CVD Equipment Corporation

Greetings and thank you for standing by. Welcome to the CBD Equipment Corporation's fourth quarter and fiscal year 2023 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 Lacchios, President and CEO and member of the CBD Board of Directors, and Rich Catalano, Executive Vice President and Chief Financial Officer. We've posted our earnings press release and call replay information on the investor relations section of our website. 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, 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 risk factor section of the company's 10K for the year ended 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 obligation to update any forward-looking statements based on new circumstances or revised expectations. Now, I'll turn the call over to Emmanuel Aquios. Please go ahead, sir.

Kevin, thank you, and good afternoon, everyone. Thank you all for joining us today to discuss our fourth quarter fiscal 2023 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. Fourth quarter 2023 revenue was 4.1 million down significant versus the prior year period. As our business continues to experience fluctuations in revenue given the nature of our emerging growth and markets we serve, we were and are disappointed with both the fourth quarter and full year performance. We'll stay the course of our strategy to return to consistent profitability with a focus on growth and return on investments. Our primary goal is to expand penetration of our equipment solutions into high power electronics, battery materials, aerospace, and industrial applications. To this end, I am very pleased to announce that we started off 2024 with several key new order wins. First of all, we successfully penetrated a second PVT equipment customer. with an evaluation unit for a newly launched PBT-200 system used to grow 200 millimeter silicon carbide crystals. This represents an important milestone for CVD with potential follow-on production orders should our equipment effectively meet the customer's needs. Second, we received a $10 million multi-system order for our silicon carbide CVD coating reactors from an industrial customer. The tools will be used to deposit a silicon carbide protective coating on OEM components. We are encouraged by these orders as we continue to make investments in both research, development, and sales marketing, which includes direct engagement with multiple potential customers, all focused on our key markets. I will turn over our call to our CFO, Rich Catalano, who will provide you an overview of our fourth quarter and fiscal 2023 results. Rich.

Rich Catalano Thank you, Manny, and good afternoon. Our revenue for fiscal 2023 was $24.1 million, a decrease of $1.7 million, or about 7 percent. The decrease was primarily attributable to lower revenue in our CBD equipment segment of approximately $0.4 million related to lower PVT-150 system revenues that was offset by higher aerospace revenue. Our CVD materials business was lowered by $2 million. This is due to the sale of our can line subsidiary in May 2023 and the announced wind down of our mesoscribe operations. These decreases were offset by an increase of 0.6 million in our SDC segment due to higher demand. Our gross profit margin was 21% in 2023. This is compared to 26% in the prior year. The decrease in gross profit of $1.6 million was primarily due to significant cost overrun on one large contract in 2023 and also lower PBT 150 and CBD materials revenues as compared to 2022. Our increase in operating expenses from the prior year is due to higher employee-related costs to support our planned growth in our business, additional selling expenditures, and higher professional fees. These costs were offset by lower bonus costs and lower expenses for CBD materials due to the disposition of Tantalign. Our operating loss for the fiscal year was $4.9 million as compared to an operating loss of $1.8 million in 2022. After non-operating income consisting principally of interest income, our net loss for the year was $4.2 million or $0.62 per share, basic and diluted. This compares to a net loss of $224,000 or $0.03 a share in 2022. The net loss in 2022 was offset by $1.5 million of other income related to the recognition of employee retention credits, that being related to fiscal 2021. Now turning to the fourth quarter of 2023, our revenue for the quarter was $4.1 million, a decrease of $3.1 million, approximately 43%. This decrease is primarily attributable to lower revenue in our CBD segment of $1.8 million, and this was related to lower PVT system revenues as compared to the prior year. Our system revenues for the fourth quarter was also impacted by an overrun that we had on that before mentioned large contract. Our CBD material revenues were lowered by about $1 million based on the sale and the wind down. Our gross profit margin for the quarter was a negative 8.5% as compared to 28% in the prior year quarter. The negative gross margin in the quarter and the decrease in gross profit of 2.3 million was primarily due to the cost overruns on the contract that I mentioned, as well as lower PBT and CBT revenues, CBD material revenues, I should say. The decrease in operating expenses of 0.1 million during the quarter as compared to the prior year was due to lower bonus costs and lower expenses for CBD materials. And again, this was partially offset by some of our higher employee-related costs. Our operating loss for the quarter was 2.5 million as compared to an operating loss of $221,000. in the prior fourth quarter. After interest income, our net loss for the quarter was 2.3 million or 33 cents per share. This compares to net income in the fourth quarter of 22 of 1.5 million or 23 cents per share, but keep in mind that quarter had that $1.5 million special item related to the employee retention credits. Moving to our backlog, our backlog increased slightly from the prior year. It was $18.4 million as compared to $17.8 million as of last year. Our working capital was $14.3 million at December 31st, 2023. This compares to $15.5 million at December 31st, 2022. Our cash and cash equivalents at December 31st, 2023 was $14 million down slightly from the prior year. Where was that? As for our future results, we are unable to predict what impact the current economic and geopolitical uncertainties will have on our financial position or in future results of our operations and cash flows. Our return to consistent profitability is dependent, 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. After considering all these factors, we believe our cash and cash equivalents and our projected cash flows from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months. We will continue to assess our operations and we will take actions as necessary to maintain sufficient levels of operating cash. At this point, I'll turn it back to Manny.