Intevac: Fiscal 4Q12 Financial Results

Intevac, Inc. reported financial results for the fourth quarter and year ended December 31, 2012.

"2012 was a challenging year for our equipment business primarily due to the weakened macro- economic environment and the industry transition underway from PC-based storage to centralized or ‘Cloud’ based storage," commented Norman Pond, chairman and CEO of Intevac. "In the hard drive market, we expect these factors to continue to impact demand for new capacity systems through this year. In the longer term however, media unit growth is expected to resume because the rate of data growth is expected to exceed the slowing rate of areal density improvement.

"We are pleased to report a return to growth in our Photonics business, with revenues up 10% for the year. This business has now turned the corner to operating profitability, with profits achieved in both the third and fourth quarters of 2012. Our Photonics business is well-positioned for continued growth, as we entered 2013 with a record level of backlog. Finally, we expect to see growth in our new equipment products in 2013 as we leverage the success of our first ENERGi tool qualification to penetrate additional customers in the solar market."

Fourth Quarter 2012 Summary
The net loss was $42.7 million, or $1.82 per share, and included a $23.4 million valuation allowance established on certain federal deferred tax assets and $18.4 million in goodwill and intangibles impairment charges, both referenced in the company’s 8-Ks filed with the SEC on December 21, 2012 and January 24, 2013. The non-GAAP net loss was $3.6 million or $0.15 per share. This compares to a net loss of $6.2 million, or $0.27 per share, on both a GAAP and non-GAAP basis for the fourth quarter of 2011.

Revenues were $17.5 million, including $9.4 million of Equipment revenues and Intevac Photonics revenues of $8.1 million. Intevac Photonics revenues included $4.9 million of R&D contracts. In the fourth quarter of 2011, revenues were $18.6 million, including $12.5 million of Equipment revenues and Intevac Photonics revenues of $6.1 million, which included $1.8 million of research and development contracts.

Equipment gross margin was 46.0% compared to 36.4% in the fourth quarter of 2011, and increased primarily due to a higher mix of upgrades. Intevac Photonics gross margin of 37.4% improved compared to 30.0% in the fourth quarter of 2011. The increase was primarily a result of higher volumes, improved yields, and lower warranty costs for our night vision products. Consolidated gross margin was 42.0%, compared to 34.3% in the fourth quarter of 2011. R&D and selling, general and administrative expenses totaled $12.8 million, compared to $14.9 million in the fourth quarter of 2011. Total operating expenses of $31.2 million included $18.4 million in non-cash goodwill and intangibles impairment charges primarily due to the decline in our market capitalization.

Order backlog totaled $35.2 million on December 31, 2012, compared to $40.0 million on September 29, 2012 and $32.9 million on December 31, 2011. Backlog as of December 31, 2012 and September 29, 2012 did not include any 200 Lean systems or Solar systems compared to one Solar system as of December 31, 2011.

Our balance sheet remains strong, with $92.2 million of cash and investments and $136.8 million in tangible book value.

Fiscal Year 2012 Summary
The net loss was $55.3 million, or $2.37 per share, and included a $23.4 million valuation allowance established on certain federal deferred tax assets and $18.4 million in goodwill and intangibles impairment charges, both referenced in the company’s 8-Ks filed with the SEC on December 21, 2012 and January 24, 2013. The non-GAAP net loss was $15.9 million or $0.68 per share, and also excluded a $3.0 million bad debt expense and a $2.2 million gain on the sale of our mainframe technology. This compares to a net loss of $22.0 million, or $0.96 per share, on both a GAAP and non-GAAP basis for fiscal 2011.

Revenues were $83.4 million, including $52.5 million of Equipment revenues and Intevac Photonics revenues of $30.9 million, compared to revenues of $83.0 million, including $54.9 million of Equipment revenues and Intevac Photonics revenues of $28.1 million, for 2011.

Equipment gross margin was 44.9%, compared to 40.7% in 2011, primarily as a result of a higher mix of upgrade revenue. Intevac Photonics gross margin of 34.2% improved compared to 28.9% in 2011, reflecting improved yields and lower warranty costs related to our night vision products. Consolidated gross margin was 40.9%, compared to 36.7% in 2011. Research and development and selling, general and administrative expenses totaled $57.5 million, compared to $61.1 million in 2011, and declined primarily due to reduced investment in new equipment products. Total operating expenses were $78.9 million, compared to $61.2 million in 2011, and increased primarily as a result of $18.4 million in non-cash goodwill and intangibles impairment charges and a $3.0 million bad debt charge.