CVD Equipment (CVV) Q1 2026 Earnings Transcript

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DATE

Thursday, May 14, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Emmanuel Lakios
• Chief Financial Officer — Richard Catalano

TAKEAWAYS

• Revenue -- $1.8 million, representing a 70.9% decline from the prior-year quarter, and a 30.9% sequential decrease from the prior quarter.
• Gross Profit -- $147,000, with an 8% gross margin; this compares to a $1.7 million gross profit and 27.4% margin in the prior-year period.
• Backlog -- $4.7 million at period-end, stable relative to the end of the prior quarter.
• Customer Concentration -- Three customers accounted for 66% of total first-quarter revenue.
• Operating Loss -- $1.8 million operating loss from continuing operations, up from $0.3 million in the prior-year quarter.
• Net Loss -- $1.7 million, or $0.25 per basic and diluted share, compared to a $229,000 net loss, or $0.03 per share, previously.
• Orders -- $1.8 million, driven primarily by spare parts demand.
• Net Cash Used in Operating Activities -- $0.9 million, including $0.4 million contributed by the SDC business during the quarter.
• Cash and Cash Equivalents -- $8.2 million as of March 31, 2026, rising to $23 million immediately after the SDC sale and debt payoff.
• SDC Sale -- SDC division sold to Atlas Copco for $16.9 million in cash (subject to adjustments) with $14.8 million net proceeds received after transaction costs and liabilities; an additional $900,000 was placed in escrow for indemnification.
• Working Capital -- $12.8 million at period-end, with further increase following the SDC sale closing.
• Strategic Transformation Initiatives -- Transitioned to outsourcing select fabrication, executed workforce reduction to reduce annual operating costs by $1.8 million, revised sales approach via distributors, and initiated review of additional asset sales or divestitures.
• Facility Lease -- The Saugerties, New York facility was retained and leased to Atlas Copco for an initial two-year term after the SDC division sale.
• Backlog Drivers -- Orders remain affected by "geopolitical uncertainty, reduced U.S. government funding for universities, and a slower pace of adoption of our solutions in certain end markets."

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RISKS

• Management noted "continued volatility in our order rates and a recent decline in bookings" within the CVD Equipment division.
• Year-over-year revenue decreased by 70.9%, and operating loss increased to $1.8 million, both attributed to "lower CVD systems revenue."
• Bookings are being pressured by "geopolitical uncertainty, reduced U.S. government funding for universities and a slower pace of adoption of our solutions in certain end markets."
• Gross margin fell to 8% from 27.4% in the prior-year quarter due to unabsorbed overhead costs from lower revenues.

SUMMARY

CVD Equipment Corporation (NASDAQ:CVV) completed the divestiture of its SDC business to Atlas Copco for $16.9 million, strengthening its balance sheet and providing financial flexibility by increasing cash reserves to $23 million and eliminating long-term debt. The company’s revenue, gross profit, and gross margin from continuing operations experienced steep declines, with management expressly citing persistent order volatility and adverse macroeconomic factors including heightened geopolitical risk and decreased U.S. funding for university customers. Leadership confirmed continued implementation of cost-reduction initiatives involving outsourcing, workforce reductions, and a restructured sales organization as part of its transformation strategy. Expanded review of strategic alternatives for remaining business lines and facilities remains ongoing, with no definitive new transactions announced.

• The SDC divestiture unlocked $14.8 million in net proceeds that have been allocated to short-term treasury securities, with an additional $900,000 held in escrow under closing terms.
• Customer concentration is elevated, as three customers comprised two-thirds of period revenue, which could heighten revenue risk.
• Management observed increasing RFQ activity versus 2025 levels but clarified that "it takes several months to a few quarters" for these requests to convert to orders and described the company as being in "the waiting period" for demand recovery.
• Exposure to silicon carbide process equipment has been negatively impacted by low-cost supply from Chinese vendors, which "deflated the PVT market" and limited domestic equipment sales.
• Management explicitly stated that gallium arsenide and gallium nitride remain product lines but characterized demand as limited and development activity as "early stage."

INDUSTRY GLOSSARY

• PVT: Physical Vapor Transport; a method used to grow high-purity single crystals such as silicon carbide boules for power electronics.
• CVI: Chemical Vapor Infiltration; a process for producing composite materials by infiltrating gaseous precursors into porous structures.
• RFQ: Request for Quotation; a formal invitation for suppliers to bid on providing specific products or services.
• SDC: Stainless Design Concepts; the divested division specializing in gas and fluid control systems.
• Boule: A large, cylindrical ingot of single-crystal material produced in semiconductor manufacturing.

Full Conference Call Transcript

Emmanuel Lakios: Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to review our first quarter 2026 financial results and to provide an update on our business and strategic initiatives. Following our prepared remarks, we'll be happy to take your questions. As previously disclosed, in response to continued volatility in our order rates and a recent decline in bookings within our CVD Equipment division, we initiated a transformation strategy late last year designed to specifically reduce fixed operating costs, create a more agile organization and better position the company to maximize shareholder value.

Key elements of this plan included transitioning the CVD Equipment business from a vertically integrated fabrication model to an outsourced fabrication for certain components, which we will expect to reduce fixed costs and improve scalability. Workforce reduction in CVD Equipment division during the fourth quarter, which is expected to reduce annual operating costs by approximately $1.8 million in 2026. Revising our sales approach by leveraging distributors and external representatives to complement our internal sales organization and broaden market reach; and finally, exploring strategic alternatives for certain business product lines, including potential sale of assets or divestitures.

As part of our strategic review, on March 23, 2026, we announced that we had entered into a definitive agreement under which our SDC business was to be sold to Atlas Copco. The purchase price was approximately $16.9 million in cash and is subject to certain purchase price adjustments. The transaction closed on April 1, 2026. The sale of SDC enables us to concentrate our attention on our core CVD Equipment business. The divestiture has strengthened our balance sheet and provided additional financial flexibility as we continue to evaluate strategic opportunities for the CVD Equipment business, its product lines and our facilities. We continue to drive operational efficiencies, allowing for reduced operating costs and increased flexibility.

Our objective remains to maximize shareholder value. Net cash proceeds from the sale of the SDC division received by the company in April 2026 after payment of transaction costs and employee-related liabilities were $14.8 million. Immediately following the sale of SDC, CVD Equipment had approximately $23 million in cash and no long-term debt. as we repaid the remaining balance of an equipment loan during the quarter. Under the agreement, an additional $900,000 was placed in escrow for post-closing adjustments and indemnification obligations under the agreement. We have retained ownership of our Saugerties, New York facility that is being leased to the buyer for an initial term of 2 years. Turning to our financial results for our continuing CVD Equipment operations.

First quarter 2026 revenue was $1.8 million, down 70.9% from the prior year quarter, revenue of $6.3 million and down 30.9% sequentially from the fourth quarter of 2026 revenue of $2.7 million. Orders in the first quarter totaled $1.8 million, driven primarily from the demand of spare parts. At March 31, 2026, backlog was $4.7 million, similar to the CVD Equipment backlog at December 31, 2025. Our bookings for our business continue to be affected by several factors, including geopolitical uncertainty, reduced U.S. government funding for universities and a slower pace of adoption of our solutions in certain end markets.

We are actively monitoring customer demand, the broader geopolitical uncertainties and potential future tariff impacts and are adjusting our plans accordingly. Even against this backdrop, we remain focused on delivering solutions across our key markets, including aerospace and defense, industrial applications such as silicon carbide on graphite, silicon carbide for high-power electronics as well as emerging applications, including nuclear energy. With that, I will turn the call over to our CFO, Richard Catalano, to review the financial results in more detail.

Richard Catalano: Thank you, Manny, and good afternoon, everyone. The financial results of SDC are now reflected in our financial statements as discontinued operations for all periods presented and the SDC assets and liabilities are considered held for sale as of March 31, 2026. With the sale of the SDC business in 2026, we now have one reportable segment consisting of our CVD Equipment division that manufactures chemical vapor deposition, physical vapor transport, thermal process and related equipment. I will review first the results from continuing operations. As Manny said, our first quarter 2026 revenue was $1.8 million. This compares to $6.3 million in the first quarter of 2026 and $2.7 million in the fourth quarter of 2025.

The year-over-year decline as well as the decline from the fourth quarter was primarily driven by lower CVD systems revenue. Our revenue was concentrated among 3 key customers, which together represented 66% of total first quarter revenue. Gross profit for the quarter was $147,000, resulting in a gross margin of 8%. This compares with gross profit of $1.7 million and a gross margin of 27.4% in the prior year quarter. The decrease in gross profit was primarily the result of lower revenues, which led to higher unabsorbed overhead costs. Gross profit during the quarter ended March 31, 2026, did benefit by about $0.3 million or $317,000 from a contract modification with one of our customers.

Our operating loss from continuing operations for the first quarter of 2026 was $1.8 million compared to $0.3 million in the first quarter of 2025. Included in the first quarter of 2026 was a gain of $46,000 from the sale of equipment. After interest income, net loss from continuing operations for the quarter was $1.7 million or $0.25 per basic and diluted share compared with a net loss of $229,000 or $0.03 per basic and diluted share in the prior year quarter. Income from discontinued operations before transaction costs of our SDC business division declined from $0.6 million in the prior year quarter to $0.5 million in the current year quarter.

This was due to lower gross margins on higher revenues. Transaction costs associated with the sale of SDC consisted of legal and investment banking fees of $0.4 million for the quarter ended March 31, 2026. Thus, the total income from discontinued operations was $63,000 for the quarter as compared to $0.6 million for the prior year quarter. And again, this is principally due to the transaction costs incurred in connection with the sale of SDC that was consummated on April 1, 2026. At December -- sorry, at March 31, 2026, we have cash and cash equivalents of $8.2 million and immediately following the sale of SDC, our cash balance was approximately $23 million.

The net proceeds from the sale of SDC totaling $14.8 million has been invested in short-term treasury securities. Cash flows for the quarter. Net cash used in operating activities during the first quarter of 2026 was $0.9 million, principally as a result of a loss from continuing operations. This amount is net of approximately $0.4 million of cash that was contributed by SDC during the first quarter. During the quarter, we did receive $556,000 from the sale of equipment, and we used a portion of those proceeds to pay off an equipment loan in the amount of $181,000. Our working capital improved to $12.8 million at March 31, 2026.

And of course, it increased after we closed the sale of SDC in April. Looking ahead, our return to consistent profitability will depend on improved equipment order flow, disciplined cost management, successful execution of our transformation plan as well as continued control of capital expenditures. With that, I will now turn it back to Manny.

Emmanuel Lakios: Thank you, Rich. Our priorities are clear: serving our customers, supporting our employees, creating value for our shareholders and returning our core CVD equipment business to sustained profitability. Operator, we are now ready to open the line for questions.

Operator: [Operator Instructions] our first question is from Neil Cataldi with Blueprint Capital Management.

Neil Cataldi: The first question, with the SDC sale complete, and as you said, $23 million in cash on the balance sheet, can you help us think a little bit about the book value of the Central Islip property? The PP&E on that is like $10.4 million. Is that reflective of what you believe the property is worth in today's market?

Emmanuel Lakios: I think we can speak to the fact that we, a while back had looked at a sale leaseback that the valuation was north of that. And we can't talk about a write-up or anything of that sort. But what we can speak about is that we think that, that is a conservative number for the valuation. We can't speak to having multiple valuations on the property at this point.

Neil Cataldi: Okay. But that number that was previously in a transaction would be a fair number for investors to sort of think about?

Richard Catalano: It was a number of years ago, correct? Real estate prices have been fairly moderate. Yes.

Emmanuel Lakios: Obviously, there are dynamics associated during that period of time that was post-COVID, a lot of demand for high volumetric real estate. The building is still a valued asset of the corporation.

Neil Cataldi: Okay. Just trying to establish the substantial amount of value that's here with the company between the $23 million in cash and what that property was previously transacted for establishes sort of a floor here of like $7 per share in cash. So very helpful. Second question pertains to the language that you're using in the press release. So you're citing geopolitical uncertainty, reduced government funding, but yet you're sort of simultaneously adding themes like data center and nuclear to your investor deck and filings of target markets, seeing your R&D not really change.

And most of your presumably end market customers across the semiconductor wafer space, whether it's 200-millimeter silicon carbide in active production or the 300-millimeter coming as well as all the activity in the nuclear space. These are themes that are -- have very elevated activity right now. And so I'm just sort of wondering like is any of that translating into active pipeline conversations for either your PVT or your CVI systems?

Emmanuel Lakios: So a couple of things. One is silicon carbide. We've spoken about silicon carbide and the impact on our value proposition in silicon carbide, which is the actual process equipment that makes the boule. Clearly, there was a deflation of that market from 2022, '23 highs. And the reasoning for that is really the Chinese vendors really flooding the market with wafers, making it economically unviable for U.S. wafer providers to buy -- to ramp up and buy additional equipment. So that's what deflated the PVT market. We are not primarily a 2-dimensional wafer-level process equipment company. We are a 3-dimensional for the most part.

Most of our orders come from preform CVI, where we are infiltrating a 3-dimensional product or by growing a boule, which is a 3-dimensional product. So we typically are not 2-dimensional. A small portion of our business is wafer level, semiconductor wafer level. We are in more the industrial and aerospace element of the food chain. We are seeing RFQs coming in at a higher rate than what we had previously seen last year in 2025. We are seeing that and in general, I think we've seen that money now has freed up after the opening up after the shutdown.

But it takes several months to a few quarters for those and sometimes several quarters for those RFQs to turn into orders. So we are in the waiting period at this point, and we continue to prosecute RFQs as they come in to process those. As far as you mentioned, whether it's -- I think you mentioned AI, nuclear, et cetera. In the area of nuclear, we do see RFQs for CVI, CVD equipment in that space. But again, we are very early in that process. As far as AI, we -- AI is a buzzword. We provide some wafer-level processing and -- but we don't advocate to be an AI-enabling company at this point.

And again, we are -- I just want to go back and underscore, we are a more 3-dimensional product or substrate company than planar wafers.

Neil Cataldi: Okay. Yes, that's very helpful. I used the word data center, which was the language that I think had been added to your filings. So I was just trying to figure out the sort of reason behind adding that language. And really just because there's so much activity in the space right now, it seems like you guys could be sitting in a good position.

Emmanuel Lakios: Look, there are a few of our products that would address that in the ramp-up, whether it's silicon carbide PVT system. But again, that requires -- that's going to require some competitive position against the Chinese wafer suppliers. And then we also have other products in the past that we've sold to -- that would assist AI centers, but not on the chip level, more so on sometimes the power transport, whether it's superconducting tape or something of that sort.

Neil Cataldi: Okay. Is the -- you previously used to talk about the PVT200 system that was placed to an unknown customer other than, I guess, presumably Stony Brook. Is that still under evaluation?

Emmanuel Lakios: Well, Stony Brook, we have a relationship with Stony Brook where we sold them two tools. We continue to collaborate with Stony Brook and that will be in the future. The customer on the 200 that we had sold also was impacted by the downturn in the U.S. demand -- well, the U.S. supply of silicon carbide wafers. So they're still in a waiting pattern if there was news to share, we would have.

Neil Cataldi: Okay. And last question. The strategic alternatives language has been pretty consistent for a few quarters. Is there any additional color on whether you're evaluating the business as a whole, specific product lines or what's left to the facilities? And any sort of time line on when investors may hear if there's a conclusion to the review?

Emmanuel Lakios: Well, the SDC was a strategic initiative, the SDC sale, great group. We've, I think, benefited the shareholders by sort of the cash on the balance sheet and also all the employees have a new home. So we're pleased with that. As far as additional actions, we continue to look at options. We don't have anything to speak to today -- when we do, we'll, of course, our shareholders will be aware of that.

Operator: Our next question is from Paul Chayka with MS&E Resource.

Unknown Analyst: The previous caller, nice to have him call in because he answered -- you guys answered a lot of my questions based on his questions. I just want to say I'm very bullish on CVV near term and long term. You've got a lot of great potential for success in multiple applications from my perspective as a materials engineer who's worked in aerospace and the electronics area. So I was intrigued by the silicon carbide boule project with Stony Brook. You've covered that already. The chip manufacturers, I think that's looking good. I want to just voice my support for not using any of this cash that you have in hand for any kind of investor dividend or anything.

You've been very good over the years in being very responsible and very methodical in using the cash you have. I'm really happy to hear that you've got this added cash for your basis for acquisitions or further developing your opportunities. So I just wanted to throw that in there. Is there any other further work? I guess it's 2-dimensional related, but gallium arsenide, gallium nitride, is that still a product line at all?

Emmanuel Lakios: It's still a product line, of course. So let me just jump into that. It's a product line. There's not a lot of -- we don't see a lot of demand in that area. We are seeing some exploratory, I would say, exploratory because it's early stage bubbling up of some new applications for some of the products that we had in the past, but it's really too early to really discuss that. But the -- we don't play in -- we play in the advanced materials area, not specifically in, let's say, LEDs or something of that sort on GaN. That's not our strength.

Unknown Analyst: Yes, sure. I just hadn't seen anything in press releases. And I guess it's for a good reason because it's not happening much.

Operator: There are no further questions at this time. I'd like to hand the floor back over to management for any closing remarks.

Emmanuel Lakios: Thank you, operator, and thanks to everyone for joining us today. We appreciate your continued interest and support of CVD Equipment Corporation. If you have any questions, please feel free, some of you do as well, to reach out to Rich or myself. This concludes today's call. Thank you.

Operator: Thank you again for your participation. You may now disconnect your lines.

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