CPS Technologies Corp.

Good morning everyone and welcome to the CPS Technologies Q1 2026 earnings call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions following the presentation. It is now my pleasure to turn the floor over to your host, Chuck Griffith, Chief Financial Officer at CPS Technologies. Chuck, the floor is yours.

Thank you, Jenny, and good morning, everyone. Today I'm joined by Brian Mackey, our president and CEO, and Chris Fraser, our next chief financial officer. We look forward to discussing our first quarter results with you, but first, Jordan Darrow, filling in for Chris Witty today on behalf of Darrow Associates, will provide a safe harbor statement. Jordan?

Thank you, Chuck, and 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 and should be considered as subject to many uncertainties that exist in CPS's operations and environment. These uncertainties include, but are not limited to, the ongoing conflicts in Ukraine and the Middle East, other geopolitical events, Thank you, Jordan. And good morning, everyone.

Before getting into the details of our discussion, let me take a moment to welcome CPS's next CFO, Chris Fraser, to the company as he's here with us today. We'd like to give him the opportunity to introduce himself to our investors this morning. Good morning, Chris, and welcome to CPS.

Thank you, Brian. It's great to be here. I'm very happy to share some details of my professional background, which has some overlap with the challenges and opportunities in front of CPS. I served as controller within the Shrivencast Park School, or PCC, which makes aluminum castings for aerospace customers. After that, at Advanced Regenerative Manufacturing Institute, or ARMI, I served as CFO for early stage ventures funded by Federal Grants. And as a result, I'm very familiar with the SDR and SPTR programs. Earlier, I worked at AWS Establishment. which manufactures engineered products. I'm excited to join CPS in helping the company continue to grow and succeed.

Thanks, Chris. Chris will officially assume the role later this month, which gives him some time working with Chuck and getting up to speed. While Chris has some big shoes to fill with Chuck's upcoming departure, Chris is highly qualified to take on this position as CPS prepares to move into a new facility and execute a strategy for greater growth ahead. I'd also once again like to thank Chuck for his seven years of dedicated service to us here at TPS without which we would not be where we are today. The official departure date is tentatively scheduled for the end of this month. Turning to our Q1 results, we posted sales of $7 million down slightly year over year due primarily to simple ordered This does not diminish our positive outlook for 2026, nor reflect a lack of orders or demand. I'll review the current state of the business portal. We continue to benefit from strong fundamentals, and while our assessment of available facilities continues in depth, we expect to soon announce a new site, which will expand and improve our production facilities. First, let me turn the call over to Chuck to provide further details about our financial results, after which I'll give some additional perspective on the quarter and outlook. Thanks, Brian.

It's with mixed emotions that I think this will be my last time on the call, but I could not be more proud of all we've accomplished at CPS since I joined the company in 2019. I wish the entire team good luck going forward and believe the company is in great shape to thrive and grow in the quarters and years to come. CPS reported revenue of $7 million for the period compared to $7.5 million in the first quarter of fiscal 2025. The year-over-year decline was primarily due to order timing, as Brian mentioned. We anticipate shipments increasing as the year plays out and are very pleased with some recent awards and the overall business outlook. In addition, while the specific timings are moved to a new manufacturing facility is not yet finalized, we regain optimistic thoughts as being executed in the coming quarters, positioning us for stronger growth going forward. Brian will speak to this more in a minute. We reported growth profit of 0.6 million dollars or 8.6 percent of revenue versus 1.2 million and 16.4 percent of revenue fiscal 2025 first quarter with the year-over-year decrease largely due to lower overall revenue as well as the current period impact of our inventory build. In future quarters, due to expected revenue growth and changes in product mix, we anticipate margins will grow. We also expect to improve our operating efficiencies once we complete the transition into the new facility. Selling general and administrative expenses total $1.1 million in the first quarter of both fiscal 2026 and 2025. We reported a net loss of roughly $300,000 or negative two cents per share versus net income of just under $100,000 or one cent per share in fiscal 2025 for supporters. Turning to the balance sheet, we had a supporter with $5.7 million of cash and $6.8 million in marketable securities for a total of $12.5 million combined versus a combined total of $13.2 million at the beginning of 2026, which included Our interest rates for cash are very close to the rates we earn on marketable securities, with the main difference being that we can lock in the rates on marketable securities, whereas cash rates fluctuate with the market. Trade accounts receivable total $3.8 million as of March 28, 2026, versus $5.2 million as of December 27, 2025. Inventories increased to $7.1 million at the end of the first quarter reflecting increased production support to support our sales during the move compared with $5.6 million at the start of the fiscal year. This growth in inventory is acceptable as it will allow us to continue shipping and generating revenue during the transition to our new facility. Turning to the liability side, tables and accruals totaled $3.9 million at the end of the first quarter versus 4.3 million as of December 27, 2025. Now, Brian will provide a more in-depth discussion of the period and outlook.

Thanks, Jeff. Before we discuss our margins a bit, I'd like to address the other topic that may be on people's minds, which is our move to a new manufacturing location. The bottom line is that the facility is taking longer than we initially anticipated, primarily related to the complexity of our needs. At this point, we're down to reviewing the top candidate sites that best fit our various requirements, particularly as it pertains to the potential building setup parameters, including power requirements, industrial gas supply, , et cetera. We can plan for the move as well, and we expect to have an update transition timing in the near future. However, Our current lease runs through February of 2028. Providing that the business is outfitted appropriately, then move too quickly and make a poor decision. This process is improving manufacturing efficiency and growing the companies. We're committed to keeping our investors posted in the coming weeks and months. On other topics, The SBAR and STTR programs have now been fully reauthorized by Congress, and instead of their typical authorization increment of one year, this time congressional reauthorization carries through fiscal 2031, providing a long runway of clarity and certainty. Although there are some modifications to these programs, the core tenets remain unchanged. We previously mentioned that our ongoing programs continue to be funded, and our funded work continues, even before this latest Congressional action. But new research topics are now being released, and we're able to bid on new work. Also, the proposals we're submitting now, or have submitted in the past, are also being reviewed. We will continue to use these programs to enhance our R&D efforts, expand our market opportunities, and drive growth over the long term. Work continues on our funded programs, including radiation shielding, energy storage for long-range missiles, and the controlled fragmentation 40-mil The Navy SBIR office recently executed its option to extend our Phase I program related to amphibious combat vehicles. This provides us with $100,000 of additional funding and extends the program for six months starting in June. We will continue to define methods of reducing the weight of the ACV with proposals that include potentially incorporating our hybrid tech armor as ballistic protection for the vehicle in place of the steel plates currently used. The Navy's decision regarding potential Phase II funding will be made at a later date. While funded research continues to bring in new opportunities, there has been some recent softening of product deliveries, particularly in metal matrix composites, within our overall book of business. However, while the lumpiness of revenue in this market is something we're very familiar with, our backlog and order intake remains strong. As one example, we recently booked a $4 million contract for Humetic Packaging. We will begin shipping very soon and expect to fulfill this contract in less than 12 months. This order is a nice win for us as it is a single shoe and a product we're familiar with producing, though historically in small quantities. Our fielding of proprietary Almax material continues to pick up speed as we are now putting more material samples into the hands of interested customers in various markets and discussing potential opportunities with them. Also, we recently shipped our first small order for chunks and alloy components made using our proprietary quick-set injection molding process. In this case, this was an order that we received in March and preferred promptly in April. The underlying technology is one we've used for many years in the production of our core metal matrix composite products. As you may recall, we're already applying this technology to the ongoing Army Phase II program to provide 40-millimeter controlled fragmentation warheads. Now, outside of the SBIR work, we've engaged with a commercial customer who needs tungsten alloy components with features that cannot be cost-effectively produced by other manufacturing methods. Our quick-set injection molding process successfully produces the desired size and features to satisfy the contract. This is our first such commercial order, and we're optimistic about the future of these capabilities for varying industrial opportunities as well as military applications. This win is closely aligned with our strategic objective of continuing to build out our product portfolio based on our unique intellectual property, particularly related to metals, ceramics, and composites. In addition, we remain optimistic about the possibility of new hybrid tech armor orders. Kinetic Protection advises us that new contracts supporting the U.S. Navy are anticipated in the latter half of the current calendar year. As a reminder, whereas our orders in the 2021 to 2014 timeframe provided protection for aircraft carriers, the potential new business would be for a small quantity of U.S. Navy destroyers. Congressional funding has already been secured to implement ballistic shields on a handful of these vessels. Detailed contract negotiations are expected to begin soon, and we look forward to returning to this important market. In summary, we continue to be upbeat about 2026 and beyond. While the new facility relocation is taking a bit longer than anticipated, we have not wavered from our goal of finding and occupying the best site possible to position the company for faster growth as well as improved bottom line results. The demand for our products remains strong, and we're actively finding and bidding on new opportunities every month. The future is bright, and CPS is transforming this very larger, broader-based technology organization to meet the advanced uniqueness of our clients today and tomorrow. Jenny, we can now open the call up for questions.

Thank you very much. We are now opening the floor for questions. If you would like to ask a question, please press star 1 on your phone keypad now. We ask that while you're posing the question, you please pick up your handset if you're listening on a speakerphone to provide optimum sound quality. So star 1 if you would like to ask a question. Thank you. Our first question is coming from Chip Moore of Roth. Chip, your line is live.

Good morning. Thanks for taking the question. Hey, everybody, and thanks, Chuck, and congrats, Chris, for joining in the CFO role. I guess, you know, maybe start there. I guess, Chris, just, you know, it seems like your background is very well aligned with what CDF is doing, but just maybe, on that and what you're excited about.

Yeah, thank you, Chip. I'm very excited to be joining CPS. I see a strong company with a good record and tremendous opportunities in front of it and opportunities that aren't afforded to most other companies. It's been challenging, but I see Brian, Chuck, and the rest of the management team are focusing on the right area to continue to improve the financial performance of the country. And I'm really looking forward to how can that happen.

Great. Look forward to working with you. And Brian, I think, you know, in your commentary, it sounds like, you know, the demand environment remains quite healthy. Just maybe expand on, you know, Some of the order lumpiness you saw this quarter, and I think you called out MMC in particular, was maybe a little softer. Is this just timing, or is this sort of lingering into the current quarter, or how are you thinking about sort of the forward view there?

Yeah, there's always some variance in revenue, and we saw that in Q1. We have a strong order book going forward across the board. and I mean, you know, the reality is that 2025 was a strong year for us. Q1 would have been the top revenue year of 2024. Every quarter of 2024 was below $6 million, I believe. So the upward march will continue. You know, we're not pleased with these numbers, but we know there's strength ahead of us. And part of it is the inventory build as well. You know, revenue waiting to be shipped, which will be the implementation of the move to keep customers satisfied for the years where we are able to do that. Of course, that's not always the case, but places where we can build inventory. Our inventory grew more in Q1 than it did in all of 2025, so it stepped up significantly, which is positioned as well for the upcoming move.

Yeah, no, that's fair, and we'll look forward to more details there. It sounds like you're narrowing things down, and we should expect something pretty soon. I guess in some of the other areas, you know, what are you excited about? I think, you know, hybrid tech armor coming back, it sounds like you've had great confidence with Kinetic. You know, what's the potential? You know, it sounds like it's a A smaller opportunity maybe initially, but potential for that to grow as well. And then I believe you've got some armor potential in the SBIR program as well.

Yeah, that's right. The congressional funding is allocated toward the destroyers. And as I mentioned, that contract negotiations will be resolved over the next several months.

So optimistic about that.

As far as the destroyer class, we've known for quite a while that key Navy personnel are interested in applying the hybrid tech armor to those needs. So this, you know, we kind of view as the foot in the door. We don't expect a large number of vessels to be funded in this initiative, but it opens this door to later opportunities as well. And, yeah, the amphibious vehicle is, you know, effectively the Navy is paying us to review opportunities to remove the weights of a sort of a large hollow, you know, steel wheeled vehicle. There's just not a tremendous amount of opportunity for weight reductions on those steel panels to protect them. So our team, of course, sees those as opportunities to apply the over-resolution that we're very familiar with. So that's a significant opportunity for us that will play out over time. The execution of the phase one option to allow us to continue that work for six months is obviously a very favorable They went from the Navy. And I think the last item that I touched on was the tungsten alloy shipment. That opens up a whole field of new opportunities for us with technology that we already have in-house. And the ability to make net-shaped components with certain features is fairly unique to quick-set injection molding, which is what we have. If you look at metal injection molding, pictures on the Internet, typically very small components. I mean, they're often pictured next to a penny to give you the scale. We're not limited in scale by that. So we can make much bigger pieces, which is evidenced by the 40-millimeter cordon. It's 40 millimeters across and roughly the same in height. So it's a much larger scale of components that we can produce that we've already turned around that first quarter. That's another strong signal for our future.

That's very helpful, and I assume Lumen, too, the new facility will help enable a lot of this as well. Maybe a last one for me, just on the cost side, you know, inflation, raw materials, some of those things, have you seen any impacts, or how are you thinking about inputs? Yeah, I can take that.

So I think... The material costs, especially on the metal matrix composite side, are not a large part of the cost profile. You know, mostly labor, overhead, that kind of thing. So, you know, there's a little bit of pressure from, for example, aluminum prices are up a little bit, but, you know, in terms of the cost and other middle nature composite product, you know, it may be the increase of maybe, you know, half a percent or something along those lines. And of course, I'll say significant exceptions, you know, we have, you know, we're taking orders for, you know, the next three to six months for the most part and, you know, when those new orders come in, we certainly have the flexibility to adjust pricing if it's necessary. So, you know, I don't I don't see that as a major issue, at least not at this point. I will say, in terms of the tungsten that Brian was talking about, you know, tungsten prices have skyrocketed. That makes a difference, but at the same time, you know, we don't have orders out to expand on that a little bit that, as Brian mentioned, because our manufacturing method reduces waste when it comes to tungsten, you know, that is huge. We can make an item for, you know, using less tungsten than, you know, if somebody's going to machine a part out of tungsten, for example.

Yeah, great. Appreciate all the callers. I'll hop back into you. Thanks, everybody.

Thank you very much. Just a reminder there, if you would like to ask any questions, you can still join the queue by pressing star 1 on your phone keypad now. And our next question is coming from Joe Schicker, who's a private investor. Joe, your line is live.

Yes, good morning, gentlemen. Thank you for taking my call. In your 10K, you list three product areas you're MMC, your hermetic packaging products, and hybrid tech armor. Could you tell me which product area is growing the fastest at this particular time?

Well, I'll start with armor. That's probably the easiest. We've sold an order for the aircraft carriers for the Navy since 2021 until about April of 2004. So today that armor revenue is effectively zero, although there are some opportunities, particularly through our partner, Kinetic Protection, that we talked about a moment ago, which we anticipate that relatively small order for a small quantity of destroyer vessels. But today, you know, in Q1, armor revenue is effectively zero. The other two product lines that we offer, we're seeing overall strength in both of those. There's a variety of dynamics in the minimum interest deposit market that are pushing that to stronger places, and hermetic packaging continues to grow for us as well. We don't always know the end use for those hermetic packages. We know they generally go into aerospace and defense applications, and obviously there's been a lot of consumption in some of those places around the world. Conflicts Overseas, etc. We recently took that $4 million which is a sizable step up for that one unit. So we're seeing both. I don't know if we compare one to the other other than we continue to see both in both and that's the reason we need to find a larger facility.

Okay, okay, great. Okay, now you may not want to answer this question, but Anyway, I'll pose it. Could you give me a ballpark sales percentage of your three product lines? You know, like MMC is 20%, this one, blah, blah, blah.

Yeah. So, obviously, like I mentioned today, Armour is, you know, 0%. And I would say that probably MMC versus... for some schematic packages is maybe, you know, 60, 40, 70, 30, something in that, you know, in the 60s versus the, you know, the 30s kind of range. I think it's probably fairly accurate. But there is a lot of fluctuation, you know, potentially there, which is why, you know, we can't, you know, give a, you know, specific answer on that.

Yeah.

Yeah, and there's definitely a lot of energy, but they're both extremely significant. And then on top of that is a little bit of that FDIR funding, which is now probably 5% of our revenue comes from FDIR funding, something like that.

Okay. All right. And final question is this. Have you ever thought about doing a YouTube interview with Tim Weintraub of Alpha Wolf Trading or potentially Martin Gagel of Radius Research to let individual investors like myself learn more about your company.

We don't know those names in particular, but we are considering a number of ways to get our names out there, and we'll certainly make a note of that from the transcript. Thank you very much. Just a reminder, you can still jump in the queue if you want to by pressing cell 1 on your phone keypad.

if anybody else comes into the queue. Okay, I'm not seeing anyone else in the queue. So we have reached the end of our question and our session. So I will now hand back over to Brian for any closing comments.

Great, thank you. Thanks everyone for joining us today for your ongoing interest in CPS Technologies. We'll start speaking with you again after the end of the second quarter. In the interim, if you have any questions, please reach out to our investor relations advisor. Thank you.

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.