CPS Technologies (CPSH) 4 May 232023 Q1 Earnings call transcript

Good day, and welcome to the CPS Technologies Q1 2023 Earnings Conference Call. The floor will be open for questions and comments following the presentation.

It is now my pleasure to turn the floor over to your host, Chuck Griffith, CFO and acting CEO at CPS Technologies. Sir, the floor is yours.

Thank you, operator, and good afternoon, everyone. Anthony Corporate by Officer. today joined Koski, Development our I'm Chris like Darrow And I'd introduce Witty in addition, to from and Associates. Many Relations on made asked about and forward. Darrow have work have and to the of we decision Chris moving these you calls, with Investor

So Chris provide Harbor to the ask going I'm Safe now to statement.

Chris?

afternoon, and Thanks, good Chuck, everyone.

and are the call Before subject the of portion uncertainties to of factors. business cause we not could exist that results include, Securities to Act like in Such the in in are to that that not actual These Litigation differ within as out are of should statement. demands statements environment. to, limited the point forward-looking strictly the Private forward-looking XXXX historical begin and economic competitive the but meaning be Ukraine, uncertainties this call, war any factors CPS' conference statements from I Reform would considered many those materially in operations market conditions, and

can Additional be the SEC. filings with information in our found

like the perspectives Chuck? call his Chuck offer quarter to first the on turn I'd to over to Now results.

Thank you, Chris.

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me. evaluate at his and announced, point great built the stronger that personally very Board candidate better place full to trying made will and level, to throughout company time. will, showed his he tenure, managers, be is and Of he that tenure, as during The a Michael take am senior team The he hired missed. I'm the retaining confidence just not the senior Michael's the X in by a humbled X were make I

headed in record Due we laid, we're for another foundation confident that the to year. part Michael are extremely

Anthony to continues been the of able development business grow. part a equation the the team, book-to-bill led by in Our strong Koski, spite of fact to that denominator ratio has billing maintain

with product we've Kachur, team, been Dr. Working to to and solutions by customer led their problems unique development our needs. find Steve evaluate able meet

complex Finally, under time technologically and Dan Barton's that continues budget, win business. easier produce parts to making within our team for Anthony's to leadership, operations much group it additional on

to the let's Now results. financial turn

of quarter compared revenue in prior pleased for The we're high first the with hit previous to X, our as hard April $X.X increased which record armor for one record set million shipments. announce Today, in $X.X customers, XXXX, Revenue new growth represents expansion in million second COVID-XX a XXXX. as $X.X major ending during the quarter surpassing by of driven the revenue rose the by with million to the CPS, was period. particularly been had pandemic QX quarter year well

million, XX% million due quarter $X.X improved costs product This sales. efficiencies year profit of higher and well the the prior compares gross million This in on gross the of to $X XXXX sales fixed impact profit XX% primarily first was in factory with or yield. as of factory in $X.X Gross sales margin or of totaled increase of period. as

year restricting in XXXX, were factors many were and have than million Travel Two higher costs in year virtual in the conferences and the $X.X on-site period. were by quarter this general still year Selling, administrative $X.X million were this primarily which Many increase. responsible for still customers prior negatively pandemic. first impacted the been significantly versus expenses COVID-XX visits. totaled last

operating just XXX(k) the I discussed. to year. gross expense, our As match XX% $XXX,XXX of partially income increased was in company's increase we $XXX,XXX with of employees, This profit, XXXX quarter compared company the last retain SG&A generated of by good plan also as greater result first of higher the The and hire of for part XXXX. offset

operating second quarter's over profit highest in years. XX was This our

for further XXXX. enhancing reported the the XXX%, for book-to-bill was XXX% Our we quarter book-to-bill

We are cautiously fiscal and translate increasing optimistic of win directly for and into demand ongoing that will and steadily fiscal the XXXX order revenue rest profit operating into rate the XXXX.

cash XXXX. cash operating sheet. partially million in accounts The due balance quarter the primarily the was significant in on cash deferred to by of and $X.X We decrease revenue, the of ended receivable versus offset to end hand million in with flow. at $X.X increases Turning fiscal reductions

to open it program in was ATM first quarter. the additional us, raised cash no Although and available remains under our

quarter, the Dr. turning first call just add. will the and win. armor of type be about another on announced make of for we the for In me SBIR excited suited over our development armor Before it to very Kachur ideally lightweight Black working his also floor let project team panels the the this UH-XX prospects application. helicopter. the attributes of We're Anthony, Hawk for tech as hybrid this

a While we will particular this full-scale there become no remain guarantee optimistic. order, is production project that

As SBIRs, to dramatically. the becoming CPS more we these for continue major a apply one or of increases likelihood for of win win and

well a going on I is come. So on the into in the CPS. Anthony? the at for more believe lot to can get there development front. call And to business he turn about performance good little see like detail the are here you opportunities of now a positioned can Anthony, so strong the to over We would growing quarters company things

Thank you, and Charles, everyone. hello,

start Another results record quarter of great to is a certainly way XXXX.

him organization He echo personally very departure. as take and this influential Michael's wish the to family Chuck's and his mentor earlier best thank his First, a significant friend. and a I'd the for We to been him me has comments on contributions. again to all opportunity like and

with to collaboration Dr. high-value product Steve avenues our potential we team, planning updates some future and our penetrating the for scale pursuing projects growth led focus upside. we're opportunities space, In and The significant CPS. are development by of team to close Kachur, Now I of the development identifying business Materials how actively on operations. within continue on new Advanced with prioritizing

number, remain the book-to-bill ensuring adequate pipeline Considering our on have more We funnel sales overall and any this from for these XXX% ratio. on qualification has strong we sales prevented we upside our committed opportunities many even can game long-term as us our development the meet is revenue a can to not be are produce. growing and calculated an cycle year. goals makes significant. Chuck managing near-term approach long it for material by programs to demonstrated This realizing mentioned, focused solutions, line top the converting Although as long into wins,

were to year, say growing both sales goals solid diverse. convert products. including growth is I QX, Suffice pipeline for and at the we over will fiscal rate It able and developing 'XX. to optimistic it customers that the pleased hit includes and existing we I'm in be the and able our am to

and few has Senior from prospects. held business The over experience is hit running welcomed Development years engineering A positions the recently business Business our Manager. both in generating Joe high-value already expanded. in previously as quarter. Joe leadership highlights the more has and has Joe manufacturing, new composites first Englin development. ground development team having We XX aerospace of

and the organization. confident have to he a him contribution to make will are significant team on excited are We the

disclose leading result customer received scale. from not a primarily this packages like to customers increase also to that that designs. this solutions from our of programs. the to specific product new company our to and I significant will but aerospace sales larger electronics a ability a can XXX% represents share I packages direct actively hermetic and QX, order and we As previously is a in a the U.S. be I'm space manufacturer. able team's at both in a or existing the highlight includes applications, provider announced, support listen would This for

incremental we portfolio increase We to development be of our are programs. parts that driving confident with client growth able and and will our ongoing this supporting continue

with We for has new to also a target qualification first initiated deliberate in XX we been are pleased qualification the quarter, bring our projects over effort each This product QX. quarter. opportunities more and product new in

of we a a tech offer way level successfully new armor in our higher qualification proven significant upon new protection. supporting delivered builds opportunity Lastly, on vehicles. achieve effort enhanced of for packaged technology hybrid combat testing a to survivability panels international This

with global defense year. partnering systems this expect later happen are to integrator We a testing and the qualification

my ahead. concludes go This answer to I you. remarks. Chuck please prepared are available Thank now questions. Operator, and any

Wachowski]. this At [Operator coming the we'll question-and-answer Instructions] session. first time, today be And question [Chris from conducting is a

us the Congratulations commercial are you much military programs? Can estimate government how for are and of great how give kind of much there of on revenues your results. an

your that's not defense want believe sure the question. I sure. going contractors, is that portion to defense government. I'm the selling in say, that XX% the we're to contractors, are about to range. if that not So going so XX% But I to to directly parts

of was -- terms like kind that of volatility products. starting it what for reason all volatile can about. you Or that your see be of and are programs defense you programs. do in that's contracts because Yes, asking I beginning ending my you're -- Okay. on of up the And And is main coming? in seems the

does... it So

finish. Yes, I'm sorry, yes.

Sorry.

Go ahead. ahead. Go

Yes.

the the to seeing products getting contractors we that time first these So or because business. think yet. we're first part been them a with And that at a of of we've haven't in lot growth coming building we're confidence actually we're of least The them. seen I time, that with -- that our seeing for defense the us

So the excited of of think our business. I future the very defense about we're actually portion

you do Anthony, know, don't to I add to anything that? want

obviously, describe I as is, thing only government I'll a The can would Yes. use to word contracting programs lumpy. add that and it. be

that once contracting Chuck the as But as like of significant end, our contracts then example, lot using times a hermetic with work we off you And armor portion actively with action. of delivering on seen we so them I protection think in bit. a you significant then U.S. for of the on and towards the Navy. were that alluded And a scale you're kind they're yet. next And program working get perfect that, the haven't a to,

about don't we're all life that the preparing the it's backfill and of that kind But an pipeline see to foreseeing kind of ensuring that for ton of cycle. that in but it adequate that have cycle yet, what’s we so of lumpiness managing program a actively So we we seen yes, and business. haven't of next

to That's hear. good Okay.

It the is science. for for on the products non-armor, the electronics. the be Another question cooling using your for side also the -- electronics on commercial more on side. But might plates

conference market It seems mass is you Are and that of have for economy. it more a seeing possibility what -- like extremely industrial like power to really not might there? And industrial electronics strong listening very to corresponding of kind with power lower electronics a of market seems the applications you at move devices, for in we despite calls, is other to happening looking the power? be there -- be use but into kind high-power more products devices that kind of more might strength plentiful

Yes.

And is electric answer silicon the same silicon what seeing I storage on example, you yes. things putting We to further vehicles think that -- is get and silicon, as it these and than like carbide, run was means is that charge. the there's more we're have I'll may towards -- important you shifts to this battery the when especially silicon, they're give with the know, been we on shift plates carbide. efficient and what question is ability now that typically the a an

fine silicon base AlSiC. AlSiC where from hotter, start the in to towards runs application to the copper than then consider may those past want that as silicon, more -- a middle-range at we a as we the -- plate, running And makes using However, modules, suited hotter you the for But were example. where silicon. power you temperature carbide get

-- where you that developing where in of and shifting So as using is was use is always AlSiC a because between. area an solution start gray more there And always then gray area AlSiC think what you there we're copper, was seeing use an carbide. of towards always silicon area you area an and I

that? And certainly involved So portion products been applications. we whether which, certainly certainly what electric into are market our of We've course, appears. going a that there vehicles, has tremendous of it -- there's certainly in But upside, could results. on we something Anthony, And couldn't end say in, this of want at really that if point. you to some ask see I'll it's up potentially great expand any could I

those heavily mean, Chuck. you utilize much engaging carbide, progress mature silicon military that -- applications, we a described. I [formula-E], It's higher fleet and to pretty with of lot semiconductor as just manufacturers end, as that of electrification And Chuck a in examples. we've of kind made No, of discussions targeting understanding, as few covered in trying a lot couple we're the performance it, are still great higher

EV as and I continues and with commercial more war commercial you're mean improve with. HEV commercial competition and the heat. carbide you're silicon efficiencies wider price you dealing market, and to overseas density, used be EV, power The and then you're increase got the that marketplace material as more with dealing a it dealing to does

So at applications. that, it even a near But carbide for materials. I in more silicon a as higher end, more see has of material in still appealing applications those big term, in least our the made play the of extreme having advance types those

line lower. where I And hoping devices that hear. say kind you is cutoff of applicable that would was to going the your good That's great. That's

perhaps cutoff either some over you you market kind a by or that or voltage XXX by us can is volts carbide. will anything lastly, Is silicon it give what -- you line of can X,XXX? power of device that like estimate of So

give don't can't you I that number. know. I

range. I but I if that don't necessarily in of that line, specific we you're think a know kind right have

in AlSiC started always of was this coming to play. X,XXX of operated So volt. kind to That we've where X,XXX kind

it it's And a that have say sand drawn to. But that probably area kind to with introduction is that's something been I this what going that line we've to, we the reached XXX we're carbide, the that's in that think closer volt. expands market silicon of to that XXX getting of not between to certainly but to

[Operator the from Fasi]. next coming is And [Stefan Instructions] question

Just armor. a quick about the vehicle question

necessarily I'm say customer ago. -- whether we're looking working years customer different -- or to necessarily the just least at the into or somebody Can I'm without name. maybe it's guys here. not the trying You couple remember But a vehicle same I'm with of you wondering. asking a

Yes. [indiscernible]

been with customer that same we've so. mainly since been the X customer, X to that working here, leading the along. years is least I've It in At it right since it's

have no is were did at time. There from come we other X Ron [Operator in questions more Richards. this question That question queue coming Instructions] And in.

that talking were of in project? calls. on our And looking you post talked and I conference about that updating was I And conference were about August several call, customers. XD benefits work over area some manufacturing on you the work XXXX previous additive printing. working that you doing noticed update the in your for Any

Yes.

one that we done -- also been we've printing, We've SBIRs still So of one the moving is, on work one XD working some that in the printing. with and is I believe, internal XD forward. that

on Kachur just probably us. just we parts some Dr. company that made everybody fact, yesterday In be that really for complex was showing this heard a could has me

very it's so And interesting.

successful be and I us. time. for at that we're definitely So an talk it's with about still applications working it, think major in and moving very that area early forward commercial could be on point But certainly this think could to we're it definitely

the Okay. hermetic used you Have been deals? And guys Starlink also in deal. I your hermetic was involved with wondering what

can I -- this one. Not take

of directly our directly. recently. some to sell of now, a them last of customers into reengage a kind But not Starlink for been few mentioned target into But customers the of We I couple has just we're to a our Starlink. over and selling So But of reengage started actually Starlink. as quite time are beginning actively ours them. weeks lot

Okay. Great. Thank you guys.

other call no in to to questions would for Griffith time. were like closing there remarks. And Chuck you. Thank some this hand at over queue I the

for before, everybody great And that quarter least XX you and certainly questions. listening today we you, talking Paul, and achieved another the to been be and pleasure forward getting And and It’s great call. that as for we’re we’ll Thank quarter. the tell here talked back to looking this able in another to about you to year. you so. hopefully goal year days one on Okay, more about for being at have all a thank we

all So thank we’ll out. that close you And on. for with again, getting

today’s other there time. this you. This at no Thank And conference does were questions call. conclude

wonderful you lines disconnect your and Thank time may participation. You for a at have day. this your

Thank you everybody.