Intevac: Fiscal 3Q19 Financial Results
Stronger than expected levels of HDD Lean upgrades during quarter
This is a Press Release edited by StorageNewsletter.com on October 30, 2019 at 2:28 pm| (in $ million) | 3Q18 | 3Q19 | 9 mo. 18 | 9 mo. 19 |
| Revenue | 19.5 | 26.3 | 63.5 | 73.4 |
| Growth | 35% | 16% | ||
| Net income (loss) | (1.1) | (0.5) | (6.4) | (4.1) |
Intevac, Inc. reported financial results for the quarter and 9 months ended September 28, 2019.
“In the third quarter, we continued to gain momentum as we drove our strategies for revenue growth and profitability,” commented Wendell Blonigan, president and CEO. “In Photonics, we booked a record order in July, which drove Photonics backlog to a new record of $76 million at quarter-end. We continue to see quarter-on-quarter revenue growth – and increasing operating profitability – for our Photonics business in 2019. In our Thin-film Equipment (TFE) growth initiatives, we continued to gain momentum through the successful installation of one VERTEX Spectra evaluation system, progress in the agreement finalization for a second VERTEX display cover glass evaluation system, the delivery of the remaining five ENERGi systems in backlog, and steady progress in the build and test of our first MATRIX PVD evaluation system for advanced semiconductor packaging, which we expect will be delivered in 4FQ19. Meanwhile, Q3 revenues and profitability exceeded our forecast, primarily due to a stronger level of upgrades in our HDD equipment business, coupled with favorable gross margins in Photonics. Our progress to date increases our confidence for Y/Y revenue growth, both for Photonics and for TFE, as well as a return to profitable results for FY19.”
3FQ19 Summary
The net loss for the quarter was $480,000, or $0.02 per diluted share, compared to a net loss of $1.1 million, or $0.05 per diluted share, in 3FQ18.
Revenues were $26.3 million, including $17.1 million of TFE revenues and $9.2 million of Photonics revenues. TFE revenues consisted of 5 solar implant ENERGi systems, upgrades, spares and service. Photonics revenues included $5.2 million of R&D contracts and $4.0 million of product sales. In 3FQ18, revenues were $19.5 million, including $12.1 million of TFE revenues, which consisted of upgrades, spares and service, and Photonics revenues of $7.4 million, which included $5.1 million of product sales and $2.3 million of R&D contracts.
TFE gross margin was 28.2% compared to 40.2% in the 3FQ18 and 38.9% in 2FQ19. The decline from 3FQ18 and the second quarter of 2019 reflected unfavorable product mix.
Photonics gross margin was 43.1% compared to 35.5% in 3FQ18 and 35.4% in 3FQ19. The improvement from 2FQ9 was primarily due to improved margins on both product sales and R&D contracts. The improvement from 3FQ18 was primarily due to improved margins on R&D contracts. Consolidated gross margin was 33.4%, compared to 38.5% in 3FQ18 and 37.5% in 2FQ19.
R&D and SG&A expenses were $9.2 million, compared to $8.6 million in 3FQ18 and $9.3 million in 2FQ9.
Order backlog totaled $115.4 million on September 28, 2019, compared to $93.7 million on June 29, 2019 and $72.2 million on September 29, 2018. Backlog at September 28, 2019 included four 200 Lean HDD systems. Backlog at June 28, 2019 included four 200 Lean HDD systems and five ENERGi solar ion implant systems. Backlog at September 29, 2018 included three 200 Lean HDD systems and 12 ENERGi solar ion implant systems.
The company ended the quarter with $37.1 million of total cash, restricted cash and investments and $88.8 million in tangible book value.
First Nine Months 2019 Summary
The net loss was $4.1 million, or $0.18 per diluted share, compared to a net loss of $6.4 million, or $0.29 per diluted share, for the first nine months of 2018. The non-GAAP net loss was $4.0 million or $0.18 per diluted share. This compares to the first nine months of 2018 non-GAAP net loss of $6.3 million or $0.28 per diluted share.
Revenues were $73.4 million, including $49.3 million of TFE revenues and $24.1 million of Photonics revenues, compared to revenues of $63.5 million, which included $45.7 million of TFE revenues and $17.8 million of Photonics revenues, for the first nine months of 2018.
TFE gross margin was 32.4%, a decline compared to 39.6% in the first nine months of 2018, as a result of less favorable product mix. Photonics gross margin was 34.9% compared to 22.5% in the first nine months of 2018. The improvement from the first nine months of 2018 was primarily due to higher revenue levels and improved margins on both product sales and R&D contracts. Consolidated gross margin was 33.2%, compared to 34.8%, in the first nine months of 2018.
R&D and SG&A expenses were $27.7 million compared to $28.3 million in the first nine months of 2018. The lower level of expenses reflects lower spending on development costs.
Comments
Consolidated 3FQ19 total $26.3 million, about 3% above the high end of the guidance due primarily to stronger than expected levels of HDD upgrades during the quarter.
Thin-film Equipment backlog of $39.3 million included four 200 Lean HDD systems and non-systems HDD backlog.
For Q4, we are projecting consolidated revenues to be between $34 million and $35 million.
Given 4FQ19 guidance, the firm expect FY19 revenues to grow 13% to 14% over 2018 to about $108 million.
Wendell Blonigan, president and CEO:
"Recent HDD channel information indicates HDD units came in a bit better than expected in 3FQ19, even after adjusting for the inconsistency amongst suppliers of 14 vs. 13-week quarters. Expectations for strong near line drive demand in the second half continue to drive the majority of growth for media as we exit 2019.
"As far as what we're seeing for our HDD business in 2020, at this point, it's too early to say. Our plan to upgrade activity is very strong for the year end our visibility for the level of upgrades in 2020 whether they're similar, higher or lower than this year is quite limited. We also have little visibility for additional 200 Lean orders beyond the two in backlog. But as the demand picture starts to solidify for the media required in the second half of 2020, our customer would likely start making those plans thin.
"Just like other parts of our equipment business the HDD media business can be lumpy Q/Q and Y/Y. Of note over the last few years are HDD customers have started each calendar year with relatively conservative views of capital investment, and yet we have exited each year with a stronger and more profitable HDD business than we had expected in January.
"The overall take away from the long-term outlook of HDD media is that our HDD business is reasonably stable at current levels and given the need for capacity additions to support the forecast demand of HDD storage for the cloud. We continue to expect the business to contribute at least as much revenue over the next 5 years as it has over the past 5, with modest upside depending on media capacity needs to support near line drive growth."
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