CPS Technologies Corp (CPSH) 2023 Q3 法說會逐字稿

Good day, everyone, and welcome to the CPS Technologies third-quarter 2023 earnings call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Chuck Griffith, Chief Financial Officer of CPS Technologies. Sir, the floor is yours.

大家好，歡迎參加 CPS Technologies 2023 年第三季財報電話會議。 （操作員說明）現在我很高興將發言權交給東道主，CPS Technologies 首席財務官查克·格里菲斯 (Chuck Griffith)。先生，地板是你的了。

Thank you, operator, and good morning, everyone. Today, I'm joined by Brian Mackey, our President and CEO, and we look forward to discussing our quarterly results with you. But first, Chris Witty, our Investor Relations Advisor, will provide a brief Safe Harbor statement. Chris?

謝謝接線員，大家早安。今天，我們的總裁兼執行長布萊恩·麥基 (Brian Mackey) 與我一起，我們期待與您討論我們的季度業績。但首先，我們的投資人關係顧問 Chris Witty 將提供一份簡短的安全港聲明。克里斯？

Thanks, Chuck, and good morning, everyone. Before we begin the business portion of today's call, I would like to point out that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in CPS's operations and environment.

謝謝，查克，大家早安。在我們開始今天電話會議的業務部分之前，我想指出，本次電話會議中並非嚴格歷史性的陳述屬於 1995 年《私人證券訴訟改革法案》含義內的前瞻性陳述，應被視為主題CPS 的營運和環境中存在許多不確定性。

These uncertainties include, but are not limited to, the wars in Ukraine and Israel, other geopolitical events, economic conditions, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement. Additional information can be found in our filings with the SEC.

這些不確定因素包括但不限於烏克蘭和以色列的戰爭、其他地緣政治事件、經濟狀況、市場需求和競爭因素。這些因素可能導致實際結果與任何前瞻性聲明中的結果有重大差異。更多資訊可以在我們向 SEC 提交的文件中找到。

Now I'll turn the call over to Brian to offer his perspective on the third quarter results. Afterwards, Chuck will review the financial results in greater detail. Brian?

現在我將把電話轉給布萊恩，提出他對第三季業績的看法。之後，查克將更詳細地審查財務業績。布萊恩？

Thanks, Chris. Today, we're pleased to announce third-quarter revenue of $6.3 million and an operating profit of approximately $131,000 for the period ending September 30, 2023. As discussed on our previous earnings call, the quarter was negatively impacted by shipment timing with certain deliveries being pushed into the last three months of 2023. Our original expectations for 2023 as a year are unchanged. The company remains on track for 2023 to be its best year ever in terms of revenue as well as underlying results. Chuck will review this further in a moment.

謝謝，克里斯。今天，我們很高興地宣布截至2023 年9 月30 日的第三季度收入為630 萬美元，營業利潤約為131,000 美元。正如我們在之前的財報電話會議上討論的那樣，該季度受到某些交付的出貨時間的負面影響被推遲到 2023 年的最後三個月。我們對 2023 年的最初預期沒有變化。就收入和基本業績而言，該公司仍有望在 2023 年成為有史以來最好的一年。查克稍後會進一步回顧這一點。

During the third quarter, we announced two noteworthy wins for the company. First, we received an award valued at approximately $7.7 million from a major long-standing customer for power module components and solutions. This contract represents a 50% increase for that customer over the prior four quarters with the systems to be employed primarily in high-speed rail, wind turbines, and other green energy applications.

在第三季度，我們宣布了公司的兩場值得注意的勝利。首先，我們從電源模組組件和解決方案的主要長期客戶處獲得了價值約 770 萬美元的獎項。該合約意味著該客戶的合約量比前四個季度增加了 50%，該系統主要用於高鐵、風力渦輪機和其他綠色能源應用。

This client is a multinational semiconductor manufacturer based overseas, which has come to rely on our unique capabilities for its cutting-edge requirements. And we're pleased to once again provide modules for the many important markets they serve.

該客戶是一家總部位於海外的跨國半導體製造商，該客戶依賴我們獨特的能力來滿足其尖端需求。我們很高興再次為他們服務的許多重要市場提供模組。

Also, we recently announced that the company had received a Phase 1 SBIR award, valued at approximately $200,000 from the United States Department of Energy, our first such grant from the DOE. This study, entitled Modular Radiation Shielding for Transportation and Use of Microreactors, will be led by Matthew Karnick, a talented material scientist at our company, opening further potential customer penetration avenues for CPS.

此外，我們最近還宣布，該公司已獲得美國能源部頒發的價值約 20 萬美元的第一階段 SBIR 資助，這是我們從能源部獲得的第一筆此類資助。這項名為「用於微反應器運輸和使用的模組化輻射屏蔽」的研究將由我們公司才華橫溢的材料科學家 Matthew Karnick 領導，為 CPS 開闢進一步的潛在客戶滲透途徑。

Notably, this is our fifth SBIR/STTR award in the past two years. It's the first of these five from the Department of Energy and the third different member of our team to win an SBIR award within the last couple of years. Our renewed focus on R&D continues to provide external funds to help bolster our intellectual property portfolio, validate our long-term strategic vision, and support our goal of accelerating the growth trajectory of our top line.

值得注意的是，這是我們在過去兩年中第五次獲得 SBIR/STTR 獎項。這是來自能源部的五位獲獎者中的第一位，也是我們團隊中第三位在過去幾年內贏得 SBIR 獎的不同成員。我們重新專注於研發，持續提供外部資金，幫助加強我們的智慧財產權組合，驗證我們的長期策略願景，並支持我們加速營收成長軌跡的目標。

Aside from these wins, the company is actively pursuing opportunities across all its end markets, from military armor to transportation products, electronics, and industrial applications. The overall outlook for the company remains bright.

除了這些勝利之外，該公司還在所有終端市場積極尋求機會，從軍事裝甲到運輸產品、電子產品和工業應用。公司的整體前景依然光明。

HybridTech Armor panels from Kinetic Protection, the US Navy's prime contractor, continue to provide best-in-class protection for the country's aircraft carriers. The panels are an integrated component of advanced ballistic shields and protection system upgrades by the navy, and we're pursuing opportunities across the rest of the fleet.

美國海軍主承包商 Kinetic Protection 的混合技術裝甲板繼續為該國的航空母艦提供一流的保護。這些面板是海軍先進彈道防護罩和防護系統升級的整合組件，我們正在艦隊的其他部分尋求機會。

We have previously discussed that we would be testing other iterations of our armor as it related to a potential ground vehicle armor opportunity. Unfortunately, that testing did not go as well as anticipated. We're working to address the issues uncovered during those tests, but this will further delay any new order for our armor with this potential customer.

我們之前已經討論過，我們將測試裝甲的其他迭代，因為它與潛在的地面車輛裝甲機會有關。不幸的是，測試並沒有像預期的那樣順利。我們正在努力解決這些測試中發現的問題，但這將進一步推遲我們向該潛在客戶訂購裝甲的任何新訂單。

The continued growth of hermetic packaging for use in aerospace, defense and power electronics also positions CPS for further growth going forward, as well increasing demand for our metal matrix composite industrial solutions. We believe our unique technology and innovative approach to solving complex design problems, along with our expanding array of customers in the government and commercial space place us at the beginning of our next phase of growth. Whether it's electric vehicles, trains, aerospace and defense or electronic applications, CPS can provide the best approach to advancing our clients' new product development initiatives.

航空航太、國防和電力電子領域使用的密封包裝的持續增長也為 CPS 的進一步增長奠定了基礎，同時對我們的金屬基複合材料工業解決方案的需求也不斷增加。我們相信，我們解決複雜設計問題的獨特技術和創新方法，以及我們在政府和商業領域不斷擴大的客戶群，使我們處於下一階段成長的開始。無論是電動車、火車、航空航太和國防還是電子應用，CPS 都可以提供最佳方法來推進客戶的新產品開發計劃。

Our strong balance sheet can and will provide us with the financial flexibility to continue to invest in increasing our product development capabilities and pursuing opportunities that will accelerate top-line growth and improve operating results. In the near term, we anticipate a very strong finish to the current fiscal year and remain on track for being our best performance ever. I continue to be upbeat about the company's ability to convert bids into backlog and backlog into revenue as we leverage our innovative solutions across a growing set of markets and new industry applications.

我們強大的資產負債表能夠並將為我們提供財務靈活性，以繼續投資於提高我們的產品開發能力，並尋求加速收入成長和改善經營績效的機會。在短期內，我們預計本財年將取得非常強勁的業績，並有望實現有史以來的最佳業績。隨著我們在不斷增長的市場和新行業應用中利用我們的創新解決方案，我仍然對公司將投標轉化為積壓訂單並將積壓訂單轉化為收入的能力感到樂觀。

I'll now temporarily turn the call over to Chuck to provide more details about our financial results, after which I'll provide some additional comments. Chuck?

現在我將暫時將電話轉給查克，以提供有關我們財務業績的更多詳細信息，然後我將提供一些額外的評論。查克？

Thanks, Brian. As was mentioned earlier, the company's revenue totaled $6.3 million in the third quarter compared to $6.7 million last year, with a slight decline year over year due to shipment timing and the delay of certain deliveries into the fourth quarter. Given our solid overall backlog, we anticipate posting a very strong finish to fiscal 2023. At this time, we fully expect to significantly exceed the 2022 revenue total of $26.6 million.

謝謝，布萊恩。如前所述，該公司第三季度的收入總計為 630 萬美元，而去年為 670 萬美元，由於發貨時間和某些交付延遲到第四季度，同比略有下降。鑑於我們整體的積壓情況良好，我們預計 2023 財年的營收將非常強勁。目前，我們完全預期收入總額將大幅超過 2022 年 2,660 萬美元。

Gross profit in the third quarter totaled $1.2 million or approximately 20% of sales compared with $1.9 million or roughly 28% of sales last year. The decrease in both profit and gross margin year over year reflects the lower level of sales as well as some inventory write-offs due to higher scrap than usual during the quarter. We anticipate fourth-quarter gross margins to be more in line with the second quarter.

第三季毛利總計 120 萬美元，約佔銷售額的 20%，而去年為 190 萬美元，約佔銷售額的 28%。利潤和毛利率同比下降反映了銷售水準較低以及由於本季廢品率高於平常而導致的一些庫存沖銷。我們預計第四季的毛利率將與第二季更加一致。

Selling, general and administrative expenses totaled $1.1 million in the third quarter versus $1.2 million in the prior-year period. This SG&A amount represents a notable decrease from our SG&A numbers in the first half of this year. The company generated operating income of $131,000 in the third quarter compared with approximately $709,000 last year and posted net earnings of $0.01 per diluted share versus $0.07 per diluted share in fiscal 2022.

第三季銷售、一般和管理費用總計 110 萬美元，去年同期為 120 萬美元。這筆 SG&A 金額較今年上半年的 SG&A 數字顯著下降。該公司第三季營業收入為 131,000 美元，去年約為 709,000 美元，稀釋後每股淨利潤為 0.01 美元，而 2022 財年稀釋後每股淨利潤為 0.07 美元。

Turning to the balance sheet. We ended the quarter with $8.8 million of cash, up from $8.3 million at the end of 2022, reflecting working capital changes and the impact of a decline in deferred revenue. Trade accounts receivable as of September 30, 2023, totaled $5 million versus $3.8 million as of December 31, 2022. Our other receivable account balance was $17,000 compared to $686,000 at the end of last year, primarily reflecting the receipt of the employee retention tax credit in April. Inventories totaled $4.8 million as of September 30 compared to $4.9 million at the start of the fiscal year.

轉向資產負債表。本季結束時，我們的現金為 880 萬美元，高於 2022 年底的 830 萬美元，反映了營運資本變動和遞延收入下降的影響。截至2023 年9 月30 日，貿易應收帳款總額為500 萬美元，而截至2022 年12 月31 日為380 萬美元。我們的其他應收帳款餘額為17,000 美元，而去年底為686,000 美元，主要反映了收到的員工保留稅收抵免在四月。截至 9 月 30 日，庫存總額為 480 萬美元，而本財年年初為 490 萬美元。

Turning to the liability side. Payables and accruals totaled $3.2 million at the end of the third quarter versus $2.7 million at the end -- as of December 31, 2022. Deferred revenue decreased from $2.8 million at the end of 2022 to $1.7 million as of September 30, 2023. As a reminder, deferred revenue predominantly represents prepayments for large orders to help appraise the impact on cash of large inventory purchases for those orders. A number of these were shipped in 2023, resulting in the recognition of revenue, and thus, a decrease in deferred revenue.

轉向責任方。截至2022 年12 月31 日，第三季末的應付帳款和應計費用總計為320 萬美元，而截至2022 年12 月31 日，第三季末的應付帳款和應計費用為270 萬美元。遞延收入從2022 年底的280 萬美元減少到截至2023 年9 月30 日的170 萬美元。提醒一下，遞延收入主要代表大額訂單的預付款，以幫助評估這些訂單的大額庫存採購對現金的影響。其中一些已於 2023 年發貨，從而確認了收入，從而減少了遞延收入。

So thank you. And now Brian will discuss his first 90 days at CPS and what he sees for the future. Brian?

所以謝謝。現在，Brian 將討論他在 CPS 的前 90 天以及他對未來的展望。布萊恩？

Thanks, Chuck. As everyone may recall, I joined CPS at the beginning of August, about three months ago. As I expected when I accepted the opportunity to come to CPS, my background is highly relevant to what we're doing here. I spent many years in leadership positions of technically oriented companies, including a focus on material science to achieve growth, with the goal of providing advanced solutions to our customers' greatest challenges.

謝謝，查克。大家可能還記得，我是在八月初加入CPS的，大約三個月前。正如我在接受加入 CPS 的機會時所預料的那樣，我的背景與我們在這裡所做的事情高度相關。我在技術導向公司擔任領導職務多年，包括專注於材料科學以實現成長，目標是為客戶面臨的最大挑戰提供先進的解決方案。

I'm excited by a number of things that we have in place today at CPS and by the opportunities that we have before us. We have a long history of close relationships with a number of large, stable customers, both domestically and abroad, particularly in metal matrix composites and hermetic packaging. We'll continue to support our customers' growth objectives by providing high-quality products that meet their needs.

我對 CPS 今天所做的許多事情以及我們面前的機會感到興奮。我們與國內外許多大型、穩定的客戶有著長期的密切關係，特別是在金屬基複合材料和氣密包裝領域。我們將透過提供滿足客戶需求的高品質產品，繼續支持客戶的成長目標。

We have a highly capable and motivated team here at CPS as well. 2023 looks to be a record year, and we're motivated to build on our own momentum.

我們 CPS 也擁有一支能力強、積極進取的團隊。 2023 年看起來將是創紀錄的一年，我們有動力繼續發展自己的勢頭。

I'd like to take a moment to focus on just one aspect of our growth strategy, which is externally funded product development. As we've mentioned, we've seen a number of recent successes in this area to help build our product portfolio for the future.

我想花點時間重點談談我們成長策略的一個方面，即外部資助的產品開發。正如我們所提到的，我們最近在該領域取得了許多成功，有助於建立我們面向未來的產品組合。

As a quick review, we completed a Phase 1 SBIR regarding thermal management for the navy. They then asked us to continue with an option phase and asked us to submit a Phase 2 proposal, which is currently under evaluation.

作為快速回顧，我們完成了有關海軍熱管理的第一階段 SBIR。然後他們要求我們繼續選擇階段，並要求我們提交第二階段提案，目前正在評估中。

We completed a Phase 1 STTR regarding the use of tungsten materials for the army. Again, we will be submitting a Phase 2 proposal to build on what we accomplished in Phase 1. We also completed a Phase 1 SBIR regarding army helicopter flooring for United States Army.

我們完成了軍隊使用鎢材料的第一階段 STTR。我們將再次提交第二階段提案，以我們在第一階段所取得的成果為基礎。我們也完成了美國陸軍軍用直升機地板的第一階段 SBIR。

While the Army has elected not to designate any funds for potential Phase 2 study, our flooring passed its testing in Phase 1 with flying colors. We know that this is of interest to helicopter OEMs, and we're pursuing this opportunity. As previously discussed, this morning, we're currently working with new funding from the DOE on another Phase 1 SBIR.

雖然陸軍選擇不為潛在的第二階段研究指定任何資金，但我們的地板出色地通過了第一階段的測試。我們知道直升機原始設備製造商對此感興趣，我們正在尋求這個機會。如同先前所討論的，今天上午，我們目前正在利用能源部的新資金進行另一項 SBIR 第一階段的工作。

You can expect to see us continue development efforts to build our product portfolio for the future. These externally funded efforts in conjunction with our internally funded work are a key part of our plan to add relevant growth paths within the advanced materials space. These opportunities leverage our know-how related to our current products and also take advantage of the technical expertise within our talented team. I'm excited about the future here at CPS. Operator, if you could please open up the line for Q&A.

您可以期待看到我們繼續努力開發，打造面向未來的產品組合。這些外部資助的工作與我們內部資助的工作相結合，是我們在先進材料領域增加相關成長路徑的計劃的關鍵部分。這些機會利用了我們與當前產品相關的專業知識，並利用了我們才華橫溢的團隊的技術專長。我對 CPS 的未來感到興奮。接線員，如果可以的話請開通問答線路。

(Operator Instructions) Jim McIlree, Dawson James.

（操作員說明）Jim McIlree、Dawson James。

Thank you. Good morning. Can you share with us the bookings in the backlog for the quarter?

謝謝。早安.您能否與我們分享本季積壓的預訂情況？

We don't normally give that information out. But certainly, our backlog is very solid going forward certainly for the next several quarters. I don't think I really want to give out any numbers at this point -- specific.

我們通常不會透露這些資訊。但可以肯定的是，我們的積壓訂單在接下來的幾季中肯定會非常穩定。我認為我現在不想給出任何具體數字。

Okay. Can you tell us if bookings were greater than revenue?

好的。能告訴我們預訂量是否大於收入嗎？

In the trailing 12 months, it's actually exactly even. It's 100% or one to one.

在過去 12 個月中，它實際上完全持平。這是 100% 或一對一。

Okay, great. Thank you.

好的，太好了。謝謝。

I'm sorry. Brian, you talked about the external development as a source of funding research. And I understand the philosophy behind that, and I understand the benefits for it. But what I'd like to try to understand is how large a portion of the revenue that would be currently? And if you were to get what you wanted out of those projects, what percent of revenue would it be generating now, let's say, 12 months or 24 months from now?

對不起。布萊恩，您談到了外部開發作為研究資金來源的問題。我了解背後的哲學，也了解其好處。但我想了解的是目前收入佔多大比例？如果您要從這些項目中獲得您想要的東西，那麼現在（比如說 12 個月或 24 個月後）會產生多少百分比的收入？

Yeah. So the two parts of your question, the revenue from a Phase 1 is relatively small. Those are typically $200,000 of funding. It could be $150,000, it could be $250,000, but it's typically in that range.

是的。所以你問題的兩個部分，第一階段的收入相對較小。這些資金通常為 20 萬美元。可能是 15 萬美元，也可能是 25 萬美元，但通常都在這個範圍內。

Normally, a Phase 2 amount of funding for an SBIR would be -- whereas the Phase 1 of say $250,000 might be over a nine-month period, the Phase 2 would typically be more around the range of $1.1 million or $1.2 million to fund research over a period of 24 months. That's what's most typical from the DoD and DOE.

通常情況下，SBIR 第2 階段的資金數量為——而第1 階段的資金可能為25 萬美元，可能需要9 個月的時間，而第2 階段通常會在110 萬美元或120 萬美元的範圍內為研究提供資金超過 24 個月的時間。這是國防部和能源部最典型的做法。

So on a revenue side, it's nice revenue. But it's mostly -- the value to us is to fund that future growth. The timing of that to translate that into what would be considered a Phase 3 or a commercial effort with funding from literally customers buying those products is going to depend on the success of the Phase 2 and the interest.

因此，從收入方面來看，這是一筆不錯的收入。但對我們來說，最主要的價值是為未來的成長提供資金。將其轉化為第三階段或由購買這些產品的客戶提供資金的商業努力的時機將取決於第二階段的成功和興趣。

The nice thing about the DoD is they're typically funding that research because they have a real need. And if you can get to the finish line, technically, the ideal outcome is that they're ready to purchase, and you're going to be scaling up volume to meet those needs. And of course, that's going to depend on the application and what the technology is that we're working on.

國防部的好處是，他們通常會資助這項研究，因為他們有真正的需求。如果你能到達終點線，從技術上講，理想的結果是他們準備好購買，並且你將擴大產量以滿足這些需求。當然，這將取決於應用程式以及我們正在研究的技術。

So it's difficult to project the revenue. But the nice thing about that SBIR with the DoD is, again, it's a need that they have some. But it also comes with the intellectual property that's developed under that program, which remains the company's property, even though it was funded by the Department of Defense. And it also eliminates the need for future competition.

因此很難預測收入。但國防部的 SBIR 的好處是，他們有一些需求。但它也附帶了根據該計劃開發的智慧財產權，儘管該計劃是由國防部資助的，但該智慧財產權仍然是該公司的財產。而且它也消除了未來競爭的需要。

So typically, the DoD contracting office is going to say we need competitive bids to make sure we're getting competitive pricing. And the response to that is that the original SBIR proposal was a competitive bid during the Phase 1, and the reward for the small business of succeeding in its technical development is the singular ownership of that intellectual property for many, many years after that.

因此，國防部承包辦公室通常會說我們需要有競爭力的投標，以確保我們獲得有競爭力的價格。對此的回應是，最初的 SBIR 提案是第一階段的競標，而小型企業在技術開發上取得成功的回報是在此後許多年裡對該智慧財產權的唯一所有權。

Right, understood. Got it. Okay. So it sounds like Q4 is going to be a nice rebound from Q3?

對了，明白了。知道了。好的。聽起來第四季將比第三季出現不錯的反彈？

That's right.

這是正確的。

Because of that, will you be requiring additional working capital? You mentioned in your commentary that working capital was a source of cash in Q3. So can we expect a reversal of that in Q4?

因此，您是否需要額外的營運資金？您在評論中提到，營運資金是第三季的現金來源。那麼我們可以預期第四季情況會出現逆轉嗎？

Probably. But certainly, it won't be an issue for us. We're with almost $9 million as of the end of the quarter. That's plenty of cash in order to fund that working capital.

大概。但當然，這對我們來說不是問題。截至本季末，我們的資金已接近 900 萬美元。這些現金足以為營運資金提供資金。

And as I think you guys know, we've got our $3 million line of credit if we need it with our bank. So there's nothing due on it at this point. It hasn't been for a while, but -- so we do have that extra source if it's necessary. But I don't think it will be. I think we'll still have -- even with the working capital increase that we may need to generate the higher sales for the quarter, we'll still have -- we'll still be in very good shape from a cash standpoint.

我想你們都知道，如果我們需要的話，我們的銀行已經提供了 300 萬美元的信貸額度。所以目前還沒有什麼到期的事情。已經有一段時間沒有了，但是——所以如果有必要的話，我們確實有額外的來源。但我認為不會。我認為我們仍然 - 即使我們可能需要增加營運資本來產生更高的季度銷售額，我們仍然 - 從現金的角度來看，我們仍然處於非常良好的狀態。

But we do expect Q4 to be more in line with Q1 and Q2 from this year in a variety of respects, it's relative versus what we have experienced currently in Q3.

但我們確實預計第四季度在各個方面將與今年第一季和第二季更加一致，這是相對於我們目前在第三季所經歷的情況而言的。

Got it. Okay. That's it for me. Thanks a lot.

知道了。好的。對我來說就是這樣。多謝。

Thank you.

謝謝。

Ron Richards.

羅恩理查茲。

Hey, guys. The November 2022 conference call, it was mentioned that the hermetic packaging revenues would be about $10 million. And they still predicted that those revenues could double by 2024. And I was wondering if you're still in that projection for $20 million in revenues in hermetic packaging for 2024.

大家好。 2022 年 11 月的電話會議上，提到密封包裝收入約 1,000 萬美元。他們仍然預測到 2024 年這些收入可能會翻倍。我想知道您是否仍在預測 2024 年密封包裝收入為 2000 萬美元。

I would say not. We've had some reductions from one of our major hermetic package customers. If we take -- I mean, you can't. But if we were to take that out, then the hermetic packaging business regarding other customers is growing significantly.

我想說不是。我們的主要密封包裝客戶之一已經進行了一些降價。如果我們接受──我的意思是，你不能。但如果我們剔除這一點，那麼其他客戶的密封包裝業務就會顯著成長。

We've got one customer in particular that was virtually non -- well, they were extremely non-material about a year ago. And they're going to be well over -- or they already are this year well over $1 million. And we expect and hope that will -- at least that piece -- and will at least double in this coming year as well in 2024.

我們有一個客戶，實際上是非——嗯，大約一年前，他們是非常非物質的。而且它們將遠遠超過——或者說今年它們已經遠遠超過 100 萬美元。我們預計並希望這一數字（至少在這一方面）在未來一年以及 2024 年至少會翻倍。

But in terms of the total doubling of hermetic packaging, I don't think that's going to happen. But certainly, it's continuing to grow even in spite of that one major customer.

但就密封包裝總量翻倍而言，我認為這種情況不會發生。但可以肯定的是，儘管有這樣一個主要客戶，它仍在繼續成長。

Yeah. It's continuing to grow, and it's certainly an area of focus for us. We see opportunities there for us to continue to drive those numbers up, and I think you'll see that going forward.

是的。它正在持續成長，這無疑是我們關注的一個領域。我們看到了繼續提高這些數字的機會，我想你們會看到這一點。

Okay. And then one other question. On the navy ships, you're talking about expanding to other ships besides the aircraft carriers. Do you have any, I guess, timeline when you might get some orders for those ships?

好的。然後還有一個問題。在海軍艦艇上，你談論的是擴展到航空母艦以外的其他艦艇。我想你們有可能收到這些船舶訂單的時間表嗎？

It's an area where we're actively pursuing translating that technology from the aircraft carriers to other vessels. The timing of that is hard to predict. But we know we've got a good solution there with our partner, and we're actively working that, but it's difficult to predict timing.

在這個領域，我們正在積極尋求將該技術從航空母艦轉移到其他船隻。其時間很難預測。但我們知道我們與合作夥伴已經找到了一個很好的解決方案，我們正在積極努力，但很難預測時間。

Okay. Thank you.

好的。謝謝。

(Operator Instructions) Greg Weaver, Invicta Capital.

（操作員指令）Greg Weaver，Invicta Capital。

Hi, good morning. Good morning and welcome to Board, Brian. So I guess, what would you consider the best unexploited opportunity now that you've been at the company for a while and kind of maybe any changes or improvements you want to focus on?

早安.早上好，歡迎來到董事會，布萊恩。所以我想，既然您已經在公司工作了一段時間，那麼您認為最好的未開發機會是什麼，以及您想要關注的任何變化或改進？

Well, I think we have a number of opportunities. As just mentioned, I think we have clearly have growth opportunities within hermetic packaging. I think we have some interesting things that we're considering within metal matrix composites. And we also have these ongoing installations of armor solutions on the aircraft carriers, which is exciting, knowing that we have a solution that the army is excited by and interested in lightweight, kind of ballistic protection, et cetera.

嗯，我認為我們有很多機會。正如剛才提到的，我認為我們在密封包裝領域顯然有成長機會。我認為我們正在金屬基複合材料中考慮一些有趣的事情。我們還在航空母艦上持續安裝裝甲解決方案，這是令人興奮的，因為我們知道我們有一個讓軍隊興奮的解決方案，並且對輕型彈道防護等感興趣。

And what I consider our fourth category, which is these new things that we're actively working on, I think that's going to yield results. And as I mentioned a minute ago, I mean, when the DoD needs something -- they need something, sometimes you have to wait for their validation process and the right program timing to come along. But I think we've got interesting opportunities there.

我認為我們的第四類，也就是我們正在積極研究的新事物，我認為這將會產生成果。正如我一分鐘前提到的，我的意思是，當國防部需要某些東西時——他們需要某些東西，有時你必須等待他們的驗證過程和正確的計劃時機出現。但我認為我們在那裡有有趣的機會。

And this organization as a company, I mean, we're continuing to improve. We've got a strong team. You've seen a number of changes over the last few years that we're continuing to implement to drive our growth. So I think our customers will see that when it comes to quality of product and things like that. So I'm excited about what we're doing.

我的意思是，作為一家公司，我們正在不斷改進。我們有一支強大的團隊。您已經看到了過去幾年我們繼續實施的許多變化，以推動我們的成長。因此，我認為我們的客戶在產品品質等方面會看到這一點。所以我對我們正在做的事情感到很興奮。

Okay. And on the AlSiC front, I mean, specifically for heat sinks and things like that, that's kind of not as much a focus?

好的。我的意思是，在 AlSiC 方面，特別是對於散熱器和類似的東西，這並不是一個重點？

There's ongoing discussions there with the interest of our customers and how we can make those products better and move those to both improvements and what we're providing on a day-to-day basis, as well as what the next generation of product would be and how we can address that. So that's where the advantage of these long-term relationships where we can have these collaborative discussions. I think it's another area that we're pursuing that can yield results in the future.

我們正在不斷討論我們的客戶的興趣，以及我們如何使這些產品變得更好，並將其轉移到改進和我們日常提供的產品，以及下一代產品將是什麼以及我們如何解決這個問題。這就是這些長期關係的優勢所在，我們可以進行這些協作討論。我認為這是我們正在追求的另一個領域，可以在未來產生成果。

Okay. That's helpful. Thank you.

好的。這很有幫助。謝謝。

Chuck, on the gross margin, you helped a little bit saying there was inventory write-offs and like due to scrap in the quarter. But I mean, the incremental flow through is over 100%, right? I mean, your revenue dropped versus the gross profit dollar drop sequentially.

查克，在毛利率方面，你說有一些庫存沖銷以及由於本季報廢而造成的損失，這對毛利率有所幫助。但我的意思是，增量流量超過 100%，對嗎？我的意思是，您的收入下降了，而毛利卻連續下降了。

Yeah.

是的。

And you didn't burn inventory either.

而且你也沒有燒掉庫存。

So basically, the biggest individual factor, of course, was the reduction in revenue and the impact of that on our fixed costs. But the secondary one was -- so we had a quality issue with one of our major customers. We set up some significant reserves for potential returns. And we also had to go through our inventory to look at it for those quality issues. And we had -- so we had a number of parts that we ended up scrapping.

所以基本上，最大的個人因素當然是收入的減少及其對我們固定成本的影響。但第二個問題是——我們的一位主要客戶遇到了品質問題。我們為潛在回報設立了一些重要的儲備。我們還必須檢查庫存以檢查是否有品質問題。我們有——所以我們有很多零件最終被報廢了。

Now we think that term we are close to the root cause for that quality issue and that it should go away soon. But it is something that we're working on to fix. And that's really why we have a fairly large reserve in there in our -- which reduced revenue and increased our liability when we look at reserve.

現在我們認為這個術語已經接近品質問題的根本原因，並且它應該很快就會消失。但這是我們正在努力解決的問題。這就是為什麼我們有相當大的準備金——當我們考慮準備金時，這減少了收入並增加了我們的負債。

The reserves. So that was top line and a whole lot of COGS or added to COGS?

儲備金。那麼這是頂線和大量的銷貨成本或添加到銷貨成本中？

Right. Yeah.

正確的。是的。

Right. That makes sense. Okay. What product area was this quality control issuing?

正確的。這就說得通了。好的。此品質控制發布的是哪個產品領域？

It's in the MMC, it's in AlSiC.

它位於 MMC 中，位於 AlSiC 中。

AlSiC.

鋁碳化矽。

Just kind of an oddity. I don't want to get into the science of it because it's not my area.

只是有點奇怪。我不想深入研究它的科學，因為這不是我的領域。

It was a number of events that came together. And as Chuck indicated, we made a lot of progress on the root cause, and then we'll finish that up and turn that to implementation, et cetera. We think the reserve that you see reflected is going to satisfy that. But we're not quite at the end of that road to make sure we're to the bottom of it.

這是許多事件聚集在一起的結果。正如查克所指出的，我們在根本原因上取得了很多進展，然後我們將完成它並將其轉向實施，等等。我們認為您所看到的儲備金將滿足此要求。但我們還沒有完全到達這條路的盡頭，以確保我們已經到達了底部。

All right. So for the current quarter, we're in there's still some yield issues, but the reserve is going to cover that, and you absorbed that in Q3?

好的。因此，就本季而言，我們仍然存在一些收益率問題，但準備金將彌補這一問題，您在第三季度吸收了這個問題嗎？

We believe so. Yes.

我們相信是這樣。是的。

All right. Okay. So we're back to the -- I mean, you had great margins over the last few quarters. That's one of the things I'm most excited about that you can get the earnings going. So this 30%-ish margin area is not unrealistic then, it wasn't a fluke?

好的。好的。所以我們回到了——我的意思是，過去幾個季度你們的利潤率很高。這是我最興奮的事情之一，因為你可以增加收入。那麼這個 30% 左右的利潤率區域並非不切實際，不是僥倖嗎？

Correct.

正確的。

Yeah. We think as this gets cleaned up, we think we'll return to that certainly, strongly in that direction what you saw in the first half. We think that's more representative of what you'll see going forward, including this quarter, Q4.

是的。我們認為，隨著問題得到解決，我們肯定會回到這個方向，就像你在上半場看到的那樣。我們認為這更能代表您未來將看到的情況，包括本季、第四季。

Okay, perfect. Thank you. Appreciate it and good luck.

好的，完美。謝謝。欣賞它並祝你好運。

Thank you.

謝謝。

Thank you.

謝謝。

(Operator Instructions) Thank you. That concludes our Q&A session. I will now hand the conference back to President and Chief Executive Officer, Brian Mackey, for closing remarks. Please go ahead.

（操作員說明）謝謝。我們的問答環節到此結束。現在，我將把會議交還給總裁兼執行長布萊恩·麥基 (Brian Mackey) 致閉幕詞。請繼續。

Okay. Thank you for joining us today and for your ongoing interest in what we're doing here at CPS Technologies. Look forward to speaking with you again after the end of our fiscal year. If you have any questions in the interim, please reach out to our Investor Relations Advisor.

好的。感謝您今天加入我們，並感謝您對我們在 CPS Technologies 所做的事情一直感興趣。期待在我們的財政年度結束後再次與您交談。如果您在此期間有任何疑問，請聯絡我們的投資者關係顧問。

There's no further questions. I think that concludes the call. Thank you.

沒有其他問題了。我想這次通話就到此結束了。謝謝。

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

謝謝大家。今天的活動到此結束。此時您可能會斷開連接並度過美好的一天。感謝您的參與。