CVD Equipment Corporation (Ticker: CVV), a leading provider of chemical vapor deposition systems, announced its financial results for the second quarter of 2024, revealing a substantial increase in revenue but also acknowledging operational challenges and a net loss. The company reported a 25.2% increase in revenue compared to the same period last year, reaching $6.3 million, and a 28.9% increase from the first quarter of 2024. Despite the revenue growth, the company faced an operating loss and a decrease in cash equivalents. The management expressed a commitment to strategic focus, profitability, and growth while managing costs and cash flow.
Key Takeaways
- Q2 2024 revenue increased by 25.2% year-over-year to $6.3 million.
- The company shipped its new PVT200 system, which is under evaluation for production.
- The backlog of orders stood at $24 million at the end of June 2024.
- Orders for the second quarter amounted to $3.2 million, driven by demand in the SDC segment.
- CVD Equipment Corporation reported an operating loss of $0.9 million for Q2.
- Cash and cash equivalents decreased to $10 million from $14 million at the end of December 2023.
Company Outlook
- The company's return to profitability depends on new equipment orders and the ability to manage inflationary pressures and expenses.
- The management believes that the current cash and projected cash flow will support working capital and capital expenditure needs for the next 12 months.
- CVD Equipment Corporation continues to assess product demand and operational efficiency to maintain necessary operating cash.
Bearish Highlights
- The company experienced an 18.1% decrease in year-to-date revenue compared to the previous year.
- There was a net loss of $761,000 or $0.11 per share for Q2 2024.
- The company's operating performance in the first half of the year was described as disappointing by the CEO.
Bullish Highlights
- The backlog of orders has increased meaningfully from the year-end backlog.
- The SDC segment's revenue was 29% higher than the same quarter in the previous year.
- Orders for the first six months of 2024 were higher than the same period in 2023.
Misses
- The company's CVD Materials segment revenue decreased due to the disposition of Tantaline and the exit from the MesoScribe business.
- The gross profit margin decreased to 25.4% from 27.4% in the same quarter of the previous year.
Q&A Highlights
- The CEO and CFO expressed their focus on customer markets, employees, shareholders, and the pursuit of growth and a return to consistent profitability.
- The management team is open to further questions and encourages direct communication with stakeholders.
In conclusion, CVD Equipment Corporation's second quarter of 2024 showcased a mix of progress and setbacks. While revenue has seen a significant increase, the company still faces the challenge of returning to profitability. Management remains focused on strategic initiatives and is optimistic about the company's future performance.
InvestingPro Insights
CVD Equipment Corporation (Ticker: CVV) has displayed a complex financial landscape in the second quarter of 2024, with a notable increase in revenue but a persistent struggle with profitability. The latest data from InvestingPro offers additional context to the company's financial health and market performance.
InvestingPro Data shows a market capitalization of $24.74 million, indicating the company's size in the marketplace. Despite the revenue growth reported in the article, the company's gross profit margin stands at a modest 17.19% for the last twelve months as of Q1 2024. This aligns with one of the InvestingPro Tips, which highlights the company's weak gross profit margins. Additionally, the company's stock is trading near its 52-week low, which could present a potential entry point for investors looking for undervalued stocks, as per another InvestingPro Tip.
An InvestingPro Tip that stands out is the fact that CVD Equipment holds more cash than debt on its balance sheet, suggesting a level of financial stability that could support its strategic focus on profitability and growth. Moreover, the company's liquid assets exceed its short-term obligations, providing further evidence of its ability to manage short-term financial risks.
To gain a deeper understanding of CVD Equipment's financials and market position, there are additional InvestingPro Tips available on their platform, which can be accessed by visiting https://www.investing.com/pro/CVV. These tips can provide investors with a more comprehensive analysis of the company's potential and risks.
Full transcript - CVD Equipment Corporation (CVV) Q2 2024:
Operator: Greetings and thank you for standing by and welcome to CVD Equipment Corporation’s Second Quarter 2024 Earnings Call. As a reminder, this conference is being recorded. [Operator Instructions] Presenting on the 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, total available market, demands 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 factors section of the company’s 10-K for the year ended December 31, 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 the new circumstances or revised expectations. Now I’d like to turn the call over to Emmanuel Lakios. Please go ahead.
Emmanuel Lakios: Joe, thank you and good evening everyone. Thank you for joining us today to discuss our second quarter 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 Q&A session. Our second quarter 2024 revenue was $6.3 million, representing a 25.2% increase from the prior year period and was up 28.9% as compared to our first quarter of 2024. While our year-to-date revenue was $11.3 million, which is 18.1% lower than the prior year period. We are pleased to have recently shipped our newly launched PVT200 system, which was part of our of the first quarter strategic order for silicon carbide 200-millimeter crystal boule growth. The performance of the system will be evaluated for production by our now second account. We are encouraged that our backlog of $24 million at the end of June 30, 2024. It’s meaningfully higher than our year-end backlog of $18.4 million. Our orders for the second quarter were $3.2 million, primarily driven by demand in our SDC segment for our gas delivery equipment. Orders for the first 6 months of 2024 were $16.9 million as compared to $15.8 million for the first 6 months of 2023. During the first quarter, we received a $10 million multi-system order in our industrial market from a company coating components with silicon carbide. Overall, we are disappointed with CVD’s operating performance in the first half of the year as order and revenue levels continue to fluctuate, given the nature of the emerging growth end markets we serve and the adverse financial impact of a specific first article system that shipped in the second quarter. We’ll stay the course of strategic focus to build critical customer relationships, achieve profitability, carefully managing our cost and cash flow while simultaneously focusing on 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.
Richard Catalano: Thank you, Manny, and good afternoon. As Manny mentioned, our revenue for the second quarter of 2024 was $6.3 million as compared to $5.1 million for the second quarter of 2023. This represents an increase of $1.3 million or 25.2%. The increase in revenue versus the prior year quarter was primarily attributable to higher revenue of $1 million from our CVD Equipment segment a $0.5 million increase in revenue from our SDC segment, offset by a 0.3% decrease from our CVD Materials segment due to the disposition of Tantaline in May of 2023 and the exit of our MesoScribe business. The increase in CVD Equipment was principally due to increases in revenue from aerospace contracts, offset in part by lower revenues for PVT150 systems and spare parts. Our SDC segment revenues were 29% higher than the second quarter of 2023 and were $0.4 million or 20% higher than the first quarter of 2024 as demand for SDC’s gas delivery system remains strong. Gross profit for the 3 months ended June 30, 2024, was $1.6 million with a gross profit margin of 25.4% as compared to a gross profit of $1.4 million or gross profit margin of 27.4% for the 3 months ended June 30, 2023. This increase in gross profit of $0.2 million was primarily due to higher revenues that was offset by a contract mix with lower gross margins as compared to the prior year quarter. Our operating loss for the second quarter of 2024 was $0.9 million as compared to an operating loss of $1.2 million in the second quarter of 2023. The operating loss in the prior year second quarter both included a nonrecurring charge of $0.3 million related to the sale of the Tantaline subsidiary and also an impairment charge resulting from our decision to exit our MesoScribe business. So that’s total onetime charges last year of $0.3 million. After other income, consisting principally of interest income, our net loss for the second quarter was $761,000 or $0.11 per share for both basic and diluted. This compares to a net loss for the second quarter of 2023 of $1.1 million or $0.16 per share for both basic and diluted. Our cash and cash equivalents at June 30, 2024 was $10 million as compared to $14 million at the end of December. This decrease was principally due to the net loss of $2.2 million, an increase in our accounts receivable of $3 million, offset by an increase in accounts payable, and we also have non-cash expense items of $0.8 million. Our working capital at June 30, 2024 was $12.7 million, and this compares to $14.3 million at December 31, 2023. Our return to 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 planned capital expenditures and operating expenses. In addition, our revenues and orders have historically fluctuated based on changes of 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 some operations and take actions anticipated to maintain our operating cash to support our working capital needs. I’ll now turn it back to Manny.
Emmanuel Lakios: Rich, thank you for your presentation. Our focus remains on our customer markets, our employees, our shareholders and the pursuit of growth and return to consistent profitability. We look forward to continuing to build on our success in the year ahead. Your comments and questions are important to us. With the close of our presentation, I would like to open the floor to your questions.
Operator:
Emmanuel Lakios: Thank you, operator, and thank you, everyone, for dialing in today. We appreciate the attendance on the call and the support and of course, the loyalty from our shareholders and employees alike. If you have any further questions, please reach out to me directly. This concludes our second quarter call. Thank you.
Operator: Thank you. This concludes today’s conference. You may now disconnect your lines. Thank you for your participation.
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