CVD Equipment Corporation (CVV) Earnings Call Transcript & Summary

Will anyone second the motion?

I second the motion.

Will each of the shareholders kindly mark his or her ballot under #3? Now that everyone has had the opportunity to vote, I declare that the polls are hereby closed. At this time, I ask the Secretary to give us the preliminary results of the ballot.

I will now present to report on voting for the formal proposals based on a preliminary examination provided by our Inspector of Election. Based on that preliminary report, for Proposal #1, each of the 5 nominees named in the proxy statement has been duly elected as a director. For Proposal #2, the appointment of Marcum LLP as our independent auditor for 2023 has been ratified. And for Proposal #3, the nonbinding advisory resolution supporting the 2023 compensation of the company's named executive officers has been approved.

This completes all the formal business to come before the meeting as set forth in the notice of meeting. Are there any other motions to come before the meeting? If there are no further business before the meeting, I will entertain a motion to adjourn the meeting.

I move that the meeting be adjourned.

Is there a second to the motion?

I second the motion.

All those in favor, say, aye.

Aye.

Aye.

All those opposed, no. This meeting is hereby declared adjourned. Hello, again. My name is Manny Lakios. And as CEO and President of CVD Equipment Corporation, I am pleased to be presenting to you today a summary of the company's status, important company developments and pertinent information related to our business and markets. As we will be providing substantive information. Your thoughts are important to us. We will be responding to your questions at the end of the question-and-answer session. Before I venture into the performance of the company, I want to take a moment to recognize Conrad Gunther for his dedication and service to the company. Conrad has served on the Board of Directors for 23 years, twice the span of any professional athletes. As you know, Conrad recently announced his retirement from the Board of Directors. Please join the Board and the employees of the company to express our appreciation and best wishes to Conrad for his years of service. We recently reviewed with you our 2022 and first quarter 2023 financial results and performance. Today, I will provide you with an update on -- and add some color to our business, including the business drivers of products and our plan to address the challenges ahead to achieve our performance and growth goals. Our focus in 2022 continue to be on 2 primary end markets: electric vehicles and aerospace and defense. In the electric vehicle space, we have 2 product applications, the first silicon carbide crystal growth for high-power electronics and the second battery anode materials for electric storage. For the 2022 year, total orders for our products and services were $31.1 million compared to $21.1 million for 2021. This equates to a 50% increase year-over-year. Our preliminary summary for orders in Q2 of 2023 is approximately $13 million compared to $12.6 million in Q2 of 2022, and orders for the first half of 2023 were approximately $16 million compared to $16.7 million in the same period in 2022. I want to emphasize that the Q2 2023 data is preliminary and may be subject to change. We, of course, will provide you with the final numbers when we release our earnings for the second quarter. The improvement in orders in Q2 over Q1 is fueled by increased acceptance of our aerospace products launched in 2022 and the continued recovery of that aerospace and defense market. Approximately $200,000 of orders in the second quarter of 2023, and $0.5 million for the first half of 2023 were related to our Tantaline subsidiary which was sold on May 26, 2023. Our strategy continues to be focused on growth, end-use markets and markets where we have an established presence and product acceptance. The theme of electrification, including both power conversion and high-power electronics and battery powered storage and battery anode materials. During 2022 and into 2023, these markets contributed to the order rate and revenue of the company. The primary end-use market is the - in support of electric vehicles and has been a key driver of our performance this past year. As I mentioned, within the electric vehicle market, there are 2 key applications we're focused on. The first again, anode materials, the global battery market for electric vehicles for 2023 is estimated at about $63 billion and then forecasted to grow to $276 billion in 2030. Most importantly is a 23% compounded annual growth rate. The other strategic application related -- is related to charging, transmission and power conversion for electric vehicles and other alternative green energy sources, specifically as we term high-power electronics. In this segment, we have developed a silicon carbide crystal boule growth system with the model name PVT-150. The PVT-150 is designed to grow 150-millimeter diameters of carbide boules, a quantity of 20 of these PVT-150 system was shipped in 2022. And in December 2022, we received an additional order for 10 systems. As previously announced, our PVT-200 system was launched in Q3 of this year. The system will have the capability to grow both 200-millimeter as well as 150-millimeter silicon carbide boules. In Q1 of 2023, we fully launched the PVT product line with a focus to broaden our customer base and to gain market acceptance of this product of which we are still in the early stages. We also hired a dedicated sales manager to lead the sales process. Related to the battery nanomaterials. In Q2, we announced a second order from OneD Battery Sciences for our production silicon nanowire growth system slated for delivery to a location in Europe. Addressing the aerospace and defense market, we provide systems that grow in deposit and advanced composite material structures and components. Over the last 9 months, we have received approximately $13 million of orders for several of these systems. Due to the nature of the application, we are not at liberty to discuss the specific terms. The demand seen over the last 9 to 12 months is a strong indication that the recovery of the market is in progress. Even with these recent orders, we remain cautiously optimistic about the market. We continue to collaborate closely and expand the network of our aerospace and defense potential companies so as to be poised and ready to respond to the demand of new equipment and services by this industry. In the equipment group during 2023 and beyond, we will continue to develop a complementary mix of product lines with the underlying theme to provide technology and product solutions to our customers and long-term return on investment to our shareholders. Consistent with this theme, we launched 3 products over the last 12 months. The first being the PVT-150 and PVT-200 system for silicon carbide boule growth to expand the product line to the silicon carbide power electronics market. We initiated the development of a production silicon carbide [ epi system ] planned for launch in late 2024. In the battery nanomaterials market, we developed 2 PowderCoat systems for use in production and research and development. The research and development system, PowderCoat300was completed in 2022 as well as the PowderCoat1100 system. As previously mentioned, in May of this year, we received an order from OneD Battery Sciences for an additional production system, PowderCoat100. The CVD -- the COVID pandemic and geopolitical issues in Eastern Europe and Asia continue to affect our business, the aerospace, gas turbine engine components, coating application, which is our largest legacy market is recovering slowly after being negatively impacted by the COVID pandemic. Our strategy of serving multiple growth markets may help to offset the impact of any decline in a single market and has proven -- provided us with overall growth over the last few years. The recent inflationary pressures on components and services as well as the global supply chain issues are causing higher prices for materials and some supply shortages. We continue to reduce our susceptibility to these supply chain challenges. This focus on manufacturing self reliance, including enhancing and expanding our internal machining and manufacturing capabilities, our new machine centers have assisted CVD mitigating some of our equipment materials delays and offsetting supplier cost escalations. We will continue also to evaluate manufacturing resources as the business level dictates. Our SDC divisions continue to provide a critical captive and also merchant supplier of gas and delivery systems. Our SDC products are considered a standard in the marketplace and also a supplier to our equipment division. Another element of our business strategy was to focus on the equipment segments of the business and to deemphasize some of the products and reduce further spending in others. The Tantaline product line was acquired in 2016. Since then and up to the end of 2020, the company had invested in the expansion of the addressable market and operational capability in Denmark as well as in the U.S. facility. During Q1 2021, all sales and marketing activities were consolidated into the Denmark facility, and the U.S. operations was ceased. The division and product line was determined to be a noncore business element, the growth and size did not meet our internal goals, and as a result, were -- was divested in an equity sale during Q2 2023. This allows the company and management team to apply additional focus on the equipment segment of the business. Our MesoScribe Group, which is -- which we acquired in 2017, focuses on high-temperature instrumentation in a very challenging environment such as in gas turbine engines and satellites. The product offering has been determined to be a noncore business element, and we are evaluating the future direction of the product line. In summary, we continue to be cautiously optimistic about our served markets. We will continue to focus on our products, customers and financial performance. We have a dedicated, capable management team, supportive Board of Directors and a loyal employee and customer base. We are focused on the business and operational planning for growth and future return to profitability. We will continue to execute to our plan of growing our customer base in the silicon carbide wafer market, and to increase our product offerings in silicon carbide battery materials in aerospace and defense. It is my pleasure to serve you. Your comments or questions are important to us. In the close of this presentation, we would like to open the floor for your questions. You may get in the queue for additional questions after your initial question. Thank you.

We're just reading the questions now. First question is from Brett Reiss. Question is, is the [indiscernible] building and business a core long holding? Yes, the SDC product line is a key element to our business and the equipment segment in total. They provide us our gas management systems, and we see them as a competitive advantage in our business, both from an economic as well as a technology perspective. With -- are there any other questions? With the end of our question-and-answer session, I want to again thank everyone for their participation, for your support as a shareholder, for the employees that -- and customers that are listening into our presentation. I thank you as well. We welcome Deb Wasser, and we wish Conrad Gunther the best, and we will speak to you in the next few months. Thank you once again. And the meeting is formally adjourned.