CVD Devices Corporation ( NASDAQ: CVV) Q4 2022 Profits Teleconference March 27, 2023 5:00 PM ET
Emmanuel Lakios – President and President
Richard Catalano – Vice President and Chief Financial Officer
Brett Reiss – Janney Montgomery Scott
Greetings, and welcome to the CVD Devices Corporation 2022 4th Quarter and Complete Fiscal 2022 Outcomes Teleconference. As a tip, this conference is being tape-recorded.
We will start with some ready remarks followed by a question-and-answer session. Providing on the call today will be Emmanuel Lakios, President and CEO and Member of the CVD Board of Directors; and Richard Catalano, Vice President and Chief Financial Officer. We have actually published our revenues news release and call replay details to the Financier Relations area of our Website at www.cvdequipment.com.
Prior to I start, I want to advise you that a lot of the remarks made on today’s call consist of positive declarations consisting of those associated to future monetary efficiency, market development, overall readily available market, need for our items and basic service conditions and outlook. These positive declarations are based upon specific presumptions, expectations, and forecasts that go through a variety of threats and unpredictabilities explained in our news release and in our filings with the SEC, consisting of, however not restricted to, the Danger Aspects area of the business’s 10-K for the year ended December 31, 2022. Real outcomes might vary materially from those explained throughout the call.
In addition, all positive declarations are made since today, and we carry out no responsibility to upgrade any positive declarations based upon the brand-new situations or modified expectations.
Now, I wish to turn the call over to Emmanuel Lakios.
Thank you, Paul. Invite to CVD Devices Corporation’s quarterly teleconference. My name is Emmanuel Lakios, CEO and President. And I am happy to exist to you today concerning our 4th quarter 2022 and our complete 2022 efficiency and crucial business advancements, and important details associated to our service. Your ideas are very important to us, and we eagerly anticipate your concerns in our Q&A session.
Now, for our 4th quarter and 2022 outcomes, we are happy to be reporting a strong income development for financial 2022, a boost of 57% over previous . The 4th quarter income, while lower than our 3rd quarter 2022, was 53% greater than our 4th quarter 2021. Throughout the 4th quarter 2022, we acknowledged earnings of $1.5 million. For the complete 2022, we acknowledged a bottom line of $224,000. Both durations consist of the acknowledgment of other earnings of $1.5 million for a federal worker retention credit. The 2022 and 4th quarter running efficiency is lined up with our technique of service focus, income development, and go back to success.
The timing of the need of our items, it depends on lots of aspects such as our clients’ market conditions, the approval of our items by our clients, and the basic financial conditions. While our income and success will continue to vary, and due to this timing of orders and deliveries, our company believe that we are on the best track to accomplish constant, long-lasting success in the years down ahead.
2022 was an interesting duration for all the stakeholders of CVD Devices. The order rate for 2022 provides more assistance to our belief that we are on the best course. Our core technique, that includes concentrating on markets that support the electrification of whatever, particularly silicon carbide is sustaining our present development. The marketplace section concentrates on high-power electronic devices which are utilized in the growing electrical automobile market. Completion usage applications are electrical motor power converters, power charging, and transmission. For 2022, we have actually gotten orders going beyond $33 million for our CVD Systems and Solutions section, as compared to roughly $31 million for the very same duration, 2021.
This is a 52% year-on-year boost in orders for the CVD section. Our Q4 2022 orders were $9.2 million. The 2022 orders consisted of 24 extra systems of our just recently released PVT-150 system for silicon carbide crystal development. All system orders were from our preliminary alpha/beta client, and totaled up to roughly $8.8 million. 10 of the 24 PVT-150 systems were purchased in the 4th quarter. The PVT-150 system is made use of to grow silicon carbide crystals which are [sequentially] (ph) produced into silicon carbide wafers. In the 4th quarter, we had the preliminary launch of the PVT-150 to the more comprehensive base of silicon carbide crystal development clients.
In the 4th quarter, we were chosen and gotten a system from a significant airplane engine maker, particularly the order was for a production chemical vapor and seepage system valued at roughly $3.7 million. As I specified previously, this system will be utilized to make ceramic matrix composite products for aerospace gas turbine engine parts. Our company believe that this order is a concrete indication of the start of the aerospace market healing, which typically has actually been a considerable part of the CVD Devices Corporation’s service. The rest of the 2022 orders were for our tradition advanced R&D and FirstNano system’s SDC department items along with our non-core sections.
Our SDC section had actually increased sales over previous year of roughly 35%. That shows a greater need for our gas and liquid control system items. SDC is both a making it possible for captive provider to the CVD Devices group, along with emerging provider to the microelectronics and commercial markets. Our Tantaline and MesoScribe, which we consider as non-core line of product, paid in 2022. Supply chain problems relative to both inflation and preparations continue to adversely affect our income timing and success for all our sections of the business. In 2022, we set up extra maker centers, and included capability to our Central Islip center to increase our system output and to continue to drive towards increased functional self-reliance.
The management of our item preparation in addition to the accurate control of our devices has actually been a competitive benefit for us.
I wish to turn the call over to our CFO, Rich Catalano, who will offer you our 4th quarter and 2022 monetary summary.
Thank you, Manny, and great afternoon. Our income for the 4th quarter of 2022 was $7.2 million. This compares to $4.7 million in the previous year 4th quarter. That represents a boost of $2.5 million or 53%. This boost in our income was mainly attributable to our PVT-150 line of product which represented roughly $2.2 million or 30% of all earnings in the 4th quarter, as compared to no such earnings in the previous year 4th quarter. Our operating loss for the 4th quarter was $221,000. This was an enhancement over the previous year, an enhancement of roughly $800,000.
This enhancement in our operating outcomes was driven by the increased income of $2.5 million that led to increased gross revenue of $1.2 million that was balanced out rather by a boost in business expenses of roughly $400,000. Our gross revenue portion was 28% in the 4th quarter as– in this 4th quarter as compared to 16% in the prior-year 4th quarter. This enhancement on our gross revenue was mainly the outcome of leveraging our repaired expenses over greater sales levels, along with an enhanced item mix. These advantages were balanced out rather by increased product expenses in product parts, along with settlement expenses.
The boost in our business expenses are mainly due to specific greater employee-related expenses to support the development of our service. That’s consisting of end marketing, along with some basic boost in our workers expense in general. As Manny discussed in the 4th quarter of ’22, we finished our analysis of whether the business was entitled to a staff member retention credit, and we identified that for 2 quarters in 2021, we were entitled to a credit of $1.5 million, which was tape-recorded as a non-operating earnings product in the 4th quarter.
Based upon the acknowledgment of that ERC credit, our earnings was $1.5 million, or about $0.23 per share, for both fundamental and watered down. Our 4th quarter of this year likewise took advantage of interest earnings of $88,000 and a forex gain on our intercompany loan with our Denmark subsidiary of about $155,000. In general, our bottom line for the quarter was $1.2 million. Earnings– our bottom line for the 4th quarter ’21, I need to state was $1.2 million or $0.18 per share.
Simply relying on the full-year of 2022 briefly, the income was $25.8 million. This compares to $16.7 in the very same duration of 2021. That’s a boost of $9.4 million, or 57%. Comparable to the 4th quarter, this boost in income was attributable to our PVT-150 line of product, which represented roughly $7.5 million or 29% of our income in 2022.
Once Again, we had no such earnings in ’21. The operating loss for financial ’22, in general for the full-year was $1.8 million. This represents an enhancement of $2.8 million when we compare it to the loss we experienced in 2021 of $4.7 million. These enhancements once again in running outcomes were mainly associated naturally to the increased income of 57% or $9.4 million, which led to increased gross revenue of $3.6 million. We likewise had a balancing out business expenses boost of roughly $700,000.
Our gross revenue for the complete was 26%. This compares to 19%. Once again, the enhancement is associated with the reality that we had much greater sales levels and permitted us to spread our overhead expenses. We likewise had some boost in our income business expenses. We did have some, like I discussed for the quarter, we had some boosts as we grew business, consisting of marketing and basic boosts in our workers expenses.
We did have a one-time severance charge of roughly $134,000. These boosts were balanced out. We did have some decreases that agreed with. In July 2021, we did offer our structure, another structure we had here in Central Islip. The decrease in the operating expense for that structure benefited business expenses by roughly $600,000, and we likewise had lower expert charges of about $300,000 for the full-year.
As formerly discussed, the year likewise took advantage of the acknowledgment of the worker retention credit. I would discuss that in the prior-year, we did have 2 one-time advantages. We had an advantage of $6.9 million from the sale of a structure, and we had $2.4 million from forgiveness of our PPP loan that certainly assisted the bottom line.
So, in general the earnings for 2022 was– bottom line I need to state for 2022 was $224,000 or $0.03 per share. The loss once again, that consists of the $1.5 million. Earnings for the prior-year was $4.8 million or $0.71 revenues per share. However remember, there were those 2 non-operating gains that amounted to $9.3 million.
Now, relying on our stockpile, our stockpile at December 31 2022 was $17.8 million. This compares to $10.4 million at the start of the year and this represents a boost of $7.4 million. Our stockpile consists mainly of staying efficiency responsibilities that we have on our agreements in development about $16.2 million and the balance of $1.6 million represents unfinished order that we have actually gotten.
Relying on our balance sheet, our money and money equivalents at December 31 was $14.4 million as compared to $16.7 in the prior-year. This was a decline of $2.3 million, extremely little motion from operations however that $2.3 million was mainly the benefit of our home loan on our Central Islip center. And likewise we had capital investment of about $700,000.
Our working capital at the end of this year is $15.5 million and this compares to $16.7 million at December 31, 2021. Simply some closing notes, we are not able to forecast the effect of the existing financial and geopolitical unpredictabilities that will have on our monetary position or our future outcomes of operations and capital. Our go back to constant success will depend on other things, the invoice of brand-new devices orders, our capability to alleviate the effect of supply chain interruptions and the inflationary pressures, along with handling our organized capital investment and our business expenses.
In addition, our earnings and orders have actually traditionally changed based upon modifications in order rate along with consider our production procedure that affects the timing of our income acknowledgment. Appropriately, orders got from clients and income acknowledged might vary from quarter-to-quarter.
After thinking about all these aspects, and our company believe our money and money equivalents and our forecasted capital from operations will suffice to satisfy our working capital and capital investment requirements for the next 12 months, we will continue to evaluate our operations and do something about it expected to preserve our operating money to support our working capital requirements.
I’ll now turn it back over to Manny.
Rich, thank you for your discussion. In summary, the 4th quarter and complete results for 2022 show the actions we reclaimed given that 2021 to restructure concentrate on whatever we do and those who we serve. Our focus stays on our client markets, our workers and our investors, and the pursuit of development and go back to constant success. We eagerly anticipate continue to develop on our success in the year ahead and continue to be carefully positive.
Your remarks and concerns are very important to us. At the close of our discussion, I wish to open the flooring to your concerns.
Thank you. We will now be performing a question-and-answer session. [Operator Instructions] Thank you. Our very first concern is from Brett Reiss with Janney Montgomery Scott. Please continue with your concern.
Hi, Manny. Hi, Rich.
Hey, Brett, how are you? Excellent to speak with you.
Excellent, great, another great decent quarter.
The money from the 3rd quarter to 4th quarter was up $2.5 million. Half of it was a decrease in working capital. The other half, was that favorable capital generation?
Hi, Brett. This is Rich. Yes, I believe our capital does vary depending upon as we total agreements there will be payments towards completion of the agreement. Likewise, upon the invoice of agreements, we normally get a deposit for a specific portion of the agreement rate. So, you will see some variations in our money balance from period-to-period.
Right. Now, the entire possible credit contraction that might unfold with the banks, it’s essentially a non-event for us due to the fact that we truly are not making use of any bank lines of credit. We remain in a commanding money position. Is that a reasonable declaration?
As at this moment, we have extremely little financial obligation after we settled our mortgage last– throughout the year– throughout this year, I need to state in 2022, we simply got one little devices loan for about $400,000. And at this moment, we’re not counting on line of credit and so on. We’re dealing with the working capital and the money balances that we have.
Right. And the supply chain problems, they appear to be easing off?
Well, they’re being handled, Brett. We still have daily, hand-to-hand fight with a few of our providers, however we have actually had the ability to handle through that procedure in 2022. So, I can’t state that it’s eased off, however we have actually acted to decrease the effect both on inflationary and supply chain hold-ups. It does not indicate that we’ll continue, I believe all of us understand there’s a fair bit of inflationary pressure out there.
Right, I’ll hang back in line. Thank you.
Thank you, Brett.
Thank you, Brett.
Thank you. Our next concern is from [John Gruber] (ph), personal financier. Please continue with your concern.
Excellent afternoon. Yes, on the PVT-150, what’s the outlook, and what’s the gross margin profile of that item versus the business average? [Indiscernible] begin with that concern.
Naturally. Hey, John, how are you. Pleased you’re on the call. This is Manny. Initially, the 150, among the significant distinctions on the 150, the PVT-150 versus a few of the more what we have actually called to be tradition items is that the 150 is a make-to-order versus a style make-to-order. So, by DNA, that earn margins are enhanced significantly on the PVT-150 items because you are not engineering every one of the tools and charging the expense of items offered line with that engineering expense. So, you will naturally see much better gross margins on the make-to-orders versus the style make-to-order. With that stated, we normally do not offer, particularly for our clients’ sake, our gross margins. However we would expect that the contribution margin on increased sales on that need to be 50%- plus as we increase the order rate for the PVT-150s.
So, 50% plus, that would be great. And where do we base on getting brand-new orders, brand-new nameplates for the PVT-150? And what development have you made with simply the [big boys and the boules] (ph) in the silicon carbide service?
Sure. So, you have actually been doing this for a while. Therefore, the response to your concern is we follow a quite regimented PLC procedure, item lifecycle. So, we established an item. We delivered the very first one, back in 2011. We productized it beginning in December of 2021, and we began delivering in July of 2022. Generally, you deliver a couple of of them as alphas and betas. Well, we wound up shipping 20 of them in 2015, alphas and betas that I believe are carrying out well in the set up base. And as we stated, we have one client for the alphas and betas. We consequently got an order for 10 more production tools.
And the only distinctions on those are documents control decrease in workflows in the production store, and we simply call them alphas, betas, and production systems. You truly can’t discriminate by taking a look at them. We released the item formally this quarter. And we began to engage on various sections of the vertical combination chain. And what I indicate by that is you have the boule maker or boule wafer makers, that’s all they do, to offer wafer. And they’re our very first entrÃ©e into that area. And there are couple emerging ones. And there’s one developed. And after that you have the folks that make their own devices and make their own boules and make their own wafers.
And After That you have actually the totally incorporated. And the totally incorporated would be the [onsemis] (ph), the Wolfspeeds, and [STs, II-VI] (ph), they, for the a lot of part, make their own devices, grow their boules, make their wafers, and likewise make gadgets. So, our main attack was with our very first client on the boule wafer. We released the item actually in the January-February timeframe, and we have actually been going to conferences. And we’re beginning now to be acknowledged as a service provider of devices to the crystal boule development folks. It’s going to take a little time for us to get some traction and adoption. Therefore what I would state with that is we’re offering quotes and discussions now to a number of possible clients.
So, at year-end– at year-end of this calendar year-end, the number of brand-new clients do you believe you could include into the portfolio of the PVT item for the boules?
In addition to serving the existing client, due to the fact that all clients are crucial, we– our goal, and sales has an unbiased to permeate 2 extra accounts.
Thank you quite. Thank you.
Thank you. There are no more concerns at this time. I want to hand the flooring back over to management for any closing remarks.
Well, we value the participation on the call, and the assistance, and the commitment from our investors and a few of our workers who are likewise on the call. We once again are carefully positive. We have actually originated from a position where we have actually grown as a group, given that 2021, grown the reservations income, enhanced the gross margin line, operating revenue line, and have actually supported the balance sheet because time period. We continue to be carefully positive and conservative. As we move on, we eagerly anticipate an effective 2023. And once again, we value your participation and assistance. Thank you.
This concludes today’s conference. You might detach your lines at this time. Thank you for your involvement.