CPS Technologies Q3 Earnings Call Highlights

Key Points

• Profitability improved despite flat year-over-year revenue: Q3 revenue was $8.9 million, while gross margin rose to 20.9%—its highest in more than three years—and net income increased to about $350,000 from $200,000 a year earlier.
• CPS is preparing to move into an 80,000-square-foot Attleboro facility, roughly twice its current footprint. The build-out could extend into late 2027; inventory increased to $10.3 million as the company builds stock to maintain shipments during the move.
• Management cited orders from its largest semiconductor customer and continued demand across aerospace and defense, energy infrastructure, and AI-related markets. CPS also received its first military-contractor order for tungsten-alloy components made with its QIM process.

CPS Technologies NASDAQ: CPSH reported third-quarter fiscal 2026 revenue of $8.9 million, matching the prior-year quarter, while management said sales increased sequentially and represented a quarterly revenue record. The company also reported improved gross margin and higher net income as it prepares for a planned relocation to a larger manufacturing facility in Attleboro, Massachusetts.

President and CEO Brian Mackey said the company benefited from higher demand and increased production volumes during the quarter. Gross margin rose to 20.9%, compared with 14.8% in the preceding quarter and 17.1% in the third quarter of fiscal 2025.

Profitability Improves as Operating Efficiencies Support Margins

Chief Financial Officer Chris Fraser said third-quarter gross profit was $1.9 million, or 20.9% of revenue, compared with $1.5 million, or 17.1% of revenue, a year earlier. Fraser attributed the year-over-year improvement to “advanced enhanced economics and operational improvements.” Gross margin increased by more than 600 basis points from the second quarter, reaching its best level in more than three years, he said.

During the question-and-answer session, Fraser said the company has passed through certain input-cost increases, including changes in gold prices, to customers. He added that pricing actions and operational efficiencies also contributed to the margin expansion.

Selling, general and administrative expenses totaled $1.5 million, up from $1.2 million in the year-earlier quarter. The current-period figure included $88,000 in non-cash expense associated with the company’s new lease, which is being recognized evenly over its 12-year term.

CPS posted operating profit of $357,000, compared with slightly less than $276,000 in the third quarter of fiscal 2025. Net income was approximately $350,000, or $0.02 per share, compared with about $200,000, or $0.01 per share, a year earlier.

Company Builds Inventory Ahead of Facility Move

CPS ended the quarter with $2.8 million in cash and $15.6 million in marketable securities, for combined liquidity of $18.4 million. That compared with $13.2 million at the beginning of fiscal 2026, consisting of $4.4 million in cash and $8.8 million in marketable securities.

The company also funded a $500,000 security deposit for its new lease, which is reflected as restricted cash in non-current assets. Accounts receivable were $4.7 million as of Sept. 26, 2026, compared with $5.2 million at the start of the year.

Inventories rose to $10.3 million from $5.6 million at the beginning of the year. Mackey said CPS has used more than $4.5 million of cash to build inventory in preparation for relocating operations. The company expects to use that inventory to maintain customer shipments during the move and convert much of it back into cash.

Attleboro Build-Out Could Extend Into Late 2027

In August, CPS entered into a lease for 80,000 square feet in Attleboro, about three miles from its current Norton, Massachusetts, location. The new site is roughly double the company’s current footprint and is intended to house corporate offices, manufacturing operations and product development activities.

Mackey said detailed planning is underway with design-build partner Dacon Corp. and other engineering and contracting firms. Work includes finalizing floor-plan specifications and electrical, plumbing and mechanical requirements, followed by municipal permitting.

“Based on the amount of work required, which is substantial, it’s plausible that the build-out will continue into fourth quarter of 2027,” Mackey said. CPS is also evaluating partial occupancy that could allow it to begin moving earlier. Its current Norton lease does not expire until the end of February 2028.

The company estimates that its share of build-out costs, as well as rigger and mover expenses, will be within approximately 10% of the $9 million in net proceeds it received from a May registered direct offering. That estimate excludes landlord contributions for building alterations, improvements, fixtures and equipment under the lease terms.

The lease began in August and runs for 12 years and 10 months. CPS said it does not currently face a cash impact from the lease, though it expects to begin paying certain expenses, including utilities and taxes, on June 1 of next year. Rent payments are scheduled to begin Dec. 1, 2027.

Orders Support Demand Outlook Across Several Markets

Mackey said CPS received additional large orders from its largest customer, a multinational semiconductor manufacturer. Demand represented by the contracts was consistent with the level shipped to that customer over the prior 12 months. CPS components supplied to the customer are used in systems supporting high-speed rail, energy and grid infrastructure.

The company also cited demand for its hermetic packaging products in aerospace and defense markets and in infrastructure tied to artificial intelligence. Mackey said this demand contributed to third-quarter revenue and is expected to continue.

CPS said its expanded facility is intended to support its core metal matrix composite and hermetic packaging businesses, along with growth initiatives involving AlMax materials, HybridTech Armor and QuickSet Injection Molding, or QIM.

• CPS recently received its first order from a military contractor for tungsten-alloy components made using its QIM process and expects to fulfill the defense-related contract before year-end.
• The company said QIM can produce net-shaped components with final dimensions and features incorporated into the molded product, reducing post-production machining requirements.
• An Army DEVCOM-supported Small Business Technology Transfer award valued at $1.15 million is funding work on scalable manufacturing of a controlled-fragmentation 40-millimeter tungsten warhead. The program is scheduled to continue through September of next year.
• CPS and partner Kinetic Protection are awaiting potential contracts connected to congressionally approved funding for HybridTech Armor on a small number of Navy destroyer-class vessels.

Mackey said the company remains focused on expanding capacity, pursuing new applications and supporting customer demand across defense, energy infrastructure, artificial intelligence and other markets. He said CPS has no debt and views its balance sheet, new facility plans and product development programs as positioning the company for continued growth.

About CPS Technologies (NASDAQ:CPSH)

CPS Technologies Corporation develops and manufactures advanced composite materials and engineered components for demanding industrial applications. The company's products are designed to provide combinations of thermal management, electrical performance, lightweight construction, strength and durability that can be difficult to achieve with conventional materials.

Its product portfolio includes metal matrix composites such as aluminum-silicon carbide (AlSiC) and copper-based composites, along with ceramic matrix composite materials and related engineered structures.

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