This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk_0: greetings and welcome to the tv be equipment two thousand and twenty two second quarter result conference call at the time ah participants are not listen only mode a question and answer session will file a formal presentation if anyone should require operators this is there in the conference please press star zero on your telephone keypad as a reminder that conference is being recorded we will begin with i'm prepared remarks followed by a question and answer session presenting on the call today will be emanuel like you president and ceo and member of the cbd the board of directors and thomas mcneil executive vice president and chief financial officer we have posted are earning press release and call replay information to the investor relations relations section of our website at www dot c b b equipment dot com before i begin i like to remind you that many of the comments made on today's call campaign forward looking statements including those related to future financial performance market growth total available market demand for a products and general business conditions than outlook the 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 se si including but not limited to the risk factors section of our ten k for the year ended december thirty one two
spk_1: that and twenty one
spk_0: actual results may differ materially from those describe their in this call in addition all for looking statements are made as of today and we undertake no obligation of the any forward looking statements based on the new circumstances or revise expectations now over like to turn a call over to manny
spk_2: thank you diego welcome to our cbd equipment corporations quarterly conference call my name is mary landrieu ceo and president and i'm pleased to be presenting to you today regarding our second quarter twenty twenty two performance and important company do developments or or the information related to our business while we we will be providing subsidy measure your thoughts are important to us and we look forward to your question that the endo or conference call in the queue and eight session
spk_3: the first half of twenty twenty two as we previously indicated has been an exciting period for all the stakeholders assuming the equipment the order rate for the first half lend support to our believe that we're on the power to to to profitability and growth our strategy of focusing on markets or support the electrification of everything is fueling are present growth the market segment includes electric vehicle battery technology as well as high power electronics for charging and power transmission or two to twenty twenty two orders were twelve point six million compared to five point eight million and que one of the prior year in the first half of twenty twenty two we have received orders exceeding sixteen million dollars for our cbd equipment products as compared to approximately nine point six million for the same period and twenty twenty one that is a seventy two percent year on year increase in orders for a company disorders primarily consisted of twenty one first nano cbd systems compared to twenty three system orders for all up twenty twenty one of the twenty one system orders fourteen or for recently announced pdt one fifty system racing silicon carbide growth and processing to wear for a superconducting tape applications and the remainder of the system orders are for battery nanomaterials both are india production
spk_2: advanced carbon based capacitors and for a legacy advanced are indeed first now system
spk_3: does the systems are planned for shipment starting in the fourth quarter and into twenty twenty three we also received orders for consumer boy spare parts that serve our install base in the aerospace market we have taken the last year to expand our engagement with additional gas turbine engine manufacturers for systems to produce ceramic matrix composite materials this is a sign that the aerospace markers beginning to recover however we do not expected to recover until at least twenty twenty three
spk_2: or as d c products i also had an increase in order rate in the second quarter supply chain issues continue to negatively impact or revenue and profitability for all the segments of the company
spk_3: the covert pandemic and geo political instability russia ukraine and eastern europe have caused issues in the global supply chain that negative effects i've been solved by all companies with increases in commodity and product material cost as well as and product the library uncertainty and unpredictability we continue to drive towards operational self reliance the then installed additional machine centers and our central islip facility to offset supply chain issues related to machine components
spk_4: we also
spk_3: are working closely with are all in supply chain to mitigate as much as possible the delays and price escalations and components and materials i would like to now introduce our see about mr thomas me deal for provide our second quarter and you're a day twenty twenty two financial summer
spk_5: thank you very good afternoon
spk_3: similarly revenue for the second quarter of twenty twenty two was five point eight million as compared to four million for the second quarter twenty twenty one and increase of one point eight million or forty four percent the was for a second quarter twenty twenty two was point eight million were twelve cents per diluted share as compared the net income of one point five million or twenty two cents per diluted share the second quarter of twenty twenty one however that quarter included a two point four you gain or dead extinguishment from the forgiveness of cbd ppp law tv these operating was for the second quarter of twenty twenty two decreased by point two million two point nine million for the second quarter of twenty twenty two as compared to an operating loss of one point one million the second quarter twenty twenty one
spk_6: this decrease was a result of increased revenue of one point eight million and the result in improvement of gross profit margins of point for me
spk_3: what's that by increased operating expenses of point two million
spk_6: the increasing gross profit and gross profit margins was primarily the result of leveraging fixed costs are higher sales levels and or improved product mix
spk_3: which also certain component was increases in compensation costs in addition operating expenses increase due to hire employee related costs to support our greater demand
spk_6: marketing and engineering efforts for the six months ended june thirty twenty twenty two revenue was ten point five million as compared to seven point four million in the same period and twenty twenty one an increase of three point one million or forty one point four percent
spk_3: that was for the six months ended june thirty twenty twenty two was one point eight million or twenty seven cents per diluted share as compared to a net loss of thirty five thousand and one twenty five were once and for didn't actually have to the same period and twenty twenty one
spk_7: and again that
spk_6: small was thirty five thousand twenty twenty one included a two point four million game or dead extinguishment for the forgiveness of see these pp ppp low
spk_3: for the six months ended june thirty twenty twenty to save these offering was decreased by point eight million to one point nine billion as compared to an opera and was of two point seven million for the same period and twenty twenty one
spk_6: this improve it was the result of increased revenue of three point one million and the result and approval of gross profit margins of point eight million and decreased upward expenses of point one million the increase
spk_8: and gross profit approach gross profit margins was primarily the result of leveraging fixed costs are higher sales levels and improve product mix which more than offset certain component cost increases and compensation course
spk_6: beginning in two three twenty twenty one and continuing to the cbd has been impacted by increase costs and certain manufacturing material components as well as delays in supply chain delivers these increases and delays may also affects the be these ability to recognize revenue a result in reduce gross profit margins of future quarters
spk_3: extended manufacturing lead times and reduced manufacturing efficiencies
spk_6: cb is also seeing inflationary effect that have resulted in increase cause for labour materials we have placed orders with increased the times to attempt to mitigate the manufacturing delays and continue to assess other material suppliers in an effort to alleviate the potential cost effects
spk_3: in addition cbd is utilizing it's flexible and house manufacturing to further mitigate potential delivery the delays and material costs increases
spk_8: now turning to our
spk_9: back off
spk_3: or a backlog and june thirty twenty twenty two with sixteen point seven million as compared to ten point four million at december thirty first twenty twenty one an increase of six point three million were sixteen point five percent this the increase is due to the timing of the receipt of new orders for the six months ended june thirty twenty twenty two of sixteen point seven million we've been reduced by recognize revenue of ten point five million
spk_6: while the negative effects of the covert nineteen pandemic continue to impact the aerospace industry generally in the form of reduce long distance travel and reduction of turbine engine sales industry reports indicate improvement they begin to occur in the late twenty two twenty twenty three timeframe our turn into our liquidity our cash and cash equivalents or june thirtieth twenty twenty two was twelve point two million as compared to sixteen point seven billion a december thirty one twenty twenty one
spk_3: is decreased or four point five million is primarily the result of the satisfaction of our mortgage said on of five five five facility them out of one point seven million
spk_6: as well as or never watched adjusted for noncash items of one point three million to six months ended june thirtieth and or capital expenses of point five million to improve or manufacturing he further mitigate potential delivery plays and reduce costs a working capital was fifteen billion and june thirtieth as compared to sixteen point seven million a december thirty first twenty twenty one a decrease of will point seven million or ten percent the long term impacts from the coven maybe an outbreak a highly uncertain and cannot be predicted
spk_3: especially now with the impacts on a supply chain as we previously discussed a while we have initiated actions to mitigate the potential negative impacts to a revenue and profitability they can be no assurance of the ultimate impact in the length of time period that the supply chain fact is the impact or business
spk_6: i'll return to profitability is dependent upon among other things the substantial completion and delivery of existing orders which include a significant first half of twenty twenty two orders of approximately sixteen point seven million jago and receipt of new equipment orders and others the lessening of the ongoing infection of the covered my academic on our business and the aerospace market managing through the supply chain issues discussed and approval operational efficiencies is was managing play and capital expenditures and other expenses based upon all of these factors we believe that our cash cash equivalent positions and projected cash flow from operations will be sufficient to meet all working capital capital expenditure requirements for the next twelve eighteen months with the filing of of one thank you so the covenant current environment continue longer or worsen we will continue to assess er operations and take actions anticipate to maintain are operating cash to support the working capital me
spk_8: i'll nail to the core back over to man
spk_3: calm thank you for your presentation in summary the second quarter first half of twenty twenty two about on our efforts of twenty twenty one
spk_2: which were and which was a year of transition reorganization and focus on everything we doing and those serve our focus remains on our customers market employees shareholders and the pursuit of growth and return to profitability
spk_3: we we look forward to the second half of twenty twenty two and continue to be cautiously optimistic your comments and questions are important to us with the close up for presentation i'd like to open up the floor to your question
spk_0: diego thank you and if you'd like have a question at this time press star one on your telephone keypad a confirmation tomlin indicate that your line of in a question que you may press the starkey followed by the number two if you would like to remove your question from the que for participants eating speaker equipment it may be necessary to pick up your have had before pressing psyches once again to ask a question press dar one on the telephone keypad will pause for a moment to pull for question
spk_10: skipper
spk_11: brent
spk_12: and thank you
spk_10: and our first question comes from brett rice with janney montgomery scott to go ahead hi manny hi tom
spk_3: the afternoon hi brad how are you good good the just a headcount question you know the amount of the employees this quarter versus last quarter and are you looking to hire more people or he had can pretty much where you wanted to be we clearly with you with the order raider strong and it's been that we've added additional capacity and or manufacturing floor we've gone to a second shift in our machine shop again that's part of this self reliance so he batted folks in the machine shop in inspection and well being
spk_10: the assembly wiring those have occurred during the sheer as you remember and twenty twenty one we went through a
spk_13: a pruning exercise
spk_3: and right sides sizing the organization for the business level the we are continue to right size the business or we've increased our staffing approximately fifteen to eighteen personnel and there and about it during this year and we able to find he the people with the proper skill set that you know at the right to you know labor cost or right around labor costs i'm any that that that is i would say that solved a lot on to that doubt that watermark we we are finding were able to attract talent or our our engineering and also operation for very pleased with the we brought on board this year on and it is in line with our
spk_14: with our ongoing labor costs here on the island
spk_3: so i would say yes it is been positive for us
spk_15: yeah it's is not a slam dunk
spk_16: but we've also brought i'm one of our hires was a new hr director
spk_10: and and she's just start a wonderful job being able to
spk_17: to do and conduct talent acquisition over the last several several months
spk_18: right right
spk_16: and that's good to hear now the
spk_19: things you doing in house you know to mitigate supply chain issues
spk_2: isn't this supply chain
spk_3: issue we feed it and abated would you still continue to to make the things you've taken in house in would that going forward in in pool margins though the the company has interesting than you say that yes it will improve margins because obviously we don't pay somebody else is gross margin in in the company has historically been a very vertically integrated our house primarily because i was doing many one off and it was more cost effective to do that
spk_14: the will be fine with his of our investment in in some capital equipment this year has allowed us to elevate a level of excellence and machining
spk_3: couple that with so that capability couple that with going to a second ship that allowed us to do additional capacity
spk_2: i would anticipate that we will continue doing that in that it does greatly support our competitiveness in this marketplace
spk_20: they do i see the the effect of the supply chain going away in the next three six nine months of my crystal ball is as good as anybody else is i think we've widely invested in the equipment installed and down and all the they will be operational and and
spk_3: producing new by the end of this month so yes it there is a gross margin benefit yes there is a competitive advantage we can deliver product in much shorter periods of time i would say that to one example is our pvt one fifty or we received orders back a you remember in december it late december we have already shipped
spk_16: those
spk_21: in approximately six months
spk_22: that world class
spk_10: and i compliment entire team of engineering manufacturing for that so yes there is an advantage yes will continue to do that
spk_16: great now what one last one
spk_10: in the virtual annual meeting you listed
spk_16: three types of different devices that you manufacture with respect to your battery technology
spk_10: a carbon three hundred machine a powder code eleven hundred and then the p b t one fifty which seemed to
spk_3: you have become the crown jewel can you just briefly you know to this how lay person who's not an engineer tell me what you what each of these devices
spk_23: do and and that's part of the three hundred million total addressable market you mentioned you know at the or the annual meeting
spk_3: yeah so yeah it it it it it said and it's the electrification of everything is not entirely due to it's up battery material per se all three of those applications the carbon three hundred dollar with was launched earlier that year we've got multiple orders for that the was launched though the latter part of twenty twenty one
spk_6: and we will watch being delivered
spk_24: to customer we had multiple orders for those and that is for advanced carbon technology used in the in the battery of carbon now to per se exactly
spk_3: and he the what the para code eleven hundred is a coding system that is this one specifically was for growing silicon now no wires on carbon powder in an evolutionary enhancement of the carbon material used in the anode of batteries and id and pvt one fifty is a product utilized to grow silicon carbon silicon carbide
spk_16: bulls for silicon carbide wafers used in power electronics are both charging and also for transmission switching
spk_10: it's referred to as high powered tries so each of those are different products different technologies
spk_3: some a carbon based on are so can know why are based in very large production systems others are silicon carbide growth systems using different techniques are but all those and i appreciate you asking the question all three of those are products that we have launched old standard products that though we hope to become standard in the marketplace that we've launched old it'll last several quarters now are are their how proprietary in nature are these three products and the and you know what are the barriers to entry to competition and is your major competitor the your customer who might wanna do these things in in house
spk_2: our customer matter fracture them in health the the world has really gone away from that part of the when you look at the competitive nature of our products there is the the element of the process capability the ability to reach temperature controlled temperature the be able to
spk_3: deposited certain rate be able to have a certain capacity be able to do that in a safe environment and in the safe manner and way and which goes into much job bar
spk_14: environmental have the management element we're going to the design of our products the control aspect the production worthiness and then that that's really from the the technical performance of the tool said on the flipside you also have cost of ownership
spk_10: the the capital costs the ability to manufacture these more and left your your previous question more
spk_2: efficiently and have a proper gross margin to invest in future products and return for our investors as well as providing the right value to our customers
spk_0: that's where we couple all those elements together
spk_25: and that's how we create a barrier to entry against our competition
spk_0: great
spk_26: thank you for answering my questions and both are you enjoy the rest of the summer
spk_27: thank you read you as well
spk_26: thank you and just are minor to everyone at of you like to ask a question at this time simply press star one on your telephone keep had to remove yourself from the queue press start to for a moment while we prefer questions
spk_3: thank you
spk_14: and next question comes from shy the dashti please go ahead hi good afternoon after the first the comment thank you for hosting this call thank you for your transparency your candor it all very much is very much appreciated to thank you above all else
spk_3: should you you up thank you and i have a few questions as to better understand what i think i'm seeing could you comment if the growth has been market share the market share games or it's been industry growth in general it's quite honestly it's both a it's demand on new technology for all for both carbon half soldier nana wires for the battery material that is and awful for
spk_26: for a silicon carbide
spk_28: solid from that perspective it's market expansion but there are
spk_3: there are other competitors in the marketplace that we want these orders from sold in there is a
spk_2: we did carve out more market presence and market share our in the last few quarters so it a shy it's a bit of both and i'm looking at a concave to understand to the competition and and i do not believe i'm seeing specific company named if it's appropriate to ask if not please don't comments are there any competitors you can name is being peers are being
spk_29: patch marks for their growth rates in their margins
spk_26: well there are companies that we would say are we want to target on performance but they're not to matters of ours their much larger companies
spk_30: you know as far as are direct competitors we will
spk_26: you likely would not want to advertise as on this call and just i hope that is sort of
spk_31: in a different direction but i noticed an article on the wall street journal published
spk_3: published oct twenty four twenty six sixteen
spk_32: germany withdrawals approval of chinese takeover of extra or extra and i'm wondering if this dynamic just america what you're doing has not security a book national security concerns and therefore be once you become vertically integrated a made in america
spk_3: a customer it might strongly prefer to go to you and not go to someone is base overseas so there's some type of national security and made in america preference going forward the do
spk_26: i'm going back to two thousand and sixteen and not in the whole acts drawn
spk_3: hill issue there that day had sometimes i can measure of know what i had for breakfast but damn and so i can comment on that one but i can say that there is clearly i knew she there for both battery manufacturing and also for associated electric vehicle and electrification of everything
spk_23: preference to be manufactured in the us
spk_3: and we are in us to better and and supplier so therefore we would benefit from that
spk_26: and if i if i could just ask at a high level what's your scarce resource what the wish more of is it human capital is it after the financial capital what's been holding you back to really unleashed a full potential
spk_33: so supply chain issues
spk_0: supply chain issues
spk_34: are are are we by a simple good simple answer is having a and in the on most equipment companies have not all equipment company suffering with the same
spk_3: wonderful thank you so much
spk_35: thank you
spk_36: the internet content
spk_2: and our next question comes from more in howard please go ahead
spk_37: you remember asking the for about the product of the l quality really good and you said it wasn't that big a deal that they come and know the don't get excited about i thank you for down player
spk_2: as it got not a year to being a potential commercial product
spk_3: martin thank you thank you again for for your question and and and i greatly it and let me say that even though we we are not a medical device company we are a and equipment and carbon technology and other process technology company we do continue to have an application development such as the device that you're referring to now
spk_34: we when i when we say downplay we don't emphasize that we try not to downplay much but we don't emphasize turn the this but i am we have received some government funding to continue our carbon technology development or carbon carbon that is technology development for such devices
spk_38: so in the background we continue to do are indeed
spk_34: i want to just really underscore lot of research not development not a product
spk_3: and down by we we are continuing and we have guns on my from external funding
spk_23: for that specific application to use our carbon carbon technology and
spk_3: while i thank you for giving us a realistic extricate have ah no i ask the before work with dream and thousand the me like the dream is by your you do you explain the arctic electrification of america and now google like them drop my camera has would be that is night that well that sounds good is that that sort of the early eight more
spk_39: glad i'm of it it's an exciting guess
spk_23: thank you get a it's an expanding marketplace
spk_3: it's a large market it's an expanding market it's a somewhere where we can clearly have ourselves a a good a good position a good market share we also have i mean that we have not yet we still support down aerospace as i mentioned and i do believe aerospace will come back
spk_34: i do like the a news on the aerospace products
spk_0: multi million dollar tools are and down the are given complexity of course
spk_26: nils solid recurring revenue on the production consumables and spare parts as we add value to them in that area yeah i i believe having our our hands in multiple growth markets and large market
spk_3: is the future of the company was a stockholder of a fifteen years of a lot of thought and i appreciate the fact that the you that the yeah thing as you you being realistic and optimistic both and i appreciate it though i thank you for your thoughts are written by
spk_2: yeah
spk_3: thank you we have other question coming from shy dashti please go ahead type that at a high level as the company becomes profitable at some point going forward
spk_2: i love to appreciate how the company thinks about capital allocation you have any thoughts about
spk_3: reports shares of the price is compelling vs doing strategic on monday that's how you think about those different buckets of your point of view i can't say we've spent a lot of time thinking about reprogram repurchasing shares we spent quite a bit of time looking at both organic and inorganic growth for the company
spk_2: as as you clearly stated as we continue down the path of
spk_40: getting to profitability
spk_41: i think those become more frequent discussions and how do we draw the company long term medium to long term
spk_0: but for the moment in time that we have our organic products and
spk_3: we've just launched these products the rain what i would turn the alpha beta phase and here we we still have work to do there and we are for the first half of this year excited about the the booking rate of sixteen million dollars compared to last year a family member correctly which i do we get approximately twenty one million dollars so so far our strategy of focusing on the on internal broken profitability works and i think i answered the question on the capital nature and and repurchase and i'm in a here we we have nothing to really report on right now thank you
spk_42: thanks shy
spk_0: good questions
Disclaimer