IVAC - Earnings call transcript Q3 2017

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Operator

Good day. And welcome to Intevac’s Third Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] Please note that this conference call is being recorded today, October 30, 2017. would Intevac’s turn Investor I to call time, McAdams, Claire Relations this like the to over At Counsel. Please go ahead.

Claire McAdams

Thank you for Intevac’s afternoon, September XXth. everyone. today ended XXXX, good the discuss of for financial you, to results on quarter which joining and us third Thank

In discussing recent the results, financial will provide XXXX. addition for full the year to guidance fourth company’s we quarter and

risk forward-looking based represent and the start this uncertainties like call future call Executive the connection Financial related the Jim statements of today’s the I’d performance this today’s future quarter, call results to but completed turn time-sensitive Wendell. as on well projections discussed everyone call the which going quarterly are undertake of Form a results will Officer; as Officer. and result outlook financial on statements regarding risks Jim Exchange the and Commission, The now various including, me I could recently President a documents factors events outlook Chief other subject to reports forward-looking discuss the our to Securities Wendell conference contain contents forward-looking of and our in Joining and will annual in update of today. us our as actual include fourth limited forward-looking the and full to Chief report and call regarding with will obligation conference Moniz, We with to our about Wendell our quarter differ including to during statements XXth projections Form over businesses for fiscal to no quarter with comments upon on XX-Q, made expectations review results comments preparation remains call. before Blonigan, not of Form financial statements Q&A. that XX-K that year of our for statements review October certain XX-Q. Intevac. most and remind financial filed current These and and company’s third are our then materially over and by as these forward turning adjustment

Wendell Blonigan

an towards Thanks, afternoon. exceeding results and orders profitable XXXX, increased of and XXX $XX in guidance reported per Claire, for revenues Lean the objectives XXX months have the for Equipment earnings. growth XX%, with as execution year. has despite Today, progress the profitability and nine industry. booked Lean significant we the We we quarters, share now XX Equipment and which new gross good revenue, media QX in continue overcapacity the our systems XX%, two equates up Thin-film new nearly growth doubled company. to million our quarter, results quarters to with in over four last profit Year-to-date driven compared straight $X.XX of Growth segment, six has the first booked revenues on are of strategy make our in

backlog. the funds order of three ISIE-XX. the increased in increase and for $X million. again into the the Included QX In booking XXX orders new which of over Photonics We the The quarter, and the expected sensor was of Systems driven to of Backlog XXXX from million. expected high-end third revenue in Implant up is next-generation a were high, ENERGi at XX in to guidance. a backlog majority also night is vision development five our than revenues of upgrades, higher which driving seven-year leveled saw are for XXXX. business, primarily the our Leans activity $XX accelerated above currently equipment by in The

the third were increased from year. and up which revenues of XX% up from We QX Photonics XX% last also quarter

full XXXX our last expect up year year results. bottomline will to XX% revenues be with continue about profitable from We

an each Thin-film with the We program the drive our In capabilities booked XXX Equipment. quarter in to shipped market on upgrade in base customers hard two Leans two at Now starting update of and five the with QX, businesses continue. our backlog of installed end. for the technical the

have which core is providing an that HDD of ongoing with the a market. We solid foreseeable in us said see technology this into our base continuing program, upgrade we future, business

in a the are are not installed of media shipping reminder, we currently increasing the industry. systems As the base capacity

of rate earlier, In product retirement the XXXX, capacity. growth media has our saw in VERTEX Carbon bigger Compared per installed protective that shipments The The panel lower is been than into this fact, and given seven future deploying the for have today three -- portion quarter. the our growth the declined This cover of installed in year, upside the HDD Optical largest has unit base average Leans drives, market discussed coatings continues market. an VERTEX capacity capacity XXX We part the environment. ratio it or is to over significant years driver an disk tie media years. of a the to growth media the display XXXX, drive in which nearline oDLC continues as we growth drive number the hard been with media a believe the we over has in quarter permanent per our of as disks record high-capacity actually business under given potential to XX% exceed discs to quarters next systems $XXX annual will business, along revenues VERTEX. number deliver just first to a this expect each million per meaningful around the significant to capacity for segment million be to protective be years our believe than industry’s will quarter in continues from of is or $XXX in per of at over drive. tie The X.X a in nearline expected, which of has Grade coating panels. the at stronger half drive If flat ship been non-systems a cover of per display positive in year. first ratio of in the increase the revenue of We our Diamond-Like progress two in we four HDD few deposits six demand story levels. rate, A for XXXX growing

in Our QX, revenued for VERTEX VERTEX revenue of an growth were QX. additional along four XX% includes that guidance XXXX in system the with

in we which allow of have today, additional this one respond order shipped to As and quickly good will finished new us to tool. a inventory, VERTEX

a we of customer. other qualification a demo third and an this five phones and At integrating cell that includes at other in This drive phone top and transition said cover. been driving sites five growing oDLC has major is place quarter. player manufacturers customer we activity charging. and film interest evaluation new protect existing significant is now driver and with this glass The coating As witness robust can cell with top protective what could in making in-house oDLC current glass In order previously, every taking as that industry XXXX to say of interest back from we’ve come Helping manufacturers, on sampling activity. activity move by stacks. covers our to increased to integration clearly phone wireless their enable either or in the doing film is aware customer the mobile oDLC. to point, we’re exceptionally both was of oDLC back this

for specifically our the tailored variants films have of been several of quarters Over oDLC back last we applications. developing unique stack, number a product

see. and And some turning color on tested activity critical films coefficient in that are resistance is criteria, of of others most impact we major films it’s specific a some these applications friction. for of applications variant Each are others then results. cycles evaluation a the transparency factor its extended these in modified depending This the and in have

actively first incorporating customer incorporation customer and projects truly making top also production engaging is Our on our five manufacturers is phone They of the are oDLC. coating. good in cell progress our adding

and for which anticipated. process move continues are The Our and taken the qualification -- to process in is second through customer and qualification applications. initially we we than continues extensive multiple deliberately longer evaluation has evaluation engaged

continue The our in time technology significant our the important having invest aspect not customers is resources bring work to and market. and is to

Now solar implant our ENERGi equipment, for XX currently in activity manufacturing. in systems an includes backlog cell our high update efficiency solar

customer schedule third first tools three being delivery all take calls of before to but XX delays of systems. purchase the shipped scheduling determined. delaying quarter has still Our end, remaining for the We factory their resulted in the our build the for the in year the tools contract in with them delivery

tools three revenue in dependent As revenue we the the presumed in revenue for XX With to next with our visibility, first current the all result revised no will schedule. half longer a the previously in quarter, single tools place shipment expect tools nine XXXX. early take a first the timing on should

Now moving gross rebounded onto range million within of the for business. third a and $X.X also the with operating target quarter total by over margins our $X Photonics. model million In revenues normalizing to

the million to the next-generation year. pursuing order quarters $X.X funded through we’ve initial the sensor was contract X our booking Importantly, been development Highlighting of our design increase ISIE-XX stage. the orders over in prototype three increased and of the by driven million development for contracts over success first the the

form funding integrating to and into our a for We additional form sensor also ordnance ManTech funding several night of process. and removal systems into prism helmet including day proprietary the for reality soldiers augmented through mature our integration booked see future for explosive free free development our prisms manufacturing programs, night free-form vision prisms Funding

Israel or the in by will camera of serve calls, development our vision vision contract the of as wireless wave DELTA-I of night the delivery contract October sensors the the vision infrared Industry the the our sponsors contract This DELTA-I is imagery. binoculars of Survey at week award operators a nations this The key long high-definition an for in for of program. Warfare DELTA-I goggles continuing France, for development will hosted for and first we crew the orders around new DELTA-I received head-mounted sight night MX incorporate weapon deliver and AUSA the Europe a of that from four in the XXXX. the of have milestone We with helmet XX on was II we night vision. next-generation ISIE-XX aircraft displays weapon I fused entities evaluation the replaced Progress In previous sales excitement two are U.K. field. and during deliveries quarter the have in Virginia. and our of second night Coalition we six On Day Program. made and typhoon on had programs. expected Program camera digital also government initial U.S. Springfield, to goggle for providing integrated the the for the we of the funding sensor the Program international family Together as prototype our systems discussed Striker sight

So the Apache business, our final the Office consistent with platform cameras the the our Photonics progress are concepts QX ones, only to ourselves big of development strategy. the our with have second the in replacing not fleet for with delivered Photonics revenue the this begin We based development opportunity night of with our our for we that made in specification vision Program ISIE-XX looking now cameras and programs pipeline. picture current positioning now to growth for address underway in and all needed camera the for Apache excellent working

this development long phase program, a to spends programs talked now a are lower we XX% to Apache waive funded business now support the about of readiness what military of Inside the Photonics the profitability is the experienced are profile to to range pipeline to will end several With years. new programs that our target pipeline will product plan over our initial similar initiated R&D revenue and production all have Photonics of of several development of that program our trending opportunity well of period our ensure eventually XX%. revenue in time new which as the results a means to one driven just drive Apache product ahead last the moving military. Our revenue for programs completion profile. is from our we the of This development

over results Jim activity growth summary, outlook we bottomline over business premature XXXX. new third the XXXX both and to revenues to to will in initiatives, XXXX, believe And provide path to results. guidance remainder and on to call the it’s expanding are overall, revenue we in and for the next while profitable XXXX earnings now guidance turn approximately year. remained of our grow our a with quarter discuss company I margins So, Jim? continue for gross XX% the our for given provide and strong, of for core levels

Jim Moniz

consolidated quarter revenue above million $X.X included of Wendell. you, service. million Thank Photonics XXX million. $XX revenues $XX Consolidated totaled $X.X of revenues and contract, contributed guidance higher guidance. totaled and reduced expenses to was million. than SG&A revenue The $XX.X was included R&D. to gross with $XX.X for and gross research $XX.X along Lean and of our systems, This third revenues. our above product $XX.X two and upgrades, of Thin-film lower but expenses Equipment million due margin $X.X from and million or our QX, spares primarily guidance were development QX R&D the profit dollars. to QX guidance and XX.X% revenues million, up higher million

$X.XX exceeded with was or diluted share. operating guidance income along range, the our of net end high the above QX million reduced and expenses, per $X.X revenue Given

backlog $XX.X ENERGi ended non-systems XX.X million backlog five million, of and million, Lean million the at Thin-film in XX based $XX.X to capital $XX.X solar and backlog expenditures $X.XX share $XX.X was Our million flow cash Cash with generated at XXX depreciation of The backlog. on was quarter including was by operations $X quarter systems, implant end. our hard were approximately Equipment systems shares drive end. and million. equivalent $X.X QX for amortization the We Photonics included million business restricted investments was cash QX. $XXX,XXX HDD quarter. and during quarter per

Turning to fourth the quarter. guidance for

between $XX million. this $XX Within million QX expenses consolidated operating be and gross fourth expect are be We and between $XX around are quarter range to we to XX%. be to XX% revenues expected QX margins projecting million.

taxes and quarter. $XXX,XXX in expect about We interest net the about $XXX,XXX of income of

For XX loss $X.XX on million and QX we’re basic positioned in of shares a outstanding. based between $X.XX

would $XXX we to from up expect in million. for year $XXX our million with guidance revenues guidance be will QX of our around revenues previous XX% the Consisting be Given full range net XXXX.

to the gross year. the taxes the the for of presentation. between $X full about of approximately part margins expect million Below operating about and Charlotte We XX% the expect million for raise see income and completes operating year. of with the formal expenses XX% for $XXX,XXX of we to be our year, line will interest net $XX This questions.

Operator

Roth Capital the first line of Alger Brian [Operator question Instructions] from Our comes Partners. from

is open. now line Your

Brian Alger

of curious the for least just know CapEx at that see the next it additional the is knowledge you I into a for to Good want lot at on Great. into going the afternoon, that’s systems, something out, calendar the we build most Thank the obviously, congrats you. the guys, bit has least that ENERGi the and on early to to dig for good of received backlog quarter been of of systems. timing what nine point here Roth, our and funding guys. at as field appears in the customer or here wide-open? a a here year little their Is this best

Wendell Blonigan

discussions. began We in with those We discussions them. are

the that be here are we’ll tools completing next four shortly. We have -- got

have So to factory I we that know some delayed. itself their has But clarity. anticipate been better

I right as think they moved now -- know haven’t tools it’s in. we

the the sure. move by time be in end so kind we assuming delay of again So of we first that three, tools better them are probably clarity what and on It given quarter where three for get the have have those least that’s at rest tools some those the first probably year we QX they at then saying a was don’t those beginning are installed a for and where of of yet. will at they would land

Brian Alger

little product mean, for is drop Photonics us, little expected business than quarter. was the I now you the right see Okay. of better bit bit least sounds maybe a curious expect that, additional that I decline appreciate the backlog am I sales you talking revenues. that in pretty lot going for color. to at a in a that in in margin though substantial? have it are as because don’t you The that quantify gross way Great. we Can

Jim Moniz

couple in Brian. of as QX. Apache Thank things. production so saw business -- for The majority Yeah. the said, Wendell you, we all itself of ship Absolutely, the that

go the higher higher be XX%. into positioning to kind the see element nature of Photonics of margins year the funded So of business. to are we’ve QX into we been gross have element margin, It’s target our going as and for next to that around at gross still and as a funded R&D just by working essentially the Photonics its lower R&D we

in we little of I in to mix the the in lower bit, remaining as is on QX, it the in should we we little million as will margin have in that make based of have just having and mix and the year QX much $XX revenues of based guidance sorry, down just fourth, million impact bit in a both saw we a see that’s We the QX $XX go the that the driving business actually the in down million see gross things $X on the am the also business the QX. QX what and one overall an versus on

Brian Alger

right. All

or half further next-generation land side fighter ticking is these it’s it. other second your out? chasing, And of lot terms of in are production got projects you for or that of Okay. upgrading projects, ‘XX When it whether different some systems start guys or the the the do side back, we of a revenues the obviously, the Got Apache is see then, of stuff. product that

Wendell Blonigan

this Well, Wendell. is

probably Certainly, Apache the are program think, that do Strike are we the programs that look It’s taking a cameras wireless business is say it furthest display shipping forget think, speak limited when of Weapon we have in ‘XX. would they along we Family in are product start Sights that we of really schedule out. development played ones I those to I in at with prototypes, that. doing Fighter. so to some head-mounted its development the Joint don’t the as for I

Brian Alger

last if can, And Okay. the front. I Great. oDLC one one on

Wendell Blonigan

Yeah.

Brian Alger

case? and a just finished tool is that have prudent to you goods say there over that You transformer, come is inventory, in expecting just planning the something are you

Wendell Blonigan

This times. basically that is managing going lead quick we watching be one supplier. much all really pretty very bring would about -- a we believe we another to how are have that for particular need to and up inventory it’s something year there And scenario in talk

to available wanted we that we had So sure make make that tool to happen.

Brian Alger

Okay.

Wendell Blonigan

of And we bit as manage the then our inventory well.

have long some that nothing to far in placed as we least have on crazy. ten-folds We so as of speak the are but -- got partial the at these order to some components queue, got

Brian Alger

Wendell, you. Okay. thank Yeah. Great.

Wendell Blonigan

All right. Thanks, Brian.

Operator

Thank you.

Our Capital comes Klieve line of Noble Ben from question the from Markets. next

now open. is line Your

Ben Klieve

Hi. below here QX A QX. how discussed if driven you jump units I and see just of Thank pretty questions, if look market, and couple quarters? is XXX you the in you that you million wonder then that a of on and down XXX capacity to of units that over if describe my having at stable kind here that is quarter last you that so couple fell fell XXX you. sizable capacity base, then, kind the think of what down next from million a as million can kind million question XXX first units of said you kind just you HDD units, in and it

Wendell Blonigan

Sure. Okay.

added required we put we counting equipment And as specifically had through think, have actually that modules on is were to or occurred non-systems what the currently have they got where our want tools. were on and business. basically that and they And particular another call XXXX, is the process model process in overall that there falls the say, those on machines. and disassemble because the we quarter million you into was XXX modules then I part that’s another where that working then took halted media which step to other gave what late installed to number machines gone base, we XXXX started -- -- that capacity layer and our same of Ben, the I So, or program, the we metal being units they use beginning project

in have that came that in know retired. some particular We that when customer there’s up back operations their storage. So that machines basically of been one we aware were we never Singapore shutdown they when those were know machines

come back and will wait could see. we but those to Now have

is kind that’s occur what machines So in why of timeframe over the and those ‘XX see -- coming offline. we’ve seen the we ‘XX

Ben Klieve

here VERTEX you. Got evaluation one other question me part you. for product. Thank around two process the regarding kind your And of

the with morning there, you First, more that a is customer. wondering proactive with second deal describe do you this the are? or of kind have if back have as your guess, And am accelerate long your if I kind customer you -- you also bit the anything basically maybe truly you with I process to for step after be is play this to you you that going future for just of long customers could evaluation see of quarterback, to Monday then second this definitely just versus process can kind are -- that process kind something evaluation with of the as

Wendell Blonigan

morning that Monday I answer question first. can Well, the quarterback second

they end do those do, be company without very the to they have that quarter they particular doing know first it, have when got may glass capacity and are around capability, larger they them. on but customers I and hooked working in we said time and sure One and was strategy that what ahead you’re customer, their got this thing this for application the want market it in And They with ready at from they as second really my previously back tablet, is doing be remarks, doing are are to or of and working not the return that winded they specifically whether the have we that answered. the can. -- be The to the to got are some they when to driving necessarily. the application very and we them And you customers of so and third smart, not of in see won’t now on is that the out that. driven have we to install limited that will a out end wearable, of in a or so cover amount customers Kind your cover wanted would because very they We the and your first moving we -- front are specifications question in are are do. that but had keep a capability. to it are that the they it necessarily was response, that whatever exactly I need forward, process got they have customer. -- what long I hope question you telling promoting proactive the can specifically cover, more also be film up some seeing us is very been of everything been criteria, for go in seeing they I But variations second but way be the went very return to just and activity for truly responsive keep run I’ve we to -- demos they we and we that I look pushing do machine as it’s partners by not how We operation there that. should situation really the who what say their machine, different depending would have may in about time and truly in and when truly on back you are

Ben Klieve

Oh! guys. No. for much. you. all and jump that’s Thank I me queue. it back Very appreciate color will I in

Wendell Blonigan

Thanks, Ben. right. All

Jim Moniz

Ben. Thanks,

Operator

Thank you.

Nehal Maxim next of from the from comes Our question Group. Chokshi line

Your now is open. line

Nehal Chokshi

Yeah. [inaudible] progress you I quarter can start the, that with they -- incremental gauge are customer off wondering had any tool? I quarter. a Thank if if dealing last truly in I will wins was was the order pursuing. truly truly gave you. that how rundown with of Good you to has you opportunities provide guess, with first, (XX:XX)

Wendell Blonigan

Yeah.

sampling certainly, around go back I the call as the prepared strategy to other in have paid guys, the the post you players maybe equipment top -- They what with that. Carbon of in Diamond-Like to for are X, well kind I off sampling from the set the thing for to this run actually with application, key come some iPhone the their manufacture volume seen that cover forward. some of so quarter projects, engineering the they can has pretty announcement, the remarks, activities, proof you engagement announcement that so units are and more what volume, third the think, would in some initial this beyond see glass that are have and we specifically that with certainly of some as has far in their going to happened that start wait is

good work but some do So progress. to

Nehal Chokshi

the smart then, time. a said And be that, some you VERTEX provide that able customer finished to Okay. a to lead relatively and new you a goods cover a phone short I and year, or million glasses in the on like let say year that’s have it’s indicates million X If number per think, produce that range. in can I recall X of correctly the

so, And to the going end of forward under that, systems multiple production if to are I are going need your one impression be would move customers fast.

between, me one multiple systems help ready needing getting to bridge versus understanding so, ready system possibly to go? go to And

Wendell Blonigan

-- I to was where -- of four they requirements to a to what a how make of script, I we move six to commitment need new for some we that, months finished top going suppliers where inventory, quickly that that. basically not films we obstacle in want so I in so from to we wanted wanted like additional customer bunch the goods discussed, us deliver end and out possible. times in We functionality to previous there position have get would a the one with shape then build around as and be that are be particular in some able we can Well, those that where as a can down as be around way to broadening to get Yeah. as and talked new that scenario go lead many our they that on under with a that of capture to incorporate But I suppliers that to. the of think, maturity the answer,

Nehal Chokshi

I see.

Okay. Understood.

questions, same million actually Q-o-Q up it’s that on a two and backlog backlog, more composition. Just was same $X unit

is backlog that is up So spares? to due Thin-film Equipment Photonics or

Jim Moniz

and we bookings to which lot I fact non-systems a the be Equipment bit due in to and with a that funded and not be is volume We success it’s the QX. is lost the ramping we going backlog we million at we Photonics in drive funded of and almost based we that had QX that revenues Thin-film the is focused $X that saw strong million as R&D move kind are saying in and some million R&D bookings on and continue the and we changed, Brian’s funded in results on non-systems of again and that’s more in the in million Apache see we why the really little most years down of coming revenue at but question. have on to have Equipment and probably book as of the of look you really ramping hasn’t forward up for the ship to R&D, bookings with ENERGi Thin-film and like area we gave system breakout good had up three revenue of was and of $X.X in hard been because if the up saw majority the in some the production we to positions on over $X with have some should to expand It’s it still related, $X.X Photonics

Nehal Chokshi

Digital. and that Okay. been Western hard terms world you discuss microwave-assisted Understood. needs recording And in if question of is, magnetic of last general the my that introduction Could there total means anything just in has dynamics? Intevac drive by so for discussed

Wendell Blonigan

Yeah.

to We it, but we about we Intevac a temperature to are went understand that it would around know that of from and certainly be if would is big do of I the of what tools what deposition was that material. ton -- similar echo think, kind systems be. perspective higher requirements don’t that announced upgrades from you know the from out see we the transition and have mostly a needed

So we is us. wash now there for a is of this microwaves and say is HARM -- kind some

Nehal Chokshi

Okay.

Wendell Blonigan

some are But higher it areal the rather which to to would is like -- interesting that density than density certainly right good because technologies at this we upgrades. sell systems levels scudding

Nehal Chokshi

Right.

the is MAMR but that recording and that is impression are materials materials the my tools would different would one order further, it different accommodate possible be whereas whereas technology, same needed MAMR? that, different think would existing speak that I base SPMR, in a HARM to had completely Just with guess, be going -- completely completely to utilize to new materials therefore, installed accommodate MAMR with HARM, legacy

Wendell Blonigan

operating system see both temperature. is media around We the for HARM mostly upgrades, also

the in those already put for the some of have field development. We already

Nehal Chokshi

Got it.

you. Thank Okay.

Wendell Blonigan

something are tell me get exactly at on right. some have you itself between able to going this I anybody -- the been there. point there on and what’s materials think but There I on not side is materials going

Nehal Chokshi

Thank you.

Wendell Blonigan

Okay.

Operator

Thank you.

B. Ellis line comes the from Riley. next Our of Craig question from

Your is open. line now

Peter Peng

This Peter is taking Craig thanks the Ellis and calling for Peng question. for actually

equipment or gives of kind and on question guide, be grow are it the flat, First is, could just and effects? what QX the takes seems like

Jim Moniz

Photonics the could that’s We relatively million that’s one I driving level but of answer and unusual that so margins, as slightly revenue be margin will different and Photonics of biggest funded would for with will funded to don’t equipment as kind in target mix even in between have $X because QX, QX. QX fact be than before, the said down, being down and revenue give things then as the similar equipment of $X.X a that’s XX% million, probably, QX be the the the XX% higher amount and of difference and say, down. couple that much down it in then of from the guidance normal I a of normally what the suppressing lower to R&D our in an that a mix R&D

Peter Peng

How in is December for $X sustainable we is XXXX? lot this it three rate. Okay. like the from of -- it’s run $X quarters this quarter, strong been And million pulling to included it’s strength, million and seems upgrade a

Jim Moniz

pull the change XX%. have much we turning why the plans pulling ‘XX from to in hoping is from to which customers strong be and as and so some In be it’s over going are we ‘XX as it’s ‘XX stronger we that raise were hope think, activity we out necessary of growth don’t XXXX, discussing with QX think pull we ‘XX XXXX long don’t was way. we we seeing a than QX ‘XX But and the I expect to that to be our are pretty didn’t we the as guidance materially. much the

Peter Peng

that. the seems new or of that down And this meaningful that first rate so it a for half kind expect? like XXXX QX, going normalize is step Photonics, in it’s Thanks run is the we in should to

Wendell Blonigan

at Jim this can. point, We but on let what are ‘XX comment not guiding I will we

Jim Moniz

lower say as bit ‘XX. similar would to they saying XXXX in run QX been Photonics normalize for we in be a it’s I rate we than be and have revenues the were would would we what expected to the little Yeah. in hope

as ‘XX with see of some based activity to to on we kind yet, not most R&D, are then QX an on We coming of guiding of funded that R&D that get funded are customers expect we we we on from for but the success would various the in the bookings XXXX. but was acceleration, working into the and

Peter Peng

queue. Okay. will And back one into question last the hop and I

VERTEX, $X spike? else what kind quarter-over-quarter million of kind seem is one beyond inventory of like so causing that that spike Your

Jim Moniz

a we there of -- XX year. by the million The with end biggest required and ship you received customer tools, contract issue order our remember those large ENERGi if our from $XX over all for is us to the

build QX, of moved said, with really in the nine majority inventory one then finished at we you but the and those majority with their having they’re VERTEX on bill some to that good, work we growth, three when trying and of But path the and a in look tool. factory to the are those the plans ship as that ship should So was of of there we we the did ship determine that majority of their to purchased to customer wants but ENERGi us out, it’s tools. so remaining

Peter Peng

Great. Thank you, guys.

Wendell Blonigan

Thanks, Peter.

Operator

you. Thank

line Miller Our comes Mark next question the from of Benchmark. from

is line Your open. now

Mark Miller

to the quarter in start because still now have XXXX. increase return growth them and density terms Do represent number just in is discussion a a Digital the of to I to is the disc Western technologies expect these coming HAMR want projecting of continued all both you significant areal MAMR which the of will leap. in

Wendell Blonigan

and to how not wait going adoption. to of effect gradual do true out, shift put mature because not, I a product to are a you some have to one now bit to and HAMR to upgrade there But an the there you day they these different, are there right. the out come with roll or all that think, will been the sliding even got I or be see right it, be Defense product when and comes technologies just and would and or have tools of introduce line I are path going think specific you a ready we over have it think they we

Mark Miller

in quarter Your spares lower, there and mix you the do rise guidance current specifically is lower with see less margin quarter? a revenues but upgrades this any impact

Jim Moniz

and that of some slightly the less We those QX. do we some was spears because of in upgrade, pull see

Wendell Blonigan

Customer pull.

Jim Moniz

in R&D requested higher I will said couple and we QX. of lower as And Photonics. if come do they revenue mix into the of Photonics overall revenue that lower from for expect that have answers, a times Customer then as go to funded the you less margin

Mark Miller

taxes jump that? you can quarter this Finally, up explain the

Jim Moniz

Yeah.

is drive to that of driven that’s through driven there NOLs so hard to R&D Singapore. that of revenue, money. is hard not business $XX million of of or also have of our of we the drive and been is But statutory we even It’s a there most drive million Some tax tax pay material. a $XX though required strong goes credit out by tax strong It’s the due hard and Singapore have and by. that’s coming of business not a and lot that’s do very most over

Mark Miller

Thank you.

Jim Moniz

welcome. You’re

Wendell Blonigan

Thanks, Mark.

Operator

am Thank time at I to Mr. over you. like And back to call turn I not further Blonigan. questions. the any showing would this

Wendell Blonigan

Thank you.

dynamic the to outcomes like also world I want to I’d around the tremendous all thank environment. our signoff I and before for dedicated their So Intevac employees very effort this thank of successful updating appreciated January continued look joining during you today in Thank call then customers you and until for our us all of long. to partnerships. forward so and business again their in for we QX

Operator

teleconference. today’s concludes This

now You may disconnect.

Intevac (IVAC) 30 Oct 172017 Q3 Earnings call transcript