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CPS TECHNOLOGIES CORP/DE/ (CPSH)·Q3 2025 Earnings Summary

Executive Summary

  • Record revenue of $8.80M, third consecutive quarterly record; gross margin expanded to 17.1% and diluted EPS was $0.01, marking continued profitability .
  • Year-over-year recovery from Q3 2024’s gross loss and net loss; sequential margins improved from 16.5% in Q2 2025 as throughput and efficiencies rose .
  • Management flagged Q4 as “strong but unlikely to be another record” due to holidays and vendor/customer shutdowns; capital raise ($9.5M net) supports a 2026 move to a larger facility to add capacity — a key forward catalyst .
  • Post-quarter $15.5M follow-on power module contract with a multinational semiconductor customer (16.5% YoY increase) supports backlog and margin trajectory as production scales; revenue recognition expected to be level-loaded over the 12 months beginning Oct 1, 2025 .

What Went Well and What Went Wrong

What Went Well

  • “Third consecutive quarter of record revenue” with $8.80M in Q3; “on track for best sales year ever,” reflecting broad-based customer demand across core products .
  • Gross margin rose to 17.1% from a gross loss a year ago, driven by higher sales and improved manufacturing efficiencies; operating profit of $0.28M and net income of $0.21M .
  • Strategic wins: $15.5M follow-on power module contract (+16.5% YoY) and six 2025 federally-funded research awards including a DOE Phase I (~$125K) and Army STTR Phase II ($1.15M) expanding future commercialization avenues .

What Went Wrong

  • Q4 commentary tempered: management expects a strong quarter but “unlikely” to set another record, citing seasonality and supplier/customer shutdowns, which may dampen near-term momentum .
  • Tariffs remain a headwind to further margin expansion; while raw material cost share is modest, domestic producers can raise pricing, pressuring gross margin progress .
  • Inventory and receivables rose with scale (inventories $5.38M; AR $5.40M), and margins remain below prior peak levels (company targeting gradual improvement), implying ongoing execution risk in scaling operations and yields .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD)$4,247,116 $7,505,921 $8,078,657 $8,803,695
Gross Margin %(12.3)% 16.4% 16.5% 17.1%
Operating Income ($USD)$(1,486,496) $129,651 $136,927 $276,082
Net Income ($USD)$(1,042,839) $95,962 $103,833 $207,964
Diluted EPS ($)$(0.07) $0.01 $0.01 $0.01

Balance Sheet Snapshot

MetricQ1 2025Q2 2025Q3 2025
Cash And Equivalents ($USD)$1,929,919 $2,374,037 $3,234,142
Marketable Securities ($USD)$1,039,714 $1,044,925 $1,054,079
Accounts Receivable – Trade ($USD)$6,302,650 $5,602,703 $5,400,080
Inventories, Net ($USD)$4,812,833 $5,198,246 $5,383,680

Estimates and Actuals

MetricQ3 2025Q4 2025FY 2025
Revenue Consensus Mean ($USD)N/A*$7,890,000*$32,280,000*
Primary EPS Consensus Mean ($)N/A*$0.00*$0.03*
Primary EPS – # of EstimatesN/A*1*1*
Revenue – # of EstimatesN/A*1*1*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue trajectoryQ4 2025Unspecified“Strong but unlikely to be another record” due to holidays and shutdowns Lowered (vs implied record streak)
Capacity expansion2026UnspecifiedMove to larger facility; nearly double usable floor space New strategic update
Margin outlookOngoing“Improvement expected”Continued focus on margin expansion via efficiencies and asset utilization Maintained directional
FinancingOct 2025N/ANet proceeds ~$9.5M from offering to fund capacity expansion New capital secured

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Manufacturing capacity & marginsAdded third shift; margins targeted toward 20–25% over time; yield recovery underway Capacity to be expanded via 2026 facility move; modest sequential margin improvement to 17.1% Improving capacity; gradual margin expansion
Tariffs/macroTariffs impact domestic pricing; monitoring supply chain; limited bottom-line impact given low raw material share Tariffs still a headwind to margin expansion Persistent headwind
Power module demand (AlSiC)Strong traction, wind/HVDC opportunities linked to AI-driven power needs $15.5M follow-on contract; integration into high-speed rail and grid infrastructure Demand broadening
Radiation shieldingNonprovisional patent filed; DOE Phase II continues; one program canceled but other opportunities active DOE Phase I impact limiter award (~$125K); ongoing DOE Phase II; adoption discussions continue Portfolio expanding; commercial interest
AlMax/FRA commercializationFirst purchase order; multi-billion aerospace opportunities; samples to customers First commercial order fulfilled; ramp via samples and business development; broad applications Early commercialization progress
Government shutdownN/AMinimal impact on active SBIRs; potential delays for new topics/proposals Manageable near term

Management Commentary

  • “We remain on track for 2025 to be our best sales year ever… margin expansion continues to be an area of considerable focus… capital raise will enable us to expand and improve our manufacturing operations” — Brian Mackey, CEO .
  • “We anticipate the location having nearly double the usable floor space… expect to complete the move during calendar year 2026” — Chuck Griffith, CFO .
  • “Q4 will be strong… but unlikely… to achieve another quarter of record revenue” — Brian Mackey .
  • “We’re very encouraged by the continued momentum in our aluminum silicon carbide product line” — Brian Mackey on $15.5M contract .

Q&A Highlights

  • Contract cadence: Management expects revenue recognition under the $15.5M order to be relatively level over the 12-month term; inventories will be built to prevent customer interruption during facility move .
  • Capacity transition plan: Staged, cell-by-cell move with temporary dual-building operations throughout calendar 2026 to mitigate disruption .
  • Radiation shielding: Active DOE programs continue; prior canceled program unrelated to CPS; ongoing commercialization dialogues for modular applications (walls, glove boxes, truck shells) .
  • AlMax commercialization: Stepwise adoption via samples and validation; recruiting BD talent; applications across aerospace/industrial with first commercial order fulfilled in Q3 .
  • Tariff impact: Raw material cost share modest, but domestic price increases can still pressure margins; supply chain continuously optimized .

Estimates Context

  • Q3 2025 consensus data were not available in S&P Global for CPSH at the time of retrieval; actual revenue was $8.80M and EPS $0.01 .
  • S&P Global consensus for Q4 2025: revenue $7.89M*, EPS $0.00* (1 estimate each). FY 2025: revenue $32.28M*, EPS $0.03* (1 estimate each). Given management’s Q4 commentary, estimates may need modest downward adjustment for near-term top-line trajectory vs recent records .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Three straight record quarters with accelerating throughput and improved efficiencies; margins rising to 17.1% gross and operating income positive — demonstrating operational leverage at higher volumes .
  • Near-term caution: Q4 likely not a record due to seasonal and vendor/customer shutdowns; watch for modest sequential pullback vs Q3 despite an overall “strong” quarter .
  • Capacity expansion is a central 2026 catalyst; $9.5M net offering bolsters balance sheet to fund a move nearly doubling usable space, supporting volume growth and margin trajectory .
  • Demand visibility strengthened by the $15.5M follow-on power module contract and broad-based customer orders (large, medium, small), with level-loaded revenue recognition across the next year .
  • Margin drivers: ongoing yield improvements, efficiency initiatives, and asset utilization; tariffs remain a manageable but persistent offset — monitor gross margin progress toward low-20s target ranges .
  • Optionality from government-funded R&D: multiple Phase I/II SBIR/STTR programs (Army/Navy/DOE) create commercialization pathways (e.g., radiation shielding, controlled fragmentation warhead) that can diversify revenue .
  • AlMax/FRA commercialization is early but promising; first commercial order shipped and active sampling underway with BD ramp — potential medium-term upside if adoption broadens across aerospace/industrial .