intevac investor presentation
TRANSCRIPT
PROPRIETARY Q3 2017 Investor Presentation_1PROPRIETARY
Intevac Investor PresentationQ3 2017 Update
POWERING INNOVATION. DELIVERING VALUE.
Wendell T. BloniganChief Executive Officer
James P. MonizChief Financial Officer
PROPRIETARY Q3 2017 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 Q3 2017 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 Q3 2017 Investor Presentation_4
Thin-Film Equipment:Core Technologies and Production-Proven Platforms
Op
200 Lean®
INTEVAC MATRIXTMINTEVAC VERTEXTM
Core Technology
• Small-Substrate Processing
• Precision Thin-Film Deposition
• High-Throughput
• Addressing Display Cover Panel Market with Optical Diamond-Like Carbon (oDLCTM)Protective Coatings
• Serving Ongoing Technology Needs as Market Share Leader in HDD Media
PVD – physical vapor depositionHDD – hard disk drive
• Enabling Advanced Solar Cell Architectures with PVD and Implant Technology
PROPRIETARY Q3 2017 Investor Presentation_5
2016: Pivotal Year Executing Thin-Film Equipment Growth Strategy
• Establish Target Markets & Applications
• Develop Platforms
2014• Launch
Platforms• Engage Tier-1
Foundation Customers
• Initial Orders & Shipments
2015• Multi-System,
Capacity & Follow-On Orders
• Engage New Customers
2016
MATRIX Introduced
Booked Pilot oDLC System Order
Won 1st Tier-1 MATRIX PVD Customer Order in Solar
VERTEX Introduced
Won 1st Tier-1 VERTEX Customer in Display Cover Panel
Won 2nd Tier-1 MATRIX PVD Customer Order in Solar
Won 1st Tier-1 MATRIX Implant Customer Order in Solar
VERTEX oDLC Launched in Production
Won Multi-System VERTEX Capacity Order in Display Cover Panel
Won 2nd Tier-1 VERTEX Customer
Won Multi-System ENERGiTM
Order with New Solar Customer
Won Multi-System Orders for Eight 200 Leans in HDD
PROPRIETARY Q3 2017 Investor Presentation_6
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
- 2D, 2.5D & 3D Cover Glass (CG); Back-Case (BC)
• Protection of Additional Value-Added Coatings• Extreme Cost Sensitivity
oDLC Advantages: • Lowest Cost Anti-Scratch Solution 20x Scratch Resistance 20% Increased Breakage Resistance 10x Haze Reduction Ability to Tune oDLC Coating for Each Application
VERTEX oDLC Applications: Display Cover Panel
oDLC ApplicationsHigh-Volume / High-Growth
Markets
Mobile PhonesTablets
Wearables POS Stations
Auto -Infotainment
Cover Glass After 10K Cycles of Sand Oscillation
Wearables
Stainless Steel Ball @ 7.5N Force – 10 Cycles per Minute
PROPRIETARY Q3 2017 Investor Presentation_7
Display Cover Panel: Smartphone Market Opportunity
Progress Multiple Systems at Truly Opto-electronics ~24M Units of Annual Smartphone Capacity in
Production VERTEX Installed at Additional Tier-1 CG
Manufacturer Progressing through Exhaustive Qualification
Process for Both oDLC Films and Tool Production-Worthiness
Multiple Top-Tier Phone Mfrs. Evaluating • 1000s of Samples Processed at In-House
Coating Operation
Opportunity• >$500M Revenue Opportunity over 5 Years
- Assumes ~25% Adoption for Smartphones / Tablets Display CG by 2020
- Additional Revenue Opportunity for Wearables, Automotive, POS, and Back Casings
Milli
ons
of U
nits
Source – IDC + Company Estimates for Interim Periods
1,300
1,350
1,400
1,450
1,500
1,550
1,600
1,650
1,700
1,750
1,800
2015 2016 2017 2018 2019 2020
2015-2020 SmartPhone Sales
Display CGNow
Camera Lens (CL)Future
Back-Case (BC) Future
Home ButtonFuture
PROPRIETARY Q3 2017 Investor Presentation_8
MATRIX PVD and Implant Application: N-Type Solar
PERT, Bifacial
IBC
n-type MonoHJT
Mono PERT, PERL, Bifacial
Mono PERC
p-type Mono
Multi PERC
Al BSF
p-type Multi
20142013 2015 2016
Cel
l Effi
cien
cy %
15%
25%
20%
2017
Market Drivers: Extreme Cost Sensitivity Space-Constrained Applications 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
Al BSF – aluminum back surface fieldMulti PERC – multi-crystalline passive emitter rear contactMono PERC – mono-crystalline passive emitter rear contactMono PERT– mono-crystalline passive emitter rear totally (diffused)Mono PERL – mono-crystalline passive emitter rear locally (diffused)HJT – heterojunction technologyIBC – interdigitated back contact
PROPRIETARY Q3 2017 Investor Presentation_9
Solar Market Opportunity
Progress• MATRIX Platform
- PVD Process Tool of Record for N-type Cells- Implant Tool Signed Off for Revenue Q2’17
• ENERGi Implant System- Order for 2 Pilot Systems Booked Q2’16 and
Revenued Q2’17- Follow-On Order for 12 Systems Booked Q1’17;
Shipping 2H’17 for 2018 Revenue
Opportunity• N-type Cell Installations up 2.2x
- >4GW of New Capacity by 2020• >$175M Revenue Opportunity Over 5 Years
- MATRIX PVD- MATRIX Implant- ENERGi Implant
Source: LONGJi Silicon Materials ’15-’18; SPV Market Research ’19-‘20
-
5,000
10,000
15,000
20,000
25,000
2016 2017 2018 2019 2020
P-Type Mono N-HJT N-PERT N-IBC
Total Installed Mono-Crystalline Solar Cell Manufacturing Capacity (MW)
PROPRIETARY Q3 2017 Investor Presentation_10
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17
Tie Ratio (Average # of Disks per Drive)
-
200
400
600
800
1,000
1,200
1,400
1,600
2015 2016 2017 2018 2019 2020
Exab
ytes
Exabytes Shipped on HDDs
200 Lean PVD Application: HDD Media
HDDs Dominate Storage in Exabytes Tie Ratio Increasing
Storage Shipped on HDDs by 2020 will be Approx. 2.3x 2016 Levels• 60% in the Cloud• HDDs to Comprise >90% of Total Data Stored
- SSDs Still <10% of Stored Data by 2020
Excess Media Capacity Remains Today• Shipped 216M in Q1’17; Capacity ~265M (per Qtr)
Multi-System Orders Support Tech. Roadmap• 8 Tools Booked in 2016 (4 Each for 2016 and 2017 Revenue)• 5 Tools Booked in 2017 (2 for 2017 Revenue, 3 for 2018)
Source – TrendFocus Feb. and May 2017, IDC “Data Age 2025” March 2017, Company Estimates
PROPRIETARY Q3 2017 Investor Presentation_11
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Actual Actual Forecast Forecast Forecast Forecast
2015 2016 2017 2018 2019 2020
Tie Ratio for Nearline (Cloud) Drives
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
Nearline HDDs for the Cloud Driving Tie Ratio Upward
High-Capacity Drives Growing Disks/Drive Key for Capacity Adds
Source – TrendFocus Feb. 2017
Growth in Media Driven by Nearline HDDs
• Nearline HDD Unit Volumes Growing in Otherwise Stagnant HDD Unit Environment
• Nearline Tie Ratio Also Increasing – from <4 to >7
Increasing Tie Ratio Positive for Media Units
• Media Demand Would Exceed Capacity, Even in a Flat HDD Market
• Crossover when Tie Ratio Increases to 2.5 – 3.0
Based on 100M Average Unit / Qtr HDD Market
Current 216
Capacity ~265
PROPRIETARY Q3 2017 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 Q3 2017 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 Q3 2017 Investor Presentation_14
Progress: Next-Generation Night Vision Systems
2016 Milestones• Next-Generation Digital Night Vision Requirements of US Army and Navy Merged - ISIE-19• 2k-by-2k High Resolution Digital Goggle Successfully Demonstrated for NAVAIR’s EVA –
Enhanced Visual Acuity Program- Increased Program Potential; All Digital EVA Competitors Utilizing Intevac Sensors
• Digital Night Vision Monocular Successfully Demonstrated for the US Army’s Enhanced Night Vision Goggle ENVG-3 Digital Follow-on Program- Generated Significant Interest for US and Foreign Special Operations Forces
• Total Revenue Opportunity Pipeline Increased, to over $1.4B
Continued Progress To Date in 2017• Launch and Award of the Department of Defense’s Coalition Warfare Program - DELTA-I
- Funded by 3 US and 3 Foreign Coalition Partners- Fully Funds the ISIE-19 Sensor Development - Deliverables include 24 Digitally-Fused Enhanced Night Vision Goggles
• Increasing Content for the US Army’s Family of Weapon Sights – Crew Served Program- Adding Intevac’s Proprietary Free-Form Prism into our Wireless Head-Mounted Displays
PROPRIETARY Q3 2017 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 Q3 2017 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+
Solar PVD and Implant
$175M+
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 Q3 2017 Investor Presentation_17
Improving Financial Performance
Positive Performance in 2016• Improved Operating P&L• Positive Cash Flow from
Operations• Net Increase in Total Cash and
Investments
Strong Growth in 2017 *• Guidance for 40% Revenue
Growth Over 2016- $61.4M in Revenues 1H’17- Q3’17 Revenue Guidance of
$25-$26M• ~39% Gross Margin• ~$41M Operating Expenses• Profitable Operations
* 2017 Guidance Provided as of July 31, 2017. Chart shows 40% revenue growth, ~39% gross margin, and ~$41M OpEx.
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
34%
36%
38%
40%
$(20)
$(10)
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
2014 2015 2016 2017 Guide*G
ross
Mar
gin
%
$M
Revenues Non-GAAP OpExOperating Income (Loss) GM%
PROPRIETARY Q3 2017 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
• Multiple VERTEX Customers Ordering and Evaluating for Display Cover Panel
• Providing Cost and Efficiency Benefits in Solar
• Strong Balance Sheet• Improving Financial Performance• Positioned for Strong Revenue Growth and Return to
Profitability in 2017
• Major Programs with Apache and JSF
• DELTA-I Funding Awarded• Next-Generation Sensor and
Fused Goggle Development
• Current Programs >$650M; Pursuits Bring Total Pipeline Opportunity to $1.4B+
PROPRIETARY Q3 2017 Investor Presentation_19PROPRIETARY © 2017 INTEVAC, INC.