| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 94-3125814 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock ($0.001 par value) | IVAC | The Nasdaq Stock Market LLC (Nasdaq Global Select) |
| Large accelerated filer | ☐ | Accelerated filer | ||||
Non-accelerated filer | Smaller reporting company | ☒ | ||||
| Emerging growth company | ☐ |
INTEVAC, Inc.
Index to the Form 10-K
For the Fiscal Year Ended December 30, 2023
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this Annual Report on
The following information should be read in conjunction with the Consolidated Financial Statementsconsolidated financial statements and the accompanying Notes to Consolidated Financial Statements included in this report.
PART I
Item 1. | Business |
Overview
Founded in 1991, Intevac is a leader in the designleading provider of thin-film process technology and development of high-productivity, thin-film processing systems. Our production-provenmanufacturing platforms are designed for high-volume manufacturing of substrates with precise thin-film properties, such asenvironments. As a long-time supplier to the hard disk drive (“HDD”) industry, over the last 20 years we have delivered over 180 of our industry-leading 200 Lean® systems, which currently represent the majority of the world’s capacity for HDD disk media production. Today, we believe that all of the technology upgrade initiatives for next-generation media for the HDD industry, along with planned media capacity additions over the next several years, are being deployed on our 200 Lean platform. With over 30 years of leadership in designing, developing, and manufacturing high-productivity, thin-film processing systems, we also are leveraging our technology and know-how for additional applications, such as protective coatings for the advanced coatings (“ADVC”) market, formerly known as the display cover panel (“DCP”), market.
In December 2021, Intevac sold its Photonics business, which consisted of developing, manufacturing and solarselling compact, high-sensitivity digital-optical products for the capture and display of extreme low-light images. As a result of this disposition, the results of operations from the Photonics business are reported as “net income (loss) from discontinued operations, net of taxes” in the consolidated financial statements in Item 8 of this Annual Report. For more information, see Note 2 “Divestiture and Discontinued Operations” to the consolidated financial statements in Item 8 of this Annual Report.
Intevac also previously designed, developed and marketed manufacturing equipment for the photovoltaic (“PV”) markets we serve currently.
HDD Equipment Market
Intevac designs, manufactures, markets and services complex capital equipment used to deposit thin films and lubricants onto substrates to produce magnetic disks that are used in HDDs. Disk and disk drive manufacturers produce magnetic disks in a sophisticated manufacturing process involving many steps, including plating, annealing, polishing, texturing, sputtering,
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etching, stripping and lubrication. Intevac believes its systems represent approximately 65% of the installed capacity for disk sputtering worldwide. Intevac’s systems are used by manufacturers of magnetic media such as Seagate Technology and Western Digital andCorporation (including its wholly-owned subsidiary HGST, Fuji Electric and Showa Denko.
HDDs are a primary storage medium for digital data includingin enterprise nearline “cloud” applications, enterprise performance and are usedsurveillance applications, and, to a lesser extent, in products and applications such as personal computers (“PCs”), enterprise data storage, video players and video game consoles.. Intevac believes that HDD media unit shipments will grow over time, driven by continued high growth rates in digitally-stored data, by the slowing of areal density improvements, by the increase inincreased demand for nearline drives for cloud storage, an increasingcontinuing increases in the HDD tie ratio (the average number of disks per hard drive), and by new and emerging applications. The projected growth rates for digitally-stored data on HDDs exceed the rate of areal density improvements, at the same time as the tie ratio is increasing, which results in demand for magnetic disks outpacing HDD units.
In recent years HDD media units have been negatively impacted by decliningan overall decline in desktop PC units, primarily resulting from the proliferationadoption of tabletssolid state drives (“SSDs”) in desktops, as well as laptops and other mobile devices, and the transition to centralized storage. Although the HDD industry continues to expect growth in the nearline data storage market segment, the transition to centralized storage combined with the negative growth in PC shipments has resulted in lower HDD shipments in recent years. However, Intevac continues to believe that long-term demand for hard disks required for high capacity HDDs will increase, driven by growth in demand for digital storage, a decliningslowing growth rate in areal density improvements, and increased information technology spending to support the transition to cloud storage. The number of disk manufacturing systems needed to support this growth as well as future technology transitions and improvements is expected to vary from year to year depending on the factors noted above.
Intevac expects that HDD manufacturers will extend their utilization of planar perpendicular media with the introduction of new technologies such as Heat Assisted Magnetic Recording (“HAMR”) and Energy Assisted Magnetic Recording (“EAMR”). Initial volume shipments of both HAMR and EAMR-based HDDs began in 2020. Intevac believes that leading manufacturers of magnetic media that are using Intevac systems for the development ofwill continue to advance these new technologies, which Intevac expects will create a significant market opportunity for systemsIntevac to develop and install the HDD system upgrades in support of the media evolutionthat will be required by these new technologies as theytechnologies.
With the slowing of HDD media unit demand that occurred beginning in mid-2022, Intevac’s customers elected to accelerate deployment of HAMR system upgrades during this period of lower capacity utilization, and at the same time elected to spread their expected media capacity additions more ratably over a two- to four-year period. Intevac’s HDD revenues through the 2024 timeframe are more widely adopted.
Advanced Coatings Market
Intevac develops equipment to deposit optically transparent thin films onto DCPs typically found on consumer and automotive electronic products.
DCPs are typically made of tempered glass, such as soda-lime or aluminosilicate, or other materials such as sapphire, ceramicglass-ceramic and colorless polyimide. The primary function of the DCP is to provide a clear protective interface to the display it protects. In many cases, the DCP is treated with various coatings to enhance its protective performance as well as for clarity, readability and touch sensitivity.
SP coatings generally consist of hard thin films deposited onto the surface of the DCP. Their primary function is to provide enhanced protection against the incidence of scratch, but they can also provide greater breakage resistance. Intevac has developed and is currently marketing aits own SP coating known as Optical Diamond-like-Carbon (“oDLC
AR coatings enable greater light transmission though the DCP by reducing the light reflected by the surface back to the user’s eye. This allows the user to more easily read the display and reduces the required power needed to display the image
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which results in extending the battery life. A significant drawback to using AR coatings is their susceptibility to scratch. AR coatings are typically soft and must be applied to the outer surface of the DCP. TheseA significant drawback to using AR coatings generally scratch easily, and as such,is their susceptibility to scratch. As a result, smartphone manufacturers have been reluctant to implement AR coatings on their products.
AF coatings provide water and oil protection for the surface of the DCP. This coating, which preventsBy preventing fingerprints, providesAF coatings provide greater aesthetics as well as improving readability. AF coatings allow for greater visual acuity when fingerprints are not visible.and increase the readability of the display. The drawback to AF coatings is their relatively low resistance to wear. The coating is soft and usually wears off within a few months of product purchase.
In March 2022, as part of wireless chargingIntevac’s realignment effort, the Company ceased pursuing several ADVC projects and the 5G standard of wireless communication, smartphone manufacturers are significantly expanding use of DCPs on the backside of devices. This transition is essentialinstead started a focused effort to ensure that the backside cover, which previously was metallic, does not interfere with the wireless signals. NCVM coatings aredevelop a new, typemodular platform that can be configured to handle a variety of color film coating, applied for decorative purposes, to the backside DCP. When applied to the exterior, the NCVM coating providesform factors, including two-dimensional (“2D”) and three-dimensional (“3D”) shapes and both small and large surface area substrates. This platform was introduced as TRIO™ in March 2022.
TRIO is a pleasing aesthetic and gives manufacturers flexibility with color customization. Decorative NCVM coatings haveflexible, horizontal deposition tool platform that evolved from single color to multiple colors with complex transitions. Intevac has developed a proprietary technology that enables the creationIntevac’s decades of uniquely patterned NCVM coatings for the phone back cover. Several leading handset manufacturers are currently evaluating this technology for potential incorporation into their upcoming phone models.
In December 2022, the Company announced it had entered a PV cell) isjoint development agreement with Corning Inc. (“Corning”), a solid state device that converts the energymajor provider of sunlight directly into electricity. Assemblies of cells are used to make solar modules, also known as solar panels. Solar panels have broad-based end market applicationsglass and glass ceramic materials, for utility-scale solar farms; integrated building PV arrays for commercial, retail, and offices; residential rooftop; and for portable devices.
TFE Products
Intevac’s TFE product portfolio addressing each of thesethe HDD and ADVC markets is based around common core technologies and competencies. Intevac believes its TFE product portfolio can be extended to support adjacent markets. Based on its history and market and technology leadership in the HDD industry, Intevac offers superior high-productivity vacuum handling of small substrates at the lowest cost of ownership. Lowest cost of ownership includes various advantages such as high target utilization, high throughput, small footprint, double-sided coating, and reduced materials costs.
The following table presents a representative list of theour TFE products that we offered during fiscal 2020 and fiscal 2019.
TFE Products | Applications and Features | |
HDD Equipment Market | ||
200 Lean ® Disk Sputtering System | • Uses • Deposits magnetic films, non-magnetic films and protective carbon-based overcoats.• Provides high-throughput for small-substrate processing. • Over | |
Upgrades, spares, consumables and services (non-systems business) | • Upgrades to the installed base to support the continued growth in areal density or reduce the manufacturing cost per disk. | |
Advanced Coatings Market | ||
TRIO™ | • • precise deposition of thin film layering to manage film stress. • Uses patented systems and designs. • Modular design enables expandability. • | |
Can operate at low vacuum pressure and temperature, allowing coating of a variety of substrate types. • | ||
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Customer Concentration
Historically, a significant portion of Intevac’s revenue in any particular period has been attributable to sales to a limited number of customers.
The following customerscustomer accounted for at least 10 percent of Intevac’s consolidated net revenues in fiscal 20202023 and 2019.
2020 | 2019 | |||||||
Seagate Technology | 42 | % | 49 | % | ||||
U.S. Government | 29 | % | 20 | % | ||||
Elbit Systems of America | 12 | % | * | |||||
Jolywood (Hongkong) Industrial Holdings Co., Limited | * | 14 | % | |||||
| 2023 | 2022 | |||||||
Seagate Technology | 92 | % | 80 | % | ||||
Our reliance on sales to relatively few customers increased with the disposition of our Photonics business in December 2021, and we expect that sales of Intevac’sour products to relatively few customers will continue to account for a high percentage of Intevac’sour revenues in the foreseeable future.
Foreign sales accounted for 47%91% of revenue in fiscal 20202023 and 67%87% of revenue in fiscal 2019.2022. The majority of Intevac’s foreign sales are to companies in Asia or to U.S. companies for use in their Asian manufacturing or development operations. Intevac anticipates that foreign sales will continue to be a significant portion of Intevac’s TFE revenues. Intevac’s disk sputtering equipment customers include magnetic disk manufacturers, such as Fuji Electric and Showa Denko, and vertically integrated HDD manufacturers, such as Seagate Technology and Western Digital and HGST.Corporation (including its wholly owned subsidiary HGST). Intevac’s PV solar equipment customers include several major solar cell manufacturers. Intevac’s DCP equipmentADVC customers include DCP manufacturers, such as Truly Opto-electronics.Opto-electronics, and providers of glass and glass ceramic materials, such as Corning. Intevac’s customers’ manufacturing facilities are primarily located in California, China, Taiwan, Japan, Malaysia, Portugal and Singapore.
Competition
The principal competitive factors affecting the markets for Intevac TFEIntevac’s products include price, product performance and functionality, ease of integration, customer support and service, reputation and reliability. Intevac has one major competitor, Canon Anelva, in the hard disk driveHDD equipment market and has historically experienced intense worldwide competition for magnetic disk sputtering equipment. Intevac primarily faces competition from large established global competitors in the PV equipment market including Centrotherm Photovoltaics, Jusung, Kingstone, Von Ardenne and Belight Technology. Intevac faces competition in the DCPADVC market from optical coating equipment manufacturers such as Optorun and Shincron on drum coating systems and Hongda,Von Ardenne on inline systems, as well as from glass manufacturers that may develop scratch resistant glass, touchscreen manufacturers that may adopt harder substrate materials, orand other equipment companies, chemical companies or the display cover plateDCP manufacturers themselves, thatwhich may offer competing protective coatings including DLC, NCVM and AR. Intevac’s competitors for PVD processes in the
Marketing and Sales
Sales are made primarily through Intevac’s direct sales force. Intevac also sells its products through distributors in Japan and China. The selling process for Intevac’s TFE products is multi-level and lengthy, involving individuals from marketing, engineering, operations, customer service and senior management.
Installing and integrating new equipment requires a substantial investment by a customer. Sales of Intevac’s systems depend, in significant part, upon the decision of a prospective customer to replace obsolete equipment or to increase manufacturing capacity by upgrading or expanding existing manufacturing facilities or by constructing new manufacturing facilities, all of which typically involve a significant capital commitment. Intevac’s systems have a lengthy sales cycle, during which Intevac may expend substantial funds and management time and effort with no assurance that a sale will result.
The production of large complex systems requires Intevac to make significant investments in inventory both to fulfill customer orders and to maintain adequate supplies of spare parts to service previously shipped systems. Intevac maintains inventories of spare parts in the United States, Singapore, Malaysia and China to support its TFE customers. Intevac often requires its TFE customers to pay for systems in three installments, with a portion of the system price billed upon receipt of an order, a portion of the price billed upon shipment, and the balance of the price and any sales tax due upon completion of installation and acceptance of the system at the customer’s factory.
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Intevac provides process and applications support, customer training, installation,
Warranties for Intevac’s TFE products typically range between 12 and 24 months from customer acceptance. During the warranty period any necessary
Research and Development and Intellectual Property
Intevac’s long-term growth strategy requires continued development of new products. Intevac works closely with Intevac’sits customers to design products that meet their planned technical and production requirements. Product development and engineering organizations are located primarily in the United States and Singapore.
Intevac’s competitive position significantly depends on Intevac’sits research, development, engineering, manufacturing and marketing capabilities, and not just on Intevac’s patent position. However, protection of Intevac’s technological assets by obtaining and enforcing intellectual property rights, including patents, is important. Therefore, Intevac’s practice is to file patent applications in the United States and other countries for inventions that Intevac considers important. Although Intevac does not consider Intevac’sits business to be materially dependent upon any one patent, the rights of Intevac and the products made and sold under Intevac’s patents along with other intellectual property, including trademarks,
Intevac enters into patent and technology licensing agreements with other companies when management determines that it is in Intevac’s best interest to do so. Intevac pays royalties under existing patent license agreements for use of certain patented technologies in several of Intevac’s products.
In the normal course of business, Intevac periodically receives and makes inquiries regarding possible patent infringements. In dealing with such inquiries, it may be necessary or useful for usIntevac to obtain or grant licenses or other rights. However, there can be no assurance that such licenses or rights will be available to usIntevac on commercially reasonable terms, or at all. If Intevac is not able to resolve or settle claims, obtain necessary licenses and/or successfully prosecute or defend Intevac’sits position, Intevac’s business, financial condition and results of operations could be materially and adversely affected.
Manufacturing
Intevac manufactures its TFE products at its facilities in California and Singapore. Intevac’s TFE manufacturing operations include electromechanical assembly, vacuum processing, fabrication of sputter sources, and system assembly, alignment and testing.
Government Regulations
We are subject to various government regulations in the United States as well as various international locations where we operate. These regulations cover several diverse areas including environmental compliance, import and export controls, economic sanctions, data and privacy protection, transfer pricing rules, anti-bribery, anti-trafficking and anti-trust provisions. Our policies mandate compliance with applicable laws and regulations administered by various state, federal and international agencies. We instituted various training programs to educate our employees on compliance with governmental regulations, as well as applied legal and ethical practices in our everyday work. We are subject to international, federal, state, and local legislation, regulations, and other requirements relating to the use, storage, discharge, handling, emission, generation, manufacture, treatment and disposal of toxic or otherwise hazardous substances, chemicals, materials or waste; recycling and
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United States-China relations) have had, and we believe may continue to have, a material impact on our business, including our ability to sell products and to manufacture or source components. Our business is affected by numerous laws and regulations relating to the award, administration and performance of U.S. Government contracts. In addition, many federal and state laws materially affect our operations. These laws relate to ethics, labor, tax, and employment matters. As any employer is, we are subject to federal and state statutes and regulations governing their standards of business conduct with the government, including that government contracts typically contain provisions permitting government clients to terminate contracts without cause with limited notice or compensation. The development of additional statutes and regulations and interpretation of existing statutes and regulations with respect to our industry can be expected to evolve over time. As with any commercial enterprise, we cannot predict with certainty the nature or direction of the development of federal statutes and regulations that will affect itsour business operations.
Human Capital Resources
General Information About Our Human Capital Resources
As of January 2, 2021,December 30, 2023, we had 269128 employees, including 32 contract employees. Approximately 71%58% of our employees are located in the United States and 29%42% are located in Asia. Of our total workforce, 8634 employees are involved in research and development; 11562 employees are involved in operations, manufacturing, service and quality assurance; and 6832 employees are involved in sales, order administration, marketing, finance, information technology, general management and other administrative functions.
Core Principles
Our core values are integral to our CompanyIntevac’s culture. We pride ourselves in providing a safe and positive work environment where mutual respect and ethical conduct is a core value. We believe in continuous learning and professional development and provide employees with opportunities to grow.
Community Involvement
Our employees are committed to making a difference in the community by actively volunteering and fundraising for many charities, including the American Cancer Society, Second Harvest, HumanHumane Society, Make a Wish,Make-a-Wish Foundation, and Salvation Army.
Health and Safety
The health and safety of our employees is of utmost importance to us. We conduct regular self-assessments and audits to ensure compliance with our health and safety guidelines and regulatory requirements. Our ultimate goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety programs. We provide protective gear (e.g., eye protection, masks and gloves) as required by applicable standards and as appropriate given employee job duties. Annual participation in trainings related to ethics, environment, health and safety, and emergency responses are at or near 100%.
Talent Management
We regularly monitor and review with management human capital metrics that are key to our business, including hiring statistics, promotion rates, turnover rates, career growth and development, and diversity and inclusion.
Hiring Practices
It is our policy to hire and promote the best-qualified person for the job and comply fully with all domestic, foreign and local laws relating to discrimination in the workplace. Our good faith outreach efforts are designed to ensure that there are no barriers for members of any group and to encourage interest by all qualified persons. We believe our actions enhance diversity, including recruiting at venues representing women, minorities and U.S. military veterans.
Turnover
We continually monitor employee turnover rates, both regionally and as a whole, as our success depends upon retaining our highly trained engineering, manufacturing and operating personnel. The average tenure of our employees is 9.89.5 years in the United States and 9.510.9 years in Asia.
Diversity and Inclusion
Recognizing and respecting our global presence, we strive to maintain a diverse and inclusive workforce everywhere we operate. We believe that a diverse and motivated workforce is vital to our success. We strive to advance diversity and inclusion
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through various talent acquisition programs to attract, retain and develop a diverse, highly-skilled work force. We conduct employee surveys to provide
Management Team
We believe our management team has the experience necessary to effectively execute our strategy and advance our product and technology leadership. Our chief executive officer and business unit leaders average approximatelyhas more than 25 years of industry experience. They areHe is supported by an experienced and talented professional team.
Training and Talent Development
We are committed to the continued development of our employees. Strategic talent reviews and succession planning occur on a planned cadence annually – globally and across all business areas. We are committed to identifying and developing the talents of our next generation leaders. We have a robust talent and succession planning process and have established specialized programs to support the development of our talent pipeline for critical roles in management, engineering, and operations. We also provide technical, professional and leadership training to our employees. We recognize and support the growth and development of our employees and offer opportunities to participate in internal as well as external learning opportunities.
Compensation and Benefits
We strive to offer employees regionally competitive compensation and benefits that are aligned to our values. All employees receive a base salary, incentive compensation and welfare benefits. Depending on the region, benefits may include medical, dental and vision coverage, short and long-term disability income protection, flexible spending plans (health, dependent and limited flexible spending) and basic and supplemental life insurance, accidental death and dismemberment insurance and retirement savings plan. Intevac pays the majority or all of the costs for these benefits.
We have various employee incentive plans. Our profit-sharing plan provides for the distribution of a percentage of
To foster a stronger sense of ownership and align the interests of employees with our stockholders we grant equity-based awards, including restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) to eligible employees. We also have an employee stock purchase plan, which provides employees with the opportunity to purchase Intevac common stock at a discount through payroll deductions. See Note 34 to the consolidated financial statements in Item 8 of this Annual Report for a description of these plans.
Oversight and Management
In accordance with its charter, our CompensationHuman Capital Committee is responsible for periodically reviewingreviews our employee programs and initiatives, including healthcare and other benefits, as well as our management development and succession planning practices and strategies.
Executive Officers
Certain information about our executive officers and other key officers as of February 17, 202115, 2024 is listed below:
Name | Age | Position | ||||||
Executive Officers: | ||||||||
Nigel D. Hunton | President and Chief Executive Officer | |||||||
Kevin Soulsby | Interim Chief Financial Officer, Secretary and Treasurer | |||||||
John Dickinson | 56 | Vice President of Operations | ||||||
Other Key Officers: | ||||||||
Samuel Harkness | 58 | Vice President of Product Development and | ||||||
Eva Valencia | Vice President | |||||||
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Mr.
Mr.
Mr. Dickinson joined Intevac as Vice President of Operations in August 2022. Mr. Dickinson previously served as Director, Mechanical Engineer within the ICAPS group (encompassing chips for IoT, communications, automotive, power, and sensors) of Applied Materials, Inc. from April 2021 to August 2022. From January 2018 to April 2021, Mr. Dickinson served as Managing Director of the Livermore Business Unit of Ferrotec USA. From 2012 until April 2018, Mr. Dickinson served as Applications Engineering Director, Distinguished Member of the Technical Staff at Applied Materials, Inc. From 1995 to 2012, Mr. Dickinson held various management and engineering roles at the Edwards Group. Mr. Dickinson holds a MS in Mechanical Engineering and Materials from the University of London.
Dr. Harkness has served as Vice President of Product Development and Technology since May 2022. Dr. Harkness re-joined Intevac in October 2018 as a Senior Member of the Technical Staff and accepted increasing responsible leadership positions to include his current role. From 2014 to 2018, Dr. Harkness served as Founder and President of HIA, Inc., a magnetron development company that was acquired by Intevac in August 2022. In 2013 to 2014, Dr. Harkness was a Technologist for Veeco Instruments, a global capital equipment company. From 2012 to 2013, Dr. Harkness was Device Physicist for Plextronics Inc., a start-up venture in OLED solution processing. From 1998 to 2009, Dr. Harkness held various technical leadership roles at Seagate Technology in our TFE Products Divisionthe component development organization for hard disk drive products. From 2010 to 2012 and our former night-vision business. Mr. Justynfrom 1996 to 1998, Dr. Harkness held various management and engineering roles at Intevac. Dr. Harkness holds a Ph.D. and a BS in chemicalmaterial science and engineering from the University of California, Santa Barbara.
Ms. Valencia joined Intevac in January 2014 and currently serves as Executive Vice President of Sales in November 2022. From August 2021 to November 2022, Ms. Valencia served as Senior Director, Semiconductor Sales at MKS Corporation, a provider of semiconductor manufacturing, advanced electronics and General Manager, TFE. Priorspecialty industrial application products. From July 2019 to joining Intevac, Mr. Cho was President, Chief Executive Officer and
Available Information
Intevac’s website is
Trademarks
Intevac’s trademarks include the following: “200 Lean
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Item 1A. | Risk Factors |
We face a variety of risks that may affect Intevac’sour business, financial condition or results of operations, and many of those risks are driven by factors that we cannot control or predict. Investors should be carefully considered in evaluatingconsider the Companyrisks described below and its business, in addition toall of the other information presented elsewhereset forth in this report.
Risks Related to Our Business
The industries we serve are cyclical, volatile and unpredictable.
A significant portion of our revenue is derived from the sale of equipment used to manufacture commodity technology products such as disk drives PV solar cells and cell phones. This subjects us to business cycles, the timing, length and volatility of which can be difficult to predict. When demand for commodity technology products exceeds production capacity, then demand for new capital equipment such as ours tends to be amplified. Conversely, when supply of commodity technology products exceeds demand, then demand for new capital equipment such as ours tends to be depressed. We cannot predict with any certainty when these cycles will begin or end. OurFor example, our sales of systems for magnetic disk production increased in 2016 as a customer began upgrading the technology level of its manufacturing capacity. Sales of systems and upgrades for magnetic disk production in 2017 and 2018 were higher than in 2016 as this customer’s technology upgrade continued. SalesHowever, sales of systems and upgrades for magnetic disk production in each of 2019, 2020, 2021, 2022 and 2023 were slightly down from the levels in 2018 as this customer took delivery of fourfewer or no (in the case of 2021 and 2022) systems. Sales of systems and upgrades for magnetic disk production in 2020 were down from the levels in 2019 asIn 2023, this customer took deliverycancelled orders for ten 200 Lean HDD systems due to the customer postponing previously planned media capacity additions, and we recorded a backlog reduction of only two systems. Intevac expects$66.0 million. We expect sales of systems and upgrades for magnetic disk production in 20212024 will be at levels lower than the levels in 2020.
Our equipment represents only a portion of the capital expenditure that our customers incur when they upgrade or add production capacity. Accordingly, our customers generally commit to making large capital expenditures far in excess of the cost of our systems alone when they decide to purchase our systems. The magnitude of these capital expenditures requires our customers to have access to large amounts of capital. Our customers generally reduce their level of capital investment during downturns in the overall economy or during a downturn in their industries.
We must effectively manage our resources and production capacity to meet rapidly changing demand. Our business experiences rapid growth and contraction, which stresses our infrastructure, internal systems and managerial resources. During periods of increasing demand for our products, we must have sufficient manufacturing capacity and inventory to meet customer demand; attract, retain and motivate a sufficient number of qualified individuals; and effectively manage our supply chain. During periods of decreasing demand for our products, we must be able to align our cost structure with prevailing market conditions; motivate and retain key employeesemployees; and effectively manage our supply chain.
We are exposed to risks associated with a highly concentrated customer base.
Historically, a significant portion of the
Sales of our equipment are primarily dependent on our customers’ upgrade and capacity expansion plans and whether our customers select our equipment.
We have no control over our customers’ upgrade and capacity expansion plans, and we cannot be sure they will select, or continue to select, our equipment when they upgrade or expand their capacity. The sales cycle for our equipment systems can be
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a year or longer, involving individuals from many different areas of Intevac and numerous product presentations and demonstrations for our prospective customers. Our sales process also commonly includes production of samples and customization of our products. We do not typically enter into long-term contracts with our customers, and until an order is actually submitted by a customer there is no binding commitment to purchase our systems. In some cases, orders are also subject to customer acceptance or other criteria even in the case of a binding agreement.
As of December 30, 2023, our total backlog was $42.4 million, which was primarily attributable to two customers. Our backlog includes orders under contracts that can extend for several years. Our backlog can be significantly affected by the timing of large orders. We may not realize all of the revenue included in our total backlog in the future. For example, in fiscal 2023, we removed $66.0 million from backlog upon receiving notices from a customer of the cancellation of orders for ten 200 Lean HDD systems due to the customer postponing previously planned media capacity additions. There can also be no assurance that our backlog will result in revenue in any particular period because the actual receipt, timing and amount of revenue under contracts included in backlog are subject to various contingencies, many of which are beyond our control. If our customers terminate, reduce or defer orders, we may be protected from certain costs and losses, but our sales will nevertheless be adversely affected, and we may not generate the revenue we expect.
Sales of new manufacturing systems are also dependent on obsolescence and replacement of the installed base of our customers’ existing equipment with newer, more capable equipment. If upgrades are developed that extend the useful life of the installed base of systems, then we tend to sell more upgrade products and fewer new systems, which can significantly reduce total revenue.
Our 200 Lean HDD customers also experience competition from companies that produce alternative storage technologies like flash memory, which offer smaller size, lower power consumption and more rugged designs. These storage technologies are being used increasingly in enterprise applications and smaller form factors such as tablets, smart-phones, ultra-books, and notebook PCs instead of hard disk drives. Tablet computing devices and smart-phones have never contained, nor are they likely in the future to contain, a disk drive. Products using alternative technologies, such as flash memory, optical storage and other storage technologies are becoming increasingly common and could become a significant source of competition to particular applications of the products of our 200 Lean HDD customers, which could adversely affect our results of operations. If
Our results of operations could be materially harmed if we are unable to long sales cycles because many of itsaccurately forecast demand for our products and manage product inventory in an effective and efficient manner.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our suppliers before orders are placed by our customers. Factors that could affect our ability to accurately forecast demand for our products include: (1) an increase or decrease in customer demand for our products; (2) a failure to accurately forecast consumer acceptance for our new products such as the TRIO platform; (3) product introductions by competitors; (4) unanticipated changes in general market conditions or other factors (for example, because of effects on inventory supply and consumer demand caused by high inflation rates or other adverse macroeconomic conditions); (5) the uncertainties and logistical challenges that accompany operations on a global scale; and (6) terrorism or acts of war, or the threat thereof, political or labor instability or unrest, or public health crises..
If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of product to deliver to our military imagingcustomers. Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, and the sale of excess inventory at discounted prices, which could harm our gross margin. Conversely, if we underestimate the demand for our products, often mustwe may not be designed intoable to produce products to meet our customer requirements, which could result in delays in the customers’ endshipment of our products, negatively impact our ability to recognize revenue, generate lost sales, and cause damage to our reputation and relationships with our customers. Challenges in forecasting demand can also make it difficult to estimate future results of operations and financial condition from period to period and meet investor expectations. A failure to accurately predict the level of demand for our products or manage product inventory in an effective and efficient manner could adversely impact our results of operations and cause us not to achieve our expected financial results.
We are dependent on certain suppliers for parts used in our products.
We are a manufacturing business. Purchased parts constitute the largest component of our product cost. Our ability to manufacture depends on the timely delivery of parts, components and subassemblies from suppliers. We obtain some of the key
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components and subassemblies used in our products from a single supplier or a limited group of suppliers. If any of our suppliers fail to deliver quality parts on a timely basis, we may experience delays in manufacturing, which could result in delayed product deliveries, increased costs to expedite deliveries or develop alternative suppliers, or require redesign of our products to accommodate alternative suppliers. Some of our suppliers are often complex
Supply chain and shipping disruptions could result in shipping delays, and increased product costs which may have a material adverse effect on our business, financial condition and results of operations.
Supply chain disruptions have impacted, and may continue to impact, us and our sales are contingentsuppliers. These disruptions have resulted in longer lead times and increased product costs and shipping expenses. While we have taken steps to minimize the impact of these increased costs by working closely with our suppliers and customers, prolonged supply chain disruptions could interrupt product manufacturing, increase lead times, increase product costs and continue to increase shipping costs, all of which could have a material adverse effect on our customers successfully integrating our product into their product, completing developmentbusiness, financial condition and results of their product and then obtaining production orders for their product from the U.S. government or its allies.
We operate in an intensely competitive marketplace, and our competitors have greater resources than we do.
In the market for our disk sputtering systems, we experience competition primarily from Canon Anelva, which has sold a substantial number of systems worldwide. In the PV equipment market, Intevac faces competition from large established competitors including Centrotherm Photovoltaics, Jusung, Kingstone, Von Ardenne and Belight Technology. In the market for our military imaging products we experience competition from companies such as Elbit Systems, L3Harris Technologies and Photonis. Some of our competitors have substantially greater financial, technical, marketing, manufacturing and other resources than we do, especially in the DCP and PV equipment markets.ADVC market. Our competitors may develop enhancements to, or future generations of, competitive products that offer superior price or performance features, and new competitors may enter our markets and develop such enhanced products. Moreover, competition for our customers is intense, and our competitors have historically offered substantial pricing concessions and incentives to attract our customers or retain their existing customers.
Our operating results fluctuate significantly from quarter to quarter, which can lead to volatility in the price of our common stock.
Our quarterly revenues and common stock price have fluctuated significantly. We anticipate that our revenues, operating margins and common stock price will continue to fluctuate for a variety of reasons, including: (1) changes in the demand, due to seasonality, cyclicality and other factors, in the markets for computer systems, storage subsystems and consumer electronics containing disks, as well as cell phones and PV solar cells our customers produce with our systems;phones; (2) delays or problems in the introduction and acceptance of our new products, or delivery of existing products; (3) timing of orders, acceptance of new systems by our customers or cancellation or delay of those orders; (4) new products, services or technological innovations by our competitors or us; (5) changes in our manufacturing costs and operating expense; (6) changes in general economic, political, stock market and industry conditions; and (7) any failure of our operating results to meet the expectations of investment research analysts or investors.
Any of these, or other factors, could lead to volatility and/or a rapid change in the trading price of our common shares.stock. In the past, securities class action litigation has been instituted against companies following periods of volatility in the market price of their securities. Any such litigation, if instituted against Intevac, could result in substantial costs and diversion of management time and attention.
Our success depends on international sales and the management of global operations.
A significant portion of our revenues have comerevenue comes from regions outside the United States.States, and we expect that international sales will continue to account for a significant portion of our total revenue in future years. Most of our international sales are to customers in Asia, which includes products shipped to overseas operations of U.S. companies. We currently have
Managing our global operations presents challenges including, but not limited to, those arising from: (1) global trade issues; (2) variations in protection of intellectual property and other legal rights in different countries; (3) concerns of U.S. governmental agencies regarding possible national commercial and/or security issues posed by growing manufacturing businessbusinesses in Asia; (4) fluctuation of interest rates, raw material costs, labor and operating costs, and exchange rates; (5) variations in the ability to develop relationships with suppliers and other local businesses; (6) changes in the laws and regulations of the United States, including export restrictions, and other countries, as well as their interpretation and application; (7) the need to provide technical and sparesspare parts support in different locations; (8) political and economic instability; (9) cultural differences;
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(10) varying government incentives to promote development; (11) shipping costs and delays; (12) adverse conditions in capital and credit markets; (13) variations in tariffs, quotas, tax codes and other market barriers; and (14) barriers to movement of cash.
We must regularly assess the size, capability and location of our global infrastructure and make appropriate changes to address these issues.
Our success is dependent on recruiting and retaining a highly talented work force.
Our employees are vital to our success, and our key management, engineering and other employees are difficult to replace. We do not maintain key person life insurance on any of our employees. The expansion of high technology companies worldwide has increased demand and competition for qualified personnel and has made companies increasingly protective of prior employees. It may be difficult for us to locate employees who are not subject to
The majority of our U.S. operations are located in California where the cost of living and of recruiting employees is high. Our operating results depend, in large part, upon our ability to retain and attract qualified management, engineering, marketing, manufacturing, customer support, sales and administrative personnel. Furthermore, we compete with industries such as the hard disk drive, semiconductor, and solar industries for skilled employees. Failure to retain existing key personnel, or to attract, assimilate or retain additional highly qualified employees to meet our needs in the future, could have a material and adverse effect on our business, financial condition and results of operations.
Risks Related to Our Intellectual Property
Our growth depends on development of technically advanced new products and processes.
We have invested heavily, and continue to invest, in the development of new products, such as our 200 Lean HDD and other PVD systems, our coating systemsTRIO platform for DCP, our solar systems for PV applications, our digital night-vision products and our
Rapid technological change in our served markets requires us to rapidly develop new technically advanced products. Our future success depends in part on our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products have reliability or quality problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance and payment for new products and additional service and warranty expenses.
Our business depends on the integrity of our intellectual property rights.
The success of our business depends upon the integrity of our intellectual property rights, and we cannot ensure that: (1) any of our pending or future patent applications will be allowed or that any of the allowed applications will be issued as patents or will issue with claims of the scope we sought; (2) any of our patents will not be invalidated, deemed unenforceable, circumvented or challenged; (3) the rights granted under our patents will provide competitive advantages to us; (4) other parties will not develop similar products, duplicate our products or design around our patents; or (5) our patent rights, intellectual property laws or our agreements will adequately protect our intellectual property or competitive position.
From time to time, we have received claims that we are infringing third parties’ intellectual property rights or seeking to invalidate our rights. We cannot ensure that third parties will not in the future claim that we have infringed current or future
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patents, trademarks or other proprietary rights relating to our products. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us.
Risks Related to Government Regulation
We are subject to risks of
We are subject to a variety of governmental regulations relating to the use, storage, discharge, handling, emission, generation, manufacture, treatment and disposal of toxic or otherwise hazardous substances, chemicals, materials or waste. If we fail to comply with current or future regulations, such failure could result in suspension of our operations, alteration of our manufacturing process, remediation costs or substantial civil penalties or criminal fines against us or our officers, directors or employees. Additionally, these regulations could require us to acquire expensive remediation or abatement equipment and incur substantial expenses to comply with them.
In addition, climate change legislation is a significant topic of recent discussion and has generated and may continue to generate federal, international or other regulatory responses in the near future. If we or our suppliers, customers or partners fail to timely comply with applicable legislation, certain customers may refuse to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, or incur legal liability and reputational damage, which could harm our business, financial condition and results of operations.
General Risk Factors
Global economic conditions may harm our industry, business and results of operations.
We operate globally and as a result our business, revenue and profitability are impacted by global macroeconomic conditions. The success of our activities is affected by general economic and market conditions, including, among others, inflation, interest rates, tax rates, economic uncertainty, political instability, changes in laws, and trade barriers and sanctions. Inflation and government efforts to combat inflation, such as raising the benchmark interest rate, have increased and could continue to increase market volatility and have an adverse effect on the financial market and global economy. Volatility and adverse conditions in the capital and credit markets have negatively affected levels of business and consumer spending, heightening concerns about the likelihood of a global recession and potential default of various national bonds and debt backed by individual countries. Such developments, as well as the politics impacting these, could adversely affect our financial results. Uncertainty about worldwide economic conditions poses a risk as businesses may further reduce or postpone spending in response to reduced budgets, tight credit, negative financial news and declines in income or asset values, which could adversely affect our business, financial condition and results of operations. Geopolitical destabilization could continue to impact global currency exchange rates, commodity prices, trade and movement of resources, which may adversely affect the ability of our customers and potential customers to incur the capital expenditures necessary to purchase our products and services.
Our business could be negatively impacted by cyber and other security threats or disruptions.
We face various cyber and other security threats, including espionage and attempts to gain unauthorized access to sensitive information and networks. Although we utilize various procedures and controls to monitor and mitigate the risk of these threats, there can be no assurance that these procedures and controls will be sufficient. These threats could lead to losses of sensitive information or capabilities; financial liabilities and damage to our reputation. If we are unable to maintain compliance with security standards applicable to defense contractors, we could lose business or suffer reputational harm.
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Changes to our effective tax rate affect our results of operations.
As a global company, we are subject to taxation in the United States, Singapore and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future effective tax rate could be affected by: (1) changes in tax laws; (2) the allocation of earnings to countries with differing tax rates; (3) changes in worldwide projected annual earnings in current and future years: (4) accounting pronouncements; or (5) changes in the valuation of our deferred tax
Difficulties in integrating past or future acquisitions or implementing strategic divestitures could adversely affect our business.
We have completed a number of acquisitions and dispositions during our operating history. We have spent and may continue to spend significant resources identifying and pursuing future acquisition opportunities. Acquisitions involve numerous risks including: (1) difficulties in integrating the operations, technologies and products of the acquired companies; (2) the diversion of our management’s attention from other business concerns; and (3) the potential loss of key employees of the acquired companies. Failure to achieve the anticipated benefits of the prior and any future acquisitions or to successfully integrate the operations of the companies we acquire could have a material and adverse effect on our business, financial condition and results of operations. Any future acquisitions could also result in potentially dilutive issuance of equity securities, acquisition or divestiture-related write-offs or the assumption of debt and contingent liabilities. In addition, we have made and will continue to consider making strategic divestitures.divestitures, such as the disposition of our Photonics business. With any divestiture, there are risks that future operating results could be unfavorably impacted if targeted objectives, such as cost savings or earnout payments associated with the financial performance of the divested business, are not achieved or if other business disruptions occur as a result of the divestiture or activities related to the divestiture.
We could be involved in litigation.
From time to time, we may be involved in litigation of various types, including litigation alleging infringement of intellectual property rights and other claims and customer disputes. For example, in 2022 we settled an action against us under the Private Attorneys General Act (“PAGA”) for $1.0 million. Litigation is expensive, subjects us to the risk of significant damages, and requires significant management time and attention, and could have a material and adverse effect on our business, financial condition and results of operations.
Business interruptions could adversely affect our operations.
Our operations are vulnerable to interruption by fire, earthquake, floods or other natural disaster, quarantines or other disruptions associated with infectious diseases, national catastrophe, terrorist activities, war, disruptions in our computing and communications infrastructure due to power loss, telecommunications failure, human error, physical or electronic security breaches and computer viruses, and other events beyond our control. We do not have a detailed disaster recovery plan. Despite our implementation of network security measures, our tools and servers may be vulnerable to computer viruses,
We could be negatively affected as a result of a proxy contest and the actions of activist stockholders.
A proxy contest with respect to election of our directors, or other activist stockholder activities, could adversely affect our business because: (1) responding to a proxy contest and other actions by activist stockholders can be costly and
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time-consuming, disruptive to our operations and divert the attention of management and our employees; (2) perceived uncertainties as to our future direction caused by activist activities may result in the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and business partners; and (3) if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans.
We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our management must perform evaluations of our internal control over financial reporting. Beginning in 2004, our Form
Item 1B. | Unresolved Staff Comments |
None.
| Item 1C. | Cybersecurity |
Risk Management and Strategy
We have established processes for assessing, identifying, and managing material risk from cybersecurity threats, and have integrated these processes into our overall risk management systems and processes. To prevent, detect and respond to information security threats, we maintain a cyber risk management program that employs a combination of Zero Trust security model and Cyber Security Framework (“CSF”) in accordance with the National Institute of Standards and Technology (“NIST”) security framework. Zero Trust is a security framework requiring all users to be authenticated, authorized, and continuously validated for security configuration before being granted access to applications and data. CSF is a set of voluntary guidelines that help organizations assess and improve their cybersecurity posture by implementing processes for identifying and mitigating risk, and detecting, responding to and recovering from cyberattacks.
We conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats. These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks. Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards.
We engage a third-party outsourced security operations center in connection with our risk assessment processes. This service provider performs daily monitoring and testing of our safeguards for intrusion and vulnerabilities. We require this third-party service provider to certify that it has the ability to implement and maintain appropriate security measures, consistent with all applicable laws, to implement and maintain reasonable security measures in connection with their work with us, and to promptly report any suspected breach of its security measures that may affect Intevac.
Our Security Awareness Program includes training that reinforces our information technology risk and security management policies, standards and practices, as well as the expectation that employees comply with these policies. The Security Awareness Program engages personnel through training on how to identify potential cybersecurity risks and protect the Company’s resources and information. This training is mandatory for all employees globally on a periodic basis, and it is supplemented by Company-wide testing initiatives, including periodic phishing tests. The Company provides specialized security training for certain employee roles such as application developers. Training includes information about confidentiality and security, as well as responding to unauthorized access to or use of information.
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Governance
One of the key functions of our Board of Directors is informed oversight of our risk management processes, including risks from cybersecurity threats. Our Board of Directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face. Our Board of Directors administers its cybersecurity risk oversight function directly as a whole, as well as through the Audit Committee of the Board of Directors (the “Audit Committee”). The Audit Committee has primary responsibility for oversight of information security risks, including fraud, vendor, data protection and privacy, business continuity and resilience, and cybersecurity risks, and provides regular updates to the Board of Directors on such matters. The Audit Committee receives regular reports from our Director of Information Technology on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen the Company’s information security systems, assessments of the Company’s security program and the emerging threat landscape. Information security risk is a significant oversight focus area for the Audit Committee, as well as the entire Board of Directors. Over the course of fiscal year 2023, the Audit Committee received four separate cybersecurity briefings from our Director of Information Technology.
Our Director of Information Technology and our management committee on cybersecurity, which includes our CEO, interim CFO, and VP of Operations, are primarily responsible for assessing and managing our material risks from cybersecurity threats. Our Director of Information Technology, who leads a team responsible for enterprise-wide cybersecurity strategy, policy, standards, architecture and processes, has extensive experience and background in information technology, platform software, cloud computing, cybersecurity, enterprise strategy, risk management, and large complex system development, delivery, and deployment. Additionally, our Director of Information Technology chairs our Cybersecurity Incident Response Team, which is responsible for prevention, identification, containment, eradication and remediation of cybersecurity incidents. While we have not experienced a material information security (cybersecurity) incident, we maintain an information security (cybersecurity) risk insurance policy as a matter of good practice.
| Item 2. | Properties |
Intevac maintains its corporate headquarters in Santa Clara, California. The location, approximate size and type of facility of the principal properties are listed below. Intevac leases all of its properties and does not own any real estate.
Location | Square Footage | Principal Use | ||||||
Santa Clara, California | 169,583 | (a),(b) | Corporate Headquarters; Marketing, Manufacturing, Engineering and Customer Support | |||||
Singapore | 31,947 | |||||||
Malaysia | 1,291 | |||||||
Shenzhen, China | 2,568 | |||||||
| (a) | In connection with the disposition of our Photonics business, we entered into a lease assignment agreement that assigns the lease obligation for two buildings in our California campus consisting of 94,890 square feet of rentable space to the buyer. As part of the assignment, we agreed to subsidize a portion of the buyer’s lease payments through the remainder of the lease term which expires in March 2024. |
| (b) | On November 30, 2023, we entered into an amendment to the lease for our California campus. The lease amendment provides for (i) effective as of April 1, 2024, our surrender of an aggregate area of approximately 94,207 rentable square feet and (ii) the extension of the expiration date of the term of the lease agreement with respect to the remaining 75,376 rentable square feet from April 1, 2024 to June 30, 2029. |
Intevac considers these properties adequate to meet its current and future requirements. Intevac regularly assesses the size, capability and location of its global infrastructure and periodically makes adjustments based on these assessments.
Item 3. | Legal Proceedings |
From time to time, Intevac is involved in claims and legal proceedings that arise in the ordinary course of business. Intevac expects that the number and significance of these matters will increase as Intevac’s business expands. Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require us to enter into royalty or licensing agreements which, if required, may not be available on terms favorable to us or at all. Intevac is not presently a party
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to any lawsuit or proceeding that, in Intevac’s opinion, is likely to seriously harm Intevac’s business.
Item 4. | Mine Safety Disclosures |
Not applicable.
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PART II
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Market Information
Intevac common stock is traded on The Nasdaq Stock Market (NASDAQ Global Select) under the symbol “IVAC.” As of February 17, 2021,15, 2024, there were 7369 holders of record.
Recent Sales of Unregistered Securities
None.
Dividend Policy
We currently anticipate that we will retain our earnings, if any, for use in the operation of our business and do not expect to pay cash dividends on our capital stock in the foreseeable future.
Issuer Purchases of Intevac Common Stock
On November 21, 2013, Intevac’sIntevac announced that its Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases.repurchases, with no expiration date. On August 15, 2018, Intevac’sIntevac announced that its Board of Directors approved a $10.0 million increase to the original stock repurchase program authorizing up tofor an aggregate authorized amount of $40.0 million. Our last repurchase under this authorization occurred during the first quarter of fiscal 2020. At January 2, 2021,December 30, 2023, $10.4 million remains available for future stock repurchases under the repurchase program. Intevac did not make any common stock repurchases during the three months ended January 2, 2021.
Item 6. | [Reserved] |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Management’s Discussion and Analysis (MD&A)(“MD&A”) is intended to facilitate an understanding of Intevac’s business and results of operations. This MD&A should be read in conjunction with Intevac’s Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in Item 8 of this
| • | Overview: a summary of Intevac’s business, measurements and opportunities. |
| • | Results of Operations: a discussion of operating results. |
| • | Liquidity and Capital Resources: an analysis of cash flows, sources and uses of cash, and financial position. |
| • | Critical Accounting Policies and Estimates: a discussion of estimates that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. |
Overview
Intevac is a provider of vacuum deposition equipment for a wide variety of thin-film applications, and a leading provider of digital night-vision technologiesthin-film process technology and products tomanufacturing platforms for high-volume manufacturing environments . With over 30 years of leadership in designing, developing, and manufacturing high-productivity, thin-film processing systems, the defense industry. The Company leverages its core capabilities in high-volume manufacturing of small substratestechnology and know-how to provide process manufacturing equipment solutions to the HDD, DCP,hard disk drive (“HDD”) and solar cell industries. Intevac also provides sensors, cameras and systems for government applications suchadvanced coatings (“ADVC”) markets (formerly known as night vision and long-range target identification.the display cover panel (“DCP”) market). Intevac’s customers include manufacturers of hard disk media, DCPsHDD and solar cells as well as the U.S. government and its agencies, allies and contractors.DCP manufacturers. Intevac reports two segments: TFE and Photonics.
Intevac’s results of operations are driven by a number of factors including success in its equipment growth initiatives in the DCP and solar marketsADVC market and by worldwide demand for HDDs. Demand for HDDs depends on the growth in digital data creation and storage, the rate of areal density improvements, and the
Fiscal Year | 2020 | 2019 | Change 2020 vs. 2019 | |||||||||
(in thousands, except percentages and per share amounts) | ||||||||||||
Net revenues | $ | 97,824 | $ | 108,885 | $ | (11,061 | ) | |||||
Gross profit | $ | 40,545 | $ | 40,868 | $ | (323 | ) | |||||
Gross margin percent | 41.4 | % | 37.5 | % | 3.9 points | |||||||
Operating income | $ | 2,555 | $ | 3,925 | $ | (1,370 | ) | |||||
Net income | $ | 1,056 | $ | 1,148 | $ | (92 | ) | |||||
Net income per diluted share | $ | 0.04 | $ | 0.05 | $ | (0.01 | ) | |||||
In December 2021, the Company resumedsold its growth trajectory. Intevac recognized revenue on four 200 Lean HDD systems. Photonics business. As a result of the disposition, the results of operations from the Photonics reporting segment are reported as “Income (loss) from discontinued operations, net of taxes” in the consolidated financial statements in Item 8 of this Annual Report.
In 2019, Intevac recognized revenue on nineMarch 2022, the Company realigned its operational focus and eliminated several research and development (“R&D”) programs and product offerings. As part of this realignment effort, the Company ceased its efforts to develop and market several of its manufacturing platforms for the ADVC, photovoltaic (“PV”) solar implant ENERG
The following table presents certain significant measurements for fiscal 2019, Photonics business levels were higher compared to the prior year due primarily to the $31.6 million U.S. Army IVAS contract award. Photonics continued to deliver production shipments of the night-vision camera modules for the F35 Joint Strike Fighter program in fiscal 20192023 and resumed shipments of the Apache camera in the second half of 2019. Fiscal 2019 net income was the result of higher net revenues and higher gross margins. During 2019, the Company received an unfavorable decision on its appeal to a
| Fiscal Year | 2023 | 2022 | Change 2023 vs. 2022 | |||||||||
| (in thousands, except percentages and per share amounts) | ||||||||||||
Net revenues | $ | 52,665 | $ | 35,761 | $ | 16,904 | ||||||
Gross profit | $ | 20,226 | $ | 15,086 | $ | 5,140 | ||||||
Gross margin percent | 38.4 | % | 42.2 | % | (3.8) points | |||||||
Operating loss | $ | (13,244 | ) | $ | (16,512 | ) | $ | 3,268 | ||||
Net loss from continuing operations | $ | (12,610 | ) | $ | (16,754 | ) | $ | 4,144 | ||||
Income (loss) from discontinued operations, net of tax | $ | 420 | $ | (321 | ) | $ | 741 | |||||
Net loss | $ | (12,190 | ) | $ | (17,075 | ) | $ | 4,885 | ||||
Net loss per basic and diluted share | $ | (0.47 | ) | $ | (0.68 | ) | $ | 0.21 | ||||
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Fiscal 20202022 financial results reflected a challenging environment partially as a result of the
Fiscal 2023 financial results improved over fiscal 2022 but reflected a continued challenging environment. Net revenues increased compared to fiscal 2022, and we recognized revenue on one 200 Lean HDD system and one refurbished 200 Lean HDD system in fiscal 2023. Lower gross margins in fiscal 2023, versus fiscal 2022, reflected higher inventory obsolescence charges, severance costs, the lower-margin contributions from the 200 Lean HDD system and the refurbished 200 Lean HDD system and lower factory utilization. Inventory obsolescence charges during fiscal 2023 included $1.7 million in expenditures primarily related to certain TRIO inventory that become obsolete resulting from engineering change orders to the product. Inventory obsolescence charges during fiscal 2022 included $755,000 in expenditures primarily related to eliminated product offerings as part of our 2022 Cost Reduction Plan. The cost of employee severance associated with our restructuring program implemented in fiscal 2023 (the “2023 Cost Reduction Plan”) of $2.0 million was offset in part by $462,000 of stock-based compensation forfeitures related to the employees affected by the reduction in workforce. We reported a smaller net loss for fiscal 2023 compared to fiscal 2022 due to higher revenues and higher gross profit, offset in part by higher operating costs. During fiscal 2023, we did not recognize an income tax benefit on our U.S. net operating loss.
We believe fiscal 20212024 will continue to be a challenging year, and Intevac doeswe do not expect to be profitable in fiscal 2021, unless new orders are received sooner than anticipated. Intevac expects2024. In fiscal 2024, we expect to begin recognizing revenue from our TRIO platform as the product completes qualifications. However, we expect that 2021 HDD equipment sales and upgrades for magnetic disk production in fiscal 2024 will be lower than 2020 levels as although we expect higher 200 Lean HDD systems revenue, upgrade revenue is expected to be lower.2023 levels. In 2021, Intevac expects higher salesaddition, our results of new TFE products as we expect to: (i) convert the two systems under evaluation at customer factories to revenueoperations and (ii) obtain follow on production orders for our VERTEX coating system for DCPs. In 2021, we expect product revenue in Photonics to decline slightly as we continue to deliver product shipments of the night-vision camera modules for the F35 Joint Strike Fighter program. Shipments for the Apache camera under the current contract with the U.S. government concluded in the third quarter of 2020. In 2021, we expect decreased contract R&D revenue as development work on the multi-year IVAS contract award for the development and production of digital night-vision cameras to support the U.S. Army’s IVAS program comes to a conclusion in early 2021. During fiscal 2021, the Company expects to receive $108,000 in government assistance related to
Results of Operations
Net revenues
2020 | 2019 | Change 2020 vs. 2019 | ||||||||||
(in thousands) | ||||||||||||
TFE | $ | 52,128 | $ | 73,678 | $ | (21,550 | ) | |||||
Photonics | ||||||||||||
Contract R&D | 22,945 | 19,657 | 3,288 | |||||||||
Products | 22,751 | 15,550 | 7,201 | |||||||||
| 45,696 | 35,207 | 10,489 | ||||||||||
Total net revenues | $ | 97,824 | $ | 108,885 | $ | (11,061 | ) | |||||
| 2023 | 2022 | Change 2023 vs. 2023 | ||||||||||
| (in thousands) | ||||||||||||
Total net revenues | $ | 52,665 | $ | 35,761 | $ | 16,904 | ||||||
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Net revenues consist primarily of sales of equipment used to manufacture thin-film disks, PV cells, DCPs, and ASP and related equipment and system components; sales of
The decreaseincrease in TFE revenues in fiscal 20202023 versus fiscal 20192022 was due primarily to lowerhigher sales of systems sales as TFE recognized revenue on two 200 Lean HDD systems,and technology upgrades, offset in part by increases inlower sales of spare parts and field service. In fiscal 2023, we recognized revenue recognized on one 200 Lean HDD system and one refurbished 200 Lean HDD system, technology upgrades, service and spare parts. In fiscal 2019, TFE2022, we recognized revenue recognized four 200 Lean HDD systems and nine solar implant ENERG
Backlog
| December 30, 2023 | December 31, 2022 | |||||||
| (in thousands) | ||||||||
Total backlog | $ | 42,415 | $ | 121,743 | ||||
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Backlog
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
TFE | $ | 5,623 | $ | 21,391 | ||||
Photonics | 41,317 | 71,015 | ||||||
Total backlog | $ | 46,940 | $ | 92,406 | ||||
Significant portions of Intevac’s revenues in any particular period have been attributable to sales to a limited number of customers. The following customers accounted for at least 10 percent of Intevac’s consolidated net revenues in fiscal 20202023 and 2019.
2020 | 2019 | |||||||
Seagate Technology | 42 | % | 49 | % | ||||
U.S. Government | 29 | % | 20 | % | ||||
Elbit Systems of America | 12 | % | * | |||||
Jolywood (Hongkong) Industrial Holdings Co., Limited | * | 14 | % | |||||
| 2023 | 2022 | |||||||
Seagate Technology | 92 | % | 80 | % | ||||
Western Digital Corporation | * | 18 | % | |||||
| * | Less than 10% |
Revenue by geographic region
2020 | 2019 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
United States | $ | 6,450 | $ | 45,363 | $ | 51,813 | $ | 1,306 | $ | 34,664 | $ | 35,970 | ||||||||||||
Asia | 45,611 | — | 45,611 | 72,372 | — | 72,372 | ||||||||||||||||||
Europe | 67 | 333 | 400 | — | 543 | 543 | ||||||||||||||||||
Total net revenues | $ | 52,128 | $ | 45,696 | $ | 97,824 | $ | 73,678 | $ | 35,207 | $ | 108,885 | ||||||||||||
| 2023 | 2022 | |||||||
| (in thousands) | ||||||||
United States | $ | 4,499 | $ | 4,558 | ||||
Asia | 48,058 | 31,103 | ||||||
Europe | 108 | 100 | ||||||
|
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| |||||
Total net revenues | $ | 52,665 | $ | 35,761 | ||||
|
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| |||||
International sales include products shipped to overseas operations of U.S. companies. The increasedecrease in sales to the U.S. region in 2020fiscal 2023 versus 2019fiscal 2022, reflected higher Photonics productlower spare parts and lower field service sales, higher Photonics contract R&D work andoffset in part by higher HDD upgrade sales to U.S. customers. There were no TFE systems sold to factories in the U.S. in 2020 or 2019.
Gross margin
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands, except percentages) | ||||||||||||
TFE gross profit | $ | 22,417 | $ | 27,377 | $ | (4,960 | ) | |||||
% of TFE net revenues | 43.0 | % | 37.2 | % | ||||||||
Photonics gross profit | $ | 18,128 | $ | 13,491 | $ | 4,637 | ||||||
% of Photonics net revenues | 39.7 | % | 38.3 | % | ||||||||
Total gross profit | $ | 40,545 | $ | 40,868 | $ | (323 | ) | |||||
% of net revenues | 41.4 | % | 37.5 | % | ||||||||
| Fiscal Year | Change 2023 vs. 2022 | |||||||||||
| 2023 | 2022 | |||||||||||
| (in thousands, except percentages) | ||||||||||||
Total gross profit | $ | 20,226 | $ | 15,086 | $ | 5,140 | ||||||
% of net revenues | 38.4 | % | 42.2 | % | ||||||||
Cost of net revenues consists primarily of purchased materials and costs attributable to contract R&D, and also includes assembly, test and installation labor and overhead, customer-specific engineering costs, warranty costs, royalties, provisions for inventory reserves and scrap.
Gross margin was 38.4% in fiscal 2023 compared to 42.2% in fiscal 2022. The decrease in the gross margin was 43.0% inpercentage for fiscal 20202023 compared to 37.2%fiscal 2022 was due primarily to higher inventory obsolescence charges, severance charges associated with the 2023 Cost Reduction Plan, lower-margin contributions from the 200 Lean HDD system and the refurbished 200 Lean HDD system, and lower factory utilization. Excess and obsolete inventory charges during fiscal 2023 included $1.7 million in fiscal 2019. Fiscal 2020 gross margins improved over fiscal 2019 as a result of higher margins on upgrades. Fiscal 2019 gross margins reflected lower margins onexpenditures primarily related to certain TRIO inventory that became obsolete resulting from engineering change orders to the sale of nine solar implant ENERG
23
Research and development
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Research and development expense | $ | 14,093 | $ | 14,309 | $ | (216 | ) | |||||
| Fiscal Year | Change 2023 vs. 2022 | |||||||||||
| 2023 | 2022 | |||||||||||
| (in thousands) | ||||||||||||
Research and development expense | $ | 15,125 | $ | 13,722 | $ | 1,403 | ||||||
R&D expense consists primarily of salaries and related costs of employees engaged in, and prototype materials used in ongoing research, design and development activities for PV cell manufacturing equipment, DCP manufacturing equipment, HDD disk sputtering equipment, semiconductor
R&D spending in fiscal 2020 was flat2023 increased compared to fiscal 20192022 due to higher spending on our TRIO platform, offset in part by lower spending on semiconductor
Selling, general and administrative
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Selling, general and administrative expense | $ | 23,897 | $ | 22,634 | $ | 1,263 | ||||||
| Fiscal Year | Change 2023 vs. 2022 | |||||||||||
| 2023 | 2022 | |||||||||||
| (in thousands) | ||||||||||||
Selling, general and administrative expense | $ | 18,345 | $ | 17,876 | $ | 469 | ||||||
Selling, general and administrative expense consists primarily of selling, marketing, customer support, financial and management costs. All domestic sales and the majority of international sales of HDD disk sputtering products in Asia are made through Intevac’s direct sales force. Intevac also sells its TFE products through distributors in Japan and China. Intevac has offices in Singapore, Malaysia and China to support Intevac’s TFE customers in Asia.
Selling, general and administrative expenses increased in 2020fiscal 2023 over the amount spent in 2019 primarily due tofiscal 2022 as higher severance charges, higher legal fees, higher training expenses, higher travel expenses, and higher variable compensation expenses incremental
Cost reduction plan
During the third quarter of fiscal 2020,2023, Intevac substantially completed implementation of the 2020 cost reduction plan (the “2020 Plan”),2023 Cost Reduction Plan, which reducedis intended to reduce expenses and reduced itsby reducing our workforce by 1 percent.23 percent, including employees and contractors. Intevac incurred restructuring costs of $2.0 million in severance, $2,000 in stock-based compensation associated with the modification of certain stock-based awards and other employee-related expenses associated with the 2023 Cost Reduction Plan. Additionally as part of the 2023 Cost Reduction Plan the Company incurred a benefit of $462,000 related to the stock-based compensation forfeitures related to the employees affected by the reduction in workforce. Substantially all cash outlays in connection with the 2023 Cost Reduction Plan occurred in the third quarter of fiscal 2023. The total cost of implementing the 20202023 Cost Reduction Plan was $103,000,reported under cost of which $16,000net revenues ($490,000) and operating expenses ($1.3 million in selling, general and administrative expense and $117,000 in R&D expense) in the consolidated statements of operations. Implementation of the 2023 Cost Reduction Plan is expected to reduce salary, wages and other employee-related expenses and contractor payments by approximately $4.6 million on an annual basis.
During the first quarter of 2022, the Company implemented the 2022 Cost Reduction Plan to realign the Company’s operational focus, scale the business and improve costs. The 2022 Cost Reduction Plan included (i) reducing the Company’s workforce by 6% and (ii) eliminating several R&D programs and product offerings. We incurred restructuring costs of $1.2 million for estimated severance and the related modification of certain stock-based awards. Other costs incurred as part of the 2022 Cost Reduction Plan include: (i) a benefit of $1.3 million related to the stock-based compensation forfeitures related to the employees affected by the reduction in workforce, (ii) $1.5 million for fixed asset disposals, and (iii) $755,000 for write-offs of excess inventory. Substantially all cash outlays in connection with the 2022 Cost Reduction Plan were completed in the fourth quarter of fiscal 2022. The cost of implementing the 2022 Cost Reduction Plan was reported under cost of net revenues and $87,000 was reported under operating expenses. Substantially all cash outlaysexpenses in connection with the 2020 Plan were completed in fiscal 2020.consolidated statements of operations. Implementation of the 20202022 Cost Reduction Plan reduced salary, wages and other employee-related expenses by approximately $864,000$2.1 million on an annual basis and reduced depreciation expense by $720,000 on an annual basis.
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Interest income and other income (expense), net
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Interest income and other income (expense), net | $ | 212 | $ | 582 | $ | (370 | ) | |||||
| Fiscal Year | Change 2023 vs. 2022 | |||||||||||
| 2023 | 2022 | |||||||||||
| (in thousands) | ||||||||||||
Interest income and other income (expense), net | $ | 2,456 | $ | 1,085 | $ | 1,371 | ||||||
Interest income and other income (expense), net in fiscal 20202023 included $284,000$2.5 million of interest income on investments and $56,000 from the saleother income of scrap materials$113,000, offset in part by $139,000$165,000 of foreign currency losses. Interest income and other income (expense), net in fiscal 20192022 included $574,000$1.2 million of interest income on investments and $20,000 in earnoutother income from a divestiture,of $31,000, offset in part by $85,000$186,000 of foreign currency losses. The decreaseincrease in interest income in 20202023 over 20192022 reflected lowerhigher interest rates on Intevac’s investments, andoffset in part by lower invested balances.
Provision for income taxes
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Provision for income taxes | $ | 1,711 | $ | 3,359 | $ | (1,648 | ) | |||||
| Fiscal Year | Change 2023 vs. 2022 | |||||||||||
| 2023 | 2022 | |||||||||||
| (in thousands) | ||||||||||||
Provision for income taxes | $ | 1,822 | $ | 1,327 | $ | 495 | ||||||
Intevac’s effective tax rate from continuing operations was 61.8%(16.9%) for fiscal 20202023 and 74.5%(8.6%) for fiscal 20192022 and we recorded income tax expense of $1.7 million and $3.4$1.8 million in 2020fiscal 2023 and 2019, respectively.$1.3 million in fiscal 2022. The income tax expense consists primarily of income taxes in foreign jurisdictions in which we conduct business and foreign withholding taxes. We maintain a full valuation allowance for
We assess the likelihood that our deferred tax assets will be recovered based upon our consideration of many factors, including the current economic climate, our expectations of future taxable income, and our ability to project such income. We maintain a full valuation allowance for our U.S. deferred tax assets due to uncertainty regarding their realization as of December 30, 2023.
Discontinued Operations
| Fiscal Year | Change 2023 vs. 2022 | |||||||||||
| 2023 | 2022 | |||||||||||
| (in thousands) | ||||||||||||
Income (loss) from discontinued operations, net of tax | $ | 420 | $ | (321 | ) | $ | 741 | |||||
Income (loss) from discontinued operations consists primarily of the results of operations of the Photonics business which we sold to EOTECH, LLC (“EOTECH”) on December 30, 2021. The income (loss) from discontinued operations in fiscal 2023 increased to a net income of $420,000 in fiscal 2023 as compared to a net loss of $321,000 in fiscal 2022. Income from discontinued operations for fiscal 2023 is comprised primarily of a stock-based compensation forfeiture benefit related to the termination of certain employees upon the completion of the assignment and novation of all government contracts to EOTECH in the first quarter of fiscal 2023 and accretion on the lease liability that was assigned to EOTECH. The loss from discontinued operations for fiscal 2022 includes salaries and wages and employee benefits up to and including January 2, 2021.
Liquidity and Capital Resources
At January 2, 2021,December 30, 2023, Intevac had $50.4$72.2 million in cash, cash equivalents, restricted cash and investments compared to $42.8$112.8 million at December 28, 2019.31, 2022. During fiscal 2020,2023, cash, cash equivalents, restricted cash and investments increaseddecreased by $7.5$40.6 million due primarily to cash generatedused by operating activities, purchases of fixed assets, and tax payments related to the net share settlement of restricted stock units offset in part by cash received from the sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit plans, offset in part by cash used for repurchases of common stock, purchases of fixed assets and tax payments related to the net share settlement of restricted stock units.plans.
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Cash, cash equivalents, restricted cash and investments consist of the following:
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents | $ | 29,341 | $ | 19,767 | ||||
Restricted cash | 787 | 787 | ||||||
Short-term investments | 14,839 | 16,720 | ||||||
Long-term investments | 5,388 | 5,537 | ||||||
Total cash, cash-equivalents, restricted cash and investments | $ | 50,355 | $ | 42,811 | ||||
| December 30, 2023 | December 31, 2022 | |||||||
| (in thousands) | ||||||||
Cash and cash equivalents | $ | 51,441 | $ | 68,904 | ||||
Restricted cash | 700 | 786 | ||||||
Short-term investments | 17,405 | 25,541 | ||||||
Long-term investments | 2,687 | 17,585 | ||||||
|
|
|
| |||||
Total cash, cash-equivalents, restricted cash and investments | $ | 72,233 | $ | 112,816 | ||||
|
|
|
| |||||
Cash generatedused by operating activities totaled $8.9$35.1 million in 2020fiscal 2023 compared to $4.9cash used by operating activities of $7.4 million in 2019. Improvedfiscal 2022. Lower operating cash flow in 2020fiscal 2023 was a result of net income and improvedinvestments made in working capital, management.
Accounts receivable totaled $28.6$18.6 million at both January 2, 2021December 30, 2023 and December 28, 2019. Customer advances for products that had not been shipped to customers and included in accounts receivable were $201,000$15.8 million at December 28, 2019.31, 2022. The number of days outstanding for Intevac’s accounts receivable was 90128 at January 2, 2021December 30, 2023 compared to 72123 at December 28, 2019.31, 2022. Net inventories totaled $21.7 million at January 2, 2021 compared to $24.9$43.8 million at December 28, 2019. Net inventories30, 2023 compared to $30.0 million at January 2, 2021 and December 28, 2019 included one VERTEX SPECTRA system for DCP under evaluation in a customer’s factory and one MATRIX PVD system for advance semiconductor packaging under evaluation in a customer’s factory. Net inventories at January 2, 2021 also included one VERTEX SPECTRA system for DCP at Intevac’s factory.31, 2022. Inventory turns were 1.60.5 in fiscal 20202023 and were 2.51.1 in fiscal 2019.2022. Accounts payable increaseddecreased to $4.3 million at January 2, 2021 compared to $4.2$5.8 million at December 28, 2019.30, 2023 compared to $11.6 million at December 31, 2022 primarily related to decreased purchases of inventory in second half of fiscal 2023. Other accrued liabilities were $3.6$1.8 million at bothDecember 30, 2023 and $5.4 million at December 31, 2022. Other accrued liabilities at December 31, 2022 included a $1.0 million accrual for the settlement of the PAGA lawsuit which was paid on January 2, 2021 and December 28, 2019.20, 2023. Accrued payroll and related liabilities increased to $7.7 million at January 2, 2021 compared to $6.5$3.5 million at December 28, 201930, 2023 compared to $3.1 million at December 31, 2022 as a result of higher variable compensation accruals and the deferral of payroll tax liabilities under the CARES Act.accruals. Customer advances decreased from $4.0$24.7 million at December 28, 201931, 2022 to $33,000$21.9 million at January 2, 2021December 30, 2023 primarily as a result of recognition of revenue. Otherrevenue, offset in part by the recognition of new orders. Customer advances for orders with deliveries beyond one year are included in long term liabilities increased to $457,000 at January 2, 2021 compared to $186,000 at December 28, 2019 as a resultliabilities.
Investing activities generated cash of the deferral of payroll tax liabilities under the CARES Act.
During fiscal 2022, the Company acquired the outstanding shares of Hia, Inc, a supplier of magnetic bars, to bring the manufacturing of these magnetic bars in-house and to protect our technology and product quality while continuing to improve our products. The Company paid $700,000 on the closing date of the acquisition. Further contingent consideration will consist of amounts payable upon achievement of certain development and commercialization milestones, which is estimated to be up to $500,000, and a royalty arrangement. Contingent consideration is not recorded in an asset acquisition until the contingency is resolved (when the contingent consideration is paid or becomes payable) or when probable and reasonably estimable. The first milestone was achieved and contingent consideration in the amount of $250,000 was paid on January 17, 2023 and was accrued in the fourth quarter of fiscal 2022. Transaction costs incurred in connection with the Hia acquisition totaled $63,000.
Financing activities used cash of $624,000 in fiscal 2023 and generated cash of $1.1$2.4 million in 2020 and $1.5 million in 2019.fiscal 2022. The sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit plans provided $1.9$1.4 million in 2020fiscal 2023 and $2.3$3.1 million in 2019.fiscal 2022. Tax payments related to the net share settlement of restricted stock units were $402,000 in 2020 and $404,000 in 2019. In November 2013, Intevac’s Board of Directors approved a stock repurchase program authorizing up to $30$1.7 million in repurchases. On August 15, 2018, Intevac’s Board of Directors approved a $10.0 million increase to the original stock repurchase program authorizing up to $40.0 millionfiscal 2023 and $724,000 in repurchases. Cash used to repurchase common stock totaled $393,000 in 2020 and $111,000 in 2019.
Intevac’s investment portfolio consists principally of investment grade money market mutual funds, U.S. treasury and agency securities, asset backed securities, certificates of deposit, commercial paper, municipal bonds and corporate bonds. Intevac regularly monitors the credit risk in its investment portfolio and takes measures, which may include the sale of certain securities, to manage such risks in accordance with its investment policies.
As of January 2, 2021,December 30, 2023, approximately $19.3$31.1 million of cash and cash equivalents and $3.4$2.5 million of investments were domiciled in foreign tax jurisdictions. Intevac expects a significant portion of these funds to remain offshore in the short term. If the Company chose to repatriate these funds to the United States, it would be required to accrue and pay additional taxes on any portion of the repatriation subject to foreign withholding taxes.
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We believe that itsour existing cash, cash equivalents and investments and cash flows from operating activities will be sufficientadequate to meet Intevac’s cash requirementsour liquidity needs for the next 12twelve months and for the foreseeable future beyond the next twelve months. Intevac intendsOur significant funding requirements include procurement of manufacturing inventories, operating expenses, non-cancelable operating lease obligations, capital expenditures, contingent consideration payments and variable compensation. We have flexibility over some of these uses of cash, including capital expenditures and discretionary operating expenses, to undertake betweenpreserve our liquidity position. Capital expenditures for fiscal 2024 are projected to be approximately $6.0$3.0 million to $8.0$4.0 million in capital expenditures during the next 12 months.
Off-Balance
Off-balance
Climate Change
We believe that neither climate change, nor governmental regulations related to climate change, have had any material effect on our business, financial condition or results of operations.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 1 of Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies.
A critical accounting policy is defined as one that is both material to the presentation of Intevac’s consolidated financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on Intevac’s financial condition or results of operations. Specifically, these policies have the following attributes: (1) Intevac is required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates Intevac could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on Intevac’s financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. Intevac bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the
Management believes that the following are Intevac’s critical accounting policies:
Revenue Recognition
A majority of our equipment sales revenue, which includes systems, technology upgrades, service and spare parts is recognized when products are shipped from our manufacturing facilities. In our TFE segment, weWe recognize revenue for equipment sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Intevac recognizes revenue in certain circumstances before delivery has occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership has
27
passed to the customer, the customer has made a written fixed commitment to purchase the finished goods, the customer has requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations exist by Intevac. For these transactions, the finished goods are segregated from inventory and normal billing and credit terms granted. Our contracts with customers may include multiple performance obligations. Under the revenue standard we allocate revenue for such arrangements to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or by using expected cost plus margin. Under the revenue standard, theThe expected costs associated with our base warranties continue to beare recognized as expense when the equipment is sold.
Inventories
Inventories are valued using average actual costs and are stated at the lower of cost or net realizable value. The carrying value of inventory is reduced for estimated obsolescence by the difference between its cost and the net realizable value based upon assumptions about future demand. Intevac evaluates the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated demand. In addition, inventories are evaluated for potential obsolescence due to the effect of known and anticipated engineering change orders and new products. If actual demand were to be substantially lower than estimated, additional inventory adjustments for excess or obsolete inventory might be required, which could have a material adverse effect on Intevac’s business, financial condition and results of operations.
Warranty
Intevac estimates the costs that may be incurred under the warranty it provides and records a liability in the amount of such costs at the time the related revenue is recognized. Estimated warranty costs are determined by analyzing specific product and historical configuration statistics and regional warranty support costs. Intevac’s warranty obligation is affected by product failure rates, material usage, and labor costs incurred in correcting product failures during the warranty period. As Intevac’s customer service engineers and process support engineers are highly trained and deployed globally, labor availability is a significant factor in determining labor costs. The quantity and availability of critical replacement parts is another significant factor in estimating warranty costs. Unforeseen component failures or exceptional component performance can also result in changes to warranty costs. If actual warranty costs differ substantially from our estimates, revisions to the estimated warranty liability would be required.
Income Taxes
Intevac accounts for income taxes by recognizing deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities, net operating losses and tax credit carryforwards. Deferred tax assets are also reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized. Management has determined that it is more likely than not that its future taxable income will not be sufficient to realize its entire deferred tax assets.
In determining whether to establish or maintain a valuation allowance against a deferred tax asset, the Company reviews available evidence to determine whether it is more likely than not that all or a portion of the Company’s net deferred tax assets will be realized in future periods. Consideration is given to various positive and negative factors that could affect the realization of the net deferred tax assets. In making such a determination, the Company considers, among other things, future reversals of existing taxable temporary differences, projected future taxable income,
The effective tax rate is highly dependent upon the geographic composition of worldwide earnings, tax regulations governing each region,
The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with Intevac’s expectations could have a material impact on Intevac’s results of operations and financial condition.
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Equity-Based Compensation
Restricted stock units (“RSUs”) granted to a business combination is recordedemployees and directors are measured at their fair value on the grant date. All RSUs granted in fiscal years 2023 and 2022 were granted for no consideration; therefore, their fair value was equal to the share price at the acquisition date at the estimated fair value of the contingent payments. The acquisition date fair value is measured based on the consideration expected to be transferred (probability-weighted), discounted back to present value. The discount rate used is determined at the time of the acquisition in accordance with accepted valuation methods.grant. The fair value of the acquisition-related contingent consideration is remeasured at the estimated fair value at each reporting periodperformance-based restricted stock units (“PRSUs”) granted in fiscal year 2022 with the change in fair value recognized as income or expense in the consolidated statements of income.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable for smaller reporting companies.
29
Item 8. | Financial Statements and Supplementary Data |
Page | |||||||
/s/ BPM LLP |
We have served as the Company’s auditor since 2015. |
San Jose, California |
February |
January 2, 2021 | December 28, 2019 | |||||||
(In thousands, except par | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 29,341 | $ | 19,767 | ||||
Short-term investments | 14,839 | 16,720 | ||||||
Trade and other accounts receivable, net of allowances of $0 at both January 2, 2021 and December 28, 2019 | 28,646 | 28,619 | ||||||
Inventories | 21,689 | 24,907 | ||||||
Prepaid expenses and other current assets | 1,893 | 1,504 | ||||||
Total current assets | 96,408 | 91,517 | ||||||
Property, plant and equipment, net | 11,004 | 11,598 | ||||||
Operating lease right-of-use-assets | 8,165 | 10,279 | ||||||
Long-term investments | 5,388 | 5,537 | ||||||
Restricted cash | 787 | 787 | ||||||
Deferred income taxes and other long-term assets | 5,486 | 6,604 | ||||||
Total assets | $ | 127,238 | $ | 126,322 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current operating lease liabilities | $ | 2,853 | $ | 2,524 | ||||
Accounts payable | 4,259 | 4,199 | ||||||
Accrued payroll and related liabilities | 7,679 | 6,488 | ||||||
Other accrued liabilities | 3,598 | 3,593 | ||||||
Customer advances | 33 | 4,007 | ||||||
Total current liabilities | 18,422 | 20,811 | ||||||
Noncurrent liabilities: | ||||||||
Noncurrent operating lease liabilities | 6,803 | 9,532 | ||||||
Other long-term liabilities | 457 | 186 | ||||||
Total noncurrent liabilities | 7,260 | 9,718 | ||||||
Commitments and contingencies | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Undesignated preferred stock, $0.001 par value, 10,000 shares authorized, 0 shares issued and outstanding | 0— | 0— | ||||||
Common stock, $0.001 par value : | ||||||||
Authorized shares — 50,000 issued and outstanding shares — 23,874 and 23,346 at January 2, 2021 and December 28, 2019, respectively | 24 | 23 | ||||||
Additional paid-in capital | 193,173 | 188,290 | ||||||
Treasury stock, 5,087 shares at January 2, 2021 and 4,989 shares at December 28, 2019 | (29,551 | ) | (29,158 | ) | ||||
Accumulated other comprehensive income | 640 | 424 | ||||||
Accumulated deficit | (62,730 | ) | (63,786 | ) | ||||
Total stockholders’ equity | 101,556 | 95,793 | ||||||
Total liabilities and stockholders’ equity | $ | 127,238 | $ | 126,322 | ||||
December 30, 2023 | December 31, 2022 | |||||||
(In thousands, except par value) | ||||||||
ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 51,441 | $ | 68,904 | ||||
| Short-term investments | 17,405 | 25,541 | ||||||
| Trade and other accounts receivable, net of allowances of $0 at both December 30, 2023 and December 31, 2022 | 18,613 | 15,823 | ||||||
| Inventories | 43,795 | 30,003 | ||||||
| Prepaid expenses and other current assets | 2,123 | 1,898 | ||||||
| Total current assets | 133,377 | 142,169 | ||||||
| Property, plant and equipment, net | 7,664 | 3,658 | ||||||
Operating lease right-of-use | 7,658 | 3,390 | ||||||
| Long-term investments | 2,687 | 17,585 | ||||||
| Restricted cash | 700 | 786 | ||||||
| Intangible assets, net of amortization of $178 at December 30, 2023 and $42 at December 31, 2022 | 954 | 1,090 | ||||||
| Deferred income taxes and other long-term assets | 3,466 | 4,381 | ||||||
| Total assets | $ | 156,506 | $ | 173,059 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current operating lease liabilities | $ | 1,008 | $ | 3,404 | ||||
| Accounts payable | 5,800 | 11,610 | ||||||
| Accrued payroll and related liabilities | 3,475 | 3,087 | ||||||
| Other accrued liabilities | 1,820 | 5,430 | ||||||
| Customer advances | 20,407 | 2,444 | ||||||
| Total current liabilities | 32,510 | 25,975 | ||||||
| Noncurrent liabilities: | ||||||||
| Noncurrent operating lease liabilities | 6,976 | 1,417 | ||||||
| Customer advances | 1,482 | 22,215 | ||||||
| Other long-term liabilities | 21 | — | ||||||
| Total noncurrent liabilities | 8,479 | 23,632 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Undesignated preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued and outstanding | — | — | ||||||
| Common stock, $0.001 par value : | ||||||||
| Authorized shares — 50,000 issued and outstanding shares — 26,396 and 25,548 at December 30, 2023 and December 31, 2022, respectively | 26 | 26 | ||||||
Additional paid-in capital | 210,320 | 206,355 | ||||||
| Treasury stock, 5,087 shares at both December 30, 2023 and December 31, 2022 | (29,551 | ) | (29,551 | ) | ||||
| Accumulated other comprehensive income (loss) | 97 | (193 | ) | |||||
| Accumulated deficit | (65,375 | ) | (53,185 | ) | ||||
| Total stockholders’ equity | 115,517 | 123,452 | ||||||
| Total liabilities and stockholders’ equity | $ | 156,506 | $ | 173,059 | ||||
Year Ended | ||||||||
December 30, 2023 | December 31, 2022 | |||||||
(In thousands, except per share amounts) | ||||||||
| Net revenues | $ | 52,665 | $ | 35,761 | ||||
| Cost of net revenues | 32,439 | 20,675 | ||||||
| Gross profit | 20,226 | 15,086 | ||||||
| Operating expenses: | ||||||||
| Research and development | 15,125 | 13,722 | ||||||
| Selling, general and administrative | 18,345 | 17,876 | ||||||
| Total operating expenses | 33,470 | 31,598 | ||||||
| Operating loss | (13,244 | ) | (16,512 | ) | ||||
| Interest income | 2,509 | 1,240 | ||||||
| Other income (expense), net | (53 | ) | (155 | ) | ||||
| Loss from continuing operations before provision for income taxes | (10,788 | ) | (15,427 | ) | ||||
| Provision for income taxes | 1,822 | 1,327 | ||||||
| Net loss from continuing operations | (12,610 | ) | (16,754 | ) | ||||
| Income (loss) from discontinued operations, net of tax | 420 | (321 | ) | |||||
| Net loss | $ | (12,190 | ) | $ | (17,075 | ) | ||
| Net income (loss) per share: | ||||||||
| Basic and diluted—continuing operations | $ | (0.48 | ) | $ | (0.67 | ) | ||
| Basic and diluted—discontinued operations | $ | 0.02 | $ | (0.01 | ) | |||
| Basic and diluted—net income (loss) | $ | (0.47 | ) | $ | (0.68 | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | 26,121 | 25,192 | ||||||
Year Ended, | ||||||||
January 2, 2021 | December 28, 2019 | |||||||
(In thousands, except per share amounts) | ||||||||
Net revenues: | ||||||||
Systems and components | $ | 74,879 | $ | 89,228 | ||||
Technology development | 22,945 | 19,657 | ||||||
Total net revenues | 97,824 | 108,885 | ||||||
Cost of net revenues: | ||||||||
Systems and components | 42,231 | 55,678 | ||||||
Technology development | 15,048 | 12,339 | ||||||
Total cost of net revenues | 57,279 | 68,017 | ||||||
Gross profit | 40,545 | 40,868 | ||||||
Operating expenses: | ||||||||
Research and development | 14,093 | 14,309 | ||||||
Selling, general and administrative | 23,897 | 22,634 | ||||||
Total operating expenses | 37,990 | 36,943 | ||||||
Operating income | 2,555 | 3,925 | ||||||
Interest income | 284 | 574 | ||||||
Other income (expense), net | (72 | ) | 8 | |||||
Income before provision for income taxes | 2,767 | 4,507 | ||||||
Provision for income taxes | 1,711 | 3,359 | ||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
Net income per share: | ||||||||
Basic | $ | 0.04 | $ | 0.05 | ||||
Diluted | $ | 0.04 | $ | 0.05 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 23,669 | 23,063 | ||||||
Diluted | 24,151 | 23,340 | ||||||
Year Ended | ||||||||
December 30, 2023 | December 31, 2022 | |||||||
(In thousands) | ||||||||
| Net loss | $ | (12,190 | ) | $ | (17,075 | ) | ||
| Other comprehensive income (loss), before tax | ||||||||
Change in unrealized net loss on available-for-sale | 422 | (454 | ) | |||||
| Foreign currency translation losses | (132 | ) | (317 | ) | ||||
| Other comprehensive income (loss), before tax | 290 | (771 | ) | |||||
| Income tax expense related to items in other comprehensive income (loss) | — | — | ||||||
| Other comprehensive income (loss), net of tax | 290 | (771 | ) | |||||
| Comprehensive loss | $ | (11,900 | ) | $ | (17,846 | ) | ||
Year Ended, | ||||||||
January 2, 2021 | December 28, 2019 | |||||||
(In thousands) | ||||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
Other comprehensive income (loss), before tax | ||||||||
Change in unrealized net gain on available-for-sale | (5 | ) | 70 | |||||
Foreign currency translation gains and (losses) | 221 | (24 | ) | |||||
Other comprehensive income, before tax | 216 | 46 | ||||||
Income tax expense related to items in other comprehensive income | 0 | — | ||||||
Other comprehensive income, net of tax | 216 | 46 | ||||||
Comprehensive income | $ | 1,272 | $ | 1,194 | ||||
Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Equity | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 28, 2019 | 22,700 | $ | 23 | $ | 183,204 | 4,965 | $ | (29,047 | ) | $ | 378 | $ | (64,934 | ) | $ | 89,624 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | 24,636 | $ | 25 | $ | 199,073 | 5,087 | $ | (29,551 | ) | $ | 578 | $ | (36,110 | ) | $ | 134,015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in connection with: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 175 | — | 799 | — | — | — | — | 799 | 388 | 1 | 1,872 | — | — | — | — | 1,873 | ||||||||||||||||||||||||||||||||||||||||||||||||
Settlement of RSUs | 199 | — | — | — | — | — | — | — | 371 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Employee stock purchase plan | 370 | — | 1,466 | — | — | — | — | 1,466 | 279 | — | 1,244 | — | — | — | — | 1,244 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares withheld in connection with net share settlement of RSUs | (74 | ) | — | (404 | ) | — | — | — | — | (404 | ) | (126 | ) | — | (724 | ) | — | — | — | — | (724 | ) | ||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation expense | — | — | 3,225 | — | — | — | — | 3,225 | — | — | 4,890 | — | — | — | — | 4,890 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 1,148 | 1,148 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 46 | — | 46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock repurchases | (24 | ) | — | — | 24 | (111 | ) | — | — | (111 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (17,075 | ) | (17,075 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (771 | ) | — | (771 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 28, 2019 | 23,346 | $ | 23 | $ | 188,290 | 4,989 | $ | (29,158 | ) | $ | 424 | $ | (63,786 | ) | $ | 95,793 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 25,548 | $ | 26 | $ | 206,355 | 5,087 | $ | (29,551 | ) | $ | (193 | ) | $ | (53,185 | ) | $ | 123,452 | |||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in connection with: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 67 | — | 326 | — | — | — | — | 326 | 53 | — | 272 | — | — | — | — | 272 | ||||||||||||||||||||||||||||||||||||||||||||||||
Settlement of RSUs | 244 | — | — | — | — | — | — | — | 776 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Employee stock purchase plan | 392 | 1 | 1,570 | — | — | — | — | 1,571 | 304 | — | 1,059 | — | — | — | — | 1,059 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares withheld in connection with net share settlement of RSUs | (77 | ) | — | (402 | ) | — | — | — | — | (402 | ) | (285 | ) | — | (1,739 | ) | — | — | — | — | (1,739 | ) | ||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation expense | — | — | 3,389 | — | — | — | — | 3,389 | — | — | 4,373 | — | — | — | — | 4,373 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 1,056 | 1,056 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (12,190 | ) | (12,190 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 216 | — | 216 | — | — | — | — | — | 290 | — | 290 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock repurchases | (98 | ) | — | — | 98 | (393 | ) | — | — | (393 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 2, 2021 | 23,874 | $ | 24 | $ | 193,173 | 5,087 | $ | (29,551 | ) | $ | 640 | $ | (62,730 | ) | $ | 101,556 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 30, 2023 | 26,396 | $ | 26 | $ | 210,320 | 5,087 | $ | (29,551 | ) | $ | 97 | $ | (65,375 | ) | $ | 115,517 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended | ||||||||
January 2, 2021 | December 28, 2019 | |||||||
(In thousands) | ||||||||
Operating activities | ||||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: | ||||||||
Depreciation and amortization | 3,206 | 2,976 | ||||||
Net amortization (accretion) of investment premiums and discounts | 12 | (75 | ) | |||||
Amortization of intangible assets | 274 | 615 | ||||||
Equity-based compensation | 3,389 | 3,225 | ||||||
Straight-line rent adjustment and amortization of lease incentives | (286 | ) | (289 | ) | ||||
Deferred income taxes | 917 | 1,661 | ||||||
Change in the fair value of acquisition-related contingent consideration | — | 7 | ||||||
Loss on disposal of equipment | — | 120 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (27 | ) | (902 | ) | ||||
Inventories | 3,218 | 6,301 | ||||||
Prepaid expenses and other assets | (462 | ) | 1,621 | |||||
Accounts payable | 60 | (1,850 | ) | |||||
Accrued payroll and other accrued liabilities | 1,467 | 694 | ||||||
Customer advances | (3,974 | ) | (10,307 | ) | ||||
Total adjustments | 7,794 | 3,797 | ||||||
Net cash and cash equivalents provided by operating activities | 8,850 | 4,945 | ||||||
Investing activities | ||||||||
Purchase of investments | (23,342 | ) | (23,306 | ) | ||||
Proceeds from sales and maturities of investments | 25,355 | 21,642 | ||||||
Purchase of leasehold improvements and equipment | (2,612 | ) | (4,107 | ) | ||||
Net cash and cash equivalents used in investing activities | (599 | ) | (5,771 | ) | ||||
Financing activities | ||||||||
Proceeds from issuance of common stock | 1,897 | 2,265 | ||||||
Common stock repurchases | (393 | ) | (111 | ) | ||||
Taxes paid related to net share settlement | (402 | ) | (404 | ) | ||||
Payment of acquisition-related contingent consideration | — | (230 | ) | |||||
Net cash and cash equivalents provided by financing activities | 1,102 | 1,520 | ||||||
Effect of exchange rate changes on cash | 221 | (24 | ) | |||||
Net increase in cash, cash equivalents and restricted cash | 9,574 | 670 | ||||||
Cash, cash equivalents and restricted cash at beginning of period | 20,554 | 19,884 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 30,128 | $ | 20,554 | ||||
Cash paid (received) for: | ||||||||
Income taxes | $ | 850 | $ | 1,016 | ||||
Income tax refund | $ | (157 | ) | $ | (157 | ) | ||
Year Ended | ||||||||
December 30, 2023 | December 31, 2022 | |||||||
(In thousands) | ||||||||
Operating activities | ||||||||
| Net loss | $ | (12,190 | ) | $ | (17,075 | ) | ||
| Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: | ||||||||
| Depreciation and amortization | 1,402 | 1,446 | ||||||
| Net amortization (accretion) of investment premiums and discounts | (191 | ) | (196 | ) | ||||
| Amortization of intangible assets | 136 | 42 | ||||||
| Equity-based compensation | 4,373 | 4,890 | ||||||
| Straight-line rent adjustment and amortization of lease incentives | (1,105 | ) | (843 | ) | ||||
| Foreign currency loss on liquidation of entity | — | 14 | ||||||
| (Gain) loss on disposal of fixed assets | (41 | ) | 1,467 | |||||
| Deferred income taxes | 1,014 | 836 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (2,824 | ) | (1,528 | ) | ||||
| Inventories | (13,792 | ) | (24,105 | ) | ||||
| Prepaid expenses and other assets | (324 | ) | 42 | |||||
| Accounts payable | (5,810 | ) | 6,290 | |||||
| Accrued payroll and other accrued liabilities | (2,951 | ) | (1,266 | ) | ||||
| Customer advances | (2,770 | ) | 22,552 | |||||
| Total adjustments | (22,883 | ) | 9,641 | |||||
| Net cash and cash equivalents used in operating activities | (35,073 | ) | (7,434 | ) | ||||
Investing activities | ||||||||
| Purchase of investments | (14,780 | ) | (52,385 | ) | ||||
| Proceeds from sales and maturities of investments | 38,427 | 26,649 | ||||||
| Proceeds from sales of property and equipment | 65 | — | ||||||
| Purchase of Hia, Inc., net of cash acquired | — | (763 | ) | |||||
| Purchase of leasehold improvements and equipment | (5,431 | ) | (1,919 | ) | ||||
| Net cash and cash equivalents provided by (used in) investing activities | 18,281 | (28,418 | ) | |||||
Financing activities | ||||||||
| Proceeds from issuance of common stock | 1,365 | 3,083 | ||||||
| Payment of acquisition-related contingent consideration | (250 | ) | — | |||||
| Taxes paid related to net share settlement | (1,739 | ) | (724 | ) | ||||
| Net cash and cash equivalents provided by (used in) financing activities | (624 | ) | 2,359 | |||||
| Effect of exchange rate changes on cash | (133 | ) | (331 | ) | ||||
| Net decrease in cash, cash equivalents and restricted cash | (17,549 | ) | (33,824 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 69,690 | 103,514 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 52,141 | $ | 69,690 | ||||
| Cash paid (received) for: | ||||||||
| Income taxes | $ | 820 | $ | 569 | ||||
| Income tax refund | $ | 5 | $ | — | ||||
Foreign currency | Unrealized holding gains (losses) on available-for-sale investments | Total | Foreign currency | Unrealized holding gains (losses) on available-for-sale investments | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Balance at December 29, 2018 | $ | 405 | $ | (27 | ) | $ | 378 | |||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | 608 | $ | (30 | ) | $ | 578 | |||||||||||||||||
| Other comprehensive loss before reclassification | (331 | ) | (454 | ) | (785 | ) | ||||||||||||||||||
| Amounts reclassified from other comprehensive income (loss) | 14 | — | 14 | |||||||||||||||||||||
| Net current-period other comprehensive loss | (317 | ) | (454 | ) | (771 | ) | ||||||||||||||||||
| Balance at December 31, 2022 | 291 | $ | (484 | ) | (193 | ) | ||||||||||||||||||
Other comprehensive income (loss) before reclassification | (24 | ) | 70 | 46 | (132 | ) | 422 | 290 | ||||||||||||||||
Amounts reclassified from other comprehensive income (loss) | — | — | — | — | — | — | ||||||||||||||||||
Net current-period other comprehensive income (loss) | (24 | ) | 70 | 46 | (132 | ) | 422 | 290 | ||||||||||||||||
Balance at December 28, 2019 | $ | 381 | $ | 43 | $ | 424 | ||||||||||||||||||
| Balance at December 30, 2023 | $ | 159 | $ | (62 | ) | $ | 97 | |||||||||||||||||
Other comprehensive income (loss) before reclassification | 221 | (5 | ) | 216 | ||||||||||||||||||||
Amounts reclassified from other comprehensive income (loss) | — | — | — | |||||||||||||||||||||
Net current-period other comprehensive income (loss) | 221 | (5 | ) | 216 | ||||||||||||||||||||
Balance at January 2, 2021 | $ | 602 | $ | 38 | $ | 640 | ||||||||||||||||||
Year Ended, | ||||||||
December 30, 2023 | December 31, 2022 | |||||||
(In thousands, except per share amounts) | ||||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | $ | (420 | ) | $ | 321 | |||
| Total operating expenses | (420 | ) | 321 | |||||
| Operating income (loss)—discontinued operations | 420 | (321 | ) | |||||
Year Ended, | ||||||||
December 30, 2023 | December 31, 2022 | |||||||
(In thousands, except per share amounts) | ||||||||
| Other income (expense)—discontinued operations | — | — | ||||||
| Income (loss) discontinued operations before provision for (benefit from) income taxes | 420 | (321 | ) | |||||
| Provision for (benefit from) income taxes | — | — | ||||||
| Net income (loss) discontinued operations net of tax | $ | 420 | $ | (321 | ) | |||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Equity-based compensation | $ | (260 | ) | $ | (229 | ) | ||
TFE | 2020 | 2019 | ||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
HDD | DCP | PV | Total | HDD | DCP | PV | Total | |||||||||||||||||||||||||
Systems, upgrades and spare parts | $ | 45,620 | $ | — | $ | 426 | $ | 46,046 | $ | 52,759 | $ | 0 | $ | 15,653 | $ | 68,412 | ||||||||||||||||
Field service | 6,080 | 0 | 2 | 6,082 | 5,210 | 2 | 54 | 5,266 | ||||||||||||||||||||||||
Total TFE net revenues | $ | 51,700 | $ | 0— | $ | 428 | $ | 52,128 | $ | 57,969 | $ | 02 | $ | 15,707 | $ | 73,678 | ||||||||||||||||
Photonics | 2020 | 2019 | ||||||
(in thousands) | ||||||||
Products: | ||||||||
Military products | $ | 20,409 | $ | 12,480 | ||||
Commercial products | 395 | 640 | ||||||
Repair and other services | 1,947 | 2,430 | ||||||
Total Photonics product net revenues | 22,751 | 15,550 | ||||||
Technology development: | ||||||||
FFP | 19,648 | 12,521 | ||||||
CPFF | 3,297 | 7,134 | ||||||
Time and materials | 0 | 2 | ||||||
Total technology development net revenues | 22,945 | 19,657 | ||||||
Total Photonics net revenues | $ | 45,696 | $ | 35,207 | ||||
2023 | 2022 | |||||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
HDD | PV | ASP | Total | HDD | ADVC | PV | ASP | Total | ||||||||||||||||||||||||||||
| Systems, upgrades and spare parts | $ | 47,846 | $ | 28 | $ | 17 | $ | 47,891 | $ | 29,507 | $ | 1 | $ | 273 | $ | 100 | $ | 29,881 | ||||||||||||||||||
| Field service | 4,677 | — | 97 | 4,774 | 5,647 | 43 | 190 | — | 5,880 | |||||||||||||||||||||||||||
| Total net revenues | $ | 52,523 | $ | 28 | $ | 114 | $ | 52,665 | $ | 35,154 | $ | 44 | $ | 463 | $ | 100 | $ | 35,761 | ||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
United States | $ | 6,450 | $ | 45,363 | $ | 51,813 | $ | 1,306 | $ | 34,664 | $ | 35,970 | ||||||||||||
Asia | 45,611 | 0— | 45,611 | 72,372 | — | 72,372 | ||||||||||||||||||
Europe | 67 | 333 | 400 | — | 543 | 543 | ||||||||||||||||||
Total net revenues | $ | 52,128 | $ | 45,696 | $ | 97,824 | $ | 73,678 | $ | 35,207 | $ | 108,885 | ||||||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| United States | $ | 4,499 | $ | 4,558 | ||||
| Asia | 48,058 | 31,103 | ||||||
| Europe | 108 | 100 | ||||||
| Total net revenues | $ | 52,665 | $ | 35,761 | ||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Products transferred at a point in time | $ | 52,665 | $ | 35,761 | ||||
| Products and services transferred over time | — | — | ||||||
| Total net revenues | $ | 52,665 | $ | 35,761 | ||||
2020 | 2019 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
Products transferred at a point in time | $ | 52,128 | $ | 1,947 | $ | 54,075 | $ | 73,678 | $ | 2,430 | $ | 76,108 | ||||||||||||
Products and services transferred over time | — | 43,749 | 43,749 | — | 32,777 | 32,777 | ||||||||||||||||||
Total net revenues | $52,128 | $ | 45,696 | $ | 97,824 | $ | 73,678 | $ | 35,207 | $ | 108,885 | |||||||||||||
January 2, 2021 | December 28, 2019 | Change | December 30, 2023 | December 31, 2022 | Change | |||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||
TFE: | ||||||||||||||||||||||||
Contract assets: | ||||||||||||||||||||||||
Accounts receivable, unbilled | $ | 369 | $ | 760 | $ | (391 | ) | $ | 393 | $ | 424 | $ | (31 | ) | ||||||||||
Contract liabilities: | ||||||||||||||||||||||||
Deferred revenue | $ | 482 | $ | 320 | $ | 162 | $ | 376 | $ | 2,446 | $ | (2,070 | ) | |||||||||||
Customer advances | 33 | 4,007 | (3,974 | ) | 21,889 | 24,659 | (2,770 | ) | ||||||||||||||||
| $ | 515 | $ | 4,327 | $ | (3,812 | ) | $ | 22,265 | $ | 27,105 | $ | (4,840 | ) | |||||||||||
Photonics: | ||||||||||||||||||||||||
Contract assets: | ||||||||||||||||||||||||
Accounts receivable, unbilled | $ | 5,439 | $ | 3,210 | $ | 2,229 | ||||||||||||||||||
Retainage | 126 | 99 | 27 | |||||||||||||||||||||
| $ | 5,565 | $ | 3,309 | $ | 2,256 | |||||||||||||||||||
Contract liabilities: | ||||||||||||||||||||||||
Deferred revenue | $ | 779 | $ | — | $ | 779 | ||||||||||||||||||
2023 | 2022 | |||||||
| Equity-based compensation by type of award: | ||||||||
| Stock options | $ | (14 | ) | $ | (156 | ) | ||
| RSUs | 2,154 | 2,184 | ||||||
| PRSUs | 1,592 | 2,379 | ||||||
| Employee stock purchase plan | 641 | 483 | ||||||
| Total equity-based compensation | $ | 4,373 | $ | 4,890 | ||||
| (a) | A reversal of $462,000 in equity-based compensation expense related to forfeitures of awards due to our 2023 cost reduction plan for fiscal 2023. A reversal of $1.3 million in equity-based compensation expense related to forfeitures of awards due to our 2022 cost reduction plan and a $37,000 benefit related to the modification of certain stock-based awards for fiscal 2022. (See Note 13. Restructuring and Other Costs, Net); and |
| (b) | Equity-based compensation reported in discontinued operations of ($260,000) for fiscal 2023, and ($229,000) for fiscal 2022. Equity-based compensation expense allocated to discontinued operations for fiscal 2022 includes $75,000 related to the modification of certain stock-based awards and is net of a divestiture-related forfeiture benefit of $446,000 that was recognized when employees were conveyed to EOTECH upon closing of the Photonics divestiture. (See Note 2. Divestiture and Discontinued Operations.) |
2020 | 2019 | |||||||
Equity-based compensation by type of award: | ||||||||
Stock options | $504 | $819 | ||||||
RSUs | 1,936 | 1,657 | ||||||
Employee stock purchase plan | 949 | 749 | ||||||
Total equity-based compensation | $ | 3,389 | $ | 3,225 | ||||
2020 | 2019 | |||||||
Stock Options: | ||||||||
Weighted-average fair value of grants per share | $ | 1.82 | $ | 2.06 | ||||
Expected volatility | 46.06 | % | 43.23 | % | ||||
Risk free interest rate | 0.44% | 1.86% | ||||||
Expected term of options (in years) | 4.39 | 4.60 | ||||||
Dividend yield | NaN | NaN | ||||||
2019 | ||||
Weighted-average fair value of grants per share | $ | 1.75 | ||
Expected volatility | 43.43 | % | ||
| Risk free interest rate | 1.96% | |||
Expected term (in years) | 4.60 | |||
Dividend yield | NaN | |||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at December 28, 2019 | 2,096,610 | $ | 6.63 | 3.75 | $ | 2,048,964 | ||||||||||
Options granted | 6,000 | $ | 4.88 | |||||||||||||
Options cancelled and forfeited | (220,971 | ) | $ | 6.88 | ||||||||||||
Options exercised | (67,172 | ) | $ | 4.85 | ||||||||||||
Options outstanding at January 2, 2021 | 1,814,467 | $ | 6.66 | 3.08 | $ | 2,520,722 | ||||||||||
Options exercisable at January 2, 2021 | 1,372,871 | $ | 6.77 | 2.52 | $ | 1,798,938 | ||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
| Options outstanding at December 31, 2022 | 383,099 | $ | 7.07 | 2.40 | $ | 327,711 | ||||||||||
| Options cancelled and forfeited | (188,286 | ) | $ | 7.97 | ||||||||||||
| Options exercised | (52,813 | ) | $ | 5.15 | ||||||||||||
| Options outstanding at December 30, 2023 | 142,000 | $ | 6.57 | 1.57 | $ | 900 | ||||||||||
| Options exercisable at December 30, 2023 | 141,750 | $ | 6.58 | 1.57 | $ | 675 | ||||||||||
Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||||||||||||||
Non-vested RSUs at December 28, 2019 | 553,355 | $ | 6.15 | 1.30 | $ | 3,713,012 | ||||||||||||||||||||||||||
Non-vested RSUs at December 31, 2022 | 1,309,792 | $ | 5.14 | 1.21 | $ | 8,474,354 | ||||||||||||||||||||||||||
Granted | 668,413 | $ | 4.87 | |||||||||||||||||||||||||||||
Vested | (243,312 | ) | $ | 6.38 | ||||||||||||||||||||||||||||
Cancelled | (76,822 | ) | $ | 4.26 | ||||||||||||||||||||||||||||
Non-vested RSUs at January 2, 2021 | 901,634 | $ | 5.30 | 1.50 | $ | 6,500,781 | ||||||||||||||||||||||||||
Non-vested RSUs at December 30, 2023 | 915,087 | $ | 4.89 | 1.04 | $ | 3,953,176 | ||||||||||||||||||||||||||
Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Non-vested PRSUs at December 31, 2022 | 1,089,339 | $ | 3.54 | 0.49 | $ | 7,048,023 | ||||||||||
| Granted | 525,656 | $ | 4.92 | |||||||||||||
| Vested | (190,903 | ) | $ | 4.26 | ||||||||||||
| Cancelled | (263,799 | ) | $ | 3.57 | ||||||||||||
Non-vested PRSUs at December 30, 2023 | 1,160,293 | $ | 4.04 | 1.99 | $ | 5,012,466 | ||||||||||
2020 | ||||
Weighted-average fair value of grants per share | $ | 3.16 | ||
Expected volatility | 46.7 | % | ||
Risk-free interest rate | 0.25 | % | ||
Dividend yield | NaN | |||
2022 | ||||
| Weighted-average fair value of grants per share | $ | 3.58 | ||
| Expected volatility | 56.70 | % | ||
| Risk-free interest rate | 3.11 | % | ||
| Dividend yield | None | |||
2023 | 2022 | |||||||||||||||
2020 | 2019 | |||||||||||||||
Stock Purchase Rights: | ||||||||||||||||
Weighted-average fair value of grants per share | $ | 2.20 | $ | 1.73 | $ | 0.91 | $ | 1.26 | ||||||||
Expected volatility | 51.49 | % | 45.81 | % | 40.33 | % | 52.57 | % | ||||||||
Risk free interest rate | 0.14 | % | 2.28 | % | 5.15 | % | 1.94 | % | ||||||||
Expected term of purchase rights (in years) | 1.24 | 0.91 | 1.08 | 1.24 | ||||||||||||
Dividend yield | NaN | NaN | None | None | ||||||||||||
2023 | 2022 | |||||||||||||||
2020 | 2019 | |||||||||||||||
(in thousands, except per share amounts) | (in thousands, except per share amounts) | |||||||||||||||
Shares purchased | 392 | 370 | 304 | 279 | ||||||||||||
Weighted-average purchase price per share | $ | 4.01 | $ | 3.96 | $ | 3.48 | $ | 4.46 | ||||||||
Aggregate intrinsic value of purchase rights exercised | $ | 765 | $ | 513 | $ | 463 | $ | 220 | ||||||||
2020 | 2019 | |||||||
(in thousands, except per share amounts) | ||||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
| Weighted-average shares – basic | 23,669 | 23,063 | ||||||
Effect of dilutive potential common shares | 482 | 277 | ||||||
| Weighted-average shares – diluted | 24,151 | 23,340 | ||||||
| Net income per share –basic | $ | 0.04 | $ | 0.05 | ||||
| Net income per share –diluted | $ | 0.04 | $ | 0.05 | ||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Stock options to purchase common stock | 935 | 1,235 | ||||||
RSUs | 5 | 5 | ||||||
Employee stock purchase plan | 103 | 3 | ||||||
2023 | 2022 | |||||||
(in thousands, except per share amounts) | ||||||||
| Net loss from continuing operations | $ | (12,610 | ) | $ | (16,754 | ) | ||
| Net income (loss) from discontinued operations, net of tax | 420 | (321 | ) | |||||
| Net loss | $ | (12,190 | ) | $ | (17,075 | ) | ||
| Weighted-average shares – basic | 26,121 | 25,192 | ||||||
| Effect of dilutive potential common shares | — | — | ||||||
| Weighted-average shares – diluted | 26,121 | 25,192 | ||||||
2023 | 2022 | |||||||
(in thousands, except per share amounts) | ||||||||
| Basic and diluted net income (loss) per share: | ||||||||
| Continuing operations | $ | (0.48 | ) | $ | (0.67 | ) | ||
| Discontinued operations | $ | 0.02 | $ | (0.01 | ) | |||
| Net loss per share | $ | (0.47 | ) | $ | (0.68 | ) | ||
2020 | 2019 | |||||||
Seagate Technology | 45 | % | 60 | % | ||||
U.S. Government | 26 | % | 25 | % | ||||
HGST | 14 | % | 0* | |||||
2023 | 2022 | |||||||
| Seagate Technology | 95 | % | 88 | % | ||||
2020 | 2019 | |||||||
Seagate Technology | 42 | % | 49 | % | ||||
U.S. Government | 29 | % | 20 | % | ||||
Elbit Systems of America | 12 | % | 0* | |||||
Jolywood (Hongkong) Industrial Holdings Co., Limited | 0* | 14 | % | |||||
2023 | 2022 | |||||||
| Seagate Technology | 92 | % | 80 | % | ||||
| Western Digital Corporation | * | 18 | % | |||||
| * | Less than 10% |
January 2, | December 28, | |||||||||||||||
2021 | 2019 | December 30, 2023 | December 31, 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Trade receivables and other | $ | 22,712 | $ | 24,472 | $ | 18,220 | $ | 15,399 | ||||||||
Unbilled costs and accrued profits | 5,934 | 4,069 | 393 | 424 | ||||||||||||
Income tax receivable | — | 78 | ||||||||||||||
Less: allowance for doubtful accounts | — | — | ||||||||||||||
| Less: allowance for credit losses | — | — | ||||||||||||||
| $ | 28,646 | $ | 28,619 | $ | 18,613 | $ | 15,823 | |||||||||
January 2, | December 28, | |||||||||||||||
2021 | 2019 | December 30, 2023 | December 31, 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Raw materials | $ | 9,999 | $ | 15,286 | $ | 37,346 | $ | 19,116 | ||||||||
Work-in-progress | 4,832 | 4,748 | 6,449 | 9,499 | ||||||||||||
Finished goods | 6,858 | 4,873 | — | 1,388 | ||||||||||||
| $ | 21,689 | $ | 24,907 | $ | 43,795 | $ | 30,003 | |||||||||
December 30, 2023 | December 31, 2022 | |||||||
(in thousands) | ||||||||
| Leasehold improvements | $ | 8,959 | $ | 9,567 | ||||
| Machinery and equipment | 20,964 | 19,016 | ||||||
| 29,923 | 28,583 | |||||||
| Less accumulated depreciation and amortization | 22,259 | 24,925 | ||||||
| Total property, plant and equipment, net | $ | 7,664 | $ | 3,658 | ||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Leasehold improvements | $ | 16,323 | $ | 15,037 | ||||
Machinery and equipment | 46,846 | 46,674 | ||||||
| 63,169 | 61,711 | |||||||
Less accumulated depreciation and amortization | 52,165 | 50,113 | ||||||
Total property, plant and equipment, net | $ | 11,004 | $ | 11,598 | ||||
December 30, 2023 | December 31, 2022 | |||||||
(in thousands) | ||||||||
| United States | $ | 7,018 | $ | 3,143 | ||||
| Asia | 646 | 515 | ||||||
| Net property, plant & equipment | $ | 7,664 | $ | 3,658 | ||||
January 2, 2021 | December 28, 2019 | December 30, 2023 | December 31, 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Deferred income taxes | $ | 5,335 | $ | 6,252 | $ | 3,342 | $ | 4,356 | ||||||||
Prepaid expenses | 151 | — | 124 | 25 | ||||||||||||
Purchased intangible assets, net | — | 274 | ||||||||||||||
Income tax receivable | — | 78 | ||||||||||||||
| $ | 5,486 | $ | 6,604 | $ | 3,466 | $ | 4,381 | |||||||||
January 2, 2021 | December 28, 2019 | December 30, 2023 | December 31, 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
| Other taxes payable | $ | 947 | $ | 838 | ||||||||||||
Deferred revenue | $ | 1,261 | $ | 320 | 376 | 2,446 | ||||||||||
Other taxes payable | 935 | 1,155 | ||||||||||||||
Accrued product warranties | 405 | 846 | 184 | 163 | ||||||||||||
Income taxes payable | 263 | 403 | 174 | 187 | ||||||||||||
Other | 734 | 869 | 139 | 216 | ||||||||||||
| Litigation settlement | — | 1,012 | ||||||||||||||
| Restructuring | — | 318 | ||||||||||||||
| Acquisition–related contingent consideration payable (See Note 15. Acquisition of Hia, Inc.) | — | 250 | ||||||||||||||
Total other accrued liabilities | $ | 3,598 | $ | 3,593 | $ | 1,820 | $ | 5,430 | ||||||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Employer payroll taxes | $ | 382 | $ | — | ||||
Accrued product warranties | 75 | 176 | ||||||
Accrued income taxes | — | 10 | ||||||
Total other long-term liabilities | $ | 457 | $ | 186 | ||||
December 30, 2023 | December 31, 2022 | |||||||
(in thousands) | ||||||||
| Accrued product warranties | $ | 21 | $ | — | ||||
| Total other long-term liabilities | $ | 21 | $ | — | ||||
December 28, 2019 | ||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
(in thousands) | ||||||||||||
Customer relationships | $ | 560 | $ | 524 | $ | 36 | ||||||
Purchased technology | 4,000 | 3,762 | 238 | |||||||||
Total amortizable intangible assets | $ | 4,560 | $ | 4,286 | $ | 274 | ||||||
2019 | ||||
(in thousands) | ||||
Beginning balance | $ | 223 | ||
Changes in fair value | 7 | |||
Cash payments made | (230 | ) | ||
Ending balance | $ | — | ||
January 2, 2021 | December 30, 2023 | |||||||||||||||||||||||||||||||
Amortized Cost | Unrealized Holding Gains | Unrealized Holding Losses | Fair Value | Amortized Cost | Unrealized Holding Gains | Unrealized Holding Losses | Fair Value | |||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||||||||||||||
Cash | $ | 24,729 | $ | — | $ | — | $ | 24,729 | $ | 19,050 | $ | — | $ | — | $ | 19,050 | ||||||||||||||||
Money market funds | 3,612 | — | — | 3,612 | 15,090 | — | — | 15,090 | ||||||||||||||||||||||||
Certificates of deposit | 1,000 | — | — | 1,000 | ||||||||||||||||||||||||||||
| Commercial paper | 14,659 | — | 4 | 14,655 | ||||||||||||||||||||||||||||
| U.S. treasury securities | 2,646 | — | — | 2,646 | ||||||||||||||||||||||||||||
Total cash and cash equivalents | $ | 29,341 | $ | — | $ | — | $ | 29,341 | $ | 51,445 | $ | — | $ | 4 | $ | 51,441 | ||||||||||||||||
Short-term investments: | ||||||||||||||||||||||||||||||||
| Asset backed securities | $ | 12 | $ | — | $ | — | $ | 12 | ||||||||||||||||||||||||
Certificates of deposit | $ | 6,450 | $ | 2 | $ | — | $ | 6,452 | 1,850 | — | — | 1,850 | ||||||||||||||||||||
Commercial paper | 500 | — | — | 500 | 3,506 | — | 1 | 3,505 | ||||||||||||||||||||||||
Corporate bonds and medium-term notes | 2,929 | 6 | — | 2,935 | 5,373 | — | 36 | 5,337 | ||||||||||||||||||||||||
Municipal bonds | 400 | — | — | 400 | 221 | — | 2 | 219 | ||||||||||||||||||||||||
U.S. treasury securities | 4,527 | 25 | — | 4,552 | ||||||||||||||||||||||||||||
| U.S. treasury and agency securities | 6,498 | 1 | 17 | 6,482 | ||||||||||||||||||||||||||||
Total short-term investments | $ | 14,806 | $ | 33 | $ | — | $ | 14,839 | $ | 17,460 | $ | 1 | $ | 56 | $ | 17,405 | ||||||||||||||||
Long-term investments: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 500 | $ | — | $ | — | $ | 500 | ||||||||||||||||||||||||
| Asset backed securities | $ | 460 | $ | — | $ | 4 | $ | 456 | ||||||||||||||||||||||||
Corporate bonds and medium-term notes | 3,474 | 4 | — | 3,478 | 2,230 | 1 | — | 2,231 | ||||||||||||||||||||||||
U.S. treasury securities | 1,409 | 1 | — | 1,410 | ||||||||||||||||||||||||||||
Total long-term investments | $ | 5,383 | $ | 5 | $ | — | $ | 5,388 | $ | 2,690 | $ | 1 | $ | 4 | $ | 2,687 | ||||||||||||||||
Total cash, cash equivalents, and investments | $ | 49,530 | $ | 38 | $ | — | $ | 49,568 | $ | 71,595 | $ | 2 | $ | 64 | $ | 71,533 | ||||||||||||||||
December 31, 2022 | ||||||||||||||||
Amortized Cost | Unrealized Holding Gains | Unrealized Holding Losses | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
| Cash and cash equivalents: | ||||||||||||||||
| Cash | $ | 26,465 | $ | — | $ | — | $ | 26,465 | ||||||||
| Money market funds | 9,589 | — | — | 9,589 | ||||||||||||
| Commercial paper | 32,856 | — | 6 | 32,850 | ||||||||||||
| Total cash and cash equivalents | $ | 68,910 | $ | — | $ | 6 | $ | 68,904 | ||||||||
| Short-term investments: | ||||||||||||||||
| Asset backed securities | $ | 2,012 | $ | — | $ | 13 | $ | 1,999 | ||||||||
| Certificates of deposit | 3,850 | — | 10 | 3,840 | ||||||||||||
| Commercial paper | 9,443 | — | 28 | 9,415 | ||||||||||||
| Corporate bonds and medium-term notes | 4,210 | — | 32 | 4,178 | ||||||||||||
| Municipal bonds | 1,486 | — | 25 | 1,461 | ||||||||||||
| U.S. treasury securities | 4,771 | — | 123 | 4,648 | ||||||||||||
| Total short-term investments | $ | 25,772 | $ | — | $ | 231 | $ | 25,541 | ||||||||
| Long-term investments: | ||||||||||||||||
| Asset backed securities | $ | 6,749 | $ | — | $ | 85 | $ | 6,664 | ||||||||
| Corporate bonds and medium-term notes | 5,366 | — | 102 | 5,264 | ||||||||||||
| Municipal bonds | 224 | — | 6 | 218 | ||||||||||||
| U.S. treasury and agency securities | 5,493 | — | 54 | 5,439 | ||||||||||||
| Total long-term investments | $ | 17,832 | $ | — | $ | 247 | $ | 17,585 | ||||||||
| Total cash, cash equivalents, and investments | $ | 112,514 | $ | — | $ | 484 | $ | 112,030 | ||||||||
December 28, 2019 | ||||||||||||||||
Amortized Cost | Unrealized Holding Gains | Unrealized Holding Losses | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Cash | $ | 16,512 | $ | — | $ | — | $ | 16,512 | ||||||||
Money market funds | 3,255 | — | — | 3,255 | ||||||||||||
Total cash and cash equivalents | $ | 19,767 | $ | — | $ | — | $ | 19,767 | ||||||||
Short-term investments: | ||||||||||||||||
Certificates of deposit | $ | 3,000 | $ | 1 | $ | — | $ | 3,001 | ||||||||
Commercial paper | 1,891 | 2 | — | 1,893 | ||||||||||||
Corporate bonds and medium-term notes | 6,383 | 25 | — | 6,408 | ||||||||||||
U.S. treasury securities | 5,417 | 1 | — | 5,418 | ||||||||||||
Total short-term investments | $ | 16,691 | $ | 29 | $ | — | $ | 16,720 | ||||||||
Long-term investments: | ||||||||||||||||
Certificates of deposit | $ | 499 | $ | 1 | $ | — | $ | 500 | ||||||||
Corporate bonds and medium-term notes | 2,530 | 12 | — | 2,542 | ||||||||||||
U.S. treasury securities | 2,494 | 1 | — | 2,495 | ||||||||||||
Total long-term investments | $ | 5,523 | $ | 14 | $ | — | $ | 5,537 | ||||||||
Total cash, cash equivalents, and investments | $ | 41,981 | $ | 43 | $ | — | $ | 42,024 | ||||||||
Amortized Cost | Fair Value | |||||||
(in thousands) | ||||||||
| Due in one year or less | $ | 49,855 | $ | 49,796 | ||||
| Due after one through five years | 2,690 | 2,687 | ||||||
| $ | 52,545 | $ | 52,483 | |||||
Amortized Cost | Fair Value | |||||||
(in thousands) | ||||||||
Due in one year or less | $ | 19,418 | $ | 19,451 | ||||
Due after one through five years | 5,383 | 5,388 | ||||||
| $ | 24,801 | $ | 24,839 | |||||
December 30, 2023 | ||||||||||||||||
In Loss Position for Less than 12 Months | In Loss Position for Greater than 12 Months | |||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||
(In thousands) | ||||||||||||||||
| Asset backed securities | $ | — | $ | — | $ | 456 | $ | 4 | ||||||||
| Commercial paper | 18,160 | 5 | — | — | ||||||||||||
| Corporate bonds and medium-term notes | 1,091 | 1 | 4,845 | 35 | ||||||||||||
| Municipal bond | — | — | 219 | 2 | ||||||||||||
| U.S. treasury and agency securities | — | — | 1,981 | 17 | ||||||||||||
| $ | 19,251 | $ | 6 | $ | 7,501 | $ | 58 | |||||||||
Fair Value Measurements at December 30, 2023 | ||||||||||||
Total | Level 1 | Level 2 | ||||||||||
(in thousands) | ||||||||||||
| Recurring fair value measurements: | ||||||||||||
| Money market funds | $ | 15,090 | $ | 15,090 | $ | — | ||||||
| U.S. treasury and agency securities | 9,128 | 5,628 | 3,500 | |||||||||
| Asset backed securities | 468 | — | 468 | |||||||||
| Certificates of deposit | 1,850 | — | 1,850 | |||||||||
Fair Value Measurements at January 2, 2021 | ||||||||||||
Total | Level 1 | Level 2 | ||||||||||
(in thousands) | ||||||||||||
Recurring fair value measurements: | ||||||||||||
Available-for-sale | ||||||||||||
Money market funds | $ | 3,612 | $ | 3,612 | $ | — | ||||||
U.S. treasury securities | 5,962 | 5,962 | — | |||||||||
Certificates of deposit | 7,952 | — | 7,952 | |||||||||
Commercial paper | 500 | — | 500 | |||||||||
Corporate bonds and medium-term notes | 6,413 | — | 6,413 | |||||||||
Municipal bonds | 400 | — | 400 | |||||||||
Total recurring fair value measurements | $ | 24,839 | $ | 9,574 | $ | 15,265 | ||||||
Fair Value Measurements at December 30, 2023 | ||||||||||||
Total | Level 1 | Level 2 | ||||||||||
(in thousands) | ||||||||||||
| Commercial paper | 18,160 | — | 18,160 | |||||||||
| Corporate bonds and medium-term notes | 7,568 | — | 7,568 | |||||||||
| Municipal bonds | 219 | — | 219 | |||||||||
| Total recurring fair value measurements | $ | 52,483 | $ | 20,718 | $ | 31,765 | ||||||
Notional Amounts | Derivative Liabilities | |||||||||||||||||||||||
Derivative Instrument | January 2, 2021 | December 28, 2019 | January 2, 2021 | December 28, 2019 | ||||||||||||||||||||
Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Undesignated Hedges: | ||||||||||||||||||||||||
Forward Foreign Currency Contracts | $ | 983 | 1,035 | * | $ | 3 | * | $ | 4 | |||||||||||||||
Total Hedges | $ | 983 | 1,035 | $ | 3 | $ | 4 | |||||||||||||||||
| At December 31, 2022 | ||||||||||||
| Derivative Instrument | Notional Amount | Balance Sheet Line Item | Derivative Assets Fair Value | |||||||||
| (in thousands) | ||||||||||||
| Undesignated Hedges: | ||||||||||||
| Forward Foreign Currency Contracts | $ | 2,240 | (a | ) | $ | 4 | ||||||
| Total Hedges | $ | 2,240 | $ | 4 | ||||||||
Other |
2020 | 2019 | |||||||
(in thousands, except per share amounts) | ||||||||
Shares of common stock repurchased | 98 | 24 | ||||||
Cost of stock repurchased | $ | 393 | $ | 111 | ||||
Average price paid per share | $ | 3.97 | $ | 4.67 | ||||
2020 | 2019 | 2023 | 2022 | |||||||||||||
Federal: | ||||||||||||||||
Current | $ | (915 | ) | $ | — | $ | — | $ | — | |||||||
Deferred | 0 | 0 | — | (121 | ) | |||||||||||
| (915 | ) | — | — | (121 | ) | |||||||||||
State: | ||||||||||||||||
Current | 4 | 4 | 3 | 4 | ||||||||||||
Deferred | 0 | 0 | — | — | ||||||||||||
| 4 | 4 | 3 | 4 | |||||||||||||
Foreign: | ||||||||||||||||
Current | 1,705 | 1,694 | 805 | 490 | ||||||||||||
Deferred | 917 | 1,661 | 1,014 | 954 | ||||||||||||
| 2,622 | 3,355 | 1,819 | 1,444 | |||||||||||||
Total | $ | 1,711 | $ | 3,359 | $ | 1,822 | $ | 1,327 | ||||||||
| Income taxes on discontinued operations | $ | — | $ | — | ||||||||||||
| Income taxes on continuing operations | $ | 1,822 | $ | 1,327 | ||||||||||||
2020 | 2019 | |||||||
U.S | $ | (3,293 | ) | $ | (4,875 | ) | ||
Foreign | 6,060 | 9,382 | ||||||
| $ | 2,767 | $ | 4,507 | |||||
Effective tax rate | 61.8 | % | 74.5 | % | ||||
2023 | 2022 | |||||||
| U.S | $ | (17,089 | ) | $ | (20,570 | ) | ||
| Foreign | 6,301 | 5,143 | ||||||
| $ | (10,788 | ) | $ | (15,427 | ) | |||
| Effective tax rate | (16.9 | %) | (8.6 | %) | ||||
December 30, 2023 | December 31, 2022 | |||||||
| Deferred tax assets: | ||||||||
| Vacation, warranty and other accruals | $ | 312 | $ | 525 | ||||
| Depreciation and amortization | 283 | 229 | ||||||
| Purchased technology | 29 | 14 | ||||||
| Inventory valuation | 304 | 1,116 | ||||||
| Equity-based compensation | 851 | 841 | ||||||
| Lease liability | 2,101 | 898 | ||||||
| Section 174 R&D adjustment | 4,701 | 2,440 | ||||||
| Net operating loss, research and other tax credit carryforwards | 53,940 | 56,310 | ||||||
| Other | 53 | 7 | ||||||
| 62,574 | 62,380 | |||||||
| Valuation allowance for deferred tax assets | (56,923 | ) | (57,310 | ) | ||||
| Total deferred tax assets | 5,651 | 5,070 | ||||||
January 2, 2021 | December 28, 2019 | |||||||
Deferred tax assets: | ||||||||
Vacation, warranty and other accruals | $ | 651 | $ | 635 | ||||
Depreciation and amortization | — | 89 | ||||||
Intangible amortization | 551 | 804 | ||||||
Purchased technology | 14 | — | ||||||
Inventory valuation | 1,101 | 1,288 | ||||||
Equity-based compensation | 1,494 | 1,593 | ||||||
Net operating loss, research and other tax credit carryforwards | 55,322 | 54,818 | ||||||
Other | 30 | 43 | ||||||
| 59,163 | 59,270 | |||||||
Valuation allowance for deferred tax assets | (52,088 | ) | (52,099 | ) | ||||
Total deferred tax assets | 7,075 | 7,171 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation and amortization | (341 | ) | — | |||||
Purchased technology | — | (45 | ) | |||||
Unbilled revenue | (1,399 | ) | (874 | ) | ||||
Total deferred tax liabilities | (1,740 | ) | (919 | ) | ||||
Net deferred tax assets | $ | 5,335 | $ | 6,252 | ||||
As reported on the balance sheet: | ||||||||
Non-current deferred tax assets | $ | 5,335 | $ | 6,252 | ||||
December 30, 2023 | December 31, 2022 | |||||||
| Deferred tax liabilities: | ||||||||
| Intangible amortization | (283 | ) | (160 | ) | ||||
| ROU asset | (2,026 | ) | (554 | ) | ||||
| Total deferred tax liabilities | (2,309 | ) | (714 | ) | ||||
| Net deferred tax assets | $ | 3,342 | $ | 4,356 | ||||
| As reported on the consolidated balance sheets: | ||||||||
Non-current deferred tax assets | $ | 3,342 | $ | 4,356 | ||||
2020 | 2019 | 2023 | 2022 | |||||||||||||
Income tax at the federal statutory rate | $ | 581 | $ | 947 | ||||||||||||
| Income tax (benefit) at the federal statutory rate | $ | (2,266 | ) | $ | (3,240 | ) | ||||||||||
State income taxes, net of federal benefit | 4 | 4 | 3 | 4 | ||||||||||||
Change in valuation allowance: | ||||||||||||||||
U.S | (416 | ) | (689 | ) | 321 | 3,129 | ||||||||||
Foreign | 0— | — | — | — | ||||||||||||
Effect of foreign operations taxed at various rates | (235 | ) | (397 | ) | (266 | ) | (219 | ) | ||||||||
Research tax credits | (1,306 | ) | (1,710 | ) | (1,009 | ) | (788 | ) | ||||||||
Effect of tax rate changes, permanent differences and adjustments of prior deferrals | 2,504 | 3,685 | 5,039 | 2,441 | ||||||||||||
Unrecognized tax benefits | 579 | 1,519 | — | — | ||||||||||||
Total | $ | 1,711 | $ | 3,359 | ||||||||||||
| Total provision for income taxes on continuing operations | $ | 1,822 | $ | 1,327 | ||||||||||||
2020 | 2019 | 2023 | 2022 | |||||||||||||
Beginning balance | $ | 7,683 | $ | 6,164 | $ | 730 | $ | 718 | ||||||||
Additions based on tax positions related to the current year | 589 | 1,519 | 430 | 12 | ||||||||||||
Settlements | 0— | — | ||||||||||||||
| Increases for tax positions of prior years | 6,448 | — | ||||||||||||||
Lapse of statute of limitations | (945 | ) | — | (9 | ) | — | ||||||||||
Ending balance | $ | 7,327 | $ | 7,683 | $ | 7,599 | $ | 730 | ||||||||
December 30, 2023 | December 31, 2022 | |||||||
(in thousands) | ||||||||
| Assets: | ||||||||
| Operating lease ROU assets | $ | 7,658 | $ | 3,390 | ||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Assets: | ||||||||
Operating lease right-of-use | $ | 8,165 | $ | 10,279 | ||||
Liabilities: | ||||||||
Current operating lease liabilities | $ | 2,853 | $ | 2,524 | ||||
Noncurrent operating lease liabilities | 6,803 | 9,532 | ||||||
| $ | 9,656 | $ | 12,056 | |||||
December 30, 2023 | December 31, 2022 | |||||||
(in thousands) | ||||||||
| Liabilities: | ||||||||
| Current operating lease liabilities | $ | 1,008 | $ | 3,404 | ||||
| Noncurrent operating lease liabilities | 6,976 | 1,417 | ||||||
| $ | 7,984 | $ | 4,821 | |||||
2020 | 2019 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Operating lease cost | $ | 2,942 | $ | 3,112 | $ | 1,613 | $ | 1,624 | ||||||||
| Operating lease cost subleased / assigned property | 869 | 974 | ||||||||||||||
Short-term lease cost | 93 | 78 | 125 | 43 | ||||||||||||
| Less: sublease income | (869 | ) | (974 | ) | ||||||||||||
Total lease cost | $ | 3,035 | $ | 3,190 | ||||||||||||
| Total lease cost, net | $ | 1,738 | $ | 1,667 | ||||||||||||
Continuing Operations | Discontinued Operations (b) | Total | ||||||||||
(in thousands) | ||||||||||||
| 2024 | $ | 1,335 | (a) | 296 | $ | 1,631 | ||||||
| 2025 | 2,110 | — | 2,110 | |||||||||
| 2026 | 1,852 | — | 1,852 | |||||||||
| 2027 | 1,799 | — | 1,799 | |||||||||
| 2028 | 1,841 | — | 1,841 | |||||||||
| 2029 | 786 | — | 786 | |||||||||
| Total lease payments | $ | 9,723 | $ | 296 | 10,019 | |||||||
| Less: Interest | (2,032 | ) | (3 | ) | (2,035 | ) | ||||||
| Present value of lease liabilities | $ | 7,691 | $ | 293 | 7,984 | |||||||
(In thousands) | ||||
2021 | $ | 3,388 | ||
2022 | 3,474 | |||
2023 | 3,289 | |||
2024 | 541 | |||
Total lease payments | 10,692 | |||
Less: Interest | (1,036 | ) | ||
Present value of lease liabilities | $ | 9,656 | ||
| (a) | The amount is net of a tenant improvement allowance of $292,000 that the Company expects to receive from the landlord. |
| (b) | The operating lease liabilities in discontinued operations represent the lease obligations that were assigned to EOTECH but which are being accounted for as a sublease as the Company has not been relieved of its primary obligations with the landlord. |
January 2, 2021 | December 28, 2019 | |||||||
Weighted-average remaining lease term (in years) | 3.09 | 4.08 | ||||||
Weighted-average discount rate | 6.39 | % | 6.37 | % | ||||
December 30, 2023 | December 31, 2022 | |||||||
| Weighted-average remaining lease term (in years) | 5.01 | 1.69 | ||||||
| Weighted-average discount rate | 8.37 | % | 5.81 | % | ||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Operating cash outflows from operating leases | $ | 1,831 | $ | 1,757 | ||||
| ROU assets obtained in exchange for new operating lease liabilities | $ | 6,520 | $ | 1,122 | ||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Operating cash outflows from operating leases | $ | 3,332 | $ | 3,484 | ||||
Right-of-use | $ | 128 | $ | 934 | ||||
2020 | 2019 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Beginning balance | $ | 1,022 | $ | 997 | $ | 163 | $ | 346 | ||||||||
Expenditures incurred under warranties | (512 | ) | (625 | ) | (214 | ) | (312 | ) | ||||||||
Accruals for product warranties | 280 | 955 | 262 | 147 | ||||||||||||
Adjustments to previously existing warranty accruals | (310 | ) | (305 | ) | (6 | ) | (18 | ) | ||||||||
Ending balance | $ | 480 | $ | 1,022 | $ | 205 | $ | 163 | ||||||||
Net Revenues | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 52,128 | $ | 73,678 | ||||
Photonics | 45,696 | 35,207 | ||||||
Total segment net revenues | $ | 97,824 | $ | 108,885 | ||||
Operating Profit (Loss) | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | (1,978 | ) | $ | 1,747 | |||
Photonics | 10,064 | 6,434 | ||||||
Total segment operating profit | 8,086 | 8,181 | ||||||
Unallocated costs | (5,531 | ) | (4,256 | ) | ||||
Operating income | 2,555 | 3,925 | ||||||
Interest income | 284 | 574 | ||||||
Other income (expense), net | (72 | ) | 8 | |||||
Income before provision for income taxes | $ | 2,767 | $ | 4,507 | ||||
Depreciation and Amortization | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 1,817 | $ | 1,909 | ||||
Photonics | 1,159 | 1,310 | ||||||
Total segment depreciation and amortization | 2,976 | 3,219 | ||||||
Unallocated costs | 504 | 372 | ||||||
Total consolidated depreciation and amortization | $ | 3,480 | $ | 3,591 | ||||
Capital Additions | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 1,336 | $ | 2,611 | ||||
Photonics | 636 | 832 | ||||||
Total segment capital additions | 1,972 | 3,443 | ||||||
Unallocated | 640 | 664 | ||||||
Total consolidated capital additions | $ | 2,612 | $ | 4,107 | ||||
Segment Assets | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 44,335 | $ | 51,153 | ||||
Photonics | 22,923 | 22,071 | ||||||
Total segment assets | 67,258 | 73,224 | ||||||
Cash and investments | 49,568 | 42,024 | ||||||
Restricted cash | 787 | 787 | ||||||
Deferred income taxes | 5,335 | 6,252 | ||||||
Other current assets | 1,093 | 752 | ||||||
Common property, plant and equipment | 1,443 | 1,307 | ||||||
Common operating lease right-of-use | 1,603 | 1,898 | ||||||
Other assets | 151 | 78 | ||||||
Consolidated total assets | $ | 127,238 | $ | 126,322 | ||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
United States | $ | 10,678 | $ | 11,420 | ||||
Asia | 326 | 178 | ||||||
Net property, plant & equipment | $ | 11,004 | $ | 11,598 | ||||
Employee Termination Costs | Other Exit Costs | Total | ||||||||||
(in thousands) | ||||||||||||
| Balance at January 1, 2022 | $ | 358 | $ | 665 | $ | 1,023 | ||||||
| Provision for restructuring charges under the 2022 Cost Reduction Plan | 1,232 | — | 1,232 | |||||||||
| Cash payments made | (1,269 | ) | — | (1,269 | ) | |||||||
Non-cash utilization | 37 | (a) | — | 37 | ||||||||
| Provision for restructuring charges associated with Photonics sale (b) | 112 | 15 | 127 | |||||||||
| Cash payments made | (395 | ) | (362 | ) | (757 | ) | ||||||
Non-cash utilization | (75 | )(a) | — | (75 | ) | |||||||
| Balance at December 31, 2022 | $ | — | $ | 318 | $ | 318 | ||||||
| Provision for restructuring charges under the 2023 Cost Reduction Plan | 1,950 | — | 1,950 | |||||||||
| Cash payments made | (1,948 | ) | — | (1,948 | ) | |||||||
Non-cash utilization | (2 | )(a) | — | (2 | ) | |||||||
| Provision for restructuring charges associated with Photonics sale (b) | — | 7 | 7 | |||||||||
| Cash payments made | — | (325 | ) | (325 | ) | |||||||
| Balance at December 30, 2023 | $ | — | $ | — | $ | — | ||||||
( | |||||||
| Cash payment | $ | ||||||
| ( | ) | ||||||
| $ | |||||||
| Assets acquired: | |||||||
| Technology intangible assets | $ | 815 | |||||
| Deferred tax asset | 119 | ||||||
| Total assets acquired | $ | 934 | |||||
| Liability assumed: | |||||||
| Deferred tax liability | $ | (171 | ) | ||||
| $ | 763 | ||||||
(In thousands) | ||||
| Initial cost of technology intangible assets recognized on the acquisition date | $ | 815 | ||
| Achievement of the first milestone and recognition of contingent consideration payable | 250 | |||
| Deferred tax liability associated with the recognition of the first milestone | 67 | |||
| Gross carrying amount at December 30, 2023 | $ | 1,132 | ||
December 30, 2023 | December 31, 2022 | |||||||
(In thousands) | ||||||||
| Technology intangible assets: | ||||||||
| Gross carrying amount | $ | 1,132 | $ | 1,132 | ||||
| Accumulated Amortization | (178 | ) | (42 | ) | ||||
| Net carrying amount | $ | 954 | $ | 1,090 | ||||
Item 9. | Changes |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
Item | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
PART III
| Item 10. | Directors, Executive Officers and Corporate Governance |
The information required by this item relating to the Company’s executive officers and key employees is included under the caption “Executive Officers of the Registrant”Intevac” under Item 1 in Part I of this Annual Report on Form
Item 11. | Executive Compensation |
The information required by this item is included under the caption “Executive Compensation and Related Information” in the Company’s Proxy Statement for the 20212024 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information required by this item is included under the caption “Ownership“Security Ownership of Securities”Certain Beneficial Owners and Management” in the Company’s Proxy Statement for the 20212024 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
The information required by this item is included under the captions “Certain Relationships and Related Party Transactions” and “Corporate Governance Matters” in the Company’s Proxy Statement for the 20212024 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. | Principal Accountant Fees and Services |
The information required by this item is included under the caption “Fees Paid To Accountants For Services Rendered During 2020”“Principal Accountant Fees and Services” in the Company’s Proxy Statement for the 20212024 Annual Meeting of Stockholders and is incorporated herein by reference.
66
PART IV
Item 15. | Exhibits and Financial |
(a) The following documents are filed as part of this Annual Report on
1. Financial Statements:
See “Index to Consolidated Financial Statements” in Part II, Item 8 of this
All other schedules have been omitted since the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements or notes thereto.
2. Exhibits
67
| (P) | Paper exhibit. |
| + | Management compensatory plan or arrangement |
| Item 16. | Form 10-K Summary |
Not applicable.
68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
INTEVAC, INC. |
/s/ KEVIN SOULSBY |
Kevin Soulsby |
Interim Chief Financial Officer, Secretary and Treasurer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Wendell T. BloniganNigel D. Hunton and James MonizKevin Soulsby and each of them, as his true and lawful
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ | President, | February | ||
( | Chief Executive Officer and Director (Principal Executive Officer) | |||
/s/ (Kevin Soulsby) | ||||
Interim Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) | February 15, 2024 | |||
/s/ DAVID S. DURY | Chairman of Board | February | ||
(David S. Dury) | ||||
/s/ KEVIN D. BARBER | Director | February | ||
(Kevin D. Barber) | ||||
/s/ DOROTHY D. HAYES | Director | February | ||
(Dorothy D. Hayes) | ||||
/s/ MICHELE F. KLEIN | Director | February | ||
(Michele F. Klein) | ||||
69