CVD Equipment Corporation

Greetings and thank you for standing by and welcome to CVD's Equipment Corporation's Fourth Quarter and Fiscal Year 2024 Financial Results 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 this 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. We have posted our 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, and 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 that 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 ending December 31, 2024. Actual results may differ materially from those described during this call. In addition, all forward-looking statements are made of as-today, and we undertake no obligation to update any forward-looking statements based on the new circumstances or revised expectations. Now, I would like to turn the call over to Emmanuel Lakios.

Operator, thank you, and good afternoon, everyone. Thank you all for joining us today to discuss our fourth quarter and fiscal year 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 our question and answer session. Our fourth quarter 2024 revenue was $7.4 million. That represents an 80.3% increase from prior year fourth quarter, while it was lower than the $8.2 million we reported for the third quarter of 2024. Our revenue for the year 2024 was $26.9 million, 11.5% higher than prior year. As previously discussed, we launched and shipped a PVT-200 system to a new account for our PVT product line during the second quarter of 2024. As we stated on our last call, this was a strategic order for a silicon carbide 200 millimeter crystal ball growth. The customer for our first PVT 200 system is continuing to evaluate the performance of our system for possible additional orders. We do continue to support our installed base of PVT 150 systems. and pursue additional PVT-150 and PVT-200 orders. However, the silicon carbide market has remained challenging due to the global overcapacity of wafers and a decline in wafer prices. Our orders in the fourth quarter were $7.1 million driven by customer demand in both our CBD and SDC segments. During 2024, we continue to see an ongoing recovery of our aerospace and defense market. Previously announced in early November, we received a $3.5 million follow-on order for our CVI CVD 3500 from an existing aerospace customer. Orders for the full year of 2024 were $28.1 million. as compared to 25.8 million for the fiscal year 2023, an increase of 8.9%. As a reminder, during the first quarter of 2024, we did receive a $10 million multi-system order in our industrial market from a company in the business of coating OEM components with silicon carbide. We continue to be focused on four key strategic segments, aerospace defense, microelectronics, including high-power electronics, energy storage, including battery materials, and industrial. We also, on a selective basis, continue to support some legacy applications. In 2024, we completed the end-of-life for our Mesoscribe product line, which will allow us to focus on our core CBD and CO2 SDC product lines. We are encouraged our backlog on December 31st, 2024 was 19.4 million, which is 4.9% higher than our 2023 year-end backlog of 18.4 million. While our fourth quarter represents the second consecutive quarter of positive net income, we continue to expect our orders and revenue levels to continue to fluctuate given the nature of our emerging growth and markets that we serve. In addition, the current geopolitical environment, inclusive of the possible imposition of tariffs, may affect our supply chain and increase costs of components and materials. This will present us with new challenges in fiscal 2025 and beyond. We are staying the course. our strategic efforts to build critical customer relationships in the markets we serve, while carefully managing our expenses and operations in order to achieve our goal of long-term profitability and positive cash flow. All this while simultaneously focusing on growth and return on investment. I would like to turn the call over to our CFO, Richard Catalano. who will provide an overview of our fourth quarter and 2024 results.

Thank you, Manny, and good afternoon. As Manny mentioned, our revenue for the fourth quarter was $7.4 million, as compared to $4.1 million in the prior year fourth quarter. This represents an increase of $3.3 million, or 80.3%. This increase in revenue versus the prior year quarter was primarily attributable to an increase in revenue of $2.8 million from our CBD equipment segment, and an increase of 0.5 million in revenue from our SDC segment. The increase in CBD equipment revenues resulted principally from increases in revenues from aerospace and industrial contracts in progress. The prior year fourth quarter was negatively impacted by a significant cost overrun on one of our contracts. Our SDC segment revenues was 28.8% higher than the fourth quarter of 2023, as demand for SDC's gas delivery systems remains strong. During the fourth quarter, we did record an additional non-cast charge to reduce the net realizable value of our PBT 150 inventory by approximately 300,000. This was based on our further assessment of the current market for silicon carbide equipment for 150 millimeter systems. This charge is in addition to the $1 million charge we recorded in the third quarter, resulting in a total charge of $1.3 million for the 2024 fiscal year. Our gross profit for the fourth quarter was $2 million, representing a gross profit margin of 27.3%, as compared to negative gross profit of $348,000 for the fourth quarter of 2023. Our gross profit margin percentage improved due to changes in contract mix, but this was offset by the inventory charge of $300,000, The gross profit in the fourth quarter of 2023 was also negatively impacted by that significant cost overrun on that particular contract. Operating income for the fourth quarter was $35,000. This compares to an operating loss of $2.5 million in the fourth quarter of 2023. After other income consisting principally of interest income, our net income for the fourth quarter was $132,000 or two cents per share for both basic and diluted. This compares to a net loss for the fourth quarter of 2023 of 2.3 million or 33 cents per share. Turning to our results for the full fiscal year, our revenue was 26.9 million. That's an increase of 2.8 million or 11.5% from fiscal 2023. This increase was primarily attributable to higher revenue of 1.9 million from our CBD equipment segment and 1.3 million increase from our SDC segment This was offset by lower tantaline revenues of a half a million dollars as a result of the sale of tantaline in May 2023. Our gross profit margin was 23.6 percent in 2024 as compared to 21 percent in the prior year. The increase in gross profit of 1.3 million was primarily attributable to higher revenues, improved margin on CBD equipment contracts, and the final mesoscribe sales And these positives were partially offset by the $1.3 million non-cash charge to reduce certain PBT inventory to their net realizable value. During fiscal 2024, we did recognize gains on the sales of equipment of $717,000. This was principally from our mesoscribe segment, which ceased operations as of September 30th, 2024. Our operating loss for the fiscal year was $2.4 million. as compared to an operating loss in the prior year of 4.9 million. After non-operating income, our net loss for the year was 1.9 million, or 28 cents per share. This compares to a net loss of 2023 of 4.2 million, or 62 cents per share. Turning to our balance sheet, our working capital at December 31st, 2024 was 13.9 million. This compares to 14.3 million in the prior year end. Our cash and cash equivalence balance was $12.6 million as of December 31st, 2024. Our return to consistent profitability is dependent upon, among other things, the receipt of new equipment orders, our ability to mitigate the impact of inflationary pressures, as well as managing our operating expenses and capital expenditures. In addition, our revenues and orders have historically fluctuated based on changes in order rate, as well as other factors in our manufacturing process that impacts the timing of our revenue recognition. 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 anticipated to maintain our operating cash to support our working capital needs.