Skywater Technology Inc.
03/11/2026 | Press release | Distributed by Public on 03/11/2026 15:15
Annual Report for Fiscal Year Ending December 28, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's audited annual consolidated financial statements and related notes in Item 8 of this Annual Report on Form 10-K. Item 7 in this Form 10-K discusses the Company's fiscal year 2025 and fiscal year 2024 results and the year-over-year comparisons between fiscal year 2025 and fiscal year 2024. Discussion of the fiscal year 2024 results and the year-over-year comparisons between fiscal year 2024 and fiscal year 2023 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Annual Report on Form 10-K for the year ended December 29, 2024, filed with the SEC on March 14, 2025, and incorporated by reference in this Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect the Company's current expectations, estimates, and assumptions concerning events and financial trends that may affect future operating results or financial position. Actual results and the timing of events may differ materially from those discussed or implied in the Company's forward-looking statements due to a number of factors, including those described in the sections entitled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" and elsewhere herein.
SkyWater's fiscal year ends on the Sunday closest to the end of the twelfth calendar month. We refer to the fiscal years ended December 28, 2025 and December 29, 2024 as fiscal year 2025 and fiscal year 2024, respectively. Fiscal years 2025 and 2024 each include 52 weeks. All percentage amounts and ratios presented in this management's discussion and analysis were calculated using the underlying data in thousands. Unless otherwise indicated, all changes identified for the current period results represent comparisons to results for the prior corresponding period.
For purposes of this section, the terms "we," "us," "our," and "SkyWater" refer to SkyWater Technology, Inc. and its subsidiaries collectively.
Overview
SkyWater Technology, Inc., together with its consolidated subsidiaries, is a U.S.-based, independent, pure-play semiconductor foundry providing foundational-node manufacturing, advanced technology development, and advanced packaging services through an integrated, multi-site operating model. We operate exclusively within the United States, with fabrication and packaging facilities in Minnesota, Texas, and Florida.
Our operations are designed to support customers that require secure, domestic manufacturing, long product life cycles, high reliability, and close engineering collaboration. Our business model integrates production-scale manufacturing with advanced technology development, enabling customers to transition specialized semiconductor technologies efficiently from development to volume production. We support a broad array of applications where continuity of supply, manufacturability, and long-term availability are as critical as device performance. This integrated approach positions SkyWater as a leading domestic manufacturing partner for commercial and government customers.
Our operations are comprised of two reportable segments:
Legacy SkyWater: A pure-play technology foundry that offers advanced semiconductor development and manufacturing services from its fabrication facility in Bloomington, Minnesota and advanced packaging services from its Kissimmee, Florida facility. Legacy SkyWater provides ATS and Wafer Services product offerings.
SkyWater Texas: A high-volume manufacturer that offers manufacturing services from its fabrication facility in Austin, Texas. SkyWater Texas provides Wafer Services product offerings focused on 200 mm semiconductor fabrication, copper processing, high-voltage technology services and 65 nm node infrastructure support.
Factors and Trends Affecting our Business and Results of Operations
The following trends and uncertainties either affected our financial performance in fiscal year 2025 and fiscal year 2024, or are reasonably likely to impact our results in the future.
•Macroeconomic and competitive conditions, including cyclicality and consolidation, as well as government funding in semiconductor technology and manufacturing, create unique challenges and opportunities for the semiconductor industry and SkyWater.
•Changes in trade policies, including the imposition of, or increase in tariffs and changes to existing trade agreements, could negatively impact our business, financial condition and results of operations.
•In August 2022, the U.S. enacted the CHIPS and Science Act pursuant to which the United States has committed to a renewed focus on providing incentives and funding for onshore companies to develop and advance the latest semiconductor technologies, supporting onshore manufacturing capabilities, and on strengthening key onshore supply chains. The CHIPS Act authorizes the U.S. Department of Commerce to enable execution of awards under the CHIPS Act and provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development, including $39 billion in financial assistance to build, expand, or modernize domestic facilities and equipment for semiconductor fabrication, assembly, testing, advanced packaging, or research and development. In December 2023, we submitted an application to the CHIPS Program Office of the U.S. Department of Commerce for funding through the CHIPS and Science Act for modernization and equipment upgrades to enhance production at our Minnesota facility. In December 2024, we signed a preliminary memorandum of terms that provides for up to $16 million pursuant to the CHIPS and Science Act, which is in addition to $19 million in incentives from the State of Minnesota. We can not predict when and/or if such funding will be received based upon Company conversations with U.S. and Minnesota government officials.
•We project customer-funded capital investment to be a significant driver of the success of our business model, as we expect customers to invest in our capabilities and enable us to develop technology platforms that will drive our future growth.
•Our overall level of indebtedness from our revolving credit agreement, which we refer to as the Revolver (as defined in Note 6 - Debt to the consolidated financial statements), financing arising from the sale and leaseback of the land and building of our Minnesota facility, which we refer to as the VIE Financing, financing arrangements with lenders to finance the purchase of manufacturing tools and other equipment, which we refer to as the Tool Financing Loans, and the corresponding interest rates charged to us by our lenders, are key components of maintaining capital funding that allow us to continue to grow our business.
Pending Acquisition of the Company
On January 25, 2026, the Company entered into a definitive agreement to be acquired by IonQ. The transaction is subject to customary closing conditions, including regulatory and stockholder approvals, and, if approved, is expected to close in the second or third quarter of 2026. The pending acquisition did not impact the Company's results of operations for the period presented. Additional information regarding the transaction is included in Item 1. "Business - IonQ Merger Agreement" and Note 19- Subsequent Events to the consolidated financial statements.
Business Combinations
On June 30, 2025, the Company completed the acquisition of all of the issued and outstanding membership interests of Spansion Fab 25, LLC ("Fab 25") a newly formed limited liability company that received, pursuant to a pre-closing restructuring, substantially all of the property, plant and equipment, employees and certain other assets and liabilities related to Infineon Technologies AG's ("Infineon") 200 mm fab in Austin, Texas (the "Transaction"), pursuant to the amended Membership Interest Purchase Agreement, with Spansion LLC ("Spansion"), an affiliate of Infineon. The Transaction has enhanced SkyWater's capabilities in foundational semiconductor manufacturing and strengthen its strategic position within North America's semiconductor industry.
In connection with the Transaction, the Company entered into a multi-year supply agreement with certain of Infineon's subsidiaries under a take-or-pay arrangement for the four-year period following the closing of the Transaction (the "Supply Agreement"). The Supply Agreement included an off-market component estimated at a fair value of $120.0 millionwhich was included as an element of the total purchase consideration exchanged with Spansion for the Transaction.
The total purchase consideration exchanged on the Transaction was $206.5 million, consisting of the $120.0 millionfair value of the off-market component of the Supply Agreement and net cash payments of $86.5 million. Net cash paid consisted of the base purchase price of $73.0 millionpaid at closing, plus $19.9 millionpaid at closing for estimated
working capital, offset by a return of cash of $6.4 millionfrom Spansion during third quarter 2025 based on the actual working capital received at closing. The Transaction was financed through proceeds received from the execution of an Amended and Restated Loan and Security Agreement (the "Amended Loan Agreement") with Siena Lending Group LLC ("Siena") and the other lenders party thereto on June 30, 2025.
Financial Performance Metrics
Our senior management team regularly reviews certain key financial performance metrics within our business, including:
•Revenue;
•Gross profit and gross margin;
•Net income (loss); and
•Earnings before interest, taxes, depreciation and amortization, as adjusted ("adjusted EBITDA"), which is a financial measure not prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), that excludes certain items that may not be indicative of our core operating results, as well as items that can vary widely across different industries or among companies within the semiconductor industry. For information regarding our non-GAAP financial measure, see the section entitled "Non-GAAP Financial Measure" below.
Results of Operations
This section contains an analysis of our results of operations presented in the accompanying consolidated statements of operations.
Fiscal Year 2025 Compared to Fiscal Year 2024
The following table summarizes certain financial information relating to our operating results for the fiscal years ended December 28, 2025 and December 29, 2024.
|
Fiscal Year Ended
|
|||||||||||||||||
| December 28, 2025 | December 29, 2024 |
Percentage Change
|
|||||||||||||||
| (in thousands) | |||||||||||||||||
|
Consolidated statements of operations data:
|
|||||||||||||||||
| Revenue | $ | 442,139 | $ | 342,269 | 29 | % | |||||||||||
| Cost of revenue | 355,211 | 272,643 | 30 | % | |||||||||||||
| Gross profit | 86,928 | 69,626 | 25 | % | |||||||||||||
| Research and development expense | 14,621 | 15,040 | (3) | % | |||||||||||||
| Selling, general, and administrative expense | 74,883 | 48,026 | 56 | % | |||||||||||||
|
Operating income (loss)
|
(2,576) | 6,560 | (139) | % | |||||||||||||
|
Other income (expense)
|
|||||||||||||||||
|
Bargain purchase gain
|
111,746 | - | NM | ||||||||||||||
| Interest expense | (13,713) | (8,837) | 55 | % | |||||||||||||
|
Total other income (expense)
|
98,033 | (8,837) | NM | ||||||||||||||
| Income (loss) before income taxes | 95,457 | (2,277) | NM | ||||||||||||||
| Income tax (benefit) expense | (27,989) | 240 | NM | ||||||||||||||
| Net income (loss) | 123,446 | (2,517) | NM | ||||||||||||||
| Less: net income attributable to noncontrolling interests | 4,536 | 4,276 | 6 | % | |||||||||||||
| Net income (loss) attributable to SkyWater Technology, Inc. | $ | 118,910 | $ | (6,793) | NM | ||||||||||||
Revenue
Revenue increased $99.9 million, or 29%, to $442.1 million for fiscal year 2025, from $342.3 million for fiscal year 2024. The following table shows revenue by service type for fiscal year 2025 and fiscal year 2024:
| Fiscal Year Ended | |||||||||||||||||
| December 28, 2025 | December 29, 2024 |
Percentage Change
|
|||||||||||||||
| (in thousands) | |||||||||||||||||
|
ATS development
|
$ | 212,497 | $ | 238,645 | (11) | % | |||||||||||
|
Tools
|
28,860 | 76,763 | (62) | % | |||||||||||||
|
Wafer Services - Legacy SkyWater
|
25,490 | 26,861 | (5) | % | |||||||||||||
|
Wafer Services - SkyWater Texas
|
175,292 | - | NM | ||||||||||||||
| Total | $ | 442,139 | $ | 342,269 | 29 | % | |||||||||||
Advanced Technology Services ("ATS") development revenue decreased $26.1 million, or 11%, from $238.6 million for fiscal year 2024 to $212.5 millionfor fiscal year 2025. The decrease was largely attributable to a $41.8 million reduction in Company's aerospace and defense market revenue, driven by recent U.S. government policy shifts and changes in defense spending priorities. These changes, coupled with delayed contract awards, have reduced program funding and slowed development and associated revenues year-over-year. These declines were partially offset by a $12.9 millionyear-over-year growth in the Company's advanced compute technology market due to the addition of new customers and acceleration of existing programs as companies continue to invest in the emerging technology. Additional contributors included a $1.7 millionincrease in our consumer end market and a $1.6 millionincrease in our industrial market, offset by a $0.6 milliondecrease in revenues from our medical end market.
Tools revenue decreased $47.9 million, or 62%, from $76.8 million for fiscal year 2024 to $28.9 million for fiscal year 2025 driven by completion of several investment efforts by our customers to acquire tools that advance our capabilities for their ATS development programs.
Legacy SkyWater Wafer services revenue decreased by $1.4 million, primarily due to a $6.4 million reduction in sales to our key automotive customer, reflecting lower demand caused by oversupply issues in our customer's product channels. Additionally, a $1.2 million decrease resulted from reduced medical customer volumes. These decreases were partially offset by a $5.6 million increase in revenue from an aerospace and defense customer program that transitioned from ATS to Wafer Services, as well as a $0.7 million increase in our industrial and consumer end markets.
SkyWater Texas Wafer services revenue increased $175.3 million as a result of the Fab 25 acquisition. Of this amount, $17.9 million represents non-cash revenue associated with the off-market component of the Supply Agreement.
Cost of revenue
Cost of revenue increased $82.6 million, or 30%, in the fiscal year 2025 when compared to the fiscal year 2024. The increase was primarily driven by $135.3 million higher cost of sales resulting from the inclusion of Fab 25 operations following the acquisition. This increase was partially offset by a $42.6 million decrease in cost of tool revenue based on delivery of several tools to our customers to advance our capabilities for their ATS development programs.
Legacy SkyWater direct expenses decreased by $9.1 million overall, primarily driven by a $16.9 million reduction in cost of sales related to a select group of aerospace and defense customers as funding limits were reached and development and program activity slowed, as well as a $5.0 million decline in warranty charges due to the non-recurrence of significant prior-year production issues that impacted yields for a major automotive customer. These decreases were partially offset by $10.3 million of incremental, non-recurring startup costs incurred at the Florida facility to install, qualify, and operationalize production tools, which are excluded from cost of tools and expected to decline as the facility transitions out of the startup phase, and a $4.5 million increase in capital-adjacent expenses driven by higher repairs, maintenance, and tooling costs to support ongoing production activity and equipment reliability. Additional impacts included a $1.5 million decrease in depreciation expense reflecting routine asset additions and retirements and certain assets becoming fully depreciated, a $1.4 million increase in engineering costs due to greater utilization of engineering labor on customer programs as engineer time was more heavily weighted toward revenue-generating customer efforts than internal development efforts year-over-year, and a $3.2 million increase in various other direct costs.
Legacy SkyWater labor costs increased by $0.5 million overall, driven by a $1.8 million increase in labor costs at SkyWater Florida resulting from the hiring of additional employees as the site continued to ramp operations, as well as a $0.5 million increase in stock-based compensation expense reflecting higher equity grant activity associated with a larger employee population. These increases were partially offset by a $2.0 million decrease in labor costs at SkyWater Minnesota, driven by lower bonus expense due to the Company's financial performance.
Selling, general and administrative expense
Selling, general and administrative expense increased $26.9 million or 56%, in fiscal year 2025 when compared to fiscal year 2024. The increase was primarily driven by $8.1 million of additional costs related to the Fab 25 costs incurred post-acquisition. Additionally, in fiscal year-ended 2025 we incurred $10.1 million in one-time transaction and integration costs (notably legal fees, consulting fees, and other professional services fees), and $3.8 million in recurring integration costs (including the recognition of $2.7 million of services rendered by Infineon under the Fab 25 transition services agreements (TSA) in support of the post-acquisition operations of Fab 25). Additional increases include $2.1 million of bonus expense recognized in fiscal 2025 along with a $2.1 million increase in insurance premiums associated with adding Fab 25 to coverage and a $1.3 million increase in SkyFed costs to support expanded personnel, compliance, and infrastructure requirements for government programs. These increases were partially offset by a $1.3 million decrease in broad-based bonus expense due to revised operating forecasts that did not support bonus achievement, while SkyWater Florida labor costs rose $0.6 million as the site added 18 employees to support operational ramp.
Interest expense
Interest expense increased $4.9 million, or 55%, from $8.8 million for fiscal year 2024 to $13.7 million for fiscal year 2025. The increase was primarily the result of increased amounts outstanding on our revolving lending facility as a result of financing the acquisition of Fab 25 and meeting increased working capital needs to operate an additional site.
Bargain Purchase Gain
In conjunction with the Fab 25 acquisition, we recognized a $111.7 million bargain purchase gain as the value of the net assets acquired by the Company were in excess of the total consideration exchanged with Spansion.
Income tax (benefit) expense
The income tax benefit was $28.0 million for fiscal year 2025 compared to income tax expense of $0.2 million for fiscal year 2024. During the third quarter of 2025, the Company concluded that the effects of the acquisition of Fab 25 would result in the realization of nearly all its deferred tax assets. As a result, the Company released a significant portion of the valuation allowance recorded against those assets and recognized $23.2 million of tax benefit.
Net Income Attributable to SkyWater Technology, Inc.
Net income attributable to SkyWater Technology increased $125.7 million from $(6.8) million for fiscal year 2024 to $118.9 million for fiscal year 2025. The increase was the result of the net impacts of the changes described above related to the components of our results of operations.
Adjusted EBITDA
Adjusted EBITDA increased $18.9 million, or 55%,to$53.2 million for fiscal year 2025 from $34.3 million for fiscal year 2024. The increase was primarily driven by the addition of Fab 25, including the impact of revenue recognized under the off-market component of the Supply Agreement, as well as continued expansion within the advanced compute end market. These increases were partially offset by headwinds in the ATS business resulting from U.S. government policy impacts on defense spending and related funding, as well as incremental costs associated with the Fab 25 acquisition. For a discussion of Adjusted EBITDA as well as reconciliation to the most directly comparable U.S. GAAP measure, see the section below entitled "Non-GAAP Financial Measure."
Segment Performance
Legacy SkyWater Segment
|
Fiscal Year Ended
|
|||||||||||
| December 28, 2025 | December 29, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Revenue | $ | 266,847 | $ | 342,269 | |||||||
| Gross profit | 46,896 | 69,626 | |||||||||
| Net loss | (14,268) | (2,517) | |||||||||
Revenue
Legacy SkyWater revenue decreased $75.4 million, or 22%, from $342.3 million to $266.8 million when comparing the fiscal year ended December 29, 2024 with the fiscal year ended December 28, 2025.
Legacy SkyWater Tools revenue decreased $47.9 million driven by completion of several investment efforts by our customers to acquire tools that advance our capabilities for their ATS development programs.
Legacy SkyWater ATS development revenue decreased by $26.1 million. The decrease was largely attributable to a $41.8 million reduction in Company's aerospace and defense market revenue, driven by recent U.S. government policy shifts and changes in defense spending priorities. These changes, coupled with delayed contract awards, have reduced program funding and slowed development and associated revenues year-over-year. These declines were partially offset by a $12.9 million year-over-year growth in the Company's advanced compute technology market due to the addition of a new customer and acceleration of existing programs as companies continue to invest in the emerging technology. Additional contributors included a $1.7 million increase in our consumer end market and a $1.6 million increase in our industrial market, offset by a $0.6 million decrease in revenues from our medical end market.
Legacy SkyWater Wafer Services revenue decreased by $1.4 million, primarily due to a $6.4 million reduction in sales to our key automotive customer, reflecting lower demand caused by oversupply issues in our customer's product channels. Additionally, a $1.2 million decrease resulted from reduced medical customer volumes. These decreases were partially offset by a $5.6 million increase in revenue from an aerospace and defense customer program that transitioned from ATS to Wafer Services and a $0.8 million increase from consumer customers, as well as a $1.4 million increase in Industrial markets revenue.
Gross profit
Gross profit decreased from $69.6 million for the fiscal year ended December 29, 2024, as compared to $46.9 million for the fiscal year ended December 28, 2025, representing a decrease in gross margins from 20% to 18% in the same periods. The decrease was primarily driven by losses from decreased tool revenue and incremental tool installation costs absorbed in 2025, compared to tool-related gains recognized in 2024. In 2024, the Company generated $3.8 million of gross profit on tools, representing a 5% gross margin, whereas in 2025 the Company incurred a $1.8 million loss on tooling and absorbed $7.5 million of incremental tool installation costs. Excluding the impact of tool-related losses and incremental installation costs, gross margins for the segment would have been relatively consistent year over year.
Net Loss
Net loss increased by $13.7 million to $16.2 million for fiscal year 2025 from $2.5 million for fiscal year 2024. The increase was primarily driven by tool margin degradation, $10.1 million of one-time transaction and integration costs, (primarily legal, consulting, and other professional services fees) and $3.8 million of recurring integration costs, including $2.7 million related to services provided by Infineon under the Fab 25 TSA with Infineon. These factors were partially offset by a $32.0 million income tax gain recognized in connection with the Fab 25 acquisition.
SkyWater Texas Segment
|
Fiscal Year Ended
|
|||||||||||
| December 28, 2025 | December 29, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Revenue | $ | 175,292 | $ | - | |||||||
| Gross profit | 40,032 | - | |||||||||
| Net income | 137,714 | - | |||||||||
Revenue
Revenue for the fiscal year ended December 28, 2025 included $175.3 million in Wafer Services revenue. Of this amount, $17.9 million represents non-cash revenue associated with the off-market component of the Supply Agreement.
Gross profit
Gross profit was $40.0 million and gross margin was 23% for the fiscal year ended December 28, 2025.
Net Income
Net income was $137.7 million for the fiscal year ended December 28, 2025.
Please refer to Note 4 to our consolidated financial statements included in this Annual Report on Form 10-K for information about the acquisition of Fab 25 which established SkyWater Texas.
Liquidity and Capital Resources
General
For the fiscal years ended December 28, 2025, and December 29, 2024, the Company incurred net income (loss) attributable to SkyWater Technology, Inc. of $118.9 million, and $(6.8) million, respectively. As of December 28, 2025 and December 29, 2024, the Company held cash and cash equivalents of $23.2 million and $18.8 million, respectively.
SkyWater's ability to execute its operating strategy is dependent on its ability to maintain liquidity and continue to access capital through the Revolver (as defined in Note 7 - Debt), and other sources of financing. The current business plans indicate that the Company maintains sufficient liquidity to continue its operations and maintain compliance with financial covenants for the next twelve months from the date the consolidated financial statements are issued. As a result of amendments made on June 30, 2025, the Revolver matures on June 30, 2030and provides for a maximum revolving facility amount of $350.0 million.
We had $22.5 million in cash and cash equivalents, not including cash held by a VIE that we consolidate, and availability under our Revolver of $55.7 million at December 28, 2025. We are subject to certain liquidity and EBITDA covenants under our Loan Agreement, as outlined in the section below entitled "-Indebtedness."
Open Market Sale Agreement
On September 2, 2022, the Company entered into an Open Market Sale Agreement with Jefferies LLC (the "Open Market Agreement") with respect to an at the market offering program. Pursuant to the Open Market Agreement and authorizations from the Company's Board of Directors, the Company may, from time to time, offer and sell up to $100,000 in shares of the Company's common stock. During the fiscal years ended December 28, 2025 and December 29, 2024, the Company did not sell shares under the Open Market Agreement. As of December 28, 2025, $74,930 in shares were available for issuance under the Open Market Sale Agreement.
Capital Expenditures
For fiscal years 2025 and 2024, cash outflows related to capital expenditures totaled $27.2 million and $14.3 million, respectively. The majority of these capital expenditures relate to our foundry expansion in Minnesota, as discussed below, and the development of our advanced packaging capabilities at the Center for NeoVation in Florida. We anticipate our cash on hand and the availability under the Revolver will provide the funds needed to meet our customer demand and anticipated capital expenditures in fiscal year 2026.
We have approximately $2.9 million of contractual commitments related to various anticipated capital expenditures outstanding as of December 28, 2025 that we expect to be paid in fiscal year 2026 through cash on hand and operating cash flows.
Working Capital
Historically, we have depended on cash on hand, funds available under our Revolver and, in the future, we may need to depend on additional types of funding sources for our growth strategy, working capital needs, and capital expenditures. We believe that these sources of funds will be adequate to provide cash, as required, to support our strategy, ongoing operations, capital expenditures, lease obligations, and working capital for at least the next twelve months. However, we cannot be certain that we will be able to obtain future debt or equity financings on commercially reasonable terms sufficient to meet our cash requirements.
At December 28, 2025, the outstanding balance of our Revolver was $195.5 million, and our remaining availability under the Revolver was $55.7 million.
The following table sets forth general information derived from our consolidated statements of cash flows for fiscal years 2025 and 2024:
|
Fiscal Year Ended
|
|||||||||||
| December 28, 2025 | December 29, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Net cash (used in) provided by operating activities | $ | (28,966) | $ | 18,460 | |||||||
| Net cash used in investing activities | (113,044) | (11,205) | |||||||||
| Net cash provided by (used in) financing activities | 146,390 | (6,794) | |||||||||
Cash and Cash Equivalents
At December 28, 2025 and December 29, 2024, we had $23.2 million and $18.8 million of cash and cash equivalents, respectively. A discussion of the change in cash and cash equivalents can be found below.
Operating Activities
Cash flow from operations is driven by changes in the working capital needs associated with the various goods and services we provide, and expenses related to the infrastructure in place to support revenue generation. Working capital is primarily affected by changes in accounts receivable, contract assets, accounts payable, accrued expenses, and contract liabilities, all of which are partially correlated to and impacted by changes in the timing and volume of activities performed in our facilities. Net cash used in operating activities was $29.0 million during fiscal year 2025, a decrease of $47.5 million from $18.5 million of net cash provided by operating activities during fiscal year 2024. Operating cash flow reflected $12.0 millionof cash generated from earnings after adjusting for non-cash items, more than offset by changes in working capital. Working capital was primarily impacted by the integration of SkyWater Texas and the timing of customer collections and supplier payments. Accounts receivable, contract assets and accounts payable resulted in a net $20.5 millionuse of cash, driven largely by the SkyWater Texas receivable balances and extended payment terms, partially offset by favorable cash collections in Legacy SkyWater. Inventory decreased $1.0 million, reflecting reductions in the Legacy SkyWater partially offset by higher inventory levels at Fab 25. Prepaid expenses increased $11.2 million, primarily due to increases in customer construction-in-progress balances.
Investing Activities
Our investments in capital expenditures are intended to enable revenue growth in new and expanding markets, help us meet product demand, and increase our manufacturing efficiencies and capacity. Net cash used in investing activities was $113.0 million during fiscal year 2025, an increase of $101.8 million from $11.2 million in fiscal year 2024. The increase in cash used in fiscal year 2025 reflects our investment in Fab 25, as well as our continued investment in our development and manufacturing capabilities.
Financing Activities
Net cash generated from financing activities was $146.4 million during fiscal year 2025, an increase of $153.2 million from $6.8 million used during fiscal year 2024. The increase in net cash provided by financing activities during the fiscal year ended 2025 was primarily driven by the increase in net draws on our Revolver from financing our investment in Fab 25 and the increased working capital needs of operating an additional site.
Indebtedness
Sale Leaseback Transaction
In 2020, we entered into an agreement to sell the land and building of our Minnesota facility to Oxbow Realty, an affiliate of our principal stockholder, for $39.0 million, less applicable transaction costs of $1.5 million and transaction services fees paid to Oxbow Realty of $2.0 million, and paid a guarantee fee to our principal stockholder of $2.0 million. We subsequently entered into an agreement to lease the land and building from Oxbow Realty for initial payments of $0.4 million per month over 20 years. The monthly payments are subject to a 2% increase each year during the term of the lease. We are also required to make certain customary payments constituting "additional rent," including certain monthly reserve, insurance, and tax payments, in accordance with the terms of the lease. Due to our continuing involvement in the property, we are accounting for the transactions as a failed sale leaseback. Under failed sale leaseback accounting, we are deemed the owner of the land and building with the proceeds received from the sale recorded as a financial obligation.
In June 2025, the Company entered into an agreement to sell and leaseback a furnace over a 36 month period. Monthly lease payments total $0.1 millionunder the agreement. The Company received $4.6 millionof cash as part of the sale agreement and accounted for the transaction as a failed sale leaseback. As a result, the Company is deemed the owner of the asset and a financial obligation has been recorded. Monthly lease payments will reduce the financial obligation balance, with a portion of the payments being applied to interest expense over the course of the lease.
Revolving Credit Agreement
On December 28, 2022, we entered into a Loan and Security Agreement with Siena, which was amended on November 19, 2024 to extend the maturity date to December 31, 2028 and increase the total borrowing capacity to $130.0 million (the "Revolver"). On June 30, 2025, we entered into an Amended Loan Agreement with Siena and the other lenders party thereto, which replaced the prior Loan and Security Agreement, as amended, to further amend the credit facility and increase the borrowing base in connection with the Transaction. The Amended Loan Agreement significantly increased our borrowing capacity from $130 million to $350 million, increased the borrowing base under the Revolver, and extended the
maturity date to June 30, 2030. The Amended Loan Agreement enhanced the availability under the borrowing base, increased the allowable unfunded capital expenditures from $15 million to $44 million for 2025, and increased our minimum liquidity requirement from $15 million to $30 million. We expect these changes to improve our liquidity profile and support continued investment in strategic capital growth initiatives.
The Company has incurred $10.1 million of debt issuance costs in connection with the Amended Loan Agreement, which is being amortized as additional interest expense over the term of the Revolver. At December 28, 2025, we had borrowings of $195.5 million and availability of $55.7 million under the Revolver.
Under the Amended Loan Agreement, the Company may be required to prepay the unpaid principal balance of the loans following specified prepayment events in the amount of 100% of the net proceeds received by the Company or any borrower with respect to such prepayment event. Borrowing under the Amended Loan Agreement is limited by a borrowing base of specified advance rates applicable to billed accounts receivable, unbilled accounts receivable, inventory and equipment, subject to various conditions and limits as provided in the Amended Loan Agreement. The Amended Loan Agreement also provides for borrowing base sublimits applicable to each of unbilled accounts receivable and equipment. Under certain circumstances, Siena may from time to time establish and revise reserves against the borrowing base and/or the maximum revolving facility amount.
Borrowings under the Amended Loan Agreement bear interest at a rate that depends upon the type of borrowing, whether a term secured overnight financing rate ("SOFR") loan or base rate loan, plus the applicable margin. The term SOFR loan rate is a forward-looking term rate based on SOFR for a tenor of one month on the applicable day, subject to a minimum of 2.5%per annum. The base rate is the greatest of the prime rate, the Federal funds rate plus 0.5%and 7.0%per annum. The applicable margin is an applicable percentage based on the fixed charge coverage ratio that ranges from 4.0%to 5.0%per annum for term SOFR loans and ranges from 3.0%to 4.0%per annum for base rate loans.
The Amended Loan Agreement contains customary representations and warranties and financial and other covenants and conditions. Subject to certain cure rights and financial conditions, the Amended Loan Agreement requires $10 millionin minimum EBITDA (as defined in the Amended Loan Agreement) calculated as of the last day of each calendar month for the preceding twelve calendar months, prohibits unfunded capital expenditures in excess of the amounts set forth in the Amended Loan Agreement calculated as of the last day of each calendar year commencing December 31, 2025, requires a minimum fixed charge coverage ratio, measured on a trailing twelve month basis, of not less than 1.00 to 1.00 if our liquidity is less than (i) $30 millionprior to the consummation of a sale and leaseback transaction on certain owned real property in Austin, Texas or (ii) $80 millionfollowing the consummation of such sale and leaseback transaction, and requires the Borrowers maintain liquidity of at least $70 millionat all times following such sale and leaseback transaction. In addition, the Amended Loan Agreement places certain restrictions on our ability to incur additional indebtedness (other than permitted indebtedness), to create liens or other encumbrances (other than liens relating to permitted indebtedness), to sell or otherwise dispose of assets, to merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends to our stockholders. As of December 28, 2025, we were in compliance with applicable covenants of the Amended Loan Agreement and expect to continue to be in compliance with applicable financial covenants over the next twelve months.
Due to a lockbox clause in the Loan Agreement, the outstanding loan balance is required to be serviced with working capital, and the debt is classified as short-term on the consolidated balance sheets in accordance with U.S. GAAP.
VIE Financing
On September 30, 2020, Oxbow Realty, the Company's consolidated VIE, entered into a loan agreement for $39.0 million (the "VIE Financing") to finance the acquisition of the building and land of the SkyWater Minnesota facility. The VIE Financing is repayable in equal monthly installments of $0.2 million over 10 years, with the balance payable at the maturity date of October 6, 2030. The interest rate under the VIE Financing is fixed at 3.44%. The VIE Financing is guaranteed by Oxbow Industries, who is also the sole equity holder of Oxbow Realty. The VIE Financing is not subject to financial covenants.
The terms of the VIE Financing include provisions that grant the lender several protective rights when certain triggering events defined in the loan agreement occur, including events tied to SkyWater's occupancy of the SkyWater Minnesota facility and SkyWater's financial performance. The triggering events are not financial covenants and the occurrence of these triggering events do not represent events of default, nor do they result in the VIE Financing becoming callable, rather the protective rights become enforceable by the lender. Based on the level of SkyWater's earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs relative to gross rents paid from SkyWater to Oxbow Realty, as defined in the loan agreement, a triggering event existed and the lender's protective rights were enforceable during the first half of fiscal year 2024. Pursuant to its protective rights, the lender had retained in a restricted account amounts paid by SkyWater to Oxbow Realty pursuant to the Company's related party lease agreement that were in
excess of the scheduled debt payments paid by Oxbow Realty to the lender. The triggering event was cured during the three-month period ended June 30, 2024 and the funds held in the restricted account were remitted back to Oxbow Realty. No triggering events as defined in the loan agreement existed as of December 28, 2025.
The VIE Financing is secured by a security interest in the land and building which was the subject of the sale-leaseback transaction described above. The Company's VIE incurred third-party transaction costs of $0.1 million, which are recognized as debt issuance costs and are amortizing as additional interest expense over the life of the VIE Financing. The Company incurred additional third-party transaction costs of $3.5 million, which are recognized as debt issuance costs and are being amortized as additional interest expense over the life of the VIE Financing.
Tool Financing Loans
We, from time to time, enter into financing arrangements with lenders to finance the purchase of manufacturing tools and other equipment. In fiscal year 2025, we did not enter into any new arrangements to sell manufacturing tools and other equipment to financing lenders. In fiscal year 2024, these arrangements totaled $3.4 million. These agreements include bargain purchase options at the end of the lease terms, which we intend to exercise. These transactions represent failed sale leasebacks with the associated equipment recorded in property and equipment, net and the proceeds received, net of scheduled repayments of the financings, recorded as debt on the consolidated balance sheets.
Material Cash Requirements
Our material cash requirements from known contractual and other obligations primarily relate to the following, for which information on both a short-term and long-term basis is provided in the indicated notes to the consolidated financial statements:
•Debt-Refer to Note 7.
•Capital expenditure commitments-Refer to Note 13.
•Capital lease commitments-Refer to Note 15.
•Sale leaseback obligation-Refer to Note 16.
•Income Taxes-Refer to Note 8.
•Other commitments and contingencies-Refer to Note 13.
Recent Accounting Developments
For information on new accounting pronouncements, see Note 3 to the consolidated financial statements.
Emerging Growth Company and Smaller Reporting Company Status
We qualify as an "emerging growth company" pursuant to the provisions of the JOBS Act, with this qualification ending at the end of our fiscal 2026. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory "say-on-pay" votes on executive compensation, and shareholder advisory votes on golden parachute compensation.
The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use the extended transition period for complying with new or revised accounting standards and therefore, we will not be subject to the same new or revised accounting standards as other public companies that comply with such new or revised accounting standards on a non-delayed basis.
However, as December 31, 2025, we no longer qualify as a "smaller reporting company" as defined under Rule 12b-2 of the Exchange Act due to the market value of our common stock held by our non-affiliates as of the last business day of the fiscal quarter ended June 29, 2025exceeding the applicable threshold for smaller reporting company status. Accordingly, while we remain eligible to take advantage of certain reduced disclosure and reporting requirements applicable to emerging growth companies and we are still applying the reduced disclosure and reporting requirements for smaller reporting companies in this Annual Report on Form 10-K, we will no longer be eligible to rely on the reduced disclosure and reporting requirements available to smaller reporting companies beginning with our Quarterly Report on Form 10-Q for the first quarter of 2026.
Critical Accounting Estimates
In connection with preparing our consolidated financial statements in accordance with U.S. GAAP, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expense, and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes are relevant at the time we prepared our consolidated financial statements. On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ materially from our assumptions and estimates.
On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, valuation of long-lived assets, valuation of inventory, equity-based compensation, and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions.
Revenue Recognition
Revenue is recognized when control of promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. To recognize revenues, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the customer contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the customer contract, and (5) recognize revenues when or as we satisfy a performance obligation. We account for a contract when it has approval and commitment from all parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of transaction price is probable. At contract inception, we apply judgment in determining customers' abilities and intentions to pay amounts entitled to us when due based on a variety of factors including customers' historical payment experience.
We primarily derive revenue from the performance of ATS wafer manufacturing process development services and the manufacture and delivery of wafers via Wafer Services.
ATS Development
ATS development contracts are focused on the performance of process development services, the output of which is a manufacturing plan that defines the steps and activities needed to produce customer wafers at high volumes and with high yields. Wafer manufacturing development services do not include services to manufacture customer wafers at scale. ATS development contracts are complex and wafer manufacturing development services are often either the lone performance obligation in an ATS development contract, or the performance obligation to which the majority of the contract value is allocated. The Company has fixed price, time-and-materials and cost-plus-fixed-fee contracts with its ATS development customers. The Company's ATS development customers receive the benefits of these services, and revenue from performance of these services are largely recognized over time as they are performed.
Revenue on fixed price contracts is recognized using either an output or input method based upon the method that best measures the value of the services performed for the Company's customers. Whether an output or input method is selected requires judgment and is subject to thorough analysis of the terms of each fixed price contract. The Company consistently uses either its output method or input method for similar performance obligations and in similar circumstances.
The Company's output method of revenue recognition evaluates the steps and activities needed to complete manufacturing development services and relies on surveys of steps and activities completed as of the reporting date in relation to the then current manufacturing development plans to measure the level of progress on the service. There are many steps and activities included in the Company's manufacturing development plans. The time and effort to complete the steps and activities are very similar, which demonstrates a level of uniformity. This uniformity accurately conveys the steps and activities successfully validated during development in relation to the development plan and therefore provides a faithful representation of the progress achieved on wafer manufacturing development services. Based on the level of progress, the Company records the proportion of the transaction price allocated to wafer manufacturing development services as revenue in the period. Manufacturing development plans are subject to change as data is analyzed and the plans are revised. Development of production plans are technical endeavors and adjustment to manufacturing development plans may impact the percentage of progress achieved and result in cumulative adjustments of revenue.
The Company uses the input method of revenue recognition for larger customer programs that are focused on development of new applications, or whose manufacturing processes will rely on new or emerging technologies. Wafer manufacturing development services for these customers is inherently more complex and requires more changes to manufacturing development plans over the period of service performance. Given the level of technical complexity and the expectation that there will be more changes to manufacturing plans as compared to other customer programs, the Company measures progress by comparing costs incurred to date to estimated total cost required to complete wafer manufacturing development services. The Company records that proportion of the transaction price allocated to wafer manufacturing development services as revenue in the period. Costs include labor costs, manufacturing costs, material costs, and other direct costs incurred while performing the services. The estimation of total costs requires significant judgment and any adjustment to estimates of total cost may impact the percentage of progress achieved and could result in cumulative adjustments of revenue.
When contracts are fixed price, the Company completes an evaluation of onerous ATS development contracts as of the reporting date for each separate contract, not for separate performance obligations in each contract. The Company recognizes losses on onerous ATS development contracts depending on whom the customer is based on the following:
•U.S. Federal Government - The Company designates all ATS development contracts with the U.S. Federal Government as production-type service contracts; accordingly, it accrues liabilities for onerous contracts in the period it becomes evident the contract will result in a loss.
•Customers other than the U.S. Federal Government - As the Company generally develops wafer manufacturing plans for its customers under ATS development contracts, ATS development contracts with non-U.S. Federal Government ATS development customers do not represent production-type service contracts; accordingly, the Company recognizes losses as the losses are incurred; it does not accrue liabilities for anticipated future losses.
In addition, ATS development revenue includes lease revenue consistent with Topic 842 (as defined below). SkyWater executed a contract with a customer that includes an operating lease for the right to use a specified portion of the Company's Minnesota facility to produce wafers using the customer's equipment. The contractual amounts that relate to revenue from an operating lease are recorded as deferred revenue, and are recognized over the estimated lease term.
Tools
SkyWater procures tools on behalf of certain customers. Tool revenue is recognized at the point in time when control of the tool transfers to the customer. The point in time when control of a tool transfers to the customer is determined by customer contract terms. For some customers, control transfers when the tool is shipped or delivered to a SkyWater facility, while for other customers, control transfers when the tool is installed, qualified, and placed into service at a SkyWater facility.
Wafer Services
Wafers are goods that are generally customer specific, highly customized and have no alternative use to the Company. Wafer Services customers contract with the Company to manufacture wafers based on their manufacturing design specifications. The terms of Wafer Services contracts dictate when control over wafers is transferred to the Company's customers.
For contracts where orders are non-cancelable and the Company thereby maintain enforceable rights to customer performance, including rights to payment for partially completed wafers at reasonable margins, control over wafers transfers to its customers as wafers are manufactured. For these contracts, the Company recognizes revenue using an input method for Legacy SkyWater and an output method for SkyWater Texas. The input method measures the percentage of completion of each wafer still in the manufacturing process by comparing total costs incurred to date to the total estimated costs to manufacture the wafer, whereas the output method measures the percentage of completion of a wafer still in the manufacturing process by comparing total manufacturing steps completed to date to the total number of manufacture steps required to complete the wafer. The Company records the proportion of the transaction price as revenue in the period.
When the Company's contracts allow for orders to be canceled and do not maintain enforceable rights to customer performance on canceled orders, including a right to payment for partially completed wafers at reasonable margins, control of wafers transfers to its customers at the point in time when wafer manufacturing is complete, and control of the wafers transfers to the customer pursuant to the customer contract and shipping terms.
The Company's Fab 25 supply agreement with Infineon includes an off-market component that resulted in the recognition of a $120.0 million contract liability in purchase accounting for the acquisition of Fab 25 (see Note 4 - Acquisitions). The contract liability is released and recognized as Wafer Services revenue for SkyWater Texas over the four-year term of the supply agreement based on the ratio of actual quantities produced as compared to estimates of total quantities expected to be produced over the term of the contract. The estimation of total quantities expected to be produced requires significant judgment and any adjustment to this estimate may impact the amount of revenue recognized in any fiscal period.
Long-lived Assets
We review long-lived assets, including property and equipment, lease right-of-use assets and intangible assets with definite lives, for impairment whenever events or changes in circumstances, known as triggering events, indicate that the asset group's carrying amount may not be recoverable. Triggering events include, but are not limited to, reduced or expected sustained decreases in cash flows generated by an asset group, negative changes in industry conditions, a significant change in an asset group's use or physical condition, and the introduction of competing technologies. When assessing an asset group for impairment, we complete a two-step process. In the first step, we assess the recoverability of the asset group by comparing the carrying amount of the asset group against the sum of the undiscounted future cash flows expected to be generated by the asset group. If the sum of the undiscounted future cash flows expected to be generated by an asset group exceed the carrying amount of the asset group, the carrying amount of the asset group is recoverable and not impaired. If the carrying amount of an asset group exceeds the sum of the undiscounted future cash flows expected to be generated by the asset group, further analysis is required in step two. In the second step, the fair value of the asset group is determined. If the fair value of the asset group exceeds the carrying amount of the asset group, the asset group is not impaired. If the carrying amount of the asset group exceeds the fair value of the asset group, an impairment loss is
recognized in the consolidated statements of operations to the extent the carrying amount of the asset group exceeds the estimated fair value of the asset group, not to exceed the carrying amount of the asset group.
For purposes of impairment testing, we group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The undiscounted cash flow analysis consists of estimating the future cash flows that are directly associated with, and are expected to arise from, the use and eventual disposition of the asset or asset groups over its remaining useful life. These estimated cash flows are inherently subjective and include significant assumptions, specifically forecasted revenue and operating margins that require estimates based upon historical experience and future expectations.
We use various approaches to determine fair values of our long-lived assets, including the income approach, the sales comparison approach, and the cost approach. Each approach is inherently subjective and includes significant assumptions, specifically the comparability of similar assets, the potential income and expenses that would be derived or incurred to rent those long-lived assets, obsolescence factors, and capitalization and discount rates.
Income Taxes
In determining taxable income for financial statement purposes, we must make certain estimates and judgments. These estimates and judgments affect the calculation of certain tax liabilities and the determination of the recoverability of certain deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expenses. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years, and our forecast of future taxable income. In estimating future taxable income, we develop assumptions regarding the reversal of temporary differences. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying business.
In the current period the Company released a large portion of the previously recorded valuation allowance on its deferred tax assets. On June 30, 2025, the Company acquired Fab 25 that was accounted for as a business combination and recognized net deferred tax liabilities of $33.6 million in purchase accounting.
Based on the Company's analysis of all positive and negative evidence available for the year ended December 28, 2025, the Company concluded it is more likely than not that the majority of the U.S. federal and U.S. states net deferred tax assets will be realizable. The Company considered the reversal of taxable temporary differences to determine the appropriate valuation allowance. Accordingly, the company recognized a non-recurring tax benefit of $23,200 for the year ended December 28, 2025, and this change mainly resulted from the taxable temporary differences recorded from the Fab 25 acquisition. As of December 28, 2025, $5,018 of our valuation allowance remained against certain tax attributes.
Our income tax expense recorded in the future may be further reduced to the extent of a decrease in the remaining valuation allowance. The realization of our remaining deferred tax assets is primarily dependent on future taxable income. Any reduction in future taxable income may require that we record an additional valuation allowance against our deferred tax assets. An increase in the valuation allowance could result in additional income tax expense in such period and could have a significant impact on our future earnings. Because the determination of the amount of deferred tax assets that can be realized is based, in part, on our forecast of future profitability, it is inherently uncertain and subjective. Changes in market conditions and our assumptions may cause the actual future profitability to differ materially from our current expectation, which may require us to increase or decrease the valuation allowance.
Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management records the effect of a tax rate or law change on our deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material effect on our financial condition, results of operations or cash flows.
Business Combinations
We account for business combinations using the acquisition method in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805,Business Combinations, recognizing identifiable tangible and intangible assets acquired, liabilities assumed, and any non-controlling interests at their fair values as of the acquisition date. The total purchase consideration transferred, including cash paid, equity issued, contingent payments and other forms of consideration is also measured at fair value as of the acquisition date. When the total consideration transferred exceeds the fair value of net assets acquired, the excess is recorded as goodwill. When the total consideration transferred is less than the fair value of net assets acquired, a bargain purchase gain is recorded.
The estimation of fair values in a business combination involves significant judgment. We use a variety of valuation techniques many of which are complex, including discounted cash flow techniques, market comparisons, and
cost approaches. These valuations depend on valuation inputs, including many assumptions such as discount rates, projected earnings, useful lives, and other economic factors that management must estimate.
If complete information is not available at the time of acquisition, provisional estimates are used and may be adjusted during a measurement period of up to one year, based on information that existed as of the acquisition date. If new information becomes available during the measurement period, provisional amounts are adjusted retrospectively. However, once the measurement period ends, any subsequent changes to fair value estimates are recognized in current-period earnings.
Non-GAAP Financial Measure
Our consolidated financial statements are prepared in accordance with U.S. GAAP. To supplement our consolidated financial statements presented in accordance with U.S. GAAP, an additional non-GAAP financial measure is provided and reconciled in the table below.
We provide supplemental non-GAAP financial information that our management regularly evaluates to provide additional insight to investors as supplemental information to our U.S. GAAP results. Our management uses adjusted EBITDA to make informed operating decisions, complete strategic planning, prepare annual budgets, and evaluate the Company's and management's performance. We believe that adjusted EBITDA is a useful performance measure to our investors because it provides a baseline for analyzing trends in our business and excludes certain items that may not be indicative of our core operating results. The use of non-GAAP financial information should not be considered as an alternative to, or more meaningful than, the comparable U.S. GAAP measure. In addition, because this non-GAAP financial measure is not determined in accordance with U.S. GAAP, other companies, including our peers, may calculate their non-GAAP financial measures differently than we do. As a result, the non-GAAP financial measure presented in this Annual Report on Form 10-K may not be directly comparable to similarly titled measures presented by other companies.
Adjusted EBITDA
Adjusted EBITDA is not a financial measure determined in accordance with U.S. GAAP. We define adjusted EBITDA as net (loss) income before interest expense, income tax expense (benefit), depreciation and amortization and certain other items that we do not view as indicative of our ongoing performance, including equity-based compensation, net income attributable to noncontrolling interests, management transition expense, restructuring costs, transaction and integration costs, sale process costs and bargain purchase gain.
We believe adjusted EBITDA is a useful performance measure to our investors because it allows for an effective evaluation of our operating performance when compared to other companies, including our peers, without regard to financing methods or capital structures. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because these amounts can vary substantially within our industry depending on the accounting methods and policies used, book values of assets, capital structures, and the methods by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net (loss) income attributable to SkyWater Technology, Inc. determined in accordance with U.S. GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.
We continuously evaluate the non-GAAP financial measures we use, the manner in which non-GAAP financial measures are calculated, and the adjustments we make to GAAP results to derive our non-GAAP financial measures.
The following table presents a reconciliation of net income (loss) to adjusted EBITDA attributable to SkyWater Technology, Inc., our most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
|
Fiscal Year Ended
|
|||||||||||
| December 28, 2025 | December 29, 2024 | ||||||||||
| (in thousands) | |||||||||||
|
Net income (loss) attributable to SkyWater Technology, Inc.
|
$ | 118,910 | $ | (6,793) | |||||||
|
Interest expense
|
13,713 | 8,837 | |||||||||
|
Income tax (benefit) expense
|
(27,989) | 240 | |||||||||
|
Depreciation and amortization, net
|
34,703 | 18,242 | |||||||||
| EBITDA | 139,337 | 20,526 | |||||||||
|
Equity-based compensation(1)
|
9,422 | 8,168 | |||||||||
|
Restructuring costs(2)
|
1,403 | 188 | |||||||||
|
Sale process costs(3)
|
153 | - | |||||||||
|
Management transition expense(4)
|
- | 903 | |||||||||
|
Transaction and integration costs(5)
|
10,058 | 220 | |||||||||
|
Bargain purchase gain(6)
|
(111,746) | - | |||||||||
|
Net income attributable to non-controlling interests (7)
|
4,536 | 4,276 | |||||||||
| Adjusted EBITDA | $ | 53,163 | $ | 34,281 | |||||||
(1)Represents non-cash equity-based compensation expense.
(2)Represents severance, separation, and other termination benefits related to the reorganization of the manufacturing and operations teams.
(3)Represents incremental expenses incurred in connection with the Company's evaluation of IonQ's offer to acquire the Company, including legal, accounting, and other advisory fees.
(4)Represents the cost of severance, separation, and other termination benefits related to the reorganization of the manufacturing, sales, marketing, and operations leadership team.
(5)Represents transaction and integration costs associated with our June 30, 2025 acquisition of Fab 25, including legal fees, professional services fees, consultant fees, and other costs to effectuate the closing of the transaction and integration of the acquired business.
(6)Represents the bargain purchase gain recognized for the acquisition of Fab 25 on June 30, 2025. The total consideration paid by SkyWater to acquire Fab 25 was less than the fair value of the net assets acquired and necessitated the recognition of the bargain purchase gain pursuant to GAAP. The amount of the bargain purchase gain is impacted by the fair values assigned to the net assets acquired in purchase accounting. Values in this regard, as well as related tax impacts, are preliminary in nature and are subject to finalization by the second quarter of fiscal 2026 as allowed by GAAP.
(7)Represents net income attributable to noncontrolling interests arising from our variable interest entity (VIE), which was formed for the purpose of purchasing the land and building of our primary operating facility in Bloomington, Minnesota. Since interest expense is added back to net loss to shareholders in our adjusted EBITDA financial measure, we also add back the net income attributable to noncontrolling interests as its net income is derived from interest the VIE charges SkyWater.
Skywater Technology Inc. published this content on March 11, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 11, 2026 at 21:15 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]