Shares of CVD Equipment Corporation (CVV Quick QuoteCVV - Free Report) have gained 11.1% since the company reported its earnings for the quarter ended Sept. 30, 2024. This compares to the S&P 500 index’s -0.7% change over the same time frame. Over the past month, the stock moved -5% versus the S&P 500’s 2.1% change.

In the third quarter of 2024, CVD Equipment reported revenues of $8.2 million, a 31.4% increase year over year. The increase in revenues was primarily driven by higher revenues from the CVD Equipment, SDC and CVD Materials segments. 

Gross profit improved to $1.8 million, up 14.8% from $1.6 million in the prior-year quarter. However, gross margin declined to 22.4% from 25.6%, largely due to a $1 million inventory charge related to adjustments in its PVT150 systems. The company achieved a net income of $0.2 million, or $0.03 per diluted share, against a net loss of $0.8 million, or $0.11 per share, a year earlier.

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Other Key Business Metrics

CVD Equipment's backlog stood at $19.8 million as of Sept. 30, 2024, a decrease from $24 million on June 30, 2024, and an increase from $18.4 million on Dec. 31, 2023. Total bookings in the quarter totaled $4.1 million compared with the prior-year quarter’s $4.4 million. 

Segment performance showed growth in revenues. CVD Equipment segment’s revenues rose 18.5% to $5.7 million, accounting for 69.3% of total revenues, boosted by aerospace contract activities. SDC segment’s revenues grew 27.5% year over year to $2 million, accounting for 22.6% of total revenues, due to heightened demand for gas delivery systems. 

CVD Materials segment’s revenues surged 634.4% year over year to $0.7 million, accounting for 8.1% of total revenues, driven by the final sales to an aerospace company and MesoScribe ceased operations as of Sept. 30, 2024.

Management Commentary

CEO Emmanuel Lakios emphasized the strategic importance of the first shipment of its PVT200 system for 200mm silicon carbide (SiC) wafer production, a transition reflecting industry trends toward larger wafers amid declining 150mm wafer prices. Management also highlighted ongoing growth in the aerospace and defense markets, supported by a $3.5 million order for CVI/CVI3500 systems in early November 2024. Despite challenges such as inventory adjustments and market shifts, the company remains focused on improving profitability and customer engagement.

Factors Influencing the Headline Numbers

The quarter benefited from increased demand in aerospace and defense, notably for Ceramic Matrix Composites, which are critical for reducing fuel consumption in jet engines. However, the company faced challenges from overcapacity and declining prices in the SiC market, impacting PVT150 systems.

Guidance

Management did not provide explicit financial guidance but expressed confidence in sustaining operations over the next 12 months, supported by a cash balance of $10 million and a backlog of orders. However, they acknowledged revenue fluctuations due to variable order timing and emerging market dynamics.

Management cited volatility in order patterns due to emerging market dynamics but emphasized disciplined cost management and focused R&D investment to support future growth. CVD Equipment reiterated its focus on expanding its SiC product portfolio to capitalize on projected market growth in high-power electronics and EV battery materials.

Other Developments

During the quarter, CVD Equipment finalized the wind-down of its MesoScribe subsidiary, recognizing a $0.6 million gain from the sale of equipment. The move aligns with a broader strategy to focus resources on high-growth markets.