CVD EQUIPMENT CORP

Previous wording

Our core strategy is to focus on growth end markets in applications related to aerospace, the “electrification of everything,” and industrial applications. With respect to aerospace, our systems are being used by our customers to produce ceramic matrix composite materials (“CMCs”) that will be used in next generation gas turbine jet engines with the objective of reducing jet fuel consumption and to produce specialty coatings for advanced high temperature environments.

Current wording

Our core strategy is to focus on growth end markets in applications related to aerospace, microelectronics including markets related to the “electrification of everything,” and industrial applications. With respect to aerospace, our systems are being used by our customers to produce ceramic matrix composite materials (“CMCs”) that will be used in next generation gas turbine jet engines with the objective of reducing jet fuel consumption and to produce specialty coatings for advanced high temperature environments.

Previous wording

Both technologies are essential for the support of the EV market. These systems should provide us with standard product offerings to continue to support the EV focused market as well as energy storage, power conversion and power transmission. We plan to evaluate opportunities to expand our product offerings in the power electronics market to build off the introduction of the PVT150 and PVT200 systems. We are also evaluating our ability to provide other equipment used in the manufacturing process of silicon carbide wafers.

Current wording

In February 2024, we received an order from a customer for our PVT200 system used to grow silicon carbide crystals for the manufacture of 200 mm wafers. We shipped this unit to the customer in the third quarter of 2024. PVT150 / PVT200 systems may provide us with standard product offerings to continue to support the EV focused market as well as energy storage, power conversion and power transmission. We plan to evaluate the market conditions and opportunities to expand our product offerings in the power electronics market.

Previous wording

In February 2024, we received a multisystem order from an industrial customer for approximately $10.0 million that will be used for depositing a silicon carbide protective coating on OEM components.

Current wording

In February 2024, we received a multisystem order from an industrial customer for approximately $10.0 million that will be used for depositing a silicon carbide protective coating on OEM components and the units are expected to be delivered over 18 to 24 months period.

Previous wording

Historically, our orders have fluctuated based on end user market conditions, adoption of our new products and acceptance of our products. The order rate as well as other factors in our manufacturing process ultimately impacts the timing of revenue recognition, whether accounted for over time or at a point in time. Accordingly, orders received from customers and the corresponding revenue recognized may fluctuate from quarter to quarter. The sales cycle for our equipment is typically six months, but can range up to twelve to eighteen months, depending on the application and product stage of the equipment. The order cycle to manufacture and test a system also will vary from six to eighteen months for our CVD Equipment segment and two to twelve months for our SDC segment, depending on system complexity and magnitude of the system.

Current wording

Historically, our orders have fluctuated based on end user market conditions, adoption of our new products and acceptance of our products. The current economic uncertainty regarding tariffs may potentially affect our future order rate. The order rate as well as other factors in our manufacturing process ultimately impacts the timing of revenue recognition, whether accounted for over time or at a point in time. Accordingly, orders received from customers and the corresponding revenue recognized may fluctuate from quarter to quarter. The sales cycle for our equipment is typically six months, but can range up to twelve to eighteen months, depending on the application and product stage of the equipment. The order cycle to manufacture and test a system also will vary from six to eighteen months for our CVD Equipment segment and two to twelve months for our SDC segment, depending on system complexity and magnitude of the system.

Previous wording

The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).

Current wording

The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the quarters ended March 31, 2025 and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).

Previous wording

Our revenue for the three months ended September 30, 2024 was $8.2 million compared to $6.2 million for the three months ended September 30, 2023, an increase of 31.4%.

Current wording

Our revenue for the quarter ended March 31, 2025 was $8.3 million compared to $4.9 million for the quarter ended March 31, 2024, an increase of 69.0%.

Previous wording

The increase in revenue versus the prior year period was primarily attributable to higher revenue of $0.9 million from our CVD Equipment segment, a $0.4 million increase in revenue from our SDC segment, and a $0.6 million increase from our CVD Materials segment. Revenue from one aerospace customer for the three months ended September 30, 2024 represented 29.1% of our total revenues and 42.0% of CVD Equipment segment revenues.

Current wording

The increase in revenue versus the prior year period was primarily attributable to higher revenue of $3.4 million from the CVD Equipment segment. Revenue from one industrial customer for the quarter ended March 31, 2025 represented 41.1% of our total revenues and 54.1% of CVD Equipment segment revenues. Revenue from one aerospace customer for the quarter ended March 31, 2025 represented 14.0% of our total revenues and 18.5% of CVD Equipment segment revenues.

Previous wording

The revenue contributed by the SDC segment for the three months ended September 30, 2024 of $2.0 million represented 22.6% of overall revenue as compared to $1.6 million or 22.3% of overall revenue for the three months ended September 30, 2023. Revenue for our SDC segment increased by $0.4 million or 27.5% due to higher demand for gas delivery system products as compared to the prior period.

Current wording

The revenue contributed by our SDC segment for the quarter ended March 31, 2025 of $2.0 million (net of intersegment sales of $0.2 million) represented 23.9% of overall revenue as compared to $1.9 million (net of intersegment sales of $15,000) or 38.9% of overall revenue for the year quarter ended March 31, 2024. External revenue for our SDC segment increased by $0.1 million or 3.5% as customer demand for gas delivery system products was consistent with the prior year quarter.

Previous wording

Our order backlog at September 30, 2024 was approximately $19.8 million as compared to December 31, 2023 of $18.4 million. Our backlog at September 30, 2024 consists of approximately $17.0 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 $2.8 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 March 31, 2025 was approximately $13.8 million as compared to December 31, 2024 of $19.4 million. Our order backlog at March 31, 2025 consists of approximately $12.3 million related to remaining performance obligations of contracts in progress and not yet started and the balance of approximately $1.5 million represents other orders received from customers. As of March 31, 2025, one industrial customer represented 32.7% of our backlog and one aerospace customer represented 30.1% of our backlog. Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impacts 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 September 30, 2024 was $1.8 million, with a gross profit margin of 22.4%, compared to a gross profit of $1.6 million and a gross profit margin of 25.6% for the three months ended September 30, 2023. The increase in gross profit of $0.2 million was primarily due to higher revenues as well as improved margins on CVD contracts in progress and final MesoScribe sales that was partially offset by a $1.0 million non-cash charge to reduce certain PVT inventory to net realizable value.

Current wording

Gross profit for the quarter ended March 31, 2025 was $2.7 million, with a gross profit margin of 32.4%, compared to a gross profit of $0.8 million and a gross profit margin of 16.2% for the quarter ended March 31, 2024. The increase in gross profit of $1.9 million was primarily the result of higher overall revenues, improved absorption of overhead as well as improved margins on contracts in progress as compared to contracts in progress in the prior year quarter.

Previous wording

For the nine months ended September 30, 2024, research and development expenses were $2.1 million, or 10.6% of revenue as compared to $1.9 million, or 9.3% for the nine months ended September 30, 2023, an increase of $0.2 million or 10.2%. The increase in 2024 was the result of lower costs allocated to cost of revenue and a recruitment fee for engineering staff.

Current wording

For the quarter ended March 31, 2025, research and development expenses were $0.8 million, or 9.4% of revenue as compared to $0.7 million, or 15.2% for the quarter ended March 31, 2024. The increase in 2025 of 4.7% was the result of less amounts charged to cost of revenue during the quarter.

Previous wording

General engineering support and expenses related to the development of more standardized products and value-added development of existing products are reflected as part of research and development expense. General engineering support and expenses are charged to costs of revenue when work is performed directly on a customer order.

Current wording

General engineering support and expenses related to the development of more standardized products and value-added development of existing products are reflected as part of research and development expense. General engineering support and expenses are charged to cost of revenue when work is performed directly on a customer order.

Previous wording

We continue to evaluate the potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.

Current wording

We continue to evaluate the potential utilization of our net deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.

Previous wording

As of September 30, 2024, aggregate working capital was $13.3 million as compared to aggregate working capital of $14.3 million at December 31, 2023. Cash and cash equivalents at September 30, 2024 and December 31, 2023 were $10.0 million and $14.0 million, respectively.

Current wording

As of March 31, 2025, aggregate working capital was $14.5 million as compared to aggregate working capital of $13.8 million at December 31, 2024. Cash and cash equivalents at March 31, 2025 and December 31, 2024 were $10.2 million and $12.6 million, respectively.

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2024 was $3.7 million. This decrease was principally due to the net loss of $2.0 million, an increase in accounts receivable of $3.2 million, reduction in contract liabilities of $1.6 million offset by a reduction in inventory of $0.6 million and non-cash items of $2.5 million including a provision for excess and obsolete inventory of $1.0 million..

Current wording

Net cash used in operating activities for the quarter ended March 31, 2025 was $2.3 million. This decrease was principally due to the increase in contract assets of $3.0 million and a decrease in contract liabilities of $1.3 million due to revenue recognized on contracts in progress. These decreases were offset by net income of $0.4 million, non-cash expense items of $0.4 million and a decrease in accounts receivable of $0.7 million.

Previous wording

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

Current wording

Net cash used in investing activities for the quarter ended March 31, 2025 consisted of capital expenditures of $29,000 related to purchases of property and equipment and investment in a captive insurance company related to our health insurance program of $51,000.

Previous wording

Net cash used in financing activities for the three months ended September 30, 2024 consisted of repayments of $0.1 million for an equipment loan.

Current wording

Net cash used in financing activities for the quarter ended March 31, 2025 consisted of repayments of 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 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 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.

Previous wording

This discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. In accordance with U.S. GAAP, the Company bases its estimates on historical experience and on various other assumptions the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

This discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.

Previous 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.

Current wording

We have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years. Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts. However, 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.

Previous wording

Long-lived assets consist primarily of property, plant and equipment. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists pursuant to the requirements of ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of it carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. In the future, if we determine that our long-lived assets are impaired, we would be required to recognize a charge in our financial statements at the time of such determination. Any such charge could be material to our results of operations and financial condition.

Current wording

Long-lived assets consist primarily of property, plant and equipment. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists pursuant to the requirements of ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of it carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment.