CPS Technologies(US:CPSH)2024-08-03 18:19Financial Data and Key Metrics Changes - The company's revenue for Q2 2024 was $5.0 million, a decline from $7.4 million in the same quarter last year, primarily due to the fulfillment of the U.S. Navy Armor contract and shipment delays [3][4] - The operating loss for the quarter was approximately $1.3 million, compared to an operating income of approximately $0.7 million in Q2 2023 [7] - The net loss was reported at $1.0 million or $0.07 per share, compared to a net income of $0.6 million or $0.04 per diluted share in the prior year [7][8] - Gross loss was $0.2 million, approximately negative 4.6% of sales, compared to a gross profit of $2.2 million or approximately 29.6% of sales last year [6] Business Line Data and Key Metrics Changes - The fulfillment of Armor orders negatively impacted results by approximately $2 million per quarter [4][5] - The trailing 12-month book-to-bill ratio, excluding Armor, was 1.10 at the end of Q2 and has continued to improve early in Q3 [5] - The company faced challenges in fulfilling open orders for non-Armor products due to labor shortages and manufacturing personnel out of work [5][9] Market Data and Key Metrics Changes - The local labor market was tight in Q2, impacting the ability to convert orders to shipments, although it appears to be loosening [5][9] - The company ended the quarter with $6.3 million in cash, down from $8.8 million at the start of 2024, and had $0.75 million invested in T-bills [8] Company Strategy and Development Direction - The company remains optimistic about growth drivers for 2025 and beyond, despite near-term performance challenges [4] - CPS Technologies is pursuing additional work for naval ship classes and has received a new SBIR Phase 2 award valued at over $1 million to develop novel metal matrix composite solutions [11][12] - The company is focused on expanding its manufacturing capabilities and product development to accelerate top-line growth [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that while near-term headwinds remain, they are optimistic about improvements in product completion and delivery in the coming quarters [10][17] - The company has resolved issues related to manufacturing and supply chain constraints that impacted production in Q2 [22][23] - Management expects significant improvement in Q3 as they ramp up production capabilities [24] Other Important Information - The company successfully completed its first manufacturing trials of Fiber Reinforced Aluminum (FRA) and is expanding production trials [15] - A new 5-axis CNC machine was commissioned, enhancing the company's offerings in response to customer demand [14] Q&A Session Summary Question: Could you provide more detail on the gross profit and manufacturing issues? - The gross profit drop was significantly impacted by manufacturing issues, particularly with a new hermetic packaging item that required more production than anticipated, leading to increased costs [18][19] Question: What is the outlook for the current quarter? - The current quarter is expected to be slow due to previous issues, but improvements have been made, and fulfillment of orders is anticipated to increase in Q4 [22][23] Question: Can you provide details on the SBIR award? - The $1 million SBIR award will be invoiced monthly over 30 months, approximately $100,000 per quarter, and revenue is expected to start in Q3 [25][26]