It is now my pleasure to turn the floor over to your host, Mr. Chuck Griffith. Sir, the floor is yours.
Thank you, Ali. Good morning, everyone. Today I'm joined by Brian Mackey, our President and CEO. We look forward to discussing our third quarter results with you. First, Chris Witty, our Investor Relations Advisor, will provide a brief safe harbor statement. Chris?
Thanks, Chuck. Good morning, everyone. Before we begin the business portion of today's call, I would like to point out that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
This should be considered as subject to t he many uncertainties that exist in CPS' operations and environment. These uncertainties include, but are not limited to, the ongoing conflict in Ukraine, other geopolitical events, economic conditions, including the current government shutdown, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statements. Additional information can be found in our filings with the SEC. Now I'll turn the call over to Brian to offer his perspective on the quarter, after which Chuck will review the financial results in greater detail. Brian?
Thank you, Chris, and good morning, everyone. Our last few months at CPS Technologies Corporation have been very productive. For the third consecutive quarter, we've delivered r ecord revenue for our company at $8.8 million. W ith greater shipping volumes in response to increased customer demand. That growing demand continues, as indicated by the order we announced earlier this week at $15.5 million for our power module components. During the quarter, we announced our fifth and sixth federally funded research contracts are expected in 2025. We are now executing three Phase II SBIR programs simultaneously. Additionally, as Chuck will review in a moment, we completed a successful secondary public offering that brought in over $9.5 million n et proceeds, including share purchases by members o f the management team, including both Chuck and myself, as well as several members of our Board of Directors.
Now I'd like to turn the call over to Chuck to provide further details about our financial results. After which I'll provide some additional perspective. Chuck?
Thanks, Brian. The third quarter was one of many accomplishments which we're excited to share with you today. CPS reported total revenue of $8.8 million for the period, a new record compared with $4.2 million in the third quarter of fiscal 2024. More than doubling year -over- year.
This represents roughly 9% revenue growth compared to the second quarter of 2025, which was also a record. Most of the improvement was driven by continued strong demand and associated increased shipments as a result of increased capacity utilization and manufacturing throughput. Our overall acceleration in growth played a direct role in our decision to raise money in preparation for a move to a larger and more efficient manufacturing location. This will provide additional room to increase our production levels as demand dictates, which we see happening in the quarters and years to come. I'll speak to this more in a moment. We reported gross profit in the third quarter of $1.5 million, or approximately 17.1% of sales, compared with a gross loss of $500,000 last year. As in other recent quarters, the increase year over year was due to higher revenue and improved manufacturing efficiencies.
Our margins continue to make modest improvements sequentially, and we remain focused on raising them further as we increase productivity and improve asset utilization. Selling, general, and administrative expenses totaled $1.2 million for the third quarter versus $1.0 million in the prior year. We continue to manage our costs even while ramping up production and investing for growth. SG&A has remained relatively consistent throughout this fiscal year. The company posted an operating profit of about $276,000 in the third quarter, compared with an operating loss of approximately $1.5 million last year, and we reported net income of just over $200,000, or $0.01 per share, versus a net loss of about $1 million, or $0.07 per share, in Q3 of fiscal 2024.
Turning to the balance sheet, we ended the quarter with $3.2 million of cash and $1.1 million in marketable securities versus $3.3 million in cash and $1.0 million in marketable securities at the beginning of 2025. Just after the end of the third quarter, we completed a public offering which, as stated earlier, raised over $9.5 million in net proceeds. While this capital will be broadly used for general corporate purposes, the key impetus for this raise was a planned move to a manufacturing facility nearby that will provide for long term growth and product expansion. An active search is underway to identify the best site to suit our needs. We anticipate the location having nearly double the usable floor space. We expect to complete the move during calendar year 2026.
The extra capacity should address CPS' manufacturing needs for the foreseeable future as we continue to scale the business. I'd also like to take a moment to publicly thank the folks at Rock Capital for providing the investment banking services. Their help, along with the efforts of the entire team, including our accountants, our attorneys, et cetera, were invaluable in helping us with this capital raise. Trade accounts receivable totaled $5.4 million as of September 27, 2025, versus $4.9 million as of December 28, 2024. Inventories rose to $5.4 million at the end of the third quarter, reflecting increased production and customer demand compared with $4.3 million at the start of the fiscal year. Turning to the liability side, payables and accruals totaled $4.8 million versus $4.0 million as of December 28, 2024. Now Brian will provide a more in-depth discussion of the period.
Thanks, Chuck. After three consecutive quarters of r ecord revenue and improving underlying in the f uture and the work [audio distortion] [CPS] to the n ext level in its growth. Key among these is extending our manufacturing c apabilities to meet rising demand as well a s the critical element of improving our operational efficiencies, as Chuck just mentioned, the clear need for additional space drove the decision to raise capital. In the months to come, we intend to move into a new, larger production center where we will be better prepared to meet the higher demand we expect in the months and years to come.
This includes meeting the growing needs of o ur current customer base, allowing floor space f or new products that are being brought t o market and expanding our product development c apabilities in response to increased federal funding a s we continue to build out our product pipeline.
This is a very exciting time for CPS and we're in great shape to take advantage of the various opportunities that lie ahead. That said, while Q4 will be strong, i t is unlikely due to holidays, planned plant shutdowns at some of our vendors, c ustomers, et cetera, for our fourth quarter results to achieve another quarter of record revenue.
This is generally consistent with past years, just as 2025 is a standout y ear in terms of performance, we anticipate fiscal 2026 to remain strong as well. We're also very pleased with the recently a nnounced new contract valued at approximately $15.5 million from a long-standing multinational semiconductor manufacturer. Under the terms of the agreement, CPS will deliver advanced power module components over a 12-month period which began October 1st, 2025.
The order represents a 16.5% year-over- year increase in value, reflecting expanding demand f or CPS Technologies Corporation high performance application specific solutions, these components will be integrated into systems. Supporting high speed rail as well as energy and grid infrastructure, supporting the dramatic growth in demand for electric from data c enters and other applications. This reflects continued strong momentum in our A luminum Silicon Carbide (AlSiC) product line.
At the same time, we continue to have great success in winning new research contracts from the federal government. This enables us to leverage our existing o ntellectual property to address well-defined customer requirements with significant commercialization potential. For example, in the second half of S eptember we announced our latest Phase II Small Business Technology Transfer, or STTR contract w ith the U.S. Army.
This funded program provides CPS with $1.15 million over a 24-month period to continue the development of a 40mm controlled fragmentation warhead. For this application, a high density material can produce smaller f ragments with higher kinetic energy. So typically, t ungsten heavy alloy materials are ideal. However, traditional manufacturing and machining methods would be impractical due to high strength brittleness and hardness of these materials.
During Phase I, CPS successfully demonstrated results fabricating a tungsten heavy alloy warhead, using our proprietary QuickSet Injection Molding Process. Initial tests delivered results consistent with the t echnical requirements of the Army. These preliminary results will be expanded upon during Phase II to improve fragmentation, develop and standardize design guidelines and move fabrication f rom the bench to low-level production.
The near term goal is to fabricate a design that satisfies the Army's performance criteria for the Mk 19 40mm warhead. The New Mexico Institute of Mining and Technology Energetic Materials Research and Training Center, or EMRTC, will perform testing to evaluate performance and improve design parameters.
EMRTC is a premier research and testing facility specializing in the study of energetic materials and explosives. The intent of the Phase II program is to establish the foundation for a robust, low-cost, high-volume manufacturing process u sing tungsten heavy alloys and subsequently explore volume manufacturing opportunities. Additionally, we also have the potential to explore other munition sizes, fabricating with other high density materials, and pursuing other applications that require a complex shape made from small area high density materials.
It's important to note this project leverages technology CPS has developed over several decades, namely our Quickset Injection Molding Process, which we have used to produce literally millions o f commercial units including our AlSiC baseplates. Dr. Mark Occhionero, whose expertise has been fundamental to the development and application of t hese techniques at CPS f or over 40 years will continue to lead this STTR effort.
The novel application of these production methods provides significant new growth opportunities for CPS. This path is very well aligned with our vision to solve our customers' toughest materials challenges through the targeted application of our unique intellectual property. Also in September, we announced a new P hase I SBIR contract from the Department of Energy. This new contract provides approximately $125,000 in f unding from the Office of Nuclear Energy for a research effort that extends until April of next year. CPS i s developing a high performance sustainable impact limiter using novel construction methods and m aterials to enhance the safety of transporting spent nuclear fuel and high-level radioactive waste.
This work runs in parallel to the o ngoing Phase II research funding we have from the DOE for modular radiation shielding. In total, we have now received one Phase II award and five Phase I awards in 2025 alone. It's great to see increasing interest in o ur technology from an expanding array of a gencies and the various departments within them.
We continue to work on other SBIRs a lready underway, including Phase I with the U.S. Navy to reduce weight of the Marine Corps' Amphibious Combat Vehicle, a Phase II for the development of novel metal m atrix composites for thermal energy storage to address t he requirements of NAVAIR's Advanced Anti- Radiation Guided Missile Extended Range Program, and a DOE Phase II award for the development effort of modular radiation shielding for transportation and use of microreactors, as well a s non-SBIR funding from the U.S. Naval Air Command at China Lake.
Our technical team continues to advance these programs to meet the specifications of these various customers. As always, we continue to pursue additional SBIR contracts where we believe we can provide a unique technical solution that also o ffers commercialization potential for the company. Regarding the ongoing federal government shutdown, we continue to monitor the impact on CPS w hich to date has been rather muted.
For federally funded research projects that are a lready under contract, our development work continues. In some cases, the federal personnel we interact with or the contractors that support t hem are currently unavailable. However, thus far this has not had a significant impact on our work. It has not interfered with our ability t o be paid when we submit invoices under active contracts.
If there is ultimately a more meaningful negative impact to CPS from the shutdown, i t could be related to slow activity on new proposals where CPS has already submitted and which are now under review, or new research topics that the government was planning to publish in the near future. There may or may not be some d elays in these areas depend on the length of the shutdown.
The impact is difficult to quantify but o verall, it has thus far not had a significant impact on us. Our manufacturing capacity has increased significantly over t he last several quarters, in response to growing demand, and we continue to land new development contracts as we innovate solutions to real world problems. At the same time, as Chuck mentioned, we are committed to improving gross margins and o verall bottom line results. We're endeavoring to increase both operating efficiencies in output and w e believe that with our new $15.5 million power module contract, margins will continue to improve in the quarters to come.
The outlook for the coming year has n ever been stronger, and we look forward to leveraging our new manufacturing operations after a new site for our company is identified. As always, we remain optimistic regarding the future a rmor orders, but the near term outlook r emains uncertain due to the government shutdown. Generally, we believe current military spending trends a re working in our favor. We will continue to work with Kinetic Protection, our partner in this area, regarding naval vessel procurement decisions or other applications across the defense spectrum, particularly once the federal government is back to work.
Additionally, the company is accelerating its efforts t o bring new and proprietary products to m arket, such as our radiation shielding solution and our AlMax materials. In fact, during the quarter, we fulfilled our first commercial order for AlMax. We have also recently expanded our technical team. S pecifically, we added a Manufacturing Engineer to o ur production staff and another PhD to our R&D team.
Although these new hires have a negative effect on our margins in the short term , we see the additions of these key personnel as investments in the continued growth of CPS. In summary, I believe the future has n ever looked better since my arrival here two years ago, given ongoing strong demand, including our new $15.5 million contract, an expanding array of research contracts, a growing portfolio of technical solutions that address customer requirements, and an upgraded production facility on the horizon, as well as a vastly improved balance sheet, which will provide the critical resources necessary to improve our performance and expand our capabilities.
We are ready to take CPS to the next level in terms of revenue, o verall performance, and return for our investors. We've come a very long way in a short period of time, and compared to 2024, the company has transformed into a larger, faster-growing, more relevant organization with unique capabilities for both industry and government.
The future is very bright and I'm excited i ncredibly proud of everything her team has accomplished this year. We can now open the call up for investors.
Ali, I'll pass it back to you.
Thank you, sir. Ladies and gentlemen, the floor is open for your questions. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, that's star o ne. If you have any questions or comments, please hold while we poll for questions. Thank you. Our first question is coming from Chip Moore with ROTH. Your line is live.
Hi, good morning. Hey, Brian and Chuck.
Good morning.
Hey I wanted to ask, congratulations on that nice new order with your long-standing customer. Maybe you can expand a bit on what you're seeing from potential other players in the power module space, large and small.
Yeah, I think as we've looked at. Our revenue growth throughout the current year. We look at various different customers in both metal matrix composites that you referred to and hermetic packaging. What we've generally seen is growth across the board. The large customers are ordering more. Indicated in that recent contract, medium customers, smaller customers, the demand has picked up. For existing customers, they're ordering more. Additionally, we've added some new customers to the portfolio, but there's not any singular element that has driven that growth either in the past bringing us to today, or what we're hearing in discussions with these customers going forward. It's quite broad.
Brian, as you think about adding capacity and space, can you give us a little more insight on how you plan that move? Do you build inventories for key customers? How will you manage that and deal with the transition when it comes to?
Right, yeah, it's all the above. Obviously, a move is fundamentally disruptive. What we're developing now are detailed plans to execute a staged move while having things in place that mitigate that, such as inventory is built up here. Inventory is built up downstream of CPS t o soften the blow, so to speak.
What we intend to do is o utfit the new facility for our needs. We have hydrogen lines, oxygen lines, et cetera. Once we're ready to affect the move, it would essentially be a work cell at a time. It would be sort of a l eapfrog situation where temporarily we'd be occupying two buildings, but we will be sequentially moving more and more of the company to the new facility until we complete that process. All that would occur during calendar year 2026.
Got it. Very helpful. Maybe just for me, you know, call it the shots on goal, a lot of interesting opportunities, any that you're more excited about. On radiation shielding in particular, the Army just came out with the Janus Program. I'm sure you saw. Any thoughts on potential there? Thanks.
Yeah, starting with the radiation shielding, we definitely see opportunities there. We know that we have a solution. That's of interest to users and customers. That are in the nuclear, so those discussions are continuing. There are adoption discussions and testing conversations that are naturally part of that process, as you can imagine. That is an area of great interest for us, as well as some of these other things. The AlMax material has broad applications because of its material properties, so we have interesting discussions going on there. The one I highlighted a few minutes ago regarding the controlled fragmentation warhead.
That's early in Phase II. We're just a baby a month or so into the Phase II two-year program, but we know that was funded because the Army is excited about what they saw. They have a real need for that product, but it's simply impractical to machine it, which would be really the only alternative way to get that outcome. We're excited to see where that goes. As we continue to push that forward and more specifically meet the exact. Requirements that they've outlined that could have significant potential over time for us as well.
Great. I'll hop back in queue. Thanks very much.
Sure.
Thank you. Just as a reminder, ladies and gentlemen, if you do have any questions, please press star one on your telephone keypad. Our next question is coming from JP Geygan with Global Value Investment Corp. Your line is live.
Good morning, gentlemen, and congratulations on a solid quarter and the recent contracts announcement. Can you help me understand how revenue under this recently announced contract will be recognized? Whether that will be fairly level over the contract term or if some of the volumes will be backloaded to be fulfilled once you move to your larger facility?
It should be relatively stable throughout the period of the contract. I think that as Brian mentioned earlier, during the actual move, we'll have tried to build up inventories beforehand so that the customer will not see impact from the move. Typically with this particular customer, the product gets sent to an outside plater where it's plated and then shipped to the customer as they need the product. We'll be building up inventory both here in the U.S. as well as with the plater, so that the customer won't see any interruptions. The customer shouldn't see any interruptions for that period. As I said, it should be relatively stable, equal throughout the year.
Yeah, I think there's sort of the two elements of it. It's a level-loaded requirement by the customer, generally speaking, but also the necessity for the move is for us to. Be able to add floor space, add production capacity. When that comes online, our weekly quantities will accelerate. It is sort of a bit of both.
Got it. All right, thanks. That's helpful in understanding that contract and the AlSiC business in general. Secondly, how has the federal government shutdown affected you either with advancing through the SBIR process, procurement, collection receivables? Any color you can provide around that would be helpful.
On the billing side, just earlier this week we submitted an invoice t hrough the government process,
Two invoice
Two invoices, and we promptly received payment. We're set up as an active contract. We received payment, so you know, that w as nice to see. On the funded contracts that are underway. There's really minimal disruption because essentially our technical team has been handed the program. They are now executing on the research work. On occasion, they might typically have a c onversation with the funding agency, you know.
Touch base every month or two, something like that. What we've seen is maybe instead of f our or five people on that call, there might be two. We can still generally get a response or i f there's some sort of clarification of path forward, you know, there's someone there. That's really not that critical to us because we proposed a research plan w hich got approved and funded, and we're executing on it.
Largely the ball is in our court, and it's probably more of a risk related to whether the government's going t o publish new topics on time, a month from now or two months from now. That's less clear to us.
Got it. Okay, thanks. You touched on it a little bit in responding to Chip's question, but I wanted to talk about AlMax a little bit more. It seems to me that that's an exceptionally large commercial opportunity that's recently validated b y e ither execution or delivery of your first order of that product in this quarter. Can you provide any sort of color or additional commentary around the additional commercial opportunity there and how we might expect this to develop over the next few years?
I think, first of all, interacting w ith people who are interested in that material. In some of those industries, they don't k now the name CPS. Some of them they do. It's a matter of getting in front of the right decision makers and d esign engineers, etc. They will have their own adoption process t hey'll want samples, which is what we're doing s ending out now to people. They want to validate the material performance r equirements, consider how they can adopt this into whether it's something they have ongoing or something new they're developing.
We anticipate a sort of stepwise, you know, volume opportunity n o one's going to come in d ay one, you know, in order. A great many pieces, they're going to do small, medium, and then large. Those are the conversations that we're taking on. That's why we're, you know, got a focused business development effort underway to add to our team. We have a position posted that we're actively recruiting for to help pursue these new opportunities because it takes a lot of legwork. That will play out. We do believe that material has a lot of applications and many of them are places we haven't historically been. We're identifying trade shows, industries, applications, updating our website, et cetera, to be more to address those more directly.
Great. Congratulations again on a great quarter, and thanks for taking my questions. We'll look forward to talking to you again soon.
Thanks, JP.
Thank you once again. If there are any final questions or comments, please press star 1 on your telephone keypad at this time. Ladies and gentlemen, as we have no further questions in the queue at this time, I'd like to hand the call back over to Mr. Mackey for any closing remarks.
Great. Thanks, Ali. Thanks, everyone, for joining us today, for y our ongoing interest in CPS. We look forward to speaking with you again after the end of our fourth quarter. If you have any questions. interim, please reach out to our investor relations advisor. Thank you.
Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.