CPS TECHNOLOGIES CORP/DE/ Q2 FY2024 earnings call

• Revenue for the quarter was $5.0 million, down from $7.4 million last year, impacted by Navy Armor contract fulfillment. - Labor shortages and tight local job market in Q2 hindered ability to fulfill non-Armor product orders. - Added new manufacturing personnel in training and expect a third shift to start next month. - Faced supply chain constraints, including an ingredient running out for MMC formulation, but steps taken to address. - Announced a new SBIR Phase 2 award with the U.S. Navy Air Systems Command valued at over $1 million for thermal energy storage. - Got new 5-axis CNC machine up and running with a matching grant, expanding offerings. - Completed first manufacturing trials of Fiber Reinforced Aluminum (FRA) per licensing agreement, with products expected in fiscal 2025. - Had successful test of lightweight UH-60 helicopter flooring and ongoing development of other products like high-temperature barrier material.

CPS Technologies' second quarter revenue was $5.0 million. Revenue declined year-over-year primarily due to the fulfillment of the U.S. Navy Armor contract with Kinetic Protection. Armor contributed approximately $0.25 million to the $5.0 million revenue. The trailing 12-month book-to-bill ratio excluding Armor was 1.10 at the end of Q2 and continued to tick upward early in Q3. The gross loss in the second quarter was $0.2 million or approximately negative 4.6% of sales, compared to gross profit of $2.2 million or approximately 29.6% of sales last year.

• Anticipate gross margins to improve in the second half of 2024. - Expect third shift to boost top line growth, particularly in the fourth quarter and beyond. - Trailing 12-month book-to-bill ratio excluding Armor remains on a growth trajectory and ticked upward early in Q3. - Cautiously optimistic about additional Navy Armor orders and future growth drivers for 2025 and beyond.

• Labor shortages and tight local job market initially impacted ability to fulfill orders. - Supply chain constraints, such as an ingredient running out for MMC formulation, caused production issues. - Hermetic packaging product ramp-up was more challenging than expected, leading to significant losses due to gold price and scrap issues.

Q: Greg Weaver from Invicta Capital asks about gross profit details and current quarter situation A: Chuck Griffith explains about the hermetic packaging item with gold price and scrap issues, and Brian Mackey adds about labor shortage and hiring process impact on current quarter, expecting improvement in Q4 Q: Question about SBIR award details A: Chuck Griffith says it's a 30-month award, ~$100k per quarter, invoicing in Q3 Q: Question about rework drag from base plate problems A: Chuck Griffith states not specifically related to that quarter Q: Question about Armor in $5 million revenue A: Chuck Griffith confirms ~$0.25 million related to Kinetic Protection