Intevac Announces First Quarter 2018 Financial Results
“The demand for technology upgrades in the hard disk 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.”
| ($ Millions, except per share amounts) | Q1 2018 | Q1 2017 | ||||||||||
| GAAP Results | Non-GAAP Results | GAAP Results | Non-GAAP Results | |||||||||
| Net Revenues | $ | 18.0 | $ | 18.0 | $ | 30.4 | $ | 30.4 | ||||
| Operating Income (Loss) | $ | (5.1) | $ | (5.0) | $ | 2.1 | $ | 2.2 | ||||
| Net Income (Loss) | $ | (5.1) | $ | (5.0) | $ | 1.8 | $ | 1.9 | ||||
| Net Income (Loss) per Diluted Share | $ | (0.23) | $ | (0.23) | $ | 0.08 | $ | 0.08 | ||||
Intevac’s non-GAAP adjusted results exclude the impact of the following, where applicable: (1) changes in fair value of contingent consideration liabilities associated with business combinations; and (2) restructuring charges. A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial table included in this release. See also “Use of Non-GAAP Financial Measures” section.
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 Lean®HDD system, upgrades, spares and service. Photonics revenues consisted of $2.7 million of product sales and $2.5 million of research and development 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 research and development 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 research and development 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.
Use of Non-GAAP Financial Measures
Intevac’s non-GAAP results exclude the impact of the following, where applicable: changes in fair value of contingent consideration liabilities associated with business combinations and restructuring. A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release.
Management uses non-GAAP results to evaluate the Company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Intevac believes these measures enhance investors’ ability to review the Company’s business from the same perspective as the Company’s management and facilitate comparisons of this period’s results with prior periods. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP.
Conference Call Information
The Company will discuss its financial results and outlook in a conference call today at 1:30 p.m. PDT (4:30 p.m. EDT). To participate in the teleconference, please call toll-free (877) 334-0811 prior to the start time. For international callers, the dial-in number is (408) 427-3734. You may also listen live via the Internet at the Company’s website, www.intevac.com, under the Investors link, or at www.earnings.com. For those unable to attend, these web sites will host an archive of the call. Additionally, a telephone replay of the call will be available for 48 hours beginning today at 7:30 p.m. EDT. You may access the replay by calling (855) 859-2056 or, for international callers, (404) 537-3406, and providing Replay Passcode 4717658.
About Intevac
Intevac was founded in 1991 and has two businesses: Thin-Film Equipment and Photonics.
In our Thin-film Equipment business, we are a leader in the design and development of high-productivity, thin-film processing systems. Our production-proven platforms are designed for high-volume manufacturing of substrates with precise thin film properties, such as the hard drive media, display cover panel, and solar photovoltaic markets we serve currently.
In our Photonics business, we are a recognized leading developer of advanced high-sensitivity digital sensors, cameras and systems that primarily serve the defense industry. We are the provider of integrated digital imaging systems for most U.S. military night vision programs.
For more information call 408-986-9888, or visit the Company’s website at www.intevac.com.
200 Lean®,INTEVAC MATRIX®, INTEVAC VERTEX®, oDLC® and ENERGi®are registered trademarks of Intevac, Inc.
Safe Harbor Statement
This press release includes statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Intevac claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “expects,” or “anticipates,” and do not reflect historical facts. Specific forward-looking statements contained in this press release include, but are not limited to: customer adoption of our products, an increase in the revenue opportunity pipeline for Photonics, and the future financial performance of Intevac, such as achieving profitability. The forward-looking statements contained herein involve risks and uncertainties that could cause actual results to differ materially from the Company’s expectations. These risks include, but are not limited to: technology risk and challenges achieving customer adoption and revenue recognition in Thin-film Equipment markets and delays in Photonics programs, each of which could have a material impact on our business, our financial results, and the Company’s stock price. These risks and other factors are detailed in the Company’s periodic filings with the U.S. Securities and Exchange Commission.
| INTEVAC, INC. | ||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
| (Unaudited, in thousands, except per share amounts) | ||||||
| Three months ended | ||||||
| March 31, |
April 1, |
|||||
| 2018 |
2017 |
|||||
| Net revenues | ||||||
| Thin-film Equipment | $ | 12,789 | $ | 21,484 | ||
| Photonics | 5,185 | 8,904 | ||||
| Total net revenues | 17,974 | 30,388 | ||||
| Gross profit | 4,875 | 13,047 | ||||
|
Gross margin |
||||||
| Thin-film Equipment | 35.6% | 43.1% | ||||
| Photonics | 6.2% | 42.6% | ||||
| Consolidated | 27.1% | 42.9% | ||||
| Operating expenses | ||||||
| Research and development | 4,167 | 4,682 | ||||
| Selling, general and administrative | 5,830 | 6,194 | ||||
| Acquisition-related1 | (1) | 80 | ||||
| Total operating expenses | 9,996 | 10,956 | ||||
| Total operating income (loss) | (5,121) | 2,091 | ||||
| Operating income (loss) | ||||||
| Thin-film Equipment | (2,509) | 1,859 | ||||
| Photonics | (1,210) | 1,465 | ||||
| Corporate | (1,402) | (1,233) | ||||
| Total operating income (loss) | (5,121) | 2,091 | ||||
| Interest and other income | 145 | 110 | ||||
| Income (loss) before income taxes | (4,976) | 2,201 | ||||
| Provision for income taxes | 160 | 372 | ||||
| Net income (loss) | $ | (5,136) | $ | 1,829 | ||
| Net income (loss) per share | ||||||
| Basic | $ | (0.23) | $ | 0.09 | ||
| Diluted | $ | (0.23) | $ | 0.08 | ||
| Weighted average common shares outstanding | ||||||
| Basic | 22,107 | 21,216 | ||||
| Diluted | 22,107 | 22,790 | ||||
1 Amounts for all periods presented include changes in fair value of contingent consideration obligations associated with the Solar Implant Technology (SIT) acquisition in 2010.
| INTEVAC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) |
|||||||
|
March 31, 2018 |
December 30, 2017 |
||||||
| (Unaudited) | (see Note) | ||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash, cash equivalents and short-term investments | $ | 35,399 |
$ |
35,639 |
|||
| Accounts receivable, net | 18,503 | 20,474 | |||||
| Inventories | 35,573 | 33,792 | |||||
| Prepaid expenses and other current assets | 2,306 | 2,524 | |||||
| Total current assets | 91,781 | 92,429 | |||||
| Long-term investments | 4,277 | 6,849 | |||||
| Restricted cash | 1,000 | 1,000 | |||||
| Property, plant and equipment, net | 12,180 | 12,478 | |||||
| Intangible assets, net | 1,349 | 1,503 | |||||
| Other long-term assets | 783 | 764 | |||||
| Total assets | $ | 111,370 |
$ |
115,023 |
|||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 4,970 |
$ |
3,949 |
|||
| Accrued payroll and related liabilities | 3,605 | 6,818 | |||||
| Other accrued liabilities | 9,845 | 7,688 | |||||
| Customer advances | 11,708 | 11,026 | |||||
| Total current liabilities | 30,128 | 29,481 | |||||
| Other long-term liabilities | 2,724 | 2,879 | |||||
| Stockholders’ equity | |||||||
| Common stock ($0.001 par value) | 22 | 22 | |||||
| Additional paid in capital | 180,070 | 177,521 | |||||
| Treasury stock, at cost | (28,489) | (28,489) | |||||
| Accumulated other comprehensive income | 566 | 490 | |||||
| Accumulated deficit | (73,651) | (66,881) | |||||
| Total stockholders’ equity | 78,518 | 82,663 | |||||
| Total liabilities and stockholders’ equity | $ | 111,370 |
$ |
115,023 |
|||
Note: Amounts as of December 30, 2017 are derived from the December 30, 2017 audited consolidated financial statements.
| INTEVAC, INC. | ||||||
| RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||||
| (Unaudited, in thousands, except per share amounts) | ||||||
| Three months ended | ||||||
|
March 31, 2018 |
April 1, 2017 |
|||||
|
Non-GAAP Income (Loss) from Operations |
||||||
| Reported operating income (loss) (GAAP basis) | $ | (5,121) | $ | 2,091 | ||
| Restructuring charges 1 | 95 | — | ||||
| Change in fair value of contingent consideration obligations2 | (1) | 80 | ||||
| Non-GAAP Operating Income (Loss) | $ | (5,027) | $ | 2,171 | ||
| Non-GAAP Net Income (Loss) | ||||||
| Reported net income (loss) (GAAP basis) | $ | (5,136) | $ | 1,829 | ||
| Restructuring charges1 | 95 | — | ||||
| Change in fair value of contingent consideration obligations2 | (1) | 80 | ||||
| Income tax effect of non-GAAP adjustments3 | — | — | ||||
| Non-GAAP Net Income (Loss) | $ | (5,042) | $ | 1,909 | ||
| Non-GAAP Net Income (Loss) Per Share | ||||||
| Reported net income (loss) per share (GAAP basis) | $ | (0.23) | $ | 0.08 | ||
| Restructuring charges 1 | — | — | ||||
| Change in fair value of contingent consideration obligations2 | — | — | ||||
| Non-GAAP Net Income (Loss) Per Share | $ | (0.23) | $ | 0.08 | ||
| Weighted average number of diluted shares outstanding |
22,107 |
22,790 |
||||
1Results for the quarter ended March 31, 2018 include severance and other employee-related costs related to a restructuring program.
2Results for all periods presented include changes in fair value of contingent consideration obligations associated with the Solar Implant Technology (SIT) acquisition in 2010.
3The amount represents the estimated income tax effect of the non-GAAP adjustments. The Company calculated the tax effect of non-GAAP adjustments by applying an applicable estimated jurisdictional tax rate to each specific non-GAAP item.
Source: Intevac, Inc.
