CVD Equipment Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing is an annual report, not a standalone fourth-quarter report. CVD Equipment designs, manufactures and services chemical vapor deposition, gas-control and related process equipment, serving advanced materials, semiconductor, battery, aerospace and research markets.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $16.45 million | $16.92 million |
| Gross profit / margin | $2.54 million / 15.4% | $2.88 million / 17.0% |
| Operating loss | $(4.81) million | $(7.82) million |
| Net income (loss) | $4.75 million | $(6.07) million |
| Net cash used in operating activities | $(4.27) million | $(1.13) million |
| Cash and cash equivalents at year-end | $16.65 million | $7.70 million |
| Working capital at year-end | $16.7 million | $8.1 million |
| Debt at year-end | $1.77 million | $13.80 million |
- FY2021 net income included a $6.89 million gain on the sale of the 555 Building and $2.44 million of PPP loan forgiveness income. Despite reported profitability, the company recorded an operating loss and used cash in operations.
- The building sale generated $23.08 million of net proceeds from sale in investing cash flows; the company separately reported approximately $14 million of proceeds after mortgage payoff and transaction costs. It used $9.62 million for debt payments during the year.
- Gross margin declined as lower sales, component cost increases, supply delays and manufacturing inefficiencies weighed on results. Management said late-2021 price increases were intended to help offset costs in 2022.
- Management estimated cash and projected operating cash flow would meet working-capital and capital-expenditure needs for 12–18 months from the filing date. The remaining headquarters mortgage, about $1.7 million, was repaid on March 1, 2022.
Changes versus FY2020
- Revenue fell 2.8%. CVD Equipment revenue decreased 17.3% to $8.59 million, principally reflecting lower aerospace spare-parts sales; SDC revenue increased 7.5% to $4.52 million, and CVD Materials revenue increased 43.2% to $3.33 million.
- Aerospace represented approximately 15.8% of FY2021 revenue, compared with 45.0% in FY2020. International sales rose to approximately $4.3 million, or 26.0% of revenue, from $2.8 million, or 16.8%.
- Operating loss narrowed from $7.82 million, which included a $3.60 million Tantaline impairment charge, to $4.81 million; no impairment charge was recorded in FY2021.
- Cash increased following the property sale, while operating cash use rose year over year. Year-end backlog increased to approximately $10.4 million from $5.7 million.
Outlook, management commentary and key risks
- Management shifted focus toward the core equipment business, growth-market applications and standardized products. It consolidated U.S. Tantaline activities in Denmark and reported that the Denmark operation achieved profitability and positive cash flow in 2021.
- Bookings exceeded $21 million, up approximately 75% year over year; CVD equipment orders doubled, with 23 system orders. Quarterly revenue rose sequentially through the year, from $3.4 million in Q1 to $4.7 million in Q4.
- Growth opportunities included battery-material systems and an approximately $2 million multi-system Silicon Carbide order, with deliveries planned for 2022. Management cited an expected aerospace manufacturing recovery in 2023. These are expectations, not formal quantified revenue or earnings guidance.
- Supply-chain delays and higher material, labor and production costs could delay shipments, constrain revenue recognition and pressure margins. The company was placing orders earlier, considering alternative suppliers and using flexible in-house manufacturing to mitigate impacts.
- Other material risks include continuing COVID-19 effects—particularly on aerospace—customer order delays or cancellations, lengthy sales cycles, customer and receivable concentration, inflation, export controls, competition, and the ability to retain skilled employees. Two customers accounted for 50% of year-end receivables, although no customer exceeded 10% of FY2021 revenue.
- The auditor issued an unqualified opinion on the financial statements and highlighted estimated costs to complete long-term system contracts as a critical audit matter. Management reported effective internal control over financial reporting; the auditor did not provide an internal-control attestation.
Investor facts to verify
- How much of FY2021 earnings reflects recurring operations versus the property-sale gain and PPP forgiveness, and whether operating cash flow improves.
- Whether backlog converts to revenue and profit on schedule, including 2022 battery and Silicon Carbide system deliveries; backlog can be delayed or cancelled.
- Whether supply-chain availability, inflation and pricing actions improve gross margin after the FY2021 decline.
- Whether aerospace demand recovers as expected and customer, receivable and end-market concentration remain manageable.
- The reconciliation of the reported building-sale proceeds, mortgage repayment and transaction costs, and the status of liquidity after the March 2022 mortgage payoff.