Good afternoon. My name is Ivo, and I'll be your conference operator today. At this time, I would like to welcome everyone to CPS Technologies First Quarter Conference Call. [Operator Instructions].

Thank you. It is now my pleasure to turn the call over to your first presenter, Mr. Chuck Griffith. The floor is yours. You may begin. .

Thank you, operator, and good afternoon. I'm joined today by Grant Bennett, our President and CEO. .

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 that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in CPS' 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'll turn the call over to Grant to offer his perspectives on the first quarter's results. .

Thank you, Chuck, and welcome to each one of you. Thank you for joining us. It's a beautiful day here in Massachusetts, and I hope it is wherever you are. I'm pleased to report our first quarter 2020 revenues of $6.5 million and operating profit of $622,000.

This compares with revenue of $5.3 million and an operating loss of $744,000 for the same period a year ago. .

Our first quarter results build nicely on our fourth quarter 2019 results, which were revenues of $5.4 million and operating profit of $368,000. Suggesting over the last 6 months, operating profit near $1 million. .

Our revenues of $6.5 million represent the highest quarterly revenue in our -- in the company's history and the operating profit of $622,000 is the fourth highest operating profit in our history. .

first, some specific details relating to Q1 results; second, the status and our progress on our longer-term strategic initiatives, which certainly impacted Q1 results and will impact future quarters; and thirdly, after Chuck discusses our Q1 financial results, I'd like to comment on the elephant in the lobby of all businesses today, namely the COVID-19 pandemic.

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So first, some additional information regarding the first quarter results. In the last 2 quarterly calls, I've commented on the fact that in the third quarter last year, we entered into new contracts with our 3 largest customers. One contract was for 1 year. The other 2 contracts are for 2 years.

All 3 contracts called for higher prices and higher volumes. The phase-in period or phase-in timing of the price and volume changes vary from contract to contract, but these changes began to be phased in, in Q4 of last year, continued to be phased in, in Q1 and will be fully phased in by the end of Q2, our current quarter.

These increased volumes and increased prices obviously had a positive impact on our Q1 results, and they should continue to do so. .

In our fourth quarter conference call, we mentioned a focused effort to improve our product mix, namely to focus on those products where we bring the greatest value and, therefore, can generate a more attractive margin. This initiative also contributed to our Q1 results. We've stopped making some products, which were not profitable.

And we've improved our ability to evaluate the attractiveness of an opportunity during the quotation stage. .

As I described earlier, we're a custom manufacturer, and it can be challenging in some cases, to accurately estimate cost of a complex product beforehand. Yes. .

Ivo, we've been told that there are some investors still trying to get on to the call that have been unable to do so.

Can you comment on that, or can you -- is there a problem on your end?.

Here in our end, speaker, we already have -- we only have 2 lines waiting to be answered in by the operator. .

Okay. .

So those 2 will be... .

Yes. .

All right. Okay. So again, let me continue. We've talked about new contracts. We've talked about a focused effort to improve product mix.

In our fourth quarter conference call, we also mentioned that we entered into a credit line with an expanded credit line with the explicit objective of stop -- allowing us to stop giving discounts for early payment of invoices. Payment terms tend to be much longer in Europe, 60, 90, 120 days are common.

And in the past, we've been giving discounts for early payment. These discounts come right off the top and bottom line. And with the added credit line, we've stopped giving these discounts and that also had a positive impact on our Q1 results and will continue to do so in the future. .

Secondly, let me pull the camera back a little bit and comment on our key strategic initiatives. One key initiative is to deepen our penetration of the U.S. aerospace and defense electronics markets.

Our sales and marketing team and our operations team are performing well in achieving new design wins, new bookings and in producing and shipping new products into the U.S. aerospace and defense customers. .

As an example, in Q1, with the help from 2 defense contractors and an outside analytical laboratory, the material properties of our AlSiC, for example, the coefficient of thermal expansion and the thermal conductivity were evaluated at cryogenic temperatures.

And this data is critical input into customers using our material in applications where the product sees cryogenic temperatures. By the way, we were very pleased with the properties, and this data is now opening new opportunities for us, primarily in the satellite area. .

A second initiative is to continue to capture the growth in the high-voltage IGBT or power module market on a worldwide basis. This is a market segment with underlying growth, we believe, for many years to come as these modules are used in a larger number of applications, such as the electrical grid. .

Chuck will comment that we've made some capital investments, both in production and analytical equipment that will allow us to continue to improve our products in this market and further differentiate us from our competition. .

A third initiative is to expand the use of AlSiC in hermetic package applications. And let me just say, this is, in many ways, tied into the first initiative of deepening our penetration in the aerospace and defense electronics market. And we're making progress in this area as well.

Just as one example of that, we have an AlSiC, hermetic package that is on the Perseverance, which is the most recent NASA Mars rover scheduled to be put in orbit to be launched this summer. That -- it's a -- obviously, on one hand, a very small market.

On the other hand, the product wasn't adopted for that application without a thorough understanding of its benefits. .

With that, let me turn the time over to Chuck. And after his comments, I'll return to the topic of COVID-19. .

Thank you, Grant. Revenues for the quarter, as Grant already said, totaled $6.5 million representing a 24% increase compared to Q1 last year. This increase was due to pricing increases implemented in the last quarter of 2019 and this first quarter of 2020 as well as unit volume increases. .

Gross margin for the quarter amounted to 24% of sales compared to 3% in the first quarter last year. The largest factor affecting this percentage was sales volume, which speaks for itself. In addition, the total manufacturing costs from quarter-to-quarter were down.

A number of factors contributed to this, both within and outside of our control, for example, improved product yields, are within our control, a relatively mild winter, reduced some of our utility expenses and that would, of course, be outside of our control. .

Selling, general and administrative costs totaled $929,000 compared to last year's $904,000. Sales commissions due to increased sales volumes accounted for more than the net increase in this amount. There were a number of other individual pluses and minuses, net of which somewhat reduced the additional commission expense. .

The company experienced an operating profit for the quarter of $622,000, which compared to a loss from operations in quarter 1, 2019, of $744,000. .

Turning to the balance sheet. We ended the quarter with about $122,000 of cash and about $1.58 million of borrowings against our line of credit. This net cash of minus $1.46 million reflects the elimination of the prompt pay discount with our largest customer.

Additionally, lower sales in January resulted in lower collections in March, while sales were growing. This increased our outstanding accounts receivable, which were financed through additional borrowing. .

Accounts receivable at March 28, 2020, totaled $6 million compared with $4.1 million at March 30, 2019. Our days sales outstanding totaled 77 days at the end of the quarter compared to 54 days the first quarter of 2019.

In addition to the elimination of the prompt pay discount, previously mentioned, our #2 customer has longer payment terms, as Grant mentioned, in Europe, and had significantly increased sales in Q1 2020. .

Inventories totaled $3.6 million at March 28, 2020, compared to $3.1 million at March 30, 2019. The inventory turnover for the most recent 4 quarters was 6.0x compared to 5.9x for the 4 quarters ended March 30, 2019. Going back through the second quarter of 2018, our inventory turns have ranged from 5.9 to 6.2.

So these numbers are consistent with our expectations. .

Finally, you'll note that our net property plant and equipment was up from last year, mainly due to the purchase of a new piece of equipment, allowing us to make significant improvements in our QA department. .

Turning to the liability side. You'll see the $1.6 million drawn on our $2.5 million line of credit. Payables and accruals totaled $3.3 million at March 28, 2020, down from $2.2 million at March 30, 2019. You'll also see the inclusion of a new note payable. This is due to the financing of the previously mentioned QA equipment. .

And for further discussion, I will turn the call back over to Grant. .

Thank you, Chuck. I wanted to separate comments -- about our results from comments about COVID-19 to emphasize the fact that our fundamentals are strong and from my perspective, very attractive.

And that we are very fortunate that COVID-19, while certainly having an impact today on our business does not appear, at least as of today to alter any of these attractive fundamentals. This is certainly not the case for many other businesses in different sectors.

And we consider ourselves very fortunate that the COVID-19 epidemic, again, we don't believe it alters the fundamental attractive -- fundamental elements that underlie our business. .

Having said that, let me comment on what impact COVID-19 is having on us today. I know many of you were listened in on our recent annual meeting, and we spent some time on COVID-19 in that meeting. But let me just try and provide a quick summary. .

Because we are in the defense industrial base, we are deemed by both state and federal government as an essential business and are requested to remain open. So we have been operating throughout the pandemic. All of our major customers also remain open and operating. Some smaller customers have closed some production facilities at least temporarily. .

All of our major suppliers also remain open and operating. And so we have not seen, and as of today, do not foresee any direct issues with our supply chain. We have heard from some of our customers that they are having some issues with other suppliers so that supply chains could be disruptive. But in our case, our major suppliers remain open. .

Fortunately, demand through the first quarter was very strong and remained strong. We do see 2 things going on, one primarily in the past and one in the future. As it relates to the past, at least some customers towards the end of Q1, sensing all of the uncertainty related to COVID-19 sought to increase their own safety stock.

And so in some cases, customers pulled the business in, this definitely occurred but was fairly modest. .

In our own case, we also foresaw uncertainties, in particular, we were looking at uncertainties relating to international shipment. And we increased our own safety stock of inventories, and that has been helpful for us. .

As we look forward, again, demand fundamentally remained strong. In some cases, we see some evidence that customers are not canceling, but stretching out their demand as they do their own planning. But in short, we don't see, as of today, these items having a significant impact. .

We are experiencing some cost increases. The freight cost to Europe has at least doubled. And depending on where you're shipping to, it's tripled.

We have, as I'll comment on a minute, implemented many actions inside CPS to create a very safe workplace so that the costs associated with cleaning the facility several times a day with supplies to do that have increased. We also have had much higher levels of absenteeism than we normally have.

Our first and primary interest is the safety of our employees. And in the current environment, there have been many employees who have elected to take a leave of absence in order to attend to family concerns, in some cases because school has been canceled and they have children at home.

In other cases, because they might have individuals at home who are in a high-risk category. So that absenteeism has been a factor. .

Internally, I'm pleased that with the full cooperation and commitment really of every employee, we have put a great deal of effort in creating the safest possible workplace. So we have scrupulously followed the CDC guidance, OSHA guidance, World Health Organization guidance. We have rearranged work locations to ensure social distancing.

We have adjusted the shifts, where we continue to operate 3 shifts, but we've adjusted the shifts to eliminate overlap and minimize interactions as employees come and go. All employees have been issued face masks and other PPE as appropriate. We take the temperature of every employee as they begin the -- within 15 minutes of beginning the shift.

We have a short questionnaire for every contractor or visitor to the facility. And we take their temperature before they're allowed in the facility as well. .

As I sit here in our conference room, I'm actually looking at just an example of the unusual times we're in, a bottle of hand sanitizer, I'll call it home brew hand sanitizer, put together by our facilities department, 70% isopropyl alcohol, 30% aloe vera, Vitamin E and scents that's a CDC recipe.

And as it's not available in the stores, we produce it ourselves, and it's in essentially every -- in a dispenser at every door and in every conference room in the company. .

So what will the impact be of COVID-19 on our operating results? In short, the impact will, without a question, be negative, but we believe as of today, it will be modest. We believe that some revenues may be stretched out.

We believe that some costs will be higher in the short term until absenteeism returns to a normal level and until in particular, commercial airlines resume flying, our freight costs will be higher. .

But nonetheless, as of today, we remain very optimistic about our prospects for 2020. We believe that the items we've mentioned relating to volume and pricing and new business will continue to be seen in the upcoming quarters through the end of this year. .

With that, let's stop and invite some questions. .

[Operator Instructions] Your first question comes from the line of [ Danny Arnett ]. .

Congrats on the good quarter. My question relates to the motor controller market for EVs. To the extent that you can comment, do you guys provide anything to Tesla in any of their current or upcoming platforms? I was looking at prior transcripts.

In prior years, I think you mentioned that you had visited them at their facility and sort of a related question. I know you have mentioned applications in space and satellite.

Do you have anything ongoing -- going on with SpaceX?.

Okay. I can answer those 2 questions. We, of course, abide by all nondisclosure agreements. So there are some customer developments that I can't comment on, but I can comment on the 2 that you asked. Today, we do not have any business with Tesla.

Tesla, in general, I don't pretend to have a complete understanding of their future plans, but their current models don't use IGBT modules. They use discrete components. And this is an architecture which, in short, they're using individual die as opposed -- IGBT die as opposed to those die being mounted in a module.

The vast majority of the hybrid and other EVs around the world have chosen to use modules, but Tesla has not. We have called on them and would love to be doing business with them in the future. But today, we're not. .

We also are not doing any direct business with SpaceX. We do make a number of products, which we sell into, let me call them, Tier 2 companies. And certainly, those companies are suppliers to SpaceX. So my own opinion is that most -- I'm thinking of some very -- some space qualified, high reliability, DC/DC converters, for which we make the housing.

I think it's highly likely that somewhere in SpaceX, those are used, but we do not have any direct business with SpaceX. .

Our next question comes from the line of Lenny Dunn. .

I don't have any problem with the company, but I do want to address one thing. I was on hold for 15 minutes before the operator finally came in to ask for my ID number. And your call was well underway. I actually called the company, talked to the operator, and she was trying to figure out how to get me in when they finally answered.

And I'm going to guess that not everybody persevered, or you'd have a lot more people on the call. So I want to bring that to your attention. .

Lenny, thank you for making the effort to call in. And the person you spoke to here did come in, and we attempted to contact the operator there. We apologize, and we'll follow up with the service. But I apologize that... .

Well, yes, well like, I'm a patient guy. I'm an old guy. But I'm willing to bet that a number of people just figured... .

That feedback will be helpful. We'll speak and see what we can do about it. .

Yes. I've never had that problem before going into any of your calls. But anyhow -- I'm glad to hear everything you've said. And of course, nobody knows the final outcome with this COVID and everybody hopes and prays that is quick, but who knows. At my age, I live like a hermit. I go home. I come to work. I'm in a car.

And nobody is in my office other than me. And I just -- I don't go to stores, and it's -- there's a lot of people, I'm sure, my age that are living like that, and it's a shame. .

And even as the country is starting to open up some, it really won't for me. I'm not going to take a chance. I mean I don't even see my grandkids, just anyhow, that's aside. That's personal. And I'm glad to hear everything you've said and that you're operating properly.

And it's very clear you're going to do very well, and we actually bought another 60,000 shares a few weeks ago, which we hadn't bought shares in a long time and probably not going to buy anymore right now only because we have a disproportionate amount.

But it got so compelling when it started trading around $1 flat that we stepped back in and bought some more. But again, part of the problem is that no one is paying attention, and it's even harder to get anyone's attention now because everybody's holding on for dear life with what they have in small caps.

And because of the clear illiquidity that small caps have, people are afraid to step in. So I mean you just have to get the story out there a little better. But as far as the execution of what you're doing, everything is falling into place. And I'm very happy to see that. .

Lenny, thank you for your comment. And let me just say, our thoughts and prayers are with you and really with everyone in this environment. And I personally think you're wise to be very, very careful. These are unusual times, no doubt about it. I see -- let me see if I can articulate this.

But as I look back over, not only the last couple of quarters, but the last couple of years, there's always been one or more issues. It might be a patent dispute or it might be a price war or it might be exchange rates.

And ironically, we're finally in a position where -- and I should say, in some cases, it's ourselves and our execution there might have been a quality issue, whatever. .

But anyway, it's ironic, but, yes, from my perspective, we're in a position today where all of the fundamentals are where they should be. And there are no unusual dislocations in the marketplace, except for the huge item of COVID-19.

And again, we're fortunate that all of our major customers are still operating, have continued to operate, will continue to operate. And I'm just very grateful for the employees here who are obviously concerned about their own health. But working together, we believe we've created a safe workplace.

And we also believe it's unlikely that COVID-19 is going to disappear anytime soon. So the sooner we create the safest workplace, the better off we'll all be. .

Just my experience in life is that by the time everybody has made enough adjustments to this, will probably be right around the same time that they have a vaccine or the Pfizer new vaccine... .

You know the cure. .

It's true. Yes. .

But in the meantime, it's better to have the caution and be very careful so that you could be there for the vaccine or the cure. .

That's exactly right. That's exactly right. Okay. Well, thank you, and be safe. .

We have our next question comes from the line of [ David Barney ]. .

I have a couple of things. Last couple of years, Grant, I know you've talked about the 5-year plan. And I'm just wanted to -- maybe you could update in terms of how you see that progressing right now and whether you feel you're on target. And the other question has to do -- I've asked this question many times before.

But I -- when I was listening to the annual meeting recording there, you seem to be pretty optimistic about the armor program, which kind of took me off guard because you haven't spoken about that a lot in the last, let's say, a year or so. So -- and perhaps, there's not a lot you can say about it.

But is it -- am I right to think that you feel that there's a future there for the -- as far as the company is concerned?.

Thank you, David. The 2 questions you asked are actually very much related -- our 5-year plan and armor. We don't release the 5-year plan. But let me simply say that the 5-year plan looks at our total company as having 3 major product lines, what we call AlSiC components, hermetic packages is the second, and armor is the third.

And as it relates to where we stand on the 5-year plan, an honest answer would be that we are well behind where we hoped we would be in armor. But having said that, and by the way, that we are -- you never exactly hit your plan.

But on the hermetic packaging front and on the AlSiC component front that we are, in fact, making the progress we hoped we would make. Just from a planning point of view, we hoped we would have greater clarity on opportunities in the automotive area than we do today.

And to be quite candid, you'll notice I'm not -- I don't speak too much about armor, and I don't speak too much about the automotive market. And let me now comment on both those. .

In reality, we believe that we do have significant potential and opportunity in both of those markets and the challenge is not technical development. The challenge is really primarily business development and technical selling.

And as it relates to armor, we have maintained the ability to produce the armor that we have developed, and we are continuing to -- we're not investing today in additional R&D in the armor area, but we are continuing to invest in sales and marketing.

And in particular, we do have our sights on one government application and one commercial application and things simply are moving much slower than we would hope. .

In the government application, the issue is appropriation of funds. And in the commercial application, frankly, the issue currently appears to be -- people are distracted by COVID-19. But in short, the market development, the speed with which customers are willing to adopt a new approach has been disappointing to us in the armor area.

But again, we actually do believe that the potential is significant, and it's also been our experience here that the first real order is the most difficult. And that once we really have that order, you may recall, we have shipped parts into an amphibious vehicle application for the marines.

It was a retrofit application and fairly early on in the program. The Marine Corps decided to cancel the rest of -- retrofitting the rest of the fleet and to focus their attention on a new vehicle. That new vehicle is not yet being produced. And so that demand went away. But I'm going on at too great a length here.

In short, yes, we believe there is opportunity. We're continuing to sell and market. And when we do have an actual order, you certainly will hear from me. And... .

It sounds like you're well positioned to take advantage of the opportunity should it come around. .

That's a much more concise summary than I can come up with. So thank you. Yes. That's a great summary. .

Anyway, congratulations on a great quarter under difficult situation. So hopefully, things will improve as the year goes on. .

Thank you. Sure appreciate your support. .

[Operator Instructions] Your next question comes from the line of Lenny Dunn. .

Just a simple question. This is -- I mean, is ordering you to get yourself set up for some late summer conference because it's likely by then the people will attend and the worse thing it will happen if things don't work, you just -- you have to cancel like anybody else would.

But at least get on the list of people attending because we do need to have this story told, the more people that are ready are watching it. .

Lenny, thank you. And I agree with you. Chuck and I have been looking at conferences. And maybe I'm being a little too open here, but I -- we're conservative by nature. And I'm much more comfortable presenting at a conference when we have a couple of very solid quarters and a clear trend.

And although today, that's 2 data points, Q4 and Q1, as you point out, by the fall, that would be at least 3. And we -- I believe that the timing would be right.

So we discussed this briefly at our most recent Board meeting, concluding that sometime this year, if they open up or at the latest, the first quarter of next year, we definitely needed to be out in front of the one or more of these conferences. And if they do open up in the second half of this year, we'd like to be at, at least one of them. .

Right. Well, get yourself on the list. They'll cancel if the world is gone and [ is common ]. So you don't need to worry about that end. And if I just... .

That's true. That's true. .

But otherwise, you're on the list -- you want to get on list before they close it. .

Good point. Good point. Yes. .

Okay. That's my only end point. .

Thank you. .

We have our next question comes from the line of [ Frank Litewski ]. .

Great quarter. I was curious. In the last fiscal year, your top 3 customers look like they accounted for about 70% of your revenues.

How do you see that coming in this year? And more importantly, what do you see over the next -- in your 5-year plan for concentration of customers?.

Excellent question. Our strategic objective is to reduce the customer concentration. And to do that, we obviously need to grow additional customers, and we're, of course, working on that. Having said that, all 3 of our largest customers, their business is growing, and we are growing with them.

And in fact, over the past year, we've increased our market share. .

And so I guess, my answer is, as we look forward, I think most likely, those 3 customers will continue to be our largest customers for a few -- a small number of years anyway. But our objective is to grow other customers.

One thing that we do, this is a little bit of an arbitrary line, but internally, we're real delighted when a customer bumps above $1 million. And we've got more than one customer that is below that level.

But as they use AlSiC for more and more applications are definitely going to be bumping above that, at least in one case this year and in some additional cases next year. .

So in short, the 3 continue to grow. They're deeply capable stable long-term worldwide leaders in their markets. And so we're going to stick with them. And in reality, we're working in all 3 cases to identify additional opportunities in these large companies, even outside of the current product line in which we're working.

But nonetheless, our objective is to further diversify our customer base. .

One other question, if I could. At least in the past, your armor operations at a remote facility, is that costing you much money since you're obviously not getting much out of it? And as you said yourself, the -- as your revenues go up, you're quite leveraged to that with the exception of, I would think, this specific facility.

Is that something you're looking at? Or is it costing you much to keep that capability there?.

The short answer is, it's not. What we have done is we have a wonderful landlord and a very good relationship. And we have very significantly reduced the square footage that we're leasing. And we have consolidated the armor-specific production equipment in an efficient way so that -- yes, there is some cost, but it's minor.

And we really -- we're now in a position where we think what we're doing is completely sustainable in the sense that we can afford the space we have and again, it's primarily related to armor. But we, of course, occasionally use some of the equipment for some of our other products.

For example, we have a water jet cutting machine there that occupies a fair amount of space, and we use that for a variety of things in addition to some of the armor applications. But in short, we have already reduced the cost to a very sustainable level, a level that we feel comfortable with. And so that's not a drag on earnings. .

Okay. One final question, if I could. In past years, I haven't seen it mentioned -- I don't think you mentioned it recently. And I was wondering what happened to the -- there was a contract that you were working on with, I believe it was Raytheon, and it was a shipboard missile application. I may have that wrong, but I think Raytheon is the company.

What has happened to that?.

You're -- you've got a very good memory. You're referring to a very large program called Air Missile Defense Radar, AMDR. Yes. And AMDR is a next-generation radar system for the Navy. It's a scalable phased array radar, where you can have a small number of modules on a small ship and a very large number of modules on a large ship.

We had a component in the phased array radar. It's a very complex system in total, and you have components going into subassemblies, subassemblies going into larger assemblies.

And the long and short of it is, we were in one subassembly, and we provided some real benefits in that subassembly, went all the way through the qualification process and with Raytheon's permission, announced that we have been down selected as the vendor of this component in this subsystem.

And Raytheon had teams of folks in here working with us on detailed planning. .

And then at a higher level, they simply decided to use a different subsystem. They didn't replace our component. They replaced the whole subsystem.

And the analogy that I use is, if you look at a personal computer, we had a key component in the personal computer and it worked well, but they decided to go with Apple rather than IBM or the other way around, if you see what I mean. It had nothing to do with our component. But in short, to our disappointment, that opportunity went away. .

Our next question comes from the line of [ Michael Hague ]. .

Just about liquidity, financing, working capital and any big bump or big boost that you might need? I'm not saying that your credit line arrangements might not be sufficient, but I could also imagine things happening either with your big 3 customers, your 70% of revs or the 30% that hopefully at least grows as fast as the big 3 do.

Might you consider, would you consider, have you considered any kind of joint venture partnering customer financing, other arrangements should occasion call for it?.

Do you want to comment, Chuck, on our liquidity?.

Yes. I think the answer to -- the quick answer to your question is we haven't really looked at that at this point. I'm not that concerned about our current liquidity.

I think at the end of the quarter, we kind of hit a peak, as I had mentioned with the low January sales translating into low collections in March, and our receivables were much higher than I would normally have expected them to be. And certainly, we've seen the borrowings come down since then.

So I guess I can say that, right?.

Yes, yes. .

Yes. So I'm not concerned certainly for the short term and probably for the immediate foreseeable future. I'm not that concerned about our liquidity at this point in time. We have a really good relationship with our lender. And I have a feeling if there were any issues, we could get them resolved very quickly and easily.

But yes, I think we're in pretty good shape from a liquidity standpoint for the -- certainly, for the rest of the year. .

Yes. If I comment on it more from an operational point of view, really, our line of credit, we're primarily -- the main area in working capital is obviously accounts receivable, and we could go back to giving a discount.

And we almost wouldn't need the credit line, but the line of credit is certainly more than paying for itself as we have stopped giving discounts. And as Chuck alluded to, without giving explicit guidance, we think that we probably were at our peak borrowings about -- at the end of Q1 and that the borrowings under the line have already come down.

And we hope will continue to do so. .

Yes. .

Yes. What I was also thinking about is if, let's just say, out of the blue, whatever it might be, armor or anything else happened in the next year or 2. If it happens slowly enough, probably you could handle all of that with existing credit lines and credit arrangements.

If the need was more immediate and you really had to push harder, you might need other financing. .

Yes, that's definitely true. And as I said, and I have not had these conversations with our lenders. So take it with a grain of salt. But as I said, we do have a very good relationship. In theory, based on our -- based on the parameters of our borrowings, we're limited by our limit. We're not limited by our receivable balances and those types of things.

If they let us borrow everything, we could. We could borrow a lot more than the $2.5 million limit. So I would think if something like that came along. .

Because you -- basically, now you have a global receivables portfolio?.

Yes. Yes. Correct. Correct. Exactly. .

[Operator Instructions] Your next question comes from the line of [ Warren Silver ]. .

It's nice to hear that your company's returning to profitability. Grant, you mentioned now the power transmission business, and there was an article in the Wall Street Journal last week, that the United States, similar to what they wanted to bring back the drug manufacturing from China to America.

Is there any program that the CPSH is adopting to supply American manufacturers? I know we deal with GE in the wind business and with ASEA Brown Boveri, ABB, overseas. But there is there any potential for us in America for American companies, there used to be old companies like Square D, [ Carter Hammer ] and others.

Do you foresee any potential here for us to grow in this market?.

Yes. Yes. So [ Warren ], thank you for that question. And by the way, thanks for the articles that you send us. They're appreciated. And I'm impressed. You read widely, and you pay attention. The -- so as you suggest, power modules are increasingly used in the electrical grid. And the U.S. has been a small player in power modules for many years.

It's primarily been the Europeans and the Japanese that have dominated that industry, but the U.S. is making somewhat of a resurgence. And the -- one of the reasons is because the U.S. is a leader in the production of silicon carbide-integrated circuits.

And silicon carbide, it's still much more expensive than silicon, but everyone believes because of the performance improvements it provides that at the high voltage end, it will, over time, become the dominant technology. .

So in the U.S., in particular, Cree and their subsidiary Wolfspeed are important players. And there are customers, and we have a very good relationship with them. International Rectifier is another major player, and they were actually bought by Infineon. So their parent company is German.

But nonetheless, they have extensive operations throughout the U.S. and are a major U.S. supplier. There are other players, Powerex, is a joint venture between General Electric and Mitsubishi Electric and is an important player in power modules in the U.S. So our U.S. business is growing.

And in particular, I think the potential of silicon carbide die will give the U.S. an opening to try and regain from the Europeans and Japanese, some of the market share. .

Again, I'm happy to see that we're in a profitable mode, and everyone up there be safe. .

Thank you. Same to you. .

We don't have further questions at this time. Presenters, please continue. .

Okay. Let me thank you for joining us. Thank those of you who joined us in our annual meeting. I do want to leave on a positive and optimistic note. We're simply very fortunate that COVID-19 has not affected our fundamental markets, has not affected significantly our primary customers.

And the fundamentals are strong, and we're looking forward to a positive 2020, a period of growth, both on the top and the bottom line compared to last year, recognizing that COVID-19 generates or creates many uncertainties. .

So with that caution -- we need to mention that caution, but we remain optimistic. We invite you, as we always do, to come see us. I realize you can't get on an airplane. And if you actually did come to see us, you wouldn't be allowed in unless your temperature was normal.

But we hope as life returns to normal that those of you who are in the Boston area or come by the Boston area would stop by and see what we're doing. We look forward to speaking with you in a quarter. And with that, we'll sign off. Thanks very much. .

Thanks, everybody. .

That concludes today's conference call. Thank you for your participation, and you may now disconnect. Stay safe, everyone. .

Thank you..