Intevac : ÜIntevac Investor Presentation

Intevac Investor Presentation

Q3 2020 Update

Wendell T. Blonigan	James P. Moniz
Chief Executive Officer	Chief Financial Officer

PROPRIETARY	POWERING	INNOVATION. DELIVERING	VALUE.

Cautionary Disclaimer

During the course of this presentation, we will comment upon future events and may make projections about our future financial performance, including statements related to strategies, our expected sales, product shipments and acceptance, gross margin, operating expense, profit, cash flow, income tax expense, and capital allocation. We will discuss our business strategy, our products, the markets our products address, our position in those markets, expected market acceptance of those products and production capacity. We wish to caution you that these are forward looking statements that are based upon our current expectations, and that actual results could differ materially as a result of various risks and uncertainties, including, without limitation, the following: inability to develop and deliver new products as planned; inability to accurately forecast the demand for our products and services; the possibility that orders in backlog may be cancelled, delayed or rescheduled; inability to achieve gross margin and expense goals; 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. We undertake no obligation to update the forward-looking statements made during this presentation.

PROPRIETARY		Q3 2020 Investor Presentation_2

Providing Enabling Technology to Important Markets

Intevac is an Essential Business with a Solid Financial Foundation

Photonics

Thin-Film Equipment

Digital Night	Integrated	Digital Night	Mobility
Night Vision	Vision for	Clean Energy	Cloud
Vision	and the
for Gen 5	Individual	& Advanced	Computing
Cameras for	Internet of
Heads Up	Ground	Semi. Pkg.	and Storage
Aviation	Things
Displays	Soldier
Critical Supplier of Digital Vision Systems	Addressing Multiple Large Growth Industries

Both Photonics and TFE are Essential Businesses Serving the Critical Defense and IT Industries

PROPRIETARY		Q3 2020 Investor Presentation_3

Photonics: Intevac's Proprietary Digital Night Vision

Intevac's Digital Night Vision	High-Definition Night
Technology Enables:	Vision

• High-DefinitionNight Imagery
• Complete Augmented Reality Capability
• • Information Overlay
  • Image Enhancement and Transmission

-	Fused Infrared and Low Light Imagery	Analog Point Source
-	Low-Halo Operation	"Halo"

Augmented Reality

Overlay

Warfighter View, Image

Enhancement, andFused Night Vision and IR

Transmission

PROPRIETARY		Q3 2020 Investor Presentation_4

Beneficiary of Major Contract Award for IVAS Program

• US Army's IVAS: Integrated Visual Augmentation System

• • First Dismounted Soldier System that Requires Digital Night Vision
  • Body-WornSensors Support Soldier Performance in All-Digital Day/Night System
• Awards for 2 Night Vision Camera Development Programs
• • CMOS Development Award is a Low-Cost/Small Form Factor Low Light Level Camera System
  • CMOS with Gain Development Award Provides State of the Art Intensified Night Vison Capability
  • Both Development Programs Leverage Intevac's ISIE-19 Sensor Currently Under Development
• Significant Program to be Delivered Through 2021
• • $31.5 Million Award Includes Development and Camera Module Units
  • Over 200,000 Camera Unit Potential Once Fielded to the Dismounted Soldier (100,000 IVAS Systems)

PROPRIETARY		Q3 2020 Investor Presentation_5

Photonics: Solid Core Business, Significant Growth Opportunities, No Impact from COVID-19

Aviation Night Vision Cameras	Integrated Night Vision	Ground Soldier Night Vision
Apache Helicopter	F-35 HMD	Joint Strike Fighter	Dismounted Ground Soldier

														"IVAS" Digital Night Vision
	LIVAR		F-16 Falcon				BAE STRIKER II HMD			Eurofighter
	Aviation Night Vision >$350M				Integrated Night Vision >$500M		Ground Soldier NV >$500M
													$2
			$90	$37	$69			$173
		$224	$39										$372
				$428

		Prior 5 Yrs. Revenue (2014-2018)			Current 5-Yr. Period Revenue (2019-2023E)		Revenue Opportunity Beyond 2023
PROPRIETARY					Q3 2020 Investor Presentation_6

IVAS Program Potential Can Double 5-Year Revenues

• ~60% of Revenue Over Last 5 Years Driven by Apache and Funded R&D
• Continued Revenue Pipeline Contribution from Avionics Programs over Next 5 Years
• • Apache Upgrades and FMS
  • LIVAR Program Sustainment and Upgrades
  • Growing Joint Strike Fighter Program
  • Increased Contribution from BAE/EVA/NAVAIR
• Significant Incremental Revenue Opportunity with IVAS
• • Provides Potential to Double Photonics Revenues over Next 5 Year Time Window
• $1B of Long-Range Revenue Opportunity Identified Beyond 2023
• • Together Comprising ~$1.4 Billion of Revenue Opportunity

Photonics Revenue Drivers

	$350
	$300
($M)	$250
REVENUE	$200
PHOTONICS	$150
$100
	$50

$-
2014-2018		2019-2023E
Prior 5 Years	Current 5-Yr Period
Contract R&D & Other	Apache	LIVAR
JSF	BAE/EVA/NAVAIR	Ground Forces

PROPRIETARY		Q3 2020 Investor Presentation_7

Thin Film Equipment:

Solid Core Business, Significant Growth Opportunities

• Common Core Technologies:

•	High-Productivity Systems	Adjacent
•	Small Substrate Processing	Markets
• High Precision Films with Low CoO	MATRIX
Advanced Semi Packaging,
 Markets Currently Serving:	Solar PVD and Implant, and Emerging
Markets Offer Additional Growth Potential

• HDD Media
• Display Cover Panel

• Solar Cell

Display Cover Panel Market

VERTEX

• Future Markets Include:
• • Advanced Packaging
  • Protective Coatings
  • EMI Shielding
  • MRAM

Protective and Decorative Coatings

Large Incremental Revenue Opportunity

Demand for More Robust, More Durable, and

Visually Differentiated Mobile Handsets and Other

Devices

200 Lean

Hard Disk Drive Media Market

Stable, Profitable Business Serving Ongoing Technology and

Future Capacity Needs Supporting the Growth of Cloud-Based

Data Storage

PROPRIETARY		Q3 2020 Investor Presentation_8

HDD Media: Growth is Driven by Nearline Storage

Storage Shipped on HDDs in 2024 will Triple from 2019 Levels

Total Industry Exabyte Shipments: HDDs+SSDs

3,000

2,500

2,000

1,500

1,000

500

-

34%

CAGR

2019

2020E

2021E

2022E

2023E

2024E

Desktop HDD

Mobile HDD

CE HDD

Traditional Enterprise HDD

Nearline HDD

Client SSD

Enterprise SSD

Source - TrendFocus Aug. 2020 (HDD) and Feb. 2020 (SSD)

PROPRIETARY		Q3 2020 Investor Presentation_9

Strong Data Center Demand Drove Record Tie Ratio in Q1

COVID-19 Driving Increased Nearline Spend and >10% Increase in Media Units 1H YoY

Average # of Disks per Drive

5.0
	18% QoQ
	Increase in
4.0	Q1
	SSDs
	26% YoY
	Increase in
	2020
	and
3.0		on HDDs
2.0		Exabytes Shipped
1.0

-

2016	2017	2018	2019	2020	2021	2022	2023	2024
				Est.	Est.	Est.	Est.	Est.

Source -TrendFocus August 2020. Long-Range SSD exabytes from TrendFocus February 2020.

Total Industry Exabyte Shipments vs. Forecasted

Media Units

3,000			1,300
			1,200
2,500		Additional	1,100
	Capacity
~80%
Required	1,000
	Capacity
	by Q4		900
2,000
		800	Units
			700
			Media
1,500			600
		HDD
			500
1,000			400
			300
500			200
			100
-			-

2019	2020E	2021E	2022E	2023E	2024E
	Total HDD Exabytes		Total SSD Exabytes
	Media Forecast			Current Media Capacity

PROPRIETARY		Q3 2020 Investor Presentation_10

Potential Upside to HDD Media Business Due to COVID-19

HDD Media Business Expectations

$250

$200

REVENUE ($M)	$150
$100

$50	~17 Tools in Both Periods

$-
2014-2018	2019-2023E
Prior 5 Years	Current 5-Yr Period
HDD - 200 Leans	HDD - Upgrades, Spares and Service

• Expectation to Date: Intevac's Revenues from HDD Media Market in 2019-2023E Time Period at Least Equal To, Or Will Slightly Exceed, Prior 5-Year Period
• • 17 Tools Shipped 2014-2018 (No Capacity Added) + Technology Upgrades, Spares and Field Service
  • 6 Tools Shipped 2019-2020 YTD (Adding Capacity)
  • ~11 (+/-) Systems Expected in 2021-2023 Based on ~8% CAGR Forecast for Media Units; Latest Forecast Raised to 8.5%
• Upside Scenario Based on Secular Shift in Data Center / Nearline Spending
• • Each 1% Increase in Media CAGR Adds Need for ~1.5 Additional 200 Leans Per Year
  • If Media CAGR Increases to 10-12% Range, Result Could be Upside of 10 to 12 Additional Systems in 2021-2023 Timeframe
  • Expect 200 Lean to Participate in All Media Capacity Expansions Addressing Growth in Nearline Drives
• Potential Upside in 200 Lean Shipments 2021-2023 Subject to a Number of Caveats
• • Our customers are still running at modest utilization rates; supply constraints exist for substrates
  • Current media capacity levels appear to be sufficient for several quarters
  • Current forecast for ~17 tools is an estimate subject to risk and potential revision at any time
  • Sustained upside in nearline spending will need to be evident by 2H'21 in order to drive upside in tool orders for the next 3 years

PROPRIETARY		Q3 2020 Investor Presentation_11

Display Cover Panel: Mobile Device Trends

Breakage reduction	Glass / PET / Ceramic
but easy to scratch	Backside with decorative
	coatings

3D contoured front and back Foldable Phones cover - all-glass look

• Market Needs
• • Enhanced scratch resistance along with improved breakage performance
  • Differentiated and uniquely patterned decorative coatings
  • 3D Edge coverage for all coatings
  • Scratch protection for plastic display
  • High film performance-to-cost ratios

PROPRIETARY		Q3 2020 Investor Presentation_12

Display Cover Panel: VERTEX Protective Coatings

• Next-GenerationOptical Diamond-LikeCarbon: DiamondClad™
• • Sapphire-likescratch performance at a fraction of the price
  • • Passes Mohs 7 Scratch Testing vs Mohs 5 for Glass + AF
  • >10x improved scratch resistance
  • • vs Glass + AF
  • No scratching under 150 Grit Sandpaper 10N load testing
  • Lowest cost anti-scratch solution

Mobile Phones	Auto -
Tablets	Infotainment

DiamondClad™

Applications

High-Volume /High-Growth

Markets

Wearables

POS Stations

# Passes to Scratch

Relative Scratch Protection

350

300

250

200

150

100

50

0

Glass + AF	Glass + oDLC + AF	Glass +	Scratch profile measured after scratching with 150 grit sandpaper under 10N load
		DiamondClad + AF
Stainless Steel Ball @ 7.5N Force - 10 cycles /	min
PROPRIETARY					Q3 2020 Investor Presentation_13

Display Cover Panel: VERTEX SpectraTM & MarathonTM

• Versatile Coating Capability
• • Ion Beam Assisted Deposition (IBAD):
  • • Non-ConductiveVacuum Metallization (NCVM)
    • Anti-Reflective(AR) Films
  • Ion Beam Etching Technology
  • • Patterning for Decorative Coatings
  • DiamondClad™ Protective Coating
• Unique Benefits
• • Single system for multiple optical coatings
  • Supports multiple substrate types
  • • Glass, Ceramic, Plastic, Metal
  • Ultra Hard NCVM / AR films
  • Complex patterning capability
  • Industry-leadingscratch protection
• Progress to Date
• • VERTEX Spectra currently producing samples at manufacturer for OEM cellphone makers
  • 2nd VERTEX evaluation agreement finalized Q1'20
  • VERTEX Marathon launched Q4'19 lowers per- volume throughput and large processing areas;

PROPRIETARY

DIAMOND DOG™ Screen Protectors with DiamondClad™

• Market Opportunity:
• • Introduce consumer product using DiamondClad coating
  • Establish DiamondClad brand, superior performance, and end-user demand
  • OEM adoption drives VERTEX Marathon tool demand
  • Premium screen protector market size is ~ $300M / year

• DIAMOND DOG vs Competition:
• • 3x-6xbetter in scratch and abrasion resistance
  • AF coating lasts 4x-6x longer in perspiration and denim testing
  • Improved scratch resistance enables 3x improved breakage resistance
• Progress:
• • Debut at Showstoppers - CES 2020

www.mydiamonddog.com

PASS

FAIL

PROPRIETARY		Q3 2020 Investor Presentation_15

TFE Opportunities in Solar and Advanced Packaging

• Market Drivers for Solar:

• • N-typeshare of market is growing to 30% by 2028
  • Increased adoption of advanced architectures for higher efficiency
  • • TOPCon
    • IBC
    • HJT
• Market Drivers for Fan-Out Panel Level Packaging (FOPLP):
• • Advanced consumer products:
  • • IoT
    • 5G
    • Automation
  • Higher Integration and Lower cost per device verses fan out wafer level packaging (FOWLP)
• Progress to Date:
• • Solar: Cell efficiency reaching 23.2% using ENERGi Ion Implant technology
  • Key process equipment in production at major solar producer
  • FOPLP: MATRIX Evaluation system shipping to Tier 1 OSAT late in 2019

PROPRIETARY

Source: IEEE JOURNAL OF PHOTOVOLTAICS, VOL. 9, NO. 3, MAY 2019

Source: Fan-Out Packaging: Technologies and Market Trends report, Yole Développement (Yole), 2019.

Q3 2020 Investor Presentation_16

New Market Potential Can Double 5 Year Revenues

• Revenue from HDD Media Expected to Equal or Exceed Last 5 Years' Level
• • Continued Upgrade Programs Underway for Foreseeable Future
  • Capacity Crossover Will Require at Least as Many 200 Leans as Last 5 Years
  • Upside Dependent on Near-line Growth Rate and Peak Quarter Capacity Needs
• Significant Incremental Revenue Opportunity with VERTEX and oDLC
• • Driving Majority of TFE Revenue Growth, with Just 10-15% Cover Glass Market Penetration
  • Significant Upside if Adopted by Multiple Top Handset OEMs
• Emerging Market Opportunities Provide Additional Growth Potential
• • Protective / Functional Coatings
  • Solar Cell Metallization and Ion Implant
  • Fan-OutAdvanced Packaging Metallization
  • EMI Component Shielding
  • Magnetic Memory Metallization (MRAM)

TFE REVENUE ($M)

TFE Revenue Drivers

$500

$450

$400

$350

$300

$250

$200

$150

$100

$50

$-

2014-2018	2019-2023E
Prior 5 Years	Current 5-Yr Period
Emerging Market Opportunities	Solar (MATRIX+ENERGi)
VERTEX	HDD Media

PROPRIETARY		Q3 2020 Investor Presentation_17

Growth Path to $250M in Annual Revenues

Potential Incremental Revenue Contributions from Each Part of the Business

Revenues in $M

$250

$200

$150

$100

$250M in

Growth Plan to $250M in Annual RevenuesAnnual

$20-$30Revenue

$50-$70

$20-$30	Photonics

$45-$80

$15-$20

~$95M*

$50

Photonics

Photonics

TFE

TFE

TFE

$-

2014	2015	2016	2017	2018	2019	2020	HDD	VERTEX Solar &	IVAS	Other	$250M in
						Outlook*	Business	Emerging Program Photonics	Annual
								TFE			Revenues
* Outlook as of July 27, 2020 Conference Call, reflecting both TFE and Photonics are relatively balanced 1H to 2H.	Markets			(Target)

PROPRIETARY		Q3 2020 Investor Presentation_18

Financial Model with Significant Operating Leverage

		2020		Incremental Margin Model:
			40%-45% Gross 30%-35% Operating
Annual	2019	Outlook		$150M	$200M	$250M
Revenue:	$109M	~$95M*		Model	Model	Model
Gross Margin	38%	>40%	35%-39%	37%-41%	39%-43%
Operating	34%	<40%	27%-28%	22%-24%	20%-22%
Expenses
Operating Margin	4%	Positive	8%-11%	14%-17%	>18%

• • Weathering the COVID-19 Pandemic with Strength and Resiliency
  • • Strong Revenue Growth in Photonics in 2020 - at Least 25% YoY
    • Hard Drive Demand Relatively Resilient in 2020 Given Strong Data Center Demand
    • Growth Initiatives Experiencing Delays, Especially in China
    • • Display Cover Glass Initiatives are in China and Likely Delayed into 2021
      • Solar Implant Capacity Expansions Delayed in China As Well
      • Advanced Semiconductor Packaging Initiatives Also Delayed by Travel Restrictions
• Outlook as of July 27, 2020 Conference Call, reflecting both TFE and Photonics are relatively balanced 1H to 2H, expected operating expenses and operating profitability.

PROPRIETARY		Q3 2020 Investor Presentation_19

Intevac: Solid Foundation, Large Growth Opportunities

Minimal to No COVID-19 Impact on Photonics and HDD; New Growth Markets in China Experiencing Delays

Photonics:	Thin-Film Equipment:
Strong Base: Entering Ground	Strong Base: Significant Growth
Soldier Growth Phase	Potential in New Markets

• On Contract for the Development and Delivery of 'IVAS" Night Vision Cameras
• Major Avionics Programs with Apache and JSF
• Ground Soldier Programs Double Revenue Opportunity over Next Five Years

• Technology and Market Share Leader in
  HDD Media; Strong Demand from Data Center Driving Growth in Media Units
• • Significant Growth Prospects in

Intevac Value	Display Cover Panel
• Versatile Platforms Double
Op
Proposition	Revenue Opportunity over Next
	Five Years

Solid Financial Foundation

• • Growth Strategy Offers Significant Long-Term Growth
• Strong Balance Sheet: Stable Balance of $45M Cash and No Debt

PROPRIETARY		Q3 2020 Investor Presentation_20

PROPRIETARY	POWERING	INNOVATION. DELIVERING	VALUE.