SkyWater Technology shares plunge 36% on news of revenue constraint

SkyWater Technology lost more than one-third of its market value Wednesday after it revealed that supply shortages and a government spending logjam were putting a crimp in its revenue.

The Bloomington-based chipmaker revealed the delay of about $15 million in expected revenue in its quarterly earnings report late Tuesday. On Wednesday, executives used a conference call to assure investors and analysts they expected the money to arrive next year.

"There is high conviction for that revenue," Steve Manko, the company's chief financial officer, said on the call. "We are seeing those headwinds and some supply constraints remaining. That is why it was pushed out of (2021)."

Investors handed SkyWater its biggest one-day drop in value since the company went public this spring. Its shares closed down $11.78 to $20.85, a 36% drop.

The company provides engineering and technical talent and services to help customers develop the manufacturing process for new chips and then manufacture those products at scale. It added eight new customers in the July-to-September quarter, when revenue grew 6% to $35 million but was still below analysts' expectations.

Supply chain issues are affecting nearly all industries as the recovery from the pandemic slowdown has been uneven among suppliers and transportation providers. SkyWater, which is a qualified defense contractor, has also been hurt by uneven payouts from the government, executives said.

The company reported a net loss of $13.9 million, or 36 cents a share in the quarter. It lost $1.7 million, or 9 cents a share, in the same period a year ago.

Adjusted for one-time events, SkyWater had a net loss of $11.5 million, or 29 cents a share, compared to an adjusted loss of $800,000, or 4 cents a share, in the third quarter of 2020.

SkyWater is lightly covered by analysts. According to Refinitiv, the four analysts covering the company expected an adjusted loss of 14 cents a share and revenue missed their expectations by 19%.

Harsh Kumar, a Piper Sandler analyst who follows SkyWater, maintained a buy rating on the company's shares, but he lowered his financial outlook and price target.

"We are decreasing our SkyWater estimates to reflect the continued (revenue) pushouts the company is facing," Kumar wrote in a note to investors.

Tom Sonderman, the company's chief executive, expressed confidence in SkyWater's long-term strategy. And SkyWater continues to make its own investments in personnel and its platforms to develop and produce new chip technologies for clients, he said.

Revenue in advanced technology services unit, which develops new processes and chips for clients, fell 8% in the quarter to $22.4 million. Its wafer services revenue, which handles volume manufacturing for clients, was up 44% to $12.7 million.

By comparison, revenue in advanced technology services grew 43% in 2020 and 35% in the second quarter this year.

SkyWater is one of seven Minnesota companies to complete initial public offerings this year. Despite the plunge on Wednesday, SkyWater's shares were still 49% higher than its IPO price of $14 in April. SkyWater shares peaked at $36.80 in early September.