Greg Weaver: Got you. Okay. Helpful. So these are field failures and not — you mentioned at some point…
Brian Mackey: They are not in the field. They’re at the customer.
Charles Griffith: Yes. So basically, just to be more clear, the customer, when they get our product, they bake it and the product — and the issue shows up when they bake it. So they haven’t put it into any of their production at that point. They just — it’s more or less their own process because if it goes beyond that, and then it has a problem and they not obviously costs the customer.
Brian Mackey: They see it before it would leave their facility.
Charles Griffith: Right.
Greg Weaver: Good. Okay. So they’re not adding any value other than baking it, so they’re not it’s not in the field and they’re not adding parts to it and then having to throw it all away.
Brian Mackey: Correct. It’s not in the field. And it’s limited to a certain small family of products that are processed in a certain way. We’re certain of that. It’s limited to this handful of things, but they have shown this defect that we’ve been working through.
Greg Weaver: All right. That’s helpful. That sounds a lot more manageable. And is this related to that $7.7 million customer? Or this is something else?
Charles Griffith: It’s something else.
Greg Weaver: Something else — okay. So — and so the reserve, Chuck, you mentioned you didn’t think there’d be a material impact in Q1, that’s a function of the reserve. Obviously, it’s an unknown because the guys tend to back, right?
Charles Griffith: Yes. Yes. Yes.
Greg Weaver: Okay. So I think Jim asked a question about the gross margins. But so post armor, what should we think about as a target corporate gross margin, assuming we’ve got through this production issue?
Charles Griffith: I would target like in the mid-20s. I think that I’m kind of hesitant to predict the future, but that would be — that would certainly be what we would be shooting for. And certainly, I think it’s achievable.
Greg Weaver: Okay. So then if we get some more armor business, then it will actually back to this 30% neighborhood hopefully.
Charles Griffith: Hopefully. From your list [indiscernible].
Brian Mackey: Back up.
Greg Weaver: Well, it’s nice when the company makes more money operating the company as opposed to interest income, right?
Charles Griffith: Right.
Greg Weaver: So we’ll focus on trying to get the operations going. So good. And — and I guess, it sounds like, Brian, your focus is obviously, for good reasons, kind of more on this armor from a growth perspective going forward with this new deal with the Triton here?
Brian Mackey: Yes. The FRA is a very interesting avenue of growth. I mean, really, as of a week ago, I would say we have R&D plus 3 product lines, which are MMC, hermetic packaging and armor. The FRA is kind of, you could call it, number 4. So you have MMC, hermetic packaging, armor and fiber reinforced aluminum. But it suits all of our capabilities well. It suits our customer relationships very well. I mean, it’s a lot of the same trade shows and same dialogue just with a different benefit from the properties of the material that we produce. And the other point that is that even though where we are with armor in the near term, gives us some challenges — the other — the hermetic packaging and the MMCs are growing. Those are growing numbers.
They’re just not at the moment growing fast enough to take up that entire near-term dip from armor. So we see continued growth in those. And then we’ll be adding FRA to the product portfolio here over the coming months and are excited about what that does for us as well as we continue to work very real opportunities on the armor side.
Greg Weaver: Okay. All right. That’s my fault. So this FRA, you mentioned about using like bearing liners and things. So this is never meant to be like sheet form, just smaller little parts that are light and strong.
Brian Mackey: Yes, exactly. I mean, a helicopter might have these components, they might have — one helicopter might have 60 to 80 of these components that are of different diameters, and that’s what we’ll be looking to make. When we make our , for example, a base plate from MMC, we make the net shape product that the customer is going to use so we can readily take our knowledge in how to make a net shape component and apply it to fiber reinforced aluminum. So instead of making a block of FRA and then needing to machine that down to a component — as soon as our team looks at this technology, they say, well, we can make a net shape. And when you produce it, you might have to do a little cleanup but you basically will have of bearing line and ready to sell.
So then it’s making different diameters and confirming that they meet the product requirements for customer testing and things like that. And there are customers that are interested that Triton has worked with in the past who are eager for a reliable supply chain. So there’s a lot of things that are very interesting about it for us.
