CVD Equipment (CVV) Q2 2026 earnings call transcript

Before I begin, please note that the comments made during this call may include forward-looking statements, including statements regarding future financial performance, marketing conditions, customer demand, strategic initiatives, potential asset monetization opportunities, and the execution of our transformation strategy. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results of different materially. For discussion for these risks, please refer to our filings with the Securities and Exchange Commission, including the risk factor 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 turn the call over to Emmanuel Acquios, President and Chief Executive Officer. Please go ahead. Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to review our second quarter, 2026 financial results, and to provide an update on our business and strategic initiatives. The second quarter marked a transformational period for CVD EQUIPMENT. Most notably, we completed the sale of our SDC business on April 1, 2026. This transaction significantly strengthened our balance sheet, increased our financial flexibility, and allowed us to focus on our future strategy, including our core advanced material process equipment group. As a result of the divestiture, we ended the quarter with approximately $23,500,000 in cash and cash equivalents and no long-term debt, providing us with a strong financial foundation as we navigate a challenging market environment.

In addition to completing the divestiture, we substantially completed the operational restructuring initiative that we began last year. These efforts were designed to align our cost structure with our current business activity levels, improve operating efficiency, and position the company to respond more effectively when market conditions improve. We expect these actions to materially reduce our fixed operating costs going forward. While customer orders level continue to be adversely affected by broader economic and geopolitical uncertainty, we remain actively engaged with our customers and are continuing to pursue opportunities developing across our targeted markets.

We are also focused on maintaining a disciplined approach to capital allocation and expense control with the goal of creating long-term shareholder value. Turning to operating performance, second quarter revenue from continuing operations was approximately $2 million, compared with $3.4 million in the prior year quarter. Orders during the quarter totaled approximately $1.2 million, and backlog at the end of June 30, 2026, was $3.9 million.

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

Thank you, Manny, and good afternoon. As Manny noted, the sale of the SDC business closed on April 1, 2026. Accordingly, the results of SDC continue to be reported as discontinued operations for all periods presented. Following the divestiture, CVD EQUIPMENT operates as a single reportable segment, focusing on advanced material, processing equipment, and related technologies. The second quarter of 2026 revenue from continuing operations was $2 million, as Manny mentioned, compared to $3.4 million in the second quarter of 2025, a decline of approximately 43%. This reduction primarily reflects lower system revenue resulting from weaker bookings experienced during 2025 and the first half of 2026.

Gross profit for the quarter was approximately $329,000 resulting in a gross margin of 16.8% compared to a gross profit of approximately $481,000 and a gross margin of 14.1% in the prior year quarter. The increase in gross margin percentage was primarily attributable to a higher proportion of non revenues during the current quarter Our operating loss from continuing operations was approximately million for the quarter After interest income and other items the net loss from continuing operations was approximately million or per share basic and diluted compared to a net loss from continuing operations of million or 19 cents per basic and diluted share in the prior year quarter Net income from discontinued operations was approximately million This is the regain on the divestiture of SDC net of transaction expenses and income tax expense Including transaction costs we recorded in the first quarter, the total gain on the divestiture was approximately $13.5 million.

As a result, the total income for the second quarter was approximately $12.6 million, or $1.81 cents per basic and diluted share, compared to a net loss of $1.1 million in the prior year quarter.

Turning to our balance sheet, we ended the quarter with approximately $23.5 million in cash and cash equivalents, compared with $8.7 million at December 31, 2025. We also have $900,000 that is being held in escrow related to the SDC transaction and no long-term debt. Our stockholders' equity increased to approximately $36 million as of June 30, 2026, as compared to $24.7 million at year end.

Following our quarter end, the customer associated with the $0.8 million system order that we received in Q2 filed a prepackaged Chapter 11 bankruptcy proceeding. Although the unsecured trade creditors are expected to be unimpaired according to the proposed plan, we will be evaluating the potential impact on the order we just received, as well as the impact on our backlog, our financial results, financial positions, and cash flows.

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

Thank you, Rich. The successful completion of the STC divestiture represents a significant milestone for CVD EQUIPMENT. We have transformed the company into a well-capitalized, debt-free organization with a focus on business strategy and a substantially improved financial position. Although market conditions remain challenging, we continue to pursue orders across our targeted markets and remain committed to disciplined execution, operational efficiency, and long-term shareholder value creation. We believe the actions we have taken over the last year provide a solid platform from where we each move forward.

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

Do you want to ask all your questions, Neil, or do you want me to take it one by one?

So on aerospace in general, aerospace, yes, has had a tick up in the production of gas turbine engines that utilize ceramic matrix composite materials, which we have both an installed base and we have a number of tools, which we have spoken before about, that are in the installation and commissioning phase. So we are in the middle of adding to our customers capacity that they ordered previously, and we shipped and now, as I said earlier, are in the process of installing and commissioning. We have seen an uptick in our consumables and spare parts from the aerospace segment, and as Rich indicated earlier, Those are typically proprietary parts that are very reasonable gross margins, and we'll continue, we believe, to see that as our customers continue to utilize our equipment.

On the PBT side of the business, we have a quality system, produces quality bulls to a marketplace that is saturated by silicon carbide wafers. So we have a solution with serving an ill market, and so we have, as you've seen, we have played down any advancements. We continue to do characterization of our equipment in that there could be a potential future, but at this point in time, we have nothing really to report on the commercial side.

We will typically – thank you, Paul. I don't think we've actually spoken before.

So we have an arrangement, an agreement with Stony Brook University that we will co-release or allow them to release characterization information first to the extent that they have not released anything since our last release. I would say there's nothing more I can say on that other than they continue to run bulls on our equipment.

It's in the energy space. Somebody can assume that it's in battery applications.

Thank you. Thank you.

Brett, I can hear you well. I'm surprised that you weren't the first person to ask the question.

Okay, so if that's the question, we probably need a cup of coffee on it, but let's start off with university funding. There needs to be a shift in the government, federal government funding of universities such that research is put at a higher priority. That has always driven our first nanoproduct lines. The first nanoproduct lines are lower ASP, but they're the seeding material for production systems of the future. The second is we are still impacted by the, and it's just going to take time, by the inefficiencies that were caused by the government shutdown. Some of our prospects, their funding was delayed substantially. I typically tell my team the longer you leave an order or an opportunity on the table the more it can potentially grow mold So some of these opportunities have to be rebirthed re funding resubmitted That going to take some period of time We are seeing some interesting demand for opportunities in the defense area.

And I can't comment because I don't have enough information yet to quantify if that will be a pickup and in what period of time we could see that as a pickup.

So those are the major ones. As far as PVT, a lot of questions today about PVT and silicon carbide. Yes, there's a big demand in the world and a lot of buzz around data centers. Silicon carbide plays a role in data centers, but we don't serve the device side. We serve the bull growth side. And as I said in the first question with Neil, is that market today is saturated by the Chinese suppliers?

And then, of course, on-semi will be incoherent. So there, I think that's going to take a longer period of time. And I don't know what the saving grace will be for that, but the PVT could potentially have – can be incubated into other growth technologies. Again, that's suspect. There are a lot of if statements, so there's nothing really to speak about there.

And in the area of aerospace, we always want to mention that we launched several new products in the aerospace market. And many of those products have not been installed and commissioned to date yet.

Those need to be installed, commissioned, and be adopted so that we could potentially, and again, potentially enjoy orders in the future.

So those are the major, I would say, macro and, I would say, mid-range being the aerospace.

Yeah, I would offend probably half the people in the room if I started talking about politics one way or another, so I probably will stay away from that one. I think whichever party is more favorable to university funding will be a positive to the universities and then, therefore, to all the equipment suppliers, including CVD.

So we really, in the past when we had something to speak about on the strategic alternatives, we did just that. We spoke about it. At this point in time, we do not have anything that I would be able to have a substantive conversation on or disclose. As we do develop that, we will inform all of you of that.

Hi, Brett. Nice to hear from you. You know, at this point, historically, we have not given any type of guidance given the nature of our business and the size of our business. So, unfortunately, we're not able to go out and make those type of forecasts.

Thank you as well. Thank you.

Thank you, Operator, and I appreciate everyone's questions and look forward to hearing from you personally. Thank you all for joining us today. We appreciate your continued support and interest in CVD Equipment Corporation. If you have any other questions or follow-up questions, feel free to contact Investor Relations or myself or Rich, who is also Investor Relations, and we'd love to chat. Thank you very much.