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CPS TECHNOLOGIES CORP/DE/ (CPSH)·Q1 2025 Earnings Summary

Executive Summary

  • Record revenue of $7.5M, up 27% sequentially from Q4 and 27% YoY, with a return to profitability ($0.1M net income; $0.01 diluted EPS) despite zero HybridTech Armor® revenue; gross margin improved to 16.4% from -4.6% in Q4 .
  • Management expects margins to “continue to expand” through 2025 and believes CPS is “well on our way to a record year,” underpinned by strong backlog, increased manufacturing throughput (third shift), and six externally funded programs (five SBIRs, one NAVAIR) .
  • Product mix shifted toward AlSiC and hermetic packaging; armor revenue’s completion was fully replaced by growth in other products, though armor had been beneficial to gross margin percentage .
  • Near-term catalysts: margin initiatives (yield recovery, efficiency gains), first shipments from new internal 5-axis machining capability in summer 2025, and emerging demand tied to AI-driven power needs (wind/offshore HVDC using AlSiC IGBT baseplates) .
  • Consensus estimates were not available via S&P Global for Q1 2025 EPS or revenue; investors should anchor on actuals and management’s qualitative outlook while awaiting estimate resets. Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

  • Record quarterly revenue ($7.5M) with no armor sales, demonstrating diversified demand and throughput gains; operating profit ($0.13M) and net income ($0.10M) turned positive. “We have fully replaced the loss of armor revenue with growth in sales of our other products.”
  • Gross margin expanded to 16.4% from 15.3% YoY and from -4.6% in Q4, driven by higher volumes and improved efficiencies; SG&A was managed down YoY ($1.10M vs $1.17M) .
  • Strategic momentum: three new Phase I Army SBIRs, DOE Phase II radiation shielding program into late 2026, and planned 5-axis machining capability for hermetic packaging with >$50M market potential and target low-to-mid 30% gross margins at scale .

What Went Wrong

  • Margins still below prior peaks, constrained by yield recovery after third-shift ramp; armor had historically supported higher gross margin percentage .
  • Radiation shielding first commercial purchase order was canceled when the broader program was terminated (unrelated to CPS), though DOE Phase II continues; commercialization timelines may be extended .
  • Cash decreased ($1.93M vs $3.28M at year start) while receivables and inventory increased alongside revenue, signaling working capital tightness amid ramp and mix shift .

Financial Results

Sequential Trend (Q3 2024 → Q4 2024 → Q1 2025)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD)$4,247,116 $5,933,283 $7,505,921
Gross Profit ($USD)$(523,432) $(271,525) $1,231,001
Gross Margin %(12.0)% (4.6)% 16.4%
Operating Income ($USD)$(1,486,496) $(1,318,984) $129,651
Net Income ($USD)$(1,042,839) $(995,153) $95,962
Diluted EPS ($USD)$(0.07) $(0.07) $0.01

YoY Comparison (Q1 2025 vs Q1 2024)

MetricQ1 2024Q1 2025
Revenue ($USD)$5,912,634 $7,505,921
Gross Profit ($USD)$906,310 $1,231,001
Gross Margin %15.3% 16.4%
Operating Income ($USD)$(259,612) $129,651
Net Income ($USD)$(143,153) $95,962
Diluted EPS ($USD)$(0.01) $0.01

Balance Sheet KPIs (Liquidity/Working Capital)

MetricDec 28, 2024Mar 29, 2025
Cash And Equivalents ($USD)$3,280,687 $1,929,919
Marketable Securities ($USD)$1,031,001 $1,039,714
Accounts Receivable - Trade ($USD)$4,858,208 $6,302,650
Inventories ($USD)$4,331,066 $4,812,833
Total Assets ($USD)$18,876,946 $19,208,908
Total Liabilities ($USD)$4,364,827 $4,492,841
Total Stockholders’ Equity ($USD)$14,512,119 $14,716,067

Estimates vs Actuals (Q1 2025)

MetricConsensus# of EstimatesActual
Revenue ($USD)n/a*n/a*$7,505,921
EPS ($USD)n/a*n/a*$0.01

Values retrieved from S&P Global.*

Segment Breakdown and KPIs

  • CPS does not provide a segment-level revenue breakdown in Q1 materials; product sales are presented in aggregate .
  • Operational KPIs referenced qualitatively include manufacturing throughput (third shift), yield improvements underway, and planned 5-axis machining commencement in summer 2025 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025None providedNo formal guidance; management expects “best year ever” and “record revenue” potential given backlog and throughput Positive qualitative outlook
Gross Margin %FY 2025None providedMargins expected to “continue to expand” through remainder of year; initiatives to lift margins from 16.4% toward 20–25% longer term (aspiration referencing prior ~30% peak in 2023) Positive qualitative outlook
Armor RevenueFY 2025Contract completed in 2024 Future orders possible; broader ballistic solutions pipeline; armor historically beneficial to margins Maintained optionality
R&D/ProgramsFY 2025–2026DOE Phase II started H2’24 DOE Phase II radiation shielding continues into late 2026; three Army Phase I SBIRs initiated Q1 2025 Expanded externally funded programs
CapabilitiesSummer 2025n/aFirst customer shipments from new 5-axis machining capability expected in summer 2025 New capability milestone

Note: CPS did not issue quantitative ranges for revenue, margins, OpEx, OI&E, or tax rate; guidance is qualitative.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Manufacturing throughput/yieldsThird shift initiated; training costs depressed margins; sequential revenue improvement in Q4; book-to-bill 1.22 Yields recovering; still below target; margins improving with volume; goal to lift GM% toward 20–25% Improving execution, ongoing
Armor programContract completed; revenue headwind in Q3/Q4 No Q1 armor revenue; future Navy/other opportunities pursued; armor supported margins historically Optionality without near-term revenue
Radiation shieldingDOE Phase II award (24 months) First commercial PO canceled due to program termination; DOE Phase II continues; market interest across modular walls, glove boxes Mixed: program setback; continued R&D/interest
Hermetic packaging & 5-axis machiningCapability build underway First shipments from internal 5-axis capability expected this summer; >$50M TAM; target low–mid 30% GM% at scale Capability ramp, margin lever
AI-driven power demand / wind/HVDCNot explicitly highlightedAlSiC baseplates for HVDC tied to AI power needs (offshore/onshore wind); potential volume beyond legacy traction Emerging demand tailwind
SBIR/NAVAIR pipelineDOE Phase II; NAVAIR $200K; Army SBIR momentum Six active external programs (five SBIRs, one NAVAIR); three Army Phase I SBIRs in Q1 Expanded externally funded R&D
Supply chain/tariffsNo material impact referencedTariff risk monitored; raw material share of COGS modest; no retaliatory tariff impact seen on sales yet Watchlist, manageable

Management Commentary

  • “We have fully replaced the loss of armor revenue with growth in sales of our other products.” — Brian Mackey
  • “We also anticipate, as production climbs and efficiencies increase, that our margins will continue to expand through the remainder of the year, leading to further improved bottom line results.” — Brian Mackey
  • “We now have 6 active externally-funded research programs, including 5 SBIRs… and one contract from NAVAIR.” — Brian Mackey
  • “Specifically, we estimate the available market for 5-axis machined hermetic package components to exceed $50 million, with gross margins in the low- to mid-30% range at high volumes.” — Brian Mackey
  • “The Armor revenue was beneficial to our gross margin percentages… we do have a number of initiatives underway… which we anticipate will continue to move that number in the right direction.” — Charles Griffith

Q&A Highlights

  • Partnerships/commercialization: CPS uses partners and sales reps for hermetic packaging and is exploring partnerships for FRA in aerospace as commercialization nears .
  • Radiation shielding: First commercial PO canceled due to program termination; DOE Phase II continues; strong interest for modular walls/glove boxes and broader use cases .
  • Armor pipeline: Pursuing helicopter flooring ballistic applications; successful structural and ballistic tests; engaging OEMs; Navy remains primary opportunity .
  • Tariffs: Aluminum/tariff impacts expected to be limited given raw material cost share; proactive vendor/supply chain reviews; no retaliatory tariff impact to sales observed .
  • Margin trajectory: Yield recovery post third-shift learning curve; aspirational GM% to 20–25% (vs prior ~30% peak quarters in 2023), paced by internal initiatives and mix .

Estimates Context

  • S&P Global showed no active consensus estimates for Q1 2025 EPS or revenue (# of estimates unavailable); investors should rely on actuals until coverage resumes or updates occur. Values retrieved from S&P Global.*
  • With revenue at $7.5M and EPS at $0.01, sell-side models (if reinstated) will likely adjust upward for revenue/margin trajectory given CPS’ qualitative guide to margin expansion and throughput gains .

Key Takeaways for Investors

  • Diversification is working: CPS delivered record revenue without armor, with throughput and demand across AlSiC and hermetic packaging; profitability returned with margin improvement .
  • Margin upside levered to yield/efficiency and mix: Recovery from third-shift learning curve and 5-axis capability could lift GM% toward 20–25% over time; armor optionality would be accretive to margins .
  • Emerging secular tailwinds: AI-driven power demand (HVDC, wind), traction/electric rail, and hermetic packaging TAM (> $50M) provide multi-year growth avenues .
  • External funding de-risks R&D: Six active programs (five SBIRs, one NAVAIR) help finance product development (FRA, radiation shielding, artillery solutions) ahead of commercialization .
  • Watch working capital and execution: Cash declined with ramp; receivables/inventory rose; continued yield gains and margin progress are key to self-funding growth .
  • No formal guidance: Position sizing should reflect qualitative outlook and execution milestones (summer 2025 5-axis shipments, margin trajectory), with upside if armor or shielding commercial orders resume .
  • Estimate gap: With no S&P Global consensus, the stock may trade more on prints and management narrative; expect models to update post a few quarters of sustained margin improvement. Values retrieved from S&P Global.*