Ultralife Corp (ULBI) 2024 Q1 法說會逐字稿

Good day and thank you for standing by, and welcome to the Ultralife Corporation first quarter conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jody Burfening, Managing Director of LHA Investor Relations. Please go ahead.

美好的一天，感謝您的支持，歡迎參加 Ultralife 公司第一季電話會議。（操作員指示）請注意，今天的會議正在錄製中。現在我想將會議交給今天的第一位發言人，LHA 投資者關係董事總經理喬迪·伯芬寧 (Jody Burfening)。請繼續。

Thank you, Antoine, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the first quarter of fiscal 2024. With us on today's call are Mike Magna, AutoWeb's President and CEO.

謝謝安托萬，大家早安，謝謝您今天早上參加 Ultralife Corporation 2024 財年第一季的財報電話會議。參加今天電話會議的有 AutoWeb 總裁兼執行長 Mike Magna。

And Phil Fain, Ultralife's Chief Financial Officer. The earnings press release was issued earlier this morning, and if anyone has not yet received a copy, I invite you to visit the Company's website, w. w. w. Ultra emcore.com, where you'll find the release under Investor News in the Investor Relations section.

還有 Ultralife 財務長 Phil Fain。收益新聞稿於今天早上早些時候發布，如果有人尚未收到副本，我邀請您訪問該公司的網站，w。 w。 w。Ultra emcore.com，您可以在投資者關係部分的投資者新聞下找到該新聞稿。

Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in US and foreign military spending, acceptance of new products on a global basis and disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, whether or other factors not under the Company's control company cautions investors not to place undue reliance on forward-looking statements, which reflect the Company's analysis only as of today's date. The Company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these and other factors that could affect Ultralife's financial results is included in the Company's filings with the Securities and Exchange Commission, including the latest annual report on Form 10 K.

在將電話轉交給管理階層之前，我想提醒大家，本次電話會議中所做的一些陳述包含基於當前預期的前瞻性陳述。由於各種風險和不確定性，實際結果可能與預測有重大差異。可能導致實際結果出現重大差異的潛在風險和不確定性包括不確定的全球經濟狀況、主要客戶收入的減少、美國和外國軍事支出的延遲或減少、全球範圍內新產品的接受度以及我們的業務中斷或延遲。本公司不承擔公開更新前瞻性陳述以反映後續事件或情況的義務。有關這些因素以及可能影響 Ultralife 財務業績的其他因素的更多信息，請參見該公司向美國證券交易委員會提交的文件，包括 10 K 表格中的最新年度報告。

In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP and non-GAAP measures should be considered supplemental to corresponding GAAP figures.

此外，在今天的電話會議上，管理階層將提及管理階層認為有用且不同於 GAAP 的某些非 GAAP 財務指標，且非 GAAP 指標應被視為對應 GAAP 數據的補充。

With that, I would now like to turn the call over to Mike.

有了這個，我現在想把電話轉給麥克。

Good morning, Mike.

早上好，麥克。

Thanks, Jody. And good morning, everyone. Welcome to our call and Ultra latest Q one operating results. Earlier this morning, we reported Q1 sales of $42 million and operating income of $4.1 million, the second consecutive quarter of 42 million or more in sales, delivering $0.18 EPS for the first quarter following a reported $0.17 EPS in the fourth quarter. I am extremely proud of the team's efforts across the business in Q1 and the positive impact realized from our top priority and objective this year, which is gross margin improvement. The sequential Q1 improvement to 27.4% accelerates our incremental cash flow to further invest in organic growth initiatives and to pay down our acquisition debt.

謝謝，喬迪。大家早安。歡迎來電諮詢超最新Q一經營績效。今天早些時候，我們報告第一季銷售額為4,200 萬美元，營業收入為410 萬美元，連續第二季銷售額達到或超過4,200 萬美元，繼第四季度報告每股收益0.17 美元之後，第一季每股收益為0.18 美元。我對團隊在第一季在整個業務領域所做的努力以及我們今年的首要任務和目標（即毛利率提高）所實現的積極影響感到非常自豪。第一季環比成長至 27.4%，加速了我們的增量現金流，以進一步投資於有機成長計畫並償還我們的收購債務。

I'll turn it over to Phil to talk through the detailed numbers.

我會把它交給菲爾來討論詳細的數字。

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our first quarter results for the quarter ended March 31st, 2024. We also filed our Form 10 Q with the SEC and updated our investor presentation in the Investor Relations section of our website, which now includes a summary and status of our transformational new products.

謝謝你，麥克，大家早安。今天早些時候，我們發布了截至 2024 年 3 月 31 日的第一季業績。我們也向 SEC 提交了 10 Q 表，並在我們網站的投資者關係部分更新了我們的投資者介紹，其中現在包括我們轉型新產品的摘要和狀態。

Consolidated revenues totaled $41.9 million compared to 31.9 million for the first quarter of 2023, an increase of 31.4%. Government Defense sales increased 83.4% and commercial sales increased 8.6%. As a reminder, our results for last year's first quarter were negatively impacted by the January cyber attack. Revenues from our Battery & Energy Products segment were $35 million compared to $28.5 million last year, an increase of 22.9%. This growth was driven by very strong performance in our sales to government, defense and medical markets, which increased 73.6% and 54.7%, respectively. These increases were partially offset by a decline of 13.9% in oil and gas market sales. The sales split between commercial and government defense for a battery business was 69 31 compared to 78 22 reported for the 2023 full year. And the domestic to international split was 56 44 compared to 49 51 for the 2023 full year, demonstrating heightened domestic demand for our core products and the continued success of our global revenue diversification strategy. Revenues from our Communications Systems segment of $6.9 million were double the 3.4 million we reported last year, primarily attributable to shipments of EL. 8,000 server cases to a large multinational information technology company, integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor under an ongoing Allied country. Government defense modernization program and power systems to a US-based global prime. On a consolidated basis, the commercial to government defense sales split was 58 42 versus 64 36 reported for the 2023 full year. Our total backlog exiting the first quarter was $97.4 million and remains diverse in nature across our commercial and government defense customer base. So replenishment rate remains high and the backlog represents almost 60% of TTM sales.

合併收入總計 4,190 萬美元，較 2023 年第一季的 3,190 萬美元成長 31.4%。政府國防銷售額成長 83.4%，商業銷售額成長 8.6%。提醒一下，我們去年第一季的業績受到一月份網路攻擊的負面影響。電池和能源產品部門的營收為 3,500 萬美元，較去年的 2,850 萬美元成長 22.9%。這一成長得益於我們對政府、國防和醫療市場的銷售表現非常強勁，分別成長了 73.6% 和 54.7%。這些成長被石油和天然氣市場銷售額下降 13.9% 部分抵消。電池業務的商業和政府國防銷售額比例為 69:31，而 2023 年全年報告的銷售額為 78:22。國內與國際比例為 56:44，而 2023 年全年為 49:51，顯示國內對我們核心產品的需求增加，以及我們全球收入多元化策略的持續成功。我們的通訊系統部門的收入為 690 萬美元，是我們去年報告的 340 萬美元的兩倍，這主要歸功於 EL 的出貨量。為一家大型跨國資訊科技公司提供 8,000 個伺服器機箱，為某盟軍國家的一家主要國際國防承包商提供擴大機和無線電車載支架的整合系統。政府國防現代化計劃和電力系統以美國為基地的全球領先。綜合來看，商業與政府國防銷售比例為 58:42，而 2023 年全年報告的比例為 64:36。第一季我們的積壓訂單總額為 9,740 萬美元，我們的商業和政府國防客戶群在性質上仍然保持多樣化。因此，補貨率仍然很高，積壓訂單幾乎佔 TTM 銷售額的 60%。

Our consolidated gross profit was $11.5 million, up 54.3% over the 2023 period, far eclipsing the 31.4% increase in revenues. As a percentage of total revenues, consolidated gross margin was 27.4% versus 23.3% for last year's first quarter of 410 basis point improvement and increased 180 basis points sequentially over the fourth quarter.

我們的綜合毛利為 1,150 萬美元，較 2023 年成長 54.3%，遠超過營收的 31.4% 增幅。綜合毛利率佔總營收的百分比為 27.4%，比去年第一季的 23.3% 提高了 410 個基點，比第四季連續提高了 180 個基點。

Gross profit for our Battery & Energy Products business was 9 million compared to $6.5 million last year, an increase of 38%. Gross margin was 25.7%, an increase of 280 basis points over 22.9% reported for last year's first quarter and an increase of 50 basis points on a quarterly sequential basis year-over-year and sequential increases were primarily due to higher cost absorption and more efficiencies resulting from our concerted effort to level load production, more evenly across the 2020 fourth quarter as well as improved price realization for our communication systems segment, gross profit was $2.5 million compared to 0.9 million for the year earlier period. Gross margin was 35.8% compared to 26.8% last year, primarily due to higher factory volume and favorable sales. Product mix on a quarterly sequential basis, gross margin for the segment improved 860 basis points. Operating expenses were $7.4 million, the same as the year earlier quarter as a percentage of revenues, operating expenses were 17.7% compared to 23.2% for last year's first quarter of 550 basis points improvement reflecting pure sales leverage, the combined leverage of our 410 basis point gross margin improvement and our 550 basis point reduction in operating expenses to sales ratio resulted in a 9.7% operating margin on an absolute dollar basis, operating profit improved to $4 million over the 2023 first quarter to 4.1 million, the highest level achieved in at least the last 15 years. Business interruption insurance claim pertaining to our Q1 2023. Cyber-attack still remains in review and is not included in our financial results.

我們的電池和能源產品業務的毛利為 900 萬美元，較去年的 650 萬美元成長了 38%。毛利率為 25.7%，比去年第一季的 22.9% 增長了 280 個基點，環比增長了 50 個基點，環比增長主要是由於更高的成本吸收和更多由於我們齊心協力在2020 年第四季度更均勻地平衡負載生產，以及通訊系統部門的價格實現提高，提高了效率，毛利為250 萬美元，而去年同期為90 萬美元。毛利率為 35.8%，而去年為 26.8%，主要是由於工廠產量增加和銷售良好。按季度連續計算的產品組合，該部門的毛利率提高了 860 個基點。營運費用為 740 萬美元，與去年同期相同，佔收入的百分比，營運費用為 17.7%，比去年第一季的 23.2% 提高了 550 個基點，反映了純銷售槓桿，即我們 410 基點的綜合槓桿毛利率提高了550 個基點，營業費用與銷售額之比降低了550 個基點，以絕對美元計算的營業利潤率達到了9.7%，營業利潤比2023 年第一季的410 萬美元提高到了400 萬美元，達到了2023 年第一季的最高水準。與 2023 年第一季相關的業務中斷保險索賠。網路攻擊仍在審查中，未包含在我們的財務表現中。

Our tax provision for the fourth quarter was $0.7 million versus 0.1 million benefit reported for the 2023 quarter. Computed on a GAAP basis, including the impact of interest expense to help finance the Accel acquisition and foreign currency gains and losses.

我們第四季的稅收撥備為 70 萬美元，而 2023 年季度報告的福利為 10 萬美元。根據 GAAP 基礎計算，包括幫助資助 Accel 收購的利息支出以及外匯損益的影響。

Net income was 2.9 million or $0.18 per share on a GAAP fully diluted basis. This compares to a net loss of $0.3 million or a loss of $0.02 per share for the 2023 quarter, excluding the provision for noncash U.S. taxes expected to be fully offset by our net operating loss carryforwards and other tax credits. Adjusted fully diluted EPS was $0.21 per share for the first quarter of 2024 compared to a loss of $0.05 for the 2023 periods. Adjusted EBITDA defined as EBITDA, including noncash stock-based compensation expense with $5.2 million or 12.5% of sales compared to $1.2 million or 3.6% for the prior year quarter. On a TTM basis, adjusted EBITDA is $19.8 million or 11.7% of sales.

以 GAAP 完全攤薄計算，淨利潤為 290 萬美元，即每股 0.18 美元。相較之下，2023 年季度的淨虧損為30 萬美元，或每股虧損0.02 美元，不包括預計將被我們的淨營業虧損結轉和其他稅收抵免完全抵消的非現金美國稅項撥備。2024 年第一季調整後完全稀釋每股收益為 0.21 美元，而 2023 年同期虧損 0.05 美元。調整後 EBITDA 定義為 EBITDA，包括非現金股票補償費用，為 520 萬美元，佔銷售額的 12.5%，而去年同期為 120 萬美元，佔銷售額的 3.6%。以 TTM 計算，調整後 EBITDA 為 1,980 萬美元，佔銷售額的 11.7%。

Turning to our balance sheet, we ended the first quarter with working capital of $70.9 million in a current ratio of four compared to $66.5 million and 3.8 for 2023 year end. With the strengthening of our balance sheet, we are positioned to accelerate the paydown of our debt, thereby reducing the costly interest expense, which represents almost $0.12 per share on a TTM basis. We reduced our debt by just over 0.5 million in the first quarter with the expectation to pick up the pace in subsequent quarters going forward.

談到我們的資產負債表，我們第一季末的營運資本為 7,090 萬美元，流動比率為 4，而 2023 年底的流動資本為 6,650 萬美元，流動比率為 3.8。隨著我們資產負債表的增強，我們能夠加速償還債務，從而減少昂貴的利息支出，以 TTM 計算，相當於每股近 0.12 美元。我們在第一季減少了略高於 50 萬美元的債務，並預計在接下來的幾季將加快步伐。

Our backlog, diversified end markets growth initiatives and ongoing actions to improve our gross margins and further strengthen our balance sheet position us well to further the leverage of our business model.

我們的積壓訂單、多元化的終端市場成長計畫以及為提高毛利率和進一步強化資產負債表而採取的持續行動，使我們能夠進一步發揮我們業務模式的槓桿作用。

I will now turn it back to Mike.

我現在將其轉回給邁克。

Thank you, Phil, for the detailed review of the Q1 results. As I mentioned in the last call, we refined our 2024 priorities exiting the year with the following being key to continued success.

謝謝菲爾對第一季結果的詳細審查。正如我在上次電話會議中提到的，我們完善了 2024 年的優先事項，其中以下內容是持續成功的關鍵。

First, material cost deflation, we need to keep driving material cost initiatives, working with key suppliers to produce realized cost savings. We have hired experienced supply chain resources over the past six months in North Virginia Beach and Vancouver locations to work on vendor rationalization and consolidation, critical part dual sourcing, low-cost region sourcing and streamlining logistics spend across the enterprise.

首先，在材料成本下降方面，我們需要繼續推動材料成本計劃，與主要供應商合作，以實現成本節約。過去六個月，我們在北維吉尼亞海灘和溫哥華聘請了經驗豐富的供應鏈資源，致力於供應商合理化和整合、關鍵零件雙重採購、低成本區域採購以及簡化整個企業的物流支出。

Secondly, lean productivity continue to reduce waste and inefficiencies in all of our processes, both on production lines, with line balancing projects and automation initiatives. And throughout the support and back office functions, including additional systems integration activities and finally, sales funnel improvement. We have a larger and increasing pipeline of new products with a healthy funnel sales opportunities, which most have yet to close, which is required to continue to drive future growth as the world becomes more portable and critical applications. It is important that UltraLight brand products lead the way on the direct labor and materials side, we have seen conditions improve over the last 12 months, and our S&OP process has kept us mostly within component lead times and allowed us to deliver strong revenue over recent quarters. We continue to refine the S&OP process and expect this to further level production demand and turning allowing more efficient utilization of our direct precious resources as we continue to grow the business.

其次，精實生產力透過生產線平衡專案和自動化計劃，繼續減少我們所有流程（包括生產線上）的浪費和低效率。整個支援和後台職能，包括額外的系統整合活動，最後是銷售管道的改進。我們擁有規模更大且不斷增加的新產品管道，以及健康的漏斗銷售機會，其中大多數尚未關閉，隨著世界變得更加便攜和關鍵應用，這是繼續推動未來成長所必需的。重要的是，UltraLight 品牌產品在直接勞動力和材料方面處於領先地位，我們在過去12 個月中看到了情況的改善，並且我們的S&OP 流程使我們基本上保持在組件交付週期內，並使我們能夠在最近實現強勁的收入宿舍。我們繼續完善 S&OP 流程，並期望這能夠進一步平衡生產需求，並在我們繼續發展業務的同時，更有效地利用我們的直接寶貴資源。

Next, I'll give updates on the organic growth projects and new development underway for the businesses, which are key to future sales and market expansion on the communication systems side, first, our VREL. 8,000 k. systems, which is a system developed with our strategic partner that allows high end computing power to be used in difficult environments on the edge in industrial, 5G and AI applications, truly bringing server level computational power to the point of use for the EL. 8,000 project. We shipped $1.6 million of revenue in Q1, the highest shipment quarter to date and a key to further diversification in the Comm Systems business.

接下來，我將介紹業務的有機成長項目和正在進行的新開發的最新情況，這對於通訊系統方面（首先是我們的 VREL）未來銷售和市場擴張的關鍵。 8,000 k。系統，這是與我們的戰略合作夥伴開發的系統，允許在工業、5G 和人工智慧應用的邊緣困難環境中使用高端運算能力，真正將伺服器級運算能力帶到 EL 的使用點。 8,000個項目。我們第一季的營收為 160 萬美元，是迄今為止出貨量最高的季度，也是通訊系統業務進一步多元化的關鍵。

Next, with the wide-range DC power supply available later this year, we expect to be secular remote DC applications to become part of the EL. 8,000 product line in the future. As this product line grows in defense and commercial applications. Secondly, we received initial orders for a new project win for radio power and an airborne application. We expect this program to ramp over the next year and continue for at least five years.

接下來，隨著今年稍後寬範圍直流電源的面世，我們預計長期遠端直流應用將成為EL的一部分。未來8000個產品線。隨著該產品線在國防和商業應用中的不斷發展。其次，我們收到了無線電功率和機載應用新項目的初步訂單。我們預計該計劃將在明年逐步實施，並持續至少五年。

Finally, we have several projects underway. Next gene amplification products that target both domestic and international customers out there more detailed updates in future calls on the battery and energy side of the business. We are excited about the opportunity funnel growth across the variety of new and existing products and are optimistic we will see incremental orders this year. As previously mentioned, we have production equipment in place for our Thin Cell to support customers in the medical wearable space in several applications in item tracking. The sales funnel is strong with multiple projects in the qualification phase, primarily in medical applications, the one to three product line currently supporting IoT in the illumination markets as seen opportunity funnel growth in medical pack assemblies with several quotes provided underway for multi-cell packs, which is a key initiative for this product. Our improved final core chloride product line targeting monitoring and telemetry application continues qualification and field testing with several customers. These qualification cycles are extremely lengthy. For instance, we have one customer that has been testing the product for over one year with multiple opportunities and qualification. We anticipate initial protection orders later this year.

最後，我們還有幾個正在進行中的項目。針對國內和國際客戶的下一代基因擴增產品將在電池和能源業務方面的未來電話中提供更詳細的更新。我們對各種新產品和現有產品的機會漏斗成長感到興奮，並對今年的訂單增量感到樂觀。如前所述，我們擁有適用於 Thin Cell 的生產設備，可為醫療穿戴領域的客戶提供物品追蹤的多種應用支援。銷售漏斗很強大，有多個項目處於資格階段，主要是醫療應用，目前支援照明市場中物聯網的一到三個產品線，可以看到醫療包組件的機會漏斗增長，並且正在為多電池組提供多個報價，這是該產品的關鍵舉措。我們針對監控和遙測應用改進的最終核心氯化物產品線繼續與多家客戶進行資格認證和現場測試。這些資格認證週期極為漫長。例如，我們有一位客戶已經測試該產品一年多了，並獲得了多次機會和資格。我們預計將在今年稍後發出初步保護令。

Our development work on the conformal wearable battery continues. We're working on completing the rest of the validation testing to enter US government for historical testing, which is currently scheduled to start later this year.

我們在保形穿戴電池的開發工作仍在繼續。我們正在努力完成其餘的驗證測試，以便進入美國政府進行歷史測試​​，目前計劃在今年稍後開始。

Meanwhile, as I mentioned last call, we are shipping samples to other prospective applications and customers to expand sales channels outside the US military to international markets, sales funnel and commercial opportunity pipeline growth is key for 2024 to keep our strong organic growth trajectory going as we have yet to fully realize the return from all our new product investments made over the last three to five years.

同時，正如我在上次電話會議中提到的，我們正在向其他潛在應用和客戶運送樣品，以將美國軍方以外的銷售管道擴展到國際市場，銷售漏斗和商業機會管道的增長是2024 年保持我們強勁的有機成長軌蹟的關鍵我們尚未完全實現過去三到五年所有新產品投資的回報。

In closing, the team is energized and focused on their key objectives of gross margin improvement and sales funnel opportunity growth initiatives started last year, delivering promising early results with initial positive gross margin improvements and a healthy backlog position we expect more benefit across the portfolio as we progress as momentum continues. I look forward to further organic growth investment, paying down our acquisition debt and being our next accretive M&A search.

最後，該團隊充滿活力，專注於去年開始的毛利率改善和銷售漏斗機會增長計劃的關鍵目標，透過初步積極的毛利率改善和健康的積壓狀況，帶來了有希望的早期結果，我們預計整個投資組合將獲得更多收益隨著動能的持續，我們不斷進步。我期待進一步的有機成長投資，償還我們的收購債務，並成為我們的下一個增值併購搜尋。

Thanks, everyone. That concludes the prepared remarks for today. Now we'll go back to the operator for questions.

感謝大家。今天準備好的發言就到此結束。現在我們將向接線員詢問問題。

(Operator Instructions) Josh Sullivan, The Benchmark Company.

（操作員說明）Josh Sullivan，Benchmark 公司。

Good morning.

早安.

Congratulations on a nice quarter.

恭喜您度過了一個美好的季度。

Here.

這裡。

Thank you.

謝謝。

Thank you from you.

從你那裡謝謝你。

As far as the gross margin initiatives, how much of the improvement here is is the benefit of volumes versus those strategic initiatives?

就毛利率舉措而言，與這些策略舉措相比，銷售量的改善有多少是來自銷售的好處？

It's probably shared at this point. I mean, obviously, we're putting more volume across the same fixed costs, which always helps your gross margin numbers. And we are seeing some additional price realization on the sales that we have. So it's the sales side is a double whammy on the gross margin. So I would say it's shared at this point.

此時可能已共享。我的意思是，顯然，我們在相同的固定成本下投入了更多的銷量，這總是有助於您的毛利率數字。我們看到我們的銷售量有一些額外的價格實現。因此，這對銷售方面的毛利率來說是雙重打擊。所以我想說現在已經共享了。

And Josh, I'll just add a little bit to that. The primary example that we use is right where we're Mike and I are located is new or kind of new work perform because the volume was slightly higher, but we did see a very, very nice increase in gross margin. So that goes beyond the volume, the value portion of it. So there is the other items that Mike mentioned really at play here.

喬希，我會補充一點。我們使用的主要例子是我和麥克所在的地方是新的或某種新的工作執行，因為數量稍高，但我們確實看到毛利率有非常非常好的增長。因此，這超出了其數量和價值部分。因此，麥克提到的其他項目在這裡確實發揮了作用。

And then if we look at the recent defense funding for Ukraine and elsewhere, should we expect that to benefit your defense worker needs or is there anything that's been pulled forward into recent quarters,

然後，如果我們看看最近為烏克蘭和其他地方提供的國防資金，我們是否應該期望這有利於國防工人的需求，或者是否有任何事情被推遲到最近幾個季度，

while we would hope that it does help our defense business and funnel through the money usually is not unfortunately as much as they are they're saying that it's an immediate funding. It's going to primes typically and then the primes are giving orders to us. So it is taking probably four to six weeks for us, they even have any mentioned that orders are possibly coming our way.

雖然我們希望它確實有助於我們的國防業務，但不幸的是，這筆資金通常並不像他們所說的那麼多，而是立即提供資金。它通常會發給素數，然後素數向我們發出命令。所以我們可能需要四到六週的時間，他們甚至提到訂單可能會發給我們。

And then on the inventory side, how should we think about the cadence through the year and the way I look at inventory is it absolutely depends on the POs in hand, the timing of deliveries and some great lessons that we learned during the lean COVID years with all the supply disruptions to put ourselves in a position where we're going to get the orders out on time to support our level loading and level loading.

然後在庫存方面，我們應該如何考慮全年的節奏以及我看待庫存的方式，這絕對取決於手頭的採購訂單、交貨時間以及我們在新冠疫情期間學到的一些重要經驗教訓所有的供應中斷都使我們能夠按時發出訂單來支持我們的水平裝載和水平裝載。

Josh, if there was one thing that helped us more than anything with gross margin. It's level loading and level loading is not just trying to do the same level of production on a at an debt day-in and day-out basis. It goes all the way through our purchasing process all the way through our materials planning through our manufacturing all the way through cash collections that is in the perfect world, but there certainly are exceptions because you get to know your suppliers very, very well. And one of the reasons why inventory went up over year end is specifically because of that, we know the orders, we know the suppliers, we know their supply chain. We do not want to be cut short.

喬希，如果有什麼比毛利率對我們的幫助更大的話。它的水平負載和水平負載不僅僅是試圖在日復一日的債務基礎上進行相同水準的生產。它貫穿我們的採購流程，貫穿我們的材料規劃，貫穿我們的製造，貫穿我們的現金收款，這是完美的世界，但肯定有例外，因為你非常非常了解你的供應商。年底庫存增加的原因之一就是因為我們了解訂單，我們了解供應商，我們了解他們的供應鏈。我們不想被打斷。

So could you could the inventory go up at $2 million or down $2 million compared to any future quarter?

那麼，與未來任何季度相比，庫存是否可以增加 200 萬美元或減少 200 萬美元？

Yes, it absolutely can just because we want to be able to serve our customers. And this does cost. The cost of that at some point is the paydown is the paydown of the debt, but that will all get caught up.

是的，這絕對可以，只是因為我們希望能夠為我們的客戶提供服務。這確實需要成本。在某些時候，其成本就是償還債務，但這一切都會被追上。

And then just on the stem cell opportunity and any update on timelines as far as, yes, FDA certification or for any trials that we can keep an eye on?

然後是關於幹細胞機會以及任何時間線的更新，是的，FDA 認證或我們可以關注的任何試驗？

Well, we're still being told over the summer, they should be through some of their initial testing on. They're still positive that we're going to see production orders this year, and we do continue to ship in small quantities to that customer for other applications, but it's not the big announcement or the bigger award that we're hoping for in the future for sure.

好吧，我們在夏天仍然被告知，他們應該完成一些初步測試。他們仍然樂觀地認為我們今年將看到生產訂單，並且我們確實繼續向該客戶小批量發貨以用於其他應用，但這並不是我們希望的重大公告或更大的獎項。

And then how should we think about the EL. 8,000 cadence. Are these orders lumpy or do you think this is the beginning of more kind of consistent flow here,

那我們該如何看待EL呢？ 8,000 節奏。這些訂單是不穩定的還是您認為這是這裡更一致的流程的開始，

and it's a little early to say definitively which way that's going to go, Josh, and there's a couple of different components with this business. In some cases, we're doing the actual integration of actually placing the server in the cases in other cases, we're just selling cases and someone else is doing integration work. So it really depends on which scenario it is. And unfortunately for us on the integration side, are the servers available number one and number two, just, you know, the cadence of the customers' orders going out to the field.

喬什，現在確定未來的發展方向還為時過早，而且這項業務有幾個不同的組成部分。在某些情況下，我們正在進行實際的集成，將伺服器實際放置在案例中，而在其他情況下，我們只是銷售案例，而其他人正在做集成工作。所以這實際上取決於具體情況。不幸的是，對於我們在整合方面來說，可用的服務器是第一和第二，只是，你知道，客戶訂單發送到現場的節奏。

And then maybe just one last one on the decline in the oil and gas market, is that end market dynamics or is there anything else going on there?

然後也許只是關於石油和天然氣市場下滑的最後一個問題，是終端市場動態還是還有其他情況發生？

We don't look at end markets dynamics at all. We had one customer. We believe overbuy in Q4 on they've been slow through Q1. We're starting to see some orders pick back up now, but we know we believe it's a long-term impact to the business I think we kind of look at things as a yearly run rate, and we think we're still on track to have a really strong year in that business fit both.

我們根本不關注終端市場動態。我們有一位客戶。我們認為第四季出現超買，因為他們在第一季一直進展緩慢。我們現在開始看到一些訂單回升，但我們知道我們相信這對業務產生長期影響我認為我們將事情視為年度運行率，我們認為我們仍在正軌上在該業務中度過一個真正強勁的一年符合兩者。

Thank you for the time.

謝謝你的時間。

Thank you, Josh.

謝謝你，喬許。

(Operator Instructions) Samuel McColgan, Breakout Investors.

（操作員指令）Samuel McColgan，突破投資者。

Can you hear me okay?

你聽得到我說話嗎？

Yes.

是的。

And we're hearing that phenomenon has made and Yes, congratulations. Great quarter.

我們聽說這種現像已經發生，是的，恭喜你。很棒的季度。

Well, done well done. And I just had a couple of questions. One was on operating expenses. They came in a little bit lower. I just wondered if and pacing kind of progress you would be are you hoping to kind of stay at or a little bit lower level or are they just going to kind of fluctuate around where they are? Just wondering how that might?

嗯，幹得好。我只有幾個問題。其中之一是營運費用。他們的排名稍低一些。我只是想知道你是否希望保持在或稍微低一點的水平，或者他們只是會在他們所在的位置上下波動？只是想知道那怎麼可能？

Well, while our goal is to keep our operating expenses as low as possible, I mean in Q1, I think we underspent a little bit on the R&D side we thought we'd probably spend a little bit higher, but it's just a matter of timing and some of that spend. And we want to add a little bit of expense on this on the marketing and sales side just to really drive that funnel growth. But overall, we're not looking for huge swings in that expense line at this point.

好吧，雖然我們的目標是保持營運費用盡可能低，但我的意思是，在第一季度，我認為我們在研發方面的支出有點少，我們以為我們可能會花更多一點，但這只是一個問題時機和其中一些支出。我們希望在行銷和銷售方面增加一點費用，以真正推動通路成長。但整體而言，我們目前並不認為該費用線會出現巨大波動。

Yes, prudent and the other question I had was about debt. I know you're hoping to kind of ramp up how quickly you're paying that down. Obviously, you don't know how they were quite seen that yet. But I just wondered if you had kind of a goal in mind of how much you were hoping to reduce that debt through 2024.

是的，謹慎，我的另一個問題是關於債務的。我知道您希望加快還款速度。顯然，你還不知道他們是如何被看見的。但我只是想知道您是否有一個目標，希望在 2024 年之前減少多少債務。

I don't know if you can comment on that, I can comment on that.

我不知道你是否可以對此發表評論，我可以對此發表評論。

I previously have commented on that, Sam and my goal going into any quarter is to reduce our debt on a quarterly basis by $2 million. And that is that is through solid operations. What we have in hand with an unknown expert X expectation date of when we're going to see it is the ERC. claim that we have with die with the IRS. We announced it in Q2 of last year. This 1.5 million, not sure when we're going to see that, and I'm not sure the IRS knows that either. And then the of the business interruption insurance claim and that we have spoken about the last couple of quarters that that's still in process with deal with the insurance underwriters. And with the volume of work they have, those do take some time. But those I would absolutely earmark to debt reduction. But on an ongoing basis, all things being equal, I target $2 million going into any one quarter, and that would be an impressive impressive reduction through the year to be able to fund a little less than that.

我之前曾評論過這一點，Sam 和我在任何季度的目標都是每季減少 200 萬美元的債務。那就是透過紮實的營運。我們手頭上有一位未知的專家 X 我們將看到它的預期日期是 ERC。聲稱我們已與國稅局同死。我們在去年第二季宣布了這項消息。這 150 萬，不確定我們什麼時候能看到，我也不確定國稅局是否知道這一點。然後是業務中斷保險索賠，我們在過去幾個季度已經談到，該索賠仍在與保險承保人打交道。由於他們的工作量很大，這些確實需要一些時間。但我絕對會專門用來減少債務。但在持續的基礎上，在所有條件相同的情況下，我的目標是在任何一個季度投入 200 萬美元，如果能夠提供比這個少一點的資金，這將是全年令人印象深刻的削減。

Yes, that's it from me that well then and really impressive quarter.

是的，這就是我在那個令人印象深刻的季度所說的。

And thank you.

謝謝你。

Thank you.

謝謝。

Thank you. Have a great day.

謝謝。祝你有美好的一天。

(Operator Instructions) I am showing no further questions at this time. I would now like to turn to I would now like to turn it back over to Mike for closing remarks.

（操作員說明）我目前沒有提出任何進一步的問題。我現在想把它轉回給麥克做結束語。

All right. Thanks, everyone, for listening to today's call, and we look forward to talking to you next time during the Q2 2020 for our earnings call in July sake. Then thanks, everyone, by now, Vicki.

好的。感謝大家收聽今天的電話會議，我們期待下次在 2020 年第二季的 7 月收益電話會議上與您交談。那現在謝謝大家，Vicki。

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

感謝您參加今天的會議。這確實結束了該程式。您現在可以斷開連線。