CPS Technologies Corporation Q4 FY2024 earnings call

• Fourth quarter revenue rose significantly relative to the third quarter due to increased customer shipments as production capacity came online.
• Core businesses of metal matrix composites and hermetic packaging are solid, with a $13.3 million contract with a semiconductor manufacturer being fulfilled.
• Added internal 5-axis machining capability and leveraged funding from Massachusetts, with first customer shipments expected in summer 2025.
• Received SBIR awards to expand product portfolio, including radiation shielding as a new commercial product with early market interest.
• Actively working on development contracts with NAVAIR for composites in rocket motor cases.

Fourth quarter revenue for CPS was $5.9 million. The gross loss in the fourth quarter was $0.3 million or approximately negative 4.6% of sales. The revenue decline year-over-year was due to the fulfillment of the U.S. Navy armor contract, but other product lines like metal matrix composites and hermetic packaging contributed. Metal matrix composites are used in high-speed rail, wind turbines, and electric vehicle applications, with strong demand expected. Hermetic packaging is also a core business with ongoing contracts.

• Expect continued growth in fiscal 2025 with improving margins as volumes climb.
• Production is stable and growing with three operating shifts, and new production operators are expected to improve over time.
• Anticipate improving gross margins and bottom-line results as onetime expenses related to production ramp-up are behind them.
• Optimistic about winning additional armor orders for naval ships in 2025 despite budget challenges.

• Uncertainties from ongoing conflicts in Ukraine and Israel, geopolitical events, economic conditions, market demands, and competitive forces.
• Challenges with ramping up production including labor training, inefficiencies, and lower yields due to new operators.

Q: Congrats on the radiation shielding order. Wondering about the market size for trucking business radiation shielding?

A: Funding from DOE is related to trucking for secondary containment of micro reactors, but there are early interests in other applications like facility management and aerospace radiation risk.

Q: Do you have an idea of revenues for radiation shielding applications in next year or two?

A: Hard to quantify as markets are diverse and certification is needed, but opportunities are expected to continue.

Q: Talk about fixed cost element in cost of goods related to armor program end?

A: Margins on traditional products are lower than armor, and there were significant nonproductive expenses from ramping up production like labor training and turnover, which are expected to diminish in 2025.

Q: Asked about Southeast Asian Armor contract shoot and rework?

A: Existing development work is ongoing to restore potential, with technical team working on resolving ballistic performance for qualification tests, but no immediate time line for another test.