CVD Equipment Corporation

Greetings. Thank you for standing by. Welcome to CVD Equipment Corporation's second quarter fiscal year 2023 earnings call. As a reminder, this call 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, member of the CVD Board of Directors, and Richard Catalano, Executive Vice President and Chief Financial Officer. We have posted earnings press release and call replay information to the investor relations section of our website at www.cvdequipment.com. Before I begin, I would 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 product, 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 the company's 10-K for the year ended December 31, 2022. 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 statement based on the new circumstances or revised expectations. I would now like to turn the call over to Emmanuel Lacchios. Please go ahead, sir.

Thank you very much, and good afternoon, everyone. Thank you all for joining us to discuss our second quarter 2023 financial results and other important company developments and the pertinent information related to our business. Your thoughts are always important to us, and we look forward to your questions in our question and answer session. As previously communicated, our order and revenue levels have historically fluctuated, which is often typical in the highly cyclical process equipment industry. As such, while we experienced a year-over-year decline in second quarter revenue, We are pleased that our first half 2023 revenue of $13.8 million was 31% higher than the corresponding period in the prior fiscal year. In addition, we have made significant progress divesting and winding down non-core business entities. This will allow our team to focus on our equipment product lines and pipeline of potential customer opportunities in our key strategic markets of high-power electronics, battery materials, energy storage, and aerospace and defense. During the second quarter, we sold our Tantalign subsidiary, and on August 8, 2023, the company entered into a purchase and license agreement with a third party to sell certain assets and to license certain intellectual property of our mass-subscribed business in exchange for approximately $900,000. The purchase price is payable in several installments and contingent upon certain performance metrics and other milestones. Orders for the second quarter were 12.9 million, driven by demand in two of our three strategic markets, while orders for the first quarter of 2023 were 2.9 million. This continues to show the variability quarter to quarter of our business. The second quarter orders included aerospace market opportunities in the amount of $8.7 million for multiple system orders, which will ship over the next 12 months. The second quarter order bookings included a battery nanomaterials production systems of approximately $1.8 million to 1D battery sciences, as we previously had announced. In the high power electronics market, while we have not received PVT-150 orders to date, For 2023, we are continuing our marketing efforts. These marketing efforts include support of our installed base, direct outreach to multiple potential customers, product evaluations, and presence at key silicon carbide trade shows and conferences. The success of our PBT 150 and PBT 200 marketing efforts are dependent on the performance of our equipment in the field, overall market conditions, our customers' ability to qualify their end product with their customers, and their ability to obtain funding required to purchase our equipment. As stated previously, our order and revenue levels have historically fluctuated. Accordingly, we anticipate that our orders received from customers and revenue recognized as a receipt of these orders will continue to show fluctuation from quarter to quarter. We remain committed to stay the course of our strategy to achieve consistent long-term profitability, growth, and return on investment. I would like to turn the call over to our CFO, Rich Catalano, who will provide an overview of our second quarter results.

Thank you, Manny, and good afternoon. Our revenue for the second quarter of 2023 was $5.1 million as compared to $5.8 million for the second quarter of 2022. This represents a decrease of 0.7 million or 12.7 percent. The decrease in our revenue was primarily attributable to lower revenue in our CBD equipment segment of approximately 0.7 million related in part to lower PVT 150 revenues, lower revenue in our CBD materials segment of approximately 500,000 as an outcome of the sale of our CandleLine subsidiary on May 26, 2023. These declines were partially offset by an increase of approximately $400,000 in revenue from our SDC segment. It should be noted, based on the terms of the aerospace orders that Manny just mentioned, revenue under these contracts that we received in the second quarter will be recognized at the point in time when the control of the equipment is transferred to the customer, rather than the overtime method which we use for the company's other system sales. Our operating loss for the second quarter of 2023 was 1.2 million. This was higher by 0.5 million than our operating loss of 0.7 million in the second quarter of 22. The increase in the operating loss was due to the two non-recurring charges, one related to Tanalign for $162,000 on the disposal, and then we had a small impairment on certain Mesoscribe fixed assets of 111,000. In addition, our operating expenses increased by approximately 200,000. Our gross margin percentage was 27.4 percent in the current quarter as compared to 24.8 in the prior year quarter. This improvement in gross profit percentage from the prior year was primarily the result of improved product and contract mix. The increase in the second quarter operating expenses from the prior year quarter is due to higher employee-related costs to support the growth of our business additional selling expenses, and also additional professional fees. After non-operating other income, and that consists principally of interest income, our net loss for the second quarter was 1.1 million or 16 cents per share for both basic and diluted. This compares to a net loss in the second quarter of 22 of 0.8 million or 12 cents loss per share for both basic and diluted. Now turning to our backlog, Our backlog at June 30th, 2023 was 18.8 million as compared to 17.8 million as of December 31st, 2022. Our orders during the six month period ended June 30th, 2023 exceeded our revenues by approximately $2 million. However, our reported backlog at June 30th has been reduced by a half a million dollars related to the sale of Tampa Wine on May 26, 2023, and also 0.6 million related to our decision to wind down the operations of Meso Scrub. Our working capital at June 30, 2023 is 16.6 million. This compares to 15.5 million at December 31, 2022. Our cash and cash equivalents at June 30, 2023 was 13 million. as compared to $14.4 million at December 31st, 2022. In early July 2023, right after our June 30th close, we did collect $1.5 million receivable for employee retention credits from the IRS. As to our future results, we are unable to predict what impact the current economic and geopolitical uncertainties will have on our financial position and future results of our operations and cash flows. Our return to consistent 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 capital expenditures and our 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 our operating cash to support our working capital needs. I will now turn it back to Manny.