intevac investor presentation · implant tool signed off for revenue q2’17 near-term opportunity:...
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PROPRIETARY B Riley May 2018 Investor Presentation_1PROPRIETARY
Intevac Investor Presentation19th Annual B. Riley FBR Investor Conference
May 24, 2018
POWERING INNOVATION. DELIVERING VALUE.
Wendell T. BloniganChief Executive Officer
James P. MonizChief Financial Officer
PROPRIETARY B Riley May 2018 Investor Presentation_2
Cautionary Disclaimer
During the course of this presentation, we will comment upon future events andmay make projections about our future financial performance, includingstatements related to strategies, our expected sales, product shipments andacceptance, gross margin, operating expense, profit, cash flow, income taxexpense, and capital allocation. We will discuss our business strategy, ourproducts, the markets our products address, our position in those markets,expected market acceptance of those products and production capacity. Wewish to caution you that these are forward looking statements that are basedupon our current expectations, and that actual results could differ materially as aresult of various risks and uncertainties, including, without limitation, thefollowing: inability to develop and deliver new products as planned; inability toaccurately forecast the demand for our products and services; the possibility thatorders in backlog may be cancelled, delayed or rescheduled; inability to achievegross margin and expense goals; and other risk factors discussed in documentsfiled by us with the Securities and Exchange Commission, including our AnnualReport on Form 10-K and Quarterly Reports on Form 10-Q. We undertake noobligation to update the forward-looking statements made during thispresentation.
PROPRIETARY B Riley May 2018 Investor Presentation_3
Providing Enabling Technology to Important Markets
Thin-Film Equipment Photonics
Mobility and the
Internet of Things
Clean Energy/ Solar Power
Cloud Computing and Storage
Addressing Multiple Large Growth Industries
Night Vision and Target ID
Cameras Systems
Integrated Night Vision Systems for Gen 5 Heads Up Displays
Night Vision and Head Mounted
Displays for Soldiers
Critical Supplier of Digital Vision Systems
~$1B Revenue Opportunity $1.4B+ Revenue OpportunityOver 5-Year Timeframe Revenue Opportunity Pipeline for Current Programs & Pursuits
PROPRIETARY B Riley May 2018 Investor Presentation_4
Thin-Film Equipment:Core Technologies and High Productivity Platforms
Op
200 Lean®
INTEVAC MATRIX®INTEVAC VERTEX®
Core Technology
• Small-Substrate Processing
• Precision Thin-Film Deposition
• High-Throughput
• Serving Ongoing Technology Needs as Market Share Leader in HDD Media
PVD – physical vapor depositionHDD – hard disk drive
• Horizontal Carrier-Based Platform for Precision Thin Film Deposition, Etch and Ion Implant
• Vertical Carrier-Based Platform for Precision Thin Film Deposition, Etch and Implant
Substrate Independent
PROPRIETARY B Riley May 2018 Investor Presentation_5
0102030405060708090
Glass Glass + Anti-Smudge Glass + oDLC
# Pa
sses
to S
crat
ch
oDLC Relative Scratch Protection
Market Drivers:• Increasing Need for Durability• New Casings & Features Require Scratch Protection
- 2.5D & 3D Cover Glass - Glass Back Cover- Protection of Additional Value-Added Coatings
• Extreme Cost Sensitivity
Advantages of Optical Diamond-Like Carbon (oDLC): • Lowest Cost Anti-Scratch Solution 20x Scratch Resistance 20% Increased Breakage Resistance 10x Haze Reduction Ability to Tune oDLC Coating for Each Application
VERTEX oDLCTM for Display Cover Panel
oDLC ApplicationsHigh-Volume / High-Growth
Markets
Mobile PhonesTablets
Wearables POS Stations
Auto -Infotainment
Stainless Steel Ball @ 7.5N Force – 10 Cycles per MinuteCS-17 (Taber) Scratch Test Results / 300 Cycles
oDLC 2.0oDLC 1.0
oDLC Version 2.0 Results:Improved Scratch Resistance
Bare Glass
PROPRIETARY B Riley May 2018 Investor Presentation_6
oDLC Demonstrating Capability to Protect Additional Film Stacks
Significant Drivers of New Customer oDLC Evaluations
Integrated Film Stacks
3D and Back Cover Glass
Market Drivers:• Wireless Charging• 5G • Improved Battery Life
oDLC Advantages: • Enables Decorative and Other Coatings
- Non-Conductive Vacuum Metallization (NCVM)- Anti-Reflective (AR)
• Improved Durability• Lowest CoO
oDLC
Cover Glass
AF
AR / NCVM
Anti-fingerprint; prevents fingerprints, dirt
oDLC improves hardness, resists scratches
AR: reduces reflection; NCVM: for color finish
PROPRIETARY B Riley May 2018 Investor Presentation_7
Display Cover Panel: Progress and Opportunity Progress Multiple Systems at Truly Opto-electronics ~24M Units of Annual Smartphone Capacity in Production oDLC Deployed on First Top-3 Handset Maker in Mar. 2018
VERTEX also Installed at Additional Tier-1 Customer Evaluations Ongoing; Performance Criteria Solidifying on
Several Applications
VERTEX to be Installed at Top-3 Cover Glass Manufacturer by Mid-Year New Processing Source Technologies in
Development- Enabling oDLC 2.0, Anti-Reflective and Decorative
Coatings• Patent Granted on Intevac’s oDLC Source
Opportunity• >$500M Revenue Opportunity over 5 Years
- Includes Smartphones / Tablets ‣ As well as Wearables, Automotive, Etc.
- Significant Growth Opportunity in a Green Field Application
Source – IHS Markit May 2017
oDLC 2.0New PVD Technology Opens Up New
Market Opportunities in AR and Decorative Coatings
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2014 2015 2016 2017 2018 2019 2020 2021
SHIP
MEN
T U
NIT
S (0
00S)
Cover Glass Shipments by Top 5 Volume Applicat ions
Automotive Monitor Mobile Phone Front Mobile Phone BackNotebook PC Smart Watch Tablet PC
PROPRIETARY B Riley May 2018 Investor Presentation_8
200 Lean: Market Leadership in HDD Media
Source – TrendFocus Feb. 2018
Storage Shipped on HDDs by 2022 will be Approx. 3x 2017 Levels HDDs will continue to dominate storage landscape
- ~2000 EB on HDD in 2022 (24% CAGR)- ~ 160 EB on SSD in 2022 (20% CAGR)
HDD Exabyte growth driven by Nearline segment• Media growth drives Intevac equipment business• Tie ratio of average # of disks per Nearline HDD will
increase from ~4 today to >7 by 2022
0
500
1000
1500
2000
2500
2015 2016 2017 2018 2019 2020 2021 2022
Exab
ytes
Desktop HDD Mobile HDD Traditional Enterprise HDD Nearline HDD CE HDD Client SSD Enterprise SSD
PROPRIETARY B Riley May 2018 Investor Presentation_9
Capacity Crossover Forecast for 2020
Approx. 15 to 20% media production overcapacity today• The increase in disks used in high-capacity
drives must offset reduction of disks shipped in lower tie-ratio mobile and desktop drives
• Crossover is forecast to occur in 2020• Near term tool sales will be for system level
technology upgrade programs
Until new media capacity is required, Intevac’s HDD business will be driven by technology upgrades• Next-generation media is and will be made
using more complex structures that require more processing stations
• Intevac works closely with customers to provide technology enabling process solutions
0
50
100
150
200
250
300
350
400
450
1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00
Med
ia U
nits
(M)
Tie Ratio (Average Disks per Drive)
Media Unit Demand per Quarter Based on Flat HDD Market and Increasing Tie Ratio
Based on 100M Average Unit / Qtr HDD Market
Current 221
Capacity ~265
PROPRIETARY B Riley May 2018 Investor Presentation_10
MATRIX ENERGi®
Update on Solar Activity
Market Drivers: Demand for Increased Cell Efficiencies Continuous Cost Reduction Strategies
MATRIX Advantages: Advanced Metallization and Doping of High-
Efficiency Solar Cells Best-in-Class Target Utilization Highly Customizable, High-Productivity Platform Lowest CoO; Process Step Reduction;
Reduction in Capex
Progress to Date: Two Tier-1 Customers PVD Process Tool of Record for N-Type Cells Implant Tool Signed Off for Revenue Q2’17
Near-Term Opportunity: Minimal N-Type Capacity Build-Out Planned
Currently; Opportunities Reside in Existing Factory Retrofits
Solution: Low-Cost, Small-Footprint Implant for Solar PV
Customer in China: Plans to Build Out 1 GW of Capacity Through 2019 2 Pilot Tools Signed Off 1H 2017 Order for 12 Tools Booked Q2 2017 First 3 Tools Shipped Q3 2017
Near-Term Opportunity: Significant Delay in Factory Completion Expect First 3 Tools to Begin Install in Q2 Expect 3 Additional Tools to Ship In 2018 Remaining Six Tools Expected to Ship 1H 2019
PROPRIETARY B Riley May 2018 Investor Presentation_11
Market Drivers:• Need for Greater I/O per Square Area
- System-in-Package Replacing System-on-Chip• Mobile, Automotive, IoT, Followed by 5G• Cost-Down Move to Panel-Level Processing
MATRIX Advantages: • Outstanding Performance at Low CoO
- High-Throughput- Uniformity and Yield- Film Properties and Control
• Reduces Cost of RDL Seed Layer by 2/3• Solution for both Wafer-Level and Panel-
Level Packaging Applications
Progress to Date: • Engaged with Tier-1 OSATs• Development Work on Process Modules
Substantially Completed in 2017• Ongoing Wafer-Level and Panel-Level
Demonstrations and Evaluations• MATRIX Launch at Industry Conferences (IWLPC)
October 2017
Emerging MATRIX Application: Advanced Packaging
MATRIX Addresses RDL and UBM
Emerging Panel-Level Packaging Market Intensifies CoO Drivers
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
2017 2018 2019 2020 2021
Annual Wafers Annual Wafer Passes for Fan-Out and UBM PVD
Fan-Out PVD Passes UBM PVD Passes
Source –TechSearch International, Yole Developpement, and Company estimates
PROPRIETARY B Riley May 2018 Investor Presentation_12
Photonics: The Supplier of Digital Night Vision to Military
Op
Soldier Night Vision + Head-Mounted Displays
Integrated Night Vision Systems
Night Vision + Target ID Cameras
Core Technology• Patented Digital Night
Vision Technology• Image Processing• Enables Digital
Augmented Reality
• Apache Helicopter Pilotage Night Camera
• LIVAR Long-Range Target ID• UAV Camera in Development
• On Roadmap for ENVG-3 Digital Follow-on Program
• Increasing Content for Family of Weapon Sites Wireless HMDs
• HMDs for F-35 and Striker II• Enhanced Visual Acuity
(EVA) Initiative• DELTA-I Coalition Warfare
Fused Digital Goggle Apache Camera
LIVAR SWIR Camera
HMDs – head-mounted displaysLIVAR – laser illuminated viewing and rangingSWIR – short wave infra redUAV – unmanned aerial vehicle
PROPRIETARY B Riley May 2018 Investor Presentation_13
Advantages of Intevac’s Proprietary Digital Night Vision
Intevac’s Digital Night Vision Technology Enables:
- High-Definition Night Imagery- Complete Augmented Reality Capability
- Information Overlay - Image Enhancement and
Transmission- Fused Infrared and Low Light Imagery- Low-Halo Operation
Fused Night Vision and IR
Warfighter View, Image Enhancement, and
Transmission
Augmented Reality Overlay
Analog Point Source “Halo”
High-Definition Night Vision
PROPRIETARY B Riley May 2018 Investor Presentation_14
Digital Night Vision Cameras• Contract Award and Development Program in Place for Next-Generation Sensor ISIE-19• Pilotage Cameras Deployed and in Service for US Apache Fleet (ISIE-11)• Discussion Underway for Next Generation 3 Camera Pilotage Camera System for Apache
- Stitched cameras replace single camera on rotating turret (ISIE-19)
Integrated Night Vision• Joint Strike Fighter in LRIP Production (ISIE-11); rate temporarily reduced• Additional Funded Development for BAE Striker II Helmet (ISIE-11) in Process• Delta I Coalition Warfare Program Industry Survey Day Held
- Award Expected in Q3’18- 16 Fused Night Vision Goggle Deliverables for Field Evaluations (ISIE-11 >> ISIE-19)- 4 Nations and 6 Entities Funding Program
Soldier Night Vision and Head Mounted Displays• Contract Award and Development Program in Place for Next-Generation Sensor ISIE-19• In Final Stage of Development for Family of Weapon Sights – Crew Served and M2 Weapon
Sight Programs- Wireless Head-Mounted Display Prototypes Began Shipping in Q4 2017- See-Thru Free-Form Prism Manufacturability effort complete
Progress: Photonics Products and Programs
PROPRIETARY B Riley May 2018 Investor Presentation_15
Major Programs, Significant Revenue Opportunity
Program Opportunity Pipeline $275M+
Current Production,
$140 Upgrades, $97
Pursuits, $39
Program Opportunity Pipeline $630M+
Current Production,
$218
Upgrades, $147
Pursuits, $273
Program Opportunity Pipeline $530M+
Current Production,
$57
Pursuits, $477
Joint Strike Fighter
Eurofighter
Apache Helicopter
LIVAR
F-35 HMD
Digital Night Vision Cameras Soldier Night Vision + HMDsIntegrated Night Vision
F-16 Falcon BAE STRIKER II HMD
NV Monocular Wireless HMD
Family of Weapon Sights
PROPRIETARY B Riley May 2018 Investor Presentation_16
In Summary:Two Businesses with Billion $ Revenue Opportunities
~$1B Revenue Opportunity for Equipment $1.4B+ Revenue Opportunity for Photonics
Display Cover Panel
$500M+
MATRIX for Adv. Packaging
and Solar
$250M+
HDD Media
$200-300M
5-Year Available Revenue Opportunity
Night Vision Cameras
$275M+
Integrated Night Vision
$630M+
Soldier Night Vision + HMDs
$530M+
Revenue Opportunity Pipeline for Current Programs & Pursuits
PROPRIETARY B Riley May 2018 Investor Presentation_17
Pause in 2018 After 3 Years of Growth
Three Straight Years of Revenue Growth and Improved Operating Results 2015-2017
2018 Will be a Pause in Growth Trajectory• Guidance of 10-12% YoY
Revenue Decline*• Expect Profitable 2H• Focus on Managing Cash
above $40M Level
Solid Balance Sheet• $41M Cash, Restricted Cash &
Investments at March 31, 2018• $77M Tangible Book Value• No Debt
* 2018 Guidance provided as of April 30, 2018.
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
34%
36%
38%
40%
42%
$(20)
$(10)
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
2014 2015 2016 2017G
ross
Mar
gin
%
$M
Revenues Non-GAAP OpEx Operating Income (Loss) GM%
PROPRIETARY B Riley May 2018 Investor Presentation_18
Intevac: Solid Foundation, Large Growth Opportunities
Op
Solid Financial Foundation
Photonics:
Key Enabler for Military Night Vision
Thin-Film Equipment:
Leadership and Strategy for Growth
Intevac Value Proposition
• Technology and Market Share Leader in HDD Media Equipment
• Multiple VERTEX Customers • in Evaluations for Display Cover
Panel Films• Substrate-Independent MATRIX
Platform Offers Incremental Growth Potential
• Strong Balance Sheet• 2018 Pause in Growth Trajectory
• Long Term Growth Strategy Intact
• Major Programs with Apache and JSF• Developing Next-Generation Sensor ISIE-19• DELTA-I Funding In Progress
• Fused Goggle Development• FWS-CS, Prototype Wireless
HMD, w/ IVAC See Through Prism, Began Shipping
PROPRIETARY B Riley May 2018 Investor Presentation_19PROPRIETARY © 2018 INTEVAC, INC.