CVD EQUIPMENT CORP Q4 FY2024 earnings call

• Launched and shipped a PVT200 system for silicon carbide crystal boule growth in Q2 2024, with the customer evaluating performance. - Aerospace and defense market recovery, including a $3.5 million follow-on order for CVI/CVD3500 in November 2024. - Received a $10 million multisystem order in the industrial market in Q1 2024. - Completed end of life for MesoScribe product line, focusing on core CVD and SDC. - Backlog at December 31, 2024 was $19.4 million, 4.9% higher than 2023 year-end. - Continued focus on key segments: Aerospace & Defense, Microelectronics, Energy Storage, Industrial. - Geopolitical environment and tariffs may impact supply chain and increase component costs.

Fourth quarter 2024 revenue was $7.4 million, an 80.3% increase from prior year's fourth quarter. Full-year 2024 revenue was $26.9 million, 11.5% higher than prior year. The CVD Equipment segment saw revenue increase due to aerospace and industrial contracts, with a $1.9 million full-year increase. The SDC segment had 28.8% higher fourth quarter revenue due to strong gas delivery systems demand, and a $1.3 million full-year increase. A non-cash charge of $1.3 million was recorded in 2024 to reduce the net realizable value of PVT150 inventory, with $300,000 in the fourth quarter and $1 million in the third quarter.

• Orders and revenue levels expected to fluctuate due to emerging growth markets. - Cash and cash equivalents, along with projected cash flow from operations, are sufficient to meet working capital and capital expenditure requirements for the next 12 months. - Need new equipment orders, mitigate inflationary pressures, and manage operating expenses and capital expenditures.

• Geopolitical environment including potential tariffs affecting supply chain and increasing component costs. - Silicon carbide market challenges due to global overcapacity of wafers and decline in wafer prices. - Fluctuating orders and revenue based on market conditions and emerging market dynamics.

Q: How did the large $10 million silicon carbide protecting coating order come about?

A: Developed a large volume silicon carbide CMC system for aerospace, and the industrial customer saw the advertisement and came for their need.

Q: What are the prospects for PVT150/200 orders?

A: Uncertainty due to overcapacity, wafer pricing, and geopolitical factors; need to monitor wafer demand and pricing in the U.S.

Q: How many major aerospace engine manufacturers are there and potential new relationships?

A: There are four key aerospace engine component manufacturers, with three having installed base; defense side is custom specific.

Q: Details on the battery materials business and potential customers?

A: 1D has IP for silicon nanowire growth on carbon, and there are other companies in the silicon addition space, but 1D is a key customer.

Q: Feedback on the PVT200 customer and bake off?

A: Tool meets performance specs, but need for demand and process validation over time.

Q: Operating margins and future trends?

A: Improvement due to learning from first article, objective to maintain margins above 30% with controlled overhead.

Q: Tariffs and inventory?

A: Some components from China, safety stock maintained, tariffs as a risk to monitor.