Intevac - Q4 2022
February 1, 2023
Transcript
Speaker 0
Welcome to the Intevac 4th Quarter and Fiscal Year 2022 Financial Results Conference Call. As a reminder, this conference is being recorded today, February 1, 2023. It's now my pleasure to turn the call over to Claire McAdams, Investor Relations for Intevac. Please go ahead, Claire.
Speaker 1
Thank you, and good afternoon, everyone. Thank you for joining us joins us today to discuss Intevac's financial results for the Q4 and full year 2022, which ended on December 31. In addition to discussing the company's recent results, we will provide financial guidance for the Q1 of 2023 and our outlook looking forward. Joining me on today's call are Nigel Hunton, President and Chief Executive Officer and Jim Moniz, Chief Financial Officer. Nigel will start with a review of our business and our outlook, then Jim will review Q4 results and discuss our financial outlook before turning the call over I'd like to remind everyone that today's conference call contains certain forward looking statements, including, but not limited to, statements regarding Financial results for the company's most recently completed fiscal quarter year, which remain subject to adjustment in connection with the preparation of our Form 10 ks, As well as comments regarding future events and projections about the future financial performance of Intevac.
These forward looking statements are based upon our current expectations and actual results could differ materially as a result of various risks Including our annual report on Form 10 ks and quarterly reports on Form 10 Q. The contents of this February 1 call include time sensitive forward looking I will now turn the call over to Nigel.
Speaker 2
Thanks, Claire, and good afternoon. I'm excited to share with all of you today our latest earnings results and to highlight the momentum we built should and the achievements we had in 2022. 2022 was quite a year for Intevac. Should we set out with a bold ambition of transforming the business and laid out a clear vision of the future of the company. I'm pleased to say we have taken huge strides towards that vision over the past 12 months.
It's been a year of significant change for the company. Intevac now fields and operates very differently to that of a year ago. We have transformed Intevac into a new company, should the new Intevac as we refer to internally and with customers. Intevac will continue this journey in 2023. The goal of this journey is to return strong shareholder value with sustained profitable growth and we are already creating this momentum.
I'm immensely proud of the entire team, not only for the progress they have made in delivering on our ambitious aims, As I reflect upon our commitments to our shareholders, starting with my first earnings call 1 year ago, I'm pleased to share that our team has executed on every single one of the mandates that we laid out for 2022. We have refocused the business around a leaner product portfolio, streamlined our business and strengthened and diversified Built on our existing strong position in the hard disk drive market and most excitedly of all, have developed a critical strategic partnership Looking briefly back on 2022, I'm pleased to share the following highlights with all of you. Each of these achievements has been a significant contributor to the change of direction, pace, energy and momentum the company has gained recently And with a specific intent set out at the start of my tenure with Interbank. A primary goal for Interbank in reestablishing momentum and focus last year, was to first assess the growth potential in each of
Speaker 3
our end
Speaker 2
markets. Indivac needed to refocus business around a lean and product portfolio. As Vaccines for COVID continued the global rollout and with the gradual reopening of travel, I took the opportunity to meet personally with each and every key customer in order to determine the correct direction and priorities for Intevac going forward. I'm pleased to share that I've traveled extensively each quarter of the year and met personally with all critical stakeholders that touch our business today could have potential to impact it greatly in the future. These efforts not only resulted in strengthened relationships, should also lead to the decision to cease development of multiple equipment initiatives in order to focus our innovation efforts on our flagship 200 Lean It has also led to an early patent award for our Trio platform and a further 9 patent applications have been submitted, Looking internally, we committed at the start of 2022 to streamlining the structure of the business And doing so, took action to align internal resource to genuine revenue growth prospects.
2022 saw us raise the bar for employee performance should and also so it's dramatically enhanced the capability of the organization. We introduced an internal development program within the business and recruited Our internal metrics and measurements are already showing strong evidence that our global team of employees feel invested in, is energized and excited for the future and our customers and partners have also validated the strength of the organizational culture place in our ability to deliver outstanding engineering. This past year has not only seen Intevac invest in personal and professional developments, should we know the importance of having an environment that encourages collaboration, Something that in turn enabled innovation and the changes made to our building to the creation of a dedicated collaboration space has been a key enabler of greater cohesion throughout the business and also led to the rapid development of our game changing Trio platform. 2022 was momentous from an organizational perspective. Our products, people, culture and customers has been part of this positive change and have seen this all year.
Today, our R and D, engineering and operational teams are developing into world class high is performing teams and we have begun the process of enhancing and developing our commercial team. I believe we are beginning 2023 with a strong team should like to comment on our financial results and are poised for continued execution in the year ahead. In relation to returning the company to profitability, We are firmly on track to return Interact to profitability for the full year in 2024 and remain fully invested in preserving the strength of our balance sheet. I have personally met and engaged with dozens of investors, each of which have expressed their preference In 2022, we maintained the strength of the balance sheet and are committed to do the same in 2023. Turning to our existing hard disk drive market and our flagship 200 Lean product.
Through HAMR upgrade initiatives and the securing of $70,000,000 in 200 lean orders, which will be delivered over the next 4 years. We continue to believe in the future of the hard drive business and our efforts in 2022 have kept us in a prime position should continue to be at the forefront of the market and its development. Finally, in what is now highly regarded internally with Intevac As well as externally as a game changing development, 2022 saw us deliver on our commitment to develop a meaningful partnership is relating to a new product category. Intevac's development of the Trio platform, a new product that supports consumer electronics and other applications, has the potential to provide a runway of compelling and sustainable long term growth opportunities and revenue for Intevac far into the future. It is by far and away the most important development achieved by the company since the launch of the 200 Lean product 20 years ago.
The recently announced partnership on December 30 is a key milestone in our growth strategy. It broadens our product line and We have a stronger, leaner, more diverse team, delivering world class products to the forefront of the markets we are operating in and pursuing. Our objective on this call today is to ensure that our investors, analysts, employees, suppliers, customers and all stakeholders recognized the achievements of the past year and our confidence and commitment in our strategy to deliver strong growth Now turning towards the trio. In late December, we completed our joint development agreement with a leading provider of glass and glass ceramic materials. The completion of this definitive agreement was a transformational event for Intevac.
The agreement includes is required to maintain exclusive access to the Trio platform for consumer electronics applications. The agreement also includes a minimal annual commitment to maintain exclusivity. We are currently completing the first TRiO system, will begin qualification later this quarter. We anticipate that once the first trio completes qualification, will receive a purchase order for the qualified unit. At this time, we are planning to deliver at least 2 additional Trio systems within 12 months of qualification.
Should we will be building several additional tools this year in advance of 2024 shipments, so we can be ready for some upside to support our key partner. I would like to point out at this time that going forward, we'll be limited to what we can communicate about our work with this customer. However, I can share with you a bit of what makes the Trio such a compelling manufacturing platform for the coating of glass is interested in the company's history, which is what excited this customer to engage with us and seek a level of exclusivity, which we granted. Could also share why we see the potential for this partnership to be well in excess of $100,000,000 over the next 5 years. The Trio offers 3 primary advantages over current coating options.
1st, It offers tremendous flexibility compared to existing coating equipment as the platform can accommodate almost limitless configurations of device form factors, should consider the 2nd, building upon our 20 year history of leadership in the hard disk drive market, Our systems have a proven track record of depositing highly uniform and defect free films of the highest quality standards for durability and precision, should executed with very high yields over a long operating life. And lastly, also critical to our Trio customer is its productivity, should flexibility, cost competitiveness and providing one platform for many different applications. Our plans for 2023 will be focused on qualifying the initial Trio system for our customers' thin film technologies by mid year, deliver the initial systems and working with our customers to ramp in the field. As our customer gains confidence in the value of Trio, could we expect that many additional systems will be deployed, potentially beyond the minimum contractual volume required to maintain exclusivity. The investments in inventory that we are making today and which began in earnest during Q4, support the build of multiple Trio systems.
These include not only the systems we expect to deliver this year, but substantially more systems to ship in the following 12 months. In the short term, these investments will be enabled by our strong cash balance. It is worth noting that the strength of our balance sheet is be particularly important to each of our customers, not just for the Treo partnership, but also for our HD business. And the investments we are making in 2023 will set us up for a profitable year in 2024 and consistent positive cash flows Once successful with the first few tool deployments, we continue to expect our Treo opportunity will be very significant. In summary, the development of this innovative and game changing platform will make a significant contribution to our growth plans, Which brings me to an update on our HDD business.
Recent news indicates encouraging signs on the horizon, Setting up a return to growth in data center investments and mass capacity derived. In the meantime, as we discussed last quarter, We're seeing a greater level of customer investments in new technology during this period of reduced factory utilization. We are very proud to be a critical technology partner in the industry's transition to HAMR, which is proceeding ahead of schedule, A fundamental part of our strategy is to maintain a focus on innovation in collaboration with key partners. As such, our roadmaps are aligned with them. Our HDD guidance for 2023 As well as the 5 year revenue forecast remains consistent with what we communicated last quarter.
We continue to see an extended investment cycle In both capacity and technology upgrades, it is providing visibility for at least $300,000,000 of HDD revenues from 2022 through 2026. We expect this strong revenue growth for the next few years will be driven by upgrades in support of the installed base of over 150 systems is excited about the year ahead and our new partnership for our Treo platform. I will take this moment to emphasize just how committed we are as a company should consider the impact of the balance sheet as we grow the business and transform Intevac into a consistently growing and profitable cash prepared remarks. And with that, I will now turn the call over to Jim.
Speaker 4
Thank you, Nigel. First, I will briefly summarize our 4th quarter results. Revenues came in a bit stronger than forecast at $11,300,000 Compared to our guidance of $10,000,000 as expected, Q4 revenues were comprised of HDD upgrades, spares and service. Which resulted in a more favorable mix of revenue in the quarter. This resulted in Q4 gross margins of 44.3%, in Q4 is now spread across our full year 2023 forecast.
So we expect to continue to maintain our Quarterly gross margins of 40% or more for the forthcoming quarters. Q4 operating expenses were $8,300,000 slightly above our guidance of $8,000,000 due to the prioritization of certain R and D spending for Trio As well as an increase in variable compensation due to the exceptional work of the team in executing key milestones before year end. The Q4 net loss was $3,200,000 or $0.13 per diluted share and better than our guidance of With total new orders of $133,000,000 in 2022, we ended the year with 12 year record high backlog of 100 and $22,000,000 As we have communicated throughout 2022, the strong level of order activity for both systems and upgrades resulted in quarterly increases in backlog during every quarter of 2022. Of the 11200 Lean HDD Systems in backlog, we expect to deliver 1 in Q4 and multiple liens in each of the following 3 years. We ended the year with cash and investments, including restricted cash of $113,000,000 Our year end cash balance was stronger than our forecast of $105,000,000 to $110,000,000 primarily due to Q4's Trio inventory purchases still residing in AP at the close of fiscal 2022, And we have since paid down that AP year to date.
Cash flow used by operations was $11,300,000 during the quarter $7,400,000 for the year. During Q4, we added $11,900,000 in inventory to support the growing backlog and anticipated shipments of Trio Systems in 2023. Were $383,000 for the quarter. Now moving to Q1 2023 guidance. We are projecting revenues to be between $10,500,000 $11,500,000 Consistent with our commentary last quarter, We do not expect system revenues until the second half of twenty twenty three, but the level of upgrades in field service for the first half of twenty twenty three is a bit stronger than we indicated last quarter.
We expect 1st quarter gross margin to be between 40% 42%. Q1 operating expenses are expected to be between $9,000,000 $9,500,000 Slightly higher than our expected run rate for the full year due to timing of investments in research and development, along with some typical seasonal increases. After Q1, we expect quarterly OpEx to be around the $9,000,000 level for the remainder of 2023. We expect interest income of about $400,000 and GAAP tax expense should of about $400,000 in the quarter. We are projecting a net loss in the range of $0.16 to $0.20 per share based on 26,000,000 shares outstanding.
As we look ahead to the full year's financial results, should I'll recap some highlights from Nigel's remarks. We continue to expect approximately $40,000,000 in HDD revenue in 2023, which will be relatively evenly weighted between the first half and second half with upgrades driving most of the first half revenue and one system expected to revenue in the second half. The Trio activity in the first half will be to build the production system We expect to receive the purchase order for the initial unit. We are currently planning to deliver at least 2 additional Trio systems within 12 months expect to be able to provide a range of how many systems could revenue in 2023. With this revenue profile, Which is largely HDD driven, but should also include some level of Trio Systems revenue, we expect Full year gross margins to be around 40%.
And as I mentioned earlier, OpEx of approximately $36,000,000 to $37,000,000 We expect both interest income and taxes to be in the range of $1,000,000 to $2,000,000 in 2023. Finally, we will continue to closely manage cash to support the business strategy. This completes the formal part of our presentation. Kevin, we are ready for questions.
Speaker 0
Certainly. We will now be conducting a question and answer Our first question today is coming from Hendi Susanto from Gabelli Funds. Your line is now live.
Speaker 3
Good afternoon, Nigel and James. So Nigel, big congratulations on the Trio partnership. May I inquire like more colors on what kind of let's select profiles that we can expect, let's say for the Treo system, once the customer ramp up, should Should we expect a linear sales profile or it will resemble more like a step up profile
Speaker 2
I mean, very clearly and hope it was came across on the call. Our focus absolutely has to be this month on completing the build of the first tool. We then move into the qualification of the tool and we are optimistic and enthusiastic and excited about the process we're going through on this qualification. And that's a qualification of the production tool. I mean, the tool was qualified on the test bed and it now moves to a production tool.
And really that process is going to take the next couple of quarters. And that's a critical thing for me is to maintain this organization's focus on delivering and executing on that plan. If I look out way beyond that and the profile, I think it's too early to say. I mean, I think For me, the opportunity, as we've said, is pretty compelling. It's a very significant opportunity.
It's a very different market we're entering. It's one that is the partner and us are going to maintain a level of confidentiality, which is why I said we're going to have to be cautious what we actually share talk with people on these calls moving forward, because the key for me is to maintain our strength, maintain that technology advantage and then move forward. So really for this call, it's very much about we're absolutely on track with that first unit. We're on track with our partner to get that qualified. I think once we get through that, we'll have a much better view on what the market potential opportunity is.
And the great thing for me is the commitment from that partner for should $100,000,000 over 5 years as a minimum for that period, but I think it's too early to say that's a linear or anything else. I I think the excitement for me is to get the first tools completed into the market and actually start building success and securing some orders. So That's going to be my absolute focus. So it's really too early. We're so excited about it and that the potential is huge.
But So I don't think it will be linear, let's say. That's probably anything to say.
Speaker 3
And then Nigel, with regard to the Treos system, what is the latest should estimate of the production rate. And then I would like also to know, let's say, when there's an estimate for production rate, will be it's somewhat like semi clicks meaning that, that's the run rate and then there is no like big window, let's say, like from like early into like a should pull them up whether there's like a big range like how many units they can produce. Yes, would you share some color on that?
Speaker 2
Yes, I mean, I think probably one of the really exciting things about the product is this new platform, which is very different to anything we've done before. So people are going to start thinking about segregating in their minds the traditional business to this new platform. This platform has huge flexibility. Could not only can it do 2 dimensional, coating, but it can do 3-dimensional coating, which is a phenomenal step forward. But it also has the ability to actually do multiple size structures through the machine.
So it's not like we're just putting through, if I could go back to the HDD business, a machine that does billions of 1 size disk day in, day out and so on. It's a platform concept and the flexibility of the design is one of the key things that attracted us and this technology to our partner. So the machine can have multiple sizes running on it. It can be running on different programs. So you can't really say it's going to be a fixed number.
So I think that level of flexibility is probably one of the unique capabilities of the technology. And is it going into consumer electronics markets? I mean, again, that market is huge, has different components within it. And that for this flexibility of the tool is probably fundamentally, one of the game changers and why we've been selected by the partner.
Speaker 3
And that might just quite
Speaker 2
answer your question, but hopefully gives you some flavor that this machine can do. So this isn't about one machine, it's about multiple
Speaker 3
Timing of like the exclusivity like will it start when the annual minimum commitment
Speaker 0
should
Speaker 3
is met or whether now you can explore potential with other customers while waiting for the annual minimum commitment to be met sometime later in 2023.
Speaker 2
The agreement, I think we're pretty clear when we announced it, does not restrict us from looking at other market opportunities. So the is within the consumer electronic devices for glass and glass substrates. So that is very clearly documented and was in the sort of announcement. So outside of that, we can look for other opportunities from the starting point of the agreement. The agreement that should be announced was signed in December.
That's the start date for the agreement. But for me, it's the real focus today should is making sure we get the 1st production unit executed on finished, that first unit qualified and then move forward with that strategic partner.
Speaker 3
Got it. And then questions for James. James, would you be able to share How much like cash consumption we can expect in 2023, especially considering That in the fact needs to build a trio systems. And then I also noticed that there is a long term customer advances of could $22,000,000 on the balance sheet. I'm wondering whether the cash on the balance sheet got boosted by that $22,000,000 and that's why the cash balance is should higher than the prior estimates.
Speaker 4
Sure. I can answer a couple of questions. First, let me answer your second question The ending cash of $113,000,000 was not influenced necessarily by the $2,000,000 that was known quarters ago. That is one of our customers who placed large orders that are in our backlog, Customary for that customer to give us cash down payments or customer deposits, we use those customer deposits So if you look at the inventory growth through the year, inventory went up by about $24,000,000 from the beginning of the year to the end of the year. Majority of that was not Trio.
Trio inventory started to build in earnest in the Q4. So we were using the customers down payments should to support the backlog and to buy the inventory as the customer requested. But that number of the cash down payment, the 22,000,000 had been reflected in our estimations of $105,000,000 to $110,000,000 and when we ended at 113,000,000 The slightly higher $113,000,000 above our last call guidance was we did secure the inventory for Trio that we expected, but it came later in the quarter. So it's still the payment was not made, did not draw down the cash. It was in accounts payable, we since drawn that down.
As far as the cash being used for the business, I think if you look over the last number of years and especially in 2022, We've been excellent stewards of the cash. We'll continue to use the cash strategically. And as Nigel said in his prepared remarks, We're building inventory beyond whatever the minimum order quantity is for 2023. So you'll likely see inventory continue to go up as we go through the year, but we will still manage cash. You won't see cash go down, let's say, to an $80,000,000 or $90,000,000 level right away.
If you see cash go down, there'll be normally a corresponding increase with us Building inventory to support customer requirements.
Speaker 3
Okay, got it. Yes. Thank you, James. Thank you, Nigel.
Speaker 2
You're welcome. Thank you.
Speaker 4
Thank you for the questions.
Speaker 0
Thank you. Next question from Mark Miller with Benchmark. Your line is now live.
Speaker 5
I'd like to congratulate you on your progress last year and looking forward to the future.
Speaker 2
Thank you.
Speaker 5
After listening to Seagate and Western Digital over the last week, they are indicating that the customer inventory For hard drives is starting to deplete and as a result they're more optimistic about the outlook at least for hard drives for the remainder of the year, have you sensed anything in terms of improvements in capacity utilization or any in terms of maybe more demand than expected now that the customer inventories of hard drives have come down? Could
Speaker 2
Yes. I think the first thing to cover what we've seen is and really excitement is and as you say listening to some other calls, should one in particular and the emphasis and the level of Q and A around the HAMR. I think what we've done in the last year, we have enabled the HAMR technology come through, that's been a key part of our last quarter's performance. And we're seeing that HAMR focus and should be maintained, I think Jim said that will be maintained into Q1. So we're seeing continued focus around those technology upgrades.
And again, like you, we are optimistic that demand is starting to come back. Some of those key markets in Asia will start to get additional business for them and we're confident that the positive outlooks are going to sort of start coming through. But really Fundamentally, is this technology shift to HAMR, I think is actually also going to be a significant change in that sector in that industry.
Speaker 4
To improve their technology and we're a key component of them being able to do that and they're helping as you see in Q4, that's One of the main drivers why revenue was above guidance and will continue, as I said in my prepared remarks that The first half of the year will actually be stronger than what we implied on the last earnings call as it relates to the linearity of shipments first should second half and most of that will be upgrades.
Speaker 5
Okay. From what I gleaned from your comments about cash in 20 23. There's going to be some drawdown as you build new tools, but you are talking about shipping, I believe, one later in the year, do you think by the Q4 you'll be cash flow positive?
Speaker 4
I think it all depends on What happens with the Trio build? That's really going to be the driver of cash flow positive when you look at combination of What the linearity of the revenue is in Q4. But I think the biggest use of cash for us, Which is just going to be a timing issue is going to be building to support a large backlog should that happen once we pass qualification on Trio.
Speaker 5
In terms of the lean tools you'll be shipping later late this year and beyond, These tools have more features such as more deposition chambers and prior tools or any new technology in these tools?
Speaker 4
I think that the one that will ship has an additional process module, But I don't think there's much additional technology other than some of it has some HAMR enabled capability. Yes.
Speaker 2
I mean, the major focus is really as we've talked on is enabling the installed base, putting in the HAMR upgrades for those tools And ensuring our customers are ready and enabled to actually execute on their HAMR roadmaps. And that's a key thing we've done is making sure our roadmaps are absolutely aligned with our key customers and that's been a key success over the last 12 months is having those regular should technology review meetings and ensuring we're meeting their needs and actually helping enabling them to actually move to that next should generation of technology, so it's been an exciting year.
Speaker 5
If all goes well with the first qualification of the TRIO tool, you're talk about delivering 2 more trios after that, one could you think these tools be revenued early 2024?
Speaker 4
I think as customary with our rev rec responsibility and rules, we'll need a couple of tools on the field should to be installed, to go through full qualification on-site and once they do that and the customer signs off on The qualification will take revenue. And then probably the 3rd or 4th tool after that, should We can take revenue at the time of shipment, but we have to first pass the call and we do expect revenue in 2023 as we Absolutely. That first qualified tool that Nigel emphasized, and I think everybody should remember is, that's our focus right now. Our focus right now is building a production tool, getting through should Trying to get that qualification through Q2. Once we get qualification and sign off, that tool can take revenue.
And then any tools we ship after that, if should go into the field, they'll have to get installed, qualified, signed off and then we can take revenue there. And then it's after that point in time That we can probably take revenue at shipment, but revenue at shipment is likely going to happen in 2024, but we will see sign offs and we will see revenue in 2023 from Trio.
Speaker 0
Thank you. Next question today is coming from Srini Sundar from Partner Capital. Your line is now live.
Speaker 6
Hi, guys. Congratulations on a fantastic quarter. My first question is Why was the accounts payable postponed?
Speaker 4
I'm not sure if your question is why is accounts payable higher at the end of the year?
Speaker 6
Yes.
Speaker 4
Is that your question?
Speaker 0
Yes.
Speaker 4
So if I understand your question, although it was hard to understand that question, The accounts payable was higher at the end of the year because of the timing, mostly of the delivery of the Trio inventories. So it came in, it was received, But there are payment terms of when we have to pay our vendors. Those payment terms required us to pay the vendors in January, not December. So it was sitting in accounts payable, you'll see accounts payable went up from the September quarter to the December quarter and that helped the cash because essentially It was in accounts payable, which has since been paid and it was roughly around $5,000,000 and it coincided with the growth of the free inventory in the quarter.
Speaker 6
Thanks. As a follow-up, The Lean 200 systems that you will be shipping in the next
Speaker 2
Those were ordered around this time last year. Some of that technology innovation will be included in them and there'll be some that's not. So there'll be further upgrades for those tools should So there'll be some level of HAMR readiness, but not the latest HAMR upgrades that we've actually should develop and executed and delivered on in 2022.
Speaker 6
Okay. Also, on the subject of exclusivity, could you explain what it exactly means? Meaning that you cannot sell it to somebody else or you can sell it to somebody else?
Speaker 2
So the exclusivity is very clearly for consumer electronic devices, The glass and glass ceramic substrate. So it is a very clear definition of the market and the substrate. So, in that again, what that means, that exclusivity means we cannot sell to anyone for those applications. So that's what the that's why it exclusively it is absolutely exclusive to them for that application.
Speaker 6
And this is actually a show of my ignorance, but I want to know what is the market share
Speaker 0
Information on
Speaker 2
our partners market share is not really for us to comment on. The market share of our partner is, I think, is probably on the website, but they are clearly the market leader, should an absolute number 1. So they are market leader in that sector.
Speaker 4
And I would say anybody that Has paid attention over the last 4 or 5 months as to what we're doing.
Speaker 6
There is a trend towards putting tempered glass on top of the should display, would that tempered glass stick to your
Speaker 2
I mean, I think if you look at what we announced in the press release, The trio is for coating glass and glass ceramic substrates and any glass and glass ceramic substrate is covered in that agreement. So it doesn't matter which tempered or not tempered. I think it will cover it covers any substrate. And that's why I mean it's a game changing technology that really has the flexibility and everything about it is why Our partner is so excited about it and why we've given the exclusivity.
Speaker 6
Okay. I think those were all my questions. Thank you very much. Congratulations on good execution.
Speaker 2
Thank you. We appreciate that, Srini.
Speaker 0
Thank you. Next question today is a follow-up from Hendi Susanto from Gabelli Funds. Your line is now live.
Speaker 2
We can't hear you, Hendi. I know this is me. Can you hear Hendi?
Speaker 3
Yes. Hi again, Nigel and James. May I I think 2024 is still far away, but with regard to the 1st full year of profitable results, Do you have insight into what revenue level and what kind of revenue mix Is the underlying assumptions among, let's say, like hard disk drive market, lean 200, HAMR and Trio?
Speaker 4
Yes. I would say at this time, we're not prepared to talk about what the revenue mix could be, how much between the 2. But What we look at internally is if you look at the investments we'll make in R and D this year and as we said in our prepared remarks, our OpEx being somewhere between $36,000,000 $37,000,000 If you just did simple math and assume the 40% gross margin, You need to be somewhere around $90,000,000 in revenue to breakeven.
Speaker 3
I see. So that is very encouraging, James. And the second question is I saw on your website, Ballastiq Coating. Is that the commercial name for Trio's, let's say, And products and then outside of consumer electronic devices, Do you see any like low hanging fruit applications?
Speaker 2
Yes, just to cover that first. I mean, as you said, as you know, when I joined a year ago, we had the Intevac Ballistic Coating and the IBC should as a potential route forward and a potential technology. And some of that has been developed into the Treo tool. So the website, as it says, is under development and we will actually address that in 2023. My focus in 2022 has not been about trying to put nice things onto a website.
It's been absolutely about creating a new technology platform, Getting this business fundamentals correct, but you're right, this year is the time to get the website upgraded, put some additional could material on there and actually bring Trio to life on the website. So that will be one of my actions for this year. But last year was very much about getting the technology launched focused and making this company a success. But you're right, the website still does say under development for IBC and We will change that to Trio and our current platform and the future growth.
Speaker 3
I see. And Nigel, my second question is about like potential target application outside of could consume electronic devices for Trio?
Speaker 2
Yes, I mean, at the moment, as we've said, very much the focus is Getting this tool built, qualified and out there and making that success. Beyond that, I see other opportunities. I think we talked in one of the announcements about this potentially around the automotive and other sectors, there's market opportunities. I mean, for me at the moment is let's get this thing should be able to build, qualified into the market and keep updating you as investors every single quarter by saying, this is what we've done, this What we're going to do next quarter and keep building that story and building that success. So, I think I've got enough to do to focus on that one is excited about the opportunity of electronic devices first.
Speaker 3
Yes. Thank you, Nigel, and then all the best for winning through yourselves is in the production environment.
Speaker 2
Thank you, Andy. Appreciate that. Thank you, Andy.
Speaker 0
Thank you. Next question is coming from Dan Weston from Westcap Management. Your line is now live.
Speaker 7
Yes. Hi, good afternoon, Thanks for taking the questions and congratulations on all the progress. Most of the questions have been answered, just a few more, if you don't mind. In terms of the Trio, could you share with us what you think your internal capacity is for build and ship per year for that product?
Speaker 2
I mean, that's highly confidential, as you can imagine. What we're really doing now is building the plan around it. We're executing is on the first bills, we're going to get the full qualification done. And then we're going to ensure we have capacity to meet whatever demand is out there. So It's I mean, the market size and what we're going to do and how we're going to deliver against that is clearly within internal plans.
And we are planning and scaling and building for success. You don't enter something like this without saying we're going to be successful. We know what we need to do. Should we have to have capacity to do it. We have to be able to actually manage our way through the industry with some still supply chain challenges.
We've got the strength of the balance sheet to actually help us leverage with some inventory. So we can be ready to ramp and build whatever the market needs. Could I don't want to put numbers in there for people at the moment. But we've got we know what we have to do. And as we've said, We actually plan things out, we think it through and then we execute.
So we are
Speaker 0
holding the floor. Okay.
Speaker 3
No, I think I get all the people.
Speaker 7
I think I get what you're calling.
Speaker 2
Yes, we just got to get the first one, Bill.
Speaker 7
Yes, it's hard to catch up.
Speaker 2
No, no, it's fine. It's great. But it's we are going to move forward. We're going to be successful and it's about getting this first one qualified and then moving forward successfully with our partner.
Speaker 7
Totally understood. Thank you for that, Nigel. Let me ask it this way. Just given the minimum commitments on this particular customer for Trio assumes, I'm guessing, using a roundabout figure of about 4 units per year to build and ship in revenue. Let's say the customer, exceeded his minimum commitments and he required 8 or 10 units to be built and shipped to him in a particular year.
Are you saying that you could successfully build and ship 10 units per year?
Speaker 2
Yes, I'm not committing to any number, but I'm saying we are planning for success and whatever our customer needs, we will deliver. Could read into that what we're doing.
Speaker 7
Okay, fine. Let me ask you a question. In terms of The evaluations that Corning was doing initially on the Trio platform, did they have any of their end customers is involved in that evaluation as well?
Speaker 2
Clearly, I can't answer that question. What I can say to you is the And we've covered it on the last couple of calls. When you launch a new product, you align it with a key partner. You have them To be successful in launching products through my 30 years of experience in many different companies is when you have a customer who's working with you, It's feeding and working with your development teams and you're producing product and we talked on a call a couple of quarters ago, we gave them some samples. They came in, they ran their own samples.
Struggles, we've done coupons for multiple different potential applications and so on. We've had other people come in and run and the qualification success And the real performance of the Trio and its flexibility and adaptability has been superb. And on the back of that, should that's why they wanted exclusivity. So you should be able to read into that what we've been doing.
Speaker 0
Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments.
Speaker 2
Thank you. As I look at where we are today compared to my first earnings call 1 year ago, should I feel we've executed on a complete transformation of the company. We've created a new InterVac, an outstanding achievement. Should look at supporting significant revenue growth, positive cash flow from operations and a profitable year for the company. Overall, I'm extremely enthusiastic about the future of Intevac, and we will continue to leverage our collective expertise and strong balance To ensure the company is positioned for growth well into the future.
In the final, I want to thank all of our employees As well as their counterparts with our industry partners for their hard work and dedication as we progress with our partnership with the new Trio platform As well as the HDD's industry transition to HAMR. And that's been for me, it's been a fantastic achievement all around. And with that, I will conclude today's call. So thank you.
Speaker 0
Thank you. That does conclude today's