Intevac: Fiscal 3Q12 Financial Results

Intevac, Inc. reported financial results for the quarter and nine months ended September 29, 2012.

"As expected, our Equipment business had a challenging quarter driven principally by the difficult economic environment and moderated demand for hard drives," commented Kevin Fairbairn, president and CEO of Intevac. "In our Photonics business, we achieved a significant milestone this quarter with a record level of revenue and profitability and are well positioned for continued growth.

"Given the current situation and our belief that our Equipment business is focused on markets that we expect will drive future growth, our game plan continues to be to prudently balance our short-term spending with developing technology solutions that can drive revenue in the near-term, but more importantly enable even greater long-term opportunities. We continue to make positive progress with our new equipment products in the solar market and new enabling deposition products for our hard drive customers."

Third Quarter 2012 Summary
The net loss was $8.0 million, or $0.34 per share, and included a $3.0 million bad debt write-off equivalent to $0.08 per share compared to a net loss of $6.1 million, or $0.27 per share, in the third quarter of 2011.

Revenues were $16.8 million, including $7.4 million of Equipment revenues and Intevac Photonics revenues of $9.4 million. Equipment revenues consisted of upgrades, spares and service. Intevac Photonics revenues included $5.2 million of research and development contracts. In the third quarter of 2011, revenues were $19.3 million, including $12.4 million of Equipment revenues and Intevac Photonics revenues of $6.9 million, which included $1.5 million of research and development contracts.

Equipment gross margin was 35.6%, compared to 44.9% in the third quarter of 2011, primarily as a result of decreased revenues and lower factory utilization. Intevac Photonics gross margin of 32.8% improved compared to 28.3% in the third quarter of 2011. The increase was primarily a result of improved yields and lower warranty related costs related to our night vision products. Consolidated gross margin was 34.1%, compared to 38.9% in the third quarter of 2011. Operating expenses were $16.7 million, compared to $15.6 million in the third quarter of 2011, and increased primarily as a result of $3.0 million bad debt charge due to the insolvency and liquidation of a customer.

Order backlog totaled $40.0 million on September 29, 2012, compared to $43.3 million on June 30, 2012 and $26.2 million on October 1, 2011. Backlog as of September 29, 2012 and June 30, 2012 did not include any 200 Lean systems or Solar systems compared to one Solar system as of October 1, 2011.

Our balance sheet remains strong, with $98.8 million of cash and investments and $159.8 million in tangible book value, equivalent to $4.21 and $6.81 per share, respectively, based upon 23.5 million shares outstanding at quarter end.

First Nine Months 2012 Summary
The net loss was $12.7 million, or $0.54 per share, compared to a net loss of $15.8 million, or $0.69 per share, for the first nine months of 2011.

Revenues were $65.9 million, including $43.2 million of Equipment revenues and Intevac Photonics revenues of $22.8 million, compared to revenues of $64.3 million, including $42.3 million of Equipment revenues and Intevac Photonics revenues of $22.0 million, for the first nine months of 2011.

Equipment gross margin was 44.7%, compared to 41.9% in the first nine months of 2011, primarily as a result of a higher mix of upgrade revenue. Intevac Photonics gross margin of 33.1% improved compared to 28.6% in the first nine months of 2011, reflecting improved yields and lower warranty costs related to our night vision products. Consolidated gross margin was 40.7%, compared to 37.4% in the first nine months of 2011. Operating expenses were $47.7 million, compared to $46.3 million in the first nine months of 2011, and increased primarily as a result of the $3.0 million bad debt charge.