Intevac: Fiscal 2Q11 Financial Results

Intevac, Inc. reported financial results for the quarter and six months ended July 2, 2011.

"While 2011 is a challenging year for our hard drive equipment business, fundamentals in the industry have strengthened in the second quarter, with continued growth expected in the second half of the year," commented Kevin Fairbairn, president and chief executive officer of Intevac. "We continue to view the pending industry consolidation as a positive for the industry and Intevac. While we anticipate our customers will remain cautious with their capital spending until the consolidations are complete, the long term drivers for digital storage remain robust."

"We continue to see incremental traction in the other markets we serve. In the solar market, we continue to make positive progress with our entry into the solar equipment market. Our focus is to provide equipment solutions that improve the conversion efficiency of solar cells, enabling customers to lower their cost per watt. In our Photonics business, we shipped a record $5.9 million in product revenues, up 11% from the first quarter," concluded Mr. Fairbairn.

Second Quarter 2011 Summary
The net loss for the quarter was $2.6 million, or $0.11 per diluted share, compared to net income of $12.3 million, or $0.54 per diluted share, in the second quarter of 2010.

Revenues were $27.6 million, including $19.8 million of Equipment revenues and Intevac Photonics revenues of $7.8 million. Equipment revenues consisted of three 200 Lean systems, upgrades, spares and service. Intevac Photonics revenues consisted of $1.9 million of research and development contracts and a record $5.9 million of product sales or 76.2% of Photonics revenues. In the second quarter of 2010, revenues were $68.6 million, including $60.0 million of Equipment revenues and Intevac Photonics revenues of $8.6 million, which included $3.9 million of product sales.

Equipment gross margin was 38.3%, compared to 44.9% in the second quarter of 2010. The decrease in gross margin was primarily as a result of lower revenues and lower factory utilization. Intevac Photonics gross margin improved to 32.7% compared to 24.2% in the second quarter of 2010. The increase was primarily a result of improved yields related to our night vision camera module for our NATO customer. Consolidated gross margin was 36.7%, compared to 42.3% in the second quarter of 2010. Operating expenses increased slightly to $14.8 million, compared to $14.6 million in the second quarter of 2010, driven by increased development expenses for our new equipment products.

Order backlog totaled $36.9 million on July 2, 2011, compared to $41.7 million on April 2, 2011 and $113.8 million on July 3, 2010. Backlog as of July 2, 2011 includes two Solar systems and no 200 Lean systems, compared to two Solar and two 200 Lean systems on April 2, 2011 and fourteen 200 Lean systems on July 3, 2010.

First Six Months 2011 Summary
The net loss was $9.7 million, or $0.42 per diluted share, compared to net income of $13.8 million, or $0.60 per diluted share, for the first six months of 2010.

Revenues were $45.0 million, including $30.0 million of Equipment revenues and Intevac Photonics revenues of $15.0 million, compared to revenues of $101.7 million, including $85.6 million of Equipment revenues and Intevac Photonics revenues of $16.2 million, for the first six months of 2010.

Equipment gross margin was 40.7%, compared to 46.1% in the first six months of 2010, primarily as a result of lower revenues and lower factory utilization. Intevac Photonics gross margin improved to 28.7% compared to 25.4% in the first six months of 2010, reflecting improved yields related to our night vision camera module for our NATO customer. Consolidated gross margin was 36.7%, compared to 42.8% in the first six months of 2010. Operating expenses were $30.7 million, compared to $27.7 million in the first six months of 2010.