CVV — Q2 2026 Financial Report Analysis

CVD Equipment Corporation builds furnaces and reactors that grow or deposit advanced materials: chemical vapor deposition (CVD) systems, physical vapor transport (PVT) systems for growing silicon carbide crystals, and thermal process equipment. Its customers are in aerospace (jet-engine composites and high-temperature coatings), compound semiconductors, battery storage and research labs. In the second quarter of 2026 (three months to June 30), revenue from the business it kept fell 42.6% to $1.95 million because it had booked fewer systems orders. The company still reported a net profit of $12.6 million, but all of that came from a $13.9 million after-tax gain on selling its SDC division on April 1. The equipment business that remains lost $1.4 million.

At a glance

• $1.95 million revenue, down 42.6% from $3.40 million a year earlier. The cause is fewer system orders: there were too few bookings to keep the factory busy.
• $12.6 million net income ($1.81 per share) is a one-time number. Without the SDC sale gain, the continuing business lost $0.20 per share, against a $0.19 loss a year ago.
• $23.5 million in cash and no debt at June 30, up from $8.7 million at December 31. Shareholders' equity is $36.0 million, about $5.19 per share. The cash is now worth much more than the operating business produces.

The quarter in numbers

All figures are for continuing operations (the CVD Equipment business without SDC) unless labelled otherwise. The year-ago numbers have been restated to exclude SDC.

Gross margin is the share of revenue left after the direct cost of building the equipment. Operating margin is what remains after research, selling and administrative costs too. "Backlog" means orders that customers have signed but that have not yet been turned into revenue. n/m = not meaningful (a swing from loss to profit has no sensible percentage).

For the first half, revenue fell 61.0% to $3.80 million from $9.74 million, and gross margin fell to 12.6% from 23.5%. The second quarter was slightly better than the first: revenue of $1.95 million against about $1.85 million in Q1.

What changed: a much smaller company with a lot of cash

The company says it is in the middle of a "comprehensive strategy to transform" itself. The board approved the plan in November 2025 after orders at the CVD Equipment division kept falling. The plan has three parts so far:

• Outsourcing fabrication. The company stopped making most components in-house and now buys some from outside suppliers, which cuts fixed costs. In early 2026 it sold manufacturing equipment it no longer needed for about $0.56 million.
• Selling SDC. The division was sold for $17.4 million in cash, and the deal closed April 1, 2026. Net proceeds after deal costs and employee-related payments were $15.7 million. Another $0.9 million is held in escrow to cover post-closing adjustments. CVD kept the Saugerties, New York building and leases it to the buyer for two years.
• Exploring "strategic alternatives". The company may sell or divest other product lines or buy new businesses. It says the SDC proceeds give it "financial flexibility" for this.

Revenue is falling because orders are falling. Management says the drop came from "lower system revenue due to lower bookings," which was partly offset by more non-system revenue (spare parts, service and similar sales). Bookings were about $1.2 million in the quarter, and $0.8 million of that was a single system order. Backlog fell to $3.9 million from $4.6 million three months earlier. Of that backlog, $2.7 million is contracts already in progress and $1.1 million is other customer orders. One aerospace customer accounts for 36.0% of it. Customer concentration is high on the revenue side too: two customers made up 50.9% and 24.3% of Q2 revenue.

Gross margin improved to 16.8% from 14.1% even though revenue fell, because there was relatively more non-system revenue. Overhead did not shrink with sales. Research and development rose 7.2% to $685,000, mainly because engineers billed fewer hours to customer contracts (so less of their time counted as cost of revenue). General and administrative costs rose 4.3% to $971,000 on higher professional fees. Selling expenses fell 17.7% after headcount cuts. Operating expenses of $1.89 million were almost the same as a year ago, so with less revenue the operating loss widened to $1.56 million.

What the headline numbers hide

• The profit is a gain on a sale, not earnings from the business. Of the $12.6 million Q2 net income, $13.9 million is the after-tax gain on SDC. The equipment business lost $1.37 million, slightly more than the $1.29 million loss a year ago. Anyone screening on the $1.81 EPS will get the wrong picture. The repeatable figure is the -$0.20 from continuing operations.
• Interest income is propping up the pre-tax line. Interest on Treasury securities rose to $190,000 from $82,000 because the company invested the sale proceeds. This income depends on the cash pile and on interest rates, not on selling equipment.
• Operating cash burn looked smaller than the loss because of collections. In the first half, operating activities used $1.3 million of cash, much less than the $3.1 million continuing loss. The main reason is that contract assets (work done but not yet billed) fell by $1.65 million, inventory fell by $0.38 million, and $0.69 million of costs were non-cash, mainly stock compensation and depreciation. A $0.9 million rise in receivables worked the other way. Turning work-in-progress into cash can only happen once. With the backlog shrinking, future quarters' cash burn should look more like the operating loss.
• A tax bill is still to come. The company expects to pay about $0.7 million in income tax on the SDC gain in Q3 2026. That will come out of the $23.5 million.
• The single system order is at risk. After the quarter ended, the customer behind the $0.8 million system order filed a prepackaged Chapter 11 bankruptcy. (A prepackaged Chapter 11 is a court reorganization the company agreed with its creditors in advance.) The customer says ordinary trade creditors should be paid in full. CVD says there is "no assurance" the purchase will go ahead as planned. That order is most of the quarter's system bookings and part of the $3.9 million backlog.
• There is no guidance. Management gave no revenue or bookings outlook. It says only that cash plus collections and existing backlog will cover its needs for the next 12 months.

Takeaway: CVD Equipment is now mostly a cash balance attached to a small, loss-making equipment business. The company has $23.5 million in cash and no debt. The remaining business brought in under $2 million of revenue this quarter, lost about $1.4 million, and holds a backlog of only about two quarters of revenue. What the company decides to do with the cash will matter more to its value than any one quarter's equipment sales.

What to watch next

At the Q2 loss rate of about $1.4 million a quarter, the cash would last many years. So the near-term questions are about direction, not survival. First, whether bookings pick up: the backlog is $3.9 million and first-half bookings were $2.9 million, so the company needs new aerospace or silicon carbide system orders (such as the two PVT150 units sold to Stony Brook University in October 2025) to keep revenue from falling further. Second, whether the bankrupt customer's $0.8 million order goes ahead. Third, what comes out of the strategic review, since management has openly said it might sell more product lines or buy other businesses. Until bookings show a sustained recovery, assume quarterly revenue of around $2 million and continued operating losses. In that case the main way to judge each quarter is how much cash the company burns.