10-Q 1 d473076d10q.htm 10-Q 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM
10-Q
 
 
 
(MARK ONE)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2023
OR
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number
0-26946
 
 
INTEVAC, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
94-3125814
(State or other jurisdiction of
incorporation or organization)
  
(IRS Employer
Identification No.)
3560 Bassett Street
Santa Clara, California 95054
(Address of principal executive office, including Zip Code)
 
 
Registrant’s telephone number, including area code: (408)
986-9888
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbol(s)
  
Name of each exchange
on which registered
Common Stock ($0.001 par value)
  
IVAC
  
The Nasdaq Stock Market LLC (Nasdaq) Global Select
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2
of the Exchange Act:
 
Large accelerated filer   ☐    Accelerated filer   ☐
       
Non-accelerated filer
   ☒    Smaller reporting company   ☒
       
         Emerging growth company   ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Act).    ☐  Yes    ☒  No
On July 31, 2023
,
26,302,666
shares of the registrant’s Common Stock, $0.001 par value, were outstanding.
 
 
 

Table of Contents

INTEVAC, INC.

INDEX

 

No.

        Page  
PART I. FINANCIAL INFORMATION       

Item 1.

   Financial Statements (unaudited)   
  Condensed Consolidated Balance Sheets      3  
  Condensed Consolidated Statements of Operations      4  
  Condensed Consolidated Statements of Comprehensive Loss      5  
  Condensed Consolidated Statements of Cash Flows      6  
  Notes to Condensed Consolidated Financial Statements      7  

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      24  

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      31  

Item 4.

   Controls and Procedures      31  
PART II. OTHER INFORMATION       

Item 1.

   Legal Proceedings      32  

Item 1A.

   Risk Factors      32  

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      38  

Item 3.

   Defaults Upon Senior Securities      38  

Item 4.

   Mine Safety Disclosures      38  

Item 5.

   Other Information      38  

Item 6.

   Exhibits      38  

SIGNATURES

     40  

 

2

Table of Contents
3P3YP3Y
PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
INTEVAC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    
July 1,

2023
    
December 31,

2022
  
              
    
(Unaudited)
  
    
(In thousands, except par value)
  
ASSETS
     
Current assets:
     
Cash and cash equivalents
    $ 43,976     $ 68,904  
Short-term investments
      23,626       25,541  
Trade and other accounts receivable, net of allowances of $0 at both July 1, 2023 and December 31, 2022
      20,211       15,823  
Inventories
      46,293       30,003  
Prepaid expenses and other current assets
      1,914       1,898  
  
 
 
    
 
 
  
Total current assets
      136,020       142,169  
Long-term investments
      5,550       17,585  
Restricted cash
      785       786  
Property, plant and equipment, net
      7,288       3,658  
Operating lease
right-of-use-assets
      2,266       3,390  
Intangible assets, net of amortization of $
110,000
at July 1, 2023 and $
42,000
at December 31, 2022
      1,022       1,090  
Deferred income taxes and other long-term assets
      4,187       4,381  
  
 
 
    
 
 
  
Total assets
    $ 157,118     $ 173,059  
  
 
 
    
 
 
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
     
Current liabilities:
     
Current operating lease liabilities
    $ 2,456     $ 3,404  
Accounts payable
      10,421       11,610  
Accrued payroll and related liabilities
      3,416       3,087  
Other accrued liabilities
      1,376       5,430  
Customer advances
      20,248       2,444  
  
 
 
    
 
 
  
Total current liabilities
      37,917       25,975  
Noncurrent liabilities:
     
Noncurrent operating lease liabilities
      687       1,417  
Customer advances
      1,482       22,215  
Other noncurrent liabilities
      29       —    
  
 
 
    
 
 
  
Total noncurrent liabilities
      2,198       23,632  
Stockholders’ equity:
     
Common stock, $0.001 par value
      26       26  
Additional
paid-in
capital
      208,672       206,355  
Treasury stock, 5,087 shares at both July 1, 2023 and at December 31, 2022
      (29,551 )      (29,551 ) 
Accumulated other comprehensive loss
      (190 )      (193 ) 
Accumulated deficit
      (61,954 )      (53,185 ) 
  
 
 
    
 
 
  
Total stockholders’ equity
      117,003       123,452  
  
 
 
    
 
 
  
Total liabilities and stockholders’ equity
    $ 157,118     $ 173,059  
  
 
 
    
 
 
  
 
Note:
Amounts as of December 31, 2022 are derived from the December 31, 2022 audited consolidated financial statements.
See accompanying notes to the condensed consolidated financial statements.
 
3
INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
    
Three Months Ended
    
Six Months Ended
  
    
July 1,

2023
    
July 2,

2022
    
July 1,

2023
    
July 2,

2022
  
                          
    
(Unaudited)
  
    
(In thousands, except per share amounts)
  
Net revenues
    $ 10,301     $ 9,307     $ 21,843     $ 13,752  
Cost of net revenues
      7,731       4,820       14,554       8,543  
  
 
 
    
 
 
    
 
 
    
 
 
  
Gross profit
      2,570       4,487       7,289       5,209  
Operating expenses:
         
Research and development
      3,647       2,868       7,620       7,028  
Selling, general and administrative
      4,375       4,016       9,575       8,265  
  
 
 
    
 
 
    
 
 
    
 
 
  
Total operating expenses
      8,022       6,884       17,195       15,293  
  
 
 
    
 
 
    
 
 
    
 
 
  
Loss from operations
      (5,452 )      (2,397 )      (9,906 )      (10,084 ) 
Interest income and other income (expense), net
      650       317       1,322       310  
  
 
 
    
 
 
    
 
 
    
 
 
  
Loss from continuing operations before provision for income taxes
      (4,802 )      (2,080 )      (8,584 )      (9,774 ) 
Provision for income taxes
      116       500       502       526  
  
 
 
    
 
 
    
 
 
    
 
 
  
Net loss from continuing operations, net of taxes
      (4,918 )      (2,580 )      (9,086 )      (10,300 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Net income (loss) from discontinued operations, net of taxes
      40       (238 )      317       (373 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Net loss
    $ (4,878 )    $ (2,818 )    $ (8,769 )    $ (10,673 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Net income (loss) per share:
         
Basic and diluted – continuing operations
    $ (0.19 )    $ (0.10 )    $ (0.35 )    $ (0.41 ) 
Basic and diluted – discontinued operations
    $ 0.00     $ (0.01 )    $ 0.01     $ (0.01 ) 
Basic and diluted – net loss
    $ (0.19 )    $ (0.11 )    $ (0.34 )    $ (0.43 ) 
Weighted average common shares outstanding:
         
Basic and diluted
      26,032       25,141       25,907       24,970  
See accompanying notes to the condensed consolidated financial statements.
 
4
INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
    
Three Months Ended
    
Six Months Ended
  
    
July 1,

2023
    
July 2,

2022
    
July 1,

2023
    
July 2,

2022
  
                          
    
(Unaudited)
  
    
(In thousands)
  
Net loss
    $ (4,878 )    $ (2,818 )    $ (8,769 )    $ (10,673 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Other comprehensive income (loss), before tax:
         
Change in unrealized net gain (loss) on
available-for-sale
investments
      53       (161 )      222       (335 ) 
Foreign currency translation losses
      (229 )      (219 )      (219 )      (252 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Other comprehensive income (loss), before tax
      (176 )      (380 )      3       (587 ) 
Income taxes related to items in other comprehensive income (loss)
      —         —         —         —    
  
 
 
    
 
 
    
 
 
    
 
 
  
Other comprehensive income (loss), net of tax
      (176 )      (380 )      3       (587 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Comprehensive loss
    $ (5,054 )    $ (3,198 )    $ (8,766 )    $ (11,260 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
See accompanying notes to the condensed consolidated financial statements.
 
5
INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    
Six months ended
  
    
July 1,

2023
    
July 2,

2022
  
              
    
(Unaudited)
  
    
(In thousands)
  
Operating activities
     
Net loss
    $ (8,769 )    $ (10,673 ) 
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
     
Depreciation and amortization
      681       776  
Amortization of intangible assets
      68       —    
Net amortization (accretion) of investment premiums and discounts
      (108 )      (20 ) 
Equity-based compensation
      3,076       489  
Straight-line rent adjustment and amortization of lease incentives
      (554 )      (483 ) 
Deferred income taxes
      183       345  
(Gain) loss on disposal of equipment
      (41 )      1,453  
Changes in operating assets and liabilities
      (27,931 )      (3,322 ) 
  
 
 
    
 
 
  
Total adjustments
      (24,626 )      (762 ) 
  
 
 
    
 
 
  
Net cash and cash equivalents used in operating activities
      (33,395 )      (11,435 ) 
Investing activities
     
Purchases of investments
      (9,099 )      (45,663 ) 
Proceeds from sales and maturities of investments
      23,029       7,263  
Proceeds from sales of fixed assets
      65       —    
Purchases of leasehold improvements and equipment
      (4,335 )      (888 ) 
  
 
 
    
 
 
  
Net cash and cash equivalents provided by (used in) investing activities
      9,660       (39,288 ) 
Financing activities
     
Net proceeds from issuance of common stock
      838       2,211  
Payment of acquisition-related contingent consideration
      (250 )      —    
Taxes paid related to net share settlement
      (1,563 )      (295 ) 
  
 
 
    
 
 
  
Net cash and cash equivalents provided by (used in) financing activities
      (975 )      1,916  
Effect of exchange rate changes on cash and cash equivalents
      (219 )      (252 ) 
  
 
 
    
 
 
  
Net decrease in cash, cash equivalents and restricted cash
      (24,929 )      (49,059 ) 
Cash, cash equivalents and restricted cash at beginning of period
      69,690       103,514  
  
 
 
    
 
 
  
Cash, cash equivalents and restricted cash at end of period
    $ 44,761     $ 54,455  
  
 
 
    
 
 
  
Non-cash
investing and financing activity
     
Additions to
right-of-use-assets
obtained from new operating lease liabilities
    $ —       $ 94  
  
 
 
    
 
 
  
See accompanying notes to the condensed consolidated financial statements.
 
6
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.
Description of Business, Basis of Presentation and Significant Accounting Policy
Description of Business
Intevac, Inc. (together with its subsidiaries, “Intevac”, the “Company” or “we”) is a leader in the design and development of high-productivity, thin-film processing systems. Intevac’s production-proven platforms are designed for high-volume manufacturing of substrates with precise thin-film properties, such as for the hard disk drive (“HDD”) and display cover panel (“DCP”) markets.
Principles of Consolidation and Basis of Presentation
The condensed consolidated financial statements include the accounts of Intevac, Inc. and its subsidiaries after elimination of inter-company balances and transactions.
In the opinion of management, the unaudited interim condensed consolidated financial statements of Intevac included herein have been prepared on a basis consistent with the December 31, 2022 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
Reportable Segment
During fiscal 2021, we sold the business of one of our reporting segments, Photonics. Therefore, we have one reportable segment remaining. See Note 2 for additional disclosure related to discontinued operations.
The remaining segment, Thin Film Equipment (“TFE”), designs, develops and markets vacuum process equipment solutions for high-volume manufacturing of small substrates with precise thin-film properties, such as for the HDD and DCP markets, as well as other adjacent thin-film markets. The TFE segment also previously designed, developed and marketed manufacturing equipment for the photovoltaic (“PV”) solar cell and advanced semiconductor packaging (“ASP”) industries.
In March 2022, the Company approved and implemented a restructuring program to realign the Company’s operational focus, scale the business and improve costs. The restructuring program includes (i) reducing the Company’s headcount and (ii) eliminating several research and development (“R&D”) programs and product offerings. As part of this realignment effort, the Company ceased its efforts to develop and market several of its manufacturing platforms for the DCP, PV and ASP industries and ceased offering certain legacy products in these industries.
Trade Accounts Receivable and Allowance for Credit Losses
The Company’s accounts receivable are recorded at invoiced amounts less allowance for any credit losses. In accordance with the Financial Accounting Standards Board’s Accounting Standards Update (“ASU”)
2016-13 that
we adopted on January 1, 2023, the Company recognizes credit losses based on forward-looking current expected credit losses (“CECL”). The Company makes estimates of expected credit losses based upon its assessment of various factors, including the age of accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. The allowance for credit losses are recognized in the consolidated statement of operations. The uncollectible accounts receivable are written off in the period in which a determination is made that all commercially reasonable means of recovering them have been exhausted. The total allowance for credit losses was $0 at both July 1, 2023 and December 31, 2022, and there was no
write-off
of accounts receivable for the periods presented.
 
7
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
2.
Divestiture and Discontinued Operations
Sale of Photonics
On December 30, 2021, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with EOTECH, LLC (“EOTECH”) governing the sale of the Company’s Photonics business to EOTECH in exchange for (i) $70.0 million in cash consideration, (ii) up to $30.0 million in earnout payments and (iii) the assumption by EOTECH of certain liabilities of the Photonics business as specified in the Purchase Agreement. The transaction closed on December 30, 2021. Under the Purchase Agreement, EOTECH also agreed to pay to the Company, if earned, earnout payments of up to an aggregate of $30.0 million based on achievement of fiscal year 2023, 2024 and 2025 Photonics segment revenue targets for the Integrated Visual Augmentation System (“IVAS”) program as specified in the Purchase Agreement. At any time prior to December 31, 2024, EOTECH may elect to pay to the Company $14.0 million, which would terminate EOTECH’s obligations with respect to any remaining earnout payments. As of July 1, 2023, there have been no earnout payments under the Purchase Agreement. The cash proceeds do not include any estimated future payments from the revenue earnout as the Company has elected to record the proceeds when the consideration is deemed realizable. The Company believes the disposition of the Photonics business will allow it to benefit from a streamlined business model, simplified operating structure, and enhanced management focus.
In connection with the Photonics sale, the Company and EOTECH also entered into a Transition Service Agreement (the “TSA”) and a Lease Assignment Agreement. The TSA, which expired on June 30, 2022, outlined the information technology, people, and facility support the parties provided to each other for a period after the closing of the sale. The Lease Assignment Agreement assigns the lease obligation for two buildings in the Company’s California campus to EOTECH. As part of the assignment, the Company has agreed to subsidize a portion of EOTECH’s lease payments through the remainder of the lease term which expires in March 2024. In August 2022, Intevac and EOTECH entered into a Shared Services Agreement (the “Shared Services Agreement”) to share certain building maintenance costs.
TSA fees earned since the divestiture were $408,000 for the three months ended July 2, 2022 and $1.2 million for the six months ended July 2, 2022. The agreed-upon charges for such services were generally intended to allow the service provider to recover all costs and expenses of providing such services. The TSA fees were included in selling, general and administrative expenses and cost of sales, respectively, in the Company’s condensed consolidated statement of operations. Additionally, during the three and six months ended July 2, 2022, the Company sold inventory in the amount of $32,000 and $148,000, respectively to EOTECH. Fees earned under the Shared Services Agreement for the three and six months ended July 1, 2023 were $39,000 and $65,000, respectively. As of July 1, 2023 and December 31, 2022, accounts receivable from EOTECH of $41,000 and $49,000, respectively, were included in trade and other accounts receivable in the Company’s condensed consolidated balance sheets.
Based on its magnitude and because the Company exited certain markets, the sale of the Photonics segment represents a significant strategic shift that has a material effect on the Company’s operations and financial results, and the Company has separately reported the results of its Photonics segment as discontinued operations in the condensed consolidated statements of operations for the three and six months ended July 1, 2023 and July 2, 2022.
The key components from discontinued operations related to the Photonics segment are as follows:
 
    
Three Months Ended
     
Six Months Ended
  
    
July 1,
2023
     
July 2,
2022
     
July 1,
2023
     
July,
2022
  
                             
    
(In thousands)
  
Selling, general and administrative
    $ (40 )     $ 238      $ (317 )     $ 373  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total operating expenses
      (40 )       238        (317 )       373  
  
 
 
     
 
 
     
 
 
     
 
 
  
Operating income (loss) – discontinued operations
      40        (238 )       317        (373 ) 
Other income (expense) – discontinued operations
      —          —          —          —    
  
 
 
     
 
 
     
 
 
     
 
 
  
Income (loss) from discontinued operations before provision for income taxes
      40        (238 )       317        (373 ) 
Provision for income taxes
      —          —          —          —    
  
 
 
     
 
 
     
 
 
     
 
 
  
Net income (loss) from discontinued operations, net of taxes
    $ 40      $ (238 )     $ 317      $ (373 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. The following table presents cash flow and
non-cash
information related to discontinued operations for the three and six months ended July 1, 2023 and July 2, 2022:
 
    
Three Months Ended
     
Six Months Ended
  
    
July 1,

2023
     
July 2,

2022
     
July 1,

2023
     
July 2,

2022
  
                             
    
(In thousands)
  
Equity-based compensation
    $ —        $ 39      $ (260 )     $ (291 ) 
 
8
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
3.
Revenue
The following tables represent a disaggregation of revenue from contracts with customers for the three and six months ended July 1, 2023 and July 2, 2022.
Major Products and Service Lines
 
    
Three Months Ended July 1, 2023
     
Three Months Ended July 2, 2022
  
                                                         
    
(In thousands)
  
    
HDD
     
PV
     
ASP
     
Total
     
HDD
     
DCP
     
PV
     
Total
  
Systems, upgrades and spare parts
    $ 9,351      $ 10      $ 11      $ 9,372      $ 7,756      $ 1      $ 82      $ 7,839  
Field service
      929        —          —          929        1,421        43        4        1,468  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total net revenues
    $ 10,280      $ 10      $ 11      $ 10,301      $ 9,177      $ 44      $ 86      $ 9,307  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
    
Six Months Ended July 1, 2023
     
Six Months Ended July 2, 2022
  
                                                         
    
(In thousands)
  
    
HDD
     
PV
     
ASP
     
Total
     
HDD
     
DCP
     
PV
     
Total
  
Systems, upgrades and spare parts
    $ 19,868      $ 28      $ 11      $ 19,907      $ 10,879      $ 1      $ 135      $ 11,015  
Field service
      1,936        —          —          1,936        2,684        43        10        2,737  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total net revenues
    $ 21,804      $ 28      $ 11      $ 21,843      $ 13,563      $ 44      $ 145      $ 13,752  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Primary Geographical Markets
 
    
Three Months Ended
     
Six Months Ended
  
                             
    
July 1, 2023
     
July 2, 2022
     
July 1, 2023
     
July 2, 2022
  
                             
    
(In thousands)
  
United States
    $ 662      $ 1,656      $ 2,276      $ 1,950  
Asia
      9,628        7,651        19,556        11,802  
Europe
      11        —          11        —    
  
 
 
     
 
 
     
 
 
     
 
 
  
Total net revenues
    $ 10,301      $ 9,307      $ 21,843      $ 13,752  
  
 
 
     
 
 
     
 
 
     
 
 
  
Timing of Revenue Recognition
 
    
Three Months Ended
     
Six Months Ended
  
                             
    
July 1, 2023
     
July 2, 2022
     
July 1, 2023
     
July 2, 2022
  
                             
    
(In thousands)
  
Products transferred at a point in time
    $ 10,301      $ 9,307      $ 21,843      $ 13,752  
Products and services transferred over time
      —          —          —          —    
  
 
 
     
 
 
     
 
 
     
 
 
  
Total net revenues
    $ 10,301      $ 9,307      $ 21,843      $ 13,752  
  
 
 
     
 
 
     
 
 
     
 
 
  
The following table reflects the changes in our contract assets, which we classify as accounts receivable, unbilled, and our contract liabilities, which we classify as deferred revenue and customer advances, for the six months ended July 1, 2023:
 
    
July 1,

2023
     
December 31,

2022
     
Six Months

Change
  
                      
    
(In thousands)
  
Contract assets:
         
Accounts receivable, unbilled
    $ 1,023      $ 424      $ 599  
  
 
 
     
 
 
     
 
 
  
Contract liabilities:
         
Deferred revenue
    $ 310      $ 2,446      $ (2,136 ) 
Customer advances
      21,730        24,659        (2,929 ) 
  
 
 
     
 
 
     
 
 
  
   $ 22,040      $ 27,105      $ (5,065 ) 
  
 
 
     
 
 
     
 
 
  
 
9
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Accounts receivable, unbilled represents a contract asset for revenue that has been recognized in advance of billing the customer. For our system and certain upgrade sales, our customers generally pay in three installments, with a portion of the system price billed upon receipt of an order, a portion of the price billed upon shipment, and the balance of the price due upon completion of installation and acceptance of the system at the customer’s factory. Accounts receivable, unbilled generally represents the balance of the system price that is due upon completion of installation and acceptance, less the amount that has been deferred as revenue for the performance of the installation tasks. During the six months ended July 1, 2023, contract assets increased by $599,000 primarily due to the accrual of revenue for a system delivered in the quarter ended July 1, 2023 that was pending acceptance as of July 1, 2023 and the accrual of revenue related to the sale of upgrades to a customer during the six months ended July 1, 2023, offset in part by the billing of accrued revenue related to spare parts sold to a customer as of December 31, 2022.
Customer advances generally represent a contract liability for amounts billed to the customer prior to transferring goods. The Company has elected to use the practical expedient to disregard the effect of the time value of money in a significant financing component when its payment terms are less than one year. These customer advances are liquidated when revenue is recognized. Deferred revenue generally represents a contract liability for amounts billed to a customer for completed systems at the customer site that are undergoing installation and acceptance testing where transfer of control has not yet occurred as Intevac does not yet have a demonstrated history of meeting the acceptance criteria upon the customer’s receipt of product. During the six months ended July 1, 2023, we recognized revenue of $3.0 million and $2.2 million that was included in customer advances and deferred revenue, respectively, at the beginning of the period.
In May 2023, the Company received notice of the cancellation of a $54.6 million order for eight 200 Lean HDD systems due to the customer postponing previously planned media capacity additions, and, accordingly, the Company removed the order from backlog. The customer contract associated with the cancelled order requires the customer to pay the Company a prorated price based upon the percentage of work completed on the order. The Company has received customer advances in the amount of $19.1 million associated with the cancelled order, all of which will be utilized to settle this customer obligation.
On July 1, 2023, we had $58.2 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 37.9% of our remaining performance obligations as revenue in 2023 and 62.1% in 2024.
 
4.
Inventories
Inventories are stated at the lower of average cost or net realizable value and consist of the following:
 
    
July 1,
     
December 31,
  
    
2023
     
2022
  
               
    
(In thousands)
  
Raw materials
    $ 35,419      $ 19,116  
Work-in-progress
      10,860        9,499  
Finished goods
      14        1,388  
  
 
 
     
 
 
  
   $ 46,293      $ 30,003  
  
 
 
     
 
 
  
Finished goods inventory at December 31, 2022 is comprised of a refurbished system at a customer location where the sales transaction did not meet our revenue recognition criteria. In May 2023, the Company received notice of the cancellation of a $54.6 million order for eight 200 Lean HDD systems. The customer contract associated with the cancelled order requires the customer to pay the Company a prorated price based upon the percentage of work completed on the order. The Company has received customer advances in the amount of $19.1 million associated with the cancelled order, all of which will be utilized to settle this customer obligation. In the second half of 2023 and into the beginning of 2024, as part of the cancellation of the order for eight 200 Lean HDD systems, the customer is expected to take delivery of $12.5 million of inventory on hand at July 1, 2023 and $11.4 million of inventory on order plus reimburse us for any supplier cancellation charges.
 
5.
Equity-Based Compensation
At July 1, 2023, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan, the 2022 Inducement Equity Incentive Plan (the “Inducement Plan”) (together, the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan and the ESPP. The Plans permit the grant of incentive or
non-statutory
stock options, performance-based stock options (“PSOs”), restricted stock, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and performance shares.
 
10
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
On January 19, 2022, Intevac’s Board of Directors adopted the Inducement Plan and, subject to the adjustment provisions of the Inducement Plan, reserved 1,200,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2020 Equity Incentive Plan. The Inducement Plan was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with that rule, awards under the Inducement Plan may only be made to individuals not previously employees or
non-employee
directors of the Company (or following such individuals’ bona fide period of
non-employment
with the Company), as an inducement material to the individuals’ entry into employment with the Company.
The ESPP provides that eligible employees may purchase Intevac’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the entry date of the applicable offering period or at the end of each applicable purchase interval. Offering periods are generally two years in length and consist of a series of
six-month
purchase intervals. Eligible employees may join the ESPP at the beginning of any
six-month
purchase interval. Under the terms of the ESPP, employees can choose to have up to 50% of their base earnings withheld to purchase Intevac common stock (not to exceed $25,000 per year).
Compensation Expense
The effect of recording equity-based compensation for the three and six months ended July 1, 2023 and July 2, 2022 was as follows:
 
    
Three Months Ended
     
Six Months Ended
  
    
July 1, 2023
     
July 2, 2022
     
July 1, 2023
     
July 2, 2022
  
                             
    
(In thousands)
  
Equity-based compensation by type of award:
                                    
Stock options
    $ 2      $ 8      $ (11 )     $ (163 ) 
RSUs
      756        729        1,355        336  
PRSUs
      534        566        1,332        231  
ESPP purchase rights
      203        222        400        85  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total equity-based compensation
    $ 1,495      $ 1,525      $ 3,076      $ 489  
    
 
 
     
 
 
     
 
 
     
 
 
  
Included in the table above are:
 
  (a)
A reversal of $1.3 million in equity-based compensation expense related to forfeitures of awards due to our reduction in workforce and a $37,000 benefit related to the modification of certain stock-based awards for the six months ended July 2, 2022. (See Note
13. Restructuring and Other Costs, Net.); and
  (b)
Equity-based compensation reported in discontinued operations of ($260,000) for the six months ended July 1, 2023. Equity-based compensation reported in discontinued operations of $39,000 and ($291,000) for the three and six months ended July 2, 2022, respectively. Equity-based compensation expense allocated to discontinued operations for the six months ended July 2, 2022 includes $75,000 related to the modification of certain stock-based awards and is net of a divestiture-related forfeiture benefit of $446,000 that was recognized when employees were conveyed to EOTECH upon closing of the Photonics divestiture. (See Note
2. Divestiture and Discontinued Operations.)
Stock Options and ESPP
The fair value of stock options and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The determination of the fair value of stock options and ESPP awards on the date of grant using an option-pricing model is affected by Intevac’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual employee stock option exercise behavior. Intevac accounts for forfeitures as they occur, rather than estimating expected forfeitures.
 
11
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Option activity as of July 1, 2023 and changes during the six months ended July 1, 2023 were as follows:
 
    
Shares
     
Weighted-Average

Exercise Price
  
               
Options outstanding at December 31, 2022
      383,099      $ 7.07  
Options cancelled and forfeited
      (41,593 )     $ 10.59  
Options exercised
      (52,813 )     $ 5.15  
    
 
 
           
Options outstanding at July 1, 2023
      288,693      $ 6.91  
    
 
 
           
Options exercisable at July 1, 2023
      288,568      $ 6.91  
    
 
 
           
Intevac issued 131,303 shares of common stock under the ESPP during the six months ended July 1, 2023.
Intevac estimated the weighted-average fair value of ESPP purchase rights using the following weighted-average assumptions:
 
    
Six Months Ended
  
    
July 1, 2023
    
July 2, 2022
  
ESPP Purchase Rights:
                 
Weighted-average fair value of grants per share
    $ 2.23     $ 1.85  
Expected volatility
      34.20 %      60.36 % 
Risk-free interest rate
      4.47 %      0.98 % 
Expected term of purchase rights (in years)
      1.0       1.2  
Dividend yield
      None       None  
The computation of the expected volatility assumptions used in the Black-Scholes calculations for ESPP purchase rights is based on the historical volatility of Intevac’s stock price, measured over a period equal to the expected term of the purchase right. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected term of purchase rights represents the period of time remaining in the current offering period. The dividend yield assumption is based on Intevac’s history of not paying dividends and the assumption of not paying dividends in the future.
RSUs
RSU activity as of July 1, 2023 and changes during the six months ended July 1, 2023 were as follows:
 
    
Shares
     
Weighted-Average

Grant Date

Fair Value
  
Non-vested
RSUs at December 31, 2022
      1,309,792      $ 5.14  
Granted
      277,269      $ 5.40  
Vested
      (442,823 )     $ 5.21  
Cancelled and forfeited
      (74,185 )     $ 5.49  
    
 
 
           
Non-vested
RSUs at July 1, 2023
      1,070,053      $ 5.15  
    
 
 
           
Time-based RSUs are converted into shares of Intevac common stock upon vesting on a
one-for-one
basis. Time-based RSUs typically are scheduled to vest over
three
or four years. For time-based RSUs granted beginning in May 2023, RSUs generally vest over a three-year period, with 33% vesting at the end of one year and the remaining vesting quarterly thereafter. Vesting of time-based RSUs is subject to the grantee’s continued service with Intevac. The compensation expense related to these awards is determined using the fair market value of Intevac common stock on the date of the grant, and the compensation expense is recognized over the vesting period.
PRSUs
PRSU activity as of July 1, 2023 and changes during the six months ended July 1, 2023 were as follows:
 
    
Shares
     
Weighted-Average

Grant Date

Fair Value
  
Non-vested
PRSUs at December 31, 2022
      1,089,339      $ 3.54  
Granted
      525,656      $ 4.92  
Vested
      (190,903 )     $ 4.26  
Cancelled and forfeited
      (7,929 )     $ 6.13  
    
 
 
           
Non-vested
PRSUs at July 1, 2023
      1,416,163      $ 3.94  
    
 
 
           
 
12
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
In May 2023, we granted to members of our senior management awards of performance-based restricted stock units (the “2023 PRSU Awards”) covering an aggregate of 525,656 shares of Intevac common stock (at maximum performance). The 2023 PRSU Awards are eligible to be earned based on achievement of five strategic goals during a three-year performance period commencing on May 18, 2023 and ending on May 31, 2026 (the “2023 Performance Period”). The 2023 PRSU Awards will vest, if at all, in five possible tranches. Each of the five tranches will vest only if the applicable strategic goal is achieved within the 2023 Performance Period, and each tranche may only be achieved once during the 2023 Performance Period. If a strategic goal is not achieved within the 2023 Performance Period, the corresponding PRSUs will not vest, and all unvested PRSUs at the end of the 2023 Performance Period will immediately be forfeited. Stock compensation expense is recorded based on the probability of achievement of the performance conditions specified in the PRSU grant. The Company evaluated the strategic goals in the context of its current long-range financial plan and its product development roadmap and determined the probability of achieving each goal for accounting purposes commencing in the quarter granted. Management expectations related to the achievement of performance goals associated with PRSUs with performance conditions are assessed regularly to determine whether such grants are expected to vest. The fair value of each PRSU is the Company’s stock price on the date of grant. Over the 2023 Performance Period, the number of shares expected to be issued may be adjusted upward or downward based upon the probability of achievement of the performance conditions.
In May 2022, we granted to members of our senior management awards of performance-based restricted stock units (the “2022 PRSU Awards”) covering an aggregate of 935,600 shares of Intevac common stock (at maximum performance). The 2022 PRSU Awards are eligible to be earned based on achievement of certain stock prices based on the average closing price of the Company’s stock over a
30-day
period (the “Company Stock Price Hurdle”) during a three-year performance period commencing on May 18, 2022 and ending on May 31, 2025 (or earlier, upon a change in control, as defined in the Company’s 2022 Inducement Equity Incentive Plan or 2020 Equity Incentive Plan, as applicable) (the “2022 Performance Period”). The 2022 PRSU Awards will vest, if at all, in five possible tranches. Each of the five tranches will vest only if the applicable Company Stock Price Hurdle is achieved within the 2022 Performance Period, and each tranche may only be achieved once during the 2022 Performance Period. If a Company Stock Price Hurdle is not achieved within the 2022 Performance Period, the corresponding PRSUs will not vest, and all unvested PRSUs at the end of the 2022 Performance Period will immediately be forfeited. The first tranche of the awards vested on December 28, 2022. The second tranche of the awards vested on February 23, 2023. The fair value of each PRSU award was estimated on the date of grant using a Monte Carlo simulation.
Intevac estimated the weighted-average fair value of the 2022 PRSU Awards using the following assumptions:
 
    
Three and Six Months Ended
  
    
July 2, 2022
  
Weighted-average fair value of grants per share
    $ 3.67  
Expected volatility
      54.42 % 
Risk-free interest rate
      2.82 % 
Dividend yield
      None  
 
6.
Warranty
Intevac provides for the estimated cost of warranty when revenue is recognized. Intevac’s warranty is subject to contract terms and, for its systems, the warranty typically ranges between 12 and 24 months from customer acceptance. During this warranty period any defective
non-consumable
parts are replaced and installed at no charge to the customer. Intevac uses estimated repair or replacement costs along with its historical warranty experience to determine its warranty obligation. The provision for the estimated future costs of warranty is based upon historical cost and product performance experience. Intevac exercises judgment in determining the underlying estimates.
On the condensed consolidated balance sheets, the short-term portion of the warranty provision is included in other accrued liabilities, while the long-term portion, if any, is included in other noncurrent liabilities. The expense associated with product warranties issued or adjusted is included in cost of net revenues on the condensed consolidated statements of operations.
 
13
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The following table displays the activity in the warranty provision account for the three and six months ended July 1, 2023 and July 2, 2022.
 
    
Three Months Ended
     
Six Months Ended
  
    
July 1,
2023
     
July 2,

2022
     
July 1,

2023
     
July 2,

2022
  
                             
    
(In thousands)
  
Opening balance
    $ 177      $ 249      $ 163      $ 346  
Expenditures incurred under warranties
      (67 )       (54 )       (165 )       (225 ) 
Accruals for product warranties issued during the reporting period
      72        36        172        72  
Adjustments to previously existing warranty accruals
      (1 )       (17 )       11        21  
  
 
 
     
 
 
     
 
 
     
 
 
  
Closing balance
    $ 181      $ 214      $ 181      $ 214  
  
 
 
     
 
 
     
 
 
     
 
 
  
The following table displays the balance sheet classification of the warranty provision account at July 1, 2023 and at December 31, 2022.
 
    
July 1

2023
     
December 31

2022
  
               
    
(In thousands)
  
Other accrued liabilities
    $ 152      $ 163  
Other noncurrent liabilities
      29        —    
  
 
 
     
 
 
  
Total warranty provision
    $ 181      $ 163  
 
 
 
 
 
 
 
 
 
 
7.
Guarantees
Officer and Director Indemnifications
As permitted or required under Delaware law and to the maximum extent allowable under that law, Intevac has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at Intevac’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments Intevac could be required to make under these indemnification obligations is unlimited; however, Intevac has a director and officer insurance policy that mitigates Intevac’s exposure and enables Intevac to recover a portion of any future amounts paid. As a result of Intevac’s insurance policy coverage, Intevac believes the estimated fair value of these indemnification obligations is not material.
Other Indemnifications
As is customary in Intevac’s industry, many of Intevac’s contracts provide remedies to certain third parties such as defense, settlement, or payment of judgments for intellectual property claims related to the use of its products. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.
Letters of Credit
As of July 1, 2023, we had letters of credit and bank guarantees outstanding totaling $785,000, including the standby letter of credit outstanding under the Santa Clara, California facility lease and various other guarantees with our bank. These letters of credit and bank guarantees are collateralized by $785,000 of restricted cash.
 
14
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
8.
Cash, Cash Equivalents and Investments
Cash and cash equivalents, short-term investments and long-term investments consist of:
 
    
July 1, 2023
  
    
Amortized Cost
     
Unrealized

Holding Gains
     
Unrealized

Holding Losses
     
Fair Value
  
                             
    
(In thousands)
  
Cash and cash equivalents:
            
Cash
    $ 22,389      $ —        $ —        $ 22,389  
Money market funds
      16,188        —          —          16,188  
Commercial paper
      5,401        —          2        5,399  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total cash and cash equivalents
    $ 43,978      $ —        $ 2      $ 43,976  
Short-term investments:
            
Asset-backed securities
    $ 1,015      $ —        $ 1      $ 1,014  
Certificates of deposit
      1,700        —          1        1,699  
Commercial paper
      5,212        —          3        5,209  
Corporate bonds and medium-term notes
      5,673        —          101        5,572  
Municipal bonds
      1,220        —          13        1,207  
U.S. treasury securities
      9,024        —          99        8,925  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total short-term investments
    $ 23,844      $ —        $ 218      $ 23,626  
Long-term investments:
            
Asset-backed securities
    $ 3,162      $ —        $ 29      $ 3,133  
Corporate bonds and medium-term notes
      2,430        —          13        2,417  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total long-term investments
    $ 5,592      $ —        $ 42      $ 5,550  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total cash, cash equivalents, and investments
    $ 73,414      $ —        $ 262      $ 73,152  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
15
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
    
December 31, 2022
  
    
Amortized Cost
     
Unrealized

Holding Gains
     
Unrealized

Holding Losses
     
Fair Value
  
                             
    
(In thousands)
  
Cash and cash equivalents:
            
Cash
    $ 26,465      $ —        $ —        $ 26,465  
Money market funds
      9,589        —          —          9,589  
Commercial paper
      32,856        —          6        32,850  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total cash and cash equivalents
    $ 68,910      $ —        $ 6      $ 68,904  
Short-term investments:
            
Asset-backed securities
    $ 2,012      $ —        $ 13      $ 1,999  
Certificates of deposit
      3,850        —          10        3,840  
Commercial paper
      9,443        —          28        9,415  
Corporate bonds and medium-term notes
      4,210        —          32        4,178  
Municipal bonds
      1,486        —          25        1,461  
U.S. treasury securities
      4,771        —          123        4,648  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total short-term investments
    $ 25,772      $ —        $ 231      $ 25,541  
Long-term investments:
            
Asset-backed securities
    $ 6,749      $ —        $ 85      $ 6,664  
Corporate bonds and medium-term notes
      5,366        —          102        5,264  
Municipal bonds
      224        —          6        218  
U.S. treasury and agency securities
      5,493        —          54        5,439  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total long-term investments
    $ 17,832      $ —        $ 247      $ 17,585  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total cash, cash equivalents, and investments
    $ 112,514      $ —        $ 484      $ 112,030  
  
 
 
     
 
 
     
 
 
     
 
 
  
The contractual maturities of investment securities at July 1, 2023 are presented in the following table.
 
    
Amortized Cost
     
Fair Value
  
               
    
(In thousands)
  
Due in one year or less
    $ 45,433      $ 45,213  
Due after one through five years
      5,592        5,550  
  
 
 
     
 
 
  
   $ 51,025      $ 50,763  
  
 
 
     
 
 
  
We reassess our estimated credit losses on investments each reporting period. U.S. government securities and cash equivalents are under a
“zero-loss
exception” for credit losses, meaning no credit loss risk calculation is necessary on those instruments due to the exceptionally low rate of default, which continues to decrease as the securities approach maturity. We record changes in the allowance for credit losses for
available-for-sale
debt securities with a corresponding adjustment in credit loss expense on the consolidated statement of operations. No reversal of a previously recorded allowance for credit losses may be made to an amount below zero. The total allowance for credit losses was $0 at both July 1, 2023 and December 31, 2022.
Our investment portfolio includes both corporate and U.S. government securities that have a maximum maturity of three years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities with a lower
yield-at-cost
show a
mark-to-market
unrealized loss. Most of our unrealized losses are due to changes in market interest rates and bond yields. We believe that we have the ability to realize the full value of all these investments upon maturity. As of July 1, 2023, we had 56 investments in a gross unrealized loss position. The following table provides the fair market value of Intevac’s investments with unrealized losses that are not deemed to be other-than temporarily impaired as of July 1, 2023.
 
16
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
    
July 1, 2023
  
    
In Loss Position for

Less than 12 Months
     
In Loss Position for

Greater than 12 Months
  
    
Fair Value
     
Gross

Unrealized
Losses
     
Fair Value
     
Gross

Unrealized

Losses
  
                             
    
(In thousands)
  
Asset-backed securities
    $ 288      $ 2      $ 3,778      $ 28  
Certificates of deposit
      499        1        —          —    
Commercial paper
      9,458        5        —          —    
Corporate bonds and medium-term notes
      3,171        30        4,103        84  
Municipal bonds
      —          —          1,207        13  
U.S. treasury securities
      4,025        4        4,900        95  
  
 
 
     
 
 
     
 
 
     
 
 
  
   $ 17,441      $ 42      $ 13,988      $ 220  
  
 
 
     
 
 
     
 
 
     
 
 
  
All prices for the fixed maturity securities including U.S. treasury and agency securities, certificates of deposit, commercial paper, corporate bonds, asset-backed securities and municipal bonds are received from independent pricing services utilized by Intevac’s outside investment manager. This investment manager performs a review of the pricing methodologies and inputs utilized by the independent pricing services for each asset type priced by the vendor. In addition, on at least an annual basis, the investment manager conducts due diligence visits and interviews with each pricing vendor to verify the inputs utilized for each asset class. The due diligence visits include a review of the procedures performed by each vendor to ensure that pricing evaluations are representative of the price that would be received if a security were sold in an orderly transaction. Any pricing where the input is based solely on a broker price is deemed to be a Level 3 price. Intevac uses the pricing data obtained from its outside investment manager as the primary input to make its assessments and determinations as to the ultimate valuation of the above-mentioned securities and has not made, during the periods presented, any material adjustments to such inputs.
The following table represents the fair value hierarchy of Intevac’s investment securities measured at fair value on a recurring basis as of July 1, 2023.
 
    
Fair Value Measurements
at July 1, 2023
  
    
Total
     
Level 1
     
Level 2
  
                      
    
(In thousands)
  
Recurring fair value measurements:
         
Investment securities
         
Money market funds
    $ 16,188      $ 16,188      $ —    
U.S. treasury and agency securities
      8,925        5,429        3,496  
Asset-backed securities
      4,147        —          4,147  
Certificates of deposit
      1,699        —          1,699  
Commercial paper
      10,608        —          10,608  
Corporate bonds and medium-term notes
      7,989        —          7,989  
Municipal bonds
      1,207        —          1,207  
  
 
 
     
 
 
     
 
 
  
Total recurring fair value measurements
    $ 50,763      $ 21,617      $ 29,146  
  
 
 
     
 
 
     
 
 
  
 
9.
Derivative Instruments
The following table summarizes the Company’s outstanding derivative instruments on a gross basis as recorded in its condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022.
 
 
17
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
   
Notional Amounts
    
Derivative Liabilities
    
Derivative Assets
  
Derivative Instrument
  
July 1,
2023
    
December 31,
2022
    
July 1,
2023
    
December 31,
2022
  
                                     
               
Balance

Sheet

Line
    
Fair

Value
    
Balance

Sheet

Line
    
Fair

Value
  
   
(In thousands)
  
Undesignated Hedges:
                                    
Forward Foreign Currency Contracts
   $ 1,258       2,240      
b
 		   $ 6      
a
 
 
 		   $ 44  
 
 
 
    
 
 
      
 
 
      
 
 
  
Total Hedges
   $ 1,258       2,240       $ 6       $ 44  
 
 
 
    
 
 
      
 
 
      
 
 
  
 
a
Other current assets
b
Other accrued liabilities
 
10.
Equity
Stock Repurchase Program
On November 21, 2013, Intevac announced that its Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. On August 20, 2018, Intevac announced that its Board of Directors approved a $10.0 million increase to the original stock repurchase program for an aggregate authorized amount of up to $40.0 million. At July 1, 2023, $10.4 million remains available for future stock repurchases under the repurchase program. Intevac did not make any common stock repurchases during the three and six months ended July 1, 2023 and July 2, 2022.
Condensed Consolidated Statement of Changes in Equity
The changes in stockholders’ equity by component for the three and six months ended July 1, 2023 and July 2, 2022, are as follows (in thousands):
 
    
Three Months Ended July 1, 2023
  
    
Common

Stock and

Additional

Paid-in

Capital
    
Treasury

Stock
    
Accumulated

Other

Comprehensive

Income (Loss)
    
Accumulated

Deficit
    
Total

Stockholders’

Equity
  
                                
Balance at April 1, 2023
    $ 207,489     $ (29,551 )    $ (14 )    $ (57,076 )    $ 120,848  
Common stock issued under employee plans
      3       —         —         —         3  
Shares withheld for net share settlement of RSUs
      (289 )      —         —         —         (289 ) 
Equity-based compensation expense
      1,495       —         —         —         1,495  
Net loss
      —         —         —         (4,878 )      (4,878 ) 
Other comprehensive loss
      —         —         (176 )      —         (176 ) 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balance at July 1, 2023
    $ 208,698     $ (29,551 )    $ (190 )    $ (61,954 )    $ 117,003  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
    
Six Months Ended July 1, 2023
  
    
Common

Stock and

Additional

Paid-in

Capital
    
Treasury

Stock
    
Accumulated

Other

Comprehensive

Income (Loss)
    
Accumulated

Deficit
    
Total

Stockholders’

Equity
  
                                
Balance at December 31, 2022
    $ 206,381     $ (29,551 )    $ (193 )    $ (53,185 )    $ 123,452  
Common stock issued under employee plans
      804       —         —         —         804  
Shares withheld for net share settlement of RSUs
      (1,563 )      —         —         —         (1,563 ) 
Equity-based compensation expense
      3,076       —         —         —         3,076  
Net loss
      —         —         —         (8,769 )      (8,769 ) 
Other comprehensive loss
      —         —         3       —         3  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balance at July 1, 2023
    $ 208,698     $ (29,551 )    $ (190 )    $ (61,954 )    $ 117,003  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
18
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
    
Three Months Ended July 2, 2022
  
    
Common

Stock and

Additional

Paid-in

Capital
    
Treasury

Stock
    
Accumulated

Other

Comprehensive

Income (Loss)
    
Accumulated

Deficit
    
Total

Stockholders’

Equity
  
Balance at April 2, 2022
    $ 198,960     $ (29,551 )    $ 371     $ (43,965 )    $ 125,815  
Common stock issued under employee plans
      1,178       —         —         —         1,178  
Shares withheld for net share settlement of RSUs
      (160 )      —         —         —         (160 ) 
Equity-based compensation expense
      1,525       —         —         —         1,525  
Net loss
      —         —         —         (2,818 )      (2,818 ) 
Other comprehensive loss
      —         —         (380 )      —