CPSH - Earnings call transcript Q4 2018 | CPS Technologies Corporation

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Operator

Good evening. My name is Rochelle and I will be conference operator today. At this time, I would like to welcome everyone to the CPS Technologies 2018 Year-end Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. Financial may Chief your Officer, Norwood, begin you conference. Ralph

Ralph Norwood

and I operator, President today Marketing President and you, am CEO. for Bennett, and good and Vice Thank Senior afternoon. joined our Breen, with Sales Grant Tom

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

to over perspective Now, the on I fourth Grant his quarter's the turn would results. to offer like call to

Grant Bennett

afternoon Thank you, good and Ralph of to you. each

ago. completely fourth year-end revenues as we very ago. so of line debt three free We XX% increase The were press largest in same and a year our a in mentioned period a We operating profit quarter quarterly revenues at versus was down credit, increase year good were same paid and quarter release, we generated a today. our so million remains indicated that XX% achieved QX years quarter. $X.X the As the the in a our over

million XXXX increase Revenues the QX in year an were of last run of million rate Looking the revenues, the with million year, XX%. were compared previous annual an XXXX. of roughly at we $XX.X $XX.X the QX running for and at half $XX for

million for was $XXX,XXX $X.X narrowed of to operating XXXX XXXX. The Our to loss operating $XXX,XXX for QX loss loss compared of XXX,XXX the in an previous year. with operating a profit compared

will growing strong traction of throughout speed increasing demand particularly in where trends But rail increasing Times me around use is is developments. Let China high the by demand both remains particularly applications driven this highlight Wonderfully This and and driven applications Financial such modules trains increasing demand turbines. power customer other year by and the for also and some important on for grids the quarter. compared spending demand last power XX% world increase overall year. as to increasing wind this indicates

for also work We continue market but power around of leaders to world, a rapidly the the dye silicon in segment. market with use small today carbide modules growing

outlook that the positive and market it power the growth in we in be wherever to right capture area on underlying We the growth this have may world. module feel a we're the taking steps

base the We We government be in China. temporary. will is our continue be very XX% and hope the the active plates although near-term, in on in by Chinese imposed tariffs to that ourselves limiting believe retaliatory Asia condition this

another electronics salesman tend and quotation the this we'll applications traction onboard identified area, area Japanese found believe for U.S. and in qualification we've for activities This focus Los likely shipping specific Our several to contractors. Ten bearing of defense be in in year. increasing meaningful with use commercial volumes of and Angeles [indiscernible] mission volumes new identifying our brought customers are and We've we for customers applications. be defense Compared the power defense not the in to is for programs that it's area new stationed penetration major applications the new we later the the us months production to than increasing lower. many the is existing and Besides fruit. focus a ago, more defense module Japan

XXXX increased parts efforts. of However, tend the the to XXXX number new contractors over higher. sales compared result be just of booked margins and years by The in many increased XX% a often the programs largely at run to for as defense

we Investor Norwood we're Ralph slot by two is by increasing let Fort haven't presentation Markets the annual me in At investors. The done you a As turn increases, very At our on the potential concurrently performance the page available we our conference almost you investors We this to it, enjoy and quarter. Noble Relations the February Investor call Noble invite busy to detail on so. new I time our provide pool to Capital more investor accessed in days sponsored for activities. if Relations numbers of conference, Ralph at Con we and Web Lauderdale. site. presented was XX, the booked feel potential of as point, the gave the at look back we every

Ralph Norwood

to quarters. Grant. aware our consecutive totaled well you Revenues who company significant quarter increase ago the in totaled ago the portion is you, periods. margin of fixed a in year the increase of follow million, gross And result manufacturing have the reason, year impact our have administrative a this percentage for a revenues those where in the are fourth general gross quarter XX% $X.X a quarter revenues corresponding while both $X fourth same The fourth in changes was our versus costs a in as growth. margin. Selling, recorded cost sequential over Thank increased revenue those and from quarter significant on is and XX% quarter a the and we million the fourth XX% major

included fourth the cash. tax nearly no and established of we the which an balance up were operating profit as was and once provision, was dollars. the of a Cut the the sales the of year Act, reserve this mentioned. income and that in of volume historical is need during tax has level set emphasize sheet. by themselves. future set We in by expectation loss reserve XXXX since the quarter year. improvement last which driven effect the year the the of to for is the made deferred up affected commissions this and effect was against quarter quarter on repeated tax severance profit Although strength Operating accounting our primarily reporting return last It $XXX,XXX asset. heavily asset year reserve item Tax which up addressed performance results quarter. the performance XXXX deferred has is last with cost fourth no quarter, compares in no decision argue tax SG&A due not expense our to the the the sales despite The all Jobs of in quarter strong This which adversely million credits for on $X significantly tax more highest was due as increase increase we rules $XXX,XXX but weighing and on revenues, than net and impact fourth impact was year of strictly future. valuation we of the side tax the to this decision to continued flat was it operating the in tax in to cost, the first versus impact accounting This the it the projections, of has quarterly This of XXXX The total on Grant's last skewed our on

reserve going As of a a generally this will favorable be result there forward. accounting impact

tax. occur next quarters, to fully tax credits several be before that expect this do after until the utilized. earnings change is earnings we have our of that they future losses our if foreseeable quarters the will several position and earnings will approximate not I to the support tax For

Receivables off we our ended during due from which XXXX represented the XX balance XXXX, bank the is to XX-day $XXX,XXX cash sales cash is our the unusually sheet, quarter. about number we year-end million down of now at line typically of which $XXX,XXX $X.X from end days. of primarily credit no to and Turning we an low year operations. as the paid average This with losses balance as totaled outstanding, borrowings

increase amount. down However, the year the our the past versus to Continuing is $X.X over lower at added million XXXX. inventory required before equipment year-end you was our and and inventory resulting of the the the loaded, business to quarter side balance Despite our down number. the for This is due exceeded decision in in as million, to over this the the year-end will million totals. capital Xx sheet, end for front-end the depreciation increase sales more receivable property, revenues inventories; net plating the asset increase, by $X also factors; two measured of secondly, since products which see up healthy year year. plant first, major accept as totaled customer $X a expenditures collected in during the turnover $XXX,XXX responsibility fourth Inventories was were corresponding a that were

deferred our for reserve million $X established we asset. earlier mentioned I as Finally, tax

amount. As we a way this of will approximately This to future by that to shield need affects result, enable no million income. on But, asset was again, $XX in book taxes the reduced an of us once was asset emphasize cash cash. value paying accounting pre-tax decision that

and we'll just an adjustment. cash non-cash that benefit So, of this is the get still accounting

of side, Turning is but reflect accruals a payment terms not in business total suppliers. year in $X our in the change payables to which million, to ago, $X.X way to a reflection is about and the liability is from a and million in amounted up increase any our

debt X.X ratio was Finally, quarter, to our at low was a and the current our end of the healthy X.X. equity a

committed a this credit ready of of million time, line At and we're some questions. agreement operator, of have $X.X this June Santander through We goes take XXXX. also end the with to

Operator

first [indiscernible]. line [Operator question Your comes Michael of the Instructions] from

Your line is open.

Unidentified Analyst

you. Thank hear me? you Can all

Grant Bennett

Yes. Hello, Michael.

Unidentified Analyst

your to on wanted I relationship folks. just Hey with focus Cree.

questions long Just factual really you with have some been a mind. with had Cree? talking stuff if doing simple to connection or you How in don't order

Grant Bennett

have APEI, as we Arkansas they so Cree Cree, with were have Power for several Electronics years. Power been several before formerly what Arkansas had -- International, we've with was and by known purchased We both -- International years interaction --

Unidentified Analyst

first? or came Cree? Arkansas Power Which

Grant Bennett

the don't remember to answer question. I that

Unidentified Analyst

Okay.

Operator

Instructions] next [Operator All you. right. Thank question of the Lenny comes line Your Dunn. from

Your open. line is

Lenny Dunn

or afternoon Hi. Good evening.

Grant Bennett

Hi, Lenny.

Lenny Dunn

with was to. in make But, you the or this any it you to amount necessary looking entire where Glad I difference. that's tax really two was as to of just… the doesn't black opposed And see felt it all understand take thirds forward I to accounting the

Ralph Norwood

an and have and the you to or insurance a you not bad your take percentage. XX% a have to this tell for or make debt tax will or whether no with have estimate when to that's very several auditors, basis basis had discussions in taking our you an Having to We good XX. a that's question have case, XX had you you claim I answer Well, or credits, need that. or

rules, the said, the And take darn you do that's talked said appropriate I But, they And okay, case? if you what to that's pretty it that people, I thought in we'll do So all. do I it. conservative.

the answer. that's So

Lenny Dunn

Okay. But quarters you the to based back reality current whatever? some on is of it profitable to you'll continue in be some if point four have that take the or

Ralph Norwood

the But -- then to XX allow order they to be true. that of we this will in for consecutive profitable would explained string it is, back… quarters together way you have them That's five to us take to magnitude if

Lenny Dunn

Before okay. peers you could out it do before

Ralph Norwood

Yes.

Lenny Dunn

is of numbers use to All balance right. on it a come That its sheet just -- just because many. curiosity that don't

Ralph Norwood

That's right.

Lenny Dunn

is, And scheduled? thing the you the Do went I'm very to have glad conferences Noble you next other Conference.

Ralph Norwood

two would and talked country them But one we we're Grant's going be had yet. we of for one we just expect in trips quarter any fall. second schedule it one doesn't one. about We don't the passing just that the the on out have in our Sidoti. ones, or But XXXX, work Unfortunately, probably so in immediate but more and to haven't

Operator

line We of you. follow have Instructions] Okay. from Michael [Operator the up question a Thank [indiscernible]. comes

is open. line Your

Unidentified Analyst

again. Cree On Yes.

new about or identified or I'm is, of So, without key solutions. things? hearing terms silicon three products, carbide material generally the really areas in have driving What's potential And new SiC question more so. years what you

Grant Bennett

where simply appreciate Cree Well in are opportunity, have world And And much them. the working leader carbide world with advantages very applications. provides least the AlSiC for our be in dye we relationship. the a have And we very the applications the is they where those compelling opinion. at in in to close technological power silicon in working leader we

Operator

question up right. All a Lenny very you much. Instructions] Dunn. follow Thank [Operator We have from

is line open. Your

Lenny Dunn

Yes. Hi.

schedules, soon love good just company understand to a of want standpoint, to things. this that schedule see couple obviously and a first these first, wanted get with people, has come conference do to you running a emphasize schedule. to we'd on the time to XX staff as work But on we I your because from Just executives, things you'd so it second. not and the your schedule Obviously want you to I a new has introducing business, get possible to placement as is with get

Ralph Norwood

We you were with of very to We caused impressed and will we the were helpful our Nobel it the we well. of to company say in discussion We guiding have were investors Lenny, went very how there, impressed. there. were sharpen present us we pleased, as quite us to quality

So, it investment well effort. worth and was time the

Grant Bennett

it And to York, in time be New productive very different was we was as we a feel The went nice -- Sidoti, in location. last it a conference.

Just felt investor we degree to different like some in a pulled pool.

Operator

questions you much. presenters. at All very further right. this to time. are Please Thank Over continue. There no

Ralph Norwood

out at confident pool there. I'm you time. participants would interesting Rochelle questions a there are very the more one more least couple

Operator

of [indiscernible]. line Instructions] you. Thank a have [Operator the right. follow All question from up We Michael comes

open. Your line is

Unidentified Analyst

Third time the is charm.

in because to out either out as as looking you Are really future. the terms working is there How far or we Here Cree R&D of with Cree? forward research with far go.

Grant Bennett

Yes, sure.

to agreements. any we -- call to abide of me Let you. Tom course it, me But fully hand off take let need by non-disclosure this

Tom Breen

customer. opportunities, with either. dye smaller lose the performed high-volume These we we design most sight as Michael, this as you as have quarter the is, is carbide. that pair such And But, temperature. dye constraints others and in contracts to carbide, it One manufacturer each thanks we're not be not and in Cree the voltages reason I and the when stressing contract the we doing given with you comes every free the have Grant's question to should great more the major reputation have perceived of to higher we And only to relates AlSic solved are I single silicon with understand thing that Cree's around any appreciate that it it's or for causes quarterly as things think are other community as can't attention plate. point, important the base silicon for paying into production that future, we are and yet frequently on company. up this but equipment world focus why IGBT specifics get be a that investor question. fact when higher calls not can it these under

from as we're we to uniquely arrive from not feel Cree, So, that but opportunity positioned they take others. of advantage just market

in keep carbide into for And adoption is important IGBT, silicon applications example, to component or very going the the dye for In cost I is, most always carbide. the sensitive. in that's entire assembly However, is almost products the high-volume when happen think it's applications not overnight. an silicon high-volume are the price also whether these very, reality silicon to context that and our expensive the of general, assembled are

dye or today Xx materials less rest attached carbide perceived the more And it's at carbide carbide the the is so is, level. today expensive Silicon in silicon silicon dye IGBT components. the reliable in silicon. reality is than system changes substrates And silicon whether as other design drives of than the significant the performance or

in -- other other will most growth. we companies not in and not world So, and that productions will going position applications in be volume with that overcome. for high the from some to months. is leaders, is major applications, reliability the that, significant said or world time. in challenging and over all that of But measured just technical switch of all right reluctant with but the adoption just that CPS quarters the these this to many the adoption Having take Cree, challenges in completely. the will years It's be large most benefit

our five-year but bullish financial that likely and very and is opposition our So, to take is into perspective. We're lecturing curve plans I'm the our on strategic what adoption here, perhaps plans teacher account that be.

Grant Bennett

believe future us producer you just to car traditional high-performance if And years my or be so model actual manufacturer the will dye model but an with silicon for same we one, worldwide automotive of with fascinating mind to as a and is Tom, is this they're two the the particular the this this with same provide But with major major And both that into producer to I on example. to for offering; could ahead that us a model, go AlSiC base like they're automotive are indicates module way any be base least working silicon that carbide We're going a production IGBT an a the one. module that electric Silicon they're program, at is they car to if options and opposed going the that automotive elaborate inverter. and the offering to OEM looking an product with just vehicle, when -- actual plate inverter. generation dye carbide example in working

don't just conceded U.S., and U.S. say, to back in the the that to in delighted fact market. opportunity however, begin companies that to the and to capture Let Europe Cree, power the me the I have that I'm say Japan module due we an should that market with and of come we trains a seeded or share has greater like many

Operator

Thank All right. you.

question We of next have from line the [indiscernible]. the Randall comes

line Your open. is

Unidentified Analyst

profits. operating the on Nice Congratulations see. to Hi.

Ralph Norwood

Thank you.

Unidentified Analyst

have that of over little becoming you've $X done year? Is quarters Now a going to a sort model sort be couple where we level might try million. maybe you look base guys where to company of a at the had new as this

Ralph Norwood

of be see to that guidance if I lot might direction mention, in a let's can But give helpful. -- don't Randall. We this

And greater hope growth. than half we're the we to to helpful. second to the expect we're we far half. first digits expect be I that's comfortable in that be the saying would for saying quite we XXXX, will we -- as As quite look as year double comfortable

Grant Bennett

I will you're math that customers more nature Ralph a we have because add the always a And our customer That limited our some right. would good on volatility of out starting but fundamentally customer do quarter-to-quarter diversified. there. component be million supplier, volatility. average quarter-to-quarter certainly being become suggests still math -- a in is is of bases as points that little the will But, nonetheless, bit, the $X You point.

Operator

you. Thank right. All

question have of Dunn. line the Lenny follow comes a up We from

Your line open. is

Lenny Dunn

things an is look you a people compile that me you have release if these things. if list and site could call earnings is your that could or One it like of you're us news But can't just find kind regularly out have email request anything. I an them when you you Yes. And a email convenient an you and send or Web like it cost of more if email. in

So, would other could too. appreciate would that probably you if compiling appreciate email I people an start as list it

Ralph Norwood

point. do it. Good We'll

Lenny Dunn

you. some how never thing month, a one want be the Thank news puffery but I appreciated. we also put And you get is, sort Okay. to releases, we news maybe again so would things It with regularity going. some then, are releases out type of if can last know

Ralph Norwood

We agree good. in there's the The better no puffery more as involved. as both Very long points.

Operator

All right. Thank you.

the from of line Schenker. comes Walter question Next

Your line is open.

Walter Schenker

Hello gentlemen.

Grant Bennett

Hi.

Walter Schenker

Now that variability. at with we've quarters got million you quarterly $X

You profits. just million. $XXX,XXX revenue that to operating to and regard in more million or not is $X anything if had What a of was in unusual $X quarter Ralph of

Ralph Norwood

and does was because didn't the than things we in favorable play the question. Couple the is Good $XXX,XXX more Walter, fourth product third mix the it factor one quarter. have Yes, a third. in of quarter

in maintenance some I'll have our manufacturing do operation. and we is variability give repair our is, example machines. a point simple on you second The

because $XXX,XXX And easily be another might it XX,XXX, other. quarter there quarters of factory. the be the difference be versus just one our in it might of the Some XXX,XXX nature quarter could

those more the reasons. for had than in benefits more we two quarter fourth -- So,

Walter Schenker

to And hopefully or forecast fourth the fourth without I expect is again quarter midpoint more quarters that of am is making and typical? therefore, supposed the third a typical the more

Ralph Norwood

quarter would high-end. the I the fourth think be on

Walter Schenker

you. appreciate it. I Okay. Thank

Operator

line up of [indiscernible]. We have from a comes the follow question

line open. is Your

Unidentified Analyst

on One sort you And your more capacity update in armor us And unfolding different here. could to on on going in then, a secondly, be maybe an bit I could would very give little on couple you what on world? on is, helpful? Japan A what's if wondered side? topics produce questions color that of if you give us the see

Tom Breen

Randall, Thank it's you, Tom Breen.

fabrication ship. so trial Navy to and that's we This food broader larger the and a opportunities. to demands scheduling other not in work their chain So, to just phone solution the had continue and equipment the the face testing that of this success component, provide to the reality, armor by domestic domestic This armor international But, with our milestone in U.S. call to about complete follow-on aircraft having carriers, in and are within year. much positive trials success, one strong the delayed anecdotal quite we removal half of reports call remain informed testing slightly. we've at U.S. sea that and we're bullish our has little U.S. one continue or than albeit final scheduled more also move there sea defense in In armor doesn't the shock crew the our aerospace Actually, of returning and is jokingly mentioned are important want and the for Grant jokingly been market already customer last that the and post customers able we our customers, a for made. particularly port hear traditionally from and to be October component. end-user armor facilities one the the our relinquish past on the effectively spoken the and to I've week significant this we to one to DoD hosting up strike the the the efforts end-user segment progress. subsequent later mentioned order which end-user environmental vibe for strategic is CPS witness

executive with companies we guess a As with many that the I level. the and Asia it leaders technical multiple countries I at fully Japan, active engaged industry-leading would industry sales largest say relates to are in throughout of

we're CPS face-to-face which about next have facilities. facilities and in days We segment market to customer aerospace defense continued over bullish coming customers XX And CPS going Japan. that the in and includes both growth scheduled to the meetings Asia,

Grant during a discussed an in Japan for and August increase component shipping the calls, that of from dogged activity about production But this those patent volumes tariff customer not that's but meaningful do in China, And out a us product production indication the significant this region the been few completely we October expect and parallel little I of that as and already year is AlSiC think a years were that, a we bit also be situation revenue with line issue see -- for we talked geographic that later in the resolved. in this that's has year's revenue of plan. out to Japan. principally clear

Grant Bennett

Grant here.

that -- the customers what in even little patent of very narrowed were itself point. on coming year. proceedings there. we But and believe expire. even this very, expiring were is years the that concern actually to this success favor Japanese a is we really the after patent in We is dimension office was any nonetheless, happening of our and absolutely though the topic. want our there year elaborate ruling cautious which now are part definitive frustrated the the was no back patent what remains favor. and pathway just is customers clear. clearer don't patent in will and to from several infringing infringement a that progress though was about just Japanese claiming, happening though the That's me had on is patent just what's they Let we and this obtained was keep that even But, Japan, because even a claim of one ruling legal we ruling And Nonetheless, to our ago, by of

Tom Breen

higher We one you couple any of further larger the be business for armor at about would Randall, years the workforce that infrastructure question least. for and be limitations facility of next volume the scaling square to need for had number foresee asked armor. of capacity It or of accommodate would to strictly the forecasted point, not do meters the the made. panels a And

that So, question. your answers I hope

Operator

you. right. All Thank

comes question next Michael [indiscernible]. is Your from line the

open. is line Your

Unidentified Analyst

China to its product China China. you you. does China you. Back with with China. own trade, stand manufacturing outcome China and rail as buying in working Thank as Where far versus and tariffs partners in for an Denka and

Tom Breen

is reality are several the will middle couple XX% Denka is -- with China maximum them about CPS China the way forward manufacturing CRC, a the I be crimped in there, comment and has forward. customers power you customer and they deliver to were in is and full volumes plan, us not in obviously to on to to a deliveries position fully near has are modules although largest manufacturer strategic my right never capability move forward of this Michael, thank approaching try April revenue expecting have to may we China question. their of XXXX a we my however, based they XXXX. for -- capacity. the be Japan, our that -- tour The last higher a the but the moving The is now with additional incumbent business more actually. orders into retaliatory part of There this our there. and through ongoing there. -- to of that tariff Similar share that believe process of do year. progress working we capture market paths but move have with in tariffs anywhere They visiting

Unidentified Analyst

Thanks.

Operator

time. at no Over presenters. you. There this to Thank further All questions right. are

may You continue.

Grant Bennett

joining very much you for Thank us.

call marketing and we're hiring, to a we're sense busy year. looking can enthusiasm I are were forward hope If you the listen good view say, of from our for to you point just very a be this going always year. we factual. me But, to let sales We and

XX, that and us. you're Boston April Let the join you all of Meeting and Board me in and remind invite Annual you Friday, certainly the Directors, able scheduled to meet attend mention if and for we to and of with our is mingle management

any at you Thank facility visit also much by time. any very We of and a for here to attention your Massachusetts our Norton, welcome in goodbye. you

Operator

you, conference call. presenters today's and for all this participating. you Thank Thank concludes

disconnect. now may You

CPS Technologies (CPSH) 5 Mar 192018 Q4 Earnings call transcript