Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CPS Technologies Corp (NASDAQ:CPSH) reported a significant improvement in operating profit for the six-month period, with a positive swing of over $1.4 million compared to the previous year.
• The company has been able to maintain operations throughout the pandemic, with no reported transmission of COVID-19 among employees.
• CPS Technologies Corp (NASDAQ:CPSH) is actively involved in the US defense and aerospace markets, contributing to high-profile projects like the NASA 2020 Mars Perseverance Rover.
• The company has seen an improvement in gross margin, which increased to 21% of sales compared to 18% in the previous year, driven by new contracts with major customers.
• CPS Technologies Corp (NASDAQ:CPSH) is positioned to benefit from the growing electric vehicle market, with its base plates being used in modules for specialty EV and HEV applications.

Negative Points

• Revenues for the second quarter were down 10% compared to the same period last year, primarily due to product mix and reduced deliveries from a major customer.
• The company experienced increased volatility in short-term demand due to pandemic-related issues, affecting inventory management and delivery schedules.
• International air freight costs have risen sharply, impacting logistics and increasing operational costs.
• The automotive market, while promising, remains highly cost-driven, posing challenges for CPS Technologies Corp (NASDAQ:CPSH) to penetrate mainstream applications with its higher-cost base plates.
• The company faces uncertainties in the timing of ramp-up for electric vehicle applications, as it is dependent on the success and order bookings of its module maker customers.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with CPSH.

Q: Can you provide an update on the current balance of orders and how COVID-19 has affected them? A: (Grant Bennett, President and CEO) The order book is strong, but delivery schedules are more volatile due to COVID-19. Customers are adjusting orders based on their own supply chain challenges, leading to short-term fluctuations. However, we view these as temporary and not indicative of long-term issues.

Q: Are there any supply chain disruptions affecting your international business? A: (Grant Bennett, President and CEO) We haven't faced material shortages, but we did experience a temporary issue with a plating vendor due to COVID-19. Freight costs have increased, but we expect this to be short-term. Overall, we can still deliver products to our customers.

Q: What is the status of CPS's involvement in the electric vehicle (EV) market? A: (Grant Bennett, President and CEO) Our base plates are used in some specialty EV applications, and we are actively working with major module makers. While we can't predict specific module success, we expect our base plates to be used in mainstream automobiles over time, especially in high-performance segments.

Q: How does the penetration of silicon carbide technology affect CPS? A: (Grant Bennett, President and CEO) Silicon carbide IGBTs offer higher efficiency and operate at higher temperatures, making thermal management crucial. Our ASIC base plates provide advantages in this area. We expect revenues from silicon carbide modules to grow as costs decrease and they penetrate higher volume applications.

Q: How does the current weak dollar impact CPS's business? A: (Unidentified_2) The weaker dollar benefits us as foreign companies pay less for our products, making us more competitive against Japanese competitors. This should positively impact our bottom line.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.