Intevac - Q4 2023
February 5, 2024
Executive Summary
- Q4 revenue was $12.9M, up 14% year over year (vs. $11.3M in Q4’22) but down sequentially from Q3’s $17.9M; gross margin was 46.0%, above guidance (39–41%), and GAAP EPS was −$0.07; cash from operations was +$5.9M and year-end cash/investments totaled $72.2M.
- Upside was driven by accelerated HAMR technology upgrades; management rebooked two 200 Lean HDD systems into HAMR process module upgrades, citing minimal gross profit impact despite lower revenue per upgrade.
- TRIO platform achieved qualification; management is negotiating a commercial agreement and reiterated a ~$1B served market with an expectation to ship multiple systems in 2024.
- Management withdrew near‑term guidance and temporarily suspended fulfillment of HDD orders until receivables are collected, making receivables resolution and TRIO order signing key near‑term catalysts.
What Went Well and What Went Wrong
What Went Well
- Q4 revenue exceeded prior expectations; gross margin reached 46% (above guidance) and net losses narrowed year over year; CFO noted Q4 revenues exceeded the midpoint of guidance by $2.7M due to HAMR upgrade acceleration.
- Record HDD upgrade activity across FY23 supported the industry’s HAMR transition; management emphasized Intevac’s role as an enabling technology partner and leadership on the 200 Lean platform.
- TRIO achieved qualification with performance metrics enabling entry into a ~$1B served market opportunity; management is focused on securing a commercial agreement and shipping multiple systems in 2024.
What Went Wrong
- Persistent receivables delays from a key customer pushed year-end cash modestly below prior expectations and led management to suspend HDD order fulfillment pending collections; near‑term guidance was withdrawn to prioritize long‑term value creation.
- Backlog continued to decline: $42.4M at year-end vs. $46.5M at Q3 and $121.7M at year-end 2022; backlog no longer includes any 200 Lean HDD systems.
- Sequential revenue down vs. Q3 (partly due to Q3 pull-ins from Q4), highlighting lumpiness in HAMR upgrade timing and customer scheduling.
Transcript
Operator (participant)
Good day, and welcome to Intevac's fourth quarter and full year 2023 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference call is being recorded today, February 5th, 2024. At this time, I would like to turn the call over to Claire McAdams, Investor Relations for Intevac. Please go ahead.
Claire McAdams (Capital Markets and M&A Strategist)
Thank you, Sherry, and good afternoon to everyone on today's call. Thank you for joining us today to discuss Intevac's financial results for the fourth quarter and full year 2023, which ended on December 30. In addition to discussing the company's recent results, we will discuss our outlook looking forward. Joining me on today's call are Nigel Hunton, President and Chief Executive Officer, and Kevin Soulsby, Chief Financial Officer. Nigel will begin with an overview of our business and outlook, and then Kevin will review our financial results before turning the call over to Q&A.
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 and year, which remains subject to adjustment in connection with the preparation of our Form 10-K, 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 and uncertainties relating to these comments and other risk factors discussed in documents filed by us with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q. The contents of this February fifth call include time-sensitive, forward-looking statements that represent our projections as of today.
We undertake no obligation to update the forward-looking statements made during this conference call. I will now turn the call over to Nigel. Nigel?
Nigel Hunton (President and CEO)
Thanks, Claire, and good afternoon. Intevac posted strong results for the fourth quarter, marking a solid finish to what was a key year of growth and execution in 2023. Q4 revenues totaled nearly $13 million, well ahead of our expectations entering the quarter. As evidenced by our record level of upgrades in 2023, Intevac is a key technology enabler in the hard drive industry's transition to HAMR. The fourth quarter was another period of accelerated demand from our leading customer as they ramp to deliver production quantities of HAMR drives. The key role of Intevac in enabling this ramp resulted in very strong 47% growth in revenues for fiscal 2023, and we achieved a four-year record in annual sales for our equipment business.
The resulting favorable revenue mix drove strong gross margin performance, exceeding our guidance at 46% for the fourth quarter and 38% for the full year. With continued due diligence controlling discretionary spending, we sharply reduced our net losses both for Q4 and the full year compared to the prior year periods. Protecting the balance sheet remains a key priority for the company, and we ended the year with over $72 million of total cash and investment. This will remain a key focus in 2024. The year-end balance was just below our previous guidance, solely due to the late payment of receivables by one customer. Total backlog at year-end was $42 million, reflecting the continued strong order activity for HAMR upgrades. In Q4, these orders included the successful rebooking of two 200 Leans in favor of additional HAMR process module upgrades.
As a reminder, these two systems have been in backlog for the past six quarters and were originally aimed at enhancing capacity as opposed to technology. We are pleased with the renegotiation of order backlog towards HAMR initiatives, as these are clearly the priority in the industry right now and from a financial perspective, while upgrades carry less revenue compared to total sales, the rebooking is expected to have a minimal impact on our forecast for gross profit. Finally, as we reflect on fiscal 2023, it was a critical year for the technology development and commercial launch of our groundbreaking TRIO platform. We successfully completed the development phase of our JDA and achieved system qualification as promised by year-end.
This is a key milestone in the growth trajectory of Intevac, as the TRIO achieved key performance metrics as part of the evaluation process that will enable Intevac to address market opportunities far larger than our existing hard drive business. We see the TRIO as having enormous potential with an estimated $1 billion served market, and the achievements in 2023 are key steps forward in our plan to diversify and grow our product portfolio and customer base. Which brings me to a discussion of our perspectives on the future and our strategies to deliver consistent and profitable growth in the years ahead. The important developments that unfolded in fiscal 2023 within each of our primary markets have underscored two key attributes of our business....
First and foremost is that Intevac plays a critical role in the global electronics manufacturing industry, and that we are uniquely capable of producing equipment that addresses the needs of technologically and challenging thin-film processes in highly demanding, high-volume manufacturing environments, and within industries that require extremely low costs of ownership. This was especially evident during the challenging macroeconomic environment of 2023, a year when our customers faced enormous headwinds, financially and operationally, yet never diverted their attention from their strategic manufacturing priorities in close partnership with Intevac. But it's these same headwinds that manifested in the second reality for Intevac's leadership team in 2023, and that is the undue influence that our large customers can exact on our short-term financial results, which is an issue that today we are addressing head-on.
As we enter a new year, we are steadfast in taking a long-term focus on improving the underlying financial performance of Intevac. We're always going to be focused on critical aspects of our financial performance, such as revenue volumes and our cash position. At this juncture, however, we have made the determination to temporarily redirect our focus away from short-term metrics, such as quarterly revenue and cash targets, in order to set up a stronger long-term value proposition for our stakeholders. Which means we have made the decision to temporarily withdraw near-term financial guidance in order to enable our focus to reside primarily on the long term, and specifically on improving our longer-term growth, profitability, and cash flow profile. This has implications for each of our served markets.
First, in our primary HDD market, the revenue ramp we achieved in 2023 demonstrates our operational agility and our ability to execute to meet customer timelines for HAMR upgrades. Even more importantly, Intevac has emerged as the enabling technology partner for the adoption of HAMR, and our revenue results in 2023 demonstrate that we are a direct beneficiary of the HDD media technology upgrade initiatives currently underway. We have demonstrated our critical role for the hard disk, disk drive industry, at the same time as we've supported the strength of our customers' financial position at the expense of our own. Our cash conversion cycle has slowed to historical lows, and collection delays have become pervasive or a quarterly norm. We encountered an unprecedented order cancellation more than eight months ago, which I've yet to resolve the transfer of inventory and material receipts off our balance sheet.
For this quarter, we have made the decision to temporarily suspend our fulfillment of HDD orders until that customer fulfills their obligations regarding payables and inventory. We are confident that we can get the business back in alignment with our standard terms, but we are not using Intevac's cash to fund our customers. I know our investors will understand the position that we have taken. Next, turning to the actions we are taking in the display market. The recently completed qualification of our TRIO system is testament to the quality of engineering resources resident within Intevac and our ability to meet key performance specifications for a very demanding and exacting customer. Upon achieving qualification and the successful completion of our joint development agreement, we engaged with our JDA partner in negotiations for a commercial agreement for multiple systems.
While we were not able to complete such agreement by year-end, as we had originally hoped, we expect such negotiations to conclude by the end of the first quarter. As we said before, the supply chain for display cover glass for high-volume consumer device applications is highly complex, to say the least. Meanwhile, conditions in the display market have become more challenging in the face of slowing customer demand, which is manifesting itself in conservative financial planning by our JDA partner in the short term. It's also quite apparent to us there are a significant customer pool coming from the end devices OEMs to rapidly deploy TRIO systems into volume manufacturing environments, that the benefits of our tool can be realized on multiple device types.
Whether through the originally contemplated exclusive arrangement with our current partner, which is tied to a minimum purchase of multiple systems estimated at approximately $100 million over a five-year period, or through other customer sales, we will work towards maximizing the long-term potential of TRIO. Which means by withdrawing near-term guidance, we'll be firm on our negotiations regarding any commercial terms for the TRIO that have long-range implications. While we work through this process within each of our markets, I will also note there's been no material change in the demand range we've indicated when previously providing our preliminary outlook for 2024, which we shared on the last two earnings calls. For purposes of annual revenue guidance, our outlook for the full year is largely unchanged at the $50 million level.
Furthermore, we expect to end 2024 with a similar balance of cash and investments as year-end 2023. However, given our decision to halt the deployment of certain of Intevac's resources in the short term in favor of maximizing the company's longer-term potential, we are not providing official guidance ranges for margins or profitability or a specific revenue range for Q1. With that, I'll turn the call over to Kevin for his Q4 review.
Kevin Soulsby (CFO)
Thank you, Nigel. Turning to our results, Q4 revenues totaled $12.9 million, which exceeded the midpoint of guidance by $2.7 million due to the acceleration of HAMR upgrades during the quarter.... For the full year, revenues grew to $52.7 million, up 47% from 2022 sales of $35.8 million. 2023 sales included a record level of HDD upgrades, as well as one new 200 Lean and one refurbished 200 Lean system. Q4 gross margin benefited from favorable mix and exceeded our forecast at 46%. For the full year, gross margin was 38.4%. Q4 operating expenses were $7.8 million, down both sequentially and year-over-year, reflecting the restructuring of our business and leaner operating structure.
As a result, we were able to reduce our operating and net loss both for Q4 and the full year compared to the year-ago periods. Turning to the balance sheet. We ended the quarter with cash and investments, including restricted cash of $72.2 million, equivalent to $2.74 per share, based on 26.4 million shares at quarter end. As Nigel mentioned, we would have ended the year with total cash in the range of $75 million-$80 million, if not for the persistent delay in collections from one large customer. Cash flow from operations was a positive $5.9 million during the quarter. Q4 capital expenditures were $500,000, and our non-cash costs for the quarter included $1 million of stock-based compensation and $400,000 of depreciation and amortization.
This completes the formal part of our presentation. Operator, we are ready for questions.
Operator (participant)
Thank you. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Mark Miller with The Benchmark Company. Please proceed.
Mark Miller (Senior Equity Research Analyst)
You mentioned that the TRIO negotiations you expect them to be complete this quarter. I'm just wondering, could you provide any more color on what's being discussed?
Nigel Hunton (President and CEO)
If you, if you take, the JDA agreement we have, the plan for that was to go from the, the JDA agreement and then negotiate a commercial agreement for ongoing supply. So we're in the middle of negotiating a sales and purchase agreement for the future. So that, that's what's been involved in the negotiations.
Mark Miller (Senior Equity Research Analyst)
We're still looking at roughly $100 million, at least in sales for TRIO?
Nigel Hunton (President and CEO)
We're looking to conclude that negotiation in this quarter, and the outcome of that negotiation we'll cover on the next earnings call.
Mark Miller (Senior Equity Research Analyst)
Any thoughts about the TRIO that was just qualified in terms of being revenued?
Nigel Hunton (President and CEO)
No, the JDA, once it's qualification, then moves to a negotiation on the commercial agreement, and at this time, we want to get the best outcome that's in the best interest for our shareholders. So it's probably not best to discuss specific outcomes of that item.
Mark Miller (Senior Equity Research Analyst)
Western Digital, during its recent conference call, indicated that they were gonna wait until 4 TB per platter to phase in HAMR. Do you have any feeling when that would be? Will that be later this year or 2025?
Nigel Hunton (President and CEO)
I think Western Digital's announcement was very positive for us. I think as you see, the industry move towards HAMR was traditionally focused really around one customer. I think now you're seeing the industry following. And I think on prior calls, we've sort of said that WD might be a year behind. I think we'll see towards the end of this year into 2025. I think it's a very positive thing for the company.
Mark Miller (Senior Equity Research Analyst)
Thank you.
Operator (participant)
Our next question is from Hendi Susanto with Gabelli Funds. Please proceed.
Hendi Susanto (Research Analyst and Portfolio Manager)
Good afternoon, Nigel and Kevin.
Nigel Hunton (President and CEO)
Good afternoon.
Kevin Soulsby (CFO)
Afternoon.
Hendi Susanto (Research Analyst and Portfolio Manager)
Well, Nigel, I would like to ask your perspective, the latest forecast of 2024 hard disk drive market, and then, the outlook for HAMR upgrade. And then, second, I'm wondering whether you can share some color of, on, what kind of timing or cyclicality of HAMR upgrades. Does it tend to be lumpy or, can it be somewhat linear and incremental?
Nigel Hunton (President and CEO)
I think, as we've said on the call, we've got, you know, an installed base of around 140 systems with over 10% of that upgraded towards HAMR. We see that continuing through the next three-four years. So we see the HAMR opportunity as being significantly large. And as Mark Miller commented there, we're actually seeing now a level of interest from WD coming in as well. The key for us is really making sure we are ready to support the HAMR ramp, making sure we're able to actually support that business. We've been a key enabler. The technology has helped prove the establishment of that as a step change in technology. The critical thing for now is to make sure we make the right decisions for the business.
And therefore that's focusing on getting our, one of our key customers back into standard terms, getting our cash position back to where it should be, is a key focus at the moment. And then we'll. Once we get that done and resolved, then we'll look to continuing further shipments. Hence, we've postponed guidance for this quarter, and while we resolve that, because we do believe fundamentally, HAMR's got a great future.
Hendi Susanto (Research Analyst and Portfolio Manager)
Then, may I verify for, like, HAMR upgrade, can it be lumpy from one quarter to another?
Nigel Hunton (President and CEO)
I think as you've seen, it will depend on the uptake and demand and how fast the take-off of that product is. So I think it'll be over the next couple of years, I think we've talked about, you know, roughly $35 million-$40 million a year, but that quarter-to-quarter, we are a level of lumpiness, depending on what upgrades are pulled in and the timing of those investments.
Hendi Susanto (Research Analyst and Portfolio Manager)
Okay. Yeah. And then, in order to position Intevac to support the HAMR, any advice on how we should be thinking about the inventories?
Nigel Hunton (President and CEO)
Well, a key thing for us is to, one, resolve the inventories around the 8 system cancellation. That's a key aspect of our focus. And as we look at actually building the business, we've got to actually make sure we actually minimize the inventory, look at the best use of our cash, and ensure we can deploy that inventory against those key HAMR shipments as we get orders for them moving forward. I think our inventory is sort of split, you know, roughly a third, a third, a third of the month between HDD, TRIO systems, and the cancellation. So we've got a lot to do on inventory, to reduce inventory, make sure we actually turn that return inventory to our customer for the cancellations, and then deploy our inventory to maximize our business moving forward.
Hendi Susanto (Research Analyst and Portfolio Manager)
Can you use the cancellation inventories for HAMR upgrade?
Nigel Hunton (President and CEO)
One of the key things that happened last quarter, which we talked about in the prepared remarks, was to actually successfully negotiate and exchange two of the systems into HAMR upgrades. And by using the relevant parts of those systems, we can actually then move them into HAMR upgrades pretty successfully. That's one of the things why it was a successful renegotiation to transfer those two systems into HAMR upgrades. And actually, as you rightly point out, we can leverage and actually transfer a significant part of that into HAMR.
Hendi Susanto (Research Analyst and Portfolio Manager)
Okay. And then I don't know whether you can answer these questions. Can you indicate, like, how many installed base units that received the HAMR upgrades in Q3? And then I'm also wondering when Intevac had, like, record sales of HAMR upgrades, whether you can quantify what the magnitude of the HAMR upgrade in dollar terms.
Nigel Hunton (President and CEO)
I think what we said on prior calls is, you know, 2023 saw us complete around probably about 15 or 16 HAMR upgrades. And that was the amount we did through the year. And that's sort of the number we're giving for 2023. And as we've said on many occasions, the HAMR upgrades, the value of those depend on the upgrade of the system. Some systems need additional process modules, if it's going from a five-process module to a seven-process module, and then the addition of the cooling and heating stations and other key upgrade systems. Or some have already got seven process modules, and it's just some of the key upgrades around heating and cooling. So the range of upgrades can between $1 million-$2 million.
It changes depending on the mix of the system that we're upgrading, which, again, adds to some of the lumpiness, of course, of the quarter.
Hendi Susanto (Research Analyst and Portfolio Manager)
Nigel, one last question for me. When it comes to negotiation for like TRIO system sales, any background on the likelihood of the customers buying one, two, or three? In other words, what will drive customers to buy two instead of one or three instead of two? I think in the past, you mentioned that customers has like multiple locations, but besides location, are there other factors that drive the decisions in terms of the number of systems that they want to purchase?
Nigel Hunton (President and CEO)
I think, I think the key message at the moment was sort of the original JDA we completed, the TRIO system was qualified, and the critical next step is to finalize a formal agreement for TRIO tool shipments. I said we had hoped to conclude that before the end of December. However, our negotiations are ongoing now, and we really can't say any more at this stage, other than to confirm we expect to ship multiple systems in 2024.
Hendi Susanto (Research Analyst and Portfolio Manager)
Okay. Yep. Thank you, Nigel. Thank you, Kevin.
Nigel Hunton (President and CEO)
Thank you.
Kevin Soulsby (CFO)
Thank you.
Operator (participant)
Our next question is from Peter Wright with PartnerCap Securities. Please proceed.
Peter Wright (Research Analyst)
Great. Good afternoon, guys, and thank you for taking my questions.
Nigel Hunton (President and CEO)
Thank you, Peter.
Peter Wright (Research Analyst)
I have three questions. The first one is on your shift to a long-term focus on the financial model, and I think that makes sense, just on number of customers and it's easy to understand. But what I'm hoping you can do is kind of reflect on this comment. If I look at your backlog, helping to guide kind of services and call that about $40 million, and across a four- or five-year cycle, you're looking at about 10 hard disk drive tools and about 20 tools on the contract with your existing one customer there. It averages about $30 million a year. It's gonna be lumpy, and it's tough to figure that out, but that's about a $70 million average cross-cycle revenue run rate....
Given kind of where your expenses are now, that, that's suggesting to me about a $4 million-$5 million free cash flow yield on an annualized basis, kind of on a cross cycle. Is there anything I'm missing there, you know, at a high level of what your long-term guidance and picture would look like?
Nigel Hunton (President and CEO)
Yeah, I think for me, it's critical that we focus our time at the moment, ensuring we actually optimize the long term and get the right deals and the right negotiation and get the right forecast for the future. So I don't really want to comment on the detail within the agreements we're actually in the middle of negotiating. But if you take the base from prior announcements, I think that's probably a logical analysis of what we've announced on prior earnings calls. I don't know whether, Kevin, you want to add anything to that?
Kevin Soulsby (CFO)
No, I would agree that that's, that's consistent with what we've said the last couple of quarters.
Nigel Hunton (President and CEO)
Yeah.
Peter Wright (Research Analyst)
Okay, fantastic. And if I look at the one comment you made on end-market pull, can you give us a little more color of what it is that some of these end-market customers are looking at and what they specifically like about your glass?
Nigel Hunton (President and CEO)
I think there's a couple of key points there. One, the capability of the TRIO and the qualification being completed has proven that we have a machine that has great capability. You know, the ability to deliver hard, scratch-resistant, and anti-reflective coatings on substrates is critical, and that has been proven. And if you look at the market opportunities, whether that be in the consumer device market, where it's very apparent the need for those sorts of coatings and those sorts of applications.
As we've sort of looked beyond that and started to talk to some key automotive customers and some of the coating people in that sector, in a similar way, the deployment of glass across the auto sector, whether it be touchscreens in cars, whether it be looking at applications externally, whether you have accurate and anti-chip coatings on some of those substrates around the cameras on the exteriors of cars, LiDAR, et cetera, et cetera, are proving that the opportunities in auto are going to come through and come through over the next, whether it's three to five-year period, pretty strongly as well. So we see sort of multiple applications now for the TRIO platform.
We see it being able to be expanded beyond consumer devices into multiple other sectors, and the ability of the tool to put specialized coatings with the key attributes that we've proven onto multiple materials is also gonna prove benefits long term. So I think we've proven a phenomenal tool. It's taken us almost over 18 months of development time and focus, but having got that tool to a point where it's now fully qualified, it's absolutely the right timing to think about the long-term opportunities for that. And the feedback we've been getting about this quality of the coatings gives you more and more confidence on the future.
Peter Wright (Research Analyst)
I could infer from your last press release and the naming of your partner in it, that clearly they see your value, you know, in this equation. Can you help us understand, in these negotiations, is there a certain element that you're more excited about or has changed over the course of last year? Whether it be from consumer electronics to consumer electronics plus, whether it be, you know, an evolution of the business model from equipment to equipment plus, or are the negotiations at this point on the TRIO side primarily about numbers?
Nigel Hunton (President and CEO)
I think we've proven that we have great technology, and the work we've done around the material science, the work we've done to developing the TRIO platform to meet the key market needs, has shown me that we've got a capability to not just deliver high-quality coatings into consumer devices, but into other sectors. So as we looked in the negotiation, I don't want to get, I do not want to get into details of that today, 'cause clearly it's a very key time in the negotiation. It's about making sure we do the right for the company, the right decisions, end up with the right agreement for the long term, that's going to maximize value for Intevac.
That's my key focus, is how do we actually ensure that we have an agreement that enables us to take Intevac forward on a much stronger growth trajectory, and with key partners. So I'm pretty excited about the opportunities with existing partners, but I'm also equally excited about the opportunities we're seeing outside of that.
Peter Wright (Research Analyst)
Fantastic. My last question is, it just seems that no matter what you do, the, you know, the market is not giving you credit for your cash. What, what are the best uses of your cash, when you look forward here? Is it organic, inorganic? You know, when you look at the balance sheet, even though, it might be down a little bit on the collections, it's still an extremely large number on the balance sheet. What, what is the uses in 2024 that you'll be sharing with us that you're most excited about?
Nigel Hunton (President and CEO)
I think the opportunity to continue to protect this business, and continue to protect the balance sheets is a key focus for me. We've done that pretty successfully through 2023. There are some minor uses. We need to expand some of our capabilities around inspection and test equipment. I think one of the things that we've got to absolutely be expert at is, as we do world-class coatings, is have the capability in-house to do key testing and key understandings of the materials, whether that be into the optics, into the hardness, into the material science. So there will be some use of that cash, but not significant, around enhancing our capability for in-house metrology.
As we look at other feedback, and our customers see the strength of our balance sheet as a key asset, and therefore, a company our size is maintaining that strong balance sheet is critical to protect the company moving forward. We've got to look to how we actually grow the company, and as we actually think through what the key strategic moves we have to do to take the company forward, then we'll think about how we actually optimize that cash and use it effectively. But the first focus at the moment is absolutely protecting the balance sheet and protecting that cash position.
Peter Wright (Research Analyst)
Fantastic. Thank you for the call.
Kevin Soulsby (CFO)
Thanks, Peter.
Nigel Hunton (President and CEO)
Thank you.
Operator (participant)
Our next question is from Dan Weston with West Capital Management. Please proceed.
Dan Weston (General Manager)
Yeah, hi. Thank you very much for taking the questions, most of which have been answered. Just some clarity relating to the receivables that you discussed. In that collection process, is there any dispute with your customer on what the receivable number is?
Kevin Soulsby (CFO)
No.
Nigel Hunton (President and CEO)
No, there's absolute clarity on what the number is.
Dan Weston (General Manager)
Okay.
Nigel Hunton (President and CEO)
Yeah.
Dan Weston (General Manager)
Oh, okay.
Nigel Hunton (President and CEO)
We have a long-term relationship. This will be worked through with them. They've been a key partner of ours. We've helped enable a successful evolution to HAMR. So there's no dispute on the receivables.
Dan Weston (General Manager)
Okay, so this is what you would classify as more of a timing issue as opposed to a dispute of the number?
Nigel Hunton (President and CEO)
Correct.
Dan Weston (General Manager)
Fine. I appreciate that. Also, Nigel, just to get some additional clarity, not to belabor the point, but I think you mentioned on your last call that the successful completion of the evaluation would then trigger the shipment of the first system. So I assume that did not trigger the shipment of the first system. Maybe you can just add a little color for us in terms of what took place. In other words, weren't the terms already outlined in the JDA that would define exactly what the numbers were once the qualification was completed?
Nigel Hunton (President and CEO)
The original JDA, the way that was written, and that was completed successfully by the end of December. The next step within the JDA is, once successful completion of the JDA was done, the next step is to then complete a formal agreement for TRIO tool shipments. We had hoped to conclude that as well, but before the end of December, however, those negotiations are still ongoing, and probably I cannot say anything more at this stage, other to confirm that we expect to still ship multiple TRIOs in 2024. But the process was goes, it goes from JDA, goes qualification, JDA completion, then we go into a formal agreement for sales and purchase. So that, that's the key steps.
Dan Weston (General Manager)
Okay. Okay, fine. And then, back to your HDD business, just to make sure I'm very clear here, since there's no guidance that you're offering for the quarter. Did I hear you right in that, your company will not be providing any upgrades until the receivables are collected? Just some clarity on that, please.
Nigel Hunton (President and CEO)
Correct. So we will not be supplying any materials until we've actually got resolution on the receivables.
Dan Weston (General Manager)
Okay, got it. I guess, I mean, is there a way that you can predict what the timing would be to resolve that receivable issue?
Nigel Hunton (President and CEO)
I think it's best if we actually leave that for me to resolve the receivable issue without putting a timeline against us.
Dan Weston (General Manager)
Okay. Okay, fair enough, and I appreciate your candor, and best of luck.
Nigel Hunton (President and CEO)
Thank you.
Kevin Soulsby (CFO)
Thank you.
Operator (participant)
Our next question is a follow-up from Hendi Susanto with Gabelli Funds. Please proceed.
Hendi Susanto (Research Analyst and Portfolio Manager)
Hi again, Nigel. So Nigel, when, let's say the negotiation of TRIO system has been concluded and you have the agreements, how soon can the sales of TRIO system take place? And then, how... I'm also wondering, upon the completion of the negotiation, whether or not Intevac will file like an SEC filing.
Nigel Hunton (President and CEO)
I think if we, as you said, we are in the middle of those negotiations. We're confident those negotiations will get concluded. We're pretty clear that as we move forward, we have timings to do updates on revenues and performance on a quarterly basis, and therefore, the next earnings call, hopefully, we can share a lot more of progress we've made. We have a very clear policy when it comes to the orders and system orders. We, when we get system orders, normally, we would actually do press releases against orders when received in the company, and that is our basic company policy that we've been following for many years. So I don't see any change to that happening.
So, you know, my aim is to conclude the negotiations, secure orders for this company, drive into that forward profitably and into the future, and we, as we get orders, to announce them under the sort of existing practice we have as, as a company, as we did with all the 200 Lean orders. So I don't see any change to that as a practice.
Hendi Susanto (Research Analyst and Portfolio Manager)
Okay. Yeah. Thank you, Nigel, and then all the best.
Nigel Hunton (President and CEO)
Thank you.
Kevin Soulsby (CFO)
Okay.
Operator (participant)
Thank you. With no further questions at this time, I will like to turn the call back over to Nigel Hunton for closing remarks.
Nigel Hunton (President and CEO)
Thank you, and thank you for all the questions. I wish to thank all of our employees, as well as their counterparts with our industry partners, for all the hard work and dedication as we proceeded through a critical milestone in 2023, which was achieving qualification for the TRIO. While at the same time achieving a significant growth year as a key technology enabler in the HDD industry's transition to HAMR. So overall, an amazing achievement. I also wish to thank our investors for their ongoing support, and as always, please reach out to Claire directly if you would like to follow up with us. I look forward to updating you all on our Q1 call in early May. With that, I will conclude today's call.
Operator (participant)
Thank you. This does conclude today's conference. You may now disconnect.