Q2 2021 CVD Equipment Corp Earnings Call
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Greetings and welcome to our CVD equipment 2021 second quarter results Conference call.
At this time all participants are in a listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
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 Lachiusa, President and CEO, and Thomas Mcneil Executive Vice President and Chief Financial Officer.
We have posted our earnings press release and call replay information.
The Investor Relations section of our website at Www Dot C D D equipment Dot com.
Before I begin I would like to remind you that many of the comments made on today's call.
Sure 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 and 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 our 10-K for the year ended December.
Remember 31.2020.
Actual results may differ materially from those described during this call.
In addition, all forward looking forward looking statements are made as of today and we undertake no obligation to update any forward looking statements based on new circumstances or revised expectations.
Now I'd like to turn the call over to Manny Manny.
Thank you.
Welcome to our CVD equipment Corporation quarterly conference call. My name is Emmanuel <unk>, CEO, and President and I am pleased to be presenting today regarding important company developments and pertinent information related to our business.
As we will be providing substantive information your thoughts are important to us we request that you waited.
With your questions and at the end.
Of the Q&A session.
I would like to introduce our CFO, Mr. Thomas Mcneil, who will provide you our financial second quarter 2021 summary.
Thank you Manny and good afternoon, everyone.
CVD <unk> second quarter, 2021 revenue was $4 million as compared to $3.7 million in the second quarter of 'twenty 'twenty and.
An increase of 300000 or eight 5%.
Net income for the second quarter was one 5 million or 22 cents per diluted share as.
As compared to a net loss of $1.1 million or 17 cents per diluted share in the second quarter of 2020.
With respect to our first half results as a result of the COVID-19 pandemic Cvd's, new order bookings substantially decrease commencing in the first quarter of 2020.
Which we don't reduce revenues in subsequent quarters, resulting in revenue of $7.4 million in the first half of 2021 as compared to $9.8 million in the first half of 2020.
The decrease of $2.4 million or 24, 1%.
Net loss for the first half of 2021.
35000.
125, or one penny per diluted share.
As compared to net income of 500000 or <unk> <unk> per diluted share for the first half of 2020.
Let me note that during the first quarter of 2020, CBD benefitted from the cares Act, which allows for the carryback of net operating losses and resulted in CVD, recognizing an income tax benefit of $1.5 million.
In the second quarter and first half of 2020.
With respect to <unk> second quarter and.
And first half results for 2021.
We were positively impacted by the gain on debt extinguishment and the amount of $2.4 million.
Which was related to our PPP loan received due to the effects of COVID-19 pandemic.
Subsequently forgiven in June 2021.
In our second quarter of 2021 sequential improvement was achieved.
<unk> revenue in the second quarter was $4 million as compared to $3.4 million in the first quarter of 2021.
An increase of 600000.
And the operating loss decreased to $1.1 million.
Second quarter of 2021 as compared to an operating loss of one 6 million.
In the first quarter of 2021, an improvement of 500000.
This is a result of increased revenue and the improvement in product margins.
The company's backlog at June 32021 improved by $2 million.
The $8 million at June 30, as compared to 6 million at March 31.2021.
Since the first quarter of 2020, the company continued to experience significant negative effects from the COVID-19 pandemic, including reductions of new orders. However, the Companys order activity has improved in both the first and second quarters of 2021.
And we believe it's longer term improvements will be benefited by the anticipated slow recovery in the aerospace markets.
Industry reports indicate will begin to occur in 'twenty 'twenty, two 'twenty three time frame.
With respect to our 555 building sale as previously announced we are pleased to have closed on the sale of oil facility located at 555, North research place in Central Islip.
On July 26.2021.
With a sales price of $24.4 million.
We satisfied our mortgage debt of approximately $9.1 million outstanding at June 30, and paid various transaction related costs.
The net proceeds of approximately 14 million dramatically improves our current cash position, which now exceeds $18 million.
And provides us with the balance sheet for sustainable growth strategies.
Our cash and cash equivalents were five 4 million at June 32021, as compared to $7.7 million.
At December 31, 2020.
However, as I just mentioned with the closing of the Wi Fi five sale that occurred in July our cash balance now exceeds $18 million.
Working capital was $11.5 million at June 32021, as compared to $8.1 million at December 31, 2020, an increase of $3.4 million or 42%.
This was primarily the result of our actions taken to several Wi Fi five building.
Which we closed in July and thus resulted in classifying our long term assets and liabilities related to the sale as short term at June 32021.
In addition, during the first half we have substantially reduced our capex from 862000 in the first half of 2020 to 118000 during the first half of 2021.
This relating to ceasing further U S spend on the tantalum product line.
The longer term impacts from COVID-19 outbreak are highly uncertain and cannot be predicted, especially now with the recent outbreaks.
Of the COVID-19 Delta area.
Our return to profitability is dependent upon among other things the receipt of new equipment orders.
Lessening of the ongoing effects of COVID-19.
And the Delta variant on our business in the aerospace market.
An improvement in operational efficiencies as well as managing planned capex and operating expenses.
Based on all of these factors, we believe our cash cash equivalent positions in our kit and cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months of the filing of this Form 10-Q.
So the current environment continue longer or worsen, we will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.
At this point I'd like to turn the call back over to Matti <unk> our CEO.
Tom Thank you for your presentation.
As we completed our second quarter on our entering into the second half of 2021. We are pleased to state that we are seeing a modest.
But nonetheless recovery in demand for our products, we continue to be cautiously optimistic that the COVID-19 pandemic impact to our business and product demand is decreasing.
We do see negative effects of Covid on our supply chain with increase.
In cost and lead time for our materials.
Our operating team is working through these issues daily and we do not expect a major impact to our revenue timing, nor our gross margins.
Over the last several quarters, we have noted the substantial impact of one of our focused and largest served markets aerospace we.
We believe based on industry reports that the timing of increased gas.
Turbine engine demand will begin to recover in late 2022, beginning of 2023.
Assuming this materializes, we should start seeing an increased demand for our products and services in 2022.
We recently announced that our company orders were approximately $6 million in the second quarter of 2021.
First nano systems business contributed with eight system orders in the first half of the year.
Furthermore, we announced that we received a $1.7 million dollar order in July from a production customer.
The customer is one deep battery sciences based in Palo Alto, California. The system will be used to produce electric vehicle battery material using one DS and then node manufacturing process.
The system is scheduled to be completed in Q1.2022.
The order supports our plan and is fully aligned with our strategy to mitigate the company into growth production applications of nanotechnology materials.
This order order rate indicate a very favorable trend with an increase from Q1, 2021 and very much so from the same period 2020.
Our SDC tagline mesh subscribed businesses also saw strong product demand.
The sale of the 555 building was completed in July with the outcome of providing $14 million of additional cash on hand.
The sale of the building provides both short term working capital as well as for future growth opportunities.
In summary.
Even with these positive indicators the year is far from over and we expect to face. Many challenges. However, our focus remains consistent on our customers employees and shareholders and the pursuit of growth and returned to profitability.
Two comments and questions are important to us with the close of our presentation, we would like to open the floor to your questions.
Operator.
Thank you ladies and gentlemen at this time that we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.
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 key.
Our first question comes from the line of Brett Reiss with Janney Montgomery Scott. Please proceed with your question.
Thank you, operator, Hi, Manny Hi, Tom.
Hello, Brian.
Yeah.
Yeah.
Systems order that you just booked do you have any idea what the total addressable market for that kind of niche product might be domestically and abroad.
That's actually an excellent question.
That's an area, where we're trying to and the marketing team is working on quantifying the size of the marketplace.
It's an emerging market both for us.
And in the field, it's a bit early to be able to give you that information we hope to have more so.
During our strategic planning in the third and fourth quarter of this year. So we will give you an update as as we have more information okay. Now in this market.
Do you have other company competitors or is your competitor your customer themselves they might decide to do what you just did in house.
We provide first it as far as in house customer competitors building their own equipment.
Many of them already do build their own equipment.
And did they turn to us for production level equipment and scale up.
That's where we provide value both from areas of safety.
Throughput.
And also being able to produce these systems in a more timely manner than they ever could.
So we see our customers not as our competitors.
We are not producing the material.
We produce the equipment many of them come to us with their own process.
We respect their proprietary nature of that process.
As far as other competitors in the field again CVD has a very unique.
Presence and that we have.
<unk> 37 years have provided application specific custom equipment.
And at this point in time.
Most of the battery material.
Customers that we would serve have a different process.
Many of those are.
Based on.
Both carbon and other nano wire type materials.
Where we have a library of processes. So we have quite a bit of experience.
I think we are very well positioned in this space against both equipment companies.
And add enough value to the customer base.
For us to be able to garner additional orders.
Okay I appreciate that.
Now CVD materials did a million seven.
The first six months, if you annualize it that's.
$3.4 million, which is twice what what that.
Segment did in 2018.
Twice, what it did in 2019 and more than five times, what you did in 2020.
Although these two businesses finally, Tampa line and met describe.
Finally, gaining momentum and traction so that.
These kind of revenue numbers.
Our sustainable looking forward yeah.
Yeah.
So let me let me just speak to that thank you for that and again the numbers are.
There are smaller in size.
And the.
The materials portion of the business that <unk> line in muscle scribe typically they account for anywhere from 10% to 20% of total revenue in a depressed equipment market.
On the demand side for Tampa line is.
Is stronger than it was in the past, but again.
We are properly sized to account for that.
<unk>.
We on the metal scribe, we issued a few press releases that we had closed.
Two contracts that are multiyear contracts.
And that also supports the.
The revenue from those contracts so to answer your question it's a.
Technically a yes.
But they still are smaller pieces of our business.
<unk> to the equipment.
I know you don't give quarterly guidance.
But.
Looking out into the future three years from now.
Where do you think.
The 10th align and meso scribe or CVD materials, where we do like to see the.
The annualized revenue run rate of those two businesses.
You know that.
That are under the CVD umbrella.
Yeah.
Would be but it would be irresponsible I think for me to really comment too much on that.
Where I would like to see them and where we would cautiously project them to be would be two different matters.
I hope that over the next couple of quarters could be able to present more information on some of the smaller businesses and where we think they serve the markets are growing.
Where we think that.
The future could hold for us.
At this time I'm not prepared to do that on this call. Okay. One last one and I'll drop back in queue.
If you could just update us.
On the oxygenator cartridge that you're developing with with Stony Brook.
Okay any update on that.
Well to just to provide a bit of technical <unk>.
Alteration to the question Paul what we're not developing it in collaboration or in with Stony Brook, we are using stone into our guidance.
As a testing facility for certain aspects of the of the device.
There we are working with potential.
Partners.
To help us further pioneer this.
It is not in the top three activities of the company May I say.
And we.
We don't have.
Really any substantive.
Information to provide on this particular call.
Okay.
I will drop back thank you for taking my questions. Thanks, Brian.
Our next question comes from the line of Robert Sussman with Bentley Capital. Please proceed with your question.
Thank you can you give us an idea is.
This first order for the batteries for Evs.
Do you are you.
Are you talking to or have you seen interest from any other EV battery manufacturers are you seeing interest and it is the interest just domestic or Richard international as well.
Most of these batteries are made.
First there is a driver for bringing it home to the United States I think we're all aware of that.
Also it is a global market.
We are seeing interest in our carbon and our nanotechnology material segment.
Specifically for energy storage.
Electric vehicles being the largest.
<unk>.
There are.
Competing technologies and techniques for some of this this material.
The order that we did receive is four one.
Hum.
Very clever technology, that's been pioneered again I stated earlier it was with <unk>.
<unk> D batteries sciences.
And I welcome you to visit our web site.
And that is one technique there are other techniques that we're also exploring with other.
Battery.
Energy storage manufacturer so to answer your question, it's a global.
We are having conversations with multiples.
And we're pleased that we were selected by <unk> for their production requirements.
Is there something.
Unique about Wendy there obviously is that makes your equipment optimal where it would be you know just another.
A piece of equipment for other.
Technology is different than one D systems.
I would be trespassing on our non disclosure on confidentiality agreements.
With our with our customer.
If I was to elaborate any further on that.
But.
Again, we were selected and we're very pleased with that.
Okay. One last one on that you may not want to answer.
This pad is probably one day for at least the next 12 months one system or is this the beginning of a larger order that could take place over the next 12 months.
Well I think youre right I really can't answer that cannot.
But I, obviously I have my own.
My own hopes and desires.
Okay.
Thank you.
Thank you Rob.
There are no other questions in the queue I'd like to hand, the call back to management for closing remarks.
We appreciate everyone's attendance.
We hope all of them and everyone stays safe in the in these.
Again difficult times.
And we look forward to.
To communicating with you in the near and mid term. Thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yeah.