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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 June 27, 2020
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 28, 2020, 23,635,197 shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.
 
 

INTEVAC, INC.
INDEX
No.
 
 
Page
 
 
 
 
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
Item 1.
 
Financial Statements (unaudited)
 
 
 
 
 
 
3
 
 
 
 
4
 
 
 
 
5
 
 
 
 
6
 
 
 
 
7
 
Item 2.
 
 
 
24
 
Item 3.
 
 
 
31
 
Item 4.
 
 
 
32
 
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
33
 
Item  1A.
 
 
 
33
 
Item  2.
 
 
 
39
 
Item  3.
 
 
 
39
 
Item  4.
 
 
 
39
 
Item  5.
 
 
 
40
 
Item  6.
 
 
 
40
 
 
 
41
 
2

PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
INTEVAC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 27,
2020
 
 
December 28,
2019
 
 
(Unaudited)
 
 
(In thousands, except
par value)
 
ASSETS
 
Current assets:
   
     
 
Cash and cash equivalents
  $
23,944
    $
19,767
 
Short-term investments
   
14,435
     
16,720
 
Trade and other accounts receivable, net of allowances of $0 at both June 27, 2020 and at December 28, 2019
   
28,957
     
28,619
 
Inventories
   
22,210
     
24,907
 
Prepaid expenses and other current assets
   
1,853
     
1,504
 
                 
Total current assets
   
91,399
     
91,517
 
Long-term investments
   
5,604
     
5,537
 
Restricted cash
   
787
     
787
 
Property, plant and equipment, net
   
11,897
     
11,598
 
Operating lease
right-of-use-assets
   
9,302
     
10,279
 
Intangible assets, net of accumulated amortization of $8,373 at June 27, 2020 and $8,113 at December 28, 2019
   
14
     
274
 
Deferred income taxes and other long-term assets
   
5,826
     
6,330
 
                 
Total assets
  $
124,829
    $
126,322
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
   
     
 
Current operating lease liabilities
  $
2,709
    $
2,524
 
Accounts payable
   
5,135
     
4,199
 
Accrued payroll and related liabilities
   
6,316
     
6,488
 
Other accrued liabilities
   
3,916
     
3,593
 
Customer advances
   
433
     
4,007
 
                 
Total current liabilities
   
18,509
     
20,811
 
Noncurrent liabilities:
 
Noncurrent operating lease liabilities
   
8,228
     
9,532
 
Other long-term liabilities
   
437
     
186
 
                 
Total noncurrent liabilities
   
8,665
     
9,718
 
Stockholders’ equity:
 
Common stock, $0.001 par value
   
24
     
23
 
Additional
paid-in
capital
   
190,266
     
188,290
 
Treasury stock, 5,087 shares at June 27, 2020 and 4,989 shares at December 28, 2019
   
(29,551
)    
(29,158
)
Accumulated other comprehensive income
   
402
     
424
 
Accumulated deficit
   
(63,486
)    
(63,786
)
                 
Total stockholders’ equity
   
97,655
     
95,793
 
                 
Total liabilities and stockholders’ equity
  $
124,829
    $
126,322
 
                 
Note: Amounts as of December 28, 2019 are derived from the December 28, 2019 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
 
 
June 27,
2020
 
 
June 29,
2019
 
 
June 27,
2020
 
 
June 29,
2019
 
 
(Unaudited)
 
 
(In thousands, except per share amounts)
 
Net revenues:
   
     
     
     
 
Systems and components
  $
22,725
    $
17,237
    $
36,561
    $
38,874
 
Technology development
   
6,117
     
5,077
     
11,121
     
8,267
 
                                 
Total net revenues
   
28,842
     
22,314
     
47,682
     
47,141
 
Cost of net revenues:
   
     
     
     
 
Systems and components
   
13,812
     
10,462
     
21,579
     
25,560
 
Technology development
   
3,610
     
3,495
     
6,526
     
5,984
 
                                 
Total cost of net revenues
   
17,422
     
13,957
     
28,105
     
31,544
 
                                 
Gross profit
   
11,420
     
8,357
     
19,577
     
15,597
 
Operating expenses:
   
     
     
     
 
Research and development
   
3,707
     
3,431
     
6,991
     
7,417
 
Selling, general and administrative
   
5,609
     
5,854
     
11,581
     
11,105
 
                                 
Total operating expenses
   
9,316
     
9,285
     
18,572
     
18,522
 
                                 
Income (loss) from operations
   
2,104
     
(928
)    
1,005
     
(2,925
)
Interest income and other income (expense), net
   
62
     
163
     
204
     
322
 
                                 
Income (loss) before provision for income taxes
   
2,166
     
(765
)    
1,209
     
(2,603
)
Provision for income taxes
   
642
     
417
     
909
     
971
 
                                 
Net income (loss)
  $
1,524
    $
(1,182
)   $
300
    $
(3,574
)
                                 
Net income (loss) per share:
   
     
     
     
 
Basic
  $
0.06
    $
(0.05
)   $
0.01
    $
(0.16
)
Diluted
  $
0.06
    $
(0.05
)   $
0.01
    $
(0.16
)
Weighted average common shares outstanding:
   
     
     
     
 
Basic
   
23,561
     
22,991
     
23,522
     
22,923
 
Diluted
   
23,906
     
22,991
     
23,953
     
22,923
 
See accompanying notes to the condensed consolidated financial statements.
4

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended
   
Six Months Ended
 
 
June 27,
2020
 
 
June 29,
2019
 
 
June 27,
2020
 
 
June 29,
2019
 
 
(Unaudited)
 
 
(In thousands)
 
Net income (loss)
  $
1,524
    $
(1,182
)   $
300
    $
(3,574
)
                                 
Other comprehensive income (loss), before tax:
   
     
     
     
 
Change in unrealized net gain on
available-for-sale
investments
   
51
     
32
     
53
     
77
 
Foreign currency translation gains (losses)
   
20
     
(61
)    
(75
)    
 
                                 
Other comprehensive income (loss), before tax
   
71
     
(29
)    
(22
)    
77
 
Income taxes related to items in other comprehensive income (loss)
   
  
     
  
     
  
     
  
 
                                 
Other comprehensive income (loss), net of tax
   
71
     
(29
)    
(22
)    
77
 
                                 
Comprehensive income (loss)
  $
1,595
    $
(1,211
)   $
278
    $
(3,497
)
                                 
See accompanying notes to the condensed consolidated financial statements.
5

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Six months ended
 
 
June 27,
2020
 
 
June 29,
2019
 
 
(Unaudited)
 
 
(In thousands)
 
Operating activities
 
 
 
 
 
 
Net income (loss)
  $
300
    $
(3,574
)
Adjustments to reconcile the net income (loss) to net cash and cash equivalents provided by operating activities:
   
     
 
Depreciation and amortization
   
1,797
     
1,920
 
Net amortization (accretion) of investment premiums and discounts
   
(26
)    
(34
)
Equity-based compensation
   
1,328
     
1,509
 
Straight-line rent adjustment and amortization of lease incentives
   
(142
)    
(158
)
Change in the fair value of acquisition-related contingent consideration
   
  
     
7
 
Deferred income taxes
   
426
     
517
 
Loss on disposal of fixed assets
   
  
     
45
 
Changes in operating assets and liabilities
   
(148
)    
776
 
                 
Total adjustments
   
3,235
     
4,582
 
                 
Net cash and cash equivalents provided by operating activities
   
3,535
     
1,008
 
Investing activities
 
 
 
 
 
 
Purchases of investments
   
(12,213
)    
(10,150
)
Proceeds from sales and maturities of investments
   
14,510
     
14,961
 
Purchases of leasehold improvements and equipment
   
(1,837
)    
(1,398
)
                 
Net cash and cash equivalents provided by investing activities
   
460
     
3,413
 
Financing activities
 
 
 
 
 
 
Net proceeds from issuance of common stock
   
994
     
1,021
 
Common stock repurchases
   
(393
)    
(42
)
Taxes paid related to net share settlement
   
(345
)    
(268
)
Payment of acquisition-related contingent consideration
   
  
     
(230
)
                 
Net cash and cash equivalents provided by financing activities
   
256
     
481
 
Effect of exchange rate changes on cash and cash equivalents
   
(74
)    
  
 
                 
Net increase in cash, cash equivalents and restricted cash
   
4,177
     
4,902
 
Cash, cash equivalents and restricted cash at beginning of period
   
20,554
     
19,884
 
                 
Cash, cash equivalents and restricted cash at end of period
  $
24,731
    $
24,786
 
                 
                 
Non-cash
investing and financing activity
 
 
 
 
 
 
Additions to
right-of-use-assets
obtained from new operating lease liabilities
  $
128
    $
  
 
                 
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 provider of vacuum deposition equipment for a wide variety of thin-film applications, and a leading provider of digital night-vision technologies and products to the defense industry. The Company leverages its core capabilities in high-volume manufacturing of small substrates to provide process manufacturing equipment solutions to the hard disk drive (“HDD”), display cover panel (“DCP”), and photovoltaic (“PV”) solar cell industries. Intevac also provides sensors, cameras and systems for government applications such as night vision. Intevac’s customers include manufacturers of hard disk media, DCPs and solar cells as well as the U.S. government and its agencies, allies and contractors. Intevac reports two segments: Thin-film Equipment (“TFE”) and Photonics.
COVID-19
Update
In March 2020, the World Health Organization characterized the coronavirus
(“COVID-19”)
a pandemic, and the President of the United States declared the
COVID-19
outbreak a national emergency. The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy. In view of the rapidly changing business environment, unprecedented market volatility and heightened degree of uncertainty resulting from
COVID-19,
we are currently unable to fully determine its future impact on our business. However, we are monitoring the progression of the pandemic and its potential effect on our financial position, results of operations, and cash flows. Our factory in Singapore was given notice by the Singapore government to suspend all
on-site
activities on April 27, 2020. We appealed this notice and were provided an exemption on May 14, 2020. We were temporarily required to limit the number of employees on site at our Singapore factory, but these restrictions were lifted on June 2, 2020.
Basis of Presentation
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 28, 2019 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. Intevac’s results of operations for the three and six months ended June 27, 2020 are not necessarily indicative of future operating results.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates.
Significant Accounting Policy
Government Grants and Credits
The Company generally records grants from governmental agencies related to income as a reduction in operating expense. Grants are recognized when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received. Reimbursements of eligible expenditures pursuant to government assistance programs are recorded as reductions of operating costs when the related costs have been incurred and there is reasonable assurance regarding collection of the claim. Grant claims not settled by the balance sheet date are recorded as receivables, provided their receipt is reasonably assured. The determination of the amount of the claim, and accordingly the receivable amount, requires management to make calculations based on its interpretation of eligible expenditures in accordance with the terms of the programs. The reimbursement claims submitted by the Company are subject to review by the relevant government agencies. In Singapore, Intevac receives government assistance under the Job Support Scheme (“JSS”). During the quarter ended June 27, 2020, the Company received $310,000 in JSS grants, of which $180,000 is reported as a reduction of cost of net revenues, $49,000 is reported as a reduction of research and development (“R&D”) expenses and $81,000 is reported as a reduction of selling, general and administrative expenses on the condensed consolidated statements of operations.
7

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
2.
Revenue
The following tables represent a disaggregation of revenue from contracts with customers for the three and six months ended June 27, 2020 and June 29, 2019 along with the reportable segment for each category.
Major Products and Service Lines
                                                                                                       
TFE
  
Three Months Ended June 27, 2020
    
Three Months Ended June 29, 2019
 
    
(In thousands)
 
    
HDD
    
DCP
    
PV
    
Total
    
HDD
    
DCP
    
PV
    
Total
 
Systems, upgrades
 
and spare parts
  $
15,226
    $
—  
    $
61
    $
15,287
    $
12,423
    $
 —  
    $
18
    $
12,441
 
Field service
   
1,306
     
—  
     
2
     
1,308
     
821
     
2
     
—  
     
823
 
                                                                 
Total TFE net revenues
  $
16,532
    $
—  
    $
63
    $
16,595
    $
13,244
    $
2
    $
18
    $
13,264
 
                                                                 
                                                                                                       
    
Six Months Ended June 27, 2020
    
Six Months Ended June 29, 2019
 
    
(In thousands)
 
    
HDD
    
DCP
    
PV
    
Total
    
HDD
    
DCP
    
PV
    
Total
 
Systems, upgrades and spare parts
  $
21,587
    $
—  
    $
269
    $
21,856
    $
23,473
    $
 —  
    $
6,391
    $
29,864
 
Field service
   
2,699
     
—  
     
2
     
2,701
     
2,343
     
2
     
—  
     
2,345
 
                                                                 
Total TFE net revenues
  $
24,286
    $
—  
    $
271
    $
24,557
    $
25,816
    $
2
    $
6,391
    $
32,209
 
 
Three Months Ended
   
Six Months Ended
 
Photonics
  
June 27,

2020
    
June 29,

2019
    
June 27,

2020
    
June 29,

2019
 
 
(In thousands)
 
Products:
   
     
     
     
 
Military products
  $
5,446
    $
2,981
    $
10,811
    $
4,794
 
Commercial products
   
39
     
182
     
118
     
500
 
Repair and other services
   
645
     
810
     
1,075
     
1,371
 
                                 
Total Photonics product net revenues
   
6,130
     
3,973
     
12,004
     
6,665
 
Technology development:
   
     
     
     
 
Firm Fixed Price (“FFP”)
   
5,462
     
3,085
     
9,892
     
4,777
 
Cost Plus Fixed Fee (“CPFF”)
   
655
     
1,992
     
1,229
     
3,488
 
Time and materials
   
—  
     
—  
     
—  
     
2
 
                                 
Total technology development net revenues
   
6,117
     
5,077
     
11,121
     
8,267
 
                                 
Total Photonics net revenues
  $
12,247
    $
9,050
    $
23,125
    $
14,932
 
                                 
Primary Geographical Markets
 
Three Months Ended
   
Three Months Ended
 
 
June 27, 2020
   
June 29, 2019
 
 
(In thousands)
 
 
TFE
   
Photonics
   
Total
   
TFE
   
Photonics
   
Total
 
United States
  $
313
    $
12,125
    $
12,438
    $
356
    $
8,811
    $
9,167
 
Asia
   
16,282
     
—  
     
16,282
     
12,908
     
—  
     
12,908
 
Europe
   
—  
     
122
     
122
     
—  
     
239
     
239
 
                                                 
Total net revenues
  $
16,595
    $
12,247
    $
28,842
    $
13,264
    $
9,050
    $
22,314
 
                                                 
8

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
 
Six Months Ended
   
Six Months Ended
 
 
June 27, 2020
   
June 29, 2019
 
 
(In thousands)
 
 
TFE
   
Photonics
   
Total
   
TFE
   
Photonics
   
Total
 
United States
  $
832
    $
22,981
    $
23,813
    $
517
    $
14,527
    $
15,044
 
Asia
   
23,725
     
—  
     
23,725
     
31,692
     
—  
     
31,692
 
Europe
   
—  
     
144
     
144
     
—  
     
405
     
405
 
                                                 
Total net revenues
  $
24,557
    $
23,125
    $
47,682
    $
32,209
    $
14,932
    $
47,141
 
                                                 
Timing of Revenue Recognition
 
 
Three Months Ended
   
Three Months Ended
 
 
June 27, 2020
   
June 29, 2019
 
 
(In thousands)
 
 
TFE
   
Photonics
   
Total
   
TFE
   
Photonics
   
Total
 
Products transferred at a point in time
  $
16,595
    $
645
    $
17,240
    $
13,264
    $
810
    $
14,074
 
Products and services transferred over time
   
—  
     
11,602
     
11,602
     
—  
     
8,240
     
8,240
 
                                                 
  $
16,595
    $
12,247
    $
28,842
    $
13,264
    $
9,050
    $
22,314
 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
 
Six Months Ended
   
Six Months Ended
 
 
June 27, 2020
   
June 29, 2019
 
 
(In thousands)
 
 
TFE
   
Photonics
   
Total
   
TFE
   
Photonics
   
Total
 
Products transferred at a point in time
  $
24,557
    $
1,075
    $
25,632
    $
32,209
    $
1,371
    $
33,580
 
Products and services transferred over time
   
—  
     
22,050
     
22,050
     
—  
     
13,561
     
13,561
 
                                                 
  $
24,557
    $
23,125
    $
47,682
    $
32,209
    $
14,932
    $
47,141
 
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
The following table reflects the changes in our contract assets, which we classify as accounts receivable, unbilled or retainage, and our contract liabilities, which we classify as deferred revenue and customer advances, for the six months ended June 27, 2020:
 
 
June 27,
2020
 
 
December 28,
2019
 
 
Six Months
Change
 
 
(In thousands)
 
TFE:
   
     
     
 
Contract assets:
   
     
     
 
Accounts receivable, unbilled
  $
560
    $
760
    $
(200
)
                         
Contract liabilities:
   
     
     
 
Deferred revenue
  $
464
    $
320
    $
144
 
Customer advances
   
433
     
4,007
     
(3,574
)
                         
  $
897
    $
4,327
    $
(3,430
)
                         
                         
Photonics:
   
     
     
 
Contract assets:
   
     
     
 
Accounts receivable, unbilled
  $
574
    $
3,210
    $
(2,636
)
Retainage
   
121
     
99
     
22
 
                         
  $
695
    $
3,309
    $
(2,614
)
 
                         
                         
Contract liabilities:
   
     
     
 
Deferred revenue
  $
1,259
    $
—  
    $
1,259
 
                         
9

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Accounts receivable, unbilled in our TFE segment represents a contract asset for revenue that has been recognized in advance of billing the customer. For our system and certain upgrade sales, our TFE 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 in our TFE segment 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 June 27, 2020, contract assets in our TFE segment decreased by $200,000 primarily due to the subsequent invoicing of certain unbilled spare parts revenue at December 28, 2019.
Customer advances in our TFE segment 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 contract advances are liquidated when revenue is recognized. Deferred revenue in our TFE segment 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 June 27, 2020, we recognized revenue in our TFE segment of $4.0 million and $55,000 that was included in customer advances and deferred revenue, respectively, at the beginning of the period.
Accounts receivable, unbilled in our Photonics segment represents a contract asset for revenue that has been recognized in advance of billing the customer, which is common for contracts in the defense industry. In our Photonics segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. Our contracts with the U.S. government may also contain retainage provisions. Retainage represents a contract asset for the portion of the contract price earned by us for work performed, but held for payment by the U.S. government as a form of security until satisfactory completion of the contract. The retainage is billable upon completion of the contract performance and approval of final indirect expense rates by the government. During the six months ended June 27, 2020, contract assets in our Photonics segment decreased by $2.6 million primarily due to the billing of contractual milestones, offset in part by the accrual of revenue for incurred costs under FFP and CPFF contracts.
Deferred revenue in our Photonics segment generally represents a contract liability for amounts billed to the customer upon achievement of contractual milestones. These amounts are liquidated when revenue is recognized.
On June 27, 2020, we had $69.0 million of remaining performance obligations, which we also refer to as backlog. Backlog at June 27, 2020 consisted of $14.6 million of TFE backlog and $54.4 million of Photonics backlog. We expect to recognize approximately 49% of our remaining performance obligations as revenue in 2020, 26% in 2021, 17% in 2022 and 8% in 2023.
3.
Inventories
Inventories are stated at the lower of average cost or net realizable value and consist of the following:
 
June 27,
2020
 
 
December 28,
2019
 
 
(In thousands)
 
Raw materials
  $
11,280
    $
15,286
 
Work-in-progress
   
4,363
     
4,748
 
Finished goods
   
6,567
     
4,873
 
                 
  $
22,210
    $
24,907
 
                 
Net inventories at June 27, 2020 and December 28, 2019 included one VERTEX SPECTRA system for DCP under evaluation in a customer’s factory and one MATRIX PVD system for advance semiconductor packaging under evaluation in a customer’s factory. Net inventories at June 27, 2020 also included one VERTEX SPECTRA system for DCP at Intevac’s factory pending delivery to a customer for evaluation.
10

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
4.
Equity-Based Compensation