CVD Equipment Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. The company designs and manufactures chemical vapor deposition and related equipment, gas-delivery systems, and materials coatings. Its strategy emphasizes equipment markets tied to electrification and aerospace.
Financial performance
Amounts below are in millions of dollars except per-share data and margins.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $8.695 | $4.656 |
| Gross profit / margin | $2.434 / 28.0% | $0.770 / 16.5% |
| Operating loss | $(0.187) | $(0.970) |
| Net loss | $(0.040) | $(0.997) |
| Loss per diluted share | $(0.01) | $(0.15) |
| Operating cash flow | $(3.272) | $(1.420) |
- Revenue rose 87%, led by CVD Equipment segment sales, including PVT150 systems. CVD Equipment revenue increased 107% to $5.845 million; SDC revenue rose 63% to $2.312 million.
- Gross margin improved as higher sales leveraged fixed costs, partly offset by component and compensation cost increases. Operating expenses grew 51% to $2.621 million, including higher R&D, selling, and administrative costs.
- Other income was $149,000, compared with net other expense of $27,000 a year earlier, mainly reflecting higher interest income. The company reported $2,000 of income tax expense.
Financial position and liquidity
- Cash and cash equivalents were $11.0 million at March 31, down from $14.4 million at year-end. Working capital was $15.7 million, compared with $15.5 million at December 31, 2022.
- Operating cash use of $3.3 million reflected, among other items, a $2.8 million reduction in contract liabilities, a $1.5 million increase in contract assets, and a $1.4 million reduction in accounts receivable.
- Total debt was approximately $407,000 ($78,000 current and $329,000 long-term), versus approximately $426,000 at year-end. The equipment-secured loan carries a 6% interest rate.
- Capital expenditures were $146,000. Management expects cash, operating income, collections, backlog revenue, inventory sales, and customer deposits to fund working capital and capital needs for the next 12 months.
Changes, outlook, and risks
- New bookings were approximately $2.9 million, down about 30% from $4.1 million in Q1 2022. Backlog declined to $12.0 million from $17.8 million at December 31, 2022, as revenue exceeded orders by about $5.8 million. Approximately $10.1 million of backlog related to remaining performance obligations, expected to be substantially recognized within 12 months.
- A follow-on order for 10 PVT150 systems was scheduled for shipment in Q2 2023. The company had begun marketing the system to other potential customers; aerospace customers were still evaluating capacity needs and order timing. The filing provides no formal revenue or earnings guidance.
- Revenue from one customer represented 28.3% of total Q1 revenue; three customers each exceeded 10%. Two customers together accounted for 33.8% of receivables at quarter-end. Customer and order concentration may amplify quarter-to-quarter variability.
- Management is evaluating a disposal of Tantaline, a non-core subsidiary. Its Q1 revenue and net income were $0.4 million and $0.1 million; a sale could result in a charge of up to $500,000 in 2023.
- Management cited geopolitical developments, supply-chain delays, and inflation in materials and labor as risks to procurement, manufacturing timing, revenue, profitability, and cash flow. Contract revenue uses cost-to-complete estimates, and changes in those estimates could materially affect margins or results. Management said disclosure controls were effective; no material risk-factor changes or legal proceedings were reported.
Important facts for investors to verify
- Whether bookings recover and backlog converts to revenue on schedule, particularly the expected PVT150 shipments and customer demand beyond the existing major customer.
- Whether the stronger gross margin is sustainable as input costs, labor costs, and product mix change.
- How contract assets, customer advances, and operating cash use evolve, given the Q1 cash decline despite near break-even net results.
- Whether customer concentration, supply constraints, and contract cost estimates create material delivery, collection, or margin risks.
- The timing and terms of any Tantaline disposal and whether it triggers the disclosed potential charge of up to $500,000.