Intevac(US:IVAC)2023-08-03 03:03Financial Data and Key Metrics Changes - In Q2 2023, the company achieved revenues of $10.3 million, exceeding guidance of $8 million to $9 million, driven by one HDD 200 Lean system delivery and upgrades [45][11] - Gross margin for Q2 was reported at 24.9%, lower than previously expected due to a less favorable mix and increased costs [45][46] - The net loss for Q2 was $4.9 million, or $0.19 per diluted share, which was better than forecasted due to higher interest income and lower taxes [4][48] Business Line Data and Key Metrics Changes - The HDD business is on track for strong growth in 2023, with expectations of approximately $44 million in revenues, despite a significant order cancellation affecting medium-term forecasts [40][16] - The TRIO platform is expected to generate two to three systems in 2024, contributing to overall revenues in the low to mid-$50 million range [41][78] Market Data and Key Metrics Changes - The hard disk drive market has shown signs of softening demand since mid-2022, with a secular decline in legacy markets and a slowing growth rate in mass capacity markets [8][17] - Despite the challenges, the HDD media market remains a growth area, driven by demand for mass capacity drives [17][18] Company Strategy and Development Direction - The company is focusing on the qualification of the TRIO platform, which is expected to enhance productivity and flexibility in manufacturing processes [6][15] - A cost restructuring plan has been implemented, reducing headcount by approximately 25%, which is anticipated to yield over $4 million in annualized savings [50][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exiting 2023 with an increase in total cash and investments, projecting a cash balance between $75 million and $80 million [5][61] - The company expects to be cash neutral in 2024, with a streamlined cost structure and ongoing operational savings [21][42] Other Important Information - The company ended Q2 with cash and investments totaling $73.9 million, a decrease of $10.9 million from the previous quarter [48][33] - The backlog at the end of Q2 was $58.2 million, reflecting the impact of a $54 million order cancellation [47] Q&A Session Summary Question: What is the outlook for the HDD upgrade business? - Management indicated that the upgrade business is expected to maintain a revenue level of around $40 million for the next couple of years, supported by visibility into customer technology roadmaps [67][68] Question: Is there potential for price appreciation on systems? - Management confirmed that there is potential for price appreciation, but emphasized that the focus remains on technology shifts and upgrades [60] Question: What is the qualification process for the TRIO platform? - The qualification process is primarily focused on meeting the stringent requirements of the JDA partner, with separate customer qualifications occurring concurrently [82][83] Question: Will there be opportunities to monetize coating chemistry? - Management acknowledged the potential for future revenue streams from coating chemistry, including royalties, but emphasized that the current focus is on equipment sales [90][89]