Intevac (IVAC) 11 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to Intevac's Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded today, November 11, 2024. At this time, I would like to turn the call over to Claire McAdams, Investor Relations for Intevac. Please go ahead.

Thank you, operator, and good afternoon to everyone on today's call, especially our veterans. us quarter discuss on of joining for financial September for third the XXXX, you today Intevac's to results XX. Thank which ended

discuss to outlook addition discussing company's we In the looking will forward. results our

today's regarding on results and Cameron's with details review followed and guidance Officer; an Chief Chief McAulay, of for our turning quarter the me Hunton, business additional President call Joining Cameron will Nigel by financial the and before Officer. third of Financial over our overview our Executive Nigel Q&A. to begin outlook, are and call

I'd in events call completed Intevac. not recently like statements, financial and with our of connection future for to as limited remind future performance certain but to most adjustment everyone company's fiscal that the as preparation quarter, results today's including, comments XX-Q financial regarding the contains projections Form conference which to, remains well the regarding statements about to forward-looking subject

Form the contents forward-looking report represent actual upon statements made call update relating XX-K reports annual this XX-Q. These differ to based as uncertainties quarterly us factors forward-looking and of call. a statements these and The and projections materially discussed are expectations, comments our on our time-sensitive our forward-looking Securities Form no undertake filed of Commission, other to Exchange results of obligation risks on with XX by November that this and include documents statements today. as conference We during including risk could result various in and the current

turn Nigel. I the will to over now call

today's on of good Claire, afternoon and Thanks, all you to call.

its compared a better and a QX the and to positive as our a in position upside gross HDD of for HDD view for many underlying margin the of performance business business. upgrade bottom Intevac's financial demand Our HDD business, including positive going of strong demonstrate a developments more QX resulted This cash the forward. performance and strengthening strengthening and in industry, results line

pleased revenue of to $XX obligations. are storing a but procuring amount cover was we a profit of inventory. the inventory related addition, obligation. resolution of gross of $XX for The of revenue our to inventory reported inventory-related customer's is report small include In million did the largely pass-through, million to QX $XX.X expenses, million Approximately the these and

With XX%, the percentage margin reported margin certain by impacted of XX was gross other profit, this adjustments, share gross points, with impact positive along while our inventory a earnings per approximately $X.XX. on negatively

We high revenue, revenues for business. strong our of this forecast. to our data underlying our center drive technology demand are trends end QX continued indicate believe demand exceeded which HDD HDD demand Absent core cloud the inventory-related upgrades, for growing continuing

cover positive development is our the for finisher a less delivered a Unfortunately, in TRIO was glass quarter April process of through which Asia. the shipment, in first-ever end conclusion since qualification

the several the And past demonstrated the has the tool period. results while endurance expected TRIO qualification the through field. promise, without Over the positive ongoing concluded months, testing in showed

existing was, material displace of coating sizable end the installed market solutions. next the the opportunity as demonstrate was device it the of decisively as unable compelling cycle. product to missed as At capacity advantages TRIO, we the consumer such, And to this day,

well work We HDD rapidly polymer this monetizing into impacted advantageous objective to forward with to taking inventory path for as turned focus believe continue evaluations to to forecast this supporting and has most expected customers, the TRIO strength that account today achieving R&D the the of at applications. the Given opportunity multiple for as our prospects our has investments. is our

evaluations months. However, beyond potential revenue very the to no resources are material to XX extends clear, next any longer be we allocate to support that going

thus providing our support and critical to opportunities on be our HDD immediate Intevac, most assured allocated The for resources forecast an will the improving sector, strong and entirely HDD dynamics increasingly our industry in return financial investment. the

We through TRIO increase profitability bottom have, platform, line TRIO this the will costs. development further engineering of reduced and ceased therefore,

patent a as glass an to additional retain and compelling will applications into small We technology group packaging. portfolio advanced can leverage level pursue semiconductor that such IP coating partnerships our

investments investments growth concluded efforts TRIO on will in XXXX while [ opportunities efforts enable recent without that material additional the disciplined for the in and to be expertise assessing further partnerships our we made our science in the While can of by monetizing Intevac. and continue months fashion, we've value collaborations in have a believe residing ] our and technology already requiring IP

sheet is balance and maintaining of the preserving because firmly cash strength we to strong committed our the position. This are

ahead the HDD our a As align potential appropriate resources of likewise and business. reduction our consolidating growing XX% opportunities is why also areas strongest with we're have the resources including and which company, structure to cost our we growth, evaluated the today restructuring assess decisions the announcing headcount to have immediate of of we us, our the worldwide made

upgrade revenues to around subsequent In business continues HDD In when its system in between target of to our we core highest million today, the spanning business. was spite period HDD cancellations, the had improve. original are we track $XXX firmly XXXX visibility outlook achieve and the X-year of XXXX XXXX. through our the on of and technology-enabling strong, for remains history, backlog Our level its August recent

necessarily radar but certainly the climate XXXX. on only revenues in but screen, This levels for once not for the Even reflects more upgrade business give strengthening importantly, continued outlook not momentum currently also revenue XXXX of orders, potential consideration the and XXXX see. lean financial on or us and confidence the further under additional revenue sector that XXXX of record XXXX significant we XXX again, new HDD strong are, for based of the sustainability our between which

we led to mass landscape. strength in overall quarter, additional pricing third HDD in in for fundamental driven upside the Recently, industry, which server demand an media cloud This most positive believe by which, with growing part business capacity demand an nearline strong the The favorable led significant growth remains driver increasingly in drive AI and recovery industry and environment drives our outlook within to traditional for numerous is drivers. an upside strengthening initial hard has continued supply demand. rapidly

continue demonstrate of bit improvements the HAMR. of approximately HDD advantages decade, compared and by enterprise enabled advantage achieved at our significant SSDs. specifically benefit The time tool being cost have data the Xx per upgrades over Xx efficiency class about aerial a these in density to been to in are advancements capital and ] a [ this most significant centers,

advancements in increasingly We're higher future XXX years HDD the additional supporting path for technology through additional with these already While HAMR our will capacity remains X its a of customers early continued lean the cycle upgrades that next engaged enable with which drives. end underpins ahead, the vector driven X by upgrade performance the decade. or upgrade another advancements, stages, in is

support focus business, HDD This increasingly increasing provides it drives. decision HDD critical on Intevac playing role our road as further map company's strength to visibility with our supporting to upgrade again, technology the industry within capacity a higher for resources revenue develop opportunity the long-term proceeds for the HDD to

observed over customers close least decade new With technology that years. at the same this have the low utilization within partnership has map time, thinking X now last few media end through the we about we in with upgrade from also deploying planning being and, XX%, quarters, technology industry the of HDD at the under our systems road start a recovered which the can approximately next from analysts, required capacity means of XX%, requiring

XXXX outlook both boosted near-term in XXXX. and the our for The demand to business. year has Turning HDD HDD for expectations likely our upside witnessed this

$XX Our forecast also for and year provides quarter a has again total excluding business range. This us million is inventory our HDD has base to this improved with of once strong the revenues improved million incrementally every $XX importantly, from XXXX. the operations pass-through. This in the year it to of forecast

acceleration Further expect driven role upside integral above million million initiative. we revenue as manufacturers. upgrade for by to baseline $XX in be the upgrade media $XX every a play multiple the We and level ahead believe of activities will an is XXXX major HDD revenue towards by

to additional seeing HDD increased customers are upgrading We time accelerated lines demand and from HAMR. already

and Intevac flow revised the combination with and cost structure, neutral for be improvements are corresponding our our forecast, and revenue the baseline, on HDD decisions expected for year. which is the cash with strengthening today being P&L business the to most a enabling our restructuring to increase in immediate the Importantly, to return assured made investment opportunities, also

the Fund much Board and our and over perspective, of strategy, look Vardeman aging but prior our We and Before a only extensive and Board. we an Ryan investor to sale our experience. the Ryan Chairman turn brings largest to has corporate Ryan where call co-founder Value principal is Board not to I'm of He today. welcome he contributions also in XXXX. Cameron, delighted his financial very background Palogic experience to with one of executive an Board investors. forward a Square operating was to

I'll that, the with Cameron. over And turn to call

you, Thank Nigel.

first Turning income the to statement.

quarter million million, for regarding above due high the in $XX totaled million of component, above treatment QX. largely subside demand upgrade came accounting resulting of Majority guidance strong required revenues $XX customer's end a year's our the from still the the range obligation during through to range revenues $XX.X resolution represents of incrementally last passed of to Third well $XX.X technology HDD revenue of [indiscernible] the million. revenue

associated of with XX profit, gross by a profit XX.X%. and approximately procuring other storing the The related this was the the collectively gross adjustments, QX expenses along certain to impacted small cover to gross margin with points. order. included operating of impact inventory And percentage inventory inventory the margin amount revenues

gross [indiscernible]. underlying at of QX million. likewise strength expenses above The $X.X remained stable drove approximately XX%, margin in strong end the high the upgrade demand performance of for Operating business

to More be consulting million our to interest higher interest restructuring, the cash income $XXX,XXX to QX. the recent rate our investments, first increased of expect of other quarter income and run OpEx expense was million $X.X XXXX. Net Following to of moved $XXX,XXX. in $X we range by rate in

EPS partially was to income the loss The offset were business expectations. was this for favorable Resulting unfavorable share. per net likewise foreign results underlying earlier net However, by $X.XX our exchange.

receivables ended the cash of balance as was with from quarter our restricted during million, on of share flow net $XX.X reflecting enabled the Moving cash cash million now XX as million, at based to in end. positive and the strong $X.X cash including QX nearly equivalent operations quarter. to P&L over cash increase collection The per investments, quarter flow sheet. $X.XX neutral well shares by We

was compensation, for tax. $XXX,XXX amortization for and $X stock-based included We million QX $XXX,XXX. deferred in depreciation and $XXX,XXX see for expenses CapEx Noncash

Now I'll our provide further outlook. details regarding

the revenues range in to $XX.X of the $X fourth quarter, be million are to For million. we projecting

XX% levels absorption during upgrades factory margins reflecting the the expected be quarter and We to of XX% range, the expect quarter. fourth gross in to mix

This million. QX includes [ range the of are $X.X ] in expected of in be the million to $X.X operating costs restructuring quarter. expenses approximately range $XXX,XXX to cash

We be and in about $XXX,XXX, income which most of expense noncash. of $XXX,XXX tax expect interest approximately QX will GAAP of

net per We loss range our in based on are the XX share outstanding. to $X.XX $X.XX million of shares projecting

As concluded. we being our ahead forecast fiscal year fiscal for the next XXXX, currently look X-year to plan is strategic and

growing business is income our result cash base baseline flow least the gross after factors: rate a $XX our reduced and support to a the neutral of combination margins XX%, of expect believe HDD this by investments. as restructuring, announced, a flow the We run positive at of of OpEx which, million deliver achievable generated to for cash of revenue will We results.

presentation. This our for of completes ready Operator, are the questions. we part formal

Wright Peter [Operator Our from Instructions] is for PartnerCap question Securities. first

of couple questions. I've a got

So of unit X-year kind 'XX you to looking good insight the million, like in cycle. at Any a cycle comfort to of like? you count next instead firstly, assumption? into about in of some Leans I 'XX pretty think had would guess guiding what that that kind $XXX Nigel, X-year the when cycle, and looks cycle XXX the now cycle at And calling at of 'XX of the 'XX we're look looking what

That's you, the question. Thank first Peter.

of over . That remarks, in be the cycle, has a really that said as period, over strong. business of believe by as similar guidance I X-year strong prepared a is underpinned few, opportunity We absolutely As believe we're we feel part couple And X-year But that you I likely playing a as industry continued XXXXperiod. that stay upgrades. that XXXX, or said we revenues be see XXX we period the a period. on said, and see utilization of growth key the to level the think calls, improving in going giving as that we in to upgrade we demand Leans this transformation. will a next is we of that previous that

very will be continuing the into majority strength the will business that we've seen this much the continue of upgrade that still So future. Intevac, that maintaining for cycle and

of you that that the -- you 'XX cycle? will the through underlying installed guide XXX assumption? do the can complete And 'XX on Is base Leans think in be you largely upgraded? HAMR when Is

that the multiple X No. rate line It's to going to X of it's next to that is time -- probably least good, maintain for years, strength years. the is over at X sort of which X

further there'll upgrades. think be I that, Beyond

think advancements technology continuing. which and good I is as there'll upgrades be that, . beyond keep

the And I to that guide you out catch X think where Did on OpEx going and right? to is that for X.X it's guide, a in average XXXX?

OpEx pretty out, kind right. kind that's much this quarter. And then X the of The X.X will to of from start level the right. Yes, XXXX, X.X to X.X once that's Peter, of

that's we've today key this said, you and as and of part the, . that. to refocusing, linked absolutely a that's restructuring the And announced

And suggest right spend on side. Is cash neutrality sales from a flow so you that level? mid-XX Wonderful. about that perspective, cash then the guys for at

Roughly, a this we -- yes, at XXXX. a cash to balance well, But We're can cash We started as the for with be higher year we're where roughly, neutral Peter. million. cash year right bit perhaps neutrality. actions little maintaining at positive we today, $XX in now think we've we announced roughly cash solid that the

cash one. solid position a very the So is

sitting run to on, question, of the What perspective my on need forward? you're from that And cash sitting you cash last going than is clearly looking cash priority the use a be more HDD. to

are to position going at one we've about of of a to strategic is keys -- at look there. and done of in as forward. continues always confidence think the bought talked under cash We'll said, . We focus I as HDD, We've sheet strong the some business from alternatives. customers you've is the along, the that sort be as is cash we'll to invest I balance by at going that look maintaining assured And look what technologies known supported. maybe past continue be at all moving going HDD -- It allocation. And Strategic our given allocation. that and as on continue robust, Yes. business all look to us to is process. more it's process for the cash we

made shut to at back coating believe need except business We one, I an extract one for difficult needed mean, XXXX, the opportunity. when have industry, ] us, kept we market to that down of value the But we device was if all go a that. to tape and decision the from there for sort then and decision in consumer point, today programs eliminating the I a horizontal the believe that that you [ coater. We in we invest

a glass into glass this strong it a in we balance will done thought the that focus and we resulted continue and finisher, we've We If throughout the easy was with critical have What else decision it future. gave maintained cash process, shot. restructuring would we for that's today's it, our tough taken. have talked and maintaining the someone on we best talked partner

Great. of a Well, being excellent capital. job steward

good Sometimes capital. but it's it's tougher easy, good easy, steward job being of if it's a a

Our with is Benchmark. from next question Miller Mark

or Yes, I'm caused or just curious, was advantages equipment. yields said existing coder or of TRIO I'm throughput in terms qualification, uptime? the it the provide the situation? curious, that could over just you not instrument What

question. you, A Mark. good Thank very

effort the if partner. and lot we worked hard a Then in. we can coater there it technology compete but the with a that The already performance. eliminate we can a said, XX% done yield finisher, We've be As to particle glass yield glass to horizontal put have required actually the were coaters had coating. it, no tape. with couldn't At free We that someone have horizontal we performance was particle-free. easy, is leading a moment, vertical deliver with of achieve that

not the applied task, the and coater our hope I that core that at Intevac. only we of you reason growing the for an have X not was but and a yield focus this the being this horizontal market. or try part create not achieve At we been again. with stop which what with stage, believe We was to go business, have us a was would our capabilities right costs, to it's decision, appreciate able easy to needed on I further development to performance, particle felt one And not

that I done it because of we we clearly success When of that XXXX, real role we've product, started invest And in would market we is shut my not need. in here in today. down would what very confident TRIO I stated were fast, that if and a the

I appreciate that added color.

[ no anything there's else. or more So calls ]

put bed. basically to just TRIO You're

trying to explore not customers. that any Is correct? You're other

the opportunity have those upside testing. in equipment we do some be We research with Anything and we've for and XXXX. can active low will qualifications believe the sampling in on given. for We to come fruition forecast development volume can that

the therefore, deliver those that we'll complete XX-month revenue in qualifications period, we could we qualifications. thought the that had So

there of level were tool, high interest but the early in the still volume, So stage we is cycle. in throughput hoping high in R&D sort this of not development

Our with is Gabelli Hendi Funds. next from question Susanto

My first question.

inventory customers' the the what QX? margin pro gross was in Excluding forma obligation,

just mid-XXs pass-through inventory margin, We excluding other adjustments. have margin, and the mid-XXs over

maybe cycle I QX, is typical And cyclicality can know what us. on of in color expectation and may represent of a normal of can disk Yes. then, give colors, yet, you this not seasonally, you us that up maybe guidepost? QX, business some kinds in drive Okay. the QX, or Nigel, hard terms any QX, but down that remind

an have really that been going see you which think cycle, the in -- of XXXX. and XX sort this through through look year we'll of I of months and we is upgrade if most cycle, upgrade

of of be year some minor calendar as and, cyclicality some there's of between customers can timing of investments especially therefore, always quarters, yes, our us some sort year. going and levels their through ends to a So to modified be change different of

But throughout under the the whole we about next overall, the therefore, year, the smooth year, financial for relatively keeping year and level same of just see sort year. million XX this and that

So overall, continue we've to upgrades through seen quarter, the XXXX. expect we each and flow through that

systems a got into upgrades performance. system or So about and like it's it's or not upgrades new XXXX. year all relatively quarterly even big It's this

whether it followed more waves, terms like comes when does upgrade kind step-up customers Nigel, activities? inactive whether upgrades place? of then it's a pursue upgrade, customers and So And upgrade kind some that in in orders more by, let's say, what patterns timing of coming like to usually what of the it's

I relationships mean, longer-term good lead Yes. -- XX-month and our I customers all a typically we as run have know, X- visibility. think with typically, and a with the in times we us you get our good customers And very very, forecasting we period. of give to

XX if visibility level, order million in So our that look ordering the get at you confidence gives of in the level we sort us backlog of XXXX. good through

the increasing technology, to think the adoption you adoption which drives. some XX increased which industry future, not months, a biggest pull-in the be the hard everyone in. be to listen is good good and position And But see if the that next as releases of moment, some at of some driver, we've got the you visibility into the is customers, those or I disk terabytes acceleration. of could the HAMR out just opportunities for earnings will for go latest keep 'XX there's as talking beyond for HAMR, about is

then TRIO. one And on question

of inventories? aside is you components is write-off any putting your there put inventory of risk in putting -- TRIO, that -- TRIO us like Now on

got key less mark, substrates. on as with I the conclude We've opportunities on evaluations, polymer tools, opportunity good is, said we've an thing got substrate. some R&D think the there I to

recent have believe turning even be to concluded clearly expertise efforts will value in revenues. inventory a what in So of and though the efforts that our fashion, is on residing material the months into through talents disappointing in and XXXX continue we our

believe this R&D revenue as we're So we opportunities inventory taking have point, we at turn that any actually units. inventory additional for not to reserves into

TRIO how information, the any in And then balance inventory related much sheet?

to one in hand. pertaining TRIO just was balance The of over $XX inventory million

million? $XX

apologies. My X.X.

Oh, X.X.

Okay, $XX Million.

Okay Yes.

that let's So -- say, something into million it the will in if let's that believe XXXX? R&D can that say, meaningful, turned $XX more consume you

no our why hope, is That which there's is taken. inventory reserve been

questions the hand Hunton further Instructions] [Operator closing this like to are Nigel time. over There floor at any for no comments. I'd back to

for you. which work our and hard And questions. investors wish you and all want IR partners, employees efforts Outside are I And thank your their with of strong a our support, and all to performance. quarterly our also as very well new firm, we're ongoing a to welcoming thank KCSA. growing as counterparts also and Thank all of their industry

role. I want you to term in transition our to And progress follow-ups if short updating you forward look reach Cameron the in on their QX our as early So any to out on also February. they for into call new

today. So thank you me for joining

This conference. concludes today's

disconnect You lines your at your may this you time. participation. for Thank