Intevac
Jul 30, 2007

Intevac Announces Results for the Second Quarter of 2007

SANTA CLARA, Calif., Jul 30, 2007 (BUSINESS WIRE) -- Intevac, Inc. (Company) (Nasdaq: IVAC) reported financial results for the quarter and six months ended June 30, 2007.

Net income for the quarter was $11.6 million, or $0.52 per diluted share, on 22.1 million weighted-average shares outstanding. Net income included $1.3 million of stock-based compensation expense, equivalent to $0.05 per diluted share. Second quarter earnings include the effect of adjusting the Company's 2007 year-to-date income tax provision to an effective tax rate of 26.9%, from the 31.6% tax rate provided for in the first quarter of 2007. For the second quarter of 2006, net income was $9.3 million, or $0.42 per diluted share, on 22.0 million weighted average shares outstanding, which included $695,000 of stock-based compensation expense, equivalent to $0.03 per diluted share.

Revenues for the quarter were $72.1 million, including $68.5 million of Equipment revenues and Imaging revenues of $3.6 million. Equipment revenues consisted of twelve 200 Lean® systems as well as disk lubrication systems, equipment upgrades, spares, consumables and service. Imaging revenues consisted of $2.5 million of research and development contracts and $1.1 million of product sales. In the second quarter of 2006, revenues were $59.5 million, including $56.4 million of Equipment revenues and $3.1 million of Imaging revenues, which included $378,000 of product sales.

Equipment and Imaging gross margins for the second quarter of 2007 rose to 43.1% and 39.5%, respectively, from 36.4% and 25.4% in the second quarter of 2006. Equipment margins improved primarily due to lower manufacturing costs as well as higher sales of spares and upgrades. Imaging margins improved primarily as the result of higher margins on development contracts and products. Consolidated gross margins improved to 42.8% from 35.7% in second quarter 2006.

Operating expenses for the quarter totaled $17.5 million, or 24.3% of revenues, versus $11.3 million, or 19.0% of revenues, in the second quarter of 2006. Operating expenses grew primarily as the result of increased spending on development of new Equipment products, increased business development expense and higher stock-based compensation expense.

Net income for the first six months of 2007 was $21.4 million, or $0.97 per diluted share, on 22.2 million weighted-average shares outstanding. Net income included $2.7 million of stock-based compensation expense, equivalent to $0.09 per diluted share. For the first six months of 2006, net income was $16.3 million, or $0.75 per diluted share, on 21.9 million weighted average shares outstanding, which included $1.1 million of stock-based compensation expense, equivalent to $0.04 per diluted share.

Revenues for the first six months were $148.5 million, including $141.0 million of Equipment revenues and Imaging revenues of $7.5 million. Equipment revenues consisted of twenty-five 200 Lean® systems as well as disk lubrication systems, equipment upgrades, spares, consumables and service. Imaging revenues consisted of $5.3 million of research and development contracts and $2.2 million of product sales. In the first six months of 2006, revenues were $109.2 million, including $104.1 million of Equipment revenues and $5.1 million of Imaging revenues, which included $879,000 of product sales.

Equipment and Imaging gross margins for the first six months of 2007 increased to 43.2% and 38.0%, respectively, from 35.8% and 25.7% in the first six months of 2006. Equipment margins improved primarily due to lower manufacturing costs as well as higher sales of spares and upgrades. Imaging margins improved primarily as the result of higher margins on development contracts and favorable adjustments related to contract closeouts. Consolidated gross margins improved to 42.8% from 35.3% in first six months of 2006.

Operating expenses for the first six months of 2007 totaled $37.2 million, or 25.0% of revenues, versus $22.0 million, or 20.1% of revenues, in the first six months of 2006. Operating expenses grew primarily as the result of increased spending on development of new Equipment products, increased business development expense and higher stock-based compensation expense.

Order backlog totaled $57.5 million on June 30, 2007, compared to $92.8 million on March 31, 2007, and $96.2 million on July 1, 2006. Backlog as of June 30, 2007 includes four 200 Lean® systems.

"We are pleased to deliver strong financial results again this quarter, with gross margin and earnings per share exceeding guidance," commented Kevin Fairbairn, president and chief executive officer of Intevac. "In the second quarter we accomplished two milestones of our growth strategy: the official launch of our Lean Etch semiconductor manufacturing system during SEMICON West and approval by the U.S. government to ship large quantities of our digital night vision modules to our NATO customer."

Conference Call Information

The Company will discuss its financial results and outlook in a conference call today at 1:30 p.m. PDT (4:30 p.m. EDT). 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 4:30 p.m. PDT. You may access the playback by calling (800) 642-1687 or, for international callers (706) 645-9291, and providing conference ID 6224367.

About Intevac

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

Equipment Business: 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 Business: Intevac is a leader in the development of leading-edge, high-sensitivity imaging products and miniature Raman instruments. We provide sensors, cameras and systems for government applications such as night vision and long-range target identification and we provide cameras and Raman systems to the industrial, physical science and life science markets.

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

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

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
                             3 months ended         6 months ended
                         ---------------------- ----------------------
                          June 30,    July 1,    June 30,    July 1,
                            2007       2006        2007       2006
                         ---------------------- ----------------------
                         (Unaudited)(Unaudited) (Unaudited)(Unaudited)
Net revenues
  Equipment               $  68,519  $  56,465   $ 140,965  $ 104,038
  Imaging                     3,586      3,077       7,514      5,124
                         ---------------------- ----------------------
    Total net revenues       72,105     59,542     148,479    109,162

Gross profit                 30,827     21,262      63,609     38,568
Gross margin
  Equipment                    43.1%      36.4%       43.2%      35.8%
  Imaging                      39.5%      25.4%       38.0%      25.7%
                         ---------------------- ----------------------
    Consolidated               42.8%      35.7%       42.8%      35.3%

Operating expenses
  Research and
   development                9,648      6,290      21,840     11,851
  Selling, general and
   administrative             7,839      5,004      15,352     10,118
                         ---------------------------------------------
    Total operating
     expenses                17,487     11,294      37,192     21,969

Operating income/(loss)
  Equipment Products         15,842     10,974      30,831     19,454
  Imaging                    (1,515)    (1,159)     (3,115)    (3,028)
  Corporate                    (987)       153      (1,299)       173
                         ---------------------- ----------------------
    Total operating
     profit                  13,340      9,968      26,417     16,599

Other income                  1,538        729       2,858      1,327
                         ---------------------- ----------------------
Profit before provision
 for income taxes            14,878     10,697      29,275     17,926
  Provision for income
   taxes                      3,326      1,364       7,878      1,582
                         ---------------------- ----------------------
Net income                $  11,552  $   9,333   $  21,397  $  16,344
                         ========== ==========  ========== ==========

Income per share
 Basic                    $    0.54  $    0.44   $    1.00  $    0.78
 Diluted                  $    0.52  $    0.42   $    0.97  $    0.75
Weighted average common
 shares outstanding
  Basic                      21,396     20,987      21,345     20,910
  Diluted                    22,146     21,972      22,167     21,883

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

ASSETS                                          June 30,    Dec. 31,
                                                  2007        2006
                                               -----------------------
                                               (Unaudited)
Current assets
  Cash, cash equivalents and short term
   investments                                 $   105,435 $    95,035
  Accounts receivable, net                          38,981      39,927
  Inventories                                       27,870      37,942
  Deferred tax assets                                4,100       3,269
  Prepaid expenses and other current assets          2,044       2,506
                                               -----------------------
    Total current assets                           178,430     178,679

Long term investments                               12,000       8,000
Property, plant and equipment, net                  15,004      13,546
Investment in 601 California Avenue LLC              2,431       2,431
Deferred tax assets                                  1,312       1,312
Goodwill                                             5,434           -
Other long-term assets                               2,432       2,035
                                               -----------------------
    Total assets                               $   217,043 $   206,003
                                               =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Notes payable                                $     1,945           -
  Accounts payable                                   9,815 $    15,994
  Accrued payroll and related liabilities            8,541      11,769
  Other accrued liabilities                          7,467       6,612
  Customer advances                                 15,387      26,243
                                               -----------------------
    Total current liabilities                       43,155      60,618

Other long-term liabilities                          2,787       1,075
Shareholders' equity
  Common stock                                     101,346      99,468
  Paid in Capital                                   10,825       7,319
  Accumulated other comprehensive income               364         354
  Retained earnings                                 58,566      37,169
                                               -----------------------
    Total shareholders' equity                     171,101     144,310
                                               -----------------------
    Total liabilities and shareholders' equity $   217,043 $   206,003
                                               =========== ===========

SUPPLEMENTAL INFORMATION REGARDING IMPACT OF THE ADOPTION OF SFAS 123R
               (In Thousands, except per share amounts)
                             (Unaudited)

The effect of recording stock-based compensation for the three- and
 six-month periods ended June 30, 2007 and July 1, 2006 were as
 follows:

                                     Three Months    Six Months Ended
                                          Ended
                                    ---------------- -----------------
                                    June 30, July 1, June 30, July 1,
                                      2007     2006    2007     2006
                                    -------- ------- -------- --------
Stock-based compensation by type of
 award:
 Stock options                      $ 1,169  $  552  $ 2,314  $   896
 Employee Stock Purchase Plan           214     167      427      283
Amounts capitalized as inventory        (68)    (24)     (72)     (56)
                                    -------- ------- -------- --------
Total stock-based compensation        1,315     695    2,669    1,123
Tax effect on stock-based
 compensation                          (290)    (61)    (718)     (99)
                                    -------- ------- -------- --------
Net effect on net income              1,025     634    1,951    1,024
                                    ======== ======= ======== ========

Effect on earnings per share:
  Basic                             $  0.05  $ 0.03  $  0.09  $  0.05
  Diluted                           $  0.05  $ 0.03  $  0.09  $  0.04

Approximately $72,000 and $56,000 of stock-based compensation was capitalized in inventory at June 30, 2007 and July 1, 2006, respectively.

SOURCE: Intevac, Inc.

Intevac, Inc.
Charles Eddy, Chief Financial Officer, 408-986-9888
or
Headgate Partners LLC
Claire McAdams, 530-274-0551