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CPS TECHNOLOGIES CORP/DE/ 8-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

CPS Technologies Corp.

Filing date:

03/14/2025

TLDR:

CPS Technologies Corp. announced its Q4 2024 financial results, with revenue of $5.9 million and a net loss of $1.0 million, while expressing an improving outlook for 2025.

ELI5:

CPS Technologies had a tough year because a big project ended, causing them to lose money. However, they’re hopeful for the future because they’re getting new projects and trying to sell their products in new areas.

Accession #:

0001437749-25-007695

Published on

Analyst Summary

  • Q4 2024 revenue increased compared to Q3 2024, indicating a potential turnaround despite a year-over-year decrease due to the completion of the HybridTech Armor contract.
  • The company experienced a gross loss in Q4 2024 and a small gross loss for the full year, attributed to lower volumes and startup costs.
  • Management emphasizes strategic initiatives to diversify revenue streams and expand into new markets, highlighting recent SBIR contract wins and the first commercial sale of radiation shielding.
  • The company’s cash position has decreased significantly, indicating cash burn, though the addition of marketable securities partially offsets this.
  • Gross Profit Margin decreased from 24.77% to -0.56% year-over-year.
  • Operating Profit Margin decreased from 6.17% to -20.74% year-over-year.
  • Net Profit Margin decreased from 4.97% to -14.84% year-over-year.
  • Revenue decreased by 23.33% year-over-year.
  • Net Income decreased by 328.82% year-over-year.

Opportunities and Risks

  • Risk: Dependence on government contracts subjects the company to funding uncertainties and competitive bidding processes.
  • Risk: The completion of the HybridTech Armor contract has negatively impacted revenue and profitability.
  • Risk: Recent financial performance raises concerns about the company’s ability to achieve and sustain profitability.
  • Risk: The decrease in cash and cash equivalents indicates a potential need for additional financing.
  • Opportunity: Expansion into new markets, such as radiation shielding and Fiber Reinforced Aluminum (FRA) applications, presents significant growth opportunities.
  • Opportunity: Recent SBIR contract wins provide funding for research and development, potentially leading to new products and revenue streams.
  • Opportunity: Increased production capacity positions the company to meet growing demand for its core products.
  • Opportunity: The ongoing $13.3 million power module contract provides a stable revenue base.

Potential Implications

Company Performance

  • Diversification efforts and new market entries could improve long-term revenue and profitability.
  • Continued losses and cash burn could necessitate cost-cutting measures or additional financing.
  • Successful execution of SBIR contracts could lead to new product development and revenue streams.

Stock Price

  • Positive news regarding new contracts and market expansion could positively impact the stock price.
  • Continued financial losses and cash burn could negatively impact the stock price.
  • Overall, a ‘Hold’ recommendation suggests a neutral outlook, with the stock price likely to remain stable unless significant positive or negative developments occur.

SEC Filing Report: CPS Technologies Corp. – 8-K (March 14, 2025)

Executive Summary

This report analyzes the 8-K filing from CPS Technologies Corp. (CPSH) on March 14, 2025, focusing on the announcement of their Q4 2024 and full-year financial results. The company is navigating a transition period following the completion of a significant armor contract, but management expresses optimism for 2025, citing increased demand for core products, new contract wins, and expansion into new markets. While the Q4 results show a net loss, there are positive signs of revenue growth compared to earlier in the year. Overall, a cautious “Hold” recommendation is warranted. The company shows potential, but profitability needs to be consistently demonstrated.

Company Overview

CPS Technologies Corp. is a technology and manufacturing company specializing in high-performance materials solutions. Their products are used in various applications, including transportation, energy, aerospace, and defense. The company operates in a competitive landscape, facing challenges from larger material science companies and smaller specialized firms.

Detailed Analysis

Financial Statement Analysis

Key Figures and Trends

Metric Q4 2024 Q4 2023 FY 2024 FY 2023 Change (FY)
Revenue $5.9M $6.7M $21.1M $27.6M -23.5%
Gross Profit (Loss) $(0.3)M $1.1M $(0.1)M $6.8M -101.5%
Operating Income (Loss) $(1.3)M $0.1M $(4.4)M $1.7M -358.8%
Net Income (Loss) $(1.0)M $0.2M $(3.1)M $1.4M -325.0%
EPS (Diluted) $(0.07) $0.01 $(0.22) $0.09 -344.4%

Revenue: Revenue decreased significantly year-over-year, primarily due to the completion of the HybridTech Armor contract. However, Q4 2024 revenue increased compared to Q3 2024, indicating a potential turnaround.

Gross Profit: The company experienced a gross loss in Q4 2024 and a small gross loss for the full year, compared to a significant gross profit in the previous year. This is attributed to lower volumes, reduced economies of scale, and startup costs associated with a new third shift.

Operating Income: Operating loss widened significantly, reflecting the impact of lower gross profit and continued operating expenses.

Net Income: The company reported a net loss for both Q4 and the full year, a stark contrast to the net income reported in the previous year.

Balance Sheet Highlights

Metric Dec 28, 2024 Dec 30, 2023 Change
Cash and Cash Equivalents $3.3M $8.8M -$5.5M
Marketable Securities $1.0M $0 +$1.0M
Total Current Assets $14.2M $18.1M -$3.9M
Total Assets $18.9M $21.6M -$2.7M
Total Liabilities $4.4M $4.3M +$0.1M
Stockholders’ Equity $14.5M $17.3M -$2.8M

Cash Position: The company’s cash position has decreased significantly, indicating cash burn. The addition of marketable securities partially offsets this.

Assets: Total assets have decreased, reflecting the lower cash balance and other changes in asset values.

Equity: Stockholders’ equity has decreased, primarily due to the accumulated deficit from net losses.

Management’s Narrative (MD&A) Insights

Management’s tone is optimistic, emphasizing the company’s strategic initiatives to diversify its revenue streams and expand into new markets. They highlight the recent SBIR contract wins and the first commercial sale of radiation shielding as positive developments. The narrative focuses on future growth and profitability, despite the current financial losses. The increased production capacity and backlog are presented as key drivers for improved performance in 2025.

Risks and Opportunities

Risks

  • Dependence on Government Contracts: A significant portion of the company’s revenue is derived from government contracts, which are subject to funding uncertainties and competitive bidding processes.
  • Loss of Armor Contract Impact: The completion of the HybridTech Armor contract has had a significant negative impact on revenue and profitability.
  • Profitability Concerns: The company’s recent financial performance raises concerns about its ability to achieve and sustain profitability.
  • Cash Burn: The decrease in cash and cash equivalents indicates a potential need for additional financing.

Opportunities

  • New Market Expansion: The company’s efforts to expand into new markets, such as radiation shielding and Fiber Reinforced Aluminum (FRA) applications, present significant growth opportunities.
  • SBIR Contract Wins: The recent SBIR contract wins provide funding for research and development, which could lead to new products and revenue streams.
  • Increased Production Capacity: The addition of a third shift and increased production capacity position the company to meet growing demand for its core products.
  • Power Module Contract: The ongoing $13.3 million power module contract provides a stable revenue base.

Conclusion and Actionable Insights

CPS Technologies Corp. is at a critical juncture. The company is transitioning from a period of reliance on a major armor contract to a more diversified revenue model. While the recent financial results are concerning, the management’s optimism and the company’s strategic initiatives offer potential for future growth. However, investors should closely monitor the company’s progress in achieving profitability and managing its cash flow.

Recommendation: Hold. Monitor the company’s performance in the coming quarters, particularly its ability to generate revenue from new products and markets, and its progress towards profitability.

1. Commentary

CPS Technologies Corp. faces significant challenges as indicated by the negative gross profit and net loss for the year ended December 28, 2024. Revenue declined substantially compared to the previous year, primarily due to the completion of a major contract. However, the company is making efforts to diversify its revenue streams, as evidenced by new SBIR contracts and the first commercial sale of radiation shielding. The company’s liquidity position has weakened, as cash reserves have decreased significantly.

2. Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

Metric: (Gross Profit / Total Revenue) * 100

  • 2024: (-$118,638 / $21,123,346) * 100 = -0.56%
  • 2023: ($6,825,409 / $27,550,646) * 100 = 24.77%

Operating Profit Margin

Metric: (Income from Operations / Total Revenue) * 100

  • 2024: (-$4,380,928 / $21,123,346) * 100 = -20.74%
  • 2023: ($1,699,363 / $27,550,646) * 100 = 6.17%

Net Profit Margin

Metric: (Net Income / Total Revenue) * 100

  • 2024: (-$3,135,449 / $21,123,346) * 100 = -14.84%
  • 2023: ($1,370,296 / $27,550,646) * 100 = 4.97%

Return on Assets (ROA)

Metric: Net Income / Total Assets

  • 2024: -$3,135,449 / $18,876,946 = -16.61%
  • 2023: $1,370,296 / $21,602,116 = 6.34%

Return on Equity (ROE)

Metric: Net Income / Total Stockholders’ Equity

  • 2024: -$3,135,449 / $14,512,119 = -21.61%
  • 2023: $1,370,296 / $17,321,974 = 7.91%

Earnings Per Share (EPS) – Basic and Diluted

Metric: Net Income / Weighted Average Shares Outstanding

  • 2024: -$3,135,449 / 14,522,513 = -$0.22
  • 2023: $1,370,296 / 14,628,811 = $0.09

Liquidity

Current Ratio

Metric: Current Assets / Current Liabilities

  • 2024: $14,159,016 / $4,307,550 = 3.29
  • 2023: $18,144,251 / $4,068,775 = 4.46

Quick Ratio (Acid-Test Ratio)

Metric: (Current Assets – Inventory) / Current Liabilities

  • 2024: ($14,159,016 – $4,331,066) / $4,307,550 = 2.28
  • 2023: ($18,144,251 – $4,581,930) / $4,068,775 = 3.33

Cash Ratio

Metric: (Cash and Cash Equivalents + Marketable Securities) / Current Liabilities

  • 2024: ($3,280,687 + $1,031,001) / $4,307,550 = 1.00
  • 2023: $8,813,626 / $4,068,775 = 2.17

Solvency/Leverage

Debt-to-Equity Ratio

Metric: Total Liabilities / Total Stockholders’ Equity

  • 2024: $4,364,827 / $14,512,119 = 0.30
  • 2023: $4,280,142 / $17,321,974 = 0.25

Debt-to-Assets Ratio

Metric: Total Liabilities / Total Assets

  • 2024: $4,364,827 / $18,876,946 = 0.23
  • 2023: $4,280,142 / $21,602,116 = 0.20

Interest Coverage Ratio (Times Interest Earned)

Metric: Earnings Before Interest and Taxes (EBIT) / Interest Expense

  • 2024: -$4,093,949 / -$286,979 = 14.27
  • 2023: $1,952,381 / -$253,018 = -7.72

Activity/Efficiency

Inventory Turnover

Metric: Cost of Goods Sold / Average Inventory

  • 2024: $21,241,984 / (($4,331,066 + $4,581,930) / 2) = 4.77
  • 2023: $20,725,237 / (($4,581,930 + Prior Year Inventory which is not available) / 2) = N/A

Days Sales Outstanding (DSO)

Metric: (Accounts Receivable / Revenue) * 365

  • 2024: ($4,858,208 / $21,123,346) * 365 = 83.97 days
  • 2023: ($4,389,155 / $27,550,646) * 365 = 58.16 days

Days Payable Outstanding (DPO)

Metric: (Accounts Payable / Cost of Goods Sold) * 365

  • 2024: ($3,053,712 / $21,241,984) * 365 = 52.47 days
  • 2023: ($2,535,086 / $20,725,237) * 365 = 44.68 days

Asset Turnover

Metric: Revenue / Total Assets

  • 2024: $21,123,346 / $18,876,946 = 1.12
  • 2023: $27,550,646 / $21,602,116 = 1.28

Valuation

Price-to-Earnings Ratio (P/E)

Metric: Share Price / Earnings Per Share

  • 2024: $1.52 / -$0.22 = -6.91

Price-to-Book Ratio (P/B)

Metric: Market Capitalization / Total Stockholders’ Equity

  • 2024: (14,525,960 * $1.52) / $14,512,119 = 1.52

Price-to-Sales Ratio (P/S)

Metric: Market Capitalization / Total Revenue

  • 2024: (14,525,960 * $1.52) / $21,123,346 = 1.05

Enterprise Value to EBITDA (EV/EBITDA)

Metric: (Market Cap + Total Debt – Cash) / EBITDA

  • 2024: ((14,525,960 * $1.52) + $26,000 – $3,280,687) / (-$4,380,928 + $286,979) = -4.49

Growth Rates

Revenue Growth

Metric: (Current Year Revenue – Prior Year Revenue) / Prior Year Revenue

  • 2024: ($21,123,346 – $27,550,646) / $27,550,646 = -23.33%

Net Income Growth

Metric: (Current Year Net Income – Prior Year Net Income) / Prior Year Net Income

  • 2024: (-$3,135,449 – $1,370,296) / $1,370,296 = -328.82%

EPS Growth

Metric: (Current Year EPS – Prior Year EPS) / Prior Year EPS

  • 2024: (-$0.22 – $0.09) / $0.09 = -344.44%

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️