CVD Equipment Corporation

Greetings, and welcome to the CVD Equipment 2022 First Quarter Results Conference Call. At this time, all participants are on a listen-only mode. A question-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 Lachios, President and CEO and member of the CVD Board of Directors, and Thomas McNeil, Executive Vice President and Chief Financial Officer. We have posted our earnings press release and call replay information to the investor relations sections of our website at 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 market, demand of 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 factor section of our 10-K for the year ended December 31st, 2021. 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'd like to turn the call over to Manny. Manny?

Thank you, Doug. Welcome to our CVD Equipment Corporation quarterly conference call. My name is Manny Laccio, CEO and President, and I'm pleased to be presenting to you today regarding our first quarter 2022 performance and important company developments and pertinent information related to our business. As we will be providing you substantive information Your thoughts are important to us, and we look forward to your questions at the end of our conference call in the Q&A session. The first four months of 2022 have been an exciting period for all the stakeholders of CVD Equipment. Having spent a majority of 2021 transitioning, reorganizing, refocusing, and realigning the company's resources and strategy towards a path to future profitability and growth, we are beginning to see the results in the form of improved market adoption and orders of our products. Our strategy of focus on markets that support the electrification of everything is fueling our present growth. The market segment includes electric vehicle battery technology, as well as high power electronics for electrical charging and power transmission. Our Q1 2022 orders were $4.1 million compared to $3.7 million in Q1 of the prior year. April 2022 orders were $7.2 million. In the first four months of 2022, we have received orders exceeding $11 million for our CVD equipment products as compared to approximately $5.5 million for the same fourth four-month period in 2021. 100% year-on-year increase in orders for the company. These orders primarily consisted of 19 CVD-first nanosystems compared to 23 system orders for all of 2021. Of the 19 system orders, 14 are for our recently announced PVT-150 system addressing silicon carbide growth and processing, while the remainder of the systems Orders are for battery nanomaterials, both R&D and production, advanced carbon-based capacitors, and for a legacy advanced R&D first nanosystem. The systems are planned for shipment starting in the fourth quarter. According to independent market research, these market segments are expected to continue to grow in the coming quarters and years. As we noted in our earnings call for 2021, which was held at the end of March 2022. We also received orders for consumables that serve our installed base in the aerospace market. We take this as a sign that the aerospace market is beginning to recover. However, it is not expected to recover until at least 2023. We believe the orders we received during the first four months of 2022 and the order rate of the prior three quarters continue to validate our strategic focus on growth and use markets such as battery nanomaterials, silicon carbide growth systems, and advanced composite materials for aerospace and other markets. Our SDC, Tantaline, and Mesoscribe product lines continue to show demand and orders in Q1 and the first four months of 2022, albeit not to the extent of the CVD equipment group. The COVID pandemic and the geopolitical instability in Russia, Ukraine, and Eastern Europe have caused issues in the global supply chain. The negative impacts have been felt by all our companies with increases in commodity and product materials cost, as well as in delivery, product delivery uncertainties and unpredictability. Revenue for the company as a whole was negatively impacted in Q2. the first quarter by supply chain issues. Some of our countermeasures to address the lingering supply chain issue are partnering with key suppliers and expanding our in-house production capabilities. Both are essential to our goal of self-reliance and will support our commitments to our customers. Our plan is to expand our in-house manufacturing capacity in our 355 centralized facility in the second half of 2022. And this plan is well underway and the end objective to be self-reliant. We continue to believe that our 355 facility has ample space in all areas of operations to support our growth. The first quarter of this year, we satisfied the mortgage of our 355 facility. In 2021, we strengthened our balance sheet and liquidity with the proceeds we received from the sale of our 555 facility. our market focus, order rate, operational performance, and manufacturing capacity, along with our balance sheet, all health positions, CVD equipment, along the path to continued growth and future profitability. I would like to now introduce our CFO, Thomas McNeil, who will provide the first quarter 2022 financial summary.

Thomas McNeil Thank you, Manny, and good afternoon, everyone. CBD first quarter of 2022 revenue was $4.7 million as compared to $3.4 million in the first quarter of 2021, an increase of $1.3 million, or 38.3%. Net loss for the first quarter of 2022 was $1 million, or 15 cents per diluted share, as compared to a net loss of $1.5 million, or 23 cents, per diluted share in the first quarter of 2021. CVD's operating loss improved by 600,000 to 1 million for the first quarter of 2022, as compared to an operating loss of 1.6 million for the first quarter of 2021. This improvement was the result of leveraging fixed costs on higher sales levels which resulted from improved orders towards the end of 2021, as well as product mix, which more than offset certain component cost increases and compensation costs. In addition, general and administrative costs decreased 400,000, which was primarily related to the reduced legal costs and lower building costs as a result of the sale of the company's 555 facility in July 2021, and the consolidation of operations into the company's 355 facility. Beginning in Q3 2021 and continuing to date, CBD has been impacted by increased costs on certain manufacturing material components, as well as delays in supply chain deliveries. This may also impact CVD's ability to recognize revenue and result in reduced gross profit margins in future quarters, extended manufacturing lead times, and reduced manufacturing efficiencies. CVD has placed orders with increased lead times to attempt to mitigate the manufacturing delays, as well as assessing other material supplies to mitigate the potential cost impacts. In addition, CVD is utilizing its in-house flexible manufacturing to further mitigate both potential delivery delays and material cost increases. With respect to our balance sheet, on March 1st, 2022, we satisfied our remaining mortgage of $1.7 million on our 355 South Technology Drive facility, and as such, have no debt outstanding. Turning to our backlog, at March 31st, 2022, we had 9.9 million of backlog as compared to 10.4 million at December 31st, 2021, a decrease of 500,000 or 4.8%. This decrease is due to the timing of the receipt of new orders during the quarter ended March 31st, 2022 of 4.1 million as compared to revenue of 4.7 million. However, with the new orders achieved in April of 2022 in excess of 7 million, this has substantially increased our backlog. While the effect of COVID-19 crisis continues to negatively impact the aerospace industry, generally in the form of reduced travel and reduction of gas turbine engine sales, industry analysts believe improvement will begin to occur in the late 2022 With respect to our liquidity, our cash and cash equivalents at March 31, 2022 was $13.3 million as compared to $16.7 million at December 31, 2021. This decrease of $3.4 million is primarily the result of the satisfaction of our mortgage debt on our 355 facility in the amount of $1.7 million. million, as well as our net loss adjusted for non-cash items of $650,000 and other operating activities. Our working capital was $15.9 million at March 31, 2022, as compared to $16.7 million at December 31, 2021, a decrease of $800,000 or 5%. For longer term, impacts from the COVID-19 outbreak are highly uncertain and cannot be predicted, especially now with the impacts on our supply chain as we previously discussed. And while we have initiated actions to mitigate the potential negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length of time period that the supply chain factors may impact our business. Our return to profitability is dependent upon, among other things, the substantial completion and delivery of existing orders, which include the significant April 22 orders in excess of 7 million, the ongoing receipt of new equipment orders, the lessening of the ongoing effects of COVID-19 on our business and the aerospace market, managing through the supply chain issues discussed, and improvement in operational efficiencies, as well as managing planned capital expenditures and operating expenses. Based upon all these factors, we believe our cash and cash equivalent positions and projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 to 18 months of the filing of a Form 10-Q today. Should the current environment continue longer or worsen, we will continue to assess our operations and take action anticipated to maintain our operating cash to support the working capital needs. And now I'd like to turn the call back to Maddie.