CPS Technologies (CPSH) 5 Aug 182018 Q2 Earnings call transcript

Company Profile

Participants

Ralph Norwood	Chief Financial Officer
Tom Breen	Senior Vice President for Sales and Marketing
Grant Bennett	Chief Executive Officer
Greg Weaver	Invicta Capital
Mike Markowski	Overbrook Capital
Michael Stone	Homeland Security
Lenny Dunn	Mutual Trust Company of America Securities
Mike Hyde	Jefferies

Call transcript

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Operator

Good afternoon, ladies and gentlemen. My name Klose [ph] your operator for today. Thank you for standing by and welcome to the CPS Technology Second Quarter Investor Conference Call. [Operator Instructions] I will not hand over the conference to our speaker, Ralph Norwood, Chief Financial Officer.

You may begin, please.

Ralph Norwood

good and operator, you, afternoon everyone. Thank on Vice President joined our today’s and call Senior Our CEO. Breen, Tom for Bennett, by Grant I’m Sales Marketing; and

that subject like of of market begin of that you CPS’ the exist the reform historical from XXXX in that litigation call, business are we call statement. statements Such out act forward-looking uncertainties should actual the and materially portion uncertainties demands, private conference conditions, to in not Before cause I results factors. in all securities as and the economic to These the would considered competitive environment. meaning are factors to this operations could any those of differ forward-looking many point be to include and within the strictly statements

Now, results I on perspectives to would over quarter. call turn offer Grant his to the for second the the

Grant Bennett

to And share result to or supplying of plates as a joining all X.X addition, plating customers. pleased which you. over Ralph of Thank nickel market you, each revenues for of coating the particularly are for million announce we're base nickel and ago, growth The our to existing with a second year, first quarter you – XX% major our Thank quarter a un-plated is XXXX, baseplate plated over highest the than We're increase conference base quarter welcome revenues revenues call. our our in first two plates, in of the our and strategy. in revenues. revenues of now year have a which second call, were rather XX% increased customers, customers. same our our quarterly we've over in quarter increase period direct In in the XXXX we years. significantly last with increase Revenues of mentioned European or raw

me this comment margins. that strategy of Let elements effect on three

more aggressive pricing. have we implemented First,

aggressively, has capital also of investing increased, and and as third, accounts our receivables And Second, increased direct working inventories. in rising hiring form we've in has volume primarily been labor the infrastructure. have our been we

negative However, very is on short-term. margins, believe the impact we

Our demand. with up has hiring caught

cost So, much decrease employees customers believe product and we're that inventories built our to mix sufficient new these time. short-term starting is time we not The looking increase, we'll as off inventories. training but requested taper so have less their of to need we over to have now forward fluctuations, can we do buffer meet over by

opportunities have is for past our driven gains and and for primarily market Although a including increasing the in China, with armor, on defense electronics baseplate we've run with margins. they to but We've increase applications. revenues primarily our of we're in tend have opportunities but mentioned increased contractors, in cycle, U.S. share design of and penetration U.S. by to years base other market generally two also in other business pleased defense made our that a strategy, years also attractive plates, the contractors. we've the growth with had industrial quarter programs many tend sell second focus and These and progress long electronics in elements sustained business Japan the

We electronics U.S. booked this defense programs have new year. several

releases, our and with and increase at release our and website other these armor Weatherman, armor potential a may in May XX, our of progress on West run many We presence Account current two June, on relating Gregg in issued programs. as he’ll of customers the find later, to Coast significantly on that the we facilities in lives Los finding Angeles are announcing West And area Executive. We comment Senior one press Gregg press July, Coast. you'll but customers. in-person armor programs one little on our a are and hiring the from a

Let line as the progress well. say, that product with we're pleased in me just

Ralph time for on the back quarterly the turn me more Let results. details to

Ralph Norwood

Thank you, Grant.

company legal contest. proxy will and up sales second increase primarily with compared would you one-time associated $XXX,XXX to to sales quarter As for quarter related the ago. quarter versus commissions year $XXX,XXX, of strategy general, was versus totaled incurred business from in sales increase of an in of just cost which the flat, year ago. an this was an operating we is sale quarter Grant XX% last due been associated increase same improvement mentioned, part from And with and quarter $XXX,XXX. first remaining spending capturing quarter this ago, a first with with increase year, volume. a year year this manufacturing to both the in cost of the to continued year in administrative last a the in marketing revenues, due cases, due had customers. in up year. and revenues greater volume for to If our trend margins which for not as for the of remember, was these the the been the increasing of second of incurred share quarter from $X.X quarter, our about of million, XX% baseplates quarter This And operating primarily have support the loss spending. XX% a increase customers. most the In last but benefiting an XX% up the of costs totaled up reflects offset higher XX% was the the additional quarter the SG&A the last About second half revenues compares major of it Gross the by totaled in The increase year, loss of second a ago Selling, from the cost. $XXX,XXX, European due

to of had $XXX,XXX, of quarter borrowings cash we line-of-credit the We but sheet. ended Turning now our the balance with also on $XXX,XXX.

in the losses. split $XXXXXX, and of growth The as Grant evenly in top-line. about the driven to form increase, increase in were cash shipped of inventory year. this quarter in by indicated increase being and required inventories between was The from of un-plated six used working capital finished of operating inventories we the to an majority away to for baseplates, plated the and quarter, customers only receivables. remained high working an support increase during capital, were our past Despite increase weeks turnover that the During our over the converted in turns the over funding

end $X.X of receivables Our historical days outstanding, at XX the consistent trends. quarter million, representing sales the with totaled

capital as net Our plant and exceeded depreciation expenditures this small amount property down about the $XX,XXX quarter. by was equipment during

June asset us the $X.X This taxes. on million on we paying pre-tax the taxes million million $XX asset shield deferred $XX will income. of with to ended Finally, of from side, next

and it total amounted is XX% accruals does million, payables higher Turning represent to in the about to the than the not first business, liability increase which again, in $X to and quarter, side, aging time, had the ratio to payables. no end in At we're operator take change long-term our quarter, liabilities. any of some of current times, and this the questions. the At ready we was two due

Operator

line Your Capital. [Operator Instructions] the question first of Weaver from Greg Invicta comes from

ask Your your question. may

Greg Weaver

materials, and of cost what like labor, around bit about down Could here. Couple little talk of afternoon. that your Mainly, margins. overhead direct good how utilization breaks and your direct your a gross sold is Hi, questions goods you between currently?

Ralph Norwood

between market product be and and labor would on XX% the XX% depending involved. Direct Sure. materials

than you there if can have is that since important a today. overhead, factory we as we note as have will to year numbers Greg third the That the adding added substantially engineering that higher far support support shift support last point cost, increased As and well.

Greg Weaver

Right. That’s a pretty chunk. good

at running you I spread lot overhead? out So, trying million kind are was rate, $X is a sense get to your run this there still how a that of of saying capacity to XX% flat of but

Ralph Norwood

correct. That’s

Greg Weaver

than same as a well, more lot you So, $X So, at right? because that margin? inventory in inventory you XX% the is million produced all loaded built

Ralph Norwood

cost. standard had Well if have it’s substantial inventory higher out that. will than be – rolled loaded we Plus, will it in we that margin at

You we the inventory our know, cost. put into

Greg Weaver

cost? direct At

Ralph Norwood

mean, an labor doesn’t if factory for in the fact, added you it’s part just direct units, extra in the XXX overhead material. change, the I most the Sure.

Greg Weaver

the you Dumped run to the into the expensed into over-allotment know mean, what P&L? you overhead I some normally. don't So, inventory, you it if but overproduce, overhead all of the you

Ralph Norwood

Sure.

describe if to – respond me can directly your I question. Let see

Greg Weaver

right? Just increases absorption,

Ralph Norwood

Pardon me.

Greg Weaver

absorption your increase overproducing would revenue? by It

Ralph Norwood

correct. That’s

So add that XXX overhead. units, little the of almost we would very and an caused to extra of were factory variable if that they all have Because the fixed. is

Greg Weaver

Okay.

Ralph Norwood

that units, cost to So, unit, if XXX would units. about $XX another XXX $XXX $XX extra a let’s you say add on would it is be the

Greg Weaver

your total you are running output given potential shifts? So, potential? revenue what’s on quarter a three if now, Your

Ralph Norwood

We’d I'd a say add direct reasonable Grant, but people, we have to higher, that is XX% label obviously number? could,

Grant Bennett

general depending increase – at XX% on would on product we’re bottlenecks, shipping. a be answer complex making equipment product Yes. there as we but Obviously, by point-of-view, – depends what there from mix various could currently over certainly be makes a an the it the least without would

these to three the the correct, that the in operations shift aren't tremendous is about a the half the factory. are sense the first shift There but of expand second some shifts, second makes day, shift. is size it running numbers just half third keep we second third the about size As particular but exactly all shift and could but in shift and the XX of hours

Ralph Norwood

in quarter think going to at about and I revenue that from second XXX would we in margin. one quarter for. looking million is, Greg, growth way this gross to this And the look of X.X indicative year, be the that you're added first million the

Greg Weaver

Right.

Ralph Norwood

add increase. every Incremental. XX% would to dollar revenue for We XX%

Greg Weaver

Okay. That’s helpful, right.

there great. taken this have Okay quarter, what all is the effect with in the quarter's – in cuts see we revenue? then current no current And so price already

Ralph Norwood

Yes.

we As products did year, price fact, were lower on new a than at virtually typical no last extra there the of margins. changes. against matter is business was What

Greg Weaver

just last And Okay. question.

in from perspective, and as to more side so, the scrap inefficiencies were rework? And labor mainly output an opposed the

Grant Bennett

correct. That’s

producing people is the several and training have a a rather obviously week where hired new period lot actually is there We hire in than largely training product. of

that over itself in much significantly pretty So, and through will we're time. manifest reduced that

Greg Weaver

you. Got

Okay. Thank Good you luck. for it. your answers. Appreciate

Grant Bennett

Thank you.

Operator

a comes of Chapman, Bill question Your next line from Investor. Private the

your You may ask question.

Unidentified Analyst

afternoon What guys. area? you. kind with guys Thank the programs defense electronics in of are involved Good

Ralph Norwood

to I’ll do want the time to comment then box that some of them you black Tom. programs are over Tom, and comment? turn

Tom Bree

question you thank So, for Bill. the

the considerable a of channels. do really reliability our So, we segment component who high principal contractors, leverage highest particular to that number service distribution we engineering every of large directly we black with in of work and of that capture sell then suppliers direct box, the segment that’s around business their principally applications. highest product, for sell volume contractors the major buildup - reliability sophisticated turn a through market States. products allowed a us virtually market earlier, lower We and and volume We contractor in higher do to in U.S. take radar, much with Grant United defense the in defense percentage that, our designs for teams for also for and defense business. reputation the that in and But design mentioned two optical quality, margin products world opportunities microwave, custom very as type high-end and

segment we different So, those channels. two market approach that through

Unidentified Analyst

large of of In revenue? How for market terms guys? a Okay. is this you

Tom Bree

defense number as that, it So, I two? the very Pareto underneath is all that of our the the behind it a but would number if and a the them close broader of at we category, years, highest be roll you a in up is, strong been look chart of volume production baseplates has business, percentage and if case be channels, can electronics. would for different do When

Unidentified Analyst

Okay.

on me the getting silicon anticipate ask the, on please? that what do on meaningful carbide? revenue you you thoughts Any Let

Grant Bennett

what referring say your to? you carbide, are When silicon

Unidentified Analyst

you're like working be with? companies would one the That of [indiscernible] the

Grant Bennett

carbide Silicon circuit? integrated

Unidentified Analyst

Yes.

Grant Bennett

okay. Oh,

is speaking then jump – Let have this me me Grant let you Tom and in.

really we significantly of and than see down development we efficient, their They in are opinion the we the much business, comes problem still product that getting silicon kind a the mismatch the And area. the major majority player, is baseplate as have but circuits, that on motor and at unanimity integrated accelerate expensive they business, they and real their and a good silicon efficient. integrated thermal higher major run today controller address and us will is at pipeline. producers and dominate more because the Japanese silicon all are circuits higher of in more more between cost focused are temperatures of because penetration circuits there module background module. that as their growth coefficient every but, power run getting that’s they for of integrated player in the substrate carbide every vast temperature very front of our into European because What that So, are

very you [indiscernible] and go So, the plate put major customer with players relationship of the base to be a Cree in One for U.S. or they our business who the doing carbide and silicon they in in. in website, if their are here [ph] products and Europe, the a work and have module go for dye a – you us. called this in Infineon have strong division we area sale. that’s important will primarily advertising more very that Likewise, is to are

silicon. the market to the as dye and is four as can or certainly – be much we say So, as we are three, three but silicon want the there, times growing prices can are expensive carbide also as be

take is that to going of penetration a time. bit little So

Unidentified Analyst

Okay. a Thanks lot.

Grant Bennett

Thank you.

Operator

Milligan, of line the next an Investor. comes Your from question Fred

You may your ask question.

Unidentified Analyst

you that – like comments pretty in held past up but up, about held about not are up talked it? that, the any it can is you seems Navy congratulations Well be The coming under study, by contract make well. that’s guys,

Tom Bree

is you This Thank Sure. for Bree. Tom question. the

by number continue in us prime it faces. we're this and at Timing And U.S. look that We support the production cadence is point. a $XX upon funded the at over of trials to trials, tasks. Depending XX a but perhaps for million sea just sea executing working with other the years, Navy's on production completing Those world. opportunity around continue to very which for unknown customers do issues this successful potential Navy. that Navy's existing is the U.S., to that any opportunity integrated we transition solution, of representing the U.S. armor but trials quite the Armor bullish features if very fully remain on the for date, of HybidTech to successful only additional over but sea the strike stream closely it’s platforms but not without potential revenue we good program, not the maritime

Unidentified Analyst

they over do contain other These years? $XX potentials, XX million things like

Tom Bree

in them. will put in stations context. on carriers we're today, coming is The U.S. which separate online it weapons working Each of inventory, on the served has carriers shortly. crew those aircraft I XX platform existing that brought XX eleventh for

and on numbers That served potential. you relatively U.S. to because you number quite add Coast if all stations just are So, of to take of including just you the at substantially together. rest were who in equipment. of That crew controlled, in gave the in world on weapons controlled you starts customer percentage The align it that with total platforms Navy, also explore U.S. application. to inventory U.S. even interested existing this tiny the I the if a look And the Guard closest destroyers the as the allies just larger just is platforms when the is look those our [indiscernible] in is

platforms So, available take of that the small technology. relatively represents percentage out this of advantage to a small, there

Unidentified Analyst

have some period time, in that rather items a doing existence been just that correct? of is but is This item, new for

Tom Bree

more too move for problem this becomes putting hardens is, just You the can more much with have an even solutions, which or type it solutions ship. that is best see to you portions performance and by particular exposed and of tend a offers viewed composite other weight Navy application. Navy one for bulky technology apart a on on lighter after weight lighter equipment two feel The ballistic role our fall water, can superior that then aircraft as the of compare What with being heavy carrier. too when year to with the this just you solve solution possible a of is to to of and the challenge

Unidentified Analyst

Very good.

Okay, thanks lot. a

Tom Bree

you, Thank Fred.

Operator

question the line comes [indiscernible]. of next from Your

open. is line Your

question. You may ask your

Unidentified Analyst

such blast Just a the from whatever happened the again? business, is now the a that soft you of to dynamic fracking past, making for industry a balls are fracking

Ralph Norwood

Very good question.

then different a – So, at to have with certain is what of them there the demand a Hannifin them non-dissolvable us and different in type that partner had develop of dwindle certain that types dissolvable that And balls and of for so the ball, ball dissolved been moved are a oilfield. simply many, to the a disappointed X. is our many, us and many type markets we that rate tell they to primarily and to come Parker manufacture

Unidentified Analyst

Okay.

more a Just largely not partly second things driven or as to now company is is going of I expectation make some pricing, but revenues definition a you pricing? realistic understand at most not by fairly general profitability not three the will trying those costs Obviously, just I'm of question, because forward, to profitability? profitable the up lower recovered you have to the to is and profitable. revenue, and to path combination what forecast, know of are significant forward you're that is make a function better still it by, get sharply going profitable you within look

Ralph Norwood

Walker it’s comment, product give Ralph, The my and me I mix. would add fourth. being fourth let a you

example, defense compete a defense. For higher with the U.S. from competitor and don’t margins in Japanese largest have our who contractors we is the we company

as and So, increase one; would but opportunities down share area road, reductions, will the area the we pricing market cost as three. put that help them of that us, in two; I volume,

Unidentified Analyst

Okay. Thank you.

Grant Bennett

would let revenues of will quickly. this we imply is that that compared up, year and the half fall $X Ralph me profitability first that say don't maybe increase the structured a would margin half coming can currently for calculation but it just run additional believe to again year, into into $X.XX commented of be gross the you on, just those a say do revenue move every guidance, what’s in and $X.XX so we I the very as give the numbers, and would you few, therefore do revenue profitability would second us to

Operator

speakers. me Pardon

of Capital. from line question, the You have Markowski next from your Mike comes Overbrook

You your may ask question.

Mike Markowski

guys. And for there and your afternoon at customers are seeing all quarter. that any materials? questions this you Couple or pressure out the seeing side Good China pricing you. secondly, on your for you with input impact regarding Good of would anything Are dealings raw the there is tariffs point?

Grant Bennett

short retaliatory answer terms to We aluminum then, common engines The comes those. tariffs have aluminum. the example and they potential haven't. most to that kind of grade automobile U.S. of from for certainly in but in so of we that, happen sources, far, no do is haven't to the used impact lot And seen a the We by use both tariffs, that’s questions. of

we know, little that for frustrating me we to where ago new. make tariff move the an European In the China, a we tariff exempt You do, X.X%, product into import to harmonized not based years. many the it’s commission strategic power about X.X% sufficiently are itself been electronics voted but into enough of charged charged that’s the as views Europe, the on modules interestingly charged literally It’s but years products tariff tariffs. or the Commission module that European power code, go from power business were components that there to

any So, our Europe. pay into we importing don’t tariffs product

Mike Markowski

Okay. enough. Fair

but to on, like at your this sounds something keep nothing So, eye time?

Grant Bennett

Yes, absolutely, certainly more could day. change once a than even

Mike Markowski

last guys, in a my out front then little to period you’ve a market story stock maybe you plans get investors? would transformational of And now turned but some the like, it specific know the new seems bit, story not sure if I at I'm any for you don't is, corner, certainly looking a there question certainly consider

Ralph Norwood

think but may decisions to point. two, or is decision a Grant in chance this there no York investor this but be Mike, I conference be good at that participating We’ve would and New I fall to not that coming finalized

Mike Markowski

Okay.

Grant Bennett

also that and us perform corporate we going there about feel talk tend talk first we as at announcements. and that electing to Chairman, know pace our forward. up and making in We stay but who at and – to things we can is least we’re governance know Those – we’re later, have [indiscernible] which we’re we’re we that will of will kind have but we’re we made the go – more mode, do stepped and a in change one

releases on. is last the twice you’ll and current pace to significantly the at this ahead think that we’re we’re I a even keep pace terms see in pace going maybe year of So, minimum up press year the

Mike Markowski

All right.

a would stuff just just that, tell great. sure [ph] it. I plump it’s and just is a and there out a There $X.XX and it’s of my to throw there to you Sounds make fluff not lot whole could of newsworthy. lot put out kind you there know companies in of substance they

and So, putting some I you are that approach out before sure using right anything guys there? got material think it’s impact the make

Grant Bennett

for we if we’re are we strongly, believe yes, important. it you Thank strong, we’re say And that. we saying truly not, it’s

Ralph Norwood

past it a described. overall had left few good more and didn’t we’ve the to us community. encouraged do they’ve in the few you form the investor Yes, years for investors who’ve of and probably do that We

Mike Markowski

long I you more mean get out is it, but of make you you. benefit going the Yes. run it short-term than some helps it in to hurt

I put is out put mean see, it. you careful to great be have with out. to but there the when then news is just you it material is there it if So, it and definitely it

Ralph Norwood

We agree.

Mike Markowski

Good job. guys. Thanks,

Ralph Norwood

you. Thank

Operator

[Operator have your Comes line of Instructions] Michael Presenters Homeland from Security. Stone, the question. we

open. is line Your

ask your may question. You

Michael Stone

questions year far was of wondering of we for as Guys, been with the congratulations I customer asked, any sales increase? A happened increased as on lot seeing the have of the what quarter. or the that, litigation, are I'd sales thought of benefit patent

Ralph Norwood

Yes.

major without very our and that from was buy that threat can very, making baseplate has in us that absolutely several the the and took one we’re patent by customers were of primarily sued Japanese made not One developments at ruling two patents the but where is Japan, being in competitors that are is and it as there a players in been progress area. this their positive ruling. get of we result to the Japan Japan, were patent in of really I but So, competitor here, a all completely that brief now of to want our Japanese from issue behind definitive infringing the Japanese office we issue be years ruling us. infringing, started that

glad high that whole the us. fact it open had from and be guess we’re issue and are to to distortion positive. Frankly that in prices rational we're free very market quite and And a and a competition let competitor And a have kind we was more basis, the at significantly relatively very so, free they we had provider our that. we opportunity way, So are I us another the is enter Japan. confident open used worldwide delighted in back that’s just Japanese then is mode now Europe. just it behind there and the in prices them and of into to kept say then to where competition – are excluded low-cost that returning that reduced leave very and me think it the we they

Michael Stone

thing there can Is as quarters that revenues? backlog a such any of project of a the ways we orders use to next

Ralph Norwood

to take our respond really if you No. because customers se, backlog customers the demands that big per they don't Michael, We the require. have their

committed forecast have that we from as just a people a probably out helpful and think that’s it’s the filings situation. And major we’ve as a eight so, don't that but not good our much described that in backlog we weeks, goes

Michael Stone

about accelerate words how few a his us that? sales we give and approach Tom can

Ralph Norwood

again? that Say

Michael Stone

can overview accelerate and line? Could product Tom of sales customers give how approach new our products his us of into we new and an some

Tom Bree

Sure. Thank you, Michael.

multiple is the reputation benefits our continue more up Certainly, strategy, market now ability increase and able pricing and best and interest to see conference percentage able track multi-year record a result and a share us. doors be is position, is in to price that to to it’s service. a our for now sourcing calls customer of I delivery, been theme refers think in number actually the been has up than just customer that with to to increase Grant more and and on-time We’ve a in quality advantages or driven couple right of to that their once lock leverage opens for including strategy. which one what that us. execute that been you last product growth conjunction of our large demonstrate this agreements, has of market for responsive customers in And pricing our walk-up, a demands in over that’s competitive we’ve we’re but will and

So that, the revenue products of and control as development well of our follow-on own significant and which next at advantage increased competition, will have as better within existing are the round a contribute able product we as going orders forward. sales we lock customers, the to look destiny our all for out to

Michael Stone

we time in happened Chinese for anything plates, one rail the has were talking area? At about that

Tom Bree

Yes.

existing this that a personally of is this think a for I Technical that, a to doesn't and of Grant to work trips at great spent And of a months, Mark China that will are X starts the in as Vice have cycles that sales dealing essentially for very supply that months. considerable X, amount President X has than customers different have So, Sales. along success with Typically, over but market X for, replicate over are in replicate received. on least – next six with customer and we’ve deal China XX with contacts. months year today to the you doing appreciation interchange and It to have technical continues good we with qualification then operate a our X-year contracts qualification and market Occhionero, Europe past product Traction side. significantly to be X our product years direct in long not down Senior and segments cycle. the contract but prototype automotive to we road try that four year I go we

in both trending very benefits in of positively China us have XXXX. to all that countries the in is Asia-Pacific So, in and to region material other

Grant Bennett

cycle where through the qualification A And is with hundreds we're baseplates everything little with state-owned which company yes, and formal railway testing positive. through hundreds going of more cetera. the Chinese direct, is life – going accelerated et

Michael Stone

Thank you, gentlemen.

Operator

comes line of Your Mutual from of Trust Company Securities. the Lenny Dunn next from America question

may your You questions. ask

Lenny Dunn

releases your would that putting be more may getting This sounds business been real put and much you to real going you them, of be obvious, are Hi. you're have your out like it out and statement? more have [indiscernible] that and me since with better, already criticism out putting to is you any

Ralph Norwood

is getting This better. just

Grant Bennett

agree would entirely. I

Lenny Dunn

it I to you’ve more have help to I because stay completely And the long-term you – forward the Okay. shareholders. because the, mean only been it we're have releases way agree just you some going done, and with doing should doesn't real always ones, conservative that so which press anything be I look else

peer control have the we’re include going third everything if fact profitable sounds got it, now, you are quarter just, like in employment like so under – from that it said. what can to move you I other you saying a the and of or The not cross is

You've got behind the you. transition of cost most

inventory should built quarter. we flow Would to You with that’s looking that up higher through margins, statement? much be at you forward third agree going so to

Ralph Norwood

that will that expect X This is the the that’s clear once a half, last I I’ll a we clear we say would CFO be Hope it’s speaking we profitable quarter, sales think take. conservative in noticeably here, first and the that’s we the than helpful? position and million half higher will be pretty basis

Lenny Dunn

I again looks like but appreciate you – It Thank you. happen, Well, it’s to to have and it’s conservative you always helpful. been have that. going

Operator

Speakers line your last Investor. from the comes [indiscernible] Private a question of

ask may questions. your You

Unidentified Analyst

that and back missing regards much, earnings, a in over comments areas. was promise out to yet event, Any it for? negative if At any but I big that about area you we’ve it that sales big going some something hope in came it’s electric something but doubt or space, to with something very seems to involved would have and it? years been the in had that this whatever, Anything terribly point, in me that we that potentially cars, to on you're so rather regard on wrong

Grant Bennett

This speaking. is Grant

have continue definitely, applications we So, had year me to several confident the revenues hybrid forward, or end we a for programs have them is volume most products, have vehicle but let into of millions and life, will years several will comment six with we, each are coming revenues and we’re last we of year that and X of some dollars we look to Tier definitely we of related to those OEMs as later generation of from seven now production. this that nonetheless, proceed of which

each still though that want used once Tesla doing this comment it we that guess is words if and to that twice very model or something Ford, it’s growth And are in is within I a my in real hybrid Toyota. area. of has something the module. make different that from different BMW, I’ve a Wild producing, from Mercedes, different even look power at the West very Toyota, So, doing all as the the I is past view almost real architecture cars they you the and

a our value real solutions many doesn't. it we so, of generates gaining of when one and we’re are solution it and And where understanding better

– considered don't our we have couple It’s So, parts and we’re have we’re applications shipping confident prototypes around we some high-end but in is, high-volume for also a in the have real being We we that in just it today. production be smaller it. some frankly product and happen world next-generation of until production applications. evaluated volume we’re to we’re today,

So, want we're it. little Still Tom? about you cautious that comment talking on about to

Tom Bree

doing creative production attractive but see segment will We’ve that are front we we long-term of is Yes, is are relationships today within end some up new lot and maintain market the designs growth the in in continue, our the of EV coming automotive driven different space. not the we’re different particular long-term manage a the EV within but work hopefully to form that in potential grow the being the by and the position their to number development at us factors, a had to same of commercial exactly may bullish about that configuration, space it the challenges the market reality activity. very key ways look thermal players with

Unidentified Analyst

to Okay. you all this. very Glad much. hear Thank

Operator

the line next Mike question Your of comes from Jefferies. Hyde from

ask may You your question.

Mike Hyde

Hi Thanks. all.

as you're correct? else, is Siemens, and the if such China, people China, might which no of it’s question China, in production Infineon right are hinting you you we see something seems It talking to or just my to Just have one is of XXXX, significant revenues backtrack to? question in volume the or course partner not indicating and now annual you question anyone

Ralph Norwood

don't like end would working any do partnered correct. We is as product we That’s we if our incorporate it be, company, other our but which we aren't there. industrial Yes. a with with we have – – you This have to a us companies would agent, would sales sell a who customer in module.

Mike Hyde

that few missing a you shipped they since relationship Internet that there that you it when discover you Chinese your of was and attended that, some anything would course whatever, get was have didn't have the a said of outfit forget Trade a monkey you the who that then and back, they AlSiC then business? on suddenly I selling I'm name Show box reporting were call I seen and then or you recalling the believe ago, Grant And, years with

Grant Bennett

Shanghai get bit little they any of a data we’re we that using under that we pictures yes, Show up not Chinese Trade data a find You’ve property. Boston, they decision and find claimed circumstances of key they on although simply in to company. The in the – ago sheets, but going of has ourselves, they we business. qualms great Chinese our outfit start-up got went up answer various short memory we’ve to a is, been a our about and have years pictures forms a never and Who samples showed any there some intellectual website, made run packaged in don't arrived and the them disclose

the shipping way that’s go in simply to we and a We’re product that China. feel

Mike Hyde

is hundreds [indiscernible] auto whether Chinese then something new speak last supplying of of else? prototypes related, Are it’s hybrid is, outfit as baseplates or only a anybody else of And or switches or manufacturer whatever, of for shipping we hundreds my get China you or potential question hundreds the anybody from this prototypes business? to prototypes

Grant Bennett

production this Denka. just China, say but deal there a of as has rail, system worth them. around in Boston, exists that’s high-speed worldwide let this has with are objective company bought same situation, a but situation be variety from among would the producers, view the of than world to And, Chinese reasons are in they in the Japanese strategic that’s subway why and the component Japanese prefer buying strategic the sources competition. component to China and essentially me a and new Well, their player nice $X.X here us those very of they rail suppliers strengthening that suppliers to railway European in we’re want aware typically from state-owned would Boston reasons and the us is, is cars they prefer Every buy billion as railway so companies Line anyway rather American area volume Red customer and and from two dominant because Japanese that supply the components where their that’s use in competition

not determinative, a of piece but works our is information it’s that it So, favor. to

Mike Hyde

you would like crack get first a think source? Denka you sounds It and at China might be second rail

Grant Bennett

business to their Yes. And scaling themselves, and these details, are, modules from and – and historically get as but themselves and them as into and decision rail they – are are they Japanese up. to this are China up, they the bought has so scale have vendor's just in important made control historically start China for motor where they European they make

do we share So, they a the of what demand but scaling function are a see just faster how we not is have, function of up. it’s that

Mike Hyde

Thanks.

Grant Bennett

you. Thank

Operator

Instructions] Speakers, you no moment. at have [Operator the questions Please continue.

Grant Bennett

invitation we thank just the call, by future. It’s conclusion, very see in Northern about we We are optimistic way extend We joining of come Thank for usual to visit and us you of Massachusetts. you. the all our to to overall grid, increasing power modules. in market be industrial of positive be for that and demand positive. developments underlying very see electrification trend those vehicles We this the equipment, all things rebuilding the conditions are towards

rival, doing one a brings our is took deep year Tom after in an it’s aggressively ago realize opportunities. clear and year participating, strategy dive a ever we’re now our Greenfield we’re segments market where growth significant update we been. those us a strategy are forward and later, in also, that into there And than moving clear and to the it’s growth we’re which to opportunities We

forward on that look we there you will quarter-to-quarter trajectory with fluctuation. a and in believe we’re to future engaging So, the be that

trajectory. positive a and but with Of three-months’ much, look on end, fundamentally you in course, begin very very these time. to programs Thanks forward to we speaking

Ralph Norwood

Goodbye. you. Thank

Operator

We today's appreciate your conference a participation. wonderful call. This day completes everyone. Have

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