Intevac
Apr 30, 2007

Intevac, Inc. Reports First-Quarter Financial Results

Achieves Record Gross Margin of 42.9%

SANTA CLARA, Calif.--(BUSINESS WIRE)--April 30, 2007--Intevac, Inc. (Nasdaq:IVAC) reported financial results for the quarter ended March 31, 2007.

Net income for the first quarter was $9.8 million, or $0.44 per diluted share, on 22.2 million weighted-average shares outstanding. Net income included $1.4 million of stock-based compensation expense, equivalent to $0.04 per diluted share; $1.4 million of flat panel license fees, equivalent to $0.04 per diluted share; and $101,000 of intangible amortization expense, related to the Company's acquisition of certain assets of Delta Nu, LLC on January 31, 2007. For first-quarter 2006, net income was $7.0 million, or $0.32 per diluted share, on 21.8 million weighted average shares outstanding, which included $428,000 of stock-based compensation expense, equivalent to $0.02 per diluted share.

Revenues for the quarter were $76.4 million, including $72.5 million of Equipment revenues and record Imaging revenues of $3.9 million. Equipment revenues consisted of thirteen magnetic media manufacturing systems, equipment upgrades, spares, consumables, and service. Imaging revenues consisted of $2.8 million of research and development contracts and $1.1 million of product sales. In first-quarter 2006, net revenues were $49.6 million, including $47.6 million of Equipment revenues and $2.0 million of Imaging revenues, which included $501,000 of product sales.

Equipment gross margins for the quarter rose to a record 43.3% from 35.2% in first quarter 2006, and Imaging gross margins increased to 36.6% from 26.2% in first-quarter 2006. Equipment margins improved primarily due to lower manufacturing costs, and 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 42.9% from 34.9% in first-quarter 2006.

Operating expenses for the quarter totaled $19.7 million, or 25.8% of revenues, versus $10.7 million, or 21.5% of revenues, in first-quarter 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 $92.8 million on March 31, 2007, compared to $125.0 million on December 31, 2006, and $124.8 million on April 1, 2006. Backlog as of March 31, 2007 includes fourteen 200 Lean systems.

Intevac Chief Executive Kevin Fairbairn commented: "We are pleased to report another solid quarter of financial results with earnings per share exceeding expectations. We delivered all 200 Lean® systems on time and continued to generate cash. The integration of our new DeltaNu subsidiary went smoothly and DeltaNu is executing ahead of plan. We continue to make good progress developing new Imaging and semiconductor products for the future growth of the business. The expansion of our Asian operations continues to track according to plan."

Conference Call Information

The Company will discuss its financial results 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 3:30 p.m. PDT. You may access the playback by calling (800) 642-1687 or, for international callers (706) 645-9291, and providing conference ID 5955930.

About Intevac

Intevac is the world's leading supplier of disk sputtering equipment to manufacturers of magnetic media used in hard disk drives and a developer and provider of leading edge extreme low light imaging sensors, cameras and systems. For more information please visit our website at www.intevac.com.

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

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
                                                   3 months ended
                                               -----------------------
                                               March 31,    April 1,
                                                   2007        2006
                                               ----------- -----------
                                               (Unaudited) (Unaudited)
Net revenues
  Equipment                                       $72,446     $47,573
  Imaging                                           3,928       2,047
                                               ----------- -----------
    Total net revenues                             76,374      49,620

Gross profit
Gross margin
  Equipment                                          43.3%       35.2%
  Imaging                                            36.6%       26.2%
                                               ----------- -----------
    Consolidated                                     42.9%       34.9%

Operating expenses
  Research and development                         12,192       5,561
  Selling, general and administrative               7,513       5,114
                                               ----------- -----------
    Total operating expenses                       19,705      10,675

Operating income/(loss)
  Equipment Products                               14,989       8,480
  Imaging                                          (1,600)     (1,869)
  Corporate                                          (312)         20
                                               ----------- -----------
    Total operating profit                         13,077       6,631

Other income                                        1,320         598
                                               ----------- -----------
Profit before provision for income taxes           14,397       7,229
  Provision for income taxes                        4,552         218
                                               ----------- -----------
Net income                                         $9,845      $7,011
                                               =========== ===========

Income per share
 Basic                                              $0.46       $0.34
 Diluted                                            $0.44       $0.32
Weighted average common shares outstanding
  Basic                                            21,293      20,832
  Diluted                                          22,188      21,793
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

ASSETS                                           March 31,   Dec. 31,
                                                     2007       2006
                                                 ----------- ---------
                                                 (Unaudited)
Current assets
  Cash, cash equivalents and short term
   investments                                     $102,496   $95,035
  Accounts receivable, net                           33,298    39,927
  Inventories                                        33,926    37,942
  Deferred tax assets                                 4,100     3,269
  Prepaid expenses and other current assets           2,134     2,506
                                                 ----------- ---------
    Total current assets                            175,954   178,679

Long term investments                                12,000     8,000
Property, plant and equipment, net                   14,511    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                                2,653     2,035
                                                 ----------- ---------
    Total assets                                   $214,295  $206,003
                                                 =========== =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Notes payable                                      $1,921         -
  Accounts payable                                   16,287   $15,994
  Accrued payroll and related liabilities             5,189    11,769
  Other accrued liabilities                           9,796     6,612
  Customer advances                                  20,404    26,243
                                                 ----------- ---------
    Total current liabilities                        53,597    60,618

Other long-term liabilities                           2,892     1,075
Shareholders' equity
  Common stock                                      101,096    99,468
  Paid in Capital                                     9,321     7,319
  Accumulated other comprehensive income                375       354
  Retained earnings                                  47,014    37,169
                                                 ----------- ---------
    Total shareholders' equity                      157,806   144,310
                                                 ----------- ---------
    Total liabilities and shareholders' equity     $214,295  $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-month
 periods ended March 31, 2007 and April 1, 2006 were as follows:

                                            Three Mos.    Three Mos.
                                               ended         ended
                                           Mar. 31, 2007 Apr. 1, 2006
                                           ------------- -------------

Stock-based compensation by type of award:
   Stock options                                 $1,145          $344
   Employee stock purchase plan                     213           116
Amounts capitalized as inventory                     (4)          (32)
                                           ------------- -------------
Total stock-based compensation                    1,354           428
Tax effect on stock-based compensation             (428)          (13)
                                           ------------- -------------
Net effect on net income                           $926          $415

Effect on earnings per share:
  Basic                                           $0.04         $0.02
  Diluted                                         $0.04         $0.02


Approximately $73 and $32 of stock-based compensation is included in
 inventory as of March 31, 2007 and April 1, 2006, respectively.

CONTACT: Intevac, Inc.
Charles Eddy
Chief Financial Officer
408-986-9888
or
Silverman Heller Associates
Phil Bourdillon/Gene Heller
310-208-2550

SOURCE: Intevac, Inc.