Greetings, and welcome to the CVD Equipment Corporation third quarter 2019 conference call. At this time, all participants are in listen-only mode . A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Len Rosenbaum. Please go ahead, sir.
Good afternoon, everyone, and thank you for joining our earnings call. The company's focus during the third quarter was on getting our materials facility up and running, starting our MesoScribe facility back up after moving from California to New York, and three, pursuing additional equipment sales. The company has invested $2.5 million during 2018 in building improvements, machinery, and other expenses related to CVD Materials. $2.1 million in the first nine months of 2019. I'm glad to say MesoScribe is now operating, and Tantaline's equipment continues to be installed and tested, and that we have continued to increase our marketing efforts for equipment and material sales. Excuse me. We are now showcasing our material facility operations and offering material coating services to new and existing customers.
The expanded material operations will enhance our capabilities in providing corrosion-resistant coatings through Tantaline for medical, pharma, oil, and gas applications, sensors through MesoScribe for defense, aerospace, and turbine applications, and through our CVD Materials subsidiary for carbon composite materials, medical coatings, electronic substrate materials, and further expansion into other coatings for defense, aerospace, and industrial applications. We have continued working on our Fluid Reactor technology, and additional testing will be done this quarter with the Center for Biotechnology at Stony Brook University to further our novel patent-pending technology on an improved extracorporeal membrane oxygenation device. We anticipate further collaboration for this promising technology and application. Excuse me. During the fourth quarter, Tantaline U.S. manufacturing should start being operational, and we will continue working on further improvement in both equipment and material sales.
We anticipate the high-margin growth markets in materials for corrosion resistance, medical, aerospace, and defense coatings will help flatten the uneven levels of our equipment sales. We will continue to monitor orders and expenditures, and we remain committed to returning to profitable quarterly results. With that, I would like to turn the call over to our CFO, Tom McNeill.
Thank you, Len. In the third quarter, our revenue was $5.7 million as compared to $4 million in the third quarter of 2018, an increase of $1.7 million or 41.6%. Our net loss was $138,000 or $0.02 per diluted share as compared to a net loss of $2.5 million or $0.39 per diluted share in the third quarter of 2018. Our nine-month revenues were $14.1 million as compared to $19.6 million in 2018, a decrease of $5.5 million or 28.1%. Our net loss was $3.7 million or $0.57 per diluted share as compared to a net loss of $3.3 million or $0.51 per diluted share in the first nine months of 2018. Our revenue increase of $1.7 million in this third quarter as compared to the year-ago period was primarily the result of increases in spare parts and equipment sales.
For the nine months of 2019, the revenue decrease of $5.5 million was primarily attributable to the completion of large equipment orders and not being able to replace them in a timely fashion. Our sequential quarterly revenue increased $800,000 in the third quarter to $5.7 million, which is an increase of 16%, and was our second sequential quarterly revenue increase of $1.5 million, Q2 over Q1 of $1.5 million or 41.8%. With respect to new orders, during the third quarter, we received orders of a [inaudible] as compared to 10% in the second quarter of 2019 and negative 11% in the first quarter of 2019. This is a result of, one, improving operating efficiencies, two, mix of product revenue, three, increased revenues and improved contribution margins as compared to the two prior quarters in 2019, and lastly, the cost containment measures we have taken. Turning to operating expenses.
Our cost containment measures this year have resulted in a sequential decrease of $388,000 in our operating expenses during the third quarter. This decrease includes the effects of a one-time $200,000 recovery of the final contingent earn-out related to our MesoScribe acquisition. With respect to other income, we recognized $207,000 in rental income in the third quarter of 2019 related to our CVD Materials facility. We believe that the progress we made again this quarter has substantially progressed the company toward a return to profitability. With respect to our liquidity, cash and cash equivalents were $6.7 million at September 30, 2019, as compared to $11.4 million at December 31, 2018. Working capital was $9.7 million at September 30, 2019, as compared to $15.4 million at December 31, 2018, a decrease of $5.7 million.
This decrease for the nine months ended September 30, 2019, was primarily attributable to overall reduced revenue and the resultant net loss, $2.1 million of capital invested that Len talked about before, primarily related to our building improvements, machinery for the CVD Materials operation, and debt service payments of approximately $900,000, which includes payments on investment in the CVD Materials building. While our cash is expected to decrease during the next quarter, our fourth quarter, albeit at a much slower rate than the last two quarters, we believe the improved order flow, cost containment measures, and improved gross profit margins provide us sufficient cash to meet our working capital and capital expenditure requirements for the next 12 months. Now I'd like to turn the call back over to the operator for your questions.
Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. Once again, that is star one to be placed into question queue. One moment, please, while we poll for questions. Our first question today is coming from Brett Reiss from Janney Montgomery Scott. Your line is now live.
Hi, Len. Hi, Tom. How are you?
Good. How are you?
Good. Thank you.
Pretty good. The bookings of $7.9 million, is it all legacy business or is there a component of the MesoScribe and the Tantaline new material handling business embedded in that?
There is some of both embedded in that number.
Can you share what that is, or you don't want to break that out?
What I could tell you is the $7.9 is appreciably equipment sales, parts, service, et cetera, CVD. There is a component of it with materials, but primarily it's the core business as we exist today.
Okay. The Tantaline new business, your potential new customers are in various sectors of the economy, oil service, medical products. Is the time for these different businesses to make a decision to use Tantaline, does it vary from industry to industry?
I'm sure it'll vary from industry to industry and also from customer to customer. I'm not overly concerned. The first six months or a year, we'll be getting out a lot of product to, let's say, existing customers that have used it, and also to new customers for them to try it.
When the Tantaline operations are fully operational in the new facility in the fourth quarter, order flow for Tantaline can start pretty much immediately?
Well, they won't be fully operational in the fourth quarter. They'll start to be operational in the fourth quarter. It'll take us probably most of the first half of next year to get everything fully operational. We got more than one system going in.
Right. Len, I dropped in and I saw your booth at the Javits Center, where you had the Tantaline offerings. I observed good traffic. The people manning the booth were very good at what they were doing and interacting with people. Do you get a sense that these were people that you reached out to at Javits that are just kind of curious, testing the waters, or do you get a sense there's going to be real order flow from that kind of marketing that you did?
We wouldn't be investing the way we are if we didn't feel there was a real business behind this. The Jacob Javits Center is only one aspect of how we're trying to get out there and market the product. There are other trade shows we go to. There are samples that we send to customers. There's salespeople out there that are doing the selling for us. It's more than just the Jacob Javits Center. Excuse me.
Are you finished with all your cost containment, or is there room for further reductions, and can you quantify what that might be?
Yeah, Brett, I think it never ends. I think you're always looking at everything from how can we do it better, faster, more efficiently, number one. Number two, we're constantly looking at our resources as we build out and balance with new orders related to the materials side. Like any other company out there, it's a never-ending process. You're always looking.
Right. If volumes in business returns at a robust level, the cost cutting that you've done, have you basically trimmed fat, but you didn't have to eat into bone that might impact you being able to service the additional revenues that might come in?
Well, we never look to reduce personnel that are very beneficial to the company. Hopefully, we'll announce additional hirings as the orders keep going up.
Okay. I think there was a release that the tenant that you have in gave back half the space. Are you vigorously attempting to find a replacement tenant?
Yes. The tenant's out at the end of the year, December 31st. Our broker has it. He's pursuing it. Just like we reasonably quickly were able to get both spaces, you can never be quite sure when you're going to get that right tenant to fill it in. It's a very desirable space, high ceilings. Again, Brett, this is just a component of the overall picture. It helps lower costs. We have a broker doing it. It's not our focus.
Thank you. Our next question is coming from Morton Howard, a private investor. Your line is now live.
Hi. I feel like Moses was in the desert for 40 years. We've been in a sort of a quasi-desert for two or three. I hope we're getting out of it. We were hoping five years ago that we'd be doing $100 million. Obviously, we're not going to do that. Metal thing that sounds so sexy when you bought it, and the guy came to the annual meeting and talked about it. Does that have a potential of being a $5 million, $10 million, $20 million division, say, in three, four, five years?
The answer to that is outright yes. Okay? We would not have pursued it otherwise.
Okay, that's good. When will we see if it's going to be $5 million or something like that in three or four years, when will we see a number that you don't need glasses to see?
Well, right now it's merged in with the materials operations. Hopefully you'll see the materials numbers going up.
Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments. Actually, in the meantime, if you'd like to be Excuse me. If you'd like to be placed into question queue, please press star one at this point. One moment please while we poll for further questions. Once again, that is star one to be placed into question queue. One moment please while we poll for further questions. I will now turn the floor back over to management for any further closing comments.
Thank you, everyone, for joining the earnings call, and I look forward to speaking to you next quarter. Thank you.
Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.