Intevac: Fiscal 2Q21 Financial Results

(in $ million)	2Q20	2Q21	6 mo. 20	6 mo. 21
Revenue	28.8	13.8	47.7	30.1
*Growth*		-52%		*-37%*
Net income (loss)	1.5	(6.1)	0.3	(12.6)

Intevac, Inc. reported financial results for the quarter and six months ended July 3, 2021.

“We are pleased to report revenues above forecast for the second quarter, chiefly as a result of the acceleration of technology upgrades by our HDD customers,” commented Wendell Blonigan, president and CEO. “We announced a record HDD upgrade order in June, which also drove the majority of the $15 million increase in backlog in our thin-film equipment (TFE) business in the quarter. In our photonics business, we announced 2 new development program awards in June, both of which are aimed at improving the low light level night vision performance of the current IVAS headset.

“In addition to these announcements, we are pleased to report positive developments on multiple other fronts during the second quarter. First, with recent HDD industry reports indicating continued upside in mass-capacity drives and overall HDD units, as well as in total media units and exabytes shipped, the discussions with our customers to add media capacity have resumed. Furthermore, we continued to attain progress with our Intevac Vertex protective coating programs, which increases our confidence in new orders as well as for our overall Vertex growth initiative. Lastly, the US Military continues to invest in photonics as a key night vision technology provider for all of its digital programs, including IVAS.”

He concluded: “While 2021 is a challenging year, we continue to maintain solid financial footing, with a strong balance sheet, increasing orders and backlog, and continued momentum on a number of programs and growth initiatives that put Intevac firmly on a path for growth in 2022 and beyond.”

2FQ21 Summary
The net loss was $6.1 million, or $0.25 per diluted share, compared to net income of $1.5 million, or $0.06 per diluted share, in 2FQ20.

Revenues were $13.8 million, including $5.4 million of TFE revenues and $8.4 million of photonics revenues. TFE revenues consisted of upgrades, spares and service. Photonics revenues consisted of $3.2 million of R&D contracts and $5.3 million of product sales. In 2FQ20, revenues were $28.8 million, including $16.6 million of TFE revenues, which consisted of 2 200 Lean HDD systems, upgrades, spares and service, and photonics revenues of $12.2 million, which included $6.1 million of R&D contracts and $6.1 million of product sales.

TFE gross margin was 18.7% compared to 36.4% in 2FQ20 and 23.1% in 1FQ21. The decline for these two quarters was primarily due to lower revenues which affected factory utilization.

Photonics gross margin was 24.9% compared to 43.9% in 2FQ20 and 13.1% in 1FQ21. The decline from 2FQ20 was primarily due to lower revenue levels, as well as higher costs related to completing the integration of our camera into the IVAS platform. The improvement from 1FQ21 was primarily due to a sequential increase in revenues and higher margins on development programs. Consolidated gross margin was 22.5%, compared to 39.6% in 2FQ20 and 18.8% in 1FQ21.

R&D and SG&A expenses were $9.4 million, compared to $9.3 million in 2FQ20 and $9.6 million in 1FQ21.

Order backlog totaled $51.7 million on July 3, 2021, compared to $43.1 million on April 3, 2021 and $69.0 million on June 27, 2020. Backlog at July 3, 2021, April 3, 2021 and June 27, 2020 did not include any 200 Lean HDD systems.

The company ended the quarter with $54.1 million of total cash, cash equivalents, restricted cash and investments and $91.7 million in tangible book value.

First Six Months 2021 Summary
The net loss was $12.6 million, or $0.52 per diluted share, compared to net income of $0.3 million, or $0.01 per diluted share, for the first six months of 2020.

Revenues were $30.1 million, including $14.6 million of TFE revenues and $15.4 million of photonics revenues, compared to first half 2020 revenues of $47.7 million, which included $24.6 million of TFE revenues and $23.1 million of photonics revenues.

TFE gross margin declined to 21.5%, compared to 38.9% in the first six months of 2020, primarily due to lower revenues and less favorable product mix. Photonics gross margin declined to 19.6%, compared to 43.4% in the first six months of 2020, primarily due to higher costs related to completing the integration of our camera into the IVAS platform, as well as lower product margins. Consolidated gross margin was 20.5%, compared to 41.1% in the first six months of 2020.

R&D and SG&A expenses were $19.0 million compared to $18.6 million in the first six months of 2020.