CVD Equipment - Q2 2024

Transcript

Operator (participant)

Greetings, and thank you for standing by, and welcome to CVD Equipment Corporation's Q2 2024 earnings call. As a reminder, this conference is being recorded. We will begin with some prepared remarks, followed by a question-and-answer session. Presenting on the call today will be Emmanuel Lakios, President and CEO, and member of the CVD Board of Directors, and Richard Catalano, Executive Vice President and Chief Financial Officer. We have posted our earnings press release and call replay information to the investor relations section of our website at www.cvdequipment.com. Before I begin, I would like to remind you that many of the comments made on today's call contain forward-looking statements, including those related to future financial performance, market growth, total available market, demand for our products and general business conditions and outlook.

These forward-looking statements are based on certain assumptions, expectations, and projections that are subject to a number of risks and uncertainties described in our press release and in our filings with the SEC, including, but not limited to, the Risk Factors section of the company's 10-K for the year ended December 31, 2023. Actual results may differ materially from those described during this call. In addition, all forward-looking statements are made as of today and we undertake no obligation to update any forward-looking statements based on the new circumstances or revised expectations. Now, I would like to turn the call over to Emmanuel Lakios. Please go ahead.

Emmanuel N. Lakios (President and CEO)

Joe, thank you, and good evening, everyone. Thank you for joining us today to discuss our Q2 2024 financial results and other important company developments and pertinent information related to our business. Your thoughts are important to us, and we look forward to your questions in our Q&A session. Our Q2 2024 revenue was $6.3 million, representing a 25.2% increase from the prior year period, and was up 28.9% as compared to our Q1 of 2024. While our year-to-date revenue was $11.3 million, which is 18.1% lower than the prior year period. We are pleased to have recently shipped our newly launched PVT-200 system, which was part of the Q1 strategic order for silicon carbide, 200 mm crystal boule growth.

The performance of the system will be evaluated for production by our now second account. We are encouraged that our backlog of $24 million at the end of June 30, 2024, is meaningfully higher than our year-end backlog of $18.4 million. Our orders for the Q2 were $3.2 million, primarily driven by demand in our SDC segment for our gas delivery equipment. Orders for the first six months of 2024 were $16.9 million, as compared to $15.8 million for the first six months of 2023. During the Q1, we received a $10 million multi-system order in our industrial market from a company coding components with silicon carbide.

Overall, we are disappointed with CVD's operating performance in the first half of the year, as order and revenue levels continue to fluctuate given the nature of the emerging growth and markets we serve, and the adverse financial impact of a specific first article system that shipped in the Q2. We'll stay the course of strategic focus to build critical customer relationships, achieve profitability, carefully managing our costs and cash flow, while simultaneously focusing on growth and return on investment. I would like to turn the call over to our CFO, Rich Catalano, who will provide an overview of our Q2 results.

Richard A. Catalano (EVP and CFO)

Thank you Emmanuel, and good afternoon. As Emmanuel mentioned, our revenue for the Q2 of 2024 was $6.3 million, as compared to $5.1 million for the Q2 of 2023. This represents an increase of $1.3 million or 25.2%. The increase in revenue versus the prior year quarter was primarily attributable to higher revenue of $1 million from our CVD Equipment segment, a $0.5 million increase in revenue from our SDC segment, offset by a $0.3 million decrease from our CVD Materials segment due to the disposition of Tantaline in May of 2023, and the exit of our MesoScribe business. The increase in CVD Equipment was principally due to increases in revenue from aerospace contracts, offset in part by lower revenues for PVT-150 systems and spare parts.

Our SDC segment revenues were 29% higher than the Q2 of 2023 and were $0.4 million, or 20% higher than the Q1 of 2024, as demand for SDC's gas delivery system remains strong. Gross profit for the three months ended June 30, 2024, was $1.6 million, with a gross profit margin of 25.4%, as compared to a gross profit of $1.4 million or gross profit margin of 27.4% for the three months ended June 30, 2023. This increase in gross profit of $0.2 million was primarily due to higher revenues that was offset by a contract mix with lower gross margins as compared to the prior year quarter.

Our operating loss for the Q2 of 2024 was $0.9 million, as compared to an operating loss of $1.2 million in the Q2 of 2023. The operating loss in the prior, prior year Q2 both included a non-recurring charge of $0.3 million related to the sale of the Tantaline subsidiary and also an impairment charge resulting from our decision to exit our MesoScribe business. That's total charge, one-time charges last year of $0.3 million. After other income, consisting principally of interest income, our net loss for the Q2 was $761,000 or $0.11 per share for both basic and diluted. This compares to a net loss for the Q2 of 2023 of $1.1 million or $0.16 per share for both basic and diluted.

Our cash and cash equivalents at June 30, 2024, was $10 million, as compared to $14 million at the end of December. This decrease was principally due to the net loss of $2.2 million, an increase in our accounts receivable of $3 million, offset by an increase in accounts payable, and we also have non-cash expense items of $0.8 million. Our working capital at June 30, 2024, was $12.7 million, and this compares to $14.3 million at December 31, 2023. Our return to profitability is dependent upon, among other things, the receipt of new equipment orders, our ability to mitigate the impact of inflationary pressures, as well as managing planned capital expenditures and operating expenses.

In addition, our revenues and orders have historically fluctuated based on changes in order rate, as well as other factors in our manufacturing process that impacts the timing of our revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter. After considering all these factors, we believe our cash and cash equivalents, and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months. We will continue to evaluate the demand for our products, assess our operations, and take actions anticipated to maintain our operating cash to support our working capital needs. I'll now turn it back to Emmanuel.

Emmanuel N. Lakios (President and CEO)

Rich, thank you for your presentation. Our focus remains on our customer markets, our employees, our shareholders, and the pursuit of growth and return to consistent profitability. We look forward to continuing to build on our success in the year ahead. Your comments and questions are important to us. With the close of our presentation, I would like to open the floor to your questions.

Operator (participant)

Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Ladies and gentlemen, there are no further questions at this time. I would like to turn the call back to Emmanuel Lakios for closing remarks.

Emmanuel N. Lakios (President and CEO)

Thank you, operator and thank you everyone for dialing in today. We appreciate the attendance on the call and the support, and of course, the loyalty from our shareholders and employees alike. If you have any further questions, please reach out to me directly. This concludes our Q2 call. Thank you.

Operator (participant)

Thank you. This concludes today's conference. You may now disconnect your lines. Thank you for your participation.