CVD Equipment Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results for the company and subsidiaries, which design and manufacture deposition, thermal-processing, gas-delivery and related equipment and materials.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $4.922 million | $8.695 million; down 43.4% |
| Gross profit / margin | $0.859 million / 17.5% | $2.434 million / 28.0% |
| Operating loss | $1.623 million | $0.187 million |
| Net loss / diluted loss per share | $1.472 million / $0.22 | $0.040 million / $0.01 |
| Operating expenses | $2.482 million | $2.621 million; R&D rose 24% to $0.746 million, while G&A fell 18% to $1.317 million |
| Operating cash flow | $(2.043) million | $(3.272) million |
| Cash and cash equivalents | $11.893 million at March 31 | $14.025 million at December 31, 2023 |
| Working capital | $13.1 million | $14.3 million at December 31, 2023 |
| Debt | $0.330 million total; $0.083 million current | Equipment loan bears 6% interest |
Investing cash outflow was $0.070 million, principally capital expenditures; financing cash outflow was $0.019 million in debt repayments. Cash declined $2.132 million during the quarter. No income tax expense was recorded in Q1 2024; deferred tax assets remain fully reserved.
Changes, orders and outlook
- Revenue declined primarily because Q1 2023 included revenue from a large PVT150 order; CVD Equipment segment revenue fell 50%. SDC revenue fell 16%, and CVD Materials revenue fell 91%, reflecting the Tantaline disposition and MesoScribe wind-down.
- Gross margin fell 10.5 percentage points. Management attributed the reduction to lower margins on contracts in progress and reduced revenue, which limited absorption of fixed costs.
- Bookings were approximately $13.6 million versus $2.9 million a year earlier. They included a roughly $10 million multisystem industrial order for silicon-carbide protective coatings and an order from a second customer for the PVT200 system.
- Backlog increased from $18.4 million at year-end 2023 to $27.1 million at March 31, 2024. Approximately $24.8 million represents remaining performance obligations, expected to be substantially recognized within 18 months.
- Management expects cash, potential operating income, collections, backlog revenue, inventory sales and customer deposits to meet working-capital and capital-equipment needs over the next 12 months. This is an expectation, not quantified earnings guidance; management cautions that quarterly orders and revenue can fluctuate.
- The company is focused on electrification-related markets, including silicon-carbide wafer equipment, battery applications, aerospace and industrial uses. It plans to fulfill remaining MesoScribe orders through 2024 and then cease those operations; a sale of certain MesoScribe assets and an IP license for $0.9 million is subject to milestones and purchaser acceptance. $0.6 million received is recorded as a deposit.
Risks, contingencies and other matters
- Customer concentration is notable: one customer accounted for 67.2% of accounts receivable at quarter-end; two customers represented 29.6% and 13.1% of quarterly revenue.
- Management cites geopolitical conflict, supply-chain delays, material and labor inflation, and possible limits on procurement and sales in certain regions. These factors may delay manufacturing and revenue recognition; their future effects are uncertain.
- Revenue on many system contracts is recognized over time using cost-to-complete estimates. Changes in forecast costs, schedules or contract scope could materially affect margins or require recognition of contract losses.
- Other stated risks include future profitability, competition, development and market acceptance of new products such as PVT200, financing availability, retaining personnel, and access to raw materials on acceptable terms.
- The filing reports no legal proceedings and no material changes to previously disclosed risk factors. Management found disclosure controls effective and reported no material quarterly change in internal controls.
Investor facts to verify
- Whether the $27.1 million backlog converts to revenue on the expected schedule and at sustainable contract margins.
- Whether bookings, including the $10 million industrial order and PVT200 order, progress to production, customer acceptance and cash collection.
- Cash use, working-capital movements and the company’s ability to sustain liquidity if operating losses continue.
- Exposure to major customers, supply-chain and geopolitical disruptions, and cost-to-complete estimate changes.
- Completion, milestone payments and accounting treatment of the MesoScribe asset sale and planned wind-down.