Q2 2021 CPS Technologies Corp Earnings Call
Yeah.
[music].
Good day. This is the operator todays conference is scheduled to begin shortly until such time your lines will again be based on U C code. Thank you for your patience.
Once again this is the operator of your conference.
Is scheduled to begin shortly until such time your lines will again be placed on music hold thank you for your patience.
[music].
Good day, and thank you for setting by welcome to the C. P. S Technologies Corporation.
For at their Investor call at this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask the question.
Question during the session you will need to press star 1 on your telephone.
Be advised that today's conference is being reported.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Mr. Chuck Griffith.
Fifth Chief Financial Officer, Sir Please go ahead.
Thank you operator good afternoon.
I'm joined today by Michael Mccormack, our new President and Chief Executive Officer.
Before we begin the business portion of the call I would like to point out to all of you that statements in this conference call.
Strictly historical are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 and should be considered as subject to the many uncertainties that exist in Cps is operations and environment. These.
Uncertainties include the impact of COVID-19 economic.
Conditions market demands and competitive factors such factors could cause actual results to differ materially from those in any forward looking statements.
Now I will turn the call over to Michael to offer his perspectives on the annual and second quarter results.
Thank you Chuck good afternoon, everyone.
Today.
Better non <unk> revenues of $5.9 million and operating income of 253000 for the quarter ending June 'twenty 6 'twenty 'twenty..1. This compares with revenues of $5.8 million and operating income of 331000 for the quarter ended June 27th in 2020.
The financial results.
We announced second quarter were profitable and growing as compared to the first quarter of fiscal year 'twenty..1 shipments are increasing to customers as indicated by the increased revenues and more importantly, our book to bill ratio was increasing over.
Over the first half of fiscal year 'twenty, 1 our book to Bill was approximately 201, confirming our strategy for growth is beginning to.
Success for the larger sample of data.
A key to our growth plan is to have all of our business lines are performing well. This internal diversification of revenue sources reduces our customer concentration while utilizing more efficiently all of the existing resources to satisfy the requirements of a wide array of customers. These customers.
<unk> have shown significant growth in 2021 to.
To put this in some.
Perspective revenue for the second quarter was 2% higher than the second quarter of 2020 and 2020, our top 3 customers in Q2 made up 80% of our revenue in this past quarter of 2021, our top 6 cluster.
Customers equated to 80 per cent of our sales for the quarter. We believe this broadening of our customer base will increase the likelihood of planned and sustained growth for both revenues and earnings moving forward.
We are continuing to see a slow recovery from the pandemic to the basically business and it is expected to remain steady throughout 2021.
Our spending on high speed rail mass transit systems continues to lag we're confident that demand in this sector will return in fiscal year 'twenty 2.
I'll speak more later about our growth plans moving forward later on the call, but for now Chuck will discuss the financial results in more detail.
Thanks, Michael.
Revenues.
<unk> totaled $5.9 million in quarter, 2.2021 compared to $5.8 million generated in quarter, 2.2020, an increase of 2%.
As Michael mentioned, the additional movement of additional customers into our top 80% more than offset the reduction in sales from certain other customers.
Gross margin in quarter, 2.2021 totaled $1.4 million or 23% of sales. This compares with gross margin in Q2, 2020 of $1.2 million or 21% of sales.
Increase in margin was primarily due to moderate price increases and product mix.
Selling general and administrative expenses totaled $1.1 million in quarter, 2.2021, compared with SG&A expenses of 853000 in quarter 2.2020.
This increase in SG&A expense was due to increased compensation expense as a result of the addition.
Of our new C O L and the delay in certain directors' compensation from quarter, 1 to quarter 2.
The company experienced an operating profit of $253000 in Q2, 2021, compared with an operating profit of 331000 in Q2.2020.
Increase in operating income is due primarily to the increase in SG&A expense previously discussed.
Turning to the balance sheet, we ended the quarter with $3.0 million of cash. This is an improvement to our cash position of $195000 at the end of 2020.
In.
In May we completed our at the market filing and began raising funds under that program through the end of the second quarter, we raised approximately $3.1 million under the ATM offering.
These funds have enabled us to completely ceased borrowing under our line of credit even as our daily cash balance for.
Fluctuate.
In addition, we've been able to absorb the increases in accounts receivable as our sales grow and in inventory as we develop our armor line.
Our raised under this offering is being managed such that as we've covered our short term cash needs. We have become more selective regarding the days in market prices.
Which we will sell additional shares.
Accounts receivable at June 26, 2021 totaled $4.4 million compared with $2.9 million at December 26, 2020.
Our day sales outstanding totaled 69 days at the end of the quarter compared to 62 days at the end of the year 2.
<unk>.
The increase in day sales outstanding was due to higher sales to large customers, who we gave longer payment terms too.
Inventories totaled 4.0 million at June 26, 2021, compared to $3.7 million at December 26, 2020. This increase was due.
<unk> 20th buildup of inventory for our armor order the inventory turnover in the most recent for quarters was 4.0 times compared to 4.5 times for the 4 quarters ended December 26.2020.
Again this decrease is related to the raw materials purchased for our armor contract.
Due to the turning to the liability side payables and accruals totaled $2.6 million at June 26 up from $1.8 million at December 26, 2020. This is due to greater expenditures due to higher sales and inventory levels.
And so for further discussion I'd like to turn the call back over to Michael.
Thank you.
Jack first of all I'd like to take a moment to recognize the significant long term contributions of grant Bennett to Cps.
Grant recently retired from his day to day CEO position, but he remains an active and contributing member to the board of directors grants compassion leadership and tireless dedication to the company overall.
Over his 35 years of selfless service to Cps has built a solid foundation that moving forward will serve the company well I'm sure grants listening to so grant. Thank you you are a great CEO for Cps and for what.
US to hear that know you personally as well as professionally and outstanding human being that inspires us all to be considered.
<unk> of the human condition and all of our endeavors. Thank you grant.
I think this is an ideal time for me to share with those on the call and investors why I joined the company and the exciting opportunities for growth I see as the business moves forward from today through the second half of fiscal 'twenty, 1 into 'twenty, 2 and beyond and well into 'twenty 3.
Growth and growth potential other reasons the board of Directors asked me to join Cps.
After graduating west point I began my career as an officer in the U S Army before transitioning to industry.
Military reported would be great deals of opportunities, specifically and growing my leadership skills and surplus service to a greater goal and.
Sorry, I have extensive experience and a product centric business environment.
<unk> has a rich history of creating unique products and their related manufacturing processes to solve customer needs in a variety of markets. The center of this activity is product development, we are making several internal resource investments.
And in this in this area ranging from staff, both engineers and scientists to facilities.
The vision for Cps is to be the premier provider of high performance material solutions for mission sensitive applications in the United States connecting and protecting customers around the world.
Our vision is informed.
Owned by our core values and beliefs purpose and mission. The fundamental reason the Cps was founded and continues to operate is to provide performance enhancing innovative solutions duty of application of advanced materials into end products to improve the quality of life.
Let the mission for Cps to grow and graduated from a small business.
And to a sustained medium sized business over the next 5 years.
We are well on our way to accomplishing this mission by building off our 35 plus years of success Spa.
Specifically in addition to our consistent ongoing and long standing commercial business, we see potential for great growth in the aerospace and defense sector, we have recently.
<unk> from a Cps and successes.
Within both the aerospace arena with the products, we provided for the Mars Rover and GPS satellites. We also continue to have success in the defense sector. As you are aware, we have begun to make product deliveries to our customer and support of the U S. Navy and there is high likely potential for additional orders to protect naval forces on this program.
Sure.
As well as other branches of the service, both domestically and with the ally.
We are continuing to make measured investments in product development sales and marketing and our digital strategy to ensure we increase our reach to potential new customers with product solutions, we are actively reallocating and realigning internal resources.
Program and prepare for growth.
Based upon our success to date, we recognize that in order to achieve our mission, we will need further investments for growth. This is the primary reason, we initiated the aftermarket or the ATM offering that Chuck just for you.
Our intention is to use the capital from this activity to help fund and accelerate on golf brands.
Specifically to hire additional staff members acquire capital equipment that will enable us to increase our capabilities efficiencies and growing capacities and provide the necessary working capital to accelerate the plan.
To provide specific examples of how our strategy is beginning to translate into operational results I would like to talk about our hermetic products.
Business line for a moment.
With our continued increase in product development efforts. We are currently exceeding our growth goals and appear to be on pace to have a new record year of growth. In addition, we have already have visibility into further growth in fiscal 'twenty 2.
Booked orders year to date for the first half for the fiscal year already exceed.
<unk> entire year last year and our revenue for this business line is already approaching last year's revenue with 2 additional quarters of execution to come there.
The primary growth in this area is the aerospace and defense market specifically in the United States. This is a very attractive sector of the market.
Yes.
See the segment places a premium on the benefits of our products and a majority of our customers are operating within and intellectual property protection envelope or a regulatory restricted environment that prevents a significantly adds barriers to entry for foreign competitors from participating.
Specifically, our lightweight and unmatched thermal.
Management properties with a high specific stiffness enabled a superior performance for our customers and products. Most of these programs are also very long running.
In addition to our success with our Hermetic packages business has also brought about a renewed interest in our market only source of an alsek hermetic package combining the best.
Because of our 2 business lines, we see prime and tier 1 contractors as well as original equipment manufacturers continuing their product development activities relying upon the advantages afforded to them with our <unk> properties. This is the basic building block for a lighter weight and highly reliable and product which directly translates into operation.
Operational availability for their customers and their integrated design, such as airborne laser weapon systems and what Cps is involved in these developments.
Cps <unk> as a base composite material of choice.
As the success of our previous product developments are more widely known and accepted as evidenced by their adoption on the GPS III.
<unk> sat and countless restricted programs.
All of our <unk> products, Alsike, Hermetic packages and our large portfolio of robust hermetic packages are illustrating our strong growth path in 2022 and beyond.
I could talk about the exciting business opportunities at Cps, All day long, but I wanted to respectful of our time and leave some time.
Michigan's since this is my first quarterly results call with you all and I suspect there may be some follow up questions for my remarks.
And in closing during the second half of fiscal 'twenty..1 in both Q3 and Q4, we expect our performance to continue to improve over the second quarter, assuming that the latest variant of the Corona virus.
For <unk> does not significantly impact the global economy as it did in 2020.
Im extremely optimistic that 'twenty 2 'twenty 3 will firmly placed cps on the path forward to achieve our goals for customers and investors.
Thank you for your time.
So operator.
So now.
We can open up for questions.
Thank you Mr. Christian.
As a reminder to ask a question you will need to press star 1 on your telephone.
For all your question you May press to get back to you.
Please standby, while we compile the Q&A roster.
And speakers your first question from Ken It's bound Sir. Please go ahead. Your line is open.
Yeah. It sounds it sounds very very encouraging maybe a few more details. So you said markets are.
Aerospace and defense are there was a contract I guess for you.
Per.
Protection for aircraft carriers.
Maybe you could develop on that if for some other ship classes.
You might be able to get contracts signed.
I cannot this is Michael Thank you for the for the thoughts, yes, well we are actively executing on our.
From right now for the U S. Navy on the CDN carrier classic programs, we are developing alternative solutions and other.
Integrated solutions with our partner kinetic protection to address other circle <unk> in the U S Navy as well as the coast Guard and those are just the near term opportunities we have Kevin we.
Our working some father out opportunities in both the U S.
<unk> wing applications and foreign navies I hope that helps.
Okay.
I would say solid metal that youre, producing yourself or is there.
Obviously, the price of steel and other kinds of alloys has been going.
Or are you facing any cost pressures.
Well excellent question. So our hybrid tech armor panels are a proprietary panels is a metal matrix composite.
So there is components in there of steel and aluminum.
The mixture and were able to contain cost.
We're able to buy and have those goods on the shelf to execute our contracts today, and we're well aware of the pressures within the supply chain globally.
As the potential for inflation exists.
Okay, well, thank you very much.
Good day can.
And speakers you are next question for.
Patrick Whyte, Sir your line is open.
Uh huh.
Hi.
This is.
I wanted to congratulate you and I appreciate all the enthusiasm you bring and are.
Certainly we won't Miss a grant that it but.
I wanted to touch base quickly if you don't mind and see if you could add any color to what you're thinking about in terms of a 5 year execution plan towards becoming a medium size business.
And you know the wood that implicate of 15%.
And turnover growth rate or.
Or do you have any parameters you can add and define that a little bit further.
It will certainly thank you Patrick for their kind words on the the opportunity here to to leave Cps Ah well certainly we built our plan going forward that tech.
Many opportunities for success and as you allude to it is based upon a combined.
Compound annual growth rate of our existing business as well as additional new business coming from new products and that's our focus right now we do see our ability to reach and touch more customers as being critical.
Has expanding our footprint and as we grow obviously, we want to grow in a sustained predictable path.
We have a predictable revenue and earnings.
Okay.
Can I ask a follow up question for Joe If that's okay right Patrick sure sure. So.
Obviously.
The silicon carbide.
Market for Evs and high voltage application any day and presumably larger vehicles.
Is 1 that is getting a lot of attention these days.
Yeah.
Have been hence them that may be.
<unk> took a cps H might be able to be involved and establish a pipeline.
Can you add any color.
Today or share any thoughts on whether in fact, you are working with 1 or more providers like SD micro or Anthony.
In other.
Towards maybe are adapting and analytic solution to those applications.
Yeah, we certainly work with a lot of the major players to feed the automotive industry.
We're extremely excited about some of the recent new programs as well as some of the past design wins as they begin.
Mature within those companies to offer solutions.
Yes. The answer is yes, we are participating with these companies.
Some of it I'd like to not reveal because it has come from our competition sensitive but.
Yes, Patrick we are participating with them, we do see debt the hybrid electric vehicle market.
Market and the use of our <unk> metal matrix composite is going to be an enabler to help them achieve their goals.
Do you see that expanding into solar and other applications.
Well certainly we're already in a wind power.
2 turbines and any any high voltage application would be would be something that would be the.
For the Oems and their engineers would certainly be looking at all.
As a as a likely solution I would say and zalviso.
Thermal management problems and things like that.
Okay.
Last couple questions and I.
Put them together and all are purely for myself from this call.
You're you're hinting at potential increases in efficiency I assume that is hopefully to maybe enhance margins, particularly as you get.
More involved in the military side.
I don't know if you can comment on that and then finally.
Airborne laser systems.
Is a problem.
Probably a long term application, but certainly a large application can you comment on that and it's not evident to me at least how al.
<unk> would play a role there or maybe it's for the hermetic packaging or something else.
So anyway, congratulations welcome aboard and thank you for.
No.
Your efforts towards establishing Cps each other there's a growing company.
Thank you.
If you could comment.
Oh, well, yeah, certainly the day the airborne laser program in particular is to your point a longer term effort. However at the point being is that we're involved early with large Oems who provide that in the defense sector.
It is a <unk> solution not only a matter of packaged children.
And we're extremely confident it.
It brings new challenges for us on the design side.
We have just begun that process, so more to be determined but to your point. It is a long design cycle, but the positive side of that is designed in design win and then production win for our customer it would be a long term.
Revenue stream for US and then obviously I think for your first question our goal of streamlining activities is to improve earnings.
Alright.
And as a reminder, every 1 of.
<unk> like to ask a question you will need to press star 1 on your telephone keypad, that's again star 1.
Yeah.
Yeah.
And speakers, we don't have or there is 1 right now.
That's from Thomas random.
Please go ahead your line is open.
Hi, guys. Thanks for having me.
What percentage of the military contract up to 32 million in the contract what percentage of that has been fulfilled and invoiced.
So that that's the prime contractors value I think we shared earlier that we're about half of their value.
Our component of that and I would say, we havent, even build the first 10% debt.
Correct, Yeah, we have which maybe have orders.
Yeah that makes sense I mean.
Based on what we're seeing I think.
Yeah. So we were actively shipping are creating we're still on the first chipset.
Okay and then once you do ship. These out is this a pay debt paid paid when paid is there something that for Berry.
A long process to finally get no no. So obviously you know 1.
Other things that are attractive above other defense market in the U S government is they're very good payers.
So that once we invoice it we get paid in accordance with the terms of the agreement with our partner connect protection and they have been nothing back of.
Outstanding today.
Okay. So you guys are only and you said, 10% right now in the first.
<unk> 10 per cent of this contract is that what I heard from that lesson that was less than that okay. So it took a little time to get ramped up and to really get moving on this I assume that.
As you continue to kind of refine that process, you're going to pump out I mean, I would assume they want this they have a certain timeline they need this product in as well correct.
But we expect it to be 100% complete so that way they can start placing other orders and we can kind of you know.
See where all the dust settles and the margin channel.
So Thomas we certainly shared with our partner kinetic protection in the U S. Navy that we have additional capacity to do more the current deliveries.
Livery cadence by which we deliver it was predicated upon the Navy's ability to receive a right now we have I think it's 5 chipsets for 5 ship sets and they are currently scheduled all the way through now through fiscal 'twenty 3 H 2.
Through quarter 2 of 23 today.
And on the orders, we have and Thats why.
For the aircraft carriers aren't always available right.
For sure it depends on when their import yeah. So other so all this let's say 15 or 17 million dollar potential.
Avenue.
This is spread out through 2023.
Barry.
Today, Yes, mhm to day okay.
Okay.
[noise].
Okay.
That that was really yet I guess I just wanted to understand I was I think for myself and everybody else what were really expecting a.
Uh huh.
You know.
Million at least a couple of million in increased revenue and profit based on these contracts.
But I guess, it's just it sounds like it's just a very long process.
Yeah, what we agree with you Thomas their debt that is going on.
Typically contribute to both revenue and earnings.
Is a long.
It's a long process. It's a you know obviously aircraft carriers are a centerpiece of the U S Naval fleet, and we've kind of out there.
They're they're scheduling.
But we could go faster, we have often ask [laughter] and and we have the capacity.
Already.
We just deliver.
The delivery schedule is the delivery schedule and the Navy has their own kind of way of doing things. So.
Okay, but when you guys are getting from interest.
For.
From other folks too right I mean, I assume theres private security and other other everybody would want this stuff out and all other cars vans trucks tanks, whatever they could do.
Right.
Yeah, the applications, though to your point Thomas are virtually endless right and finding those applications, where our product makes the most sense and are conducting net sales engagement and closing is going on daily here.
But just like the sales cycle are just.
Revenue cycle, the sales cycle is a little long too so.
But we're actively engaged we have lots of potential clients and clients.
I think it's fair to say that we've probably seen an increase in our.
Sales contacts from companies as a result of this Navy order and the fact that.
Like there's a lot more interest.
From from some of these other army folks would you yeah, no I agree Chuck I mean, we currently have for a 5 active arm our programs going on we're talking just about the Navy program. So.
They're all in various stages.
I'm cautiously optimistic I've been in the armor business for.
They are now and.
I love our product I think it adds value protecting sailors and Marines and there are many more applications Thomas and I think to your point, we're just scratching the surface.
Okay.
I do have 1 more question for you guys on the marketing and PR I think you guys spoke on the last conference call.
For a bit or youre going to try and Polish things up a bit what are the what what kind of strides have been made and in regards to that.
So I would say Thomas we're probably a little past halfway.
We have selected a firm.
We have a digital strategy about how we're trying to affect people, making that combined with our.
Our social media presence, a web presence or collateral and where are you.
We have a review this this week or next to get an update but I think we're at a 60 per cent review if that's helpful. Thomas and our plan is still to hopefully be done on a round.
The first of October.
Okay, Yes, I see that there have been some increase post and Theres just a couple of guys who had the opposite of really trying to do what they can to at least keep people like myself tuning in to kind of see what's going on and that's helpful. But.
I think from overall.
Polish.
And invest for actions kind of would go a long way, where we're extremely excited.
And how it's developing I mean, we've gone we go through the pages in the content reviews weekly and we really like the way the message is going to come out and it's consistent to what we want it just takes a little time and and to your point. We are trying to continue our dialogue and improve our communications with them not just.
The problem you, but you know all our customers shareholders and the entire investment community. It's.
We're excited about the progress we're making forward.
Hopefully that leaking [laughter] some of this stuff out as part of our build to launch How's that yes, absolutely and I don't know if you guys are working with.
You know as far as when these leaks happen and how they happen and the timing is obviously crucial on all those different style, but yeah, well you know and again to your point you know, where we were acutely aware of how the social media informed the.
The website.
We are working through all of these things and we also have.
You know our plan for the first 6 months of.
Releases of information that arent material, so oh employee profiles et cetera et cetera.
And are you guys continuing to reinvest in your sales team and put quite a bit back into the company for future growth is that something.
There's a little bit.
That's something that you're showing as far as where hey, you know we did this but you got to understand I see are improved.
Improved your offices and we're bringing on these folks and we're getting ready for the.
The next wave I guess.
Yeah, well certainly.
Growth requires some timing right and we have.
<unk> made some measured investments that we shared with us, but you know obviously the goal is to increase revenue increase market share to be the solution provider. Our customers are looking for and that's what we're focused on we need to attract more employees.
Barry.
Competitive space these days to hire talented folks.
Folks and we're doing well in fact, we had a couple of more folks accept this week. So I think theres more positive news will share once we actually get them in the door, but it's it's all trending well and I couldnt be happier with our progress to date Chuck do you want to I know I think sure. We hired have the press release was it in May.
With him Yeah, Tim Davies joins us and us GAAP in Florida.
I think.
And already he is looking like a great hire [laughter] everybody time.
And can we expect a lot out of you Michael as far as bringing some of your older contacts and relationships.
And ships and of this new business.
Absolutely.
I think that with.
The board when they hired me knew that I had a pretty strong rolodex of contacts and specifically in the aerospace and defense market and it might have been in communication with them and we've begun some some contract research and development activities.
<unk> their lower level of longer term, but you know our goal is to fill the product pipeline with all kinds of products at different stages of development and just fill that thing up and <unk>.
And keep pushing for solutions with customers and you know, it's a dynamic environment Thomas It is competitors.
We're doing our best.
You have to do better.
Yeah.
Well good deal because I know you know Tim or Michael Mccormack, there he had a quite a resume of kind of grooming and polishing. These companies and I guess also went to west point. So I was just expect I was thinking that a lot of those contacts or to come with him in a lot of those relationships I for 1.
Years ago, I used to work in our defense and electronics manufacturing place and it seemed like the old General was always out rubbing elbows up in Washington to get the next contract for that I mean, I know that sounds funny, but it really was he would be gone for a few weeks and he come back and you'd say yeah. We're working on another we're going to bring out the old jigs and we're gonna start making this to begin or this.
As you know.
So I assume the same things happening with Michael Yeah, well you know, obviously, you know businesses about relationships right and you're gonna be from and you Gotta brings them.
Okay.
Yeah.
Thank you for atmosphere tenant those are great questions.
Yeah I appreciate your answers.
I'm gonna hang on for the long term and the long ride here I hope everybody else is on the same page I do I do look forward to the.
You know the next 20 or 30 per cent of these contracts being fulfilled hopefully.
Kind of see what that looks like and have a few a few wind policy or for everybody. So yes.
Yes, yes.
Cool I appreciate you guys and thank you.
Okay.
Yeah, you bet you.
And sorry, you have a follow up question from magic weight.
Hi.
In total.
Tom's question, a little bit and probe just a little bit further because.
If I.
I I.
I think I heard some hesitance to say exactly what the cadence of the sales would be over the next 2 years, but if it was you know on a level basis.
I was just about 16 million of the existing orders, we would be talking about a roughly 2 million additive to your your base business a year and I'm assuming that because this is a bit of a unique technology. Unlike ethic, where you may have competitors that the contribution margins you might be 25%.
Sent or higher.
And so Ken can you confirm that and is that you know.
Sound way of thinking of this going forward over the next couple of years.
Well, certainly oh, we've gotten half of the ship sets that are available to us ordered already.
And we were executing and we agree with you Patrick that we believe our margin on this product line moving forward will increase.
We have just started.
Stomach chipset 1.
We have some other request into from the Navy and so it's going extremely well I think that if you.
You know you can do the math right essentially have from this point on 2 more years of delivery already on the books.
And frankly half of the value of that order, so and it is extremely productive and protective piece of equipment.
Yeah.
Okay.
That sounds promising.
It sounds from 1.
Yeah, it's absolutely want it.
Yeah, no it sounds more promising than I are perhaps depreciated I thought there for a longer term deal and I certainly did not appreciate that it might extend into you mentioned for a 5 programs I'm, assuming you're counting.
Existing Navy program with the carriers to be 1 program.
Correct right.
And we currently have for other ones active.
Although not at the <unk>, but then as the production award stage right right right.
I understand but would they be at the same relative.
The thickness food or much smaller.
I'm sure it could be the.
The same could be more could be less I mean, the data they've shared with us the Oems we're working with makes it on par if not better than the existing Navy order, but we'll see right I mean, they have competitors too so.
Magnet they have to win too.
Sure.
Excellent okay.
We agree with you Patrick we think the armor business line is consistent with our long term strategy, which was developed another business line or 2.
Stabilize the business and we talked about that earlier in the call about getting.
Our customer concentration down while improving our revenues and margin that's consistent with what we've been planning to do for years. So we're just starting to see the results now.
It is the tank side of.
The army tanks.
It's something that is off the radar no longer a viable or that's something also that is.
So facility.
Depending on the platform you know it is very a pliable. It's just it's a combination of the threat platform the ballistic protection the kinetic energy threat.
All of the different combinations, whether it's at a truck tank.
Aircraft.
Possibly not.
All of our service member.
Members men and women at Etsy are on land deployed forward are in harm's way and so they have a need to protect its a significant income in the budget.
A nice to have it's a must have and we're sitting right in there.
Kraft Carey you know other competitors, but we do have certain advantages of our Hybritech AMR panel that does extremely well it does very well at low wage it does extremely well with high kinetic energy threats. So that's all we can really say Patrick I don't know if that's helpful but from that.
That's quite helpful.
Their implicit in the map is that the higher the volume for the higher contribution margin might be a simple yes.
Yes, I mean, we've been in high volume manufacturing for a long time here and so we realize.
In order to get that high volume there there are certain trade offs at the low side, but it's very lucrative at Hy Tech.
Excellent.
Alright, well that's.
Helpful color. Thank you very much.
Thank you Patrick you're correct.
Okay.
And speakers, we don't have questions on queue. You May proceed.
Okay, all right well, thank you Catherine and we appreciate.
Flows who have called and listened in and Chuck to take US loans, just say, thank you to everybody for calling in.
Hopefully, we'll have lots of good news coming quarter to announce as we go forward but.
We'll see and we'll certainly at a minimum.
Talking to you at the end.
Shareholder.
Thank you very much thank you everyone.
This concludes today's conference call. Thank you all for joining you may now disconnect.
Okay.
Yeah.
[music].
End of the quarter.
[music].
Okay.
[music].