Q4 2024 CVD Equipment Corp Earnings Call
[music].
Greetings and thank you for standing by and welcome to C V D's equipment Corporation's fourth quarter and fiscal year 'twenty 'twenty four financial results call. As a reminder, this conference is being recorded and will be.
Speaker Change: Do some prepared remarks, followed by a question and answer session presenting on the call today will be Daniel Wackiest, President and CEO and member of the C. V D Board of Directors, and Richard Colorado, Executive Vice President and Chief Financial Officer.
Speaker Change: We have posted our earnings press release and call replay information to the Investor Relations section of our website at Ww Dot CVD equipment dotcom.
Speaker Change: Before I begin I would like to remind you that many of the comments made on today's call contain forward looking statements, including those related to future financial performance market growth and total available market demand for our products and general business conditions and outlook. These forward looking statements are based on certain assumptions expect.
Speaker Change: Patients and projections that are subject to a number of risks and uncertainties described in our press release and in our filings with the SEC, including but not limited to risks to the risk factors section of the company's 10-K for the year ended December 31st 2024.
Speaker Change: Actual results may differ materially from those described during this call.
Speaker Change: In addition, all forward looking statements are made of as of today and we undertake no obligation to update any forward looking statements based on the new circumstances or revised expectations now I would like to turn the call over to a manual work yes.
Speaker Change: Operator, thank you and good afternoon, everyone.
Speaker Change: Thank you all for joining us today to discuss our fourth quarter and fiscal year 2024 financial results and other important company developments and pertinent information related to our business.
Speaker Change: So I'm sort of important to us and we look forward to your questions in our question and answer session.
Speaker Change: Our fourth quarter 2020 for revenue was $7 4 million that represents an 80.
Speaker Change: 0.3% increase from prior year fourth quarter, while it was lower than the $8 2 million, we reported for the third quarter of 2024.
Speaker Change: Our revenue for the year 2024 was $26 9 million 11, 5% higher than in prior year.
Speaker Change: As previously discussed we launched and shipped a pvt 200 system to a new account for our PBT product line during the second quarter of 2024.
Speaker Change: As we stated on our last call. This was a strategic order for our Silicon carbide 200 millimeter Crystal boule growth the customer for our first pvt 200 system is continuing to evaluate the performance of our system for possible additional waters.
Speaker Change: We do continue to support our installed base of PV to 150 systems and pursue additional pvt, 150, and 200 and Pvt 200 orders. However, the silicon carbide market has remained challenging due to the global overcapacity of wafers and a decline in wafer prices.
Speaker Change: Our orders in the fourth quarter were $7 1 million driven by customer demand in both our CVD and etch D C segments.
Speaker Change: During 2024, we continue to see an ongoing recovery of our aerospace and defense market.
Speaker Change: Our previously announced in.
Speaker Change: Early November we received a $3 $5 million follow on order for our CVI CBD 3500.
Speaker Change: From an existing aerospace customer.
Speaker Change: Orders for the full year of 2024 were $28 1 million as compared to $25 8 million for the fiscal year 2023, an increase of eight 9%.
Speaker Change: As a reminder, during the first quarter of 2024, we did receive a 10 million dollar multi system order in our industrial market from a company in the business of coding OEM components with Silicon carbide.
Speaker Change: We continue to be focused on.
Speaker Change: Four key strategic segments Aerospace defense microwave electronics, including high power electronics.
Speaker Change: Energy storage, including battery materials and industrial.
Speaker Change: Also on a selective basis continue to support some legacy applications.
Speaker Change: In 2024, we completed the end of life for our Mercer Scott missile scribe product line.
Speaker Change: Which will allow us to focus on our core CVD STC product lines.
Speaker Change: We are encouraged our backlog on December 31, 2024 was $19 4 million, which is four 9% higher than our 2023 year end backlog up to $18 4 million.
Speaker Change: While items fourth quarter represents the second consecutive quarter of positive net income. We expect we continue to expect our orders and revenue levels to continue to fluctuate given the nature of our emerging.
Speaker Change: Growth end markets that we serve in addition, the current geopolitical environment inclusive inclusive of the possible imposition of tariffs may affect our supply chain and increased cost of components and materials. This will present us with new challenges in fiscal 2020.
Speaker Change: Five and beyond.
Speaker Change: We are staying the course with our strategic efforts to build critical customer relationships in the markets, we serve while carefully managing our expenses and operations in order to achieve our goal of long term profitability and positive cash flow all of this while simultaneously focusing on crown.
Speaker Change: And return on investment.
Richard Colorado: I would like to turn the call off call over to our CFO, Richard <unk>, who will provide an overview of our fourth quarter and 2024 results.
Richard Colorado: Thank you Manny and good afternoon, as Manny mentioned, our revenue for the fourth quarter was seven 4 million as compared to $4 1 million in the prior year fourth quarter. This represents an increase of $3 3 million or 83%.
Richard Colorado: This increase in revenue versus the prior year quarter was primarily attributable to an increase in revenue of $2 8 million from our CVD equipment segment, and an increase of <unk> 5 million in revenue from our <unk> segment.
Richard Colorado: The increase in CVD equipment revenues resulted principally from increases in revenues from aerospace industrial contracts in progress.
Richard Colorado: Prior year fourth quarter was negatively impacted by a significant cost overrun on one of our contracts are STC segment revenues was 28, 8% higher than the fourth quarter of 2023.
As demand for Stc's gas delivery systems remains strong.
Richard Colorado: During the fourth quarter, we did record an additional noncash charge to reduce the net realizable value of our PBT of 150 inventory by approximately 300000. This was based on our further assessment of the current market for Silicon carbide equipment for 150 millimeter systems. This charge is in addition to the 1 million.
Richard Colorado: The charge, we recorded in the third quarter, resulting in a total charge of $1 $3 million for the 2020 for fiscal year.
Richard Colorado: Our gross profit for the fourth quarter was $2 million, representing a gross profit margin of 27, 3% as compared to negative gross profit of 348000 for the fourth quarter of 2023.
Richard Colorado: Gross profit margin percentage improved due to changes in contract mix.
Richard Colorado: But this was offset by the inventory charge of 300000, the gross profit in the fourth quarter of 2023 was also negatively impacted by that significant cost overrun on that particular contract operating income for the fourth quarter was $35000. This compares to an operating loss of $2 5 million in the fourth quarter of 2012.
Richard Colorado: <unk> three <unk>.
Richard Colorado: Other income consisting principally of interest income our net income for the fourth quarter was 132000 or <unk> <unk> per share for both basic and diluted this compares to a net loss for the fourth quarter of 2023, or $2 3 million or <unk> 33 per share.
Richard Colorado: Turning to our results for the full fiscal year. Our revenue was $26 9 million. That's an increase of $2 8 million or 11, 5% from fiscal 2023. This increase was primarily attributable to higher revenue of $1 9 million from our CVD equipment segment, and $1 3 million increase from our St's seasick.
Richard Colorado: STC segment. This was offset by lower cancel line revenues of a half a million dollars as a result of the sale of chance of line in May 2023, or.
Richard Colorado: Our gross profit margin was 23, 6% in 2024 as compared to 21% in the prior year. The increase in gross profit of $1 3 million was primarily attributable to higher revenues improved margin on CVD equipment contracts and the final Cert missile described sales that these positives.
Richard Colorado: Partially offset by the $1 $3 million noncash charge to reduce certain pvt inventory to their net realizable value.
Richard Colorado: During fiscal 2024, we did recognize gains on the sales of equipment of $717000. This was principally from our mezzo scribes segment would see meso scribe segment, which ceased operations as of September 32024, our operating loss for the fiscal year was $2 4 million as compared to an operating loss.
Richard Colorado: In the prior year of $4 9 million.
Richard Colorado: After non operating income our net loss for the year was $1 9 million or <unk> 28 per share.
Richard Colorado: This compares to a net loss of 2023 of $4 2 million or <unk> 62 per share.
Turning to our balance sheet, our working capital at December 31, 2024 was $13 9 billion. This compares to $14 3 million in the prior year and our cash and cash equivalents balance was $12 6 million as of December 31, 2024.
Richard Colorado: Our return to consistent profitability is dependent upon among other things the receipt of new equipment orders and our ability to mitigate the impact of inflationary pressures as well as managing our operating expenses and capital expenditures. In addition, our revenues and orders have historically fluctuated based on changes in order rates as well as <unk>.
Richard Colorado: Other factors on our manufacturing process that impacts the timing of our revenue recognition.
Richard Colorado: Accordingly orders received from customers and revenue recognized may fluctuate from quarter to quarter.
Richard Colorado: After considering all these factors, we believe our cash and cash equivalents and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months, we will continue to evaluate the demand for our products assess our operations and take actions anticipate to maintain our operating cash.
Richard Colorado: Cash to support our working capital needs.
Richard Colorado: Rich thank you for your presentation.
Richard Colorado: Our focus remains on our customer markets, our employees, our shareholders and the pursuit of growth and return to consistent profitability, we look forward to continuing to build on our own.
Richard Colorado: On our success.
Richard Colorado: And in the year ahead.
Comments or questions are important to us with the close of this presentation I would like to open up the floor to questions.
Richard Colorado: Thank you.
Speaker Change: Now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Nikki: You May press star two if he would like to move your questions I'm Nikki for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Okay.
Speaker Change: Thank you My first question. It comes from the line of Brett Reece with Janney Montgomery Scott. Please proceed.
Brett Reece: Hi, Manny Hi, Rich how are you guys doing.
Speaker Change: Well. Thank you Brad good to hear you on the call Hi, Brad how are you.
Brett Reece: Great.
Brett Reece:
Speaker Change: If you can just educate me and anybody else that's on the call.
Speaker Change: That large $10 million.
Speaker Change: Silicon carbide protecting coding order you got in February of 2024, I mean, that's a that's a big order.
Speaker Change: How does that come about the customer come to you and ask you to come up with a solution.
Speaker Change: To enhance the hardness prevent the corrosion on whatever their products are your engineering staff came up with a solution and then we got the business.
Speaker Change: Yes.
Speaker Change: It's a call a little bit.
Speaker Change: Yeah. So let me let me take the <unk>.
Brad: Operating element of that Brad Thank you.
Brad: We had developed the large deals.
Brad: Large volume.
Brad: Silicon carbide CMC system for aerospace and we and as you remember we had originally received an order.
Brad: And bind two orders for four systems in total subsequently we also now have received a fifth system.
Brad: Which we are in the process of filling in 2024, but when we developed that tool through advertising of that system.
Brad: It does.
Brad: Posit silicon carbide, among one of many different materials for the aerospace and defense market.
Brad: And then obviously that was a need from this other customer in the.
Brad: In the industrial market. So it's a combination of their need.
Brad: So our our advertisement and came to us.
Brad: Okay.
Brad: Now Youll, probably almost finished completing the order.
Brad: I think it was a one one year to 18 months.
Brad: Time lag on doing that.
Brad: The orders are staggered on that $10 million order. There are three tools those are staggered in time.
Brad: To allow both the build and then the installation and there'll be a slight digestion of on.
Brad: On the performance, but we have a we have all three slated over several quarters. So those will extend out.
Brad: Into delivery into old I believe the first or so a quarter in 2026.
Speaker Change: Are there other MTV.
Brad: Literally situated to this customer.
Brad: Would would need also what it does to this customer and.
Brad: Can you piggyback on on the successful completion for this customer to get other.
Brad: Similar type water because we're all frustrated.
Speaker Change: Got a good engineering team good niche business.
Brad: Done a fantastic job.
Speaker Change: Turning this company around from the prior.
Speaker Change: Chief Exec.
Speaker Change: Executive officer and yet.
Speaker Change: Just like to see.
Speaker Change: A greater level of sales.
Speaker Change: Yes.
Speaker Change: So yes, the answer Youre, a couple of questions and and and.
Speaker Change: And our voice of frustration, which which I understand and accept but let me go for your questions.
Speaker Change: Can it be applicable to other customers in the industrial space. The answer that is question is yes. The question is capacity. Many of these customers are depositing the silicon carbide coating or on.
Speaker Change: On OEM components as I said earlier these serve marketplaces such as the.
Speaker Change: Crystal growth for Silicon carbide wafers take.
Speaker Change: Taking OEM.
Speaker Change: Oems OEM graphite.
Speaker Change: Components and coding them with a protective coating, which is silicon carbide.
Speaker Change: Also used in led market it's used in other applications.
The.
The driver for this is going to be market growth in those particular areas.
Speaker Change: So it's a.
It's not an adoption of technology, because it's a it's a mature technology.
Speaker Change: It is a an expansion of capacity in that space today, the pvt space as we know.
Speaker Change: For power.
Speaker Change: Power electronics for Crystal growth for power electronics, as we know is.
Speaker Change: Is.
Speaker Change: Not overly healthy.
Speaker Change: And that's due to the overcapacity of.
Speaker Change: You know in China of wafers and the drop in price of those wafers.
Speaker Change: So to answer your question in short, yes. It is applicable to other customers in the same space that do similar if not the same thing.
Speaker Change: But it's going to be conditional on expansion of.
Speaker Change: Of demand.
Speaker Change: Okay.
Speaker Change: The.
Speaker Change: You know kind of unfair.
Speaker Change: Competition from China on the Pvt, 150 is kind of not the wind out of our sales there do we still get recurring income on the $30 million 30.
Speaker Change: Units of installed base.
Speaker Change: And what I mean, we're not maybe going to get 30, new waters for PBT, two hundreds, but could we get over the next.
Couple of years, five new orders 10.
Speaker Change: But do you think the prospects are there.
Speaker Change: There is.
Speaker Change: Yes.
Speaker Change: I would like to say, yes, but I can't.
Speaker Change: Reasoning for that is there's so much uncertainty right now on on the overcapacity the undercutting us price.
Speaker Change: Wafers that were selling for $1000. Many of US on this call knows that they're now selling for under $300, which is less than what I anticipate U S manufacturers can make them for.
Speaker Change:
Speaker Change: The.
Speaker Change: The geopolitical and tariffs.
Speaker Change: How they play into the supply of wafers to the United States.
Speaker Change: I think anybody on this call is guess is probably as good as possibly not better than mine.
Speaker Change: So I really we need to allow the next quarter or two quarters.
Speaker Change: To pass to understand where are we with our wafer demand and where are we with pricing of wafers in the United States and in Europe.
Speaker Change: Okay.
Speaker Change: This is a question from.
Speaker Change: Some of the people talk to me.
Speaker Change: CBD.
Speaker Change: We have relationships with two of the leading aerospace engine manufacturers.
Speaker Change: How many major one are there and is it possible for us to.
Speaker Change: Get orders of begin relationships with some of the others in the industry.
Speaker Change: Okay.
Speaker Change: I think that's a fair that's a fair question.
Speaker Change: And I think you are probably asking a lot of questions that everybody else wants a spokesperson for the shareholders clearly the there are several.
Speaker Change: There are five that we speak to.
Speaker Change: That we speak to them that were aware of.
Speaker Change: And they are all household names.
Speaker Change: One of them is a joint venture of two of them. So it will take them out of the equation. So theres really four that are in guest.
Speaker Change: Gas turbine engine component manufacturing that would be interested in our class of products, which are the ceramics.
Speaker Change: And ceramic matrix composite materials to be to be exact and.
Speaker Change: Those four that are remaining I don't like correcting you, but I will there are three that we have now sold product to.
Speaker Change: We announced that we had sold a silicon bond code system to a third.
Speaker Change: And two a third site, which is presently being installed.
Speaker Change: So we have relationships and installed base at three of the four.
Speaker Change: Accounts now there are many different applications. They have some incumbents in for a certain processes in these applications, but we have our foot in the door at three or four accounts that we would target at this point.
Speaker Change: That's in the gas turbine engine side. Then you also have the defense side, which are materials and our advanced research materials for hypersonic and as such.
And those at what at this point in time are very application and customer specific.
Speaker Change: Okay I do have other questions, but I will drop back in Q2.
Speaker Change: I had the courtesy of anyone else that wants to ask questions.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of David <unk>, a private Investor. Please proceed.
Speaker Change: Yeah.
Speaker Change: Hey, guys can you hear me yes.
Speaker Change: Yes, we can David how are you hi, David Oh, good how are you Manny how you're doing with good. Thank you good to hear your voice.
Speaker Change: So my first question is your original aerospace customer purchased 30 million of tow coating equipment I believe back in 2016.
Speaker Change: And there were significant their parts orders that came in after that.
Speaker Change: It appears that those spare part orders haven't come in since Covid.
Speaker Change: So should we assume as investors that the company.
Speaker Change: Who made the the 30 million dollar purchase of a toe cutting systems has found another solution.
Speaker Change: And do you think they may be in need of additional spare parts and you may even get large ball up orders for similar systems in the future as they expand.
Speaker Change: Okay. So you I believe you ask two opposing questions. The first is where we have an installed base of top coat systems.
Speaker Change: You are absolutely accurate, we enjoyed and we supported them properly with spare parts quality spare parts and courts.
Speaker Change: When COVID-19 hit and long haul travel stopped obviously the demand for airplanes gas turbine engines, I think everybody knows fish and then obviously.
Speaker Change: CMC components, and then and then equipment that stalled.
Speaker Change: So did spare parts, if youre not making the components you don't need spare parts for those for those tools.
Speaker Change: I have to say that we have started to see an increase in spare parts and some consumables.
Speaker Change: And so we will continue to support that particular customer.
Speaker Change: Loss on spare parts and consumables as well as continue to bid on contracts going forward for additional capacity.
Speaker Change: Okay.
Speaker Change: Okay, Great and then moving onto the battery materials are part of the business. You you have one opportunity that you are cashed in on with one D.
Speaker Change: Do you have a list of many other target companies, who might benefit from a similar system.
Speaker Change: Or are you pretty much relying on one D for that part of the business.
Speaker Change: Moment.
Speaker Change: Hum.
Speaker Change: <unk> has an exceptional portfolio, a very deep and broad portfolio of IP.
Speaker Change: For Silicon and Andrew White Rose on a carpet and we're pleased to have received the orders from one day and provided them the systems.
Speaker Change: As you know that there are many different ways to add silicon, which improves the performance of the anode material to the to the graphite.
Speaker Change: But there are there are many established ways, whether it's just adding silicon in powder form whether it's coding. It further it's taking carbon encoding silicon there are many different ways and I believe that that horse race.
Speaker Change: On which is the best Mousetrap is going to continue for a period of time.
Speaker Change: We have proven that our tools work for that that process.
Speaker Change: We also have grown silicon nanowires for other applications in medical so we understand the growth process as well.
Speaker Change: We've evaluated and we continue to reach out to others that.
Speaker Change: Do.
Speaker Change: Silicon in a CVD process differently than than one ddos.
Speaker Change: And that space is much more heavily populated with competitors, but we again are in the early stages.
Speaker Change: So you do think there might be potential opportunities to sell to other companies in that space sure a similar a similar type system button.
Speaker Change: But typically and likely not silicon nanowires that space.
Speaker Change: <unk> has done a great job of it.
Speaker Change: And planting a lot of IP in that in that arena.
Speaker Change: Okay, Great and then there was a second customer for a P. B T system.
Speaker Change: Said, they've been testing and evaluating it.
Speaker Change: The current year or the last half of this year can you provide any insight into.
Speaker Change: Two its ongoing operations in the field the machine the Pvt 200.
Speaker Change: And any feedback you might have received and.
And at what point will we know if you guys have one debate I think you called it a bake off last year. So what time when you know if you want the bake off.
Speaker Change: Hey, good all good questions first of all I can't obviously say who the customers.
Speaker Change: That would be a bad.
Speaker Change: Can say that our tool is.
Speaker Change: Either meeting or exceeding our performance specification.
Speaker Change: As we sold the system.
Speaker Change: And we have used here in the factory, we have started to grow.
Speaker Change: What I would term process development for the sake of improving our equipment.
Speaker Change: Bulls on our own.
Speaker Change: So we we know we can grow a.
April it's not a quality electronic grade pool.
Speaker Change: But we can grow pools, that's not quite our business to grow electronic right. We don't want to compete with our customers of course.
Speaker Change: But the tools meeting the specification.
Speaker Change: The question is going to be.
Speaker Change: All ships rise with when the current comes in and all ships go down with the current goes out so.
Speaker Change: I would anticipate that all U S manufacturers of wafers and silicon carbide crystals are impacted by the geopolitical price cutting and overcapacity that we've seen from China.
Speaker Change: So there is there is two steps one is a design in where we are technically we check off the box and.
Speaker Change: We're in the process that may take another quarter or two and remember these processes take a week to two weeks to Ron saying, we only have one system at that location.
Speaker Change: By the time you know if.
Speaker Change: You can only get <unk>.
Speaker Change: Possibly 10 to 15 runs a quarter.
Speaker Change:
Speaker Change: May not be enough to one quarter may not be enough to to prove out the process. The secondary demand you're going to need to be able to have the requirement for additional capacity.
Speaker Change: Again, the next quarter to two quarters, depending on what happens in the AR.
Speaker Change: And the PV now not just PBT, but the wafer portion of the business will determine that demand in the U S.
Speaker Change: Okay. Thanks for that and then the last question I have is.
Speaker Change: You are it seems that operating margins if you take out the one mark down of the pvt.
Speaker Change: Hundred 50 system, which was I think a $300000 mark down your margins would have been over 30% of your operating margins would have been over 30% and that's a significant improvement from recent quarters.
Speaker Change: Is that a trend upwards are we going to see continued improved margins above 30% over the next let's say year or two from what you can tell.
Speaker Change: As like I think originally you had a hard time producing the first largest system earlier in the year, but now you have more practice fulfilling these orders do you think youll become more efficient in operating margins will improve.
Speaker Change: And I've said it before thank you David.
Speaker Change: I think you're tied to pieces together.
Speaker Change: Earlier in 2024.
Speaker Change: We and fulfilling the first contract.
Speaker Change: We.
You ship the product to the level of performance specification, we needed a bit of rework.
Speaker Change: Both in engineering and also in operations that was the first article.
Speaker Change: The first article businesses are pretty difficult and we do all of them and we do charge the engineering to the cost of goods sold line. So you'll see all of the the cost of developing a product on these first articles.
Speaker Change: Again in the gross margin line.
Speaker Change: So clearly when we do a development of a product in this manner. The return on investment is on the first tool.
Speaker Change: Hmm.
Speaker Change: That tool was was more painful than any of us would have liked the second third and fourth system our trailing.
Speaker Change: Much favorably to the first system, hence why you've seen an improvement in the ER and the gross margins. So over the last couple of quarters.
Speaker Change:
Speaker Change: A lot of the technology that we developed.
Speaker Change: Developed in the first system.
Speaker Change: We also have ported we put it on the shelf is technology and we put it into the industrial order that we received those three systems. So a lot of that learning went into subsequent similar class products.
Speaker Change: Okay.
Speaker Change: Okay great.
Speaker Change: Yeah go ahead.
Speaker Change: No no I think to answer your question is yes, you understand the the storyline pretty well.
Speaker Change: Okay, and you expect margins to continue north of 30% over the next let's say year or two it'll depend on absorption of our overhead if we keep the volume at that level.
Speaker Change: And we control any missteps on the first article.
Speaker Change: Control of first article cost I I would've.
Speaker Change: That's our objective.
Speaker Change: Okay. Thank you so much I'm going to allow someone else to ask some questions.
Speaker Change: Thank you so much.
Speaker Change: Thank you David.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line of Brett Reiss with Janney Montgomery Scott. Please proceed.
Speaker Change: Okay.
Speaker Change: Great can you hear me again, I'm sorry, yes.
Brett Reece: Yeah, No of course, Brett Thank you.
Speaker Change: Great.
Speaker Change: I've got one or two more questions, but I don't Wanna be remiss in not telling you how appreciative.
Speaker Change: I am.
Speaker Change: And rich.
Speaker Change: Yeah.
Speaker Change: Could be.
Speaker Change: Continued controlling of course, Youre working capital management and the cash levels are still at very nice robust levels. So you.
Speaker Change: No.
Speaker Change: We appreciate that.
Speaker Change: The question.
Speaker Change: With what's going on with.
Speaker Change: This business with Musk and goes.
Speaker Change: Is there any.
Speaker Change: <unk> you too.
Speaker Change: Higher.
Speaker Change: Some engineering talent from the government from people that are looking for employment in the private sector.
Speaker Change: So interesting we.
Speaker Change: <unk>.
Speaker Change: I think Elon I'll, probably hire any good engineers first but.
Speaker Change: Interesting question, we think we believe we've properly size the organization.
Speaker Change: For our engineering development programs as well as our capacity.
Speaker Change: With our with our operating engineers.
Speaker Change: So at this point in time.
Speaker Change: We're not looking at a.
Speaker Change: Any hiring in the in the short term.
Speaker Change: Okay.
Speaker Change: The tariff stuff.
Speaker Change:
Speaker Change: Yes did you inventory some of the things you that might be in short supply.
Speaker Change: Are their preliminary discussions how to apportion extra costs between you and customers what.
Speaker Change: The tariff thing is driving not only you, but I'm sure a lot of other businesses.
Speaker Change: Crazy.
Speaker Change: Yeah.
Speaker Change: How are you do you have plans yet.
Speaker Change: Thanks.
Speaker Change: So tariffs.
Speaker Change: We've seen the impact of tariffs we were we were not buying an excessive amount of product from from China in our CBD product line in central Islip in SDC. There are some components that are purchased in China and just as we did during the Covid period of time with supply chain basically disassembly.
Speaker Change: On us, we went out and bought and bought.
Speaker Change: Some periods of safety stock of.
Components, and we continue to look at that and do that intelligently I thinking at SDC.
Speaker Change: On the CBD side of things.
Speaker Change: We identified some suppliers and actually it was through the advent of use of AI identified some suppliers in China for certain components.
Speaker Change: You know the fact of the matter is.
Speaker Change: You can still buy product from China with.
Speaker Change: There was a 45% total tariff rich, but I think I'm.
Speaker Change: About 45% tariff on that product.
Speaker Change: The product group.
Speaker Change: And it was scale.
Speaker Change: Almost half of what we would have bought it from a U S distributor.
Speaker Change: So.
Speaker Change: On that job, we actually reduced our material content.
Speaker Change: But to report to you, yes, we're seeing tariffs on products from China, but for us that should not impact.
Speaker Change: US severely other than indirect.
Speaker Change: One of our suppliers buys a lot of product from China. That's one eight will impact us but two at this point in time, it's early we have not seen that effect.
Speaker Change: But it is a risk and that's part of my earlier discussion is we will see the challenges in 2025 due to the tariffs and as whole.
Speaker Change: At some point in time I'm, hoping that we don't have a restriction of materials coming into our into the U S.
Speaker Change: Great.
Speaker Change: Thank you for taking my questions and.
Speaker Change: But I don't speak to you again have a have a good summer.
Speaker Change: Thank you Brad. Thank you good to hear your voice.
Speaker Change: Okay.
Speaker Change: Thank you there are no further questions at this time.
To pass the call back over to Emmanuel for any closing remarks.
Speaker Change: Thank you operator, and thanks for everyone dialing in today and for all the good questions.
Speaker Change: We appreciate the attendance on the call and your support.
Speaker Change: And the continued loyalty that youll have in us.
Speaker Change: Phase.
Speaker Change: As well as that of our employees. If you if there are no further questions. Please.
Please reach out to Richard or myself directly.
Speaker Change: And this concludes.
Speaker Change: Our call for today. Thank you.
Speaker Change: Okay.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: <unk>.
Speaker Change: [music].
Speaker Change: Thank you.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].