CPS Technologies' Q3 2025: Contradictions Emerge on Capacity Expansion, Government Shutdown Impact, and Revenue Recognition

Date of Call: October 30, 2025

Financials Results

• Revenue: $8.8M, more than double year-over-year vs $4.2M in Q3 2024; ~9% increase vs Q2 2025
• EPS: $0.01 per share, net income just over $0.2M vs net loss of $1.0M (−$0.07 per share) in Q3 2024
• Gross Margin: 17.1% of sales (gross profit $1.5M) vs gross loss of $0.5M in Q3 2024; modest sequential improvement
• Operating Margin: $276K operating profit vs operating loss of ~$1.5M in Q3 2024; margins improving sequentially

Guidance:

• Q4 expected to be strong but unlikely to set a new record due to holidays and planned vendor/customer shutdowns.
• Fiscal 2026 expected to remain strong based on current momentum and new contracts.
• $15.5M power module contract to be delivered over 12 months starting Oct 1, 2025; shipments expected to be relatively level-loaded.
• Plan to relocate to a ~double-size manufacturing facility in calendar 2026 to expand capacity and improve efficiency.
• Management expects margins to improve as production scales and asset utilization increases.

Business Commentary:

* Revenue Growth and Increased Demand: - CPS Technologies reported record revenue of $8.8 million for Q3 2025, more than doubling year-over-year from $4.2 million in Q3 2024, and achieving a 9% revenue growth from the second quarter of 2025. - This growth was driven by continued strong demand and increased shipments, as well as higher capacity utilization and manufacturing throughput.

• Manufacturing Expansion and Capital Raise:
• CPS completed a successful public offering, raising over $9.5 million in net proceeds, to fund a move to a larger manufacturing facility, which is expected to double the usable floor space.

• The expansion is motivated by the need to accommodate increased demand and product expansion, supporting the company's long-term growth strategy.

• Federal Research Contracts and Technological Advancements:

• CPS announced its fifth and sixth federally funded research contracts in 2025, raising its total to 1 Phase 2 and 5 Phase 1 awards.

• This increase in research contracts is attributed to the expanding interest in CPS' technology and solutions from various federal agencies, which aims to leverage existing intellectual property for well-defined customer requirements with significant commercialization potential.

• Strategic Partnerships and Contracts:

• CPS Technologies secured a $15.5 million order from a long-standing multinational semiconductor manufacturer, resulting in a 16.5% year-over-year increase in contract value.
• The contract was awarded due to expanding demand for CPS' high-performance application-specific solutions and will support projects in high-speed rail and energy grid infrastructure.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "record revenue" of $8.8M, a $15.5M contract, completion of a $9.5M net proceeds offering to fund a larger facility, and sequential margin improvements, stating "the future has never looked better."

Q&A:

• Question from Chip Moore (ROTH): Can you expand on what you're seeing from other players in the power module space—are large, medium and small customers ordering more?
  Response: Demand is broad-based: large, medium and small customers are ordering more and CPS has added new customers, not driven by any single source.

• Question from Chip Moore (ROTH): As you add capacity and move facilities, how will you plan the transition—will you build inventories and how will you manage disruptions?
  Response: Plan a staged CY2026 move executed work-cell by work-cell while pre-building inventory here and with downstream platers to minimize customer disruption.

• Question from Chip Moore (ROTH): Which opportunities are you most excited about (shots on goal), and any thoughts on radiation shielding (e.g., Janus program)?
  Response: Radiation shielding is of clear interest with ongoing adoption/testing discussions; ALMAX and the funded Phase 2 controlled-fragmentation warhead also present promising opportunities.

• Question from James Geygan (Global Value Investment Corp.): How will revenue under the recently announced $15.5M contract be recognized—level over the term or backloaded until you move to the larger facility?
  Response: Revenue is expected to be relatively level-loaded over the 12-month contract; CPS will pre-build inventory and coordinate with an external plater to maintain steady deliveries.

• Question from James Geygan (Global Value Investment Corp.): How has the federal government shutdown affected SBIR progress, procurement and collections?
  Response: Minimal disruption so far—recent invoices were paid and active contracts continue to be executed; primary risk is slower publication/review of new proposals.

• Question from James Geygan (Global Value Investment Corp.): Can you provide color on the commercial opportunity for ALMAX and how volumes might develop over the next few years?
  Response: Commercialization is expected to be stepwise—samples then small, medium then larger production—with active business development driving gradual volume ramp over time.

Contradiction Point 1

Capacity Expansion and Demand

It highlights differing perspectives on the company's ability to meet growing demand through capacity expansion, which directly impacts production capabilities and revenue expectations.

What are you observing about other players in the power module market, both large and small? - Chip Moore (ROTH)

2025Q3: We've added new customers to our portfolio. But as you know, we're building the new facility, and we're not going to be able to fill it with new customers. We need to fill it with existing customers that have very good growth opportunities. - Brian Mackey(CEO)

Are you facing near-term capacity constraints due to the higher production run rate? - Unknown Analyst

2025Q2: The third shift was added to increase capacity, but it has not been enough to meet the current demand. CPS is aware of the growing need for more capacity and has plans in place to address this challenge. - Brian Mackey(CEO)

Contradiction Point 2

Federal Government Shutdown Impact

It demonstrates differing views on the impact of a federal government shutdown, which could affect the company's contract portfolio and revenue stability.

How will you manage the transition as you add capacity and space? - Chip Moore (ROTH)

2025Q3: CPS finds the area of high-voltage DC lines (HVDC) projects to be of great interest. These projects, like wind farms, require base plates to address switching and heat, opening a new opportunity separate from established markets like transportation. This is a new growth area expected to develop over the next couple of years. - Brian Mackey(CEO)

How has the federal government shutdown impacted CPS? - James Geygan (Global Value Investment Corp.)

2025Q2: There's minimal disruption to funded contracts. We're still receiving payments. However, the greater risk is the potential delay in publishing new contract topics. Our technical team is progressing as planned. - Brian Mackey(CEO)

Contradiction Point 3

Growth from Existing and New Customers

It highlights differing perspectives on the sources of growth for the company, which can impact assessments of the business strategy and customer base.

What are you seeing from other players in the power module space, both large and small? - Chip Moore (ROTH)

2025Q3: We've generally seen growth across the board with existing and new customers. Demand has picked up from large, medium, and small customers. There's no single driver for this growth, but rather a broad increase in demand. Additionally, we've added new customers to our portfolio. - Brian Mackey(CEO & President)

Are there other potential armor contracts in the pipeline besides the Navy contract? - Unknown Analyst

2025Q1: We're doing significant business with our customers. We've got a strong backlog right now. The goal is to get as much of that backlog into production as we possibly can. - Brian Mackey(President and CEO)

Contradiction Point 4

Revenue Recognition and Contract Impact

It involves differing explanations of how revenue from a contract will be recognized, which can have implications for financial forecasting and investor expectations.

How will revenue from the recently announced contract be recognized? - James Geygan (Global Value Investment Corp.)

2025Q3: The requirement is level loaded but will ramp up once the new facility is operational, adding floor space and production capacity. - Brian Mackey(CEO & President)

Is there potential to bring in other partners to market your unique technologies? - Unknown Analyst

2025Q1: Revenue under the contract is expected to be recognized entirely in fiscal 2025, with delivery expected to occur in the second half of that fiscal year. - Charles Griffith(CFO & Secretary)

Contradiction Point 5

SBIR Funding Nature

It concerns the nature of SBIR funding, which affects the financial impact on the company and investor understanding of revenue and cost structures.

How will revenue from the recent contract be recognized? - James Geygan (Global Value Investment Corp.)

2025Q3: The contract is a cost reimbursable contract, so they're funding us. The payment is a single upfront payment. - Brian Mackey(CEO)

Is SBIR funding considered a revenue item or a cost offset? - Greg Weaver (Private Investor)

2024Q4: SBIR funding includes profit and overhead absorption. It helps cover project costs and supports additional personnel working on these projects. - Chuck Griffith(CFO)