
No that's great that's a start and then.
And then on gross margin, Steve maybe add one for you.
Again, a lot of the investors that we have stocked our longer term guys. They kind of want to see profitability at some point in time I think.
Correct me if I'm wrong.
This annual new unit that maybe breakeven as possible in the mid <unk> is that how I should take it.
With the new cost structure or am I missing something here.
That's a pretty good estimate, especially given what I'll call. The new cost structure that includes investments, we're making for the long term. So as I mentioned in the comments, we were at about $2 $7 million in Q4.
Our advanced packaging facility in Florida right.
Annual run rate, we still are trying to monitor our spend to keep spend.
Downer invested wisely, but as Tom alluded to as well. We're also going after a trusted certification in different facilities. So there is some additional cost or investment that needs to be made.
I think we can be very close to that breakeven with our new cost structure in the near term.
If we execute on the opportunities that are before us it could come through in the second half of 2022 now remember the investments that we're making in our H 90 in Florida.
Good investments in Florida alone, we now have access to $133 million of building and equipment and if we invest.
Around $12 million for that that's a pretty good return for the long term on that investment.
Understood. Thanks, guys. That's it for me thank you.
And we do have a follow up from Rajiv Gill with Needham <unk> Company. Your line is open.
Thanks for the falloff in.
Sorry to beat a dead horse can you comment on it.
Some a little more clarity on the 25% growth rate or near 25% growth this year.
As you know in 2021.
You had about $19 million.
Full revenue.
So I'm, assuming that's not going to kind of repeat itself. This year in 2022.
So there is a potential that the $19 million headwind.
And if you strip that out and.
And would imply a much higher growth rate in <unk>.
Ats.
And so I'm assuming.
You'll be able to offset that 19, perhaps $15 million is being pushed out.
And then you would need at least another $25 million or so of additional business to get to kind of close to that.
The 25% number.
So just number one are you expecting any tool revenue. This year I know it is a lumpy business.
And number two.
Nine.
You can kind of walk us through a little bit if you can how you kind of intend to offset that $19 million headwind.
That was embedded in the 2021 revenue. Thank you.
I can talk first about the tool revenue and then Tom can talk about the revenue growth, but on the tool side. We don't expect the same level of tool revenue in 2022 that we had in 2021, especially a quarter with $15 million of tool running like we saw in the first quarter of 'twenty one.
As far as the revenue growth.
The plan for that yes.
Literally goes back to what we've been saying there is a lot of activities that we are continuing to ramp and the Ats side of the business. We are moving again, the power MOSFET and power solutions to volume.
That was not.
And the plan.
Last year so some.
Some of that did get pushed out.
Is it related to A&D, but the idea is that we have.
New new business coming into wafer services, the Ats transitions.
<unk> continued strong demand from our existing wafer services customers and we have a very.
Strong set of new customers that want to move very quickly on the Ats side. So the strengthen our customer base the strength of their appetite to move quickly and the ability for the fab here in Minnesota as well as in Florida to execute to absorb those customer.
<unk> and move them to their cycles of learning ultimately leading to volume production is what gives us confidence.
25% targeted growth rate.
Just to add onto that I think it goes back to Toms previous answer on a similar question a while ago, we have opportunity for balanced growth across Etfs and wafer services over the course of 2022.
Got it thank you.
And there are no further questions at this time I will now turn the call back over to Tom on Sunderman for any additional or closing remarks.
Thank you.
As I look at where we are today compare to five years ago at our company's inception. It is my strong conviction that with the technology achievements, we are making on a routine basis and the customer wins that we continue to capture sky what has never been better positioned to achieve our financial objectives and play a role.
And the ongoing Renaissance in semiconductor manufacturing in the United States.
<unk> for your interest in Skywest.
And this concludes today's conference call you may now disconnect.
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