
	Six Months Ended July 3, 2021										Six Months Ended June 27, 2020
	(In thousands)
	HDD		DCP		PV		ASP		Total		HDD		PV		Total
Systems, upgrades and spare parts	$	7,539	$	3	$	158	$	3,850	$	11,550	$	21,587	$	269	$	21,856
Field service		3,001		14		42		—		3,057		2,699		2		2,701

Total TFE net revenues	$	10,540	$	17	$	200	$	3,850	$	14,607	$	24,286	$	271	$	24,557


	Three Months Ended				Six Months Ended
Photonics	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
	(In thousands)
Products:

Military products	$	4,958	$	5,446	$	8,209	$	10,811
Commercial products		50		39		178		118
Repair and other services		274		645		716		1,075

Total Photonics product net revenues		5,282		6,130		9,103		12,004
Technology development:
Firm Fixed Price (“FFP”)		1,543		5,462		3,348		9,892
Cost Plus Fixed Fee (“CPFF”)		1,619		655		2,996		1,229
Time and materials		—		—		—		—

Total technology development net revenues		3,162		6,117		6,344		11,121

Total Photonics net revenues	$	8,444	$	12,247	$	15,447	$	23,125

Primary Geographical Markets


	Three Months Ended						Three Months Ended
	July 3, 2021						June 27, 2020
	(In thousands)
	TFE		Photonics		Total		TFE		Photonics		Total
United States	$	2,121	$	8,371	$	10,492	$	313	$	12,125	$	12,438
Asia		3,248		—		3,248		16,282		—		16,282
Europe		—		73		73		—		122		122

Total net revenues	$	5,369	$	8,444	$	13,813	$	16,595	$	12,247	$	28,842


	Six Months Ended						Six Months Ended
	July 3, 2021						June 27, 2020
	(In thousands)
	TFE		Photonics		Total		TFE		Photonics		Total
United States	$	2,488	$	15,331	$	17,819	$	832	$	22,981	$	23,813
Asia		8,269		—		8,269		23,725		—		23,725
Europe		3,850		116		3,966		—		144		144

Total net revenues	$	14,607	$	15,447	$	30,054	$	24,557	$	23,125	$	47,682

Timing of Revenue Recognition


	Three Months Ended						Three Months Ended
	July 3, 2021						June 27, 2020
	(In thousands)
	TFE		Photonics		Total		TFE		Photonics		Total
Products transferred at a point in time	$	5,369	$	274	$	5,643	$	16,595	$	645	$	17,240
Products and services transferred over time		—		8,170		8,170		—		11,602		11,602

	$	5,369	$	8,444	$	13,813	$	16,595	$	12,247	$	28,842


	Six Months Ended						Six Months Ended
	July 3, 2021						June 27, 2020
	(In thousands)
	TFE		Photonics		Total		TFE		Photonics		Total
Products transferred at a point in time	$	14,607	$	645	$	15,252	$	24,557	$	1,075	$	25,632
Products and services transferred over time		—		14,802		14,802		—		22,050		22,050

	$	14,607	$	15,447	$	30,054	$	24,557	$	23,125	$	47,682

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 July 3, 2021:


	July 3, 2021		January 2, 2021		Six Months Change
	(In thousands)
TFE:
Contract assets:
Accounts receivable, unbilled	$	—	$	369	$	(369	)

Contract liabilities:
Deferred revenue	$	195	$	482	$	(287	)
Customer advances		1		33		(32	)

	$	196	$	515	$	(319	)


Photonics:
Contract assets:
Accounts receivable, unbilled	$	1,410	$	5,439	$	(4,029	)
Retainage		127		126		1

	$	1,537	$	5,565	$	(4,028	)

Contract liabilities:
Deferred revenue	$	275	$	779	$	(504	)

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 July 3, 2021, contract assets in our TFE segment decreased by $369,000 primarily due to the recognition of revenue for the installation portion of revenue for one system that completed installation and acceptance.

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 July 3, 2021, we recognized revenue in our TFE segment of $33,000 and $296,000 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 July 3, 2021, contract assets in our Photonics segment decreased by $4.0 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. During the six months ended July 3, 2021, we recognized revenue in our Photonics segment of $

779

,000 that was included in deferred revenue at the beginning of the period.

On July 3, 2021, we had $51.7 million of remaining performance obligations, which we also refer to as backlog. Backlog at July 3, 2021 consisted of $18.9 million of TFE backlog and $32.7 million of Photonics backlog. We expect to recognize approximately 52% of our remaining performance obligations as revenue in 2021, 29% in 2022, and 19% in 2023.