Q1 2025 SkyWater Technology Inc Earnings Call
Speaker Change: Good afternoon and welcome to Skywater Technology's first quarter 2025 Financial Results conference call.
Speaker Change: All participants aren't a listen-only mode. After the speaker's remarks, we will conduct a question-and-answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the call over to Claire McAdams, investor relations for Skywater. Please go ahead.
Claire McAdams: Thank you, operator. Good afternoon and welcome to Skywater's first quarter 2025 conference call. With me on the call today from Skywater, our Thomas Sonderman Chief Executive Officer and Steve Manko Chief Financial Officer.
Claire McAdams: The webcast will be available for replay shortly after the call concludes.
Claire McAdams: On the events page of our IR website, we have posted a side presentation that accompanies today's call.
Claire McAdams: Also posted is our financial supplement which summarizes our quarterly and annual financial results for the last three years, including all non-GAAP adjustments and comparisons to our gap results, as well as the impact of tool sales on our gross margins.
Claire McAdams: During the calls, any statements made about our 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.
Claire McAdams: 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 2024 Form 10K.
Claire McAdams: All forward-looking statements are made as of today and we assume no obligation to update any such statements.
Claire McAdams: our financial supplement, and in our Q1 earnings presentation, all three of which are posted on our Investor Relations website.
Claire McAdams: Also on our IR website events page, you'll see that we plan to participate in three investor conferences in Q2.
Craig Hallam in Minneapolis
and TD Cowan in New York.
Tom: We are also in the early stages of planning our capital market state at Fab 25 in Austin, ideally this summer before Q2 reporting season. Please feel free to contact me directly for any investor follow-up request. With that, I'll turn the call over to Tom.
Tom: Thank you, Claire, and good afternoon to everyone on the call.
Tom: Our revenues for the first quarter were closely aligned, but the outlook provided in February and just above the midpoint of our guidance range.
Tom: Gross Margin and non-GAAP EPS both exceeded guidance and adjusted EBITDA performance was stronger than forecast at over four million dollars.
Tom: The upside achieved away for services during Q1 was driven by strong traction from our recently launch Thermaview platform. This launch represents a significant strategic milestone for our company.
Tom: Thermaview is a dedicated 90 nanometer CMOS Simmons platform focused on the rapidly growing advanced thermal imaging market.
Tom: The initial traction we are seeing from our lead customers is an important indicator that underscores both the relevance of this highly differentiated technology and the strength of our operating model for co-operating technologies and transitioning them efficiently to production.
Tom: New products drove over half of Q1's wafer services revenue led by Thermaview as well as recent ATS to wafer services conversions, a meaningful shift from 2024's 90% legacy mix.
Tom: Despite potential thermo-view lumpiness during ramp-up, new products will fuel most of Wafer Services' growth in 2025, supporting sustainable, innovation-driven growth at our Minnesota FAF, further increasing this long-term revenue contribution.
Tom: The continued budget delays and extended negotiations occurring in Washington DC are impacting our near-term revenue outlook while the US government continues to operate at 2024 spending levels.
Tom: Once resolved, we are prepared to execute aggressively and expect a strong snapback in ATS revenue in the second half of 2025.
Tom: Skywater's full year outlook remains largely unchanged from our last earnings call.
Tom: On today's call, I want to reiterate the strategic rationale for expanding 200 millimeter Founder Capacity in the U.S. through the pending acquisition of Infinian's flagship bad 25 in Austin, Texas.
and discuss the unique value Skywater brings to this opportunity.
Tom: Semiconductor Sovereignty in the U.S. isn't a one-size-fits-all equation. It requires increased domestic capacity across both advance and foundational nodes, as well as the establishment of a comprehensive domestic packaging and test infrastructure.
Tom: The future manufacturing landscape will include a mix of form factories, 200mm, 300mm, and panel base technologies, each occupying distinct and essential roles in the broader value chain.
Tom: Skywater's acquisition up at 25 is a strategic step to meet this multi-dimensional need.
Tom: Recognized as one of the most advanced 200-millimeter CMOS FADs in the Western Hemisphere, FAD-25 is expected to unlock new domestically-sourced founder capacity, creating customer opportunities for both new product development and the dual sourcing of critical foundational semiconductors.
Tom: The 200-millimeter format remains the optimal manufacturing base for a wide range of specially technologies, including analog and mixed signal ICs, our management, RF, MEMS, sensors, and high-voltage CMOS.
Tom: These technologies are critical to high growth sectors such as automotive and particular autonomous driving and EV power control, industrial automation and sensing, medical devices, and defense systems.
Tom: We believe FAB 25 occupies a strategic sweet spot in capabilities, delivering the output scale, quality standards, and process flexibility needed to meet the evolving demands of these markets, all while remaining aligned with secure U.S.-based supply chain goals.
Tom: Supported by four-year supply agreement valued at over $1 billion, this acquisition will provide immediate revenue and positive cash flow to our company.
Tom: The acquisition will further enhance our ability to extend our differentiated technology as a service model to a broader range of customers.
Tom: Diversifying a revenue base and advancing our mission as an essential enabler of American semiconductor onshoreing and industrial resilience strategy.
Tom: We continue to proceed to an expected mid-year closing and we currently anticipate holding our planned capital market stay at Fab 25 in Austin in early to mid-July.
Tom: Now moving to our partner D-Waves historic announcement made during Q1, demonstrating quantum supremacy and simulation.
Tom: An industry-defining milestone proving that quantum systems can outperform classical computers on targeted problems. We believe this breakthrough underscores Skywater's vital role in enabling real-world quantum innovations through its secure US-based manufacturing capabilities.
Tom: for the Man for Quantum Computing Innovation is both strong and accelerating.
Fueled by intense global competition.
for Mindshare, Marketshare, and Technical Leadership.
Tom: Momentum continues to build around this technology space as commercial and government stakeholders alike race to capitalize on its transformational potential.
We believe Skywater is uniquely positioned in this dynamic landscape
Tom: In 2024, advanced compute grew to become our second largest end market after aerospace and defense. Over 90% of our revenues from the advanced compute segment last year were related to quantum technology development, with key customers including D-Wave and Cyclonum.
Tom: Our technology as a service model provides a critical bridge for lab-to-fab breakthroughs, leading to scalable production-ready solutions, offering support for superconducting photonic and other Cuba technologies.
Tom: Skywater's superconducting technology, leverages proprietary process integration schemes, crowd-genic testing capabilities, and advanced packaging platforms.
Tom: When coupled with the highest levels of quality and reliability, Skywater's approach ensures rapid innovation and trusted on shore scaling.
Tom: These capabilities make our company an instrumental partner and unlocking the advancements that quantum computing promises to deliver, enabling further AI leadership and enhancing our national security.
Speaker Change: We congratulate DeWave on the important accomplishment and look forward to communicating our continued success in quantum technology enablement as our revenue growth in this nasium and important segment continues to gain traction.
Speaker Change: Turning to the current demand environment. RATS Business, which drives the majority of the revenue for the company, has continued to face challenges from prolonged U.S. federal budget negotiations, delaying the timing of key program funding for RAD customers.
Speaker Change: Last quarter, we expected improved visibility and a strong ATS recovery in Q2. However, the resulting continuing resolution has shifted several anticipated programs spending level increases into the second half of the year.
Speaker Change: Importantly, this is not a matter of program viability, our customer demand. These are strategic mission critical initiatives that remain fully supported by our partners and the administration.
Speaker Change: In most cases, we continue to execute our ATS programs at 2020 for spending levels with anticipated funding releases later in 2025.
Speaker Change: Based on today's visibility, we continue to expect that increased program funding will drive solid ATS growth beginning in Q3. The fundamentals of these programs remain strong. Our execution readiness is high and we continue to see clear customer alignment on the need for rapid progress once funding is approved.
Speaker Change: We also expect our Florida Advanced Packaging Platform Development to further contribute to this revenue adding additional momentum to the second half.
Speaker Change: Given our current visibility and customer commitments, two second half funding, we are maintaining our full-year revenue guidance range of 5% revenue growth for our combined ATFs and Wafer Services business plus or minus 2%.
Speaker Change: Now I'd like to say a few words about the current uncertainty regarding terror policy. So far, we have seen no downward revisions in the demand forecast from our major customers in response to the new tariffs.
Speaker Change: Although we cannot eliminate all tariff risk as an exclusively domestic US semiconductor manufacturer, we believe our overall tariff exposure is limited, especially in comparison to most multinational manufacturers in our industry.
Speaker Change: Importantly, we do not expect any significant impact to our business and defense, which is our primary and market.
Speaker Change: While we use some imported materials in our defense programs, these products are entirely manufactured in the U.S.
Speaker Change: We do not anticipate that the impact of potentially higher input costs will have an adverse effect on the demand far of the long-term profitability of these important programs.
Speaker Change: During this period, we are proactively managing costs and aligning our execution plans to open sure we are well positioned to capitalize on the anticipated second half ramp.
Speaker Change: Overall, we believe these temporary periods of uncertainty do not diminish the long-term strategic value of our defense programs are our outlet for 2025.
Speaker Change: For Q2 specifically, we expect total revenues in the range of $55 to $60 million.
Speaker Change: We expect ATS revenues and the $49 to $53 million range and tools revenue just under $1 million and $1 million.
Speaker Change: With Q1 wafer services exceeding our expectations, we anticipate some lumpiness in Q2 as these new programs begin their production ramp, leading to between $5-6 million of expected wafer services revenues in the current quarter.
Speaker Change: We expect a stronger second half of 2025 with significant sequential growth in both T3 and Q4, driven in part by the ongoing ramp of our advanced packaging business.
Speaker Change: Skywater continues to aim for positive non-GAAP EPS for the year. I will now turn the call over to Steve.
Steve Manko: Thank you, Tom. First quarter revenue of $61.3 million came in just above the midpoint of our guidance range.
Combined ATS and wafer services revenue was $60.1 million.
Steve Manko: and Tools Avenue was $1.2 million. Upside and wait for services more than offset the temporary suffering in ATS as a result of government budget delays in Washington, D.C.
Steve Manko: Our key one gross margin exceeded our expectations at 24.2% and the impact of tools in the quarter was less than 20 basis points.
Steve Manko: Key-1 gross margin benefited from a roughly $2 million dollar favorable reversal of a warranty
Steve Manko: Adjusted even to a $4 million was stronger than forecast as a result of favorable gross margin performance as well as lower op-axe.
Steve Manko: Q1 op-x was $15.2 million and with continued close management of spending levels, we currently expect the increase in operating expenses for the full year will be at the lower end of the 10-50% increase expected for 2025 to communicate it previously.
Steve Manko: Turning to the balance sheet, we ended the quarter with $51 million in cash and increase of $32 million from your end.
Steve Manko: The majority of the increase was driven by advanced payments to fund tool purchases that we anticipate will be made over the course of 2025. The accounting for tools for this customer program is different than some of our other programs in that we own the tools and the funding goes through the cash flow statement rather than being recorded as tools revenue on the P&L.
Steve Manko: Cashflow generated by the P&L was slightly positive for the quarter, and working capital changes net of the customer advance added approximately $4 million to operating cash flow.
Steve Manko: The majority of capital expenditures of $15 million were customer funded. We also paid down approximately $7 million on our revolver during the quarter to finish Q1 with approximately $60 million in total debt.
Steve Manko: Before I talk about guidance, let me give you a little more color on the impact of tariffs and trade on Skywater.
Steve Manko: The situation is very dynamic, potentially increasing macroeconomic risk and making longer-term financial projections difficult and subject to change.
Steve Manko: However, we believe that Skywater is relatively well-positioned. From a revenue perspective, our customers have made no downward revisions to their forecast in direct response to tariffs.
Steve Manko: From a cost perspective, we are taking actions that mitigate any potential financial impacts, which for us would primarily come in the form of higher cost for materials sourced outside of the US, and higher cost for tools.
Steve Manko: As things stand right now, our cooling purchases are all considered 84 86 items, which are exempt from tariffs. The larger concern we are focused on at the moment is any ancillary equipment purchases that are not exempt from tariffs.
Steve Manko: We do have some exposure on spend, but it is relatively small, about $2 million a quarter. Some of which can be mitigated by simply canceling that spend or sourcing from other countries.
Steve Manko: We also could have some unknown exposure due to potential price increases from suppliers who source materials from countries affected by tariffs. We believe we should have more clarity on overall financial impact at our next earnings call.
Steve Manko: Turning to our outlook, which is all before any contribution from the pending acquisition of Fab 25.
Speaker Change: Based on the four-year revenue expectations Tom discussed earlier, reflecting modest growth in both ATS and wafer services, or approximately 5% growth from both businesses combined, we expect significant expansion of our gross margin profile in the second half of 2025.
Speaker Change: As you recall, our combined ATS and wafer services business generated nearly 26% gross profit margin in 2024. Our gross margin model demonstrates strong flow through or incremental gross margin above the breakeven low of $45 million in quarterly revenue, excluding tools.
Speaker Change: In queue to the midpoint of our ATS and Wafer Services revenue guidance is about $12 million
Speaker Change: Given that our EPS-break even level is about $70 million, the implication is that we expect to drop at least 70% of incremental revenues directly to gross profit.
Speaker Change: Provided that ETS funding comes through as expected in the second half.
Speaker Change: We expect a little to no gross profit on the $30 million of tools revenue in 2025, most of which will be recorded in the second half.
Speaker Change: We expect close to a 300 basis point negative impact of tools revenue on our gross margin for the full year.
Speaker Change: Therefore, our expectation for reported non-GAAP gross margin in the full year is in the mid-20s for the 23 to 27% range.
Speaker Change: We expect the expansion of our gross margin profile as we move through 2025 will resolve in profitability in the second half. And for the full year, odds of non-GAAP EPS and strong and trusted EBITDA have at least 10% of total revenues.
Speaker Change: For the four-year, we expect a similar level of combined interest, tax, and VIP as we reported in 2024, which altogether are on the range of $13 to $14 million annually.
Speaker Change: Given the forecast for profitable results in the second half and the impact of the third taxes, we currently estimate tax expense of approximately $1.5 million in 2025 and slightly lower interest expense for the year in the $8 million range.
Speaker Change: Turning to Q2 guidance. Given the dynamics time discussed earlier, we are taking a conservative view to the quarter with an expected range of $55 to $60 million in total revenue.
Speaker Change: consisting of five to six million dollars in weight for services revenue, just under one million dollars in tool revenue, and a range of forty-nine to fifty-three million dollars in ETS revenues in advance of a rebound in Q3.
Speaker Change: Given these assumptions, our gross margin guidance for Q2 is in the range of 16 to 19%, but about a 30 basis point impact from tools.
Speaker Change: We expect Q2 operating expenses for approximately $15.7 million, plus or minus $200,000, approximately $2 million in interest expense.
Speaker Change: $400,000 in tax and $1,000,000 in income from variable interest entities for an expected EPS loss for the quarter in the range of $16.22 per share.
Speaker Change: Based on our outlook for the full year, we expect a strong rebound in financial results for Q3 and continued sequential improvement in Q4. And with that, I'll turn the call over to Q&A. Operator, please open the line for questions.
Speaker Change: Thank you. As a reminder to ask the question, please press star followed by the number one on your telephone keypad. To withdraw any questions, press star one again. We'll pause for just a moment to compile the Q&A roster.
[inaudible]
Speaker Change: Our first question comes from Quinn Bolton from Needham and Company, who's got head
[inaudible]
Quinn Bolton: Hey guys, thanks for taking my question, I guess. My first question is, you know, obviously last quarter looking into Q2, you expected a recovery in ATS.
and that didn't happen. Now we're sort of...
Quinn Bolton: Looking for that ATS recovery to begin strongly in the second half.
Speaker Change: I understand these are key programs, but there's a lot of volatility going on in Washington right now. How do you have confidence that these programs and the budget will get approved at higher funding levels that support that second half?
Speaker Change: Yeah, thanks for the question. Clearly, that's the issue that a lot of us are wrestling with
Speaker Change: The dynamics unfold in DC. The biggest thing that gives us confidence is the almost $300 million of investment that has been made by the US government over the last several years to create capability. We believe the programs.
that that investment drives.
Art
Speaker Change: very much aligned with the National Security Agenda, kind of irrespective of the administration, but we are going through the dynamics of a change in administration, the continuing resolution that was passed, you know, as we were in the middle of the quarter essentially held spending at 24 levels.
Speaker Change: So given that we obviously had to adapt, but as the quarter is unfolded, we've had multiple dialogues with our end customers within the US government as part of their exercise, which is ongoing, to look at government efficiency, how they can drive out.
Speaker Change: Waste and the program reviews that we're undertaking, we feel very strong about not only the commitment.
coming from the customer, but our ability to execute.
with speed once the funding issues are resolved. [inaudible]
Speaker Change: So it's really the backdrop of a chain to administration but more importantly the criticality of the programs we have and the long standing investment and commitment we've seen over multiple years with all these initiatives.
Speaker Change: And I guess Tom may just fall up to that, I don't know if it's up on my head.
Speaker Change: How for how long the current continuing resolution fund to the government is there a
Speaker Change: You know, date by which, you know, we've got to either get another continuing resolution or to pass a budget that lands in Q2 or, you know, could could this, you know, could really continue to be funded by CR's.
Speaker Change: You're well into the summer. Again, just trying to get some sense of what visibility you may have into that funding recovery in second half. And then I've got to follow up on a different topic.
Speaker Change: Yeah, so clearly, we're looking by the interview, too, to have-
Speaker Change: very good transparency in terms of what we expect the second half will look like.
and that will be reflected in our Q3 forecast.
Speaker Change: So much like, you know, again, the rest of us were watching what's happening in DC, the discussions driving towards a omnibus type of bill over the summer is what we're hearing and that's what we're marching towards. But I would say by the end of Q2 we'll have good transparency.
[inaudible]
Speaker Change: and then just you guys mentioned some of the work you're doing on the quantum computing.
Speaker Change: Say a quantum, I guess maybe two quick questions there, you know, how big you mentioned this 90% of your advance computing.
Speaker Change: Roughly how big is advanced computing as a percentage of the business and can you give us any sense on the type of work you're doing with cyclone number you manufacturing silicon photonics wafers for them are you doing signal and control devices there's any
Speaker Change: Common because I think you've previously said what you're doing with D-Wave. Thank you.
Speaker Change: Yeah, so the advanced compute market is about 10% of the business today and as we've you know alluded to 90% of that is tied to the quantum computing space.
Speaker Change: with regards to side quantum. Think of, you know, side quantum has a very complicated product that they're putting together. We're part of their value chain and our focus is around obviously our expertise in superconducting technology.
Speaker Change: and other films technology that they integrate. Photonics is another component that is unique within the cyclone solution, and that's another area of expertise. But beyond that, we don't really want to provide any more detail.
Speaker Change: Get it and looking forward to coming down to CFAB 25 in Austin over the summer. Thank you.
Speaker Change: Yeah, I apologize for the fact that it'll be the middle of July and again, but look forward to seeing you there. I'll bring a cool drink. Thanks.
Speaker Change: Our next question comes from Robert Mertens, from TD Security. Please go ahead, your line is open.
Speaker Change: Hi, this is Robert Mertens on the line for Krish Sankar. Thanks for taking my question. Just if I'm doing the math right here, it seems like their review represented a mid single digit, a million revenue amount for the March quarter.
Speaker Change: This is how should we think about the ramp of that business, maybe compared to some of the other programs and way for services this year, and just if you have any sort of potential sizing of what that market could be over the next few years.
Speaker Change: Yeah, so, you know, ThermoView is driving the ramp of our way for services business.
Speaker Change: This has really been our plan all along, just given the traction that we have with our lead customers and their ability to take our products and put them into state systems. We feel like that will be the main driver of growth and way for services this year. We do have other converts that we talked about last year. They're coming together at somewhat of a different pace. Again, some of those are tied to the medical device.
Speaker Change: Rapid Diagnostic Space, and so their timeline to ramp is a little bit different and I think we have the most clarity around the thermobu space.
Speaker Change: Traditional, our legacy last year was 90% legacy, 10% new, we expect in this year to be 60% new, 40% legacy as we exit this year and that was the run rate we had in the first quarter as well.
Thank you, that's very helpful [inaudible]
Speaker Change: Our next question comes from Robert Aguanno from Piper Samler. Just go ahead, your line is open.
Robert Aguano: Hey guys, thanks for taking the call. I'm doing the call here.
Robert Aguano: Just to expand on that, you guys mentioned new products driving half of the way for services can you maybe just double click on some of maybe the other opportunities that you might have and ultimately how big you think you can expand that business going forward. Care the near future.
Speaker Change: Yeah, so again, we have two lead customers that we're providing.
Speaker Change: Product for today, so this is wafer services product that are then being put into their systems that are going through additional qualifications.
Speaker Change: We have several other designs that these are design wins, think of it as-
Speaker Change: Products that will immediately move in the way for services. This is really how we're driving with, you know, with our platform is you leverage the work to create the platform and then every subsequent tape out is relatively straightforward.
Of course, the two lead customers are major primes.
that we've been working with for several years.
We generated a lot of ATS revenue from those customers.
as we built the platform.
Speaker Change: Those customers are obviously the lead customers that are bringing the product into volume ramp and then we will subsequently put in other customers as they complete their design process.
So, I'm not-
Speaker Change: Really in a position to say how big do we think the market we can go after but we feel like the traction we're getting already is significant and the fact that we do have these two lead customers is certainly allowing us to have a robust process that we believe will be able to bring new designs in relatively efficiently. Thank you very much.
Speaker Change: You guys mentioned a little bit of revenues coming in this year. More of a second half story. Can you talk about any sort of KPIs or any other metrics that we could use for how much impact that's going to have this year or is it more of a 26 story?
Speaker Change: Yeah, so I think this year the impact is going to be around tools revenue, the majority of tools revenue in 2025 is...
Speaker Change: Coming into Florida. Again, this is coming in the second half.
If you recall, we talked about the first half
Speaker Change: We've had some infrastructure products tied to a build back better grant we got in 2022.
Speaker Change: that are gating the tool move-ins. Those two move-ins will begin in the second half and then we'll start generating...
Speaker Change: You know, traditional we'll call it ATS revenue, you know, through the engineering efforts first as we, you know, basically hook up the equipment, get the tools qualified, and then as we start executing the program, which will really be driven mainly in 2026.
Speaker Change: So mainly tool revenue in 2025, traditional ATS revenue in 26.
Thank you.
Speaker Change: Our next question comes from Richard Shannon from Craig Hallum. Please go ahead, your line is open.
[inaudible]
Well, hi, Thomas C. Thanks for taking my questions as well.
Speaker Change: Maybe this is just like broadly in the transition towards wafer services, obviously by a couple of questions, been about a specific one-term review, but we can give us a view here, Tom. How can we look at the number of conversions that go from ATS to wafer services this year? Maybe we can delineate that between, you know, AMD type of customers versus other markets?
Speaker Change: Yeah, so again, last year, if you recall, we had, I believe, four announced transitions, one was into the auto industrial sector, the other three were into into the...
Um, no bio-diagnostic.
and another medical device area.
Speaker Change: and I think those again are relatively smaller companies that are again going through the necessary qualifications. Typically, once the technology gets qualified, you're not making process adjustments what you're doing is producing product.
Speaker Change: that initially is going into samples that our customers would be, you know, putting in front of, you know, they're in state OEMs trying to get them to, you know, buy into the new products and then ultimately ramp those up. So I think we're in that process right now, certainly in the bio space. This is relatively new to us. So we're learning, you know, how the sequencing of those, you know, kind of aligned with our ramp strategies.
Speaker Change: So the testing and qualification sequencing is a little bit different there versus when they go into a new system which we also expect to get designs.
Speaker Change: Design wins for us. So overall, you know, we can do what we can do, which is develop the process, get it qualified, get the samples in the hands of our customers, and then their ramp rate of course depends on their qualification cycles.
Speaker Change: As we get more converts, of course, this year we expect to have converts happening as well Each individual conversion will have less of an effect on our overall business because they'll all be operating at different speeds but collectively they will become much more predictable to both
Speaker Change: This is really, you know, if you think about last year, that was the first year that converts this year, we're getting more converts We're getting more converts, we're getting more converts.
Speaker Change: ATS in a way for services, and then the other thing that's going on as well as we're getting new design wins in the ATS.
Speaker Change: So in addition to design wins on the ThermoV platform this year, for example, we expect to have other design wins that are coming into ATS to kind of backfill the programs that are moving into volume production.
Thanks for those thoughts, Tom, on my second question.
Speaker Change: is another program. We haven't heard about it in a few quarters here, and that's the Rad Hard Program. I've actually funded a number of years ago. One of the gifts is an update there and how that's going. It has already impact from the budget area still made in Washington on that program.
Claire Manko, Claire McAdams, Thomas Sonderman
Drive towards meeting the customer requirements
Speaker Change: Again, in the defense industry, and especially in the environment we're in today, even the requirements are changing as you move through program initiation, which in this case started at the beginning of this decade, and now as we prepare to actually put them in the in-state systems, you know, you're beginning to refine the requirements, and we want to make sure that our in-state capability matches, you know, the majority of the requirements coming from, you know, the customer base that we'll be serving. So, we're-
Speaker Change: We're expecting, you know, this year unfolds and going into the next year, we're getting to the point where we get a qualified process.
Speaker Change: But to your point about government funding, this is certainly one of the programs along with really all programs that are being reassessed in terms of priority.
Speaker Change: One thing I think it's important to understand is that our model is…
Speaker Change: A Foundry Model. And I think the DOD is going through a similar process that the commercial spaces went to and that they're embracing the movement.
to Foundry's and leveraging this kind of approach.
You know, our technology foundry approach.
having a common source that all the primes can access.
Speaker Change: Primes running labs who foundries running fabs is really what Skywater is intending to demonstrate and I think, you know, we are a national asset and we expect that investment not only for the programs that I alluded to earlier but this specific program to continue to come to Skywater because of the unique capabilities that literally the government's been investing and since we were created back in 2017.
Kamala: That's a great detail, Kamala. Thanks a lot for all that. I will jump out of line [inaudible]
Speaker Change: We have no further questions. I would like to turn the call back over to Thomas Sonderman for closing our marks.
Thomas Sonderman: Thank you, operator. At Skywater, we are confident in our ability to execute our long-term growth and profitability goals, and we aim to strengthen your trust in our performance.
Thomas Sonderman: We look forward to providing updates at our Capital Markets Day in Austin, our Q2 earnings call in early August . With that I conclude today's call.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Thank you for watching!
Claire Manko, Claire McAdams, Thomas Sonderman