CVD EQUIPMENT CORP

Previous wording

During the three months ended March 31, 2024:

Current wording

During the three and six months ended June 30, 2024 and 2023:

Previous wording

Our current strategy yielded multisystem orders of PVT150 equipment that was delivered to one company that manufactures silicon carbide wafers in 2023 and 2022.

Current wording

Our current strategy yielded multisystem orders of PVT150 equipment in 2023 and 2022 that was delivered to one company that manufactures silicon carbide wafers. Although we continue to invest in our vision for the “electrification of everything,” we have observed lower-than-anticipated industrywide electric vehicle adoption rates which may reduce demand for silicon carbide and impact sales of our PVT systems.

Previous wording

Our revenue for the three months ended March 31, 2024 was $4.9 million compared to $8.7 million for the three months ended March 31, 2023, a decrease of 43%.

Current wording

Our revenue for the three months ended June 30, 2024 was $6.3 million compared to $5.1 million for the three months ended June 30, 2023, an increase of 25.2%.

Previous wording

The decrease in revenue versus the prior year period was primarily attributable to lower revenue of $2.9 million from the CVD Equipment segment, a $0.3 million decrease in revenue from our SDC segment and a $0.6 million decrease from the CVD Materials segment due to the disposition of Tantaline in May 2023 and the wind down of MesoScribe’s operations. The decrease in CVD Equipment revenue in the period was principally the result of the recognition of revenue associated with our PVT150 systems in the prior period as compared to no such revenue in the current period. Revenue related to PVT150 systems sold to one customer for the three months ended March 31, 2023 represented 28.3% of our total revenues and 42.2% of CVD Equipment segment revenues. Revenue from one aerospace customer for the three months ended March 31, 2024 represented 29.6% of our total revenues and 49.5% of CVD Equipment segment revenues.

Current wording

The increase in revenue versus the prior year period was primarily attributable to higher revenue of $1.0 million from our CVD Equipment segment, a $0.5 million increase in revenue from our SDC segment, offset by a $0.3 million decrease from our CVD Materials segment. Revenue from one aerospace customer for the three months ended June 30, 2024 represented 35.2% of our total revenues and 54.3% of CVD Equipment segment revenues.

Previous wording

The revenue contributed by the SDC segment for the three months ended March 31, 2024 of $1.9 million represented 40% of overall revenue as compared to $2.2 million or 25% of overall revenue for the three months ended March 31, 2023. Revenue for our SDC segment decreased by $0.3 million or 12% due to lower orders of SDC’s gas and chemical delivery system products as compared to the prior period.

Current wording

The revenue contributed by the SDC segment for the three months ended June 30, 2024 of $2.3 million represented 36.5% of overall revenue as compared to $1.8 million or 35.4% of overall revenue for the three months ended June 30, 2023. Revenue for our SDC segment increased by $0.5 million or 30.0% due to higher demand for SDC’s gas and chemical delivery system products as compared to the prior period.

Previous wording

The revenue contributed by the CVD Materials segment for the three months ended March 31, 2024 of $59,000 represented 1% of our overall revenue as compared to $0.7 million or 8% of overall revenue for the three months ended March 31, 2023. The decrease of $0.6 million was principally due to the disposition of Tantaline in May 2023 and the wind down of MesoScribe’s operations.

Current wording

The revenue contributed by the CVD Materials segment for the three months ended June 30, 2024 of $55,000 represented 0.9% of our overall revenue as compared to $0.3 million or 6.7% of overall revenue for the three months ended June 30, 2023. The decrease of $0.3 million or 83.9% was principally due to the disposition of Tantaline in May 2023 and the wind down of MesoScribe’s operations.

Previous wording

Our order backlog at March 31, 2024 was approximately $27.1 million as compared to December 31, 2023 of $18.4 million. Our backlog at March 31, 2024 consists of approximately $24.8 million related to remaining performance obligations of contracts in progress and not yet started that will be recognized over time with the balance of approximately $2.3 million representing other orders received from customers. Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impact the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.

Current wording

Our order backlog at June 30, 2024 was approximately $24.0 million as compared to December 31, 2023 of $18.4 million. Our backlog at June 30, 2024 consists of approximately $21.6 million related to remaining performance obligations of contracts in progress and not yet started that will be recognized over time with the balance of approximately $2.4 million representing other orders received from customers. Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impact the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.

Previous wording

Gross profit for the three months ended March 31, 2024 was $0.9 million, with a gross profit margin of 17.5%, compared to a gross profit of $2.4 million and a gross profit margin of 28.0% for the three months ended March 31, 2023. The decrease in gross profit of $1.6 million was primarily the result of lower gross profit margins on contracts in progress during the current period as compared to the first quarter of 2023 which benefited from contracts with higher gross margins. In addition, lower CVD Equipment segment revenues reduced the Company’s ability to spread its fixed costs.

Current wording

Gross profit for the three months ended June 30, 2024 was $1.6 million, with a gross profit margin of 25.4%, compared to a gross profit of $1.4 million and a gross profit margin of 27.4% for the three months ended June 30, 2023. The 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 period.

Previous wording

Selling expenses were $0.4 million or 8.5% of the revenue for the three months ended March 31, 2024 as compared to $0.4 million or 4.8% for the three months ended March 31, 2023. Increase in marketing costs were offset by lower personnel costs.

Current wording

Selling expenses were $0.4 million or 6.7% of the revenue for the three months ended June 30, 2024 as compared to $0.4 million or 8.4% for the three months ended June 30, 2023. There were no significant changes in selling expenses as compared to the prior period quarter.

Previous wording

For the three months ended March 31, 2024, research and development expenses were $0.7 million, or 15.2% of revenue as compared to $0.6 million, or 6.9% for the three months ended March 31, 2023. The increase in 2024 was the result of less amounts charged to cost of goods sold as a result of lower revenues offset by reductions in personnel costs.

Current wording

For the six months ended June 30, 2024, research and development expenses were $1.4 million, or 12.5% of revenue as compared to $1.2 million, or 8.4% for the six months ended June 30, 2023, an increase of $0.2 million or 21.4%. The increase in 2024 was the result of lower costs allocated to cost of revenue and a recruitment fee for a new engineer in the current year period.

Previous wording

General and administrative expenses for the three months ended March 31, 2024 were $1.3 million or 26.8% of revenue compared to $1.6 million or 18.4% of revenue for the three months ended March 31, 2023, a decrease of $0.3 million. The decrease in expenses was principally due to lower personnel costs of $0.2 million due to a reduction of bonus accruals.

Current wording

General and administrative expenses for the six months ended June 30, 2024 were $2.7 million or 24.3% of revenue compared to $3.0 million or 21.5% of revenue for the six months ended June 30, 2023, a decrease of $0.2 million. The decrease in expenses was principally due to lower salaries of $0.1 million due to sale of Tantaline, lower bonuses and commissions of $0.1 million and lower professional fees of $0.1 million, offset by higher stock-based compensation expense of $0.1 million.

Previous wording

As of March 31, 2024, aggregate working capital was $13.1 million as compared to aggregate working capital of $14.3 million at December 31, 2023. Cash and cash equivalents at March 31, 2024 and December 31, 2023 were $11.9 million and $14.0 million, respectively.

Current wording

As of June 30, 2024, aggregate working capital was $12.7 million as compared to aggregate working capital of $14.3 million at December 31, 2023. Cash and cash equivalents at June 30, 2024 and December 31, 2023 were $10.0 million and $14.0 million, respectively.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $2.0 million. This decrease was principally due to the net loss of $1.5 million, increase in contract assets of $1.1 million, increase in accounts receivable of $1.1 million, increase in inventories of $0.5 million, offset by an increase in contract liabilities of $1.1 million and non-cash items of $0.4 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $3.8 million. This decrease was principally due to the net loss of $2.2 million, an increase in accounts receivable of $3.0 million, offset by an increase in accounts payable of $0.4 million and non-cash items of $0.8 million.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 consisted of capital expenditures of $70,000 related to purchases of equipment, building improvements and software.

Current wording

Net cash used in investing activities for the three months ended June 30, 2024 consisted of capital expenditures of $0.2 million related to purchases of equipment, building improvements and software.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 consisted of repayments of an equipment loan.

Current wording

Net cash used in financing activities for the three months ended June 30, 2024 consisted of repayments of $40,000 for an equipment loan.

Previous wording

We believe that our cash and cash equivalent positions and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months .from the filing of these condensed consolidated financial statements included in this Form 10-Q. We will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.

Current wording

We believe that our cash and cash equivalent positions and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months from the filing of this Form 10-Q. We will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.

Previous wording

There exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or longer-term contracts. If we do not estimate the total sales, related costs, and progress toward completion on such contracts, the estimated gross margins may be significantly impacted, or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.

Current wording

There exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or longer-term contracts. Changes in estimates of the total sales, related costs, and progress toward completion on such contracts may significantly impact the estimated gross margins, or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.