INTEVAC INC (IVAC)·Q1 2024 Earnings Summary

Executive Summary

• Q1 revenue was $9.631M with gross margin 43.7%, reflecting a favorable mix of HAMR technology upgrades; GAAP EPS was $(0.06), non-GAAP EPS $(0.10) .
• Backlog rose 25% since year-end to $53.1M on new orders of $20.3M, including initial HAMR upgrade orders from a leading data storage company; cash and investments were $65.5M at quarter-end and rebounded to over $75M post quarter on receivable collections .
• Q2 guidance implies sequential revenue decline ($7.5M–$8.5M) and margin compression (34%–37%), and full-year gross margin outlook was lowered to “low 30s” (from prior “high 30s”) on mix and TRIO qualification costs; revenue outlook maintained in “low $50M” range with 2–3 TRIO systems to revenue .
• Stock reaction catalysts: confirmation of multi-customer HAMR adoption, first TRIO field shipment and timeline to revenue recognition upon successful qualification, and improvement in cash collections after resolving payment terms with a major HDD customer .

What Went Well and What Went Wrong

What Went Well

• Gross margin improved YoY to 43.7% (from 40.9%) on favorable upgrade mix; OpEx declined YoY to $8.650M; GAAP net loss narrowed to $(1.606)M vs $(3.891)M a year ago .
• New orders exceeded $20M in Q1 (bookings $20.3M), backlog increased to $53.1M, and initial HAMR upgrades were booked from multiple customers, expanding beyond the first HDD customer .
• Management resolved JDA structure and shipped the first TRIO system directly to a cover glass finisher for a leading smartphone OEM, with revenue recognition expected upon qualification: “We continue to believe the TRIO platform will be our major growth driver” .

What Went Wrong

• Revenue declined sequentially and year-over-year ($9.631M vs $12.906M in Q4 and $11.542M in Q1’23); operating loss widened sequentially to $(4.446)M .
• Q2 guide calls for lower revenue ($7.5M–$8.5M) and gross margin headwinds (34%–37%) due to underabsorption and less favorable mix, with projected GAAP EPS loss of $(0.20)–$(0.22) .
• Full-year gross margin outlook was cut to “low 30s” from prior expectations in the high-30s, driven by change in customer composition and incremental TRIO qualification costs with both cover glass finisher and OEM .

Financial Results

Quarterly Comparison (Oldest → Newest)

YoY Comparison (Q1 2023 vs Q1 2024)

KPIs and Operating Metrics

Note: Q1 revenues consisted of HDD upgrades, spares and service; TRIO revenue expected only upon successful field qualification .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are pleased to demonstrate our critical role in the HDD ecosystem with Q1 revenues approaching $10 million… Our HDD backlog of $53 million at quarter-end… supports the visibility and longevity of a multi-year HAMR investment cycle” — Nigel Hunton, CEO .
• “The first TRIO system was delivered this month to an established cover glass finisher for a leading smartphone OEM… our expectation is that this will be the first TRIO system to revenue in 2024” — Nigel Hunton, CEO .
• “We arrived at an agreement with our largest customer regarding payment terms… our cash balance exceeds $75 million” — Nigel Hunton, CEO .
• “We are projecting [Q2] revenues to be in the range of $7.5 million to $8.5 million… gross margins… 34% to 37%… [GAAP] EPS… $(0.20) to $(0.22)” — Kevin Soulsby, CFO .
• “For the full year… total revenues in the low $50 million range… TRIO revenues potentially exceeding $10 million… HDD… approaching $40 million” — Kevin Soulsby, CFO .

Q&A Highlights

• TRIO outlook and revenue timing: Management reiterated 2–3 TRIO systems in 2024 with revenue recognition upon field qualification; follow-on orders anticipated, and capacity exists to deliver additional systems via Singapore and contract manufacturing .
• HAMR upgrade durability: Management expects a similar level of HAMR upgrades to continue for the next 3–5 years, supporting a consistent base business on 200 Lean platforms .
• Cash/receivables: Payment terms with the largest HDD customer were resolved in Q1; receivables have “caught up,” with no exposure on canceled orders due to customer deposits covering inventory .
• TRIO service model: Beyond equipment revenue, management sees potential to build service and consumables revenue streams (e.g., silicon sources, maintenance cadence) as installed base grows .
• OpEx and investments: Q1 OpEx included write-offs and higher legal costs; increased investment in BD/marketing to scale TRIO, with OpEx expected to decline below $8M beyond Q2 .

Estimates Context

• Wall Street consensus via S&P Global was unavailable for IVAC in our system due to missing CIQ mapping; therefore, we could not compare Q1 results to analyst estimates or assess beat/miss vs consensus. Values from S&P Global could not be retrieved and are unavailable.

Key Takeaways for Investors

• HAMR upgrade cycle is broadening to multiple HDD customers, lifting backlog (+25% since YE) and underpinning multi-year visibility; this supports a durable base business while TRIO ramps .
• Near-term headwind: Q2 guide calls for lower revenue ($7.5M–$8.5M) and GM (34%–37%) due to underabsorption and mix; expect sequential margin compression and a deeper EPS loss of $(0.20)–$(0.22) .
• Full-year margin reset: Gross margin outlook lowered to “low 30s” (from high-30s) given customer composition and TRIO qualification costs; treat 2024 as an investment year for TRIO commercialization .
• TRIO commercialization catalyst: First field shipment in April with revenue recognition pending qualification; 2–3 systems in 2024 (> $10M) could inflect sentiment as orders convert and service/consumables model develops .
• Cash collections improved post-resolution of payment terms, with cash over $75M post-quarter; management targets YE’24 cash similar to YE’23, mitigating financing risk during TRIO ramp .
• Capacity adds (200 Lean) remain deferred; focus is on HAMR upgrades with strong margins and consistent revenue for several years, aligning with data center and cloud CapEx tailwinds .
• Without published S&P consensus in-system, trading setups should center on execution of Q2 guidance, backlog conversion, and TRIO qualification milestones; watch for additional TRIO orders and margin trajectory updates on Q2 call (beat/miss vs internal guide becomes the near-term narrative) .

Appendix: Source Summary

• Q1 2024 8-K 2.02 press release (Ex. 99.1): financials, backlog, cash, highlights .
• Q1 2024 earnings call: prepared remarks and detailed guidance; Q&A on HAMR, TRIO, cash, OpEx .
• Q4 2023 8-K 2.02 press release: sequential context, record HDD upgrades, YE cash, financials .
• Q3 2023 8-K 2.02 press release and call: upgrade cycle strength, backlog, operating metrics, FY’24 revenue expectations .