Intevac: Fiscal 2Q09 Financial Results

Intevac, Inc. reported financial results for the quarter and six months ended June 27, 2009.

The net loss for the quarter was $4.5 million, or $0.20 per diluted share, on 21.9 million weighted-average shares outstanding. The net loss included $1.3 million of equity-based compensation expense, equivalent to $0.04 per diluted share. For the second quarter of 2008, the net loss was $937,000, or $0.04 per diluted share, on 21.7 million weighted average shares outstanding, which included $1.6 million of equity-based compensation expense, equivalent to $0.05 per diluted share.

Revenues for the quarter were $12.3 million, including $6.1 million of Equipment revenues and Intevac Photonics revenues of $6.3 million. Equipment revenues consisted of one disk lubrication system, equipment upgrades, spares and service. Intevac Photonics revenues consisted of $3.3 million of research and development contracts and $2.9 million of product sales or 46.6% of Photonics revenues. In the second quarter of 2008, revenues were $32.1 million, including $25.7 million of Equipment revenues and $6.4 million of Intevac Photonics revenues, which included $2.4 million of product sales or 37.4% of Photonics revenues.

Equipment gross margin was 39.2%, compared to 29.9% in the first quarter of 2009 and 42.4% in the second quarter of 2008. The sequential improvement in Equipment gross margin reflected changes in product mix to higher-margin technology upgrades, while the year-over-year decrease reflected lower revenues and lower factory utilization. Intevac Photonics gross margin was 34.1%, compared to 39.4% in the first quarter of 2009 and 34.9% in the second quarter of 2008. The decrease in Photonics gross margin reflected higher manufacturing and contract research and development costs. Consolidated gross margin was 36.6%, compared to 40.9% in the second quarter of 2008.

Operating expenses for the quarter totaled $12.8 million, a decline of 19.3% compared to $15.8 million in the second quarter of 2008 and a decline of 7.0% compared to $13.7 million in the first quarter of 2009. Operating expenses declined compared to the first quarter of 2009 and the second quarter of 2008 as a result of the cost savings from the global cost reduction plan initiated in the fourth quarter of 2008.

The net loss for the first six months of 2009 was $10.3 million, or $0.47 per diluted share, on 21.9 million weighted-average shares outstanding. The net loss included $2.7 million of equity-based compensation expense, equivalent to $0.09 per diluted share. For the first six months of 2008, net income was $626,000, or $0.03 per diluted share, on 22.1 million weighted average shares outstanding, which included $3.2 million of equity-based compensation expense, equivalent to $0.10 per diluted share.

Revenues for the first six months of 2009 were $24.6 million, including $12.2 million of Equipment revenues and $12.4 million of Intevac Photonics revenues. Equipment revenues consisted of disk lubrication systems, equipment upgrades, spares and service and did not include any 200 Lean systems. Intevac Photonics revenues consisted of $7.0 million of research and development contracts and $5.5 million of product sales or 44.0% of Photonics revenues. In the first six months of 2008, revenues were $65.3 million, including $52.7 million of Equipment revenues and $12.6 million of Intevac Photonics revenues, which included $4.4 million of product sales or 35.2% of Photonics revenues.

Equipment and Intevac Photonics gross margins for the first six months of 2009 were 34.5% and 36.7%, respectively, compared to 44.8% and 38.4% in the first six months of 2008. The decrease in Equipment gross margin reflected lower revenues and lower factory utilization. The decrease in Intevac Photonics margin reflected higher manufacturing and warranty costs. Consolidated gross margin was 35.6%, compared to 43.6% in first six months of 2008.

Operating expenses for the first six months of 2009 totaled $26.5 million and declined 17.9% from $32.3 million in the first six months of 2008. Operating expenses declined primarily as the result of decreased spending on development of new Equipment products as well as the result of cost savings from the global cost reduction plan initiated in the fourth quarter of 2008.

Order backlog totaled $44.0 million on June 27, 2009, compared to $17.0 million on March 28, 2009 and $27.7 million on June 28, 2008. Backlog as of June 27, 2009 includes five 200 Lean systems, compared to one on March 28, 2009 and four on June 28, 2008.

"After several quarters of limited bookings and visibility from our hard disk customers, we are pleased to see an increase in order activity during the second quarter," commented Kevin Fairbairn, president and chief executive officer of Intevac. "Our hard disk customers are investing in technology as evidenced by our recent announcements of the industry’s first two high-productivity Etch and Deposition systems for use in Patterned Media development, as well as two additional research and development systems. Additionally, our Photonics business continues its positive momentum and generated record-level product sales this quarter.”