CPS Technologies Corporation CPSH faced headwinds from contract completions and elevated operational expenses in third-quarter 2024. Shifts in customer demand and strategic adjustments weighed on the company’s performance, impacting revenues and profitability. However, with its third production shift fully operational and new contracts secured across key sectors, CPS Technologies is positioned for a rebound. Management is optimistic about the road ahead, focusing on leveraging recent developments in government projects and the semiconductor industry to drive growth.
CPS Technologies Corp. Price, Consensus and EPS Surprise
CPS Technologies Corp. price-consensus-eps-surprise-chart | CPS Technologies Corp. Quote
Q3 Results
CPS Technologies reported a third-quarter 2024 loss per diluted share of 7 cents, falling 800% from earnings of 1 cent per diluted share in the prior-year quarter.
Total quarterly revenues of $4.2 million declined 33.3% from $6.3 million in the prior-year period. The revenue decline is attributed to the end of the HybridTech Armor contract with Kinetic Protection for the U.S. Navy and reduced orders from another major client due to excess inventory.
Profitability Metrics
The company’s gross margin turned negative, with a gross loss of $0.5 million against a gross profit of $1.2 million in third-quarter 2023. This margin compression resulted from lower manufacturing efficiencies and expenses tied to staffing and training a third production shift. The shift, operational as of late August, increased the cost of goods sold without yielding corresponding revenues in this quarter.
CPS Technologies recorded an operating loss of $1.5 million for third-quarter 2024 against an operating profit of $0.1 million in the prior-year period. This downturn in operating income reflects the cumulative impacts of reduced revenues and expenses related to increased production.
The company reported a net loss of $1 million against a net income of $0.2 million in third-quarter 2023. The loss reflects the impacts of challenges from contract completion and elevated labor costs in the quarter.
Costs
In third-quarter 2024, CPS Technologies experienced increased costs, led by the need for additional staffing and training associated with launching a third shift. These costs, incurred without corresponding revenues from increased production, contributed to a significant decline in the gross margin. Manufacturing inefficiencies further exacerbated cost pressures.
Management View
CPS Technologies expressed optimism regarding a recovery in the fourth quarter and beyond, as the company’s third shift is now fully operational. Management anticipates higher deliveries in future quarters to contribute positively to revenues. The company maintains a favorable book-to-bill ratio of 1.22, suggesting demand growth for its products and services.
Other Developments
CPSH announced multiple significant contracts and awards in the quarter. CPS Technologies secured a $1.1-million contract for 24 months from the U.S. Department of Energy to advance “Modular Radiation Shielding for Transportation and Use of Microreactors.” The company received a $200,000-contract from the U.S. Naval Air Systems Command to develop metal matrix composite solutions to strengthen and reduce weight for specialized applications. CPS Technologies was awarded a contract valued at approximately $12 million from a longstanding global semiconductor customer to provide power module components and related solutions.
Conclusion
CPS Technologies faced notable revenue declines and operating challenges in the third quarter of 2024 due to the end of a major contract and rising labor costs. However, the company’s new contracts signal growth potential, particularly in government-related projects and the semiconductor industry.
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