| Emmanuel Lakios | executive |
| Richard Catalano | executive |
Greetings. Thank you for standing by. Welcome to CVD Equipment Corporation's Third Quarter 2024 Earnings Call.
As a reminder, this conference is being recorded. [Operator Instructions] Presenting on the call today will be Emmanuel Lakios, President and CEO and a member of 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 I 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 that are subject to a number of risks and uncertainties described in our press release and 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, 2023. 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 new circumstances or revised expectations.
I would now like to turn the call over to Emmanuel Lakios. Please go ahead, sir.
Operator, thank you, and good afternoon, everyone. Thank you for -- thank you all for joining us today to discuss our third quarter 2024 financial results and other important company developments and pertinent information related to our business.
Your thoughts are important to us, and we look forward to your questions in our Q&A session.
Our third quarter 2024 revenue was $8.2 million, representing a 31.4% increase from prior year period and was up 29.1% as compared to our second quarter of 2024, while our year-to-date revenue of $19.5 million was 2.8% lower than the prior year period.
We are pleased to have shipped a PVT200 system to a new account for our PVT product line during the third quarter.
As we stand -- as we stated on our last call, this was a strategic order for silicon carbide 200-millimeter crystal boule growth, which we received in the first quarter of 2024. The performance of the system is currently being evaluated for production by our now second account.
Our orders for the third quarter were $4.1 million, primarily driven by demand in our CVD segment. Orders for the first 9 months of 2024 were $21 million as compared to $19.9 million for the first 9 months of 2023.
We continue to see an ongoing recovery of our aerospace and defense market segment. In early November, we received a $3.5 million follow-on order for our CVI/CVD3500 system from an existing aerospace customer.
As a reminder, during our first quarter of 2024, we received a $10 million multisystem order in our industrial market from a company coating components with silicon carbide.
We are encouraged that our backlog on September 30, 2024, was $19.8 million, which is 7.6% higher than our 2023 year-end backlog. The increase in revenue for the quarter supported an improvement in operating performance and system gross margin. This was unfortunately partially offset by a noncash charge for PVT150 inventory as the 150-millimeter silicon carbide market continues to show overcapacity and declining wafer price.
As a result, the wafer producers are quickly transitioning to 200-millimeter production to stay competitive.
We will continue to support, though, both our PVT150 and, of course, our PVT200 products.
Our order and revenue levels continue to fluctuate given the nature of the emerging growth end markets we serve. We'll stay the course on our strategic efforts to build critical customer relationships, achieve profitability, carefully manage our cash flow and our costs while simultaneously focusing on growth and return on investment.
I would like to turn our call over to our CFO, Richard Catalano, who will provide an overview of our third quarter results.
Thank you, Manny, and good afternoon.
As Manny mentioned, our revenue for the third quarter of 2024 was $8.2 million as compared to $6.2 million in the prior year quarter. It should be noted that the third quarter of 2023 did include revenue of $0.8 million that was recognized as a result of a modification of a customer contract during that quarter. The increase in revenues versus the prior year quarter was primarily attributable to higher revenue of $0.9 million from our CVD Equipment segment, $0.4 million increase in revenue from our SDC segment and also an increase of $0.6 million from our CVD Materials segment as our MesoScribe subsidiary fulfilled its final orders.
During the quarter, we recognized a gain of $0.6 million upon completion of the sale of equipment related to our MesoScribe subsidiary.
As previously disclosed, we have decided to wind down the operations of MesoScribe. MesoScribe ceased operations effective September 30, 2024, upon fulfillment of its final orders. The increase in CVD Equipment revenues of $0.9 million, or 18.5% as compared to the prior year quarter, principally is from increases in revenues from aerospace contracts in progress, offset in part by lower revenues for PVT systems and spare parts.
Our SDC segment revenues were 27.5% higher than the third quarter of 2023, as demand for SDC's gas delivery systems remained strong.
During the 3 months ended September 30, 2024, we did record a noncash charge to reduce the net realizable value of our PVT150 inventory by approximately $1 million. This was based on our assessment of the current market for silicon carbide equipment for 150-millimeter systems.
Our gross profit for the 3 months ended September 30, 2024, was $1.8 million, representing a gross profit margin of 22.4%. This is compared to a gross profit of $1.6 million or a gross profit margin of 25.6% for the 3 months ended September 30, 2023. This increase in gross profit of $0.2 million was primarily due to the higher revenues as well as improved margins on CVD contracts in progress and higher gross margins on the final MesoScribe sales. These increases were partially offset by the $1 million inventory charge.
Operating income for the third quarter was $77,000 as compared to an operating loss of $1 million in the third quarter of 2023. The current year quarter does include gross profit on the final sales of MesoScribe of approximately $0.5 million; the gain on the sale of equipment of MesoScribe of $0.6 million; and the inventory charge offsetting that by $1 million.
After other income, which consists principally of interest income, our net income for the third quarter was $209,000, or $0.03 per share for both basic and diluted. This compares to a net loss for the third quarter of '23 of $753,000, or $0.30 per share for basic and diluted.
Our working capital at September 30, '24, was $13.3 million as compared to $14.3 million at the end of December '23.
Our return to consistent profitability is dependent upon, 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, as Manny says -- Manny mentioned, our revenues and orders have historically fluctuated based on changes in order rate as well as other factors in our manufacturing process that impacts the timing of our revenue recognition. Accordingly, orders received from customers and revenue recognized may 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. We look forward to continuing to build on our success in the year ahead.
Your comments and questions are important to us.
With the close of this presentation, I would like to open the floor to your questions.
[Operator Instructions] Our first question is from [ Frank Giordano ] with -- he's a private investor.
Congratulations on the return to profitability. My question, again, you guys never mentioned the type of clients you have. Like I know you -- it's probably because you have to keep it quiet. But can you at least mention the type of company, if it's an EV company or if it's an airplane company or something like that? Is there a way you could do that? Or you just have to keep it private?
Well, Frank, thank you for your question. Nice meeting you, first and foremost. The -- we do have NDAs with our customers, where we're not allowed to disclose specifically for most of them, what the -- what they've ordered and also that they are a customer.
So we do not associate when we announce, for example, the order that we announced today, which was a follow-on order for CVI3500, which is -- which was sold for a bit over $3.5 million. We can say that they are a leading gas turbine engine manufacturer, and there are only a certain number of gas turbine manufacturers on the planet.
In the area of electric vehicles, again, we're not able to disclose who our end-use customers are other than that they are crystal growth and wafer producers in that space.
So I understand the appetite and the desire to know more, but we are limited by our NDAs.
So you just cannot -- besides the name of the company, you cannot even mention what type of company it is. Is that correct?
No, they can. I did before. The aerospace company manufactures gas turbine engines, and the EV company manufactures silicon carbide wafers.
Okay.
So you did mention EV company, all right, okay.
Well, the EV use case, the application I did mention, yes, Frank.
Okay. All right. I will recheck it again. All right. Besides that, again, congratulations again and hopefully, things get better down the road.
Thank you, sir. Thank you, Frank.
[Operator Instructions] With no further questions at this time, I would like to turn the conference back over to Mr. Lakios for closing remarks.
Thank you, operator, and thank you, everyone, for dialing in. We appreciate your attendance on the call and all of your support and especially the loyalty from our shareholders and our employees.
If you have any further questions, please reach out to Richard or myself directly. This concludes our third quarter call. Thank you.
Thank you.
You may now disconnect, and thank you once again for your participation.