Q4 2021 Intevac Inc Earnings Call

Yes, our outlook looking forward joining me on today's call are Nigel Hunton, President and Chief Executive Officer, and Jim Monies Chief Financial Officer.

Nigel will begin with his prepared remarks, then Jim will review our financial results before turning the call over to Q&A.

Speaker 1: I'd like to remind everyone that today's conference call contains certain forward-looking statements, including but not limited to statements regarding financial results for the company's most recently completed fiscal year.

I'd like to remind everyone that todays conference call contains certain forward looking statements, including but not limited to statements regarding financial results for the company's most recently completed fiscal year.

Speaker 1: remain subject to adjustment in connection with the preparation of our Form 10-K , as well as comments regarding future events and projections about the future financial performance of impact.

Which remains subject to adjustment in connection with the preparation of our Form 10-K , as well as comments regarding future events and projections about the future financial performance of into back. These forward looking statements are based upon our current expectations and actual results could differ materially as a result of various <unk>.

Speaker 1: These forward-looking statements are based upon our current expectations.

Speaker 1: And actual results could differ materially as a result of various risks and uncertainties relating to these comments and other risk factors discussed in documents filed by us with the Securities and Exchange Commission.

<unk> and uncertainties relating to these comments and other risk factors discussed in documents filed by US with the Securities and Exchange Commission.

Speaker 1: including our annual report on Form 10-K and quarterly reports on Form 10-K .

<unk> our annual report on Form 10-K , and quarterly reports on Form 10-Q .

Speaker 1: The contents of this February 9 call include time-sensitive, forward-looking statements that represent our projections as of today.

The contents of this February 9th call include time sensitive forward looking statements that represent our projections as of today.

Speaker 1: we undertake no obligation to update the forward-looking statement.

We undertake no obligation to update the forward looking statements.

Speaker 1: made during this conference call. I will now turn the call over to Nigel.

During this conference call.

I will now turn the call over to Nigel.

Thanks, Claire and good afternoon.

Speaker 2: I'm very excited to be joining InterVac and leveraging my expertise in the semiconductor capital equipment and other high tech industries.

I'm very excited to be joining in tobacco and leveraging my expertise in the semiconductor capital equipment.

Hi Tech industries to execute on the company's objective.

Speaker 2: to execute on the company's objective to create long-term stockholder value.

Great long term stockholder value.

Most recently I was CEO of proton control.

Speaker 2: Most recently, I was CEO of Fault on Control, a critical component company serving a leading process equipment companies in a way for fabric equipment. I joined the game.

Critical component company, serving a leading process equipment companies in wafer fab equipment.

I joined the company in May 2019, and two years later had grown revenues by 250% and completed the sale of the company to MKS instruments for over 300 million U S storms.

Speaker 2: And two years later, had grown revenues by 250% and completed the sale of the company to MKS Instruments for over 300...

I have a long history in the industry and in fact was the CEO of one of <unk> key suppliers in years past.

Speaker 2: I have a long history in the industry and in fact was the CEO of one of Intervax's key suppliers in years past and I am fully committed to building on this company's strong legacy of leadership in thin film processing technology in order to drive value for our stock.

And I'm fully committed to building on this company's strong legacy of leadership in thin film processing technology in order to drive value for our stockholders.

Since joining three weeks ago, I've been able to talk to several customers and <unk> employees working in both Santa Clara and Singapore.

Speaker 2: Since joining three weeks ago, I've been able to talk to several customers and Intervac employees working in both Santa Clara and Singapore.

Speaker 2: to ensure that they fully understand my commitment to building strong relationships and creating a successful...

To ensure they fully understand my commitment to building strong relationships and creating a successful business.

Speaker 2: I've been very impressed by the depth of talent in the business and especially the expertise in thin film processing in ultra high volume small substrate application.

I've been very impressed by the depth of talent in the business and especially the expertise in thin film processing in ultra high volume small substrate applications.

Speaker 2: By initial areas of focus, we based around the key mandates and priorities outlined in our recent press release.

Finally show areas of focus we based around the key mandates and priorities outlined in our recent press release.

Speaker 2: First, assessing our growth potential in each of our end markets, which entails meeting with each of our key customers both existing and prospective.

First assessing our growth potential in each of our end markets, which entails meeting with each of our key customers both existing and perspective.

Next I'm working internally to fully understand the organization.

Speaker 2: I'm working internally to fully understand the organisation.

Speaker 2: Aligning resources with our revenue growth prospects and streamlining the cost stroke.

Aligning resources with our revenue growth prospects and streamlining the cost structure.

Speaker 2: given that we are now a standalone capital equipment company without the added complexity of also running a wholly different plutonically

Given that we are now a standalone capital equipment company without the added complexity of also running a wholly different photonics business.

Speaker 2: And third, position the company for a return to profitability as soon as possible, while preserving the strength of the balance sheet.

Third positioning the company for a return to profitability as soon as possible, while preserving the strength of the balance sheet.

I have met multiple times with the leadership group and we are quickly developing our near term targets and priorities.

Speaker 2: and we are quickly developing our native targets and priorities.

We have a customer centric culture and.

Speaker 2: We have a customer-centric culture and an experienced team that is highly attuned to our customers' needs and challenges.

And an experienced team that is highly attuned to our customers' needs and challenges for each of our end markets.

Speaker 2: I expect to meet with every key customer within my first 90 days of CEO . The objective...

I expect to meet with every key customer within my first 90 days as CEO .

The objective of these customer meetings is to understand their commitment to <unk> thin film process solutions in the future technology Road map and to both identify and size our revenue growth opportunities.

Speaker 2: understand their commitment to interacts with the infill processing solutions in their future technology roadmap and to both identify and size our revenue growth opportunities.

Next as it relates to streamlining operations.

Speaker 2: As we build a forecast, customer by customer, gaining a clear understanding of their tool purchase and technology upgrade plans for the next two to three years.

As we build our forecast customer by customer gaining a clear understanding of the tool purchase and technology upgrade plans for the next two to three years.

Speaker 2: We will begin optimizing our company's resources with our growth process.

We will begin optimizing our company's resources with our growth prospects.

Speaker 2: We're also identifying costs that can be reduced with our newly simplified structure.

We are also identifying costs that can be reduced with our newly simplified structure.

Number three.

Speaker 2: prudent fiscal management, including positioning the company for profitability and preserving the strong balance sheet including our significant cash

Fiscal management, including positioning the company for profitability and preserving our strong balance sheet, including a significant cash reserves.

We are continuing our strategic review work with Greenhill in concert with my immediate efforts to size, our revenue growth and streamline operations.

Speaker 2: We are continuing our strategic review work with Green Hill. In concert with my immediate efforts to size our revenue growth and streamline operation.

My objective is to provide you with our near term forecast as well as longer term objectives on the next earnings call in early May.

Speaker 2: My objective is to provide you with a near term forecast as well as longer term objectives on the next earnings call in early.

So for today's call I'll be referring and official look for 2022 financials until I can personally meet with all of our key customers and make that assessment.

Speaker 2: So for today's call, I will be deferring an official look for 2022 for now.

Speaker 2: until I can personally meet with all of our key customers and make that a test.

Speaker 2: That being said, at this time I believe it's prudent to assume that the HDD business will be pretty similar to 2021, given the timing of the first new HDD system to be delivered later in the year.

That being said at this time I believe its prudent to assume that the HDD business will be pretty similar to 2021, given the timing of the first new HDD system to be delivered later in the year.

Speaker 2: In the meantime, we are laser focused on minimizing our use of cash as we streamline Inter.

In the meantime, we are laser focused on minimizing our use of cash as we streamline in track.

Speaker 2: Before we turn into the call over to Jim, I'll make a few more comments about the re-results published in our Q4 press release today.

Before turning the call over to Jim I'll make a few more comments about the results published in our Q4 press release today.

Speaker 2: The fiscal 2021 and Q14 particular. For the most part, our results were in line with what the company had guided the quarter ago for the thin film equipment.

For fiscal 2021, and Q4 in particular for the most part our results were in line with what the company had guided a quarter ago for the thin film equipment business.

Speaker 2: The main difference on the P&L, other than the photonics business moving to discontinued operations.

The main difference on the P&L other than the photonics business moving to discontinued operations.

Speaker 2: is that we took additional reserves against some of our inventory in non-HDD.

Is that we took additional reserves against some of our inventory in non HDD markets.

Speaker 2: I have taken a conservative viewpoint on our ability to turn over some inventory to revenue.

I have taken a conservative viewpoint on our ability to turn over some inventory to revenue.

Speaker 2: For example, two of the three vertex tools we built.

For example, two of the three vertex tools, we built.

Speaker 2: We're intended for decorative back cover glass coatings and we require significant modifications for the applications we've been working on more recent.

Were intended for decorative back cover glass coatings and will require significant modifications for the applications. We've been working on more recently.

Speaker 2: We also feel it's prudent to reserve the inventory associated with our energy product line for solar implant which could continue to get pushed out of the forecast for the last two years.

We also feel it's prudent to reserve the inventory associated with our energy product line for solar implant, which could continue to get pushed out of the forecast for the last two years.

Speaker 2: absent these additional inventory reserves taken in Q4. Our results for the year came in pretty much as expected.

Absent these additional inventory reserves taken in Q4, our results for the year came in pretty much as expected.

I look forward to meeting with and working with our investors our customers our board the management team and the entire in tobacco organization.

Speaker 2: I look forward to meeting with and working with our investors, our customers, our board, the management team and the entire interbacked organisation to retake the company for.

We take the company forward.

Speaker 2: That completes my repair remarks and with that I will now turn the call over.

That completes my prepared remarks, and with that I will now turn the call over to Jim.

Speaker 3: Thank you, Nigel. Our earnings release reflects the Q4 2021 and full year 2021 financial results per GAAP accounting, which reports the photonics business as discontinued operations.

Thank you Nigel.

Our earnings release reflects the Q4 2021 and full year 2021 financial results per GAAP accounting, which reports the photonics business as discontinued operations.

Speaker 3: My remarks here will close out Q4 2021 as compared to what was forecast for the equipment business and which drove our prior guidance for revenue, gross margin, op-X and profit or loss.

My remarks here will close out Q4, 2021 as compared to what was forecast for the equipment business and which drove our prior guidance for revenue gross margin opex and profit or loss.

Speaker 3: Fourth quarter revenues were $15.9 million. And total revenues for the year were $38.5 million. This was slightly above our forecast.

Fourth quarter revenues were $15 9 million in total revenues for the year were $38 5 million.

This was slightly above our forecast for the equipment business given a pull in of HDD upgrades from Q1 into Q4.

Speaker 3: given a pull-in of HDD upgrades from Q1 into Q4. For the full year, revenues included one matrix plus HDD upgrades, spares, and service.

For the full year revenues included one matrix, plus HDD upgrades spares and service.

Speaker 3: Q4 gross margin was 4%. Below our forecast for the equipment business, as we took additional inventory reserves of $8.4 million as Nigel described. Without those reserves, our gross margin would have been 57% above forecast, driven by favorable mix of higher margin HDD up.

Q4, gross margin was 4% below our forecast for the equipment business as we took additional inventory reserves of $8 $4 million.

Nigel described without those reserves, our gross margin would have been 57% above forecast.

Driven by favorable mix of higher margin HDD upgrades full.

Speaker 3: Full-year gross margin was 18.3%, and excluding the inventory reserves taken in Q4 would have been 40%.

Full year gross margin was 18, 3% and excluding the inventory reserve taken in Q4 would've been 40%.

Q4, operating expenses were $7 3 million and included a $1 million litigation settlement cost that is excluded from our non-GAAP results.

Speaker 3: Hugh IV operating expenses were $7.3 million, and included a $1 million litigation settlement cost that is excluded from our non-gap results.

Speaker 3: The net operating expenses of $6.3 million was below forecast due to less spending on IRD efforts and the absence of operating expenses from the photonics business.

The net operating expenses of $6 3 million was below forecast due to less spending on R&D efforts and the absence of operating expenses from the photonics business.

Speaker 3: The Q4 net loss from continuing operations was $7.3 million, or a loss of 30 cents per share for the quarter.

The Q4 net loss from continuing operations was $7 3 million or a loss of <unk> 30 per share for the quarter.

Speaker 3: excluding the impact of the inventory reserves, which were equivalent to $0.34 per share, as well as the litigation settlement, we would have reported net income from continuing operations of $0.7 per share.

Excluding the impact of the inventory reserves, which were equivalent to 34 per share.

As well as the litigation settlement, we would have reported net income from continuing operations of seven per share.

Speaker 3: Gap net income for the quarter was $43.5 million, or $1.77 per share, as a result of the gain recorded on the sale of our photonics.

GAAP net income for the quarter was $43 5 million or $1 77 per share as a result of the gain recorded on the sale of our photonics business, which contributed a net profit of $2 10 per share for Q4.

Speaker 3: which contributed a net profit of $2.10 per share for Q4.

Speaker 3: For the full year, Gap Net income was a dollar nine per share.

For the full year GAAP net income was $1 nine per share.

Speaker 3: Driven by our strongest bookings quarter for equipment in the last three years, our backlog grew to $24.7 million at year end, and includes one 200 lean system, as well as HDD upgrades and service.

Driven by our strongest bookings quarter for equipment in the last three years, our backlog grew to $24 7 million at year end and includes one 200 lean system as well as HDD upgrades and service business.

Speaker 3: We ended the year with cash and investments, including restricted cash of $121.1 million.

We ended the year with cash and investments, including restricted cash of $121 1 million equivalent to.

Speaker 3: Equivalent to approximately $4.93 per share based on 24.6 million shares at year end. The increase in cash year over year less the $70 million of gross proceeds from the sale of platonics was about $1 million.

Approximately $4 93 per share based on $24 6 million shares at year end.

The increase in cash year over year.

Less the $70 million of gross proceeds from the sale of photonics was about $1 million.

Speaker 3: We incurred about $3 million of transaction costs associated with the photonic sale, and these were paid in Q1. So these costs will be reflected in the balance sheet and investments at the end of this quarter. The litigation settlement payment.

We incurred about $3 million of transaction costs associated with the photonics sale and these were paid in Q1. So these costs will be reflected in the balance sheet and investments at the end of this quarter.

The litigation settlement payment will be made in Q2.

Speaker 3: Cashflow generated by operations was $318,000 during the quarter and $278,000 for the year.

Cash flow generated by operations was $318000 during the quarter and $278000 for the year.

Speaker 3: Q4 capitalist expenditures were $425,000 and depreciation and amortization was $888,000 for the quarter.

Q4 capital expenditures were $425000 and depreciation and amortization was $888000 for the quarter.

Speaker 3: For the full year, CAPEX was $1.2 million, and depreciation and amortization was $3.5 million. Now moving to Q1.

For the full year, Capex was $1 $2 million and.

Creation, and amortization was $3 $5 million.

Now moving to Q1 2022 guidance.

Speaker 3: We are projecting revenues to be around $4 million.

We are projecting revenues to be around $4 million.

Speaker 3: The Q1 projection includes HDD upgrades, spares and fuel service revenue and no thin film equipment systems.

Q1 projection includes HDD upgrades spares and field service revenue and no thin film equipment systems. As a reminder, we did see a pooling of upgrades from Q1 into Q4.

Speaker 3: As a reminder, we did say pulling up upgrades from Q1 into Q4.

Speaker 3: The fourth quarter is typically our largest quarter for upgrades. And the first quarter is typically our lowest quarter for upgrades.

Fourth quarter is typically our largest quarter for upgrades in the first quarter is typically our lowest quarter for upgrades.

Speaker 3: Given the lower revenue volumes in Q1, which will affect factory utilization, we expect first quarter gross margin to be around 25%.

Given the lower revenue volumes in Q1, which will affect factory utilization, we expect first quarter gross margin to be around 25%.

Speaker 3: If you want operating expenses are expected to be around $7 million, with some typical seasonal increase.

Q1 operating expenses are expected to be around $7 million with some typical seasonal increases we are working to reduce our quarterly opex and we'll have more to report on our next earnings call.

Speaker 3: We are working to reduce our quarterly optics and we'll have more to report on our next earnings call.

Speaker 3: We expect interest income of about $40,000 and gap tax expense of about $100,000 in the quarter.

We expect interest income of about $40000 and GAAP tax expense of about $100000 in the quarter.

Speaker 3: We are projecting a net loss of around $0.24 per share based on 25 million shares outspan.

We are projecting a net loss of around 24 per share based on 25 million shares outstanding.

Speaker 3: This completes the formal part of our presentation. John , we are ready for questions.

This completes the formal part of our presentation, John we are ready for questions.

Speaker 4: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation phone will indicate that your line is in the question queue. You may press star two if you would like...

Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker 4: For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys. One moment please, while we...

One moment, please where we pull for questions.

Okay.

Yes.

Speaker 4: As a reminder, if you would like to ask a question, please press star one on your telephone keypad.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Our first question comes from the line of Peter Wright with Intro Act you May proceed with your question.

Speaker 4: Our first question comes from the line of Peter Wright with intro act. You may proceed with your question.

Speaker 5: Great, thank you guys for taking my question and Nigel, congratulations on the new position enrolled.

Okay, great. Thank you guys for taking my question and Nigel Congratulations John .

The new position enrolled.

Speaker 5: My first question is, I've got two questions. My first question is, if I was to look at the equipment business and start with the assumption normalize sales are around 60 million.

Thank you.

Mike My first question is I've got two questions. My first question is if I was to look at the equipment business.

Start with the assumption normalized sales are around $60 million.

Speaker 5: annualized. I'm hoping you can comment, you know, kind of your thoughts around that if that's a good number to think about as kind of the baseline that you're you're looking at when looking to rape size.

Annualized I'm, hoping you can comment kind of your thoughts around that if that is a good number to think about as kind of a baseline that youre youre looking at when looking at the right size.

Speaker 5: you know, to business. And that's the first question. And then the second question is kind of, your frame of reference. So you noted in your commentary to salient points of kind of your...

The business.

And.

That's the first question and then the second question is kind of.

Your frame of reference so you noted in your commentary.

Two salient points of kind of your <unk>.

Speaker 5: expertise and past experience, which is growing a company organically 250% and then selling.

The expertise.

And past experience, which is growing our company organically, 250% and then selling it.

Speaker 5: I guess my second question is, is a strategic review of the business still?

I guess my second question is is is a strategic review of the business still.

Speaker 5: so ongoing or now with the photonics being sold off is that complete.

So ongoing.

Or now with photonics being sold off is that complete.

Speaker 5: And if you can comment and light it up, how do you think of the equipment business? Do you think that there's more opportunity in growing it as a standalone? You know, and...

And if you can comment in light of that how do you. How do you think of the equipment business do you think that there's more opportunity in growing it as a standalone.

<unk>.

And.

Speaker 5: Of course, if fitting into something else, what are your thoughts more generally?

Of course, it fitting into something else what are your thoughts more generally around that.

Speaker 2: Okay, thank you for those questions. What I'll try and do is cover them.

Okay. Thank you for those questions.

And as cover them.

Speaker 2: in sort of multiple ways. Clearly, where we're at at the moment is going through a pretty thorough review of the business.

And as of multiple ways.

Clearly.

Where we're at at the moment is going through a pretty thorough review of the business.

Speaker 2: And I suppose the next 90 days is about really understanding it.

And as for the next 90 days is about really understanding it's not just the core business, but understanding opportunities that have been looked at over the last couple of years. So.

Speaker 2: not just the core business but understanding, opportunities that have been looked at over that couple of years. So that's got a part of this process. So if I look at the equipment business and annualise sales, as I said in my opening remarks, 2022 will be pretty flat against 2021, and therefore doesn't get the business to a level of profitability. But this year is very much about stream

Part of this process.

So if I look at the equipment business and annualized sales as I said in my.

Opening remarks two.

2022 will be pretty flat against 2021, and therefore doesn't get the business to a level of profitability.

But this year is very much about.

Streamlining the operations.

Speaker 2: getting this business back to a base 18 HDD platform and then bolting on any initiatives beyond that. But overall, having some in my first, I suppose, 30 days of analysis so far, we do believe a business in the sort of...

This business back to a base 18 to HDD platform, and then bolting on any initiatives beyond that but overall, having some in my first I suppose.

A few days of analysis so far.

We do believe our business in the sort of mid sixties can get to a level of beyond breakeven the signs look at profitability, but that does need in 2023.

Speaker 2: and get to a level of beyond breaking even the sight and look at the profitability. But that does need in 2023.

Speaker 2: and if we're not just delivering on the cost reduction and right sizing of the company, it needs a return to rev.

On the for not just delivering on the cost reduction and right sizing of the company.

In East a return to revenue as well and my initial discussions with the leading customers shows that 2023, we'll have increased sales as they need capacity in that year. So with this year being flat is a great opportunity for me to look at streamlining of getting focused into the business.

Speaker 2: And my initial discussions with sort of the leading customers shows that 2023 will have increased sales as they need capacity in that year. So with this year being flat, it's a great opportunity for me to look at streamlining and getting focused into the business.

Speaker 2: making sure we keep a razor sharp focus on the cash but ensure we actually get the business in shape. So we hit 2020-23 with a very different structure but very focused.

Making sure we keep.

A razor sharp focus on the cash, but ensure we actually get the business in shape. So we hit to 2023 with a very different structure, but very focused.

Speaker 2: and a good base organization to take the company forward into profitability as we go through 2023. So I think...

And a good base organization to take the company forward into profitability as we go through 2023, So I think.

Speaker 2: 60 million analysed, that's a good baseline. So I'm sort of okay with that, as do you think about the equipment?

Ah 60 million annualized that's a good baseline.

Okay with that as you think about the equipment business.

Speaker 2: Terms of reference, by refer terms, I've touched on my opening remarks. Let's look at the business.

Tom as a reference.

RASK terms as I touched on in my opening remarks.

Look at the.

Business.

Look at right sizing it.

Speaker 2: Look at what growth opportunities there are. So really, it's too early to say what the final conclusion of that is, but over the first 90 days we'll go through that. And as part of that, I don't want to shut down any strategic review of the business.

Look at what growth opportunities at all so really it's too early to say what the final conclusion of that is but over the first 90 days will go through that and as part of that I don't want to shut down any strategic review of the business.

Speaker 2: As I conclude on what we're structuring we need, as I conclude the revenue forecast, how to certainly, as I look, we on one to two years.

As I conclude on what restructuring we need as I conclude the revenue forecast out certainly as I look beyond one to two years.

Speaker 2: Then we'll feed that and we'll talk. What does that mean for strategic process? So it is still there. I will talk to Greenhill as I develop the plans. But the moment, my turn.

Then we'll feed that and we'll talk what does that mean the strategic process. So it is still there.

I will talk to greenhill as I develop the plans.

My terms references to make sure the company returns to profitability as fast as possible is right sized for the new shape.

Speaker 2: make sure the company returns to profitability as fast as possible is right size for the new shape.

Speaker 2: And therefore, we can build a business that is standalone and delivers returns to our stockholders. So, a lot to do, but I'm excited. We're getting a lot of focus. You'll see a lot of change coming through. But the important thing is we're going to get and build a company for the future. And that's where my passion and drive is and that's my commitment.

And therefore that we can build a business that is standalone and delivers returns.

So I'd love to do but I'm excited.

And a lot of focus you'll see a lot of change coming through.

One thing is we're going to get and build a company for the future and that's where my passion and drive it and that's my commitment.

Okay.

Speaker 5: Thank you. If I could have one more follow up. If you look at the $60 million, can you help us understand what that would look like? Without a timeframe necessarily around it, how much of that is systems versus upgrades? And if we look at the systems, it's a little different in the next cycle than backwards looking. How do you envision that, maybe from a number of systems perspective in each category?

Thank you if I could ask one more follow up.

If you if you look at the $60 million can you help us understand what that would look like without a timeframe necessarily around it.

How much of that is in our systems versus upgrades.

If we look at the systems, it's a little different in the next cycle then backwards looking.

How do you envision that maybe from a number of systems perspective in each category.

Speaker 2: I mean, I think overall, I would say we're looking at a sort of similar level of upgrades, but a system business that could be delivering at least 50 million next year. So, I think we've talked on prior calls about whether there was 200 million over three years. I think for the HDD business, I think if you look over just two years for now, I think my initial visibility says we can do 100 million over two years.

I mean, I think overall I would say we're looking at a.

A similar level of upgrades, but our system business that can be delivering.

At least $50 million next year. So I think we've talked on prior calls about whether.

It was 200 million over three years I think for the HDD business I think if you look at it with just two years from now I think my initial visibility says, we can talk to a $100 million over two years.

Speaker 2: And the majority of that really has to become systems revenue sales in 2023.

The majority of vessels still has to become systems revenue sales in 2023.

Thank you very much.

Peter.

Speaker 4: Our next question comes from the line of Mark Miller with Benchmark Company. You may proceed with your question.

Our next question comes from the line of Mark Miller with Benchmark Company. You May proceed with your question.

Speaker 3: Through the years, you've attempted to broaden yourself out, at least in equipment business, in terms of solar, also in terms of coatings for mobile devices. Now you took an image or a torch on to the Vogue Vertex tool and a solar tool, but you did complete a matrix evaluation. I'm just wondering of any thoughts you have about future broadening of your mark.

Through the years, you've attempted to broaden yourself out of at least in the equipment business.

In terms of solar also in terms of coatings for them.

Mobile devices now you took an immature toward charge on to the vote vertex tool and the solar tool, which you didn't complete a matrix evaluation.

Just wondering any thoughts.

You have about future.

Broadening of your market.

Yeah.

Speaker 2: Yeah, I mean, not to repeat things again. I mean, I'm very early into the review of the business. It's key for me.

Yes, I mean.

Not to repeat things again.

Early in the review of the business.

It's key for me.

Speaker 2: not just to understand internally what the focus is up, but to understand the you say Kick tire tire

Not just understand internally, what the focus is up but to understand the customers.

Speaker 2: You know, internet has to become a customer driven business.

Internet has to become a customer driven business.

Speaker 2: that understands the customer requirements and understands what the key things are that we can add value to solving their problem.

It understands the customer requirements and understands what the key things are that we can add value to solving their problems.

Speaker 2: So as I look at that market, I don't see...

So as I look at that market.

Don't see a future within the solar for the company, hence we've made those decisions.

Speaker 2: the future within the solar for the company and to be made for those decisions.

Speaker 2: If I look at coatings, I see I'm pretty excited about some of those opportunities, but we've got to really meet with the key customers. We've got to meet with the right partners and really get to understand what the opportunities are there. So for me, it's early days understanding what the coatings are.

If I look at coatings.

I see I'm pretty excited about some of those opportunities, but we've got to really meet with key customers.

To meet with the right partners.

Really get to understand what the opportunities are that so for me it's early days.

Understanding what the coatings out for mobile.

Speaker 2: I think there's some excitement there, but for me it's not just about having the technology It's making sure there's a customer that has the pull and has processing or other challenges that require our technology So I'd say over the first 90 days I'm going to be meeting and talking to the customers involved in that sector

I think there's some excitement.

But for me, it's not just about having the technology is making sure. There's a customer that has the pole and has processing or other challenges that require our technology. So I'd say over the first 90 days.

Meeting and talking to the customers involved in that sector.

Speaker 2: and then feeding that into our strategy and feeding that into our renewed focus for the business. So that's it, it's too early to make a final comment on that and maybe on the next call, I can add a lot more color to that.

And then feeding that into our strategy and feeding that into us with a renewed focus for the business. So I'd say, it's too early to make a final comment on that and maybe on the next call I can add a lot more color to that.

Speaker 3: Would you expect a follow-on order from this matrix evaluation and if so, when?

Would you expect a follow on orders from this matrix evaluation and if so one.

The matrix evaluation that was on advanced packaging I'm, assuming you're talking about.

Speaker 2: The Matrix evaluation that was on Advanced Packaging, I'm assuming you're talking about, I think that could be a couple of years away for a follow-on order. So it's still in evaluation stage, but it is some way off and therefore that will be part of my strategic review as well.

I think that could be a couple of years away for a follow on order. So it's still in evaluation stage, but it is some way off and therefore that will be part of my strategic review as well.

Speaker 3: Yeah, and it's not an evaluation unit. I mean, we sold a unit, sold for $4 million. It's in the engineering. So it's not considered just an evaluation unit. But the question is, when are they going to bring it into production?

It's not an evaluation unit, we sold a unit sold for $4 million is into engineering. So it's.

Not considered you know just an evaluation unit, but the question is what are they going to bringing into production.

Okay.

Speaker 3: Just wanted to clarify. You said without the photonics sale, the inventory adjustment and the litigation charge, it would have reported a net income of $0.7 per share. Is that correct or did I have something and miss something? That is correct for the quarter, yes. Okay.

Just wanted to clarify you said without.

Photonics sell the inventory adjustment in the litigation charge.

We reported a net income of seven cents per share.

Is that correct or did I Miss something that is correct for the quarter yes.

Okay.

Thank you.

Thank you Mark.

Okay.

Speaker 4: Our next question comes from the line of Joe Vittich with Manelapin Oracle. You may proceed with your question.

Our next question comes from the line of Joe Vintage with mental up an Oracle you May proceed with your question.

Yes, thanks for taking my call.

Speaker 6: I guess I don't know a little last year you guys forecasted growth in the HDD business for the next three years of basically 40% over the last three years. And I was just wondering if if you're reviewing that or if you feel that's still a reasonable expectation.

Yeah, I guess I don't know a little last year, you guys forecasted.

Growth in the HDD business for the next three years.

Basically 40% over the last three years and I was just wondering if you are reviewing that or if you feel that still.

Reasonable expectation.

Speaker 2: Yeah, and it's recognized your aim to my, I'm still in my first 30 days. The initial feedback I have had from my discussions with customers.

Yes.

Recognize that Ain't amongst absolutely in my first 30 days.

The initial feedback I've had from my discussions with customers.

Speaker 2: say that probably the 200 million maybe over four years, not three, I think there is clearly the HDD market that's got a long future.

Say that probably the 200 million may be over four years not three I think there is clearly the HDD market.

A long future will require capacity additions over the next three to five years. The long term there is still growth in that market and that will drive our system sales in the future.

Speaker 2: will require capacity additions over the next three to five years. So long term, there is still growth in that market and that will drive our system sales.

Speaker 2: Where I'm set today, I think as I touched on on my perds remarks, this year is looking that it's going to be flat on.

I'm set today I think as I touched on in my prepared remarks. This year is looking that theres going to be flat on.

2021.

Speaker 2: And looking into 2023, it could be the 65, 70, that sort of level. So I think I'm pretty clear and firm about 100 million over two years. What it doesn't give you is a 40% growth in 2022. And I think I've been pretty clear on that. But the HDD business is still alive.

And looking into 2023, it could be the $65 70 that sort of levels. So I think.

I'm pretty clear and firm of about $100 million over two years.

What it doesn't give us a 40% growth in 2022, and I think I've been pretty clear on that but the HDD business is still alive will need investments will need capex, but I, probably won't have a clear vision.

Speaker 2: will need investments, will need Catholics, but I probably won't have a clear vision on the two, three, four year outlook until I've met with all the customers and actually spent a bit more time on that and therefore that's a key priority during my first 90 days.

On the two three and four year outlook until I've met with all our customers and actually it's been a bit more time on that and therefore that is a key priority. During my first 90 days.

Speaker 6: Okay, great. I appreciate it. Thanks very much. That's all I have. All right. Thank you. Thank you, Joe.

Okay, Great I appreciate it thanks very much that's all I have alright. Thank you. Thank you Joe.

At this time there are no further questions and ladies and gentlemen. This does conclude today's teleconference. Thank you very much for your participation. You may disconnect. Your lines at this time. Thank you very much and have a great day.

Speaker 4: And ladies and gentlemen, this does conclude today's teleconference. Thank you very much for your participation. You may disconnect your lines at this time. Thank you very much and have a great day.

Thank you.

Yeah.

Yeah.