CPS Technologies Corp (CPSH) 2023 Q4 法說會逐字稿

Good day, and welcome to the CPS Technologies Fourth Quarter and Year-End 2023 Earnings Conference Call. (Operator Instructions)

美好的一天，歡迎參加 CPS Technologies 2023 年第四季和年終收益電話會議。 （操作員說明）

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

現在我很高興將發言權交給主持人、CPS Technologies 財務長 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. We look forward to discussing our fourth quarter results with you.

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) 也加入了我的行列。我們期待與您討論我們的第四季業績。

But first, Chris Witty, our Investor Relations Adviser, will provide a brief Safe Harbor statement. Chris?

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. 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.

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。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 will turn the call over to Brian to offer his perspective on the fourth-quarter results, after which Chuck will review the financial results in greater detail. Brian?

現在我將把電話轉給布萊恩，提出他對第四季業績的看法，之後查克將更詳細地審查財務表現。布萊恩？

Thanks, Chris. Today, we're pleased to announce fourth-quarter revenue of $6.7 million and an operating profit of approximately $144,000. While revenue rose significantly year over year, operating profit continued to be negatively impacted by a quality problem with a major customer that we discussed previously. We ended the year with our best top line ever, $27.6 million, and are pleased with the backlog of $20 million as we begin fiscal 2024. Chuck will provide more detail in a minute.

謝謝，克里斯。今天，我們很高興地宣布第四季度收入為 670 萬美元，營業利潤約為 144,000 美元。儘管收入同比大幅增長，但營業利潤繼續受到我們之前討論過的主要客戶的品質問題的負面影響。我們以 2,760 萬美元的歷史最高收入結束了這一年，並對 2024 財年開始時積壓的 2,000 萬美元感到滿意。查克稍後將提供更多詳細資訊。

In addition, we recently announced two new developments that reflect our strategy for growth and bode well for our long-term outlook. First, CPS signed a manufacturing license agreement for fiber reinforced aluminum or FRA composites with Triton Systems, which gives us the exclusive global rights to make and sell products using this technology. FRA composites are comprised of high-strength aluminum alloys discontinuously reinforced with short ceramic fibers. Given its superior performance characteristics, this technology will facilitate the introduction of many new products for our military, commercial, and industrial end markets, which makes it a great fit for the company.

此外，我們最近宣布了兩項新進展，反映了我們的成長策略，並對我們的長期前景預示著良好的前景。首先，CPS 與 Triton Systems 簽署了纖維增強鋁或 FRA 複合材料的製造許可協議，這使我們擁有製造和銷售使用該技術的產品的全球獨家權利。 FRA 複合材料由短陶瓷纖維不連續增強的高強度鋁合金組成。鑑於其卓越的性能特徵，該技術將有助於為我們的軍事、商業和工業終端市場推出許多新產品，這使其非常適合該公司。

CPS is already known as the world leader in advanced metal matrix composites, but adding FRA capabilities will complement our core competencies, broaden the company's target markets, and strengthen our mission to accelerate growth going forward. Over the coming weeks and months, we will be working to initiate manufacturing trials of FRA composites here at CPS and begin to engage customers in relevant markets. We think this will be an excellent addition to our product folio.

CPS 已被認為是先進金屬基複合材料領域的全球領導者，但增加 FRA 能力將補充我們的核心能力，拓寬公司的目標市場，並強化我們加速未來成長的使命。在接下來的幾週和幾個月裡，我們將致力於在 CPS 啟動 FRA 複合材料的製造試驗，並開始吸引相關市場的客戶。我們認為這將是我們產品組合的絕佳補充。

Second, and also announced earlier this week, we received an award for the Massachusetts Manufacturing Accelerate Program, known as MMAP, in response to a proposal submitted by the company in the fourth quarter of 2023. This award, valued at $20,000 (sic - see press release, "$200,000"), will support the purchase of a five-axis CNC machine and expand the company's manufacturing capabilities to better serve our clients.

其次，也是在本週早些時候宣布的，我們獲得了馬薩諸塞州製造加速計劃（MMAP）獎項，以響應該公司在 2023 年第四季度提交的提案。該獎項價值 20,000 美元（原文如此 - 請參閱新聞稿，「200,000 美元」），將支援購買五軸數控工具機並擴大公司的製造能力，以更好地為我們的客戶服務。

This five-axis machine, our first, will pave the way for sales opportunities in hermetic packaging and other products with new and existing customers for which we would otherwise not be cost-competitive. These two recent developments, the licensing agreement for FRA and the purchase of a new five-axis machine, enable us to continue to broaden our revenue base and expand avenues of growth with clients in markets that are very familiar to us.

這台五軸機器是我們的第一台機器，將為密封包裝和其他產品與新舊客戶的銷售機會鋪平道路，否則我們將不具備成本競爭力。 FRA 的授權協議和購買新的五軸工具機這兩項最新進展使我們能夠繼續擴大我們的收入基礎，並在我們非常熟悉的市場中拓展與客戶的成長途徑。

In terms of the business today, among other things, we will continue to fulfill a long-term supply agreement announced last year, providing power model components and systems for a variety of rail and other applications to a multinational semiconductor manufacturer. We're on track for the shipment of product under this contract over the course of 2024.

就今天的業務而言，除其他外，我們將繼續履行去年宣布的長期供應協議，為跨國半導體製造商提供用於各種鐵路和其他應用的電源模型組件和系統。我們預計在 2024 年根據該合約發貨。

At the same time, we are working on our most recent Phase 1 SBIR grant from the Department of Energy, and we'll soon be submitting a Phase 2 proposal to extend this program. We continue to invest in innovative next-generation technologies, advancing the company's long-term growth profile, and have several other government R&D opportunities in the pipeline. For example, a Phase 2 SBIR proposal for thermal energy storage is under review by the Navy, we're preparing a Phase 2 STTR proposal for tungsten material for the Army, and we're submitting several additional new Phase 1 SBIR proposals with various federal agencies. Overall, we find these externally funded R&D opportunities very productive and rewarding so we will continue pursuing them even as we invest internally to broaden our range of products, expand the company's client base, and rapidly respond to changes in industry demand.

同時，我們正在處理能源部最新的第一階段 SBIR 撥款，我們很快就會提交第二階段提案以擴展該計劃。我們繼續投資創新的下一代技術，推動公司的長期成長，並且還有其他幾個政府研發機會正在醞釀中。例如，海軍正在審查關於熱能儲存的第 2 階段 SBIR 提案，我們正在為陸軍準備關於鎢材料的第 2 階段 STTR 提案，並且我們正在向各個聯邦機構提交其他幾項新的第 1 階段 SBIR 提案。機構。總體而言，我們發現這些外部資助的研發機會非常富有成效和回報，因此我們將繼續追求它們，即使我們內部投資以擴大我們的產品範圍，擴大公司的客戶群，并快速響應行業需求的變化。

Our unique metal matrix composite technology brings innovative, cost-effective solutions to durability and efficiency problems faced by a host of customers and markets across the globe. For fiscal 2024 however, I want to remind our audience that shipments of our HybridTech Armor panels for Kinetic Protection Navy contract are expected to be complete as of the middle of second quarter. For the last year or so, these sales have generated, on average, quarterly revenue of just over $2 million, so the completion of our subcontract will have a material effect on near-term revenue. However, we see growth in other product lines mitigating some of this impact, which we estimate will cover roughly half the revenue shortfall.

我們獨特的金屬基複合材料技術為全球眾多客戶和市場面臨的耐用性和效率問題帶來了創新、經濟高效的解決方案。然而，對於 2024 財年，我想提醒我們的聽眾，我們用於動能防護海軍合約的混合技術裝甲板的發貨預計將於第二季度中期完成。在過去一年左右的時間裡，這些銷售平均產生了略高於 200 萬美元的季度收入，因此我們分包合約的完成將對近期收入產生重大影響。然而，我們看到其他產品線的成長減輕了部分影響，我們估計這將彌補約一半的收入缺口。

Further out, we expect our other products, as well as the potential for the additional armor orders that we are pursuing to enable us to resume and exceed our recent revenue run rate. We're actively pursuing other opportunities for armor products across several military programs. We are hopeful of future contracts to support other ship classes but remain uncertain as to contract timing, particularly given the protracted continuing resolution.

此外，我們預計我們的其他產品以及我們正在尋求的額外裝甲訂單的潛力將使我們能夠恢復並超過我們最近的收入運行率。我們正在多個軍事項目中積極尋求裝甲產品的其他機會。我們對未來能夠支持其他船舶類別的合約抱有希望，但合約時間仍不確定，特別是考慮到長期持續的解決方案。

In addition, as previously explained, we're pursuing business on potential ground vehicle applications, but these efforts have been hampered due to testing that did not go as well as anticipated. We continue to work to address the relevant deficiencies, but cannot determine when such initiatives will move forward.

此外，正如先前所解釋的，我們正在尋求潛在的地面車輛應用業務，但由於測試進展不及預期，這些努力受到了阻礙。我們將繼續努力解決相關缺陷，但無法確定此類措施何時推進。

Overall, based on current developments and a solid backlog, we remain well-positioned for the future. We're pursuing a number of new opportunities and taking steps to expand both the breadth and depth of our product portfolio, which should lay the groundwork for growth acceleration. While headwinds related to armor exist in the near term, we're committed to improving our top-line profile, strengthening operating results, and in turn, improving total return for our shareholders.

總體而言，基於當前的發展和堅實的積壓，我們仍然為未來做好了準備。我們正在尋求許多新的機會，並採取措施擴大我們產品組合的廣度和深度，這將為加速成長奠定基礎。儘管短期內存在與裝甲相關的不利因素，但我們致力於改善我們的營收狀況，增強營運業績，進而提高股東的總回報。

I'll now turn the call over to Chuck to provide more details about our financial results, after which we will open it up for questions. Chuck?

我現在將把電話轉給查克，提供有關我們財務業績的更多詳細信息，然後我們將開放提問。查克？

Thanks, Brian. As mentioned earlier, the company's revenue totaled $6.7 million in the fourth quarter. That's compared with $6.1 million last year, which represents a substantial growth year over year. We expect to continue posting solid results in the quarters to come.

謝謝，布萊恩。如前所述，該公司第四季的營收總計為 670 萬美元。與去年的 610 萬美元相比，年比大幅成長。我們預計在未來幾季將繼續公佈穩健的業績。

However, as Brian indicated, the negative impact from the completion of our armor contract outfitting the US carrier fleet will cause a different revenue near term. While our partner Kinetic Protection is cautiously optimistic about additional work for other Navy ships, the length of the impact remains to be seen.

然而，正如布萊恩所指出的，我們為美國航空母艦艦隊裝備的裝甲合約的完成所帶來的負面影響將導致近期收入出現不同。雖然我們的合作夥伴動能保護對其他海軍艦艇的額外工作持謹慎樂觀態度，但影響的持續時間仍有待觀察。

Gross profit in the fourth quarter totaled $1.1 million or approximately 17% of sales, and that compares with $1.6 million or 27% of sales last year. The decrease in both profit and gross margin year over year was predominantly due to the quality issue with a major customer that we've discussed in the past. Not only did this result in $0.5 million of write-offs and returns, but we've also devoted significant internal engineering hours to investigate and solve this problem. While we're not ready to claim victory yet, we have seen signs of significant improvement and are optimistic that any impact on 2024 will be minimal.

第四季的毛利總計 110 萬美元，約佔銷售額的 17%，而去年的毛利為 160 萬美元，約佔銷售額的 27%。利潤和毛利率年減主要是由於我們過去討論過的一個主要客戶的品質問題。這不僅導致 50 萬美元的沖銷和退貨，而且我們還投入了大量的內部工程時間來調查和解決這個問題。雖然我們尚未準備好宣布勝利，但我們已經看到了顯著改善的跡象，並樂觀地認為對 2024 年的影響將很小。

Selling, general and administrative expenses totaled $1 million in the fourth quarter versus $1.3 million in the prior-year period. We maintained our cost discipline in terms of overhead, and we're happy to do so. The company generated operating income of $144,000 in the fourth quarter compared with approximately $309,000 last year.

第四季的銷售、一般和管理費用總計 100 萬美元，而去年同期為 130 萬美元。我們在管理費用方面保持了成本紀律，我們很高興這樣做。該公司第四季營業收入為 144,000 美元，而去年約為 309,000 美元。

Turning to the balance sheet. We ended the year with $8.8 million of cash, up from $8.3 million at the end of 2022. And this increase was in spite of the reduction in deferred revenue by almost $2.5 million during 2023. Trade accounts receivable as of December 30, 2023, totaled $4.4 million versus $3.8 million as of December 31, 2022. Inventories totaled $4.6 million at the end of 2023 versus $4.9 million at the start of the fiscal year.

轉向資產負債表。截至年底，我們的現金為880 萬美元，高於2022 年底的830 萬美元。儘管2023 年遞延收入減少了近250 萬美元，但這一增長還是存在的。截至2023 年12 月30 日，應收帳款總計截至2022 年12 月31 日，庫存為440 萬美元，而截至2022 年12 月31 日為380 萬美元。截至2023 年底，庫存總額為460 萬美元，而本財年年初為490 萬美元。

Turning to the liability side. Payrolls and accruals totaled $3.6 million at the end of the fourth quarter versus $2.7 million as of December 31, 2022. Deferred revenue decreased, as I mentioned earlier, $2.3 million from $2.8 million at the end of 2022. As a reminder, deferred revenue predominantly represents prepayments for large orders to help defray the impact on cash of large inventory purchased for those orders. A number of these shipments in 2023 resulted in recognition of revenue and thus decreased deferred revenue.

轉向責任方。第四季末的薪資和應計費用總額為360 萬美元，而截至2022 年12 月31 日為270 萬美元。正如我之前提到的，遞延收入從2022 年底的280 萬美元減少了230萬美元。需要提醒的是，遞延收入主要是代表大訂單的預付款，以幫助支付為這些訂單購買的大庫存對現金的影響。 2023 年的許多出貨量導致了收入確認，從而減少了遞延收入。

So thank you, this concludes my discussion of the financials. So now, we will open the call up for questions. Operator?

謝謝大家，我對財務問題的討論到此結束。現在，我們將開放提問。操作員？

(Operator Instructions) Jim McIlree, Dawson James.

（操作員說明）Jim McIlree、Dawson James。

I was hoping you could give a little bit more detail on the Triton license. Is it limited to certain end markets, the timeframe of the license? And then where are you going to manufacture this product?

我希望您能提供有關 Triton 許可證的更多詳細資訊。是否僅限於某些終端市場、授權的時間範圍？那你要在哪裡生產這個產品呢？

Yeah. Thanks, Jim. The FLRAA license is a exclusive global license to use that technology for any application, so it's quite broad. The timeframe is, essentially, I would interpret it as perpetual, unless we fall down on the job and Triton Systems decides to pull that back. But there's a pretty high bar for that type of activity, and ability to cure, and those kind of things, so it's sort of not ended in a term. There's a lot of joint interest and alignment between Triton Systems and what we'll be trying to do. Success for one of us is a success for both of us, so we're very excited about the opportunity.

是的。謝謝，吉姆。 FLRAA 許可證是在任何應用程式中使用該技術的獨家全球許可證，因此它的範圍相當廣泛。從本質上講，我將其解釋為永久的時間範圍，除非我們在工作中失敗並且 Triton Systems 決定取消該時間範圍。但這種類型的活動、治癒能力以及諸如此類的事情有一個相當高的門檻，所以它不會在一個術語中結束。 Triton Systems 和我們將要嘗試做的事情之間存在著許多共同利益和一致性。我們一個人的成功就是我們雙方的成功，所以我們對這個機會感到非常興奮。

It's a very well-tested material whose benefits are known. To answer your question, we will be manufacturing that material here at our facility in Norton. And it's a metal matrix composite material, so just like the MMCs we've been making for 39 years, it's a preform infiltrated by aluminum.

這是一種經過充分測試的材料，其優點眾所周知。為了回答您的問題，我們將在諾頓的工廠生產該材料。它是一種金屬基複合材料，所以就像我們 39 年製造的 MMC 一樣，它是一種滲有鋁的預製件。

The armor products that we make is a preform infiltrated by aluminum. Of course, the first one is for primarily thermal conductivity, and the latter one's primarily for ballistic protection. In this case, it'll be lightweight but also strong. So the area one is aircraft, like bushing or a bearing liner for a helicopter. Obviously, lightweight is of high value. And there's any number of applications. We can make net shape products from these, and we can also make essentially ingots or blocks which can be machined. It's a machinable material to add a through-hole or other feature.

我們生產的裝甲產品是滲鋁的預製件。當然，第一個主要是為了導熱，而後者主要是為了防彈。在這種情況下，它會很輕但也很堅固。因此，第一個區域是飛機，例如直升機的襯套或軸承襯套。顯然，輕量化具有很高的價值。並且有很多應用程式。我們可以用它們製造淨形狀產品，我們也可以製造可加工的錠或塊。它是一種可加工材料，可以添加通孔或其他功能。

So it's very well in line with our core competencies. We will be on the learning curve for some of the nuances, based on our relationship with Triton Systems, but once that handoff is complete, this will be ours to manufacture and sell with their support.

所以這非常符合我們的核心競爭力。根據我們與 Triton Systems 的關係，我們將處於一些細微差別的學習曲線上，但一旦交接完成，這將由我們在他們的支持下製造和銷售。

And just a couple more questions, again, on the Triton license. So one, do you have minimum commitments that you need to satisfy? And then it seems like that this will be something that would contribute to revenue, maybe 12 to 18 months down the road. Is that too optimistic, too pessimistic?

還有幾個關於 Triton 許可證的問題。那麼第一，您是否有需要滿足的最低承諾？然後，這似乎將在 12 到 18 個月後為收入做出貢獻。是不是太樂觀、太悲觀了？

Yeah, it's certainly not this quarter. I mean we'll be on the learning curve and making trial pieces and things like that. The intriguing part of it is also that there are interested customers who have dialogued with Triton Systems in the past who are looking for a reliable supply chain before they can turn this on.

是的，當然不是這個季度。我的意思是我們將處於學習曲線上並製作試用件之類的東西。有趣的是，有一些有興趣的客戶過去曾與 Triton Systems 進行過對話，他們正在尋找可靠的供應鏈，然後才能啟用此功能。

Having said that, obviously, you don't get into a helicopter without sufficient testing, given a set of specifications, given the OEM, or whoever the case may be. So there will be a timeframe to it that will play out. If anything, this year, it's going to be small revenue of early pieces and that kind of thing, and it will go from there.

話雖如此，顯然，如果沒有經過充分的測試、給定一組規格、給定 OEM 或任何情況，您就不會進入直升機。因此，它將會有一個時間表。如果今年有什麼不同的話，那就是早期作品之類的小收入，而且會從那裡開始。

And the other question about minimums, it's more just about making material efforts to succeed in this market. So there's not a high bar for success, as long as we're continuing to work on it, which we certainly intend to do.

另一個關於最低限度的問題，更多的是為了在這個市場上取得成功而做出物質努力。因此，成功的門檻並不高，只要我們繼續努力，當然也打算這麼做。

Okay. I have three other questions, and I'll just throw them all out at you. You talked about the revenue impact of the Navy completion. I was hoping that you could talk a little bit about the margin impact. And then on the quality issue, it sounds like there's still going to be some, although small, impact on Q1. And then you opened up indicating that backlog was $20 million. I was hoping you could tell me what it was a year ago.

好的。我還有另外三個問題，我會把它們全部丟給你。您談到了海軍竣工對收入的影響。我希望您能談談利潤率的影響。然後在品質問題上，聽起來對第一季仍然會產生一些影響，儘管影響很小。然後你開口表示積壓金額為 2000 萬美元。我希望你能告訴我一年前的事。

Okay. Well, this is Chuck. Let me answer that. So in terms of the armor, that does tend to be higher-margin than our other products. So there will be somewhat of an impact on the bottom line from that standpoint as well. Although, again, I think that when it comes to that bottom-line margin, more than half of our overhead is fixed. So it's really a function of getting the throughput through the factory in order to increase the margin in the bottom line. So we're certainly working to do that. As Brian mentioned, we do have other items that are -- or other orders that are going to increase this year that are going to somewhat mitigate the loss of the armor revenue.

好的。嗯，這是查克。讓我來回答一下。因此，就裝甲而言，它的利潤率確實比我們的其他產品更高。因此，從這個角度來看，這也會對利潤產生一定的影響。不過，我再次認為，當談到底線利潤時，我們一半以上的管理費用是固定的。因此，這實際上是提高工廠吞吐量以增加利潤的功能。所以我們肯定正在努力做到這一點。正如布萊恩所提到的，我們確實有其他項目，或者今年將增加的其他訂單，這將在一定程度上減輕裝甲收入的損失。

What was the second question again?

第二個問題又是什麼？

The quality issue, if there is some impact, although small in Q1.

品質問題，如果有一些影響，雖然在第一季影響很小。

Yeah, from what we've seen so far, it's probably -- I would say it's probably not material to Q1, as it were -- as it was certainly for the last three quarters of last year. As I said, it hasn't gone away, but it appears to have significantly, significantly decreased to the point where -- well, as I said, we're not declaring victory. We're still trying to get it down to virtually zero, but we're at the point where -- it's more of a nuisance maybe now --

是的，從我們到目前為止所看到的情況來看，我想說這可能對第一季並不重要，因為它確實是去年最後三個季度的情況。正如我所說，它並沒有消失，但它似乎已經顯著、顯著地減少到了這樣的程度——好吧，正如我所說，我們並沒有宣布勝利。我們仍在努力將其降至幾乎為零，但我們正處於這樣的地步——也許現在更令人討厭——

I mean part of the trick, which makes it thorny, technically, is that the defect doesn't show itself until it's been shipped and processed downstream, so connecting cause and effect has been challenging. But what we're now receiving from the customer are reports with a dramatically reduced defect rate based on product that we shipped to them, let's say, December timeframe, that they processed in January.

我的意思是，從技術上來說，這個問題的棘手之處在於，缺陷只有在被運送到下游並進行處理後才會顯現出來，因此連接因果關係一直具有挑戰性。但我們現在從客戶收到的報告顯示，根據我們運送給他們的產品（比方說，12 月的時間範圍），他們在 1 月處理的產品，缺陷率大幅降低。

Okay. All right. And your backlog a year ago?

好的。好的。那你一年前的積壓工作呢？

Oh, yeah. I want to say it was probably about $27 million, at the top off my head, but a big chunk of that was armor. And I think in terms of the backlog, one thing to keep in mind is that with the exception of armor, typically, the orders that -- we're going to be receiving orders today that are going to ship in late Q2, early Q3. So there's still a lot of additional business to get out of that backlog before we --

哦耶。我想說，據我所知，這可能是 2700 萬美元，但其中很大一部分是裝甲。我認為就積壓而言，需要記住的一件事是，除了裝甲之外，通常我們今天將收到的訂單將在第二季末、第三季初發貨。因此，在我們之前還有很多額外的業務需要處理積壓的訂單——

Yeah, and on the armor side, we don't enter the year with significant backlog.

是的，在裝甲方面，今年我們並沒有大量積壓訂單。

Right.

正確的。

But I mean there are very real opportunities that we're actively pursuing. We don't control Navy decision-making and things like that, but that remains an active area going forward.

但我的意思是，我們正在積極尋求非常真實的機會。我們不控制海軍決策之類的事情，但這仍然是未來的活躍領域。

Understood. Okay. Great. Thanks a lot, guys. That's it for me.

明白了。好的。偉大的。非常感謝，夥計們。對我來說就是這樣。

Thank you, Jim.

謝謝你，吉姆。

[Michael Weiss], a private investor.

[麥可‧韋斯]，私人投資者。

Just a question on the interest income. And I know it went down significantly from '22 to '23, and your cash balances were up significantly, and I just want to have an answer about your cash management strategy.

只是關於利息收入的問題。我知道從 22 年到 23 年，現金餘額顯著下降，而您的現金餘額顯著增加，我只想知道您的現金管理策略。

Yeah, let me address that. So that's actually other income, and last year, that other income included $600,000 of -- for the ERTC, the tax credit, the employer tax credit --

是的，讓我解決這個問題。所以這實際上是其他收入，去年，其他收入包括 60 萬美元——用於 ERTC、稅收抵免、雇主稅收抵免——

Employee retention.

留住員工。

Yeah, so actually, interest income was up this year significantly. I want to say it was probably $10,000 for 2022, and this year was closer to $240,000, $250,000, something in that range. So actually, the interest income is up significantly compared to the prior year.

是的，實際上，今年的利息收入大幅增加。我想說 2022 年可能是 10,000 美元，今年接近 240,000 美元、250,000 美元，在這個範圍內。所以實際上，利息收入比前一年大幅增加。

And in terms of cash management, I think that one thing that we've done is -- which I think is good from a risk standpoint, is our bank has a sweep product, whereby every night, $250,000 of cash goes to different FDIC-insured banks around the country so that basically, we're protected from that standpoint. If there's another Silicon Valley Bank or something like that, we don't have too many concerns about that kind of thing because it's basically automatically spread out every night, so we don't have issues from that standpoint.

在現金管理方面，我認為我們所做的一件事是——從風險的角度來看，這很好，我們的銀行有一個掃描產品，每天晚上，250,000 美元的現金流向不同的 FDIC——全國各地的銀行都受保，所以基本上，從這個角度來看，我們受到了保護。如果還有另一家矽谷銀行或類似的東西，我們對這類事情沒有太多擔心，因為它基本上每天晚上都會自動傳播，所以從這個角度來看我們沒有問題。

Other questions about cash, or anything else?

還有其他關於現金的問題嗎？

Yeah, what type of rate are you getting on that sweep?

是的，您這次掃描的利率是多少？

I want to say we're in the high 3%s, close to 4%.

我想說我們處於 3% 的高位，接近 4%。

Any thought of laddering treasury bills gaining over 5%, which is a very liquid market? If you ever needed the cash, you can always sell them, but the ladder note, 3 months, 6 months, 9 months?

有沒有想過階梯式國庫券漲幅超過 5%，這是一個流動性很強的市場？如果你需要現金，你可以隨時賣掉它們，但是階梯上註明，3個月、6個月、9個月？

Yeah, so we have discussed it -- how do I say that, what is the word I want? We've discussed it, but not really to the point where we would want to pull the trigger on something like that. It's a good idea, and, yeah, but it's not something that, as I said, we pull the trigger on. But it's definitely something that’s on the radar, let's say that.

是的，所以我們已經討論過——我該怎麼說，我想要的詞是什麼？我們已經討論過這個問題，但還沒有真正達到我們想要觸發這樣的事情的程度。這是個好主意，是的，但正如我所說，這不是我們扣動扳機的事情。但可以這麼說，這絕對是人們關注的事情。

Yeah, $8.8 million, that's a nice cash flow you're sitting on. And the stock, if you take that away from the market cap, the stock seems very undervalued. Any thought to using some of your future free cash flow? I know in the past, you wanted to have a large cash for it, but use some of your future free cash flow to buy back stock?

是的，880 萬美元，這是一筆不錯的現金流。而這隻股票，如果你把它從市值中剔除，那麼這隻股票似乎被嚴重低估了。有想過使用您未來的一些自由現金流嗎？我知道過去你想擁有大量現金，但用你未來的一些自由現金流來回購股票？

We have not discussed that. I don't believe, yeah. Yeah, I don't think we've discussed doing something like that at this point.

我們還沒有討論過這個問題。我不相信，是的。是的，我認為我們目前還沒有討論過做類似的事情。

I think we're looking at a number of opportunities. I think the FRA, the fiber reinforced aluminum, is an opportunity. The $200,000 grant from the state or from MMAP is another opportunity where we're looking at being able to invest cash in order to better grow the company. And I think that we're looking to use the cash for that purpose, as opposed to buying back stock, for example.

我認為我們正在尋找很多機會。我認為 FRA（纖維增強鋁）是一個機會。來自國家或 MMAP 的 20 萬美元補助金是我們尋求能夠投資現金以更好地發展公司的另一個機會。我認為我們希望將現金用於此目的，而不是回購股票等。

All right. Like I say, I'm not saying use all the $8.8 million, but if you had --

好的。就像我說的，我並不是說要用掉所有 880 萬美元，但如果你——

No, no, no, I know --

不不不，我知道——

25% to 30% of future cash, send a message to the market that, hey, we believe the stock is undervalued. And if you did even 25% or 30% of future free cash flow, that's a significant number of shares you'd be buying back.

未來現金的 25% 到 30%，向市場發出這樣的訊息：嘿，我們認為該股票被低估了。如果你用了未來自由現金流的 25% 或 30%，你就會回購大量股票。

Yeah. Okay. I'm glad you brought it up, and it's something that we can put on that radar screen.

是的。好的。我很高興你提出這個問題，我們可以將其放在雷達螢幕上。

All right. I look at the premarket and the stock price going down at $2.01, so it looks pretty appetizing. All right, guys. Thanks for your time.

好的。我查看了盤前情況，股價下跌至 2.01 美元，所以看起來相當誘人。好吧，夥計們。謝謝你的時間。

Thank you.

謝謝。

(Operator Instructions) And the next question is coming from Greg Weaver. Greg, your line is live.

（操作員說明）下一個問題來自 Greg Weaver。格雷格，您的線路已上線。

All right, Chuck, going to beat you up a little bit here because this gross margin situation, I mean, the reserve didn't cover what you needed, obviously, from Q3 for Q4 issue. So you cited $500,000 hit, so I think that's both periods, or ever since the problem started?

好吧，查克，我要在這裡打敗你，因為這種毛利率情況，我的意思是，準備金顯然沒有滿足你從第三季到第四季的需要。所以你提到了 50 萬美元的打擊，所以我認為這是兩個時期，還是從問題開始以來？

Yeah, that would cover the year, but most of it was probably in the fourth -- more than half of it was in the fourth quarter, let's say, yeah.

是的，這將涵蓋全年，但大部分可能是在第四季度——其中一半以上是在第四季度，可以這麼說，是的。

Got you. So the production issue, is that precipitated by changes made by CPSH, or the customer, or supply inputs? Any sense there?

明白你了。那麼，生產問題是由 CPSH、顧客或供應投入的改變所造成的嗎？有什麼意義嗎？

What we believe is there's a confluence of issues that from a few years ago, individually, did not seem to indicate any concern. But over time, culminating in 2023, resulted in the downstream appearance of this defect. And because it's a multifactor cause, it has been a thorny issue to get to the bottom of. And as I mentioned earlier, it doesn't show itself until later. So tying back a single product with a defect back to its origin, et cetera, has been challenging. But at the root of it seems to be a number of factors that literally go back a few years, but didn't show themselves until 2023.

我們認為，幾年前出現的一系列問題似乎並沒有表現出任何擔憂。但隨著時間的推移，最終在 2023 年，導致了這一缺陷的下游出現。由於這是一個多因素造成的，因此它一直是一個棘手的問題。正如我之前提到的，它直到後來才會顯現出來。因此，將有缺陷的單一產品追溯到其原產地等一直是一項挑戰。但其根源似乎是一些實際上可以追溯到幾年前的因素，但直到 2023 年才顯現出來。

Got you. Okay. Helpful. So these are field failures then, not -- you mentioned at some point --

明白你了。好的。有幫助。所以這些都是現場故障，而不是——你在某個時候提到過——

They're not in the field. They're at the customer.

他們不在現場。他們在顧客那裡。

Yeah. So basically, just to be more clear, the customer, when they get our product, they bake it. And the product -- and the issue shows up when they bake it. So they haven't put it into any of their production at that point. They just -- it's more or less their own process. Because if it goes beyond that, and then it has a problem, then it obviously costs the customer --

是的。所以基本上，更清楚地說，當客戶收到我們的產品時，他們會烘烤它。還有產品——當他們烘烤產品時，問題就顯現出來了。所以他們當時還沒有投入任何製作。他們只是──這或多或少是他們自己的過程。因為如果超出這個範圍，然後出現問題，那麼顯然會讓客戶付出代價——

They see it before it would leave their facility.

他們在它離開他們的設施之前就看到了它。

Right.

正確的。

Oh, good. Okay. So they're not adding any value other than baking it, so they're not -- it's not in the field and they're not adding parts to it and then having to throw it all away.

哦，很好。好的。因此，除了烘烤之外，他們不會增加任何價值，所以他們不會——它不在現場，他們不會向其中添加零件，然後不得不將其全部扔掉。

Correct. It's not in the field. And it's limited to a certain small family of products that are processed in a certain way. We're certain of that. It's limited to this handful of things, but they have shown this defect that we've been working through.

正確的。它不在田野裡。而且它僅限於以某種方式加工的某個小系列產品。我們確信這一點。它僅限於這幾件事，但它們已經顯示了我們一直在努力解決的缺陷。

All right. That's helpful. That sounds a lot more manageable. And is this related to that $7.7 million customer? Or this is something else?

好的。這很有幫助。這聽起來更容易管理。這與那位 770 萬美元的客戶有關嗎？還是這是別的東西？

It's something else.

這是另一回事。

Something else, okay. So the reserve, Chuck, you mentioned you didn't think there'd be a material impact in Q1, that's a function of the reserve. Obviously, it's an unknown because the guys -- back, right?

還有別的事，好吧。所以，查克，儲備金，你提到你認為第一季不會產生實質影響，這是儲備金的功能。顯然，這是一個未知數，因為這些傢伙——回來了，對吧？

Yeah. Yeah. Yeah.

是的。是的。是的。

Okay. So I think Jim asked a question about the gross margins. But so post-armor, what should we think about as a target corporate gross margin, assuming we've got through this production issue?

好的。所以我認為吉姆問了一個關於毛利率的問題。但是，在裝甲之後，假設我們已經解決了這個生產問題，我們應該考慮什麼作為企業毛利率目標？

I would target like in the mid-20%s. I think that -- I'm kind of hesitant to predict the future, but that would certainly be what we would be shooting for. And certainly, I think it's achievable.

我的目標是 20% 左右。我認為——我對預測未來有點猶豫，但這肯定是我們的目標。當然，我認為這是可以實現的。

Okay. So then if we get some more armor business, then it will eventually back to this 30% neighborhood, hopefully.

好的。因此，如果我們獲得更多的裝甲業務，那麼它最終將有望回到這 30% 的區域。

Hopefully. (inaudible)

希望。 （聽不清楚）

(inaudible) back up.

（聽不清楚）備份。

Well, it's nice when the company makes more money operating the company, as opposed to interest income, right? (laughter)

好吧，當公司透過經營公司賺更多的錢（而不是利息收入）時，這很好，對吧？ （笑聲）

Right. So true.

正確的。如此真實。

So we'll focus on trying to get the operations going, so good. And I guess, it sounds like, Brian, your focus is obviously, for good reasons, more on this armor from a growth perspective going forward, with this new deal with Triton here?

因此，我們將專注於努力讓營運順利進行，非常好。我想，聽起來，布萊恩，你的重點顯然是，出於充分的理由，從未來的增長角度更多地關注這件盔甲，與 Triton 達成新協議？

Yeah. The FRA is a very interesting avenue of growth. I mean, really, as of a week ago, I would say we have R&D plus three product lines, which are MMC, hermetic packaging, and armor. The FRA is kind of, you could call it number 4. So you have MMC, hermetic packaging, armor, and fiber reinforced aluminum. But it suits all of our capabilities well. It suits our customer relationships very well. I mean, it's a lot of the same trade shows and same dialogue, just with a different benefit from the properties of the material that we produce.

是的。 FRA 是一個非常有趣的成長途徑。我的意思是，實際上，截至一周前，我想說我們擁有研發和三個產品線，即 MMC、密封包裝和裝甲。 FRA 是一種，你可以稱之為 4 號。所以你有 MMC、密封包裝、裝甲和纖維增強鋁。但它非常適合我們所有的能力。它非常適合我們的客戶關係。我的意思是，這是許多相同的貿易展覽和相同的對話，只是我們生產的材料的特性帶來了不同的好處。

And the other point that is that even though where we are with armor in the near term gives us some challenges, the other -- the hermetic packaging and the MMCs are growing. Those are growing numbers, they're just not, at the moment, growing fast enough to take up that entire near-term dip from armor. So we see continued growth in those. And then we'll be adding FRA to the product portfolio here over the coming months and are excited about what that does for us as well, as we continue to work very real opportunities on the armor side.

另一點是，儘管我們在短期內的裝甲狀況給我們帶來了一些挑戰，但另一個挑戰——密封包裝和 MMC 正在增長。這些數字正在不斷增長，但目前它們的成長速度還不夠快，無法彌補近期裝甲的全部下降。所以我們看到這些持續成長。然後，我們將在接下來的幾個月內將 FRA 添加到這裡的產品組合中，並且我們也對這對我們所做的事情感到興奮，因為我們將繼續在裝甲方面尋找非常實際的機會。

Okay. All right. That's my fault. So this FRA, you mentioned about using, like, bearing liners and things. So this is never meant to be, like, sheet form, just smaller little parts that are light and strong?

好的。好的。那是我的錯。在這次 FRA 中，您提到了使用軸承襯套之類的東西。所以這絕不意味著是片狀的，只是更輕、更堅固的小部件？

Yeah, exactly. I mean, a helicopter might have these components, they might have -- so one helicopter might have 60 to 80 of these components that are of different diameters, and that's what we'll be looking to make.

是的，完全正確。我的意思是，一架直升機可能有這些組件，他們可能有——所以一架直升機可能有 60 到 80 個不同直徑的組件，這就是我們想要製造的。

When we make our, for example, a base plate from MMC, we make the net shape product that the customer is going to use so we can readily take our knowledge in how to make a net shape component and apply it to fiber reinforced aluminum. So instead of making a block of FRA and then needing to machine that down to a component, as soon as our team looks at this technology, they say, well, we can make a net shape. And when you produce it, you might have to do a little cleanup, but you basically will have a bearing line and ready to sell. So then it's making different diameters and confirming that they meet the product requirements for customer testing and things like that.

例如，當我們製造 MMC 基板時，我們會製造客戶將要使用的淨形狀產品，因此我們可以輕鬆地利用我們關於如何製造淨形狀部件的知識並將其應用於纖維增強鋁。因此，我們的團隊一看到這項技術，他們就說，我們可以製作一個淨形狀，而不是製作一塊 FRA，然後將其加工成一個組件。當你生產它時，你可能需要做一些清理工作，但你基本上會有一條軸承生產線並準備好出售。然後，它會製造不同的直徑，並確認它們滿足客戶測試等的產品要求。

And there are customers that are interested, that Triton has worked with in the past, who are eager for a reliable supply chain. So there's a lot of things that are very interesting about it for us.

有些客戶對 Triton 過去合作過的產品感興趣，他們渴望可靠的供應鏈。所以有很多事情對我們來說非常有趣。

Got you. Okay. So historically, it hasn't got taken off that much because maybe cost and having to machine it down, but you guys think you can reduce the cost by near net to molding it?

明白你了。好的。所以從歷史上看，它並沒有被取消那麼多，因為可能是成本和必須將其加工下來，但你們認為可以透過近淨模製來降低成本嗎？

Yeah, and I think some of the hesitation was, well, what's the supply base? As an OEM, you're not going to adopt a family of products and incorporate them and go all the way to introduction unless you know that 5, 10 years down the road, your supply base is going to be there. So when we say, well, we've been doing this for 39 years, we're Metal Matrix Composite company, et cetera, et cetera, we're domestically located, no foreign entanglements, all that kind of good stuff, currently working on different things with the DoD, it satisfies a lot of those questions. So then you're talking about product capabilities and product introduction, and we're excited about it.

是的，我認為一些猶豫是，供應基地是什麼？作為 OEM，您不會採用一系列產品並整合它們並一路推出，除非您知道 5 到 10 年後，您的供應基地將會在那裡。所以當我們說，好吧，我們已經這樣做了 39 年，我們是金屬基複合材料公司，等等，等等，我們位於國內，沒有外國糾葛，所有這些好東西，目前正在工作在與國防部在不同的事情上，它解決了很多這樣的問題。那麼您正在談論產品功能和產品介紹，我們對此感到興奮。

Got you. Okay. Thank you. Appreciate the color. Good luck.

明白你了。好的。謝謝。欣賞顏色。祝你好運。

Thanks.

謝謝。

(Operator Instructions) Okay. At this point, there are no other callers in the queue, so I will turn the call back to management for any closing remarks.

（操作員指示）好的。此時，佇列中沒有其他來電者，因此我會將電話轉回給管理階層以取得結束語。

Okay. Thank you for joining us today and for your ongoing interest in CPS Technologies. We look forward to speaking with you again after the end of the first quarter, which is upcoming. If you have any questions in the interim, please reach out to our Investor Relations adviser. Thanks.

好的。感謝您今天加入我們並感謝您對 CPS 技術的持續關注。我們期待在即將到來的第一季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。謝謝。

Thank you. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day and thank you for your participation.

謝謝。今天的會議到此結束。此時您可以斷開線路，祝您度過愉快的一天，感謝您的參與。