Intevac: Fiscal 1Q18 Financial Results
Sales down 41% with relative strength in HDD equipment business
This is a Press Release edited by StorageNewsletter.com on May 3, 2018 at 2:08 pm| (in $ million) | 1Q17 | 1Q18 | Growth |
| Revenue |
30.4 | 18.0 | -41% |
| Net income (loss) | 1.8 | (5.1) |
Intevac, Inc. reported financial results for the first quarter ended March 31, 2018.
“In the first quarter, we continued to make good progress in our Thin-film Equipment growth initiatives, which support the future revenue growth trajectory of our company,” commented Wendell Blonigan, president and CEO. “We announced the adoption of our oDLC protective coating on a portion of a Top-3 Cellphone maker’s recently-launched flagship handsets, protecting the vibrant and striking decorative color coatings deposited on the outside of the backside cover glass. In addition, we are finalizing an agreement with a new Top-3 cover glass manufacturer to install a VERTEX system by mid-year and co-market the capability to their customer base, which includes the world’s leading handset makers.
“The demand for technology upgrades in the HDD drive market continues to drive favorable results for our core HDD business, which we expect will see similarly strong results in 2018, compared to 2017. Our expectations for revenues from the solar market remain consistent from last quarter. Given developments over the last two months, in both Photonics and new Thin-film Equipment initiatives, our revenue outlook for 2018 has moderated since our last forecast. In Photonics, we have experienced some delays in funded R&D releases, as well a temporary production slowdown in the Joint Strike Fighter program. We also now believe the application we have been working on, driving near-term opportunities with the VERTEX, will require our oDLC 2.0 solution. Our oDLC 2.0 offers additional functionality for certain types of scratch damage, and includes integration with other value-added film stacks such as anti-reflective and decorative coatings. Migrating to oDLC 2.0 will require customer qualification and acceptance on new VERTEX systems, resulting in revenue on the majority of forecasted VERTEX orders moving out of 2018. Therefore, after three straight years of revenue growth, we now expect a pause in 2018. Despite this pause, our growth story remains very much intact, and we believe the execution of our growth initiatives in 2018 will drive the resumption of growth in 2019.”
First Quarter 2018 Summary
The net loss was $5.1 million, or $0.23 per diluted share, compared to net income of $1.8 million, or $0.08 per diluted share in the first quarter of 2017. The non-GAAP net loss was $5.0 million or $0.23 per diluted share. This compares to the first quarter 2017 non-GAAP income of $1.9 million or $0.08 per diluted share.
Revenues were $18.0 million, including $12.8 million of TFE revenues and Photonics revenues of $5.2 million. TFE revenues consisted of one 200 LeanHDD system, upgrades, spares and service. Photonics revenues consisted of $2.7 million of product sales and $2.5 million of R&D contracts. In the first quarter of 2017, revenues were $30.4 million, including $21.5 million of TFE revenues which consisted of four VERTEX coating systems for display cover panels, one 200 LeanHDD system, upgrades, spares and service and Photonics revenues of $8.9 million, which included $6.9 million of product sales and $2.0 million of R&D contracts.
TFE gross margin was 35.6%, compared to 43.1% in the first quarter of 2017, and compared to 45.0% in the fourth quarter of 2017. The decline from the first quarter of 2017 and from the fourth quarter of 2017 was primarily due to lower revenue levels and lower factory absorption. Photonics gross margin was 6.2%, compared to 42.6% in the first quarter of 2017 and 26.0% in the fourth quarter of 2017. The decline from the first quarter of 2017 and from the fourth quarter of 2017 was due lower revenue levels, a higher-mix of lower margin R&D contracts, lower margins on technology development contracts and incremental loss provisions recorded on several contracts. Consolidated gross margin was 27.1%, compared to 42.9% in the first quarter of 2017 and 39.8% in the fourth quarter of 2017.
R&D and SG&A expenses were $10.0 million and were down compared to $10.9 million in the first quarter of 2017 and up from $9.7 million in the fourth quarter of 2017.
Order backlog totaled $66.9 million on March 31, 2018, compared to $64.0 million on December 30, 2017 and $73.0 million on April 1, 2017. Backlog at March 31, 2018 included two 200 Lean HDD systems and twelve ENERGi solar ion implant systems. Backlog at December 30, 2017 included three 200 Lean HDD systems and twelve ENERGi solar ion implant systems. Backlog at April 1, 2017 included three 200 Lean HDD systems, one INTEVAC MATRIX solar system and fourteen ENERGi solar ion implant systems.
The company ended the quarter with $40.7 million of total cash, restricted cash and investments and $77.2 million in tangible book value.
Comments
Abstracts of the earnings call transcript:
Wendell Blonigan, president and CEI:
"Our equipment operations in Asia are now and will continue to be fully utilized, manufacturing HDD systems and upgrades and providing installation and service support. In our Santa Clara equipment operations, we reduced headcount by 12%, primarily in engineering and administration.
"VPs and above have reduce their salaries by 10% for the year, which was has allowed the company to retain key technical positions deemed critical to drive our VERTEX and ISIE-19 initiatives.
"As for the balance of our Thin-film Equipment business, we feel comfortable that our prior expectations of revenue for the HDD segment as well as for our solar products remain on track. Our HDD drive business has continued to be strong in the first quarter. Revenues included one 200 lean system and continued strong levels of upgrades, spares and field service.
"We have two 200 leans in backlog for 2018 revenue and are forecasting another strong year in our HDD business similar to 2017 with the business more weighted towards upgrades rather than tools.
"Due to anticipated delays in revenue recognition timing on new VERTEX orders, we now expect our Thin-film Equipment revenues will be down around 5% to 10% from what we recorded in 2017.
"So in summary, Q1 was a wrought quarter for us. There is no getting around that and we now expect 2018 will be a pause in our revenue growth trajectory after three straight years of growth.
"Today we now expect total revenues to be down around 10% to 12% in 2018, which will be below breakeven profitability."
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