Intevac Announces Third Quarter 2015 Financial Results

Intevac, Inc. recently reported financial results for the quarter and nine months ended October 3, 2015. “I’m pleased to report that in the third quarter we achieved the highest level of bookings in over two years, including over $19 million in Thin-film Equipment orders and over $8 million in Photonics orders,” commented Wendell Blonigan, Intevac’s president and chief executive officer. “Our Thin-film Equipment bookings in the third quarter demonstrated significant progress in our growth initiatives, winning Tier 1 customers for each of our new system orders: VERTEX PVD for protective coatings of display cover panels and MATRIX tools for solar metallization and implant.

“In our Photonics business, we were awarded a $25 million funding vehicle from the U.S. Army, as well as the initial grant of funding, for development of our next-generation night vision sensors. In 2015, we have seen our Photonics program engagements expand the total opportunity pipeline, which, combined with our recent successes establishing our Tier 1 foundation customers for our Thin-film Equipment growth initiatives, are key 2015 achievements that bode well for continued improvement in our financial performance in 2016 and beyond.”

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.

Third Quarter 2015 Summary

The net loss for the quarter was $3.8 million, or $0.17 per share, compared to a net loss of $3.6 million, or $0.15 per share, in the third quarter of 2014. The non-GAAP net loss was $3.9 million or $0.18 per share. This compares to the third quarter 2014 non-GAAP net loss of $3.6 million or $0.15 per share.

Revenues were $18.4 million, including $9.2 million of Thin-film Equipment revenues and Photonics revenues of $9.2 million. Thin-film Equipment revenues included revenue recognition of the first MATRIX PVD system for solar panels, upgrades, spares and service. Photonics revenues included $2.1 million of research and development contracts. In the third quarter of 2014, revenues were $14.8 million, including $3.4 million of Thin-film Equipment revenues and Photonics revenues of $11.4 million, which included $2.5 million of research and development contracts.

Thin-film Equipment gross margin was 17.8% compared to (9.5)% in the third quarter of 2014 and 41.0% in the second quarter of 2015. The decline from the second quarter of 2015 reflected the lower margin on the first MATRIX PVD system for solar panels recognized for revenue. The improvement from the third quarter of 2014 reflected a higher level of revenue and improved factory absorption.

Photonics gross margin was 35.5% compared to 45.1% in the third quarter of 2014 and 34.5% in the second quarter of 2015. The decline from the third quarter of 2014 was due to lower contractual pricing on shipments of the Apache helicopter camera and higher factory overhead due to the modified cost structure implemented in the second quarter of 2015. Consolidated gross margin was 26.7%, compared to 32.6% in the third quarter of 2014 and 38.2% in the second quarter of 2015.

R&D and SG&A expenses were $8.8 million, compared to $9.0 million in the third quarter of 2014.

Order backlog totaled $52.8 million on October 3, 2015, compared to $43.5 million on July 4, 2015 and $43.9 million on September 27, 2014. Backlog at October 3, 2015 included three solar systems and one PVD display cover glass coating system. Backlog at July 4, 2015 included two solar systems. Backlog as of September 27, 2014 included one 200 Lean system, one solar system and one PVD display cover glass coating system.

The company ended the quarter with $56.1 million of total cash, restricted cash and investments and $82.0 million in tangible book value. The company repurchased 331 thousand shares of common stock for $1.7 million during the third quarter. As of October 3, 2015 the company has repurchased 3.3 million shares for $20.9 million out of the $30 million plan announced in November of 2013.

First Nine Months 2015 Summary

The net loss was $6.6 million, or $0.29 per share, compared to a net loss of $13.1 million, or $0.55 per share, for the first nine months of 2014. The non-GAAP net loss was $6.8 million or $0.30 per share. This compares to the first nine months of 2014 non-GAAP net loss of $12.8 million or $0.54 per share.

Revenues were $58.8 million, including $31.3 million of Thin-film Equipment revenues and Photonics revenues of $27.4 million, compared to revenues of $46.5 million, including $16.2 million of Thin-film Equipment revenues and Photonics revenues of $30.3 million, for the first nine months of 2014.

Thin-film Equipment gross margin was 30.0%, compared to 12.3% in the first nine months of 2014, the increase primarily due to higher mix of higher-margin upgrades, lower factory overhead expenses and lower inventory charges. Photonics gross margin was 37.4% compared to 42.4% in the first nine months of 2014, reflecting lower contractual pricing on Apache camera shipments and higher factory overhead due to the modified cost structure implemented in the second quarter of 2015. Consolidated gross margin was 33.4%, compared to 31.9% in the first nine months of 2014.

R&D and SG&A expenses were $26.4 million and were down 8.5% from $28.9 million in the first nine months of 2014 primarily due to costs recovered under customer-funded NRE in Thin-film Equipment. Also 2014 operating expenses included costs associated with the proxy contest.

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.