Q1 2024 CVD Equipment Corp Earnings Call

Speaker Change: [music].

Yes.

Operator: Greetings and thank you for standing by, and welcome to CVD Equipment Corporation's first quarter fiscal year 2024 earnings conference. 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.

Greetings and thank you for standing by and welcome to C V D's equipment corporations first quarter fiscal year 'twenty 'twenty four earnings conference call.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: We'll begin with some prepared remarks, followed by a question and answer session presenting on the call today will be Emmanuel Lucky Us President and CEO and member of the C. V D Board of directors and Richard Cow lot, though Catalan O Executive Vice President and Chief Financial Officer, we have posted.

Speaker Change: Our earnings press release and call replay information to the Investor Relations section of our website www CBD quit bit dotcom.

Operator: We have posted our earnings press release and call replay information in the Investor Relations section of our website, www.cvdequipment.com. Before I begin, I'd 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 markets, 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 releases, including, but not limited to, the risk factors sections of the company's 10-K for the year ending December 31st, 2022.

Emmanuel N. Lakios: Before I begin I'd 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.

Emmanuel N. Lakios: <unk> and projections and are subject to a number of risks and uncertainties described in our press release and in our filing with the S. E C.

Emmanuel N. Lakios: But not limited to risk factors sections of the company's 10-K for the year ending December 31st 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 obligations to update any.

Operator: In addition, all 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 Emmanuel Lakios.

Emmanuel N. Lakios: Forward looking statements based on new circumstances or revised expectations now I'd like to turn the call over to Emmanuel like yours.

Emmanuel N. Lakios: Operator, thank you, and good afternoon everyone. Thank you all for joining us today to discuss our first quarter of 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 the Q&A session.

Operator, Thank you and good afternoon, everyone. Thank you all for joining us today to discuss our first quarter 2024 financial results and other important company developments and personal information related to our business.

Emmanuel N. Lakios: Your thoughts are important to us and we look forward to your questions in Q&A session.

Emmanuel N. Lakios: First quarter 2024, revenue was $4.9 million, down significantly versus the same prior year period, as our business continues to experience fluctuations in revenue given the nature of the emerging growth and markets we serve. While we are disappointed with our first quarter performance, we'll stay the course on strategic efforts to achieve profitability, carefully managing our costs and cash flow while simultaneously focusing on growth and return on investment. As we mentioned in our year-end press release, we started off 2024 with several key order wins during the first quarter.

Emmanuel N. Lakios: First quarter 2024 revenue was $4 9 million down significantly versus the same prior year period as our business continues to experience fluctuations in revenue given the nature of the emerging growth and markets we serve.

Emmanuel N. Lakios: While we are disappointed with our first quarter performance will stay the course on strategic efforts to achieve profitability carefully managing our costs and cash flow, while simultaneously focusing on growth and a return on investment.

Emmanuel N. Lakios: Specifically, this included a strategic order for our PBT200 system from a new customer, marking an important milestone for our silicon carbide crystal growth system. The PBT 200 customer plans to evaluate our equipment for potential additional orders. In addition, we received a multi-system order for our industrial market silicon carbide CVD coating system for approximately $10 million. The order performance of the first quarter resulted in an increase in backlog from $18.4 million at year-end to $27.1 million at March 31, 2024.

Emmanuel N. Lakios: As we mentioned in our year end press release, we started off 2024 with several key order wins during the first quarter. Specifically this included a strategic order for our Pvt, 200 system from a new customer.

Emmanuel N. Lakios: Marking an important mark milestone for our silicon carbide crystal growth system the.

Emmanuel N. Lakios: The pvt, 200 customer plans to evaluate our equipment purpose for potential additional orders.

Emmanuel N. Lakios: In addition, we received a multi system order for our industrial market Silicon carbide CPT coding system for approximately $10 million.

Emmanuel N. Lakios: The order performance of the first quarter resulted in an increase in backlog from 18.4 million at year end to $27 1 million at March 31 2024.

Emmanuel N. Lakios: We are encouraged by these orders as we continue to fund both research, development, sales, and marketing activities, including direct engagement with multiple potential customers, highly focused on penetrating key market opportunities. I would like to turn the call over to our CFO, Rich Catalano, who will provide an overview of our first quarter financial results.

Emmanuel N. Lakios: We are encouraged by these orders as we continue to fund both research and development sales and marketing activities, including direct engagement with multiple potential customers highly focused on penetrating key market opportunities.

Emmanuel N. Lakios: I would like to turn the call over to our CFO Rich, Colorado, who will provide an overview of our first quarter financial results.

Richard A. Catalano: Thank you, Manny, and good afternoon. Our revenue for the first quarter was $4.9 million. This compares to $8.7 million for the first quarter of 2023. This is a decrease of $3.8 million, or 43%. The decrease in revenue versus the prior year period was primarily attributable to lower revenue of $2.9 million from our CVD equipment segment, a 0.4 million decrease in revenue from our SDC segment, and a 0.6 million decrease from the CVD material segment due to the disposition of Tantaline in May 2023 and the winding down of MesoScribe's operation. The decrease in CVD equipment revenue in the period was principally the result of revenue associated with our PBT 150 systems in the prior period as compared to no such revenue in the current period.

Rich: Thank you Manny and good afternoon.

Rich: Our revenue for the first quarter was $4 9 million. This compares to $8 7 million for the first quarter of 2023.

Rich: This is a decrease of $3 8 million or 43%.

Rich: The decrease in revenue versus the prior year period was primarily attributable to lower revenue of $2 9 million from our CVT equipment segment.

Rich: <unk> 4 million decrease in revenue from our S. T C segment, and a point 6 million decrease from the CVD materials segment due to the disposition of chance of line in May 2023, and the wind down of meso scribes operations the.

Rich: The decrease in CVD equipment revenue in the period was principally the result of the revenue associated with our PV Chi Wen 50 systems in the prior period as compared to no such revenue in the current period.

Richard A. Catalano: While our SDC segment revenues were 16% lower than the first quarter of 2023, they were 0.6 million, or 44% higher than the fourth quarter of 2023 due to increased demand for SDC's gas and chemical delivery system. Gross profit for the three months ended March 31st, 2024 was $0.9 million, with a gross profit margin of 17.5%. This compares to a gross profit of 2.4 million and a gross profit margin of 28% for the three months ended March 31st, 2023.

Rich: While our STC segment revenues were 16% lower than the first quarter of 2023, it was <unk> 6 million or 44% higher than the fourth quarter of 'twenty three due to increased demand for S. T six gas and chemical delivery systems.

Rich: Gross profit for the three months ended March 31, 2024 was point 9 billion.

With a gross profit margin of 17, 5%. This compares to a gross profit of $2 4 million and a gross profit margin of 28% for the three months ended March 31 2023.

Richard A. Catalano: The decrease in gross profit of $1.6 million was primarily the result of lower gross profit margins on contracts currently in progress as compared to the first quarter of 2023, which benefited from contracts with higher gross margins. The operating loss for the first quarter of 2024 was $1.6 million as compared to an operating loss of $0.2 million in the first quarter of 2023. This increase in the operating loss was due to a lower gross profit margin of $1.6 million that was partially offset by lower personnel costs from a reduction in our workforce in January 2024 and also lower bonus accruals.

Rich: The decrease in gross profit of $1 6 million was primarily the result of lower gross profit margins on contracts currently in progress as compared to the first quarter of 2023, which benefit benefited from contracts with higher gross margins.

Rich: The operating loss for the first quarter of 2024 was $1 6 million as compared to an operating loss of <unk> 2 million in the first quarter of 'twenty three.

Rich: This increase in the operating loss was due to the lower gross profit margin of $1 6 million that was partially offset by lower personnel costs from our reduction in our workforce in January 2024, and also lower bonus accruals.

Richard A. Catalano: After net income, which consists principally of interest income, our net loss for the first quarter was $1.5 million, or $0.22 per share, for both basic and diluted. This compares to a net loss for the first quarter of 2023 of $40,000, or $0.01 per share for both basic and diluted.

Rich: After that income which consists principally of interest income our net loss for the first quarter was $1 5 million or 22 per share for both basic and diluted this.

Rich: This compares to a net loss for the first quarter of 2023, a 40000 or <unk> <unk> per share for both basic and diluted.

Richard A. Catalano: As to our balance sheet, our cash and cash equivalents at March 31, 2024 were $11.9 million as compared to $14 million at December 31, 2023. This decrease in cash was principally due to a net loss of $1.5 million, an increase in contract assets of $1.1 million, an increase in accounts receivable of $1.1 million, as well as an increase in inventories of $0.5 million. These were offset by an increase in contract liabilities of $1.1 million, and we also have non-cash items of $0.4 million, principally depreciation as well as stock-based compensation. Our working capital at March 31, 2024 is $13.1 million. This compares to $14.3 million at December 31, 2023.

Rich: As for our balance sheet, our cash and cash equivalents at March 31, 2023 'twenty 'twenty 'twenty four was $11 $9 million as compared to $14 million at December 31, 2023.

Rich: This decrease in cash was principally due to the net loss of $1 5 million an increase in contract assets of $1 1 million an increase in accounts receivable of $1 1 million as well as an increase in inventories of <unk> 5 million. These.

Rich: These were offset by an increase in contract liabilities of $1 1 million and also we have noncash items of <unk> 4 million principally depreciation.

Rich: Depreciation as well as stock based compensation, our working capital at March 31, 2024 is $13 1 million. This compares to $14 3 million at December 31 2023.

Richard A. Catalano: We are unable to predict what impact the current economic and geopolitical uncertainties will have on our financial position and future results of operations and cash flows. Our return to profitability is dependent upon, among other things, the receipt of new equipment orders, our ability to mitigate the impact of supply chain disruptions and 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 rates as well as other factors in our manufacturing process that impact the timing of our revenue recognition.

We are unable to predict what impact the current economic and geopolitical uncertainties will have on our financial position and future results of operations and cash flows our return to profitability is dependent upon among other things the receipt of new equipment orders, our ability to mitigate the impact of supply chain disruption.

Rich: And inflationary pressures as well as managing planned capital expenditures and operating expenses in.

Rich: In addition, our revenues orders have historically fluctuated based on changes in order rates as well as other factors in our manufacturing process that impacts the timing of our revenue recognition.

Richard A. Catalano: 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 as necessary to maintain our operating cash to support our working capital needs. Now, I'll turn it back to Manny.

Rich: Accordingly orders received from customers and revenue recognized may fluctuate from quarter to quarter.

Rich: 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.

Rich: We will continue to evaluate the demand for our products assess our operations and take actions as necessary to maintain our operating cash to support our working capital needs ill now turn it back to Manny.

Emmanuel N. Lakios: Rich, thank you for your presentation. In summary, the first quarter results of 2023 reflect our efforts to continue to focus on everything we do and those who we serve. Our focus remains on our customer markets, our employees, our shareholders, and the pursuit of growth and a return to consistent profitability. We look forward to continuing to build on our success in the year ahead and continue to be cautiously optimistic. Your comments and questions are important to us. At the close of the presentation, I would like to open the floor to your questions. Thank you.

Rich thank you for your presentation.

Manny: In summary, the first quarter results of 2023 reflect our efforts to continue to focus on everything we do and who has it and those who we serve our focus remains on our cost on our customer markets, our employees, our shareholders and the pursuit of growth and a return to consistent profitability, we look forward to continuing to build on.

Manny: Sure.

Speaker Change: And our success in the year ahead and continue to be cautiously optimistic comments and questions are important to us with the close of the presentation I would like to open the floor to your questions.

Speaker Change: Yeah.

Speaker Change: Thank you we.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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 start key.

Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, 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.

Speaker Change: Be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Brett Reiss with Janie Montgomery-Scott. Please proceed with your question.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our first question comes from the line of Brett Reece with Jamie Janney Montgomery Scott. Please proceed with your question.

Brett Reiss: Hi, Manny. Hi, Richard. How are you guys doing? Hi, Brett. How are you?

Brett Reiss: Hi, Manny Hi, Richard are you guys, Hey, Brian how are you hi, Brett.

Brett Reiss: Good. Backlog increase, you know, very nice. The 10 million silicon carbide protective coating order and even the 3.6 million new PVT-200 order, I assume you use some sort of percentage of completion method of recognizing revenue. Do you know kind of what the cadence of recognition will be of the revenues from those two orders, the balance of the year?

Speaker Change: But backlog increase you know very nice.

Speaker Change: The 10 million silicon carbide protective coating water and even the $3 6 million New Pvt 2200.

Speaker Change: Order I assume you use some sort of percentage of.

Speaker Change: Please Finn.

Speaker Change: Yep Yep.

Speaker Change: Method of recognizing revenue.

Speaker Change: Kind of what the cadence of breaking the recognition will be the revenues from those two waters the balance of the year.

Richard A. Catalano: First, Brett, I think an adjustment to the discussion is appropriate. The question on the $10 million multisystem order for the silicon carbide protective industrial coating system is accurate. The PBT system was for a single PBT. I think you stated that it was 3.6 or 3.7 million. That's not accurate.

Speaker Change: First Fred I think an adjustment to the ease of discussion the.

Speaker Change: The the question onto the 10 million dollar multi system order for the silicon carbide protective industrial coating system.

Speaker Change: It was is accurate the pvt system was for a single PBT I think you stated that it was three six to $3 7 million that's not accurate.

Speaker Change: Okay.

Operator: Okay. Okay, so let's take a look at a bundle of questions.

Speaker Change: Okay. So.

Speaker Change: Let's see.

Speaker Change: Unbundled pathogen dollar yeah yeah.

Richard A. Catalano: Just to answer your question, Brett, on the accounting, the $10 million order will be recognized over time. We just got that order recently, and that will be recognized toward the latter part of this year, in 2024 and 2025 as we work on the contract. With respect to PBTs, since we have that as one of our products, standard products that are available for sale, given that we have now a second customer, our accounting position on revenue recognition will be based on when we ship the product to the end customer, or what's referred to as point-in-time revenue recognition.

Yes, just to answer your question Brett on the accounting of the $10 million order.

Speaker Change: It will be recognized over time.

Speaker Change: Got that order recently and that will be recognized towards the latter part of this year in 2024 into 2025 as we work on the contract.

Speaker Change: With respect to PV cheese.

Speaker Change: Since you know we have that as you know one of our products standard products Thats available for sale given that we have now a second customer our accounting position on revenue recognition will be based on when we ship the product to the end customer or what's referred to as point in time revenue recognition and we anticipate that for sure.

Richard A. Catalano: and that will be this year going forward. So we have not recognized any revenue on that PBT 200 order that will be recognized later on in 2024.

Speaker Change: And that will be this year going forward. So we have not recognized any revenue on that PBT 200 order that will be recognized later on in 2024.

Brett Reiss: All right, what I did is your backlog went up 13.6. I took the 10, and I just assumed that the 3.6 was all new PVT, but it's not, so the backlog came from other products.

Speaker Change: Alright, what what what I did your backlog went up 13.6, I took the 10 and I just assume that.

Speaker Change: 3.6 involved a new P D T, but it's it's not so the backlog came from other products, but we had a healthy U S. D C quarter as well as and in addition to that spare parts as a portion of our business and we had an additional system order, which we didn't do we didn't speak about.

Richard A. Catalano: We had a healthy SDC quarter as well, and in addition to that, spare parts are a portion of our business, and we had an additional system order which we didn't speak about, which is part of our legacy product.

Speaker Change: Which is part of our legacy product lines.

Brett Reiss: Okay, that's great. The SG&A, you reduced it from 1.6 to 1.3 million this week.

Speaker Change: Okay, that's great.

Speaker Change: Okay.

Speaker Change: The SG&A you reduced it from one six to one 3 million. This quarter is that a a good run rate going forward.

Richard A. Catalano: Yeah, I think it does reflect our current run rate. We did have some reduction in force, as I mentioned. We do have lower bonus accruals as well. So we don't give guidance, per se, but that is kind of consistent with what we would expect going forward, subject to other things that might be.

Speaker Change: Yeah, I think it does reflect our current run rate. We did have some reduction in force as I mentioned, we do have lower bonus accruals as well. So we don't give guidance per se, but that is kind of consistent what we would expect going forward.

Speaker Change: Jack to other things that might pop up for example, as far as any other business activities that might require additional fees for example, which we can't predict yet and its also subject to the business situation and as you know as we get more orders or order rate fluctuates.

Richard A. Catalano: which we can't predict. Yeah. And it's also subject to the business situation and as we get more orders or as our order rate fluctuates.

Brett Reiss: Right. And I see, you know, despite this soft quarter, you still are keeping the pedal to the metal on R&D with 746,000 versus 602. Do you plan to continue to try to do that? We have not.

Speaker Change: Right.

Speaker Change: And I see you know despite the soft quarter.

Speaker Change: You're still.

Speaker Change: <unk> are keeping the pedal to the metal on R&D was 746000 versus 602, you plan to continue to trying.

Speaker Change: Trying to do that.

Richard A. Catalano: We have not affected at all our engineering programs, and quite a bit of our engineering effort is going into satisfying the large silicon carbide coating system, as well as the launch, the final launch, and delivery of our Alpha Beta PVT-200 system.

Speaker Change: We have not affected our at all our engineering programs and quite a bit is going to have our engineering effort is going into satisfying the large.

Speaker Change: Silicon carbide coating systems.

Speaker Change: Great as well as the launch the final launch and delivery of our Alpha beta.

Speaker Change: Pvt 200 system.

Speaker Change: Right right.

Brett Reiss: How many employees did you have to kind of, you know, let go to bring overhead down to, you know, our new current reality? Yeah, we...

Speaker Change: Many employees did you have to kind of let go to.

Speaker Change: Yeah, we you know, bringing all their head down to our you know our new current reality.

Richard A. Catalano: We don't have a tendency to release that information; we find that to be a competitive advantage. All right, I'm going to

Speaker Change: We don't have a tendency to release that information we.

Speaker Change: We find that to be a competitive advantage.

Speaker Change: Okay.

Speaker Change: Got it.

Brett Reiss: All right, I'm going to drop back in the queue. Thank you very much. And the backlog... is encouraged.

Speaker Change: Alright.

I'm going to drop back in queue. Thank you very much in the backlog.

Speaker Change: Very encouraging.

Speaker Change: Thank you thank you Brad.

Speaker Change: Thank you.

Operator: There are no further questions at this time. I'd like to pass the call back over to Emmanuel for closing comments. Thank you, Operator.

Speaker Change: There are no further questions at this time I'd like to pass the call back over to Emmanuel for closing comments.

Emmanuel N. Lakios: Thank you, operator, and thanks to everyone for dialing in today. We appreciate the attendance on the call and your support, as well as the loyalty from all our shareholders. Some of the employees were actually on the call today. We appreciate that. If you have any further questions, please reach out to me directly or to Rich, and this concludes our first quarter call.

Emmanuel N. Lakios: Okay. Thank you operator, and thanks, everyone for dialing in today, we appreciate the attendance on the call and your support as well as the loyalty from all our shareholders and some of the employees were actually on the call today and we appreciate that.

Emmanuel N. Lakios: If you have any further questions. Please reach out to me directly or with rich and this concludes our first quarter call. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Unnamed: Richard Catalano, Lawrence Waldman, CVD Equip

Speaker Change:

Speaker Change: [music].

Speaker Change: Yeah.

Thank you.

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