Intevac: Fiscal 2Q15 Financial Results

Intevac, Inc. reported financial results for the quarter and six months ended July 4, 2015.

“We made significant progress in our Thin-Film Equipment growth strategy during the second quarter,” commented Wendell Blonigan, president and CEO. “The proprietary protective carbon film we’ve engineered for our production VERTEX PVD system has demonstrated outstanding performance as a cost-effective, optically-transparent, scratch-protective solution for cell phone display cover panels. We won a new Tier 1 customer for this marketplace, in which we generated excitement for our film by working together with our customer to market the film directly to mobile phone manufacturers, culminating in the new system order announced in July.”

“Our Photonics business continued to perform well, achieving favorable yields in our production programs, while we invest in our next-generation low-light sensor technology,” added Blonigan. “We were also pleased to experience an uptick in demand for strategic HDD media upgrades, which boosted both revenues and gross margin in the quarter as well as our outlook for the year.“

Second Quarter 2015 Summary

• Net income for the quarter was $12,000, or $0.00 per share, compared to a net loss of $5.0 million, or $0.21 per share, in the second quarter of 2014. The non-GAAP net loss was $0.2 million or $0.01 per share, compared to the second-quarter 2014 non-GAAP net loss of $4.9 million or $0.20 per share.
• Revenues were $20.5 million, including $11.5 million of Thin-film Equipment revenues and Photonics revenues of $9.0 million. Thin-film Equipment revenues included upgrades, spares and service, as well as some customer-funded NRE for passing key technical milestones during the quarter. Photonics revenues consisted of $1.8 million of R&D contracts and $7.2 million of product sales. In the second quarter of 2014, revenues were $14.7 million, including $3.8 million of Thin-film Equipment revenues and Photonics revenues of $11.0 million, which included $2.7 million of R&D contracts.
• Thin-film Equipment gross margin was 41.0% compared to 8.3% in the second quarter of 2014 and 28.5% in the first quarter of 2015. Equipment margins in the second quarter of 2015 were higher primarily due to a higher mix of higher-margin upgrades and improved factory absorption.
• Photonics gross margin was 34.5% compared to 44.7% in the second quarter of 2014 and 42.1% in the first quarter of 2015. The decline from the second quarter of 2014 and the first quarter of 2015 was due to lower contractual pricing on shipments of the Apache helicopter camera and higher factory overhead expenses. Consolidated gross margin was 38.2%, compared to 35.4% in the second quarter of 2014 and 34.8% in the first quarter of 2015.
• R&D and SG&A expenses of $7.7 million decreased 22.2% compared to the first quarter of 2015. Lower R&D spending in the second quarter was due primarily to costs recovered under customer-funded NRE in Thin-film Equipment.
• Order backlog totaled $43.5 million on July 4, 2015, compared to $39.2 million on April 4, 2015 and $46.4 million on June 28, 2014. Backlog at both July 4, 2015 and April 4, 2015 included two solar systems, compared to backlog as of June 28, 2014 which included one solar system and one PVD display cover glass coating system.
• The company ended the quarter with $58.8 million of total cash, restricted cash and investments and $85.7 million in tangible book value. The company repurchased 1.1 million shares of common stock for $6.3 million during the second quarter. As of July 4, 2015 the company has repurchased 3.0 million shares for $19.3 million out of the $30 million plan announced in November of 2013.

First Six Months 2015 Summary

• The net loss was $2.9 million, or $0.13 per share, compared to a net loss of $9.5 million, or $0.40 per share, for the first six months of 2014. The non-GAAP net loss was $2.9 million or $0.13 per share. This compares to the first half 2014 non-GAAP net loss of $9.1 million or $0.38 per share.
• Revenues were $40.3 million, including $22.1 million of Thin-film Equipment revenues and Photonics revenues of $18.2 million, compared to revenues of $31.7 million, including $12.8 million of Thin-film Equipment revenues and Photonics revenues of $18.9 million, for the first six months of 2014.
• Thin-film Equipment gross margin was 35.0%, compared to 18.1% in the first six months of 2014, primarily due to higher mix of higher-margin upgrades, lower factory overhead expenses and lower inventory charges. We recognized revenue on one 200 Lean system in both the first half of 2015 and 2014. Photonics gross margin was 38.3% compared to 40.7% in the first six months of 2014, reflecting lower contractual pricing on Apache camera shipments, lower margins on technology development programs and higher factory overhead costs. Consolidated gross margin was 36.5%, compared to 31.6% in the first six months of 2014.
• R&D and SG&A expenses were $17.6 million and were down 11.6% from $19.9 million in the first six months of 2014 primarily due to costs recovered under customer-funded NRE in Thin-film Equipment.