Revenue

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue

3. Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the three and nine months ended September 30, 2023 and October 1, 2022.

Major Products and Service Lines

	Three Months Ended September 30, 2023						Three Months Ended October 1, 2022
	HDD		ASP		Total		HDD		PV		ASP		Total
Systems, upgrades and spare parts	$	16,477	$	6	$	16,483	$	8,233	$	77	$	100	$	8,410
Field service		1,335		97		1,432		2,160		180		—		2,340
Total net revenues	$	17,812	$	103	$	17,915	$	10,393	$	257	$	100	$	10,750

	Nine Months Ended September 30, 2023								Nine Months Ended October 1, 2022
	HDD		PV		ASP		Total		HDD		DCP		PV		ASP		Total
Systems, upgrades and spare parts	$	36,345	$	28	$	17	$	36,390	$	19,112	$	1	$	212	$	100	$	19,425
Field service		3,271		—		97		3,368		4,844		43		190		—		5,077
Total net revenues	$	39,616	$	28	$	114	$	39,758	$	23,956	$	44	$	402	$	100	$	24,502

Primary Geographical Markets

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
United States	$	784	$	1,377	$	3,060	$	3,327
Asia		17,034		9,273		36,590		21,075
Europe		97		100		108		100
Total net revenues	$	17,915	$	10,750	$	39,758	$	24,502

Timing of Revenue Recognition

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Products transferred at a point in time	$	17,915	$	10,750	$	39,758	$	24,502
Products and services transferred over time		—		—		—		—
Total net revenues	$	17,915	$	10,750	$	39,758	$	24,502

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 nine months ended September 30, 2023:

	September 30, 2023		December 31, 2022		Nine Months Change
	(In thousands)
Contract assets:
Accounts receivable, unbilled	$	394	$	424	$	(30	)
Contract liabilities:
Deferred revenue	$	409	$	2,446	$	(2,037	)
Customer advances		23,005		24,659		(1,654	)
	$	23,414	$	27,105	$	(3,691	)

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 nine months ended September 30, 2023, contract assets decreased by $30,000 primarily due to the invoicing of accrued revenue related to certain upgrades and spare parts that were unbilled as of December 31, 2022, offset in part by the accrual of revenue for a system delivered in the quarter ended July 1, 2023 that was pending acceptance as of September 30, 2023 and the accrual of revenue related to the sale of upgrades and billable services during the nine months ended September 30, 2023.

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 nine months ended September 30, 2023, we recognized revenue of $3.4 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. In September 2023, the Company applied $444,000 of billings against these advances in connection with inventory scrapped at the customer’s direction.

On September 30, 2023, we had $46.5 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 25.3% of our remaining performance obligations as revenue in 2023, 50.2% in 2024 and 24.5% in 2025.