Summary of Significant Accounting Policies	12 Months Ended
Dec. 29, 2024
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies Recently Adopted Accounting Standards In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (ASU No. 2023-07”). The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. SkyWater adopted ASU 2023-07 on January 1, 2024 as shown in its annual consolidated financial statements for its fiscal year ending December 29, 2024. See Note 17 - Reportable Segment and Geographic Information for further information. Prior period information has been updated to reflect the new disclosure requirements. Recently Issued Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (“ASU 2023-09”). The amendments in this update improve existing income tax disclosures, notably with respect to the income tax rate reconciliation and income taxes paid disclosures, and are effective for annual periods beginning after December 15, 2025. As an emerging growth company, SkyWater will adopt the amendments in ASU 2023-09 for its fiscal year ending January 3, 2027. The Company is evaluating the impacts of the amendments on its consolidated financial statements and the accompanying notes to the financial statements. In November of 2024, the FASB issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income—Expense Disaggregation Disclosures (“ASU 2024-03”). The amendments in this update require disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026. SkyWater will adopt the amendments in this update for its fiscal year ending January 2, 2028. The Company is evaluating the impacts of the amendments on its consolidated financial statements and the accompanying notes to the financial statements. Cash and Cash Equivalents All highly liquid debt instruments purchased with an original maturity of three months or less are considered to be cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in its deposit accounts. Accounts Receivable Accounts receivable are carried at original invoiced amounts, less an estimate made for expected credit losses based on the Company’s expectation of losses to be incurred. Management determines the need for an allowance for credit losses through the review of its historical write-offs and recoveries and assessment of current and future economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Contract Assets Contract assets represent SkyWater’s rights to payments for services it has transferred to its customers but has not yet billed to its customers. Inventory Inventory consist of raw materials, work in process, and finished goods. Cost is determined on the first-in, first-out basis. Raw materials are stated at weighted-average cost, while work in process and finished goods inventory is stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling costs. When net realizable value (which requires projecting future average selling prices, sales volumes, and costs to complete work in process) is below cost, the Company records a charge to cost of revenue to write down inventory to its estimated net realizable values in advance of when the inventory is actually sold. Supplies and spare parts are measured at weighted-average cost and expensed when utilized. Supplies and spare parts are classified as inventory if expected to be used within one year. Supplies and spare parts not expected to be used within one year are classified as other assets in the Company’s consolidated balance sheets. Property and Equipment Property and equipment is recorded at cost when acquired. The costs of additions and improvements are capitalized. The cost of repairs and maintenance are expensed in the period incurred. When equipment is sold or retired, the related net carrying amount of the equipment is de-recognized and a gain or loss is recorded in the consolidated statements of operations based on the proceeds received from the disposition. Depreciation expense is computed using the straight-line attribution method and recognized over the estimated useful lives of the assets assigned for accounting purposes, which are generally seven to ten years for machinery and equipment, ten years for building improvements, and 25 years for buildings. Intangible Assets Intangible assets consist of payments made under software and technology licensing arrangements with third-parties. These intangible assets are amortized over their identified finite lives. Impairment of Long-Lived Assets SkyWater assesses long-lived assets, including property and equipment, lease right-of-use assets and intangible assets with definite lives, for impairment using a two-step process whenever events or changes in circumstances indicate that the asset group’s carrying amount may not be recoverable. In the first step, SkyWater assesses 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 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; the second step of the assessment is not completed. If the carrying amount of the asset group exceeds the sum of the undiscounted future cash flows expected to be generated by the asset group, SkyWater completes a second step and determines the fair value of the asset group. 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 statement of operations to the extent the carrying amount of the asset group exceeds the fair value of the asset group, not to exceed the carrying amount of the asset group. Due to SkyWater’s history of operating losses, it estimated the fair value of its long-lived assets as of December 29, 2024. As of December 29, 2024, the estimated fair value of the Company’s asset group significantly exceeded its carrying amount. There have been no impairments of long-lived assets during the fiscal years ended December 29, 2024, December 31, 2023, or January 1, 2023. Leases The Company leases certain property and equipment, such as its Minnesota facility, its office location in Florida, and certain production equipment under finance leases. It also leases its manufacturing location in Florida and warehouse space in Minnesota under operating leases. The Company applies the provisions of ASC Topic 842, Leases (“Topic 842”) to determine if an arrangement is, or contains, a lease at contract inception. The Company applies many of the exemptions allowed in Topic 842, notably the Company (1) excludes leases with an initial term of twelve months or less from its lease accounting and (2) accounts for lease and nonlease components as a single component (only for equipment leases). Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Pursuant to Topic 842, the Company recognizes right-of-use assets (“ROU”) and lease liabilities for operating leases on its balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets are recognized at the inception of a lease based on the present value of lease payments over the lease term. For leases that do not provide an implicit rate, the Company uses its incremental borrowing rate at the lease inception date in determining the present value of lease payments. Some of the Company’s leases include options to extend or cancel the lease term, which is only included in the lease liability and right-of-use assets calculation when it is reasonably certain the Company will exercise that option at the inception of the lease. As of December 29, 2024, the Company did not intend to exercise its lease extension or cancellation options. Deferred Debt Issuance Costs Deferred debt issuance costs consist of costs incurred in relation to obtaining the Company’s financing and revolving credit facility. These costs are amortized over the life of the related agreements using the effective interest method for its financing and the straight-line method for its revolving credit facilities. The amortization of these costs is included in interest expense. The unamortized debt issuance costs and debt discount are presented as a reduction of the outstanding borrowings in the consolidated balance sheets. Unamortized deferred debt issuance costs and debt discount at the time of an extinguishment of debt are charged to interest expense, as are third-party costs of a modification. Contingent Consideration In connection with SkyWater’s acquisition of the business from Cypress Semiconductor Corporation (“Cypress”), the purchase price of the acquisition was allocated to assets acquired and liabilities assumed, at fair value, and did not result in any goodwill being recorded. The Company recorded a contingent consideration liability of $24,900 for the future estimated earn-out/royalties owed on ATS revenue, at fair value as of the acquisition date in March 2017. For each reporting period thereafter, the Company revalued future estimated earn-out payments and recorded the changes in fair value of the liability in the consolidated statements of operations. The contingent consideration represented a declining percentage of ATS revenue through 2023, and were paid quarterly. No contingent consideration was paid during the fiscal years ended December 29, 2024 and December 31, 2023, and contingent consideration of $816 was paid during the fiscal year ended January 1, 2023. No contingent consideration expenses were recorded in the years ended December 29, 2024, December 31, 2023 or January 1, 2023. Variable Interest Entities The Company evaluates whether an entity is a VIE based on the sufficiency of the entity’s equity at risk and by determining whether the equity holders have the characteristics of a controlling financial interest. If an entity is a VIE, SkyWater determines if it is the primary beneficiary of the VIE by assessing whether it has the power to direct the activities that most significantly impact the economic performance of the VIE, as well as the obligation to absorb losses, or the right to receive benefits, that may be significant to the VIE. These determinations require management to make judgments and assumptions about the VIE’s forecasted financial performance and the volatility inherent in those forecasted results. The Company regularly reviews its arrangements and agreements and assesses whether events or conditions may exist that result in an entity becoming a VIE, or the Company becoming the primary beneficiary of an existing VIE - see Note 15 – Variable Interest Entity. Non-controlling interests reported in shareholders’ equity on the consolidated balance sheets represent the ownership interests in the consolidated VIE held by entities or persons other than SkyWater. Revenue Recognition Revenue is recognized when control of promised goods or services are transferred to the Company’s customers, in amounts that reflect the consideration the Company expects to be entitled to in exchange for those goods or services. To recognize revenue, the Company applies a five-step process to evaluate customer arrangements as follow: (1) it identifies the customer contract; (2) it identifies the performance obligations within the customer contract; (3) it determines the transaction price; (4) it allocates the transaction price to the performance obligations within the contract; and (5) it recognizes revenues when, or as, it satisfies the performance obligations within the contract. The Company accounts 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 the transaction price is reasonably assured. At contract inception, the Company applies judgment in determining the customer’s ability and intention to pay amounts to which the Company is entitled as they become due based on a variety of factors including the customer’s historical payment experience. See below and Note 4 – Revenue, for further discussion of SkyWater’s revenue. 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 input or output 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. 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. 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. This method measures the percentage of completion of wafers still in the manufacturing process by comparing total costs incurred to date to the total estimated costs to manufacture the wafers. The Company records that proportion of the transaction price as revenue in the period. The input method provides the best method of progress as it considers the steps and activities needed to manufacture a wafer and the costs associated with those steps. Costs include labor costs, manufacturing costs, material costs, and other direct costs required to manufacture the customer’s wafers. The estimation of total costs requires judgment and any adjustment to estimates of cost to complete manufacturing may impact the percentage of completion achieved and could result in cumulative adjustments of revenue. 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 has a long-standing relationship with a significant Wafer Services customer. The terms and conditions of this relationship have evolved over time and have impacted the manner in which the Company has recognized revenue. In March 2022, the Company signed a new contract with this customer pursuant to which orders are non-cancelable and the customer maintains obligations to specific performance, including an enforceable obligation to payment for the cost of partially completed orders plus a reasonable profit margin. Given that the wafers produced for this customer are for customer-specific applications with no alternative use to the Company, control of the wafers transfers to the customer over time as the wafers are manufactured. Prior to March 2022, this customer’s agreement allowed it to operate under a bill and hold arrangement where completed wafers it purchased were shipped to them at a later date of their choosing. Pursuant to the terms of this arrangement, transfer of control of the wafers, and revenue recognition occurred as wafers completed post-manufacturing electrical testing and became available for shipment to the customer. Prior to March 2022, wafers manufactured while bill and hold provisions were in place, were separately identified as belonging to this customer, the wafers were denoted as ready for shipment to this customer in their then current form, and the Company did not have the ability to direct or sell the wafers to different customers. Upon completion of post-manufacturing electrical testing, the Company had the right to invoice this customer. This customer also obtained legal title and the risks and rewards of ownership at that point. In March 2022 as a result of entering into the new contract with this customer, the Company transitioned away from its point in time method of revenue recognition to its over-time input method of revenue recognition and recorded a one-time, cumulative adjustment to revenue of $8,290 for wafers still being manufactured at the time the new contract became enforceable. Tools - The Company 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. Research and Development Expense Research and development costs are expensed as incurred. Research and development expense include all costs incurred related to internal technology and process improvements and non-customer funded technology transfers. Licensed Technology The Company licenses technology and pays royalties based on the revenue of the related products or services sold by the Company. Royalties are expensed as incurred and included in cost of revenue in the consolidated statements of operations. Equity-Based Compensation Compensation associated with the Company’s equity-based compensation plans are measured at fair value as of the grant date based on the terms of the award granted. As the Company’s awards are tied to service conditions, compensation expense is recognized over the requisite service period. Forfeitures reduce compensation expense for non-vested awards in the period a forfeiture occurs. The Black-Scholes Option-Pricing Model (the “Black-Scholes Model”) is used to measure the grant-date-fair-value of awards. The Black-Scholes Model requires certain assumptions to determine an award’s fair value, including expected term, risk-free interest rate, expected volatility, expected dividend yield, and fair value of underlying share of equity to which the award relates. Investment Tax Credits and Government Assistance The Company recognizes the benefits of government assistance it receives, or expects to receive, only when there is reasonable assurance that the Company will (1) comply with the conditions attached to government assistance; and (2) the government assistance will be received or paid. The Company receives government assistance in the form of refundable investment tax credits available under Section 48D of the Creating Helpful Incentives to Produce Semiconductors for America Act of 2022 (“CHIPS Act”) for eligible capital expenditures. Upon completing all necessary registrations, the Company recognized during its fiscal year ended December 29, 2024 , an income tax receivable of $4,824 for eligible capital expenditures arising from its 2023 and 2024 tax years. As the Section 48 investment tax credit is asset-based, the deferred benefit from the credit has been recorded as a reduction of the cost basis in the underlying equipment from which the tax credit was derived and will be recognized as a reduction of the assets’ depreciation expense over their useful lives. For the fiscal year ended December 29, 2024, $449 of deferred gain was recognized as a reduction of depreciation expense in cost of revenues on the consolidated statement of operations. Income Taxes Income taxes are accounted for under the liability method. Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences represent the tax-effected differences between the GAAP and tax bases of the Company’s assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date the laws are enactment. Interest and penalties are recognized within interest expense and income tax expense (benefit), respectively, in the consolidated statement of operations.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (ASU No. 2023-07”). The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. SkyWater adopted ASU 2023-07 on January 1, 2024 as shown in its annual consolidated financial statements for its fiscal year ending December 29, 2024. See Note 17 - Reportable Segment and Geographic Information for further information. Prior period information has been updated to reflect the new disclosure requirements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (“ASU 2023-09”). The amendments in this update improve existing income tax disclosures, notably with respect to the income tax rate reconciliation and income taxes paid disclosures, and are effective for annual periods beginning after December 15, 2025. As an emerging growth company, SkyWater will adopt the amendments in ASU 2023-09 for its fiscal year ending January 3, 2027. The Company is evaluating the impacts of the amendments on its consolidated financial statements and the accompanying notes to the financial statements.

In November of 2024, the FASB issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income—Expense Disaggregation Disclosures (“ASU 2024-03”). The amendments in this update require disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026. SkyWater will adopt the amendments in this update for its fiscal year ending January 2, 2028. The Company is evaluating the impacts of the amendments on its consolidated financial statements and the accompanying notes to the financial statements.

All highly liquid debt instruments purchased with an original maturity of three months or less are considered to be cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in its deposit accounts.

Accounts receivable are carried at original invoiced amounts, less an estimate made for expected credit losses based on the Company’s expectation of losses to be incurred. Management determines the need for an allowance for credit losses through the review of its historical write-offs and recoveries and assessment of current and future economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

Inventory consist of raw materials, work in process, and finished goods. Cost is determined on the first-in, first-out basis. Raw materials are stated at weighted-average cost, while work in process and finished goods inventory is stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling costs. When net realizable value (which requires projecting future average selling prices, sales volumes, and costs to complete work in process) is below cost, the Company records a charge to cost of revenue to write down inventory to its estimated net realizable values in advance of when the inventory is actually sold.

Supplies and spare parts are measured at weighted-average cost and expensed when utilized. Supplies and spare parts are classified as inventory if expected to be used within one year. Supplies and spare parts not expected to be used within one year are classified as other assets in the Company’s consolidated balance sheets.

Property and equipment is recorded at cost when acquired. The costs of additions and improvements are capitalized. The cost of repairs and maintenance are expensed in the period incurred. When equipment is sold or retired, the related net carrying amount of the equipment is de-recognized and a gain or loss is recorded in the consolidated statements of operations based on the proceeds received from the disposition. Depreciation expense is computed using the straight-line attribution method and recognized over the estimated useful lives of the assets assigned for accounting purposes, which are generally seven to ten years for machinery and equipment, ten years for building improvements, and 25 years for buildings.

SkyWater assesses long-lived assets, including property and equipment, lease right-of-use assets and intangible assets with definite lives, for impairment using a two-step process whenever events or changes in circumstances indicate that the asset group’s carrying amount may not be recoverable. In the first step, SkyWater assesses 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 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; the second step of the assessment is not completed. If the carrying amount of the asset group exceeds the sum of the undiscounted future cash flows expected to be generated by the asset group, SkyWater completes a second step and determines the fair value of the asset group. 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 statement of operations to the extent the carrying amount of the asset group exceeds the fair value of the asset group, not to exceed the carrying amount of the asset group.

Due to SkyWater’s history of operating losses, it estimated the fair value of its long-lived assets as of December 29, 2024. As of December 29, 2024, the estimated fair value of the Company’s asset group significantly exceeded its carrying amount. There have been no impairments of long-lived assets during the fiscal years ended December 29, 2024, December 31, 2023, or January 1, 2023.

The Company leases certain property and equipment, such as its Minnesota facility, its office location in Florida, and certain production equipment under finance leases. It also leases its manufacturing location in Florida and warehouse space in Minnesota under operating leases. The Company applies the provisions of ASC Topic 842, Leases (“Topic 842”) to determine if an arrangement is, or contains, a lease at contract inception. The Company applies many of the exemptions allowed in Topic 842, notably the Company (1) excludes leases with an initial term of twelve months or less from its lease accounting and (2) accounts for lease and nonlease components as a single component (only for equipment leases). Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

Pursuant to Topic 842, the Company recognizes right-of-use assets (“ROU”) and lease liabilities for operating leases on its balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets are recognized at the inception of a lease based on the present value of lease payments over the lease term. For leases that do not provide an implicit rate, the Company uses its incremental borrowing rate at the lease inception date in determining the present value of lease payments. Some of the Company’s leases include options to extend or cancel the lease term, which is only included in the lease liability and right-of-use assets calculation when it is reasonably certain the Company will exercise that option at the inception of the lease. As of December 29, 2024, the Company did not intend to exercise its lease extension or cancellation options.

Deferred debt issuance costs consist of costs incurred in relation to obtaining the Company’s financing and revolving credit facility. These costs are amortized over the life of the related agreements using the effective interest method for its financing and the straight-line method for its revolving credit facilities. The amortization of these costs is included in interest expense. The unamortized debt issuance costs and debt discount are presented as a reduction of the outstanding borrowings in the consolidated balance sheets. Unamortized deferred debt issuance costs and debt discount at the time of an extinguishment of debt are charged to interest expense, as are third-party costs of a modification.

In connection with SkyWater’s acquisition of the business from Cypress Semiconductor Corporation (“Cypress”), the purchase price of the acquisition was allocated to assets acquired and liabilities assumed, at fair value, and did not result in any goodwill being recorded. The Company recorded a contingent consideration liability of $24,900 for the future estimated earn-out/royalties owed on ATS revenue, at fair value as of the acquisition date in March 2017. For each reporting period thereafter, the Company revalued future estimated earn-out payments and recorded the changes in fair value of the liability in the consolidated statements of operations.

The contingent consideration represented a declining percentage of ATS revenue through 2023, and were paid quarterly. No contingent consideration was paid during the fiscal years ended December 29, 2024 and December 31, 2023, and contingent consideration of $816 was paid during the fiscal year ended January 1, 2023. No contingent consideration expenses were recorded in the years ended December 29, 2024, December 31, 2023 or January 1, 2023.

The Company evaluates whether an entity is a VIE based on the sufficiency of the entity’s equity at risk and by determining whether the equity holders have the characteristics of a controlling financial interest. If an entity is a VIE, SkyWater determines if it is the primary beneficiary of the VIE by assessing whether it has the power to direct the activities that most significantly impact the economic performance of the VIE, as well as the obligation to absorb losses, or the right to receive benefits, that may be significant to the VIE. These determinations require management to make judgments and assumptions about the VIE’s forecasted financial performance and the volatility inherent in those forecasted results. The Company regularly reviews its arrangements and agreements and assesses whether events or conditions may exist that result in an entity becoming a VIE, or the Company becoming the primary beneficiary of an existing VIE - see Note 15 – Variable Interest Entity. Non-controlling interests reported in shareholders’ equity on the consolidated balance sheets represent the ownership interests in the consolidated VIE held by entities or persons other than SkyWater.

Revenue is recognized when control of promised goods or services are transferred to the Company’s customers, in amounts that reflect the consideration the Company expects to be entitled to in exchange for those goods or services. To recognize revenue, the Company applies a five-step process to evaluate customer arrangements as follow: (1) it identifies the customer contract; (2) it identifies the performance obligations within the customer contract; (3) it determines the transaction price; (4) it allocates the transaction price to the performance obligations within the contract; and (5) it recognizes revenues when, or as, it satisfies the performance obligations within the contract. The Company accounts 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 the transaction price is reasonably assured. At contract inception, the Company applies judgment in determining the customer’s ability and intention to pay amounts to which the Company is entitled as they become due based on a variety of factors including the customer’s historical payment experience. See below and Note 4 – Revenue, for further discussion of SkyWater’s revenue.

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 input or output 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:

•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. 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.

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. This method measures the percentage of completion of wafers still in the manufacturing process by comparing total costs incurred to date to the total estimated costs to manufacture the wafers. The Company records that proportion of the transaction price as revenue in the period. The input method provides the best method of progress as it considers the steps and activities needed to manufacture a wafer and the costs associated with those steps. Costs include labor costs, manufacturing costs, material costs, and other direct costs required to manufacture the customer’s wafers. The estimation of total costs requires judgment and any adjustment to estimates of cost to complete manufacturing may impact the percentage of completion achieved and could result in cumulative adjustments of revenue.

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 has a long-standing relationship with a significant Wafer Services customer. The terms and conditions of this relationship have evolved over time and have impacted the manner in which the Company has recognized revenue. In March 2022, the Company signed a new contract with this customer pursuant to which orders are non-cancelable and the customer maintains obligations to specific performance, including an enforceable obligation to payment for the cost of partially completed orders plus a reasonable profit margin. Given that the wafers produced for this customer are for customer-specific applications with no alternative use to the Company, control of the wafers transfers to the customer over time as the wafers are manufactured.

Prior to March 2022, this customer’s agreement allowed it to operate under a bill and hold arrangement where completed wafers it purchased were shipped to them at a later date of their choosing. Pursuant to the terms of this arrangement, transfer of control of the wafers, and revenue recognition occurred as wafers completed post-manufacturing electrical testing and became available for shipment to the customer. Prior to March 2022, wafers manufactured while bill and hold provisions were in place, were separately identified as belonging to this customer, the wafers were denoted as ready for shipment to this customer in their then current form, and the Company did not have the ability to direct or sell the wafers to different customers. Upon completion of post-manufacturing electrical testing, the Company had the right to invoice this customer. This customer also obtained legal title and the risks and rewards of ownership at that point.

In March 2022 as a result of entering into the new contract with this customer, the Company transitioned away from its point in time method of revenue recognition to its over-time input method of revenue recognition and recorded a one-time, cumulative adjustment to revenue of $8,290 for wafers still being manufactured at the time the new contract became enforceable.

Tools - The Company 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.

Compensation associated with the Company’s equity-based compensation plans are measured at fair value as of the grant date based on the terms of the award granted. As the Company’s awards are tied to service conditions, compensation expense is recognized over the requisite service period. Forfeitures reduce compensation expense for non-vested awards in the period a forfeiture occurs. The Black-Scholes Option-Pricing Model (the “Black-Scholes Model”) is used to measure the grant-date-fair-value of awards. The Black-Scholes Model requires certain assumptions to determine an award’s fair value, including expected term, risk-free interest rate, expected volatility, expected dividend yield, and fair value of underlying share of equity to which the award relates.

The Company recognizes the benefits of government assistance it receives, or expects to receive, only when there is reasonable assurance that the Company will (1) comply with the conditions attached to government assistance; and (2) the government assistance will be received or paid. The Company receives government assistance in the form of refundable investment tax credits available under Section 48D of the Creating Helpful Incentives to Produce Semiconductors for America Act of 2022 (“CHIPS Act”) for eligible capital expenditures. Upon completing all necessary registrations, the Company recognized during its fiscal year ended December 29, 2024 , an income tax receivable of $4,824 for eligible capital expenditures arising from its 2023 and 2024 tax years. As the Section 48 investment tax credit is asset-based, the deferred benefit from the credit has been recorded as a reduction of the cost basis in the underlying equipment from which the tax credit was derived and will be recognized as a reduction of the assets’ depreciation expense over their useful lives. For the fiscal year ended December 29, 2024, $449 of deferred gain was recognized as a reduction of depreciation expense in cost of revenues on the consolidated statement of operations.

Income taxes are accounted for under the liability method. Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences represent the tax-effected differences between the GAAP and tax bases of the Company’s assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date the laws are enactment. Interest and penalties are recognized within interest expense and income tax expense (benefit), respectively, in the consolidated statement of operations.