Revenue

6 Months Ended

Jun. 27, 2020

Revenue from Contract with Customer [Abstract]

Revenue

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

	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

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.