CVD Equipment Corporation — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; comparisons are with FY2021. This is an annual report, not a standalone fourth-quarter filing. CVD designs and manufactures equipment and process solutions for advanced materials, semiconductors, energy storage, aerospace and research. Its three segments are CVD Equipment, SDC and CVD Materials.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $25.813 million | $16.447 million |
| Gross profit / margin | $6.627 million / 26% | $3.077 million / 19% |
| Operating loss | $1.823 million | $4.664 million |
| Net income (loss) | $(0.224) million | $4.747 million |
| Operating cash flow | $0.194 million | $(4.273) million |
| Capital expenditures | $0.665 million | $0.236 million |
| Cash and cash equivalents at year-end | $14.365 million | $16.651 million |
| Working capital | $15.5 million | $16.7 million |
| Total debt at year-end | $0.426 million | $1.766 million |
- Revenue increased 57%. CVD Equipment revenue rose 94% to $16.674 million; SDC rose 35% to $6.541 million; CVD Materials declined 5% to $3.171 million. Segment figures include intersegment sales before consolidated eliminations.
- Management attributed the gross-margin improvement to higher sales absorbing fixed costs and a better product mix, partly offset by component and compensation cost increases.
- FY2022 net loss contrasts with FY2021 net income, which included a $6.894 million building-sale gain and $2.443 million PPP-loan forgiveness gain. FY2022 included $1.529 million of employee retention credit income; without that item, reported operating and net losses show that profitability remained a challenge.
- Cash declined by $2.286 million during 2022. Operating cash flow was modestly positive, while working-capital needs included higher receivables and inventory; customer advances increased contract liabilities.
- The company repaid its $1.766 million mortgage in March 2022 and obtained a $0.432 million equipment loan at 6% in September. It reported $0.077 million of current maturities and $0.349 million of long-term debt at year-end.
Material changes and operating developments
- Bookings increased 56.6% to approximately $33.1 million, from $21.1 million. The company booked 33 systems, including 24 PVT150 systems; it reported cumulative PVT150 orders of 30 through 2022, all from one customer.
- Backlog increased to approximately $17.8 million from $10.4 million. About $16.2 million represented remaining performance obligations on contracts in progress; the filing said this amount was expected to be recognized within the next 12 months. Backlog may be delayed, cancelled, adjusted or unprofitable.
- One customer represented 29.2% of FY2022 revenue and two customers accounted for 66% of year-end accounts receivable, creating material customer and collection concentration.
- The company received an approximately $3.7 million order for an aerospace chemical vapor infiltration system. It also completed a system for battery-anode materials during 2022.
- Headcount rose to 136 from 111. The company expanded manufacturing capability and added sales and marketing resources.
Outlook, risks and unusual items
- Management stated that cash, expected operating cash flow, collections, backlog-related revenue, inventory sales and customer deposits should cover working-capital and capital-expenditure needs for the next 12 months. This is management’s assessment, not quantified earnings or revenue guidance; the filing provides no clear numerical forecast for future results.
- Growth plans focus on silicon-carbide power electronics, electric-vehicle battery materials and aerospace. The PVT200 system for 200mm silicon-carbide wafers was under development, with a planned 2023 launch; annealing furnace and epitaxy products were also described as in development. Timing and commercial success are uncertain.
- Supply-chain delays, component shortages, geopolitical developments, inflation and higher labor costs may delay deliveries, raise costs and pressure margins. Fixed-price contracts expose the company to cost overruns.
- Other important risks include dependence on a limited number of large customers, long and variable sales cycles, competition, difficulty attracting and retaining technical staff, export-control restrictions, and uncertainty around future demand and profitability.
- Revenue on system contracts is recognized over time using costs incurred relative to estimated total contract costs. The auditor identified estimated total contract costs in this method as a critical audit matter; changes in estimates could materially affect revenue and margins.
- The company recognized the $1.529 million ERC receivable and income in 2022 for qualifying 2021 payroll. The filing also reports the 2021 building sale and PPP forgiveness as significant prior-year nonrecurring items. Deferred tax assets remained subject to a valuation allowance.
Important facts for investors to verify
- Whether PVT150 orders and revenue can diversify beyond the customer responsible for 29.2% of 2022 sales, and whether that customer pays outstanding receivables on time.
- How much of the $17.8 million backlog converts to revenue, on what schedule, and at what final contract margins.
- Whether supply constraints, inflation and contract cost estimates affect delivery schedules, cash conversion or gross margins.
- Whether the PVT200 and other planned products reach launch and obtain customer orders; the filing gives plans, not assured outcomes.
- Whether operating cash flow improves enough to support working capital and investment after the 2022 increase in receivables and inventory.
- Management reported effective disclosure controls and internal control over financial reporting as of year-end. The auditor issued an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.