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    CPSH
    Earnings call· Jun 2026(Q2 FY26)

    CPS TECHNOLOGIES CORP/DE/ Q2 FY26 earnings call CPSH

    Aug 5, 2026 Source

    Executive summary

    CPS Technologies Q2 FY26 — Gross Margin Recovery and Strategic Facility Relocation Underway

    CPS Technologies reported a slight revenue increase and a significant gross margin recovery in Q2 FY26, driven by improved efficiency. The company is actively progressing with its strategic manufacturing facility relocation, which is crucial for future growth and new product manufacturing, despite initial timeline delays. With strong capital resources from recent raises, CPS is focused on expanding production capacity and advancing defense and commercial applications for its AlMax and tungsten alloy materials.

    Highlights

    4

    • Revenue increased to $8.3 million in Q2 FY26, up from $8.1 million in Q2 FY25.

    • Gross margin substantially recovered to 14.8% in Q2 FY26, up from 8.6% in Q1 FY26.

    • Successfully completed a secondary offering in May, raising $9.6 million in gross proceeds.

    • Ended the quarter with $19.2 million in combined cash and marketable securities, up from $13.2 million at the beginning of the year.

    Concerns

    4

    • Operating loss of $200,000 in Q2 FY26, compared to an operating profit of $100,000 in Q2 FY25.

    • SG&A expenses increased to $1.5 million in Q2 FY26, up from $1.2 million in Q2 FY25, due to one-time noncash stock options.

    • Gross margin year-over-year decreased to 14.8% from 16.5% in Q2 FY25, impacted by higher material and plating costs.

    • Initial estimates for the new manufacturing facility relocation were overly aggressive, extending the timeline.

    Guidance & targets

    4
    CategoryTargetConfidence
    Shipment Pace
    similar pace as the second quarter going forward
    medium materiality
    High
    Company Performance
    better performance
    high materiality
    Medium
    HybridTech Armor Contracts Resolution
    resolved and issued later this year
    medium materiality
    High
    SBIR Proposal Responses
    receive responses in the coming weeks and months
    low materiality
    Medium

    Operational metrics

    14
    Non-GAAP gross margin
    14.8%up 620 bps QoQ, down 170 bps YoY
    Q2 FY26

    Substantial recovery from Q1 levels, but year-over-year decrease due to cost pressures.

    SG&A expenses
    $1.5Mup from $1.2M YoY
    Q2 FY26

    Increase primarily due to one-time noncash stock option expenses.

    Operating loss
    $200Kvs operating profit of $100K in Q2 FY25
    Q2 FY26

    Company posted an operating loss in the current quarter.

    Net income
    $40Kvs $100K in Q2 FY25
    Q2 FY26

    Essentially breakeven net income for the quarter.

    Non-GAAP EPS
    $0.00vs $0.01 in Q2 FY25
    Q2 FY26

    Essentially breakeven EPS for the quarter.

    Cash and investments balance
    $19.2Mup from $13.2M at beginning of FY26
    end Q2 FY26

    Combined total of cash and marketable securities, significantly increased due to secondary offering.

    Secondary offering proceeds
    $9.6M
    May 2026

    Successfully completed secondary offering providing additional capital.

    Trade accounts receivable
    $4.9Mvs $5.2M end Q2 FY25
    end Q2 FY26

    Slight decrease in trade accounts receivable year-over-year.

    Inventory
    $8.6Mup from $5.6M at start of FY26
    end Q2 FY26

    Increase in inventory reflecting preparation for the facility relocation.

    Payables and accruals
    $4Mvs $4.3M as of Dec 27, 2025
    end Q2 FY26

    Slight decrease in payables and accruals.

    Capital raises
    2
    last 12 months

    Two capital raises completed providing sufficient resources for growth.

    Tungsten program duration
    Fall 2027
    ongoing

    Funding from the U.S. Army supports ongoing work on a controlled fragmentation 40-millimeter warhead.

    ACV program option period
    6 months
    June 2026 - December 2026

    The Navy exercised a 6-month option period for the amphibious combat vehicle program.

    SBIR/STTR reauthorization
    FY2031
    through

    SBIR and STTR programs have been fully reauthorized by Congress through fiscal 2031.

    Industry KPIs

    5
    MetricValueDetails
    Orders book to billstrong
    Design wins product cycle rampsActively quoting tungsten alloy parts
    Order visibility backlog policyScheduled out
    Capacity expansion internal sourcingNew facility twice the size of current location
    Operating margin incremental leverage14.8%%

    Orderbook & backlog

    1
    Order backlogstrongQ2 FY26

    Supports anticipated shipments at a similar pace as Q2 FY26 going forward.

    Deals & partnerships

    1
    Kinetic ProtectionCollaboration on HybridTech Armor for U.S. Navy destroyers

    Congressional funding has been approved to implement ballistic shields from CPS on a small number of destroyer class vessels. Contracts are expected to be resolved and issued later this year.

    Capital programs

    3
    New Manufacturing Facility Relocationunderwaymillions of dollars
    Funding: original capital raise (October)
    Start: Q2 FY26 (negotiation phase)

    Benefit: twice the size of current location, improved production capacity and efficiencies, better layout for new equipment

    The company is close to finalizing lease terms. The process includes 3-4 months for design and permitting, followed by 7-8 months for construction and equipment installation. The total cost for build-out, rigging, and CapEx is in the millions of dollars, largely covered by the original capital raise.

    Metal Matrix Composites Production Capacity Expansionunderway

    Benefit: increased production capacity

    Additional capital expenditures are planned to improve and expand production capacity, with new equipment to be delivered to the new facility.

    AlMax and Tungsten Alloys Scale-upunderway

    Benefit: scale-up of capabilities

    Anticipate additional expenditure over time to support the scale-up of capabilities for newer offerings such as AlMax material and tungsten alloys produced using QuickSet injection molding process.

    Risks & headwinds

    7
    Geopolitical eventsOngoing

    Ongoing conflicts in Ukraine and the Middle East

    Economic conditionsOngoing

    General economic conditions

    Market demands and competitive factorsOngoing

    Market demands and competitive factors

    Higher material and plating costsQ2 FY26

    Caused year-over-year gross margin decrease from 16.5% to 14.8%

    Mitigation: Partially offset by improved labor and overhead efficiency

    One-time SG&A expensesQ2 FY26

    Increased SG&A to $1.5M from $1.2M YoY

    Extended timeline for new facility relocationPast and ongoing

    Initial estimates were overly aggressive, search and negotiation process took longer than expected

    Mitigation: Measured approach ensuring optimal selection, current lease runs through Feb 2028 provides flexibility

    SBIR proposal backlogOngoing, expected responses in coming weeks and months

    Significant backlog of Phase 1 and Phase 2 proposals awaiting funding decisions, some dating back to August last year

    Mitigation: Agencies are actively working through the backlog, company continues submitting proposals

    What to watch in Q3 FY26

    4

    New facility lease finalization

    Coming weeks/months
    CurrentVery close to finalizing lease terms
    TargetFormal announcement regarding a new facility

    Why it matters

    Securing the new facility is fundamental to the company's go-forward growth strategy, enabling expansion and efficiency improvements.

    Today, however, we're very close to finalizing the lease terms for a new facility, and I expect we will soon be making a formal announcement regarding a facility that is twice the size of our current location.

    Q&A highlights

    2

    Can you comment on the competitive standing of AlSiC versus copper tungsten in terms of cost and price volatility, and if it's retaining or gaining new business?

    Brian Mackey acknowledged the competitive nature of the area and stated he would provide more factual details offline, as he was hesitant to go too deep into technical specifics on the call.

    “Yes. That's a technical post there that I'm a little hesitant to get too deep into the weeds on that, Steve. I know that that's a competitive area where we like what our offering represents. But specifically how we're seeing that manifest, I'd have to pull some other people into that conversation, and I'd be happy to send you something offline that speaks directly to that.”

    asked by Steven Fassey · answered by Brian Mackey

    2 min read5 chapters

    Detailed Narrative

    01

    Q2 FY26 Financial Performance Overview

    CPS Technologies reported Q2 FY26 revenue of $8.3 million, a slight increase from $8.1 million in Q2 FY25. Gross profit recovered significantly to $1.2 million or 14.8% of revenue, up from 8.6% in Q1 FY26, but down from 16.5% in Q2 FY25 due to higher material and plating costs. The company posted an operating loss of $200,000 and net income of $40,000, or $0.00 per share, compared to an operating profit of $100,000 and net income of $100,000 or $0.01 per share in the prior year.

    02

    Strategic Manufacturing Facility Relocation Update

    The company is close to finalizing lease terms for a new manufacturing facility, which will be twice the size of its current location. The relocation process, including detailed architectural design, permitting, construction, and equipment installation, is expected to take approximately 10-12 months after lease execution. The current lease runs through February 2028, providing flexibility. This move is critical for expanding production capacity, improving efficiencies, and supporting new product lines like AlMax and tungsten alloys.

    03

    Growth Initiatives and Capital Allocation

    CPS Technologies completed two capital raises within the last 12 months, including a secondary offering in May that generated $9.6 million in gross proceeds, bringing total cash and marketable securities to $19.2 million. These funds are earmarked for outfitting the new facility, physical relocation costs, and capital expenditures to expand production capacity, particularly for metal matrix composites. Additional CapEx is anticipated to scale up capabilities for AlMax and tungsten alloy offerings.

    04

    Tungsten Alloy and AlMax Materials Development

    Work on a controlled fragmentation 40-millimeter warhead, funded by the U.S. Army, continues until fall 2027, with optimism for future volume revenue. The company is seeing positive market feedback for tungsten alloy components, actively quoting parts for commercial and defense applications, believing they can be produced more cost-effectively. AlMax material is also being explored for lightweighting applications, such as replacing steel components in amphibious combat vehicles.

    05

    Defense Programs and SBIR Funding

    Congressional funding has been approved for ballistic shields from CPS on destroyer class vessels, with contracts expected later this year, marking a return to revenue for HybridTech Armor. The amphibious combat vehicle (ACV) program is in a 6-month option period, with potential for follow-on Phase II funding in December. While SBIR and STTR programs are reauthorized through FY2031, there is a significant backlog of proposals awaiting funding decisions, with responses expected in the coming weeks and months.

    AI-generated summary of the company’s earnings call. Not investment advice.