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Apr 28, 2008

Intevac Announces First Quarter 2008 Financial Results

Intevac Announces First Quarter 2008 Financial Results

Intevac Announces First Quarter 2008 Financial Results

SANTA CLARA, Calif., Apr 28, 2008 (BUSINESS WIRE) -- Intevac, Inc. (Nasdaq:IVAC) today reported financial results for the quarter ended March 29, 2008.

Net income for the quarter was $1.6 million, or $0.07 per diluted share, on 22.1 million weighted-average shares outstanding. Net income included $1.6 million of pre-tax stock-based compensation expense, equivalent to $0.04 per diluted share. First quarter earnings included a $1.3 million net tax benefit, equivalent to $0.06 per diluted share. For the first quarter of 2007, net income was $9.8 million, or $0.44 per diluted share, on 22.2 million weighted average shares outstanding, which included $1.4 million of pre-tax stock-based compensation expense, equivalent to $0.04 per diluted share.

Revenues for the quarter were $33.2 million, including $27.0 million of Equipment revenues and record Imaging revenues of $6.2 million. Equipment revenues consisted of two 200 Lean® systems as well as disk lubrication systems, equipment upgrades, spares, consumables and service. Imaging revenues consisted of $4.1 million of research and development contracts and a record $2.1 million of product sales. In the first quarter of 2007, revenues were $76.4 million, including $72.5 million of Equipment revenues and $3.9 million of Imaging revenues, which included $1.1 million of product sales.

Equipment gross margins grew to 47.1%, from 43.3% in the first quarter of 2007, primarily due to the high proportion of technology upgrades and spares relative to system sales. Imaging gross margins increased to 42.0%, from 36.6% in the first quarter of 2007, primarily as a result of securing higher-margin development contracts and an increased percentage of revenue derived from higher-margin product shipments. Consolidated gross margins improved to 46.2%, from 42.9% in the first quarter of 2007.

Operating expenses for the quarter totaled $16.5 million, or 50% of revenues, versus $19.7 million, or 26% of revenues, in the first quarter of 2007. Total operating expenses decreased versus the first quarter of 2007 as a result of lower R&D expenditures and legal costs as well as overall cost-reduction initiatives.

Order backlog totaled $43.5 million on March 29, 2008, compared to $34.2 million on December 31, 2007 and $92.8 million on March 31, 2007. Backlog at quarter end includes seven 200 Lean® systems, compared to two on December 31, 2007 and fourteen on March 31, 2007.

"In this challenging business environment, we delivered strong results for the first quarter. We increased our backlog for 200 Leans® from two to seven systems and announced orders for our first 200 Lean® Gen II systems," commented Kevin Fairbairn, president and chief executive officer of Intevac. "Imaging continues to grow and achieve record revenues for the business. We continue to work to fully integrate Creative Display Systems and expect this acquisition to be accretive to our Imaging Instrumentation business within a year."

Conference Call Information

The Company will discuss its financial results and outlook in a conference call today at 1:30 p.m. PT (4:30 p.m. ET). To participate in the teleconference, please call toll-free (800) 291-8929 prior to the start time. For international callers, the dial-in number is (706) 634-0478. You may also listen live via the Internet at the Company's website, www.Intevac.com, under the Investors link, or at www.earnings.com. For those unable to attend, these web sites will host an archive of the call. Additionally, a telephone replay of the call will be available for 48 hours beginning today at 7:30 p.m. ET. You may access the playback by calling (800) 642-1687, or for international callers (706) 645-9291, and providing conference ID 41854048.

About Intevac

Intevac was founded in 1991 and has two businesses: Equipment Products and Imaging Instrumentation.

Equipment Products: Intevac is a leader in the design, manufacture and marketing of high-productivity "lean" manufacturing systems and has been producing "Lean Thinking" platforms since 1994. We are the leading supplier of magnetic media sputtering equipment to the hard disk drive industry and offer leading-edge, high-productivity etch systems to the semiconductor industry.

Imaging Instrumentation: Intevac is a leader in the development of compact, cost-effective, high-sensitivity digital-optical products for the capture and display of low-light images and the optical analysis of materials. We provide sensors, cameras and systems for commercial applications in the inspection, medical, scientific and security industries, and for government applications such as night vision and long-range target identification.

For more information call 408-986-9888, or visit the Company's website at www.intevac.com.

200 Lean® is a registered trademark of Intevac, Inc.

Safe Harbor Statement

This press release includes statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Intevac claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. These forward-looking statements are often characterized by the terms "may," "believes," "projects," "expects," or "anticipates," and do not reflect historical facts. Specific forward-looking statements contained in this press release include, but are not limited to; expected revenue growth of its products, success of the CDS acquisition and management of the Company's operating expenses. The forward-looking statements contained herein involve risks and uncertainties that could cause actual results to differ materially from the Company's expectations. These risks include, but are not limited to: failure to increase Imaging Instrumentation revenues, manage operating expenses or introduce new products, each of which could have a material impact on our business, our financial results, and the Company's stock price. These risks and other factors are detailed in the Company's regular filings with the U.S. Securities and Exchange Commission.

(In thousands, except per share amounts)
                                                   3 months ended
                                                Mar. 29,    Mar. 31,
                                                  2008        2007
                                               (Unaudited) (Unaudited)
Net revenues
  Equipment                                        $26,973     $72,446
  Imaging                                            6,202       3,928
    Total net revenues                              33,175      76,374

Gross profit                                        15,311      32,782
Gross margin
  Equipment                                          47.1%       43.3%
  Imaging                                            42.0%       36.6%
    Consolidated                                     46.2%       42.9%

Operating expenses
  Research and development                           9,388      12,192
  Selling, general and administrative                7,064       7,513
    Total operating expenses                        16,452      19,705

Operating income (loss)
  Equipment                                            496      14,989
  Imaging                                            (821)     (1,600)
  Corporate                                          (816)       (312)
    Total operating income (loss)                  (1,141)      13,077

Other income                                         1,411       1,320
Income before income taxes                             270      14,397
  Provision for (benefit from) income taxes        (1,293)       4,552
Net income                                          $1,563      $9,845
                                               =========== ===========

Income per share
  Basic                                              $0.07       $0.46
  Diluted                                            $0.07       $0.44
Weighted average common shares outstanding
  Basic                                             21,647      21,293
  Diluted                                           22,053      22,188

(In thousands)

ASSETS                                          Mar. 29,    Dec. 31,
                                                  2008        2007
                                               (Unaudited) (see Note)
Current assets
  Cash, cash equivalents and short term
   investments                                     $46,163    $138,658
  Accounts receivable, net                          22,831      14,142
  Inventories                                       22,203      22,133
  Deferred tax assets                                4,450       3,609
  Prepaid expenses and other current assets          3,266       4,162
    Total current assets                            98,913     182,704

Long term investments                               78,788       2,009
Property, plant and equipment, net                  15,604      15,402
Deferred tax assets                                  4,614       3,740
Goodwill                                             7,905       7,905
Other long-term assets                               3,417       3,653
    Total assets                                  $209,241    $215,413
                                               =========== ===========


Current liabilities
  Notes payable                                     $1,929      $1,992
  Accounts payable                                   6,825       7,678
  Accrued payroll and related liabilities            3,478       8,610
  Other accrued liabilities                          5,185       5,454
  Customer advances                                  3,910       4,340
    Total current liabilities                       21,327      28,074

Other long-term liabilities                            190       2,176
Shareholders' equity
  Common stock ($0.001 par value)                       22          22
  Paid in capital                                  122,389     120,056
  Accumulated other comprehensive income
   (loss)                                            (764)         571
  Retained earnings                                 66,077      64,514
    Total shareholders' equity                     187,724     185,163
    Total liabilities and shareholders' equity    $209,241    $215,413
                                               =========== ===========

Note: Amounts as of December 31, 2007 are derived from the December 31, 2007 audited consolidated financial statements.


The effect of recording stock-based compensation for the three-month periods ended March 29, 2008 and March 31, 2007 were as follows (in thousands, except per share amounts):

                                               Three Months Ended
                                             Mar. 29,       Mar. 31
                                               2008          2007
                                            (Unaudited)   (Unaudited)
Stock-based compensation by type of award:
   Stock options                                  $1,325        $1,145
   Employee Stock Purchase Plan                      202           213
Amounts (capitalized to) charged from
 inventory                                            69           (4)
                                           ------------- -------------
Total stock-based compensation                     1,596         1,354
Tax effect on stock-based compensation               626           428
                                           ------------- -------------
Net effect on net income                            $970          $926
                                           ============= =============

Effect on earnings per share:
  Basic                                            $0.04         $0.04
  Diluted                                          $0.04         $0.04

Approximately $69,000 of stock-based compensation was charged to cost of sales during the three-months ending March 29, 2008 and $4,000 of stock-based compensation was capitalized to inventory during the three-months ending March 31, 2007.

SOURCE: Intevac, Inc.

Intevac, Inc.
Jeff Andreson, 408-986-9888
Chief Financial Officer
Headgate Partners LLC
Claire McAdams, 530-274-0551

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