Intevac(IVAC) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported consolidated second quarter revenues of $13.8 million, exceeding guidance of $12.5 million to $13 million [44] - Gross margin for the quarter was 22.5%, below the guidance of 27% [45] - The net loss for the quarter was $6.1 million, or $0.25 per share, within the guidance range [46] Business Line Data and Key Metrics Changes - Thin Film Equipment (TFE) revenues totaled $5.4 million, including upgrades, spares, and service [44] - Photonics revenue was $8.4 million, comprising $5.3 million in product revenues and $3.2 million in contract research and development revenues [44] - TFE gross margin was 18.7%, lower than forecast due to lower overall volume affecting factory utilization [45] Market Data and Key Metrics Changes - The HDD market demand in Q2 outpaced expectations, with close to 4 million additional drives shipped compared to forecasts [15] - The nearline HDD market saw record unit and capacity shipments, totaling approximately 19 million units and 240 exabytes [16] - Discussions with customers to add media capacity resumed in Q2, indicating a positive outlook for HDD media business growth in 2022 and 2023 [20] Company Strategy and Development Direction - The company aims to gain initial adoption of its DiamondClad protected coating through the Vertex initiative, with expectations for tool orders in 2021 [22] - The MATRIX tool has moved into pilot manufacturing, indicating progress in expanding the Equipment business [28] - The company is focused on multiple critical military programs, including IVAS, which is expected to drive future revenue growth [42] Management's Comments on Operating Environment and Future Outlook - Management noted challenges due to semiconductor shortages and supply chain constraints impacting lead times and production levels [13] - The company expects Q3 revenues in the range of $12 million to $13 million, with gross margins around 35% [49] - Full-year guidance for TFE revenues remains at approximately $38 million, while Photonics revenues are expected at the lower end of the $30 million to $34 million range [50] Other Important Information - The company ended the quarter with $54.1 million in cash and investments, an increase of $3.8 million since year-end 2020 [13] - Backlog at quarter-end was $51.7 million, with TFE backlog at $18.9 million and Photonics backlog at $32.7 million [47] Q&A Session Summary Question: Update on Vertex revenue opportunities - Management indicated that revenue from evaluation systems could materialize depending on final testing and acceptance [54][60] Question: Clarification on operating expenses - Full-year operating expenses are expected to remain around $39 million [62] Question: Drivers for increased margins in the next quarter - Increased margins are anticipated from upgrade orders and IVAS development deliveries [67][68] Question: Update on IVAS program and market share - Initial units ordered are at least 5,000, with potential for nearly 10,000 over the next 12 months [79] Question: Competitive landscape in the deposition market - Canon remains a competitor, but the company feels well-positioned in the HDD media market [91]