Intevac Announces Second Quarter 2016 Financial Results
Intevac, Inc. recently reported financial results for the quarter and six months ended July 2, 2016.
“The second quarter of 2016 marked an inflection point in the execution of our strategic growth initiatives for our Thin-film Equipment business,” commented Wendell Blonigan, Intevac’s president and chief executive officer. “We booked nine systems, building our Thin-film Equipment backlog to nearly $50 million, its highest level since 2010. We booked multi-unit orders in each of our three equipment end markets. In the hard drive industry, our four-system order reflects our ongoing engagement with our customers to provide strategic technology improvements in support of their product roadmaps. In the solar industry, the two implant tools booked reflect an incremental market opportunity for our suite of technology solutions. In the display cover panel industry, the order for three new systems by Truly Opto-electronics marks the transition from pilot production to high-volume manufacturing capacity for our optical diamond-like carbon (oDLC™) protective film, which has demonstrated outstanding performance as a cost-effective, optically-transparent, scratch-protection solution for display cover panels.
“Photonics revenues increased 9% from the first quarter, primarily due to an increase in contract R&D sales, supporting our confidence that we will see a similar level of Photonics business this year, compared to 2015,” added Mr. Blonigan. “The same can be said for our hard-drive equipment revenues this year, which we also expect to be similar to last year. The revenue growth forecast for 2016 will therefore come from our new Thin-film Equipment systems, which require customer sign-off for revenue recognition. Timing of customer sign-off can be difficult to predict, but, with most of the systems scheduled to ship before year end, a majority of the current Thin-film Equipment backlog will be received in cash before year end.”
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.
Second Quarter 2016 Summary
The net loss for the quarter was $3.5 million, or $0.17 per share, compared to a net income of $12,000, or $0.00 per share, in the second quarter of 2015. The non-GAAP net loss was $3.6 million or $0.18 per share, compared to the second-quarter 2015 non-GAAP net loss of $0.2 million or $0.01 per share.
Revenues were $14.9 million, including $6.1 million of Thin-film Equipment revenues and Photonics revenues of $8.8 million. Thin-film Equipment revenues included upgrades, spares and service. Photonics revenues consisted of $1.8 million of research and development contracts and $7.0 million of product sales. In the second quarter of 2015, revenues were $20.5 million, including $11.5 million of Thin-film Equipment revenues and Photonics revenues of $9.0 million, which included $1.8 million of research and development contracts.
Thin-film Equipment gross margin was 36.2% compared to 41.0% in the second quarter of 2015 and 9.0% in the first quarter of 2016. The decline from the second quarter of 2015 was primarily due to lower revenues and lower factory absorption. The improvement from the first quarter of 2016 was primarily due to a higher mix of higher-margin upgrades and improved factory absorption.
Photonics gross margin was 44.4% compared to 34.5% in the second quarter of 2015 and 41.5% in the first quarter of 2016. The improvement from the second quarter of 2015 was due primarily to improved sensor yields and lower inventory provisions. The improvement from the first quarter of 2016 was due primarily to favorable sensor yields and higher research and development revenues. Consolidated gross margin was 41.1%, compared to 38.2% in the second quarter of 2015 and 28.2% in the first quarter of 2016.
R&D and SG&A expenses were $10.1 million compared to $7.7 million in the second quarter of 2015 and $10.2 million in the first quarter of 2016. The lower level of expenses in the year-ago period primarily reflects costs recovered under a customer-funded NRE arrangement in Thin-film Equipment.
Order backlog totaled $75.3 million on July 2, 2016, compared to $44.7 million on April 2, 2016 and $43.5 million on July 4, 2015. Backlog at July 2, 2016 included four 200 Lean® HDD systems, three INTEVAC VERTEX™ display cover glass coating systems, two INTEVAC MATRIX™ solar systems, and three ENERGi™ solar ion implant systems. Backlog at April 2, 2016 included three solar systems. Backlog at July 4, 2015 included two solar systems.
The Company ended the quarter with $42.4 million of total cash, restricted cash and investments and $66.1 million in tangible book value.
First Six Months 2016 Summary
The net loss was $9.8 million, or $0.48 per share, compared to a net loss of $2.9 million, or $0.13 per share, for the first six months of 2015. The non-GAAP net loss was $9.9 million or $0.48 per share. This compares to the first half 2015 non-GAAP net loss of $2.9 million or $0.13 per share.
Revenues were $28.6 million, including $11.7 million of Thin-film Equipment revenues and Photonics revenues of $16.9 million, compared to revenues of $40.3 million, including $22.1 million of Thin-film Equipment revenues and Photonics revenues of $18.2 million, for the first six months of 2015.
Thin-film Equipment gross margin was 23.2%, compared to 35.0% in the first six months of 2015, primarily due to lower revenues, higher factory overhead expenses and higher inventory charges. We recognized revenue on one VERTEX system in both the first half of 2016 and the first half of 2015 and on one 200 Lean system in the first half of 2015. Photonics gross margin was 43.0% compared to 38.3% in the first six months of 2015, reflecting improved sensor yields and lower inventory provisions. Consolidated gross margin was 34.9%, compared to 36.5% in the first six months of 2015.
R&D and SG&A expenses were $20.2 million compared to $17.6 million in the first six months of 2015. Lower R&D spending in the first six months of 2015 was due primarily to costs recovered under a customer-funded NRE arrangement in Thin-film Equipment.
Use of Non-GAAP Financial Measures
Intevac’s non-GAAP 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 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.
