• Revenue: $4.2 million in Q3, down from $6.3 million last year.
• Operating Loss: $1.5 million in Q3, compared to operating income of $0.1 million last year.
• Gross Loss: $0.5 million or negative 12% of sales, compared to a gross profit of $1.2 million or 20% of sales last year.
• Net Loss: $1.0 million or 7 per share, versus net income of $0.2 million or 1 per diluted share last year.
• Cash and Marketable Securities: $4.7 million in cash and $1 million in marketable securities at the end of Q3.
• SG&A Expenses: $1 million in Q3, down from $1.1 million last year.
• Accounts Receivable: $3.7 million as of September 28, down from $4.4 million at the end of December 2023.
• Inventories: $4.4 million at the end of Q3, compared with $4.6 million at the start of the fiscal year.
• Payables and Accruals: $3.3 million at the end of Q3, down from $3.6 million as of December 31, 2023.

• Warning! GuruFocus has detected 2 Warning Sign with CPSH.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CPS Technologies Corp (NASDAQ:CPSH) has improved product throughput and is optimistic about the fourth quarter and beyond.
• The company has secured several new contracts, including a $12 million contract with an existing semiconductor customer and a new development contract with the US Navy.
• CPS Technologies Corp (NASDAQ:CPSH) has successfully trained a third shift of operators, increasing its capacity to turn orders into shipments.
• The company has received a Phase Two SBIR Award with the Department of Energy, providing $1.1 million in funding over 24 months.
• CPS Technologies Corp (NASDAQ:CPSH) is expanding its product line to include fiber-reinforced aluminum composites, with commercialization expected in fiscal 2025.

Negative Points

• Third quarter revenue declined to $4.2 million from $6.3 million year over year, primarily due to the end of a US Navy Armor contract.
• The company reported an operating loss of $1.5 million in the third quarter compared to an operating income of $0.1 million last year.
• Gross loss in the third quarter was approximately negative 12% of sales, compared to a gross profit of 20% of sales last year.
• The completion of the armor contract with Kinetic Protection will continue to be a headwind for CPS Technologies Corp (NASDAQ:CPSH).
• Supply chain issues and third shift startup costs negatively impacted the third quarter results.

Q & A Highlights

Q: Can you elaborate on the impact of the end of the US Navy Armor contract on your financial results? A: Charles Griffith, CFO: The end of the US Navy Armor contract with Kinetic Protection significantly impacted our revenue, reducing it by approximately $2 million per quarter. This was a major factor in the year-over-year revenue decline from $6.3 million to $4.2 million in the third quarter.

Q: What are the expectations for the new semiconductor contract and its impact on future revenue? A: Brian Mackey, CEO: The new $12 million contract with our semiconductor customer is expected to significantly boost revenue in fiscal 2025. Deliveries are scheduled over a 12-month period, and the contract is focused on power module components for high-speed rail, wind turbines, and EV/HEV applications.

Q: How is the third shift impacting your operations and future outlook? A: Charles Griffith, CFO: The third shift, which began operating in late August, initially increased costs due to training but is now contributing to improved production capacity. This is expected to enhance our ability to meet demand and improve gross margins in the fourth quarter and beyond.

Q: Can you provide more details on the new contract with the US Navy? A: Brian Mackey, CEO: We received a $200,000 contract from the US Navy for developing lightweight, high-strength materials. This contract will fund research over the next 12 months, focusing on our metal matrix composite solutions for the Naval Air Systems Command.

Q: What are the prospects for new orders from Kinetic Protection and other military applications? A: Brian Mackey, CEO: We remain cautiously optimistic about Kinetic Protection securing new armor orders for additional naval vessels in fiscal 2025. Our ballistic solutions have a large market potential across various military applications, and we are actively pursuing these opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.