Daniel Thoren: Yes. So what you’re describing is a learning curve — and essentially, you learned by building the first 1 and you can apply those lessons learned to the second one. And you don’t have to improve your processes, improve your tools anything, and you actually get some benefit just from the learning of how to do things and in what sequence, et cetera. But then if you start to look at your process and look at how you can reduce time or make processes go in parallel or things like that, you can start to get even further down that learning curve. So an industry, the manufacturing industry, you’ll see learning curves that are very steep at the very beginning for small quantities. And then as you increase quantities or basically put accumulate builds, you’ll start to see that learning curve flatten.
And each 1 of those learning curves really is product and process specific. And so I wouldn’t even attempt to start to name savings from first article, the second to third to fourth to fifth just because they are so dependent upon the process and the product and then ultimately, the people. So — but we are very active and looking at this process is mapping those processes helping our folks with better tools and better supervision and timely receipt of materials and gosh, all of that. So it’s the nature of a manufacturing business that if you have one, you live it and you really enjoy the improvements that you can make in your process and your people over time.
Gary Schwab: So you think you can squeeze a lot more margin out of the third articles that you’ll be building over the second?
Daniel Thoren: Yes. As you build more of them, the improvements or the reduction in time starts to decrease for each one, and that’s what they kind of call moving down the learning curve. So you’ll save probably the most between the first and the second, a little bit less between the second, third, you’ll save a little bit less between the third and the fourth, et cetera.
Gary Schwab: Okay. So it’s still there. There’s still savings?
Daniel Thoren: Absolutely still there. It just flattens.
Gary Schwab: Right. And as far as what you were expecting in efficiency and productivity on the second article did it — did it meet what you were expecting when you first started on the first article and thought about the second? Or did you surpass what you thought you would get to?
Daniel Thoren: Good question that I don’t know the answer to, actually. There was definitely the savings did our guys and gals really predict or not, I couldn’t tell you.
Gary Schwab: Okay. I didn’t know if you figured predicted a margin that you thought you would save or an additional margin you would make or shorten your labor time on the second 1 over the first.
Daniel Thoren: Gary, but I couldn’t quote it to you.
Christopher Thome: And it’s different for every program. And as you know, we have multiple programs in the backlog.
Operator: Our next question comes from the line of Brett Kearney with Gabelli Funds.
Brett Kearney: Congrats on the continued momentum.
Daniel Thoren: Thanks, Brett.
Christopher Thome: Thanks, Brett.
Brett Kearney: Just following up on the strategic investment. This is for, I guess, to get yourself aligned with your customer for new work you all will be bidding on with the U.S. Navy going forward?
Christopher Thome: Correct. So we already did have a few orders in our backlog. Right after we received the PO for the strategic investment we received another order for several more units. And then we will have the opportunity down the road to bid on other jobs and other units as they come up for bid.
Brett Kearney: Okay. Excellent. And then it sounds like incorporated in this — in your plans as some more advanced machine equipment. How are you guys thinking about the labor needs to meet the ramp on these new lines?
