CVD Equipment Corporation Aktie

Good afternoon, and welcome to the CVD Equipment Corporation First Quarter 2026 Earnings Conference Call. As a reminder, today's call is being recorded. We will begin with prepared remarks followed by a question-and-answer session. Presenting on today's call are Emmanuel Lakios, President and Chief Executive Officer; and Richard Catalano, Executive Vice President and Chief Financial Officer. Our earnings press release and information about today's call replay are available in the Investor Relations section of our website at cvdequipment.com.

Before we begin, please note that the comments made during this call may include forward-looking statements, including statements regarding our future financial performance, market growth, product demand, business outlook and strategic initiatives. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to our filings with the Securities and Exchange Commission, including the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2025. We undertake no obligation to update any forward-looking statements, except as required by law.

With that, I will now turn the call over to Emmanuel Lakios, President and Chief Executive Officer.

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.

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.

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

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?

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.

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

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

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.

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?

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.

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.

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.

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?

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.

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?

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.

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

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?

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.

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.

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

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.

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

Good afternoon, and welcome to the CVD Equipment Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. As a reminder, today's call is being recorded. We will begin with prepared remarks, followed by a question-and-answer session.

Presenting on today's call are Emmanuel Lakios, President and Chief Executive Officer; and Richard Catalano, Executive Vice President and Chief Financial Officer. Our earnings press release and information about today's call replay are available in the Investor Relations section of our website at cvdequipment.com.

Before we begin, please note that comments made during this call may include forward-looking statements, including statements regarding our future financial performance, market growth, product demand, business outlook and strategic initiatives. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to our filings with the Securities and Exchange Commission including the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2025. We undertake no obligation to update any forward-looking statements except as required by law.

With that, I will now turn the call over to Emmanuel Lakios, President and Chief Executive Officer.

Thank you, Diego, and good afternoon, everyone. We appreciate you joining us today to review our fourth quarter and full year 2025 financial results and to provide you an update on our business and strategic initiatives. Following our prepared remarks, we will be happy to take your questions.

As previously disclosed, in response to continued volatility in order rates and recent decline in bookings within our CVD Equipment division, we have initiated a transformation strategy during the fourth quarter designed to significantly 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 outsource fabrication for certain components, which we expect will reduce fixed costs and improve scalability; completing a workforce reduction in the CVD Equipment division during the fourth quarter, which was to rightsize the organization, and 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 exploring strategic alternatives for certain businesses and product lines, including potential asset sales 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 will be sold to Atlas Copco Group. The purchase price is approximately $16.9 million in cash, subject to certain purchase price adjustments. The transaction is expected to close during the second quarter of 2026, subject to customary closing conditions. This transaction will allow us to sharpen our focus on our core CVD Equipment business in Central Islip, New York. It is also expected to strengthen our balance sheet and provide additional financial flexibility as we continue to evaluate opportunities across the CVD Equipment business, its product lines and our facilities.

We expect net cash proceeds after transaction expenses and taxes to be approximately $15 million, of which $900,000 will be held in escrow for post-closing adjustments and indemnification obligations under the agreement. We retain ownership of our Saugerties, New York facility, which will be leased to Atlas Copco Group for the initial term of 2 years following the closing. I also want to express our appreciation to our SDC employees for their contribution to the company over the years.

Turning to our financial results. Fourth quarter 2025 revenue was $5 million, down 33% from prior year period and down 33% sequentially from the third quarter. For our full year 2025, revenue was $25.8 million, a decrease of 4.1% from fiscal year 2024. Orders in the fourth quarter totaled $3.5 million, driven primarily by the demand in our SDC segment for gas delivery equipment and the receipt of two orders from Stony Brook University for two PVT150 units.

For the full year, orders totaled $13 million compared to $28 million in 2024, primarily driven by demand in our SDC business for gas delivery equipment and order for spare parts and service for our CVD Equipment division.

At December 31, 2025, backlog was $6.6 million compared with $8 million at the end of September 30, 2025, and $19.4 million at the end of December 31, 2024. Our bookings continued to be pressured by several factors, including softer demand for our products in our CVD Equipment division, tariff-related uncertainties, reduced U.S. government spending for universities and a slower pace of adoption of our solutions in certain end markets. We continue to market -- to monitor our customer demand, the general uncertainty of the geopolitical environment and potential tariff impacts as we are -- and we are planning accordingly.

Even against this backdrop, we remain focused on delivering solutions across our key targeted markets of aerospace, defense, industrial applications, including silicon carbide on graphite and silicon carbide use in high-power electronics and other emerging applications.

With that, I will turn the call over to our CFO, Richard Catalano, to review the financial results in more detail.

Thank you, Manny, and good afternoon, everyone. Fourth quarter 2025 revenues were $5 million. This compares to $7.4 million in the fourth quarter of 2024. This year-over-year decline was primarily driven by lower CVD systems revenue. Revenue in our CVD Equipment segment was concentrated among two key customers, which together represented approximately 53% of total fourth quarter revenue.

Our SDC segment reported revenue of $2.2 million in the quarter compared to $1.9 million in the fourth quarter of fiscal '24 and $1.7 million in the third quarter of 2025. Consolidated gross profit for the quarter was $1.1 million, resulting in a gross margin of 22.2%. This compares with a gross profit of $2 million and a gross margin of 26.4% in the prior year quarter. The decrease was primarily due to lower CVD revenue, which resulted in higher unabsorbed overhead as well as a less favorable contract mix.

Our operating loss for the fourth quarter of 2025 was $1.3 million compared to operating income of $34,000 in the fourth quarter of 2024. Included in the fourth quarter 2025 results was a noncash impairment charge of $163,000. This was related to certain equipment and capitalized software associated with our transition to outsourced fabrication of certain components in our CVD business. After interest income, the net loss for the quarter was $1.3 million or $0.18 per diluted share compared with net income of $132,000 or $0.02 per diluted share in the prior year quarter.

For the full fiscal year, revenue was $25.8 million. This compares to $26.9 million in fiscal 2024. The year-over-year decline was primarily due to lower SDC revenue and lower MesoScribe revenue as we ceased that business. MesoScribe ceased operations in 2024.

Revenue in our CVD Equipment segment was again concentrated among two key customers, which together represent 41% of total revenue for the year. Our SDC segment reported full year revenue of $7.6 million as compared to $7.8 million in fiscal 2024.

Consolidated gross profit in fiscal '25 was $7.3 million or 28.3% of revenue compared to $6.1 million or 22.5% of revenue in fiscal '24. The increase in gross profit was primarily due to improved gross margins in our CVD Equipment segment. This was primarily due to a prior year charge of $1.6 million that we took last year to write down certain inventory to net realizable value. We did not incur a similar charge in fiscal '25. This improvement, not having the charge was partially offset by lower gross profit in the current year in our SDC and MesoScribe segments due principally to lower revenues.

Operating loss for fiscal '25 was $1.9 million. This compares to an operating loss of $2.4 million in fiscal '24. Interest income, net loss for the year was $1.6 million or $0.23 per diluted share compared to a net loss of $1.9 million or $0.28 per diluted share in fiscal '24. At December 31, '25, we had cash and cash equivalents of $8.7 million. This compares to $12.6 million at December 31, '24. Net cash used in operating activities during fiscal '25 was $3.7 million. This was largely driven by changes in working capital and contract timing as far as milestone billings.

Working capital improved to $14.1 million at year-end '25. This compares to $13.8 million at the end of '24. This was due in part to the classification of approximately $0.5 million of fixed assets that we had held for sale and for which we sold in the early part of 2026.

Looking ahead, our return to consistent profitability will depend on improved equipment order flow, disciplined cost management, successful execution of our transformation plan and continued control of capital expenditures. While our quarterly results might continue to fluctuate based on order timing, we believe our current cash position and projected cash flows will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months.

In addition, upon the closing of the transaction to sell SDC, we expect net cash proceeds, excluding the $900,000 escrow amount to approximate $14 million and we currently intend to initially invest those proceeds in U.S. treasury securities.

With that, I'll now turn it back to Manny.

Thank you, Rich. Our priorities are clear: serving our customers, supporting our employees and creating value for our shareholders and returning the business to sustained profitability.

Operator, we are now ready to open the line for questions.

[Operator Instructions] And our first question comes from Brett Reiss with Janney Montgomery Scott.

Can you hear me?

We can hear you, Brett. Good to hear you again.

Great. Great. Great. You're sitting on $23 million, $24 million in cash. Could you describe to us the skill sets of your existing engineers? And what I'm trying to get at is what are -- their skill sets would be complementary and enhance what type of acquisition you might be contemplating with the $23 million?

Yes. Well -- so Brett, we -- the number, I'll let Rich speak to the actual number on the cash -- any cash on hand plus what will net from the transaction. But as far as the talent pool, you asked, there are a couple of questions in your one question. The first is talent pool is consistent with what the talent pool was essentially from a capabilities perspective a year ago. We have a full complement of resources in the engineering and technology group for CVD equipment or CVI equipment, basically the main product line from Central Islip. So we retain that skill set.

As far as the subsequent question, which is what are we going to do with cash and the proceeds, the Board is looking at opportunities and strategic alternatives for increasing shareholder value, and we'll continue to do that. At this point in time, we do not have something that is material or a [ path ] yet. This was a fair transaction for all parties, the SDC transaction. So we took advantage of that. So time will tell, but we don't have something to highlight today.

Yes. Fair enough. Can you give us some sense, though, of what the pipeline of opportunities you're looking at? Are you looking at 3, 4, 5 different things? And how long have you been kicking the tires on some of these opportunities?

Well, we -- as a Board, we've been looking at strategic alternatives for quite several quarters, as you can imagine. You don't do a transaction in a quarter or two. And so -- but again, at this point in time, I'd be speaking out of turn -- I think in the next few quarters, we'll be able to identify and share with you certain -- some additional information. But right now, again, Brett, I don't have anything to speak of.

Okay. And are you guardedly optimistic, though, you'll be able to find something that will have a less lumpy or more recurring revenue stream, perhaps with service revenue, which has always been what the company would like to have had, but just the nature of the type of businesses we're in, it's always been a kind of lumpy revenue cadence.

Well, the equipment business, Brett, is lumpy in itself, especially when you're a couple of hundred million dollars of revenue as we are, of course. The -- I think you've outlined nicely the objective for any strategic activity, which we want to have is have a smooth non-lumpy revenue stream, good customer value in spares and service. Those are all the attributes of entities we would like to entertain. But again, I can't speak to that at this point.

Okay. I'll drop back. I don't know if there are any other people...

Thank you, again, Brett. Good hearing your voice.

[Operator Instructions] And your next question comes from Frank Giordano, Private Investor.

I just wanted to ask a question, of course, the money. It's something continuing on with Brett before. Regarding that, have you ever considered paying a special dividend in situations like this? Or it's something that the company doesn't pay?

I do not believe that in the history of the company, a special dividend was paid, at least in the period of time that I've been with the company, which is 9 years that has not been the case. But I could be corrected, but I think I'm accurate. Clearly, we believe shareholder value is based on growing the business, and utilization of our funds in a respectful manner, and we are conservative. So at this point in time, that is not actively on the table.

Okay. And something else regarding the business itself. Are you concentrating a little bit with the military right now, let's say, in the drone companies or anything dealing with the military due to the situation that we are in?

Yes. Frank, thank you. Yes, we do serve aerospace and defense. That's one of our key markets. About 78% of our revenue over the last several years of our orders has come from military and defense, whether it's gas turbine engines, the use of CMCs or other ceramics, which we create -- we build the equipment that creates the material, and that goes into both commercial and also military gas turbine engines. As well as last year, we received an order, we shipped it this year. Actually, we shipped it in 2025 was for a research system that will be used for especially the ceramic materials for hypersonics. So we are in the next generation, I would say, materials. So -- and it will continue -- I foresee that it will continue to be our revenue and previously that orders will be driven by aerospace, defense for the foreseeable future. That's where these advanced materials are primarily utilized.

Okay. I just wanted to tell you just my opinion here. You remind me of a company based out of Milan, it's called SAES Getters, was founded during Mussolini's time, the dictator Mussolini. And it survived through World War II. And then it became a company was taken over, I believe, a couple of years ago, at a much higher price than what it was in 2000. It was the only Italian company trading on the NASDAQ back in 2000, and it was around your price around $3 or $4 a share. And they used to pay a dividend every 3 months. I couldn't believe it, but it wasn't with the vapor, the decision, they do a lot of stuff, maybe different from your kind of company. But again, it was similar. It was similar. If you could research that and give you some ideas, interesting company out of Milan.

Yes. Drop us a line on the -- I didn't catch the name entirely, but drop us a line on that...

All right. I repeat it again. SAES Getters. And there was a takeover, but the name is still there. There's a website. Of course, you could research it. But again, I don't know if they do have a division here still in the United States, out of Denver or something like that. But I remember that 20 years ago, when I used to deal with them.

We'll do. Thank you, sir. Appreciate it.

And there appears to be no additional questions at this time. So I'll hand the floor back to Emmanuel Lakios for closing remarks. Thank you.

Thank you, Diego, and thanks to everyone for joining us today. We appreciate your continued interest and support of CVD Equipment Corporation. If you have any additional questions, as I said earlier, please reach out to myself or Rich directly. And this concludes our today's conference call.

Thank you. And all parties may now disconnect. Have a good day.

Good afternoon, and welcome to the CVD Equipment Corporation Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. We will begin with prepared remarks followed by a question-and-answer session. Presenting on today's call are Emmanuel Lakios, President and Chief Executive Officer; and Richard Catalano, Executive Vice President and Chief Financial Officer. Our earnings press release and call replay information are available in the Investor Relations section of our website at www.cvdequipment.com.

Before we begin, please note that comments made during this call may include forward-looking statements, including those related to our future financial performance, market growth, demand for our products and overall business outlook. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed discussion of these risks, please refer to our filings with the SEC, including the Risk Factors section of our Form 10-K for the year ended December 31, 2024. We assume no obligation to update any forward-looking statements, except as required by law.

With that, I'll now turn the call over to Emmanuel Lakios, President and CEO.

Thank you, Paul, and good afternoon, everyone. We appreciate you joining us today to review our third quarter 2025 financial results and to provide an update on our business and strategic initiatives. After our prepared remarks, we look forward to taking your questions. For the third quarter 2025, revenue was $7.4 million, a 9.6% decrease from prior year quarter and a 44.9% increase compared to the second quarter of this year. Revenue to date was $20.8 million and was 7.1% higher than the same period 2024.

Orders for the third quarter totaled $2.2 million, primarily driven by continued demand in our SDC segment for gas delivery systems. For the 9 months of 2025, total orders were $9.5 million compared to $21 million in the same period last year. At September 30, 2025, backlog stood at $8 million compared to $13.2 million at June 30, 2025, as we converted backlog to revenue in the quarter.

Our third quarter and year-to-date bookings were influenced by several external factors, including uncertainties related to proposed tariffs, reduced U.S. government funding for university and U.S. government shutdown and timing in the product adoption within our growth markets.

In response to the ongoing fluctuations in our order rate and the recent decline in bookings within the CVD Equipment division, our Board of Directors has approved a comprehensive transformation strategy aimed at significantly reducing fixed operating costs and creating a more agile organization.

Key elements of this plan include: transitioning CVD equipment business from vertically integrated fabrication to outsourced fabrication of certain components, enabling us to reduce our fixed costs and improve scalability. A workforce reduction in the CVD Equipment division to be completed by year-end 2025, expected to reduce the annual operating cost by approximately $2 million beginning in 2026. To note, the SDC division will not be impacted by these actions.

Revising our sales approach by leveraging distributors and external representatives to complement our internal sales force and broadening our market reach, exploring strategic alternatives for certain businesses and product lines, which could include asset sales and divestments. Together, these initiatives will allow us to focus on our core strengths, which are engineering design, assembly, test, installation and customer service, all while driving greater efficiency and long-term profitability.

We remain encouraged by the opportunities ahead in our target markets, aerospace and defense, industrial applications, which include silicon carbide on graphite, silicon carbide high-power electronics and electric vehicle battery materials. As an update on opportunities in the silicon carbide market, in October 2025, we announced a new order from Stony Brook University for 2 PVT150 physical vapor transport systems to support their center established by onsemi Silicon Carbide Crystal Growth Center.

We're proud to play a role in advancing semiconductor materials research and support critical technologies in artificial intelligence and electrification. We are continuing the development of our 200-millimeter silicon carbide crystal growth process using our PVT200 system targeted at the high-power electronics market. This same platform is being evaluated for other wide band gap materials such as aluminum nitride.

Our reactor design and control architecture delivered the precision and repeatability needed for next-generation material production. CVD remains well positioned across multiple growth markets. We believe that our transformation initiatives will strengthen our foundation and will better support our goal of achieving profitability and positive cash flow.

With that, I'll now turn over the call to our CFO, Rich Catalano, to review our financial results in more detail.

Thank you, Manny, and good afternoon, everyone. Third quarter 2025 revenue was $7.4 million compared to $8.2 million in Q3 of 2024. The quarter-over-quarter decrease was primarily due to the absence of revenue from our MesoScribe segment, which ceased operation in 2024. Revenue from our CVD Equipment segment was driven by 3 key customers, representing approximately 55% of total revenue for the quarter. Our contract modification during the third quarter allowed us to recognize revenue in Q3, contributing approximately $1 million. This was a change only in the timing of the revenue recognition.

Our SDC segment reported $1.7 million in revenue, down slightly from $1.9 million in Q3 2024 due to fewer contracts in progress, but they continue to have a strong backlog. The company gross profit for the quarter, was $2.4 million with a gross margin of 32.7%. This is compared to $1.8 million and 21.5% in the prior year quarter. This improvement was primarily due to a more profitable contract mix in our CVD Equipment segment, offset by the loss of the MesoScribe's contribution, and we also had a $100,000 charge for a onetime certification cost within the SDC segment.

Operating income was $308,000 as compared to operating income of $77,000 in Q3 2024. After other income, primarily interest, net income was $384,000 or $0.06 per diluted share versus $203,000 or $0.03 per diluted share in the prior year quarter.

As to our balance sheet, at September 30, 2025, we held $8.4 million in cash and cash equivalents as compared to $12.6 million at December 31, 2024. Net cash used in operating activities for the first 9 months of 2025 was $4.1 million, largely due to changes in working capital as well as contract timing. Our working capital improved to $14.6 million as compared to $13.8 million at year-end 2024.

As part of our transformation plan discussed earlier, we do expect to incur approximately $100,000 in severance and related charges in Q4 of 2025. In addition, we may recognize noncash impairment charges in future periods if certain long-lived assets are sold below their book value.

Looking ahead, our return to consistent profitability depends on new equipment orders, cost management, successful implementation of our transformation plan and continued control over our capital expenditures.

Although order timing can cause quarterly fluctuations, we believe our current cash position and projected operating cash flows will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months.

With that, I'll turn the call back to Manny.

Thank you, Rich. Our focus remains clear: serving our customers, supporting our employees, creating value for our shareholders and achieving a return to sustained profitability. Our goal continues to be enabling tomorrow's technology today.

Operator, we're now ready to open the line for questions.

[Operator Instructions] Our first question is from [indiscernible] with MSE Resources.

I'm a long-time buy-and-hold fan of CVV. Also, materials engineer that's worked -- done a lot of work mainly in CVD coatings for engine -- high-temperature engines and semiconductor applications. So I've got a lot of hope for the company in those markets, especially. My question is about markets for composite applications for combustion turbines for power generations, meaning stationary turbine engines. For example, GE Vernova is showing growing backlog for stationary combustion engines. I was wondering if you can speak to orders or applications of the CVV systems for stationary combustion engines. Also a second question about just a little bit of insight on general locations of the materials outsourcing you'll be doing? Is it quite regional? Is that across the country or abroad?

Paul, thank you for being a loyal shareholder. Let me -- 2 questions. First, the question on the ground-based gas turbine engines. As you're likely aware and many of the listeners are as well, the primary use of ceramic matrix composites are in the hot section of the engine. There are several engines out there that already are utilizing silicon carbide-based composite materials for shrouds and for nozzles.

Those, to my knowledge, have not yet been brought into the ground station gas turbine engines in that they don't burn -- they're not a hot section turbine, where we anticipate use in the future for silicon carbide-based composite materials, CMCs in the energy field would be more so in replacement of some specific materials for nuclear reactors and for pellet encapsulation. Those are future emerging opportunities.

On your second question, which is more on the supplier base. CVD has historically had a mix of both external and also internal make components. We've had a focus on our sheet metal shop and also on the smaller machine components, both turned and milled machined elements. The larger chambers have typically been outsourced. So we've always had a mix of suppliers. Over the last several years, we have combed through those suppliers. And we've evaluated our cost structure closely over the last 12 months to a little over a year.

And we've determined that the vertical integration model -- integrated model has really become less efficient given both our order volumes and also from the sheer fact that when you're vertically integrated, it's very difficult to be best-of-breed in sheet metal cutting, bending, welding, painting. And those are things that our suppliers do -- our merchant suppliers do, I would say, as well and in some cases, better than we do and are more cost effective.

So this -- the outsourcing was inevitable, and this is the right time to implement that strategy. Now to answer your question, is it regional? It's in the U.S. We are -- our focus is to outsource our machining to the U.S. We will extend to North America, specifically Canada in some cases.

Okay. That's really great detail. Aside on that, the vertical integration, I think, was hugely valuable to the company 15, 20 years ago. I think it allowed you to really refine the quality and the control that you had over your systems, but I totally understand the change in the dynamics of the economies and economies of scale. I assume that your quartz, will that remain interior?

It will be a mix, but we will retain our IP and Black Art in the area of quartz fabrication. And we'll also retain certain elements of capability in our machine shop, but the lion's share of the components will be outsourced.

There are no further questions at this time. I'd like to hand the floor back over to Emmanuel Lakios for any closing comments.

Okay. Thank you, operator, and thanks to everyone for joining us today. We appreciate your continued support and confidence in CVD Equipment Corporation. If you have any additional questions, please feel free to reach out to me directly. This concludes today's call. Thank you.

We thank you again for your participation. You may now disconnect your lines.

Greetings, and thank you for standing by. Welcome to the CVD Equipment Corporation Second Quarter 2025 Earnings Call. As a reminder, this conference is being recorded. We will begin with prepared remarks followed by a question-and-answer session. Presenting on the call today will be Emmanuel Lakios, President and CEO and member of the CVD Board of Directors; and Richard Catalano, Executive Vice President and Chief Financial Officer.

We have posted our earnings press release and call replay information to the Investor Relations section of our website at www.cvdequipment.com. Before we begin, I would like to remind you that many of the comments made on today's call contain forward-looking statements, including those related to future financial performance, market growth, total available market, demand for our products and general business conditions and outlook.

These forward-looking statements are based on certain assumptions, expectations and projections and are subject to a number of risks and uncertainties described in our press release and in our filings with the SEC, including, but not limited to, the Risk Factors section of the company's 10-K for the year ended December 31, 2024.

Actual results may differ materially from those described during this call. In addition, all forward-looking statements are made as of today, and we undertake no obligation to update any forward-looking statements based on the new circumstances or revised expectations. Now I would like to turn the call over to Emmanuel Lakios.

Operator, thank you, and good afternoon, everyone. Thank you all for joining us today to discuss our second quarter 2025 financial results and other important company developments and pertinent information related to our business. Your thoughts are important to us. We look forward to your questions in our Q&A session.

Our second quarter 2025 revenue was $5.1 million, representing 19.4% decrease from prior year period and a decrease of 38.5% as compared to our first quarter of 2025. Our year-to-date revenue of $13.4 million was 19.2% higher than the prior year period. Our orders for the second quarter were $4.5 million, supported by strong demand in our SDC segment for gas delivery equipment. Orders for the company for the first 6 months of 2025 were $7.3 million as compared to $16.9 million for the first 6 months of 2024.

Our bookings and revenue during the second quarter reflected several factors, including the uncertainties related to proposed tariffs, reduced U.S. government funding for universities, the timing of the adoption of our products and the dynamic nature of the emerging markets we serve. We are actively monitoring the evolving customer demand, geopolitical landscape and potential tariff impacts as we continue to manage our operating expenses.

In early July 2025, we shipped our first CVD4000 silicon carbide coating reactor system to an industrial customer. The system will be used by our customer to apply a silicon carbide coating on OEM graphite components. The remaining 2 systems of the 3 system order are planned for shipment over the next 12 months. Our backlog as of June 30, 2025, was $13.2 million, down from $13.8 million at March 31, 2025.

We believe CVD Equipment Corporation is well positioned to provide solutions across our key markets, aerospace and defense, industrial with applications such as silicon carbide on graphite, silicon carbide high-power electronics and electric vehicle battery materials. In our aerospace and defense market, our key product offerings include chemical vapor and filtration systems used in the production of ceramic matrix composites for commercial jet engines and for silicon bond coat systems for CMC components.

Our industrial market customers include silicon carbide on graphite coating systems, and we are also exploring potential uses for the nuclear energy market. Related to silicon carbide high-power electronics, our core products are the PVT150 and PVT200 silicon carbide crystal growth systems. In the electric vehicle markets, we are pursuing new opportunities for our powder coat systems, which could be used in the production of advanced anode materials.

In 2025, we are shipping several FirstNano systems for microelectronic and carbon nanotube applications. We will continue to support the sales activity and development in these areas. We are committed to our long-term strategy of growing our presence across key markets while maintaining expense management to support our goal of achieving sustained profitability and cash flow. I would like to turn the call over to our CFO, Rich Catalano, who will provide an overview of our second quarter results.

Thank you, Manny, and good afternoon. Our revenue for the second quarter of 2025 was $5.1 million as compared to $6.3 million for the second quarter of 2024. Revenue from our CVD Equipment segment was primarily driven by 2 customers, one in the industrial sector and one in aerospace. These customers represented 41.1% of our revenues for the quarter.

The decrease in revenue versus the prior year quarter was primarily attributable to lower revenue of $0.7 million from our CVD Equipment segment and $0.6 million decrease in revenue in our SDC segment. The decrease in the CVD equipment revenue of 17.4% was principally due to lower revenues from contracts in progress of $1.1 million, offset by higher nonsystem revenue of $0.4 million. The resources we focus on our new product launch of the CVD4000 partially attributed to the reduced revenue from other contracts in progress.

While our SDC segment revenue of $1.4 million was lower than the $2.2 million recorded in the second quarter of 2024 due to less contracts in progress, orders for SDC's gas delivery systems were strong during the quarter. Gross profit for the 3 months ended June 30, 2025, was $1.1 million with a gross margin of 21%. This compares to a gross profit of $1.5 million or 24.3% for the 3 months ended June 30, 2024.

The decrease in gross profit of $0.5 million was primarily due to lower revenues for contracts in progress at both CVD Equipment and SDC segments, partially offset by higher CVD equipment nonsystem revenues. Our operating loss for the second quarter of 2025 was $1.1 million as compared to an operating loss of $0.9 million in the second quarter of 2024.

After other income, which consists principally of interest income, our net loss for the second quarter was $1.1 million or $0.15 per share for both basic and diluted. This compares to a net loss for the second quarter of 2024 of $0.8 million or $0.11 per share for both basic and diluted. As to our balance sheet, our cash and cash equivalents at June 30, 2025, was $7 million as compared to $12.6 million at December 31, 2024.

This decrease was principally due to the net loss of $0.7 million for the 6 months ended June 30, 2025, an increase in accounts receivable of $2.8 million (sic) [ $3.6 million ] as we achieved certain contract milestones late in the quarter, a net change in contract assets and liabilities of $2.6 million, offset by noncash items of $0.9 million. Our net working capital at June 30, 2025, was $13.9 million, comparable to what we had at December 31, 2024, of $13.8 million.

Our return to profitability is dependent, among other things, the receipt of new equipment orders, our ability to mitigate the impact of inflationary pressures as well as managing planned capital expenditures and operating expenses. In addition, our revenues and orders have historically fluctuated based on changes in order rates as well as other factors in our manufacturing process that impact the timing of our revenue recognition.

Accordingly, both orders received from customers and revenue recognized historically fluctuate from quarter-to-quarter. After considering all these factors, we believe our cash and cash equivalents and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months. We will continue to evaluate the demand for our products, assess our operations and take actions anticipated to maintain our operating cash to support our working capital needs.

Rich, thank you for your presentation. Our focus remains on our customer markets, our employees, our shareholders and the pursuit of growth and return to consistent profitability. Your comments and questions are important to us. With the close of our presentation, I would like to open the floor up to your questions.

[Operator Instructions] Our first question comes from the line of [ Frank Giordano ], private investor.

I just wanted to ask a question -- a quick question regarding the question I asked about 2 quarters ago. It's about the NDAs that you have. Can you specify if it's a domestic client or if it's an international client because of the tariff environment right now, that might be more important to us to know.

Can you be -- and I apologize if my memory doesn't recollect the question. This is the first time around 2 quarters ago, I apologize. Can you just rephrase that a little bit when you refer to the NDA?

Well, I want to know specifically what kind of company it was. And again, probably indirectly, I meant if it was domestic or international client. And back then, we didn't have the problem with the tariffs. But now we do have a problem with the tariffs. So if it's domestic or if it's international, it might make a difference.

It's domestic. The facility is located here in the United States.

Okay. But your clients, your clients that signed an NDA with you guys, these clients, are they international clients or they are domestic clients?

It could be both U.S. domestic as well as North America and then expand to Europe and Asia as well. We have NDA nondisclosure agreements with most, if not all of our clients. But as far as the impact of tariffs on our business, the majority of the orders that we're speaking to are U.S.-based.

All right. So you won't have no problems with tariffs on those orders?

Well, the tariffs that we do have clearly affect the cost of goods sold line on the cost of the product, where some of the components come from pumps and things of that sort come from either Europe or from Asia, and there are some import tariffs. So there is some inflationary pressure on the cost of goods sold line, but we're managing through that. And that's something that I spoke about just before.

And one more thing, just I thought in my thought. On that delivery that you had in July, early July, would that be recorded in the third quarter?

We recognize our revenue using the overtime concept. So as we manufacture the equipment, we recognize a pro rata amount of revenue. So we've recognized a good portion of that revenue as we've been manufacturing it, the equipment...

At the time of manufacturing, okay.

There are no further questions at this time. I'd like to turn the call back over to Emmanuel Lakios for closing remarks.

Okay. Well, thank you, operator. I appreciate that, and thank you all for joining the call today. We appreciate the attendance on the call and the support and the loyalty of our shareholders and all of our employees. If you have any further questions, please feel encouraged to reach out to myself or to Rich. And this concludes our second quarter earnings call. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Good morning. and welcome to the CVD Equipment Corporation Annual Meeting of Shareholders. My name is Lawrence Waldman, and I am the Chairman of the Board of Directors.

It is now my pleasure to introduce Emmanuel Lakios, our President and Chief Executive Officer.

Good morning, and thank you, Larry, for the introduction. I'm Emmanuel Lakios, President, Chief Executive Officer of CVD Equipment Corporation. Before this shareholder meeting begins, I would want to extend a warm welcome to you and express the thanks of the management team for your virtual attendance today.

Richard Catalano, Executive Vice President, Chief Financial Officer, Treasurer and Secretary of the company, will act as Secretary of the meeting and will now present proof of the due calling of this meeting.

I present the following: a copy of the printed notice of meeting dated June 27, 2025, stating the time, place and purpose there hereof. I suggest that unless specifically requested, we dispense with the reading of the notice. Please see the website, which contains a copy of the printed notice of meeting, a complete list of holders of record of common stock of the company as of the close of business on June 16, 2025, and the record date fixed by the Board of Directors for shareholders entitled to notice of and to vote at the meeting.

This list, which will be kept open to the Inspector of shareholders throughout the course of the meeting shows that at the close of business on June 16, 2025, there were 6,881,838 shares of common stock issued and outstanding and an affidavit from Robert Zubrycki of Continental Stock Transfer and Trust Company showing that on June 27, 2025, he caused to be mailed to each shareholder of record a copy of the notice of Internet availability of proxy materials.

The secretary is directed to incorporate a copy of the notice of Internet availability of proxy materials, together with the affidavit of mailing of such notice in the minute book of the company as part of the minutes of this meeting.

At this time, I would like to introduce the other company's directors, Andrew Africk, Robert M. Brill, Ashraf Lotfi and Debra Wasser.

I have appointed Margaret Lloyd of Continental Stock Transfer & Trust Company as the Inspector of Elections. The Secretary will please annex the inspector's affirmation of the minutes of this meeting. The inspector has entered upon her duties and has informed me that the holders of record of a majority of outstanding shares of common stock representing a quorum are present at the opening of this meeting.

The notice of meeting sets forth three proposals for the shareholders to vote upon, each of you who are shareholders of record as of June 16, 2025, have received a proxy. If anyone has not previously voted, you may vote online until the polling has been closed. The virtual polls have been opened since the beginning of the meeting. Any shareholder who has not yet voted or wants to change their vote, may do so by clicking on the voting button of the web portal and following the instructions. Shareholders who have not sent in the proxy or have already voted via the Internet and do not want to change their vote, do not need to take any further action.

We will discuss each proposal that is due to be voted on. We will also advise you of the preliminary vote tabulation before the meeting adjourns. After the ballots have been counted following the close of the voting pools, we will file a current report on Form 8-K disclosing the final vote tabulations.

The first item of business before the meeting is the election of 6 directors who shall serve until the next meeting of shareholders in 2026 when their successors are duly elected and qualified. Mr. Waldman will present the nomination of directors to the shareholders.

I nominate as directors, Lawrence J. Waldman, Emmanuel Lakios, Andrew Africk, Robert M. Brill, Ashraf Lotfi and Debra Wasser.

Will anyone second the nomination?

I second the nominations.

Will each of the shareholders kindly mark his or her ballot under item number #1.

The next item of business to come before the meeting is the ratification of the appointment of CBIZ CPAs P.C. as the company's independent registered public accounting firm for the fiscal year ending December 31, 2025. Will anyone move that the appointment of CBIZ CPAs P.C. be ratified, confirmed and approved?

I move that the appointment of is, CBIZ CPAs P.C. be ratified, confirmed and approved.

Will anyone second the motion?

I second the motion.

Will each of the shareholders kindly mark his or her ballot under item #2.

The next item of business before the meeting is an advisory vote to approve the compensation of the company's named executive officers. This proposal is a nonbinding advisory vote. The company's executive compensation is discussed in the proxy statement that was sent to you in connection with this meeting. A motion to vote on the compensation of the company's named executive officers as described in the proxy statement is now in order.

Will anyone move that the compensation of the company's named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure of the SEC to be approved?

I move that the compensation of the company's named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure rules of the SEC be approved.

Will anyone second the motion?

I second the motion.

Will each of the shareholders kindly mark his or her ballot under Item #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 balloting.

I will now present the report on voting for the formal proposals based on preliminary examination provided by our inspector of elections. Based on that preliminary report for proposal #1, each of the 6 nominees named in the proxy statement has been duly elected as a director.

For proposal #2, the appointment of CBIZ CPAs P.C. as our independent auditor for 2025 has been ratified.

For Proposal #3, the nonbinding advisory resolution supporting the 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 to the meeting be adjourned.

Is there a second to the motion?

I second the motion.

All those in favor say aye

[Voting]

All those opposed say no.

This meeting is hereby declared adjourned.