Intevac: Fiscal 2Q20 Financial Results
Revenue of $16.6 million of thin-film equipment, turning profitable
This is a Press Release edited by StorageNewsletter.com on August 5, 2020 at 2:21 pm| (in $ million) | 2Q19 | 2Q20 | 6 mo. 19 | 6 mo. 20 |
| Revenue | 22.3 | 23.8 | 47.1 | 47.7 |
| Growth | 7% | 1% | ||
| Net income (loss) | (1.2) | 1.5 | (2.9) | 1.0 |
Intevac, Inc. reported financial results for the quarter and six months ended June 27, 2020.
“We are pleased to report profitable second-quarter financial results, demonstrating excellent execution by our team in delivering strong levels of business to our HDD customers and a record quarter in Photonics,” commented Wendell Blonigan, president and CEO. “In light of the constraints placed on our operations and supply chain as a result of the Covid-19 pandemic, our financial results are indicative of the essential role Intevac plays within the critical IT and defense infrastructure sectors. While 2020 will be an immensely challenging year overall, we are on very strong financial footing and further strengthened the balance sheet in the second quarter, increasing total cash and investments to $45 million. In our thin-film equipment (TFE) growth initiatives, we continue to experience pandemic-related delays in our evaluation and development work. Nonetheless, we expect solid levels of business with our HDD customers and a record year in Photonics will enable us to deliver operating profitability for the year and maintain our strong balance sheet until revenue growth resumes.”
2FQ20 Summary
Net income as $1.5 million, or $0.06 per diluted share, compared to a net loss of $1.2 million, or $0.05 per diluted share, in 2FQ19.
Non-GAAP net income was $1.5 million or $0.06 per diluted share, compared to the 2FQ19 non-GAAP net loss of $1.2 million or $0.05 per diluted share.
Revenues were $28.8 million, including $16.6 million of TFE revenues and $12.2 million of Photonics revenues. TFE revenues consisted of two 200 Lean HDD systems, upgrades, spares and service. Photonics revenues consisted of $6.1 million of R&D contracts and $6.1 million of product sales. In 2FQ19, revenues were $22.3 million, including $13.3 million of TFE revenues, which consisted of one 200 Lean HDD system, upgrades, spares and service, and Photonics revenues of $9.1 million, which included $5.1 million of R&D contracts and $4.0 million of product sales.
TFE gross margin was 36.4% compared to 38.9% in 2FQ19 and 44.0% in 1FQ20. This decline was primarily due to less favorable product mix.
Photonics gross margin was 43.9% compared to 35.4% in 2FQ129 and 42.8% in 1FQ20. The improvement was primarily due to higher revenue levels and improved margins on both product sales and R&D contracts. Consolidated gross margin was 39.6%, compared to 37.5% in 2FQ19 and 43.3% in 2FQ20.
R&D and SG&A expenses were $9.3 million, compared to $9.3 million in 2FQ19 and $9.3 million in 1FQ20.
Order backlog totaled $69.0 million on June 27, 2020, compared to $87.2 million on March 28, 2020 and $93.7 million on June 29, 2019. Backlog at June 27, 2020 did not include any 200 Lean HDD systems. Backlog at March 28, 2020 included two 200 Lean HDD systems. Backlog at June 29, 2019 included four 200 Lean HDD systems and five ENERGi solar ion implant systems.
The company ended the quarter with $44.8 million of total cash, restricted cash and investments and $97.6 million in tangible book value, defined as total stockholders’ equity, less intangible assets.
First Six Months 2020 Summary
Net income was $0.3 million, or $0.01 per diluted share, compared to a net loss of $3.6 million, or $0.16 per diluted share, for 1HF19. Non-GAAP net income was $0.3 million or $0.01 per diluted share, compared to 1HF19 non-GAAP net loss of $3.6 million or $0.16 per diluted share.
Revenue was $47.7 million, including $24.6 million of TFE revenue and $23.1 million of Photonics revenue, compared to 1HF19 revenue of $47.1 million, which included $32.2 million of TFE revenue and $14.9 million of Photonics revenue.
TFE gross margin was 38.9%, an improvement compared to 34.6% in 1HF19, as a result of more favorable product mix. Photonics gross margin was 43.4% compared to 29.9% in the first six months of 2019. This improvement was primarily due to higher revenue levels and improved margins on both product sales and R&D contracts. Consolidated gross margin was 41.1%, compared to 33.1% in 1HF19.
R&D and SG&A expenses were $18.6 million compared to $18.5 million in 1HF19.
Comments
While Covid-19 has negatively impacted Intevac's thin-film equipment (TPE) growth initiatives, on the flip side so far, it has had a relatively positive impact on hard drive media growth.
Strong demand for nearline drives driven by the work-from-home and distance learning transitions have resulted in strong Y/Y growth in media units to date in 2020. In 1FQ20, the company saw record shipments of nearline drives. "And at this point, midway through the year, data center spending is holding up better than some had predicted," stated the firm.
It presented its view that the number of 200 Lean systems needed by its customers in the 2019 to 2023 period would be about the same as for the prior 5 years or 17 tools. 6 of these tools have shipped in 2019 and 2020. So the expectation is another 11 tools, plus or minus, will ship into 2021 to 2023 timeframe.
The average number of disks per drive or tie ratio jumped 18% in 1FQ20 to 3.3 disks per drive exceeding prior records. The longer-term secular drivers for data center spending are improving, which could also result in future upside to nearline drive growth and in turn media unit growth. The most recent long-term forecast for media, which were published in February, before any impact of Covid-19, were factored in, model an 8% annual growth rate for media units.
Given the number of uncertainties related to the pandemic, Intevac decided not to provide guidance. However the company provides confidence in its optimism in key areas, namely its growth story in Photonics and the relative stability of its HDD forecast.
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