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IVAC Intevac

Participants
Claire McAdams Investor Relations
Wendell Blonigan President and Chief Executive Officer
James Moniz Chief Financial Officer and Treasurer
Peter Wright Intro-Blue, LLC
Mark Miller The Benchmark Company
Call transcript
Operator

Good day and welcome to Intevac’s First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference call is being recorded today, May 3, 2021. At this time, I would like to turn the call over to Claire McAdams, Investor Relations for Intevac. Please go ahead.

Claire McAdams

Thanks, Stacy, and good afternoon, everyone.

So thank you for joining us today to discuss Intevac’s financial results for the first quarter 2021, which ended on April 3.

In addition to discussing the company’s recent results, we will discuss our outlook looking forward.

Joining me on today’s call are Wendell Blonigan, President and Chief Executive Officer; and Jim Moniz, Chief Financial Officer. Wendell will start with a review of our business and our current outlook. Then Jim will review first quarter results and provide further details regarding our financial outlook before turning the call over to Q&A. I’d like to remind everyone that today’s conference call contains certain forward-looking statements, including but not limited to, statements regarding financial results for the company’s most recently completed fiscal quarter, which remains subject to adjustment in connection with the preparation of our Form 10-Q as well as comments regarding future events and projections about future financial performance of Intevac. These forward-looking statements are based upon our current expectations and actual results could differ materially as a result of various risks and uncertainties relating to these comments and other risk factors discussed in documents filed by us with the Securities and Exchange Commission, including our Annual Report on Form 10-K and quarterly reports on Form 10-Q. The contents of this May 3 call include time-sensitive forward-looking statements that represent our projections as of today. We undertake no obligation to update the forward-looking statements made during this conference call. And I will now turn over the call to Wendell.

Wendell Blonigan

Thanks, Claire. Good afternoon. Today, we reported first quarter results that were within our guidance ranges for both revenue and earnings.

As expected, it was a challenging quarter, driven by a near-term pause in investments by our hard drive customers occurring at the same time as we were completing the funded development work on the IVAS contract. Photonics in particular came in light on revenue, primarily due to milestones in the quarter that moved to the right in DELTA-I program. Gross Margin was below forecast largely due to an additional $1.4 million of investment required to complete the integration of our cameras into the Army’s digital vision system. I’ll discuss this further in a moment. Despite these challenges, we had several highlights in the first quarter. We successfully completed our MATRIX evaluation program for advanced semiconductor packaging, which resulted in our first purchase order and revenue in this new market for us.

Additionally, we announced a new $7 million development program in Photonics, demonstrating the U.S. military’s continued commitment to Intevac’s Gated SWIR LIVAR technology for new weapon system applications.

We also successfully managed our cash and discretionary spending during this challenging period. Notably, we improved upon our already strong balance sheet, generating positive cash flow from operations and ending the first quarter with $53.6 million in total cash and investments, an increase of $3.2 million since yearend 2020.

Now, for a review of each of our businesses, starting with Photonics, after delivering its best year ever in 2020, we are seeing a reduction in the quarterly revenue run rate for Photonics in early 2021 as forecast.

For the last several quarters, our Photonics business has been heavily focused on the IVAS night vision camera development program. And in Q1, we completed the initial integration of our CMOS cameras into the IVAS platform.

While some deliveries of our CMOS with gain cameras were completed early in Q2, for the most part, Q1 marked the completion of the development phase for the IVAS contract. This totaled approximately $32 million in contract R&D and initial camera revenue for us since late 2018. In Q2, we also will be shipping additional CMOS cameras incremental to the $32 million development program. The final stages of our initial camera deliveries required several iterations of firmware enhancements and integration adjustments as well as the support of new functionality requirements deemed necessary during the development phase.

As I detailed last quarter, the completion of this program required investment by Intevac, causing margin pressure on our business. Incremental costs in Q1 resulted in a short-term dip in margins, which we expect to reverse in Q2. The CMOS with gain cameras that were delivered early in Q2 are based on our ISIE 19 technology and provide visual acuity in the lowest of light conditions, no moon overcast skies. This acuity level is far beyond the capability of CMOS imagers. And we believe that the incorporation of the proprietary technology we currently supply to the Apache helicopter and the F-35 Joint Strike Fighter will enable the highest level of digital night vision capability for the IVAS system. The big news around the IVAS program since last quarter was the announcement of the production agreement between the Army and Microsoft, and the transition from development to rapid fielding. The agreement was widely reported to be worth up to $22 billion over 10 years, and includes the first deployment of approximately 120,000 IVAS systems to close-combat force over the first 5 years. When we look at the army as a whole, including the National Guard and the reserves, the total number of soldiers was just over $1 million at the end of 2020. Therefore, the initial rollout of IVAS system addresses only around 10% of Army personnel. IVAS was designed to, “Allow the soldier to fight, rehearse and train using a single platform, and to provide the improved situational awareness, target engagement, and informed decision-making necessary to achieve overmatch against current and future adversaries.” We believe that the IVAS system and derivatives of it are applicable across the entire service. And while they clearly will not provide IVAS systems to the entire military, we see a much larger deployment opportunity in the future. This view is why we believe the IVAS program holds game-changing potential to an already well-positioned Photonics business and our role as a critical supplier to the U.S. military. Per plan IVAS systems using the first Intevac digital CMOS cameras, underwent field evaluations at Soldier Touchpoint 4, which was held over the last 2 weeks of April. Information gathered is currently under review.

Our expectation continues to be that Intevac will be a supplier of night vision cameras as IVAS moves into production. The overall program plan of record remains to equip the first fighting units with IVAS systems in the fourth quarter of this year. The public announcement of the production agreement between the Army and Microsoft, and the completion of Soldier Touch Point 4 utilizing Intevac night vision should be catalysts that clearly gates to a production order for Intevac. In order to meet deliveries, we have been prudently managing component lead times and securing material as needed.

As a note, as we finished out development programs with the army and the IVAS initiative moves into initial production and fielding, the sensitivity of the program and the disclosure restrictions in the supply chain will limit our ability to provide fine detail of our IVAS activity going forward. In other development work, in Q1, we received a Phase-I ManTech Development Award from Night Vision Labs to continue our work on the current IVAS CMOS camera, targeting reduced cost, improved performance and reduced power-draw. We estimate if down-selected for Phase-II development work, this program would be around $5 million over 2 years.

We are also anticipating awards for 2 additional Phase 1 development programs in May: 1 for our next generation CMOS camera focusing on improving low starlight operation; and the other for the development of a higher performance IVAS night vision camera based on our ISIE 19 EBAPS technology. This is effective in no moon overcast conditions. We estimate if down-selected for Phase 2 development work, these 2 programs would be around $18 million over 2 years. The Phase 1 awards are meant to get the programs to the critical design review stage this year and ready for a down-select process for development and initial fabrication with a period of performance beginning in 2022 and extending through 2023. In Q1, we announced the development contract award from the Joint Directed Energy Transition Office representing the funding for year 1 of a projected 3-year $7 million development effort for gated SWIR sensor for fine tracking and adaptive optics in high energy laser system applications. Directed energy systems are expected to become a critical component of our military’s advanced weaponry and represent a significant feature market opportunity for Intevac.

Our $5 million development contract for the U.S. Navy-funded enhanced visual acuity program increased in scope a bit during Q1 and is running well. This program supports the U.S. Navy and Marine Corps pilots and executing their missions more effectively under low light conditions. This program incorporates our latest ISIE 19 sensor technology, and is destined for rotary craft pilotage applications beyond the Apache helicopter. The DELTA-I program is also an important element of our Photonics business.

We are developing the DELTA-I fused digital night vision goggle incorporating advanced augmented reality capabilities. The program incorporates our most advanced ISIE 19 sensor, and supports the Coalition Warfare Program for the special operation forces of the United States, Australia, Canada and the United Kingdom.

While DELTA-I is an important program for us, it unfortunately shifted to the right in Q1 due to supply chain delays.

We’re also seeing delays in the supply chain that are affecting our LIVAR revenue in the short-term.

So between the DELTA-I LIVAR delays, we saw Q1 revenues fall below the $8 million to $10 million quarterly run rate we discussed in our last earnings call. With DELTA-I milestones upcoming and recovering LIVAR sales, we expect to see Photonics revenues back in that range in Q2. In our volume production products, we continue to execute well on the Joint Strike Fighter contract at full production rates on this multi-year production contract. The key takeaway for Photonics is that we believe Intevac will be a meaningful supplier for the IVAS platform, and that we are on multiple critical military programs providing the best digital night vision technology available.

Beyond 2021, the success in the IVAS program as well as the multiple other key night vision programs underway will become the major drivers of revenue growth for Photonics for years to come.

Now turning to our Thin-film Equipment business, starting with the hard drive market. Demand for nearline drives specifically mass capacity drives for cloud-based storage and the data center have clearly emerged as the most significant long-term driver of growth for disks or hard drive media. Media growth is what will exhaust existing industry capacity and results in new 200 Lean orders for Intevac. At our last conference call, [Thin-film’s] [ph] expected media shipments to exceed 90% capacity by Q3 of this year. And we expected imminent orders to support [end of quarter] [ph] the first major media capacity expansion that will occur in over 10 years. Since then, while the long-term growth expectations are unchanged; in the near-term, this demand is now expected to be spread more ratably over the balance of 2021. This has mostly to do with the timing of cloud and data center CapEx investments being made by the 5 biggest cloud infrastructure providers. Recent reports indicate stronger than expected nearline drive demand for the first half of 2021 followed by a period of more moderate growth in the second half and then a return to strong nearline growth in 2022. This softening of the quarterly peaks and valleys in 2021, or more specifically, a flattening of the mass capacity shipment curve this year is enabling our customers to delay the start of their media capacity expansions and push to the right new 200 Lean purchases.

As of our last call, the timeline is communicated to us for capacity 200 Lean orders were to begin in the March, April timeframe. Because of this more ratably deployment of mass capacity drive demand over the course of 2021, latest estimates now indicate media capacity utilization peaking at around 90% in the fourth quarter, and as such capacity orders look to be delayed 2 to 3 quarters.

We expect to start booking orders for multiple 200 Lean systems as we progress through 2021.

However, our current outlook has those tools beginning to install in 2022 and accelerating into 2023. We believe we will be the major player in supporting all media capacity expansions that address the growth in mass capacity drives, with our industry leading 200 Lean system.

As such, our market leadership positions in HDD media and the expected growth in media unit demand sets the stage for continued sustained growth in our HDD business beyond this year.

The other major driver of HDD revenue growth for Intevac comes from our customers’ technology upgrade programs. The fourth quarter and full year 2020 both saw record levels of upgrades, and upgrades were down sharply in Q1 as expected. On our February call, we expected 2021 upgrade sales would be lower than 2020, but still a good year overall. Since then, well reported delays in next generation drive technology, such as heat-assisted magnetic recording have enabled our customers to push a significant amount of technology upgrade orders from 2021 to 2022. This puts more pressure on our HDD revenue forecasts for 2021. The takeaway here is that the long-term growth trajectory of our HDD business remains strong and is unchanged over the last few quarters.

For 2021, however, this year is proving to be more challenging than we believe the quarter ago.

Now turning to our Thin-film Equipment growth initiatives. The conversion of our first MATRIX evaluation system for advanced semiconductor packaging into revenue was an important milestone in our efforts to expand our equipment business beyond the HDD market. The conversion to revenue reflects the fact that this leading OSAT purchased the system to support his technology roadmap that the tool has been qualified and its performance and cost of ownership benefits have been validated. This provides us with optimism that this market could be a meaningful 1 for us in the years to come.

Although, we don’t expect immediate follow-on orders until industry begins to wholesale transition from wafer-level to panel-level fan-out architectures. In our VERTEX initiative, our primary objective is to gain initial adoption of our DiamondClad-protected coating, and to convert the systems under evaluation into orders and revenues.

We continue to be active with our Tier 1 display cover panel to customer on a key program for backside cell phone glass decorative patterning, and our latest version of DiamondClad is also under evaluation. In our demo activity here in the U.S., we’re currently driving 3 separate programs, 1 for cell phone cover glass protection, 1 for wearable functional protective coating, and the other for augmented reality component functionality.

Given the stages we are at with our evaluation programs and in-house demo activity, we expect to get some key answers on the future direction of our VERTEX initiative over the next couple of quarters. We originally debuted our Marathon system and DiamondClad technology in early 2020 with plans to introduce them to our customer base, specifically in China throughout the year. Unfortunately, we were impacted in our rollout plans by 2 or 3 quarters due to the pandemic.

We also anticipate that in this timeframe, we’ll have a much better clarity on the post-pandemic environment and how our activity in China will normalize. Overall, our Q1 progress continues to indicate that the VERTEX and MATRIX can add additional upside in revenue growth, incremental to strong long-term growth stories of HDD media and Photonics.

So to sum up our overall look as today. The long-term expectations for our hard drive and Photonics business, and the critical role Intevac plays in them, continue to be very positive. And we continue to expect both of our core businesses to be meaningful growth drivers for Intevac with incremental growth driven by our TFE growth initiatives.

Over the past couple of quarters, we’ve communicated our progress and increasing confidence in the growth potential for both HDD and Photonics given the beginning of both: 1, media capacity additions; and 2, the rollout of the IVAS program. We fully anticipated that current and forthcoming purchase order announcements expected in both businesses would significantly improve our backlog visibility and, in turn, investor confidence in Intevac.

However, we do not control the timing of these orders.

For 2021, in particular, both TFE and Photonics are experiencing a soft patch until we put multiple significant orders and rebuilt backlog. Both the beginning of HDD system orders and the IVAS production ramp are late 2021 events. This ramping of the revenue run rate as we exit 2021 will set the stage for a strong growth year in 2022.

As for the preliminary outlook for the full year, we’ve taken a conservative view assuming no 200 Lean shipments and reduced technology upgrades for the year.

Given that scenario, we expect, in total, our HDD business will be in the range of $34 million to $35 million this year, consisting of upgrades, spares and field service, and we’ll return to growth in 2022. We believe 2022 growth will be driven both by technology upgrades and capacity tool sales. In total, incremental to our HDD revenues in 2021 will be the MATRIX is already recorded in Q1, as well as any VERTEX evaluations converting to revenue. At this time, we expect total Thin-film Equipment revenues in the range of $38 million to $39 million for the year, with potential upside if we revenue either 1 of the 2 vertex evaluation systems. Q2 will be down sequentially from Q1 given the current low level of HDD upgrades.

So, therefore, this is a back-half weighted year.

On the Photonics side, we’re also taking a conservative view of the timing of the IVAS production ramp.

We expect a sequential improvement in Photonics revenues in Q2 followed by continued growth through the end of the year, setting the stage for a strong growth year in 2022. We currently expect Photonics revenues will be in the range of $30 million to $34 million in 2021 with the $34 million including the first production shipments on the IVAS contract occurring in Q4.

While 2021 will be a challenging period for our reported results, we have a strong balance sheet that allows us to weather any soft patches, while continuing to invest in ramping our core businesses. Once we have the orders in backlog and the visibility that supports a strong growth year for 2022, we feel that we’ll be on a solid path for sustainable profitable revenue growth for 2022 and beyond. To conclude, we strongly believe in the significant long-term opportunities that lie in both our equipment and Photonics businesses.

We have proprietary technology, particularly strong customer positions, and leading market share in our core served markets.

Additionally, we believe we’re extremely well positioned to benefit from the secular growth being driven by overall industry trends and key military programs such as datacenter spending for cloud storage and digital night vision systems for the dismounted soldier. In our view, the Intevac enterprise has significant unrealized value embedded across the range of our products, technology, and customer relationships that we’ve developed over the years. And we believe our current market capitalization does not fully reflect the value of Intevac’s critical role in both our core markets. To that point, today I’m sharing with you that the board of directors have formed a strategic committee with a broad mandate to consider a wide range of possible ways that we may increase shareholder value. The goal of this effort is to identify strategies to unlock the value in each of our businesses in parallel with executing our core revenue growth activity.

Our determination to investigate these strategies is consistent with our focus on delivering long-term value for our shareholders.

While we would typically not disclose board initiatives until such time as a specific new strategy or transaction had been decided upon and was being pursued, we wanted to make sure that our shareholders clearly understand that we are leaving no stone unturned in our valuation of avenues to increase shareholder value. The committee has retained the investment banking firm Greenhill and Company to work with management and the board to evaluate a broad range of strategic alternatives that may be available to the company to enhance our value. There can be no assurance that any transaction or other strategic alternative will take place as a result of this evaluation. And Intevac has not set a definitive timetable for completion of the process. Note also that we do not expect to disclose further developments relating to this strategic evaluation process, unless and until the board approves a specific transaction or otherwise concludes this review of strategic alternatives. And with that, I’ll now turn the call over to Jim.

James Moniz

Thank you, Wendell.

Turning to the first quarter results, consolidated first quarter revenues totaled $16.2 million within the range of our guidance of $16 million to $16.5 million. Thin-film Equipment revenue totaled $9.2 million and included 1 MATRIX PVD system for advanced semiconductor packaging as well as upgrades, spares and service. Photonics revenue of $7 million included $3.8 million of product revenues, and $3.2 million of contracts research and development revenues. Q1 consolidated gross margin was 18.8% below our guidance of 26% to 28%. Thin-film Equipment gross margin was 23.1%, which was lower than forecast primarily due to lower overall volume, which affected factor utilization and product mix to the less high-margin upgrade revenue, and the lower margin MATRIX evaluation system as the first tool of its kind. Photonics gross margin was 13.1%, which was lower than forecast, primarily due to higher costs related to the additional work needed in order to finish the initial integration of our camera into the IVAS platform as we near the completion of the development stage. This increase was partially offset by decreased by R&D spending in Photonics. Q1 operating expenses were $9.6 million, below our guidance due to lower Photonics IR&D as their efforts were spent finishing the initial integration of our camera into the IVAS platform.

We expect quarterly operating expenses to remain below the $10 million level for the remainder of 2021. This resulted in a net loss of $6.5 million or $0.27 per share within our guidance of $0.25 to $0.27 per diluted share.

Our backlog was $43.1 million at quarter end. Thin-film Equipment backlog of $4.2 billion, included non-systems HDD backlog. The backlog in our Photonics business was $38.9 million.

Now turning to the balance sheet. We ended the quarter with cash and investments including restricted cash of $53.6 million, equivalent to approximately $2.22 per share based on 24.1 million shares at quarter end. Cash flow generated by operations was $2.5 million during Q1. Q1 capital expenditures were $243,000, and depreciation and amortization was $791,000 for the quarter.

Now turning to our outlook for 2021.

As Wendell indicated, our preliminary full year view is Thin-film Equipment revenues of $38 million to $39 million, and Photonics revenue of $30 million to $34 million for a combined $68 million to $73 million within this revenue range and expected mix, we expect full year gross margins between 30% and 32%.

As mentioned, our OpEx run rate is below $10 million per quarter, and thus, expected to be around $39 million for the year.

We’re forecasting interest income of around $200,000 for the year and income tax expense of around $1 million for the year.

While our operation results will be challenged in 2021, we will continue to prudently manage our cash and maintain our strong balance sheet.

Specifically for Q2, we see revenue in the range of $12.5 million to $13 million. At this range, we would forecast gross margins to be around 27%. OpEx should come in between $9.6 million and $9.9 million. Interest income should be around $50,000 for the quarter with no income tax expense. Therefore, forecasting a loss in the quarter of around $0.26 per share using 24 million shares outstanding. This completes the formal part of our presentation. Stacy, we’re ready for questions.

Operator

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Peter Wright with Intro-act. Please go ahead.

Peter Wright

Great. Thank you, guys, for taking my question. Two questions actually.

The first one on the IVAS side, if we look at the $32 million spend on the development part of the contract, what is a good rule of thumb or how should we think of the relationship between how much projects like this typically spend on development and how that converts over a multiyear period into kind of the commercial contract if there is any multiple or way of thinking about that? And then, the second part to that would be, can we extrapolate a similar type ratio or way to think about the next 3 programs that you outlined today for us?

Wendell Blonigan

Yeah, so from a program perspective, I think what’s unique about this development that we’ve been doing with the Army for the cameras, for the IVAS platform, is how fast the programs were. Normally, a development like this would take well over the 2.5 years that we’ve been working on it, the more typical military procurement cycle.

So I think in that perspective, it’s a very unique procurement process that’s going on around this program for the primes and as well as all of the suppliers to the primes. But can you repeat your second question for me, please?

Peter Wright

Is there like a ratio of how to think – if you spend $100 on development, how much should be spent on a commercial program? Is there any multiple that is kind of the good rule of thumb to think about that?

Wendell Blonigan

Not, not really.

I think they’re all pretty much are similar.

You might have a little more work done on the component reliability on the military programs, but they’re similar.

Peter Wright

Or how many quarters would you think that it would take to be able to get kind of a commercial ramp equivalent to your better quarters on the development side? Second half last year type run rate?

Wendell Blonigan

3, probably around 3.

Peter Wright

3 quarters, fantastic. And then, if I can ask one other question on the Thin-film side of your business, kind of in a similar way, hard disk drive is a mature business, we know how to think about that kind of on a cross-cycle basis.

If you look at MATRIX and VERTEX, how would you think of the size of those markets and kind of your positioning within those markets in relation to hard drive? I look at this year as kind of a year where, as your Board is figuring out, you’re reinventing many parts of the business that are good multiyear growth stories. How is the best way to be thinking of MATRIX and VERTEX in relation to kind of the size of [references] [ph]?

Wendell Blonigan

Well, I think from a 2021 perspective, we have the MATRIX that’s already revenue.

We have 2 VERTEX developed eval tools that are available to revenue, as well as Marathon.

So the opportunity is there.

I think the big issue we have is the ongoing situation in China and accessing that covered last business.

So I think from a – we’ve been running roughly $50 million in hard drive over the last several years.

So I would say that, that opportunity is similar, but it’s going to require adoption in the VERTEX side of the business. And it’s going to require, say, on the MATRIX side of the business, a transition to panel-level packaging from wafer-level that’s going on right now.

Peter Wright

So to understand that, I’m sorry, you think it’s about a $50 million cross-cycle opportunity in each in those business lines at maturity, is that the way to…?

Wendell Blonigan

Yeah, I think it’s really dependent on adoption rates. The VERTEX opportunity can be very, very large. If one of the large cell-phone manufacturers adapt on their phones, just they’re driving 25% of the overall the glasses being made.

So that takes quite a few tools. We estimated before that 10% adoption drives $500 million worth of equipment to support. But I think we’re looking at now some of the more incremental opportunities rather than the hockey-stick opportunities. But that still exists for us there. But I would model it somewhere similar to – between the 2 of them to at least a year in hard drive.

Peter Wright

Right. Thank you, guys.

Wendell Blonigan

Thank you, Peter.

Operator

Your next question comes from Mark Miller, The Benchmark Company. Please go ahead.

Mark Miller

Just had a question about the – you’re projecting first half revenues are going to be lower than second half. Besides the IVAS shipments later this year, are you hopeful that you’re going to get these 2 VERTEX tools qualified? Is that in kind of your assumptions for second half? Where does the besides IVAS, where does the improved revenues in the second half come from?

Wendell Blonigan

Yeah, the range we gave in Thin-film Equipment would include the 2 VERTEX in the back-half, second-half of the year. And then, the other thing is, we would expect the upgrade revenue to be much stronger in the back-half for the hard drive business than what were going to be seeing in the first two quarters. And then again, we did point out that with an IVAS production contract. That’s why the range of $30 million to $34 million in Photonics. It would include if we can get the order in time to ship that in Q4 of this year for the IVAS production contract.

Mark Miller

Your expenses were actually up year-over-year, yet revenues were down. Are you taking any steps to bring down some of your operational expenses over the next 2 quarters, because of the sales decline?

Wendell Blonigan

Yeah, we don’t have anything that we’re executing on right now.

I think we want to see just how well the back-half responds. But we certainly are doing some discretionary things around the company to minimize the OpEx.

Mark Miller

So could you explain why even though sales were up by $2.5 million similar quarter last year by – OpEx was up this quarter or the March quarter by $250,000, what drove the difference despite the lower sales?

James Moniz

It was higher IR&D.

One of the things we said I think in the last couple of conference calls is in 2021, as Wendell mentioned that ManTech award that we got and these potential other 2 Phase-I awards that we’ll get in Photonics will require some investment on Intevac side in Photonics IR&D, so that we can keep some of the IP.

And so, we will see a higher amount of IRAD coming from Photonics than they historically have spent. And they didn’t spend as much as we had forecasted in Q1, because some of that effort went into finalizing what I’ll call the cost of goods sold, which is why there were some margin pressure. But we would expect to see more IR&D, but it’ll still be below a $10 million at quarter level.

Mark Miller

Yeah, just it looks like, yeah, most of it is coming from R&D compared to last year.

Okay. Thank you.

James Moniz

That’s correct. All right. Thanks, Mark.

Operator

I will now turn the call over to Mr. Blonigan for closing remarks.

Wendell Blonigan

Thank you. I want to, again, thank the dedicated employees of Intevac all around the world for continued resilience and dedication in a challenging operating environment. I’d also like to thank our customers and our suppliers for their business and appreciating partnerships. And finally, I’d like to thank our stockholders for the continued support of Intevac. Thank you for joining us today and we look forward to updating you again during our Q2 call in August. Until then, so long.

Operator

This concludes today’s teleconference.

You may now disconnect.