CPS Technologies Corporation Stock

Good day, ladies and gentlemen, and welcome to the CPS Technologies Corporation Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mr. Chris Fraser, Chief Financial Officer at CPS Technologies. Sir, the floor is yours.

Thank you, Ali, and good morning, everyone. Today, I'm joined by Brian Mackey, our President and CEO. We look forward to discussing our second quarter results with you. But first, Chris Witty, our Investor Relations adviser, will provide a brief safe harbor statement. Chris?

Thanks, Chris, 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 the many uncertainties that exist in CPS' operations and environment. These uncertainties include, but are not limited to, the ongoing conflicts in Ukraine and the Middle East, other geopolitical events, economic conditions, market demands and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement. Additional information can be found in our filings with the SEC.

Now I will turn the call over to Brian to offer his perspective on the quarter, after which Chris Fraser will review the financial results in greater detail. Brian?

Thanks, Chris. As a quick reminder, at the time of our previous quarterly earnings call on May 5, it was only Chris Fraser's second day with the company. He officially assumed the role of CFO on May 18, and our former CFO, Chuck Griffith, retired from CPS at the end of May as expected. The transition has gone well, and we're very glad to have Chris on board.

Now turning to our Q2 results. We posted sales of $8.3 million, up slightly year-over-year and with an increase over first quarter levels, reflecting overall robust demand. While pleased with this top line improvement, we're also glad to note a substantial recovery in gross margins to 14.8% from 8.6% in Q1. Our outlook remains strong, and I'll come back in a moment to talk more about our commercial outlook as well as our plans for an improved manufacturing center. But first, let me turn the call over to Chris to provide further details about our financial results. Chris?

Thank you, Brian. As just stated, CPS reported revenue of $8.3 million for the period compared with $8.1 million in the second quarter of 2025. And we anticipate shipments to continue at a similar pace as the second quarter going forward given our current order backlog and outlook. We're very focused on executing a plan to move to a new facility, which will position the company for better performance in 2027 and beyond. Brian will speak more to this in a moment. And we reported gross profit of $1.2 million or 14.8% of revenue versus $1.3 million or 16.5% of revenue in the second quarter of last year, with the year-over-year decrease caused in part by higher material and plating costs, which is partially offset by improved labor and overhead efficiency.

As Brian mentioned, our gross margin improved by 620 basis points relative to Q1 levels this year. SG&A or selling, general and administrative expenses totaled $1.5 million in the second quarter of this year, up from $1.2 million last year, reflecting some one-time expenses, mainly noncash stock options, which happened in the first quarter of last year and the second quarter this year. And the company posted an operating loss of about $200,000 in the current quarter compared to an operating profit of $100,000 in 2025.

Including other income and tax benefit, we reported net income of roughly $40,000 or $0.00 per share this quarter, essentially breakeven versus net income of around $100,000 or $0.01 per share in the second quarter of last year.

Before turning to the balance sheet, I'd like to note that we successfully completed a secondary offering in May that raised proceeds of $9.6 million that the gross proceeds, providing additional capital to support our growth initiatives. With this in hand, we ended the quarter with $15.4 million of cash and $3.8 million in marketable securities or $19.2 million combined versus a combined total of $13.2 million at the beginning of the year. Last -- at the beginning of the year, we had $4.4 million in cash and $8.8 million in marketable securities. So we are currently very well funded. Trade accounts receivable totaled $4.9 million at the end of June 2026 versus $5.2 million as of the end of Q2 last year, while inventories increased to $8.6 million at the end of the second quarter compared with $5.6 million at the start of the year, reflecting our preparation for a move to a new facility.

Turning to the liability side. Payables and accruals totaled $4 million at the end of the second quarter versus $4.3 million as of December 27, 2025. Now Brian will provide more in-depth discussion of the period and outlook. Brian?

Great. Thanks, Chris. I want to first give an update about our plan to move to a larger improved manufacturing facility. I realize our investors are eager to hear an update on the status of this initiative to relocate to an improved space, something we consider fundamentally important to our go-forward growth strategy due to both strong demand for our existing products as well as the need for space to manufacture new products that we're bringing to market. It is clear now that our initial estimates were overly aggressive.

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. The specialized operating factors necessary to optimize our production, including power requirements, industrial gas provisions, the floor build-out, et cetera, and all within relatively close proximity to our current locations to maintain our talented employee base expanded the time line for this effort. So while this search and negotiation process has certainly taken longer than we expected, we believe our measured approach is ensuring the optimal selection for our needs.

Although the lease document is not yet signature ready, we are very close to resolution. Once this lease is executed, our design-build partner, Dacon Corporation, will work to complete the detailed architectural and engineering design phase, which is already underway. We expect this process, including laying out the production flow of our various work centers to take approximately 3 to 4 months, culminating with permit approval. The subsequent 7 to 8 months will include construction and equipment installation. Following the phased relocation of our manufacturing operations, we will conduct the necessary equipment qualification, process validation and customer approvals to ensure a smooth transition while minimizing disruption to production and customer deliveries.

As a reminder, our current lease runs through February of 2028. So we have sufficient flexibility to get this done. We believe this process culminating with occupancy at the right location for our company will enable us to capitalize on opportunities for expansion, increase efficiencies and improve margins, leading to better overall long-term performance for the company.

Regarding the current state of our business, the company's backlog for its core products remains strong, supported by the various markets we support and our optimism about our newer products continues to grow. We're experiencing increased interest from a number of industries that our investors are familiar with, including energy infrastructure, AI, defense, semiconductors, space and other commercial applications. Our markets are expanding as our technology offerings support and drive new applications across a wide range of existing and potential customers.

We've completed 2 capital raises within the last 12 months, which provide us with sufficient resources to pursue relevant growth opportunities. The first of these is obviously the cost of outfitting the new location to suit our needs for our production requirements as well as the cost of physically relocating our company. In line with that will be some capital expenditures to improve and expand our production capacity, particularly for metal matrix composites. Also, we anticipate additional expenditure over time to support the scale-up of the capabilities we have for our newer offerings such as AlMax material as well as tungsten alloys produced using our QuickSet injection molding process.

Regarding tungsten, funding from the U.S. Army supports our ongoing work on a controlled fragmentation 40-millimeter warhead with that program continuing until the fall of 2027. We remain optimistic about the potential volume revenue opportunities that may ultimately come from that development work. In parallel, we are now seeing positive market feedback from our offerings of tungsten alloy components. As I mentioned previously, we completed our first small commercial sale earlier this year. Now our business development team is actively quoting tungsten alloy parts, which we believe we can produce more cost effectively than competing manufacturing processes for potential commercial and defense applications. Additional CapEx may be necessary to support this product line as it grows over time.

In line with the indications of market interest that we're seeing for tungsten, AlMax materials and various other products, we're also working to expand our business development team. We need a larger team to respond to the potential sales opportunities that we have identified in various markets, and we anticipate near-term investment in this growth of customer-facing personnel. As I mentioned before, congressional funding has already been approved to implement ballistic shields from CPS on a small number of destroyer class vessels.

Along with our partner, Kinetic Protection, we expect these contracts to be resolved and issued later this year. This represents a return to revenue for our HybridTech Armor product, which we're excited about. With regard to our proprietary portfolio, our research and development work continues, often under externally funded initiatives with the government such as SBIR programs. These include the tungsten warheads for the Army, radiation shielding funded by the DOE, impact limiters for the DOE, thermal energy storage for the Navy and lightweighting of the amphibious combat vehicle for the Navy and Marine Corps.

For the ACV program I just mentioned, we're now in a 6-month option period, which the Navy exercised in June. Once this concludes in December, we expect to have the opportunity for potential follow-on Phase II funding. This program enables us to offer lightweight benefits of 2 of our materials. First, our AlMax material could potentially be used to replace certain steel components across the entire vehicle. Second, our HybridTech Armor solution can provide ballistic protection in place of the steel plates currently used. This represents a second volume opportunity for HybridTech Armor distinct from the destroyer vessels of the U.S. Navy. As mentioned previously, the SBIR and STTR programs have been fully reauthorized by Congress through fiscal 2031.

However, while our pace of submitting proposals continues, there is a significant backlog still awaiting formal responses from the SBIR offices of the DoD and DOE. A number of our Phase 1 and Phase 2 proposals, some going all the way back to August of last year, are awaiting funding decisions. While it's difficult for us to predict the timing of responses we'll see from the government, we see that these agencies are actively working through their proposal backlog. As a result, we expect to receive responses in the coming weeks and months. Overall, given expanding demand for our innovative products and the applications they serve, we remain optimistic about the remainder of fiscal 2026 as well as the years ahead.

In addition, working with Kinetic Protection, we're upbeat about potential new HybridTech Armor orders in the coming quarters. The outlook for such new awards has not looked as positive in several years, and we look forward to providing critical protection to U.S. Navy destroyers just as we've done in recent history with aircraft carriers. We'll keep our investors updated on these developments along with any decision on our pending new facility transition. Once again, I'd like to thank our investors for their interest and enthusiasm as we continue to position the company for even better days ahead.

We can now open the call up for questions. Ali?

[Operator Instructions] We have a question on the line from Steven Fassey, who is an investor.

So you had posted something online recently, maybe on LinkedIn, comparing AlSiC versus copper tungsten from a sort of cost and price volatility standpoint. Can you comment on where that comparison stands and whether you're seeing any actual retaining of business you might otherwise lose or new business from it?

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. So I want to make sure I'm being factual.

Yes, that would be great because I think traditionally, copper has been a pretty strong competitor to your materials. But anyway, I realize it's deep in the weeds.

[Operator Instructions] As we have no further questions on the lines at this time, I would like to -- apologies, we've had a late question come in from Greg Weaver with Invicta Capital.

Sorry, I was slow there. Can you give us a little more color maybe in terms of the movement? So it sounds like you're going to run both operations in parallel is the thought and then slowly move things over, buy new equipment for the new facility, so you don't have to disassemble much and can kind of run in parallel?

Yes. Greg, let me talk through that a little bit. As I mentioned, there'll be a number of months to outfit the building, industrial gas and various work cells, some of which require fire containment, we do deal with molten aluminum and things like that. So some of it is the build-out of that facility to meet our needs, which would then be followed by a staged move of our company where at the end, we would be relocated. So we are scheduling now which work cells will move at which time.

But ultimately, the equipment that's currently here in the building that we occupy will be moved. And we're working with our customers as well to talk through buffer inventory and things like that. We do have some CapEx spending, some of which has already been initiated and others is planned, which is primarily to expand our production capacity for metal matrix composites. So that equipment that we're ordering will be delivered to the new site, but that's additive to the equipment that we have to increase our production capacity.

So ultimately, everything that's here plus the new stuff will end up in the new building after a phased move of certain work cells, it might take a couple of weeks to move this work cell and then a couple of weeks to move these other ones and sequentially do that and overlap that with that validation process where we make sure that equipment operates correctly, and then we make sure the product meets the specifications and the customers are satisfied. But ultimately, everything from here will move over there.

Okay. And do you have any estimate at this point in terms of total dollars for the upfit as well as the new equipment? And I guess from an AlSiC perspective, you're not adding equipment there. I thought you were kind of tight on capacity for that.

That's right. That's why the new equipment will go to the new site. We don't have -- we simply don't have the room for it here. So the new facility provides the additional square footage where we can add equipment and lay it out thoughtfully, which is very difficult to do in our current facility. So it both allows more room and better flow. The new equipment would not come here. We only go over there for that reason.

We're currently totaling up these various budgetary estimates for the rigging to move us over there, the CapEx that we're spending, the build-out, which is by itself millions of dollars. Those are numbers that we -- the original capital raise back in October was intended to cover the majority of that expense, if not all of it, but I'm not quite prepared to publish a tally, but it's in the millions of dollars. It's adding up to get us from here to there and have a better layout once we're done.

Got you. Okay. And just lastly, any requalifications required for the new facility? And do you foresee any issues with when you move the equipment and you're stuck for some period of time where you can't make product on it until it's requalified?

Yes. Those are the discussions that we're having on a case-by-case basis with each customer. In some cases, we're able to build inventory ahead because we know what the customer wants and when they want it, and that will provide us with a bridge for that qualification period, but it more specifically depends on the depth of the qualification. How much is necessary? I mean the reality is it's the same equipment. It's the same personnel, it's the same process, but we are putting it on a truck and moving it and setting it back up.

So validation is necessary. And the details of that depend on the needs of each customer and our relationship with them and how we resolve that. So those are all the things that we're working through as part of our time line and plan.

[Operator Instructions] Okay. As we have no further questions, I'll turn the call back over to Mr. Mackey for any closing remarks.

Okay. Great. Thanks, everyone, for joining us today and for your ongoing interest in CPS. We look forward to speaking with you again after the end of the third quarter. If you have any questions in the interim, please reach out to our Investor Relations adviser. 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, and we thank you for your participation.

Good morning, everyone, and welcome to the CPS Technologies Q1 2026 Earnings Call. [Operator Instructions] 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' operations and environment. These uncertainties include, but are not limited to, the ongoing conflicts in Ukraine and the Middle East, other geopolitical events, economic conditions, market demands and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement. Additional information can be found in our filings with the SEC.

Now I will turn the call over to Brian to offer his perspective on the first quarter, after which Chuck will review the financial results in greater detail. Brian?

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

Thank you, Brian, and it's great to be here. I'm very happy to share some details of my professional background, which has significant overlap with the challenges and opportunities in front of CPS. Most recently, I served as Controller within Precision Castparts Corp. or PCC, which makes aluminum castings for aerospace customers.

Prior to that, at Advanced 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 SBIR and STTR programs. Earlier, I worked at A.W. Chesterton, which manufactures engineered products and North America, where I worked for 17 years. I'm excited to join CPS and 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 his 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 7 years of dedicated service to us here at CPS without which we would not be where we are today. Chuck's 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 order timing. 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 shortly. 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 capability.

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. Chuck?

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 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 timing of our move to a new manufacturing facility is not yet finalized, we remain optimistic about this being executed in the coming quarters, positioning us for stronger growth going forward. Brian will speak to this more in a moment.

We reported gross profit of $0.6 million or 8.6% of revenue versus $1.2 million or 16.4% of revenue in 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 totaled $1.1 million in the first quarter of both fiscal 2026 and 2025, and the company posted an operating loss of $500,000 in the first quarter compared with an operating profit of approximately $100,000 last year. We reported a net loss of roughly $300,000 or negative $0.02 per share versus net income of just under $100,000 or $0.01 per share in fiscal 2025 first quarter.

Turning to the balance sheet. We ended the quarter 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 $4.4 million in cash and $8.8 million in marketable securities. 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 totaled $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 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, payables 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. Jeff has discussed 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 the facility review 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 fit up parameters, including power requirements, industrial gas supply, floor space, et cetera.

We continue to plan for the move as well as and we expect to have an update on transition timing in the near future. However, we continue to move through this process cautiously, our current lease runs through February 2028, providing outfitted appropriately then move too quickly and make a poor decision. This processes improving manufacturing efficiency and growing the company. We're committed to keeping our investors posted in the coming weeks and months.

On other topics, the SBIR and STTR programs have now been fully reauthorized by Congress. And instead of their typical authorization increment of 1 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 continued 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 control fragmentation 40-millimeter head made from tungsten alloys. Additionally, the Navy SBI 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 6 months starting in June. We will continue to define methods of reducing the weight of the ACV with proposals that include potentially incorporating our HybridTech Armor as ballistic protection for the vehicle in place of the steel plates currently used. The Navy's decision regarding potential Phase 2 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 kinetic packaging. We will begin to ship it 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 SKU 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 tungsten alloy components made using our proprietary QuickSet Injection Molding process. In this case, this was an order that we received in March and fulfilled 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 QuickSet 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 various 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 HybridTech 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 2024 time frame 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. 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 into a larger, broader-based technology organization to meet the advanced, unique needs of our clients today and tomorrow.

Jenny, we can now open the call up for questions.

[Operator Instructions] Our first question is coming from Chip Moore of ROTH.

Congrats, Chris, for joining in the CFO role. I guess maybe start there. I guess, Chris, just it seems like your background is very well aligned with what CPS is doing, but just maybe expand on that and what you're excited about?

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. Significant challenges that I see Brian, Chuck and the rest of the management team are focusing on the right areas to continue to improve the financial performance of the company, and I'm really looking forward to helping that happen.

Great. Look forward to working with you. And Brian, I think on your commentary, it sounds like demand environment remains quite healthy. Just maybe expand on 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?

Yes. 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, 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.

We're not pleased with these numbers, but we know there's strength ahead of us -- so -- and part of it is the inventory build as well. That's now revenue waiting to be shipped, which will help with the implementation of the move to keep customers satisfied for the communities 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 positioning us well for the upcoming move.

Yes. No, that's fair. And we look forward to more details there. It sounds like you're narrowing things down, and we should expect something pretty soon. And I guess in some of the other areas, what are you excited about? I think HybridTech Armor coming back, it sounds like you had great confidence with Kinetic. What's the potential? It sounds like it's 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.

Yes, that's right. The congressional funding is allocated toward the destroyers. And as I mentioned, that contract negotiations specifics will be resolved over the next several months. So we're 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 HybridTech Armor to those needs. So this -- 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 the door to later opportunities as well.

And yes, the Amphibious Vehicle, effectively, the Navy is paying us to review opportunities to remove the weight of sort of a large hollow steel wheel vehicle. There's just not a tremendous amount of opportunity for weight reduction that has steel panels for ballistic protection. So our team, of course, sees those as opportunities to apply the armor solution 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 I option to allow us to continue that work for 6 months is obviously a very favorable signal 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 shape components with certain features is fairly unique to QuickSet 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 $0.01 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 warhead. It's 40 millimeters across and roughly the same in height. So it's a much larger scale of components that we can produce, and we've already turned around that first order. So that's another strong signal for our future.

No, that's very helpful. And I assume moving to the new facility will help enable a lot of this as well. Maybe just a last one for me, just on the cost side, inflation, raw materials, some of those things. Have you seen any impacts or how are you thinking about inputs?

Yes, 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. It's mostly labor, overhead, that kind of thing. So there's a little bit of pressure from, for example, aluminum prices are up a little bit. But in terms of the cost of our metal matrix composite products, it's maybe -- the increase is maybe 0.5% or something along those lines. And of course, with a couple of, I'll say, significant exceptions, we have -- we're taking orders for the next 3 to 6 months for the most part. And when those new orders come in, we certainly have the flexibility to adjust pricing if it's necessary. So 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 tungsten prices have skyrocketed. That makes a difference. But at the same time, we don't have orders out for next year that are problematic. Basically, we had that first small order that we placed and the market is the market, so we can price it accordingly. And actually, just to expand on that a little bit that, as Brian mentioned, because our manufacturing method reduces waste when it comes to tungsten, that is huge. We can make an item for using less tungsten than if somebody is going to machine a part out of tungsten, for example.

And our next question is coming from Joe Schicker, who is a private investor.

In your 10-K, you list 3 product areas, your MMC, your hermetic packaging products and HybridTech 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 fulfilled an order for the aircraft carriers for the Navy from 2021 until about April of 2024. So today, that armor revenue is effectively 0, 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, in Q1, armor revenue is effectively 0.

The other 2 product lines that we offer, we're seeing overall strength in both of those. There's a variety of dynamics in the metal matrix composite market that are pushing that to stronger places. Hermetic packaging, it 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, et cetera. We recently booked that $4 million order, which was a sizable step up for that one SKU. So we're seeing both. I don't know if I would compare one to the other, other than we continue to see growth in both, and that's part of 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 3 product lines? Like MMC is 20%. This one is blah, blah...

Yes. So obviously, like I mentioned today, armor is 0%. And I would say that probably MMC versus hermetic packages is maybe 60-40, 70-30, something in the 60s versus the 30s kind of range. I think it's probably fairly accurate. But there is a lot of fluctuation potentially there, which is why we can't give a specific answer on that. Yes, and then there's definitely one from ACV, but they're both extremely significant when it comes to that.

And then on top of that, not profit, but on top of that is a little bit of that SBIR funding, which is now over...

Well, probably 5 percentage of our revenue comes from SBIR funding, yes, something like that.

Okay. All right. And final question is, have you ever thought about doing a YouTube interview with Tim Weintraut 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 do -- we are pursuing a number of ways to get our names out there, and we'll certainly make a more of that from the transcript and recording of this call, because that's a barrier for us. I think there's a lot of investors on this call, their point is probably were not aware of us maybe 12 months ago, and we're going to continue in that direction for sure.

[Operator Instructions] So we have reached the end of our question-and-answer session. So I will now hand back over to Brian for any closing comments.

Great. Thanks, Jenny. Thanks, everyone, for joining us today, for your ongoing interest in CPS Technologies. We look forward to 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 adviser. 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.

Good morning, everyone, and welcome to CPS Technologies Fourth Quarter 2025 Earnings Call. [Operator Instructions].

It is now my pleasure to turn the floor over to your host, Chuck Griffith, CFO 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. We look forward to discussing our fourth quarter results with you. But first, Chris Witty, our Investor Relations adviser, will provide a brief safe harbor statement. Chris?

Thanks, 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 the many uncertainties that exist in CPS' operations and environment.

These uncertainties include, but are not limited to, the ongoing conflict in Ukraine, Israel and Middle East, other geopolitical events, economic conditions, market demand and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement. Additional information can be found in our filings with the SEC.

Now I will 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?

Thanks, Chris. Good morning, everyone. As expected, we just closed out the best year in the company's history from a revenue standpoint with sales of $32.6 million. This was a milestone accomplishment for CPS and marks a strong comeback from where we were just 1 year ago.

We continue to benefit from strong underlying demand and are well on our way to selecting a new site to expand and improve our production capabilities. We also have some news to share regarding HybridTech Armor. I'll speak more to both of these topics in a moment.

As previously announced, we completed a secondary offering in the fourth quarter that raised $9.5 million of net proceeds. With our newly strengthened balance sheet, we are clearly in better shape than at any time in recent memory, and we expect 2026 to position our company very well for higher growth going forward.

Let me now turn the call over to Chuck to provide further details about our financial results, after which I will provide some additional perspective on the quarter and our outlook. Chuck?

Thanks, Brian. The fourth quarter capped a year of significant achievement and puts the company on track for even better days ahead. CPS reported revenue of $8.2 million for the period compared with $5.9 million in the fourth quarter of fiscal 2024.

As with the year in total, the increase was driven by strong product demand and higher overall shipments, benefiting from our third shift and expanded production capabilities. Revenue in Q4 was down from Q3 levels, primarily due to extended holiday periods for our customers, particularly overseas. We reported gross profit in the fourth quarter of $1.2 million or approximately 14.6% of sales compared with a gross loss of $0.3 million last year.

As in other recent quarters, the increase year-over-year was due to higher revenue and greater manufacturing efficiencies. However, margins in Q4 took a step down versus Q3 due to the reduction in revenue as well as the dilutive impact on margins of the dramatically increased cost of gold. A number of our products are gold slated and historically, the expense of some of these charges was rather nominal.

Now, however, these dramatically increased costs are having a dilutive impact on margins as the margin for added gold cost is nominally 0. Going forward, we expect margins to expand as we continue to implement improvements to our operations, notwithstanding any short-term impacts when we move production at the appropriate time. We remain focused on expanding margins as we increase productivity and improve asset utilization at the new facility.

Selling, general and administrative SG&A expenses totaled $1.3 million for the fourth quarter versus $1.0 million in the prior year. We continue to actively manage costs while ramping up production and investing for growth. SG&A remained fairly constant for each quarter of 2025. The company posted an operating loss of about $100,000 in the fourth quarter compared to approximately $1.3 million last year. We reported net income of around $12,000 or $0.00 per share versus a net loss of about $1 million or $0.07 per share in Q4 of fiscal 2024.

Turning to the balance sheet. We ended the year with $4.5 million of cash and $8.8 million in marketable securities. [ $0.3 ] million combined versus a combined total of $4.3 million at the beginning of 2025, which included $3.3 million total securities. As a reminder, earlier we completed a public offering, which raised a net proceed growth capital and funds to move to a larger manufacturing facility and further scale the business.

Trade accounts receivable totaled $5.2 million in [ 2025 ] [indiscernible] million sorry, December 28, 2024. Inventories rose to end of the fourth quarter, reflecting increased production and customer demand [indiscernible] at the start of the fiscal year. Liability side, payables and accruals totaled $4.3 million at the end of the fourth quarter versus $4.0 million in 2024.

Now Brian will provide a more in-depth discussion of the period and outlook.

Thanks, Chuck. Let me first point out that as I'm sure our investors know, Chuck, our CFO, announced late last year he was finally looking forward to retirement. He has earned it after a full career, including the last 7 years at CPS, where he has positively impacted not only our financial reporting, but our strategy, growth trajectory and underlying operating results. Although we do not expect this to be his last earnings call with the company, I know the entire team here at CPS agrees with me that it's been a pleasure working with him these past several years, and we certainly hope retirement treats him well.

Since joining the company in 2019, Chuck has been instrumental in heading the company's finance and accounting functions as well as providing overall leadership at CPS that's been crucial to driving the growth we've experienced. We are now actively searching for a successor as capable as he is, who will join the company in what we believe is an inflection point in support of future growth. This screening and interviewing effort will naturally be a key point of focus for us in the coming weeks.

Now returning to our performance. We're obviously pleased with the rapid expansion of our sales and operations leading to record revenue this past year. I think it says a lot about our products, our markets and the ability of our committed team here at CPS to raise production to meet demand. However, we know we have further to go with respect to both revenue and gross margins, which is why we're looking to upgrade our manufacturing capabilities as soon as possible.

As we discussed last quarter, the key impetus for the capital raise in October is a planned move to a manufacturing facility nearby, which will provide for long-term growth and product expansion. In our current facility, we simply do not have enough space to respond to the continued growth in demand we're experiencing. Using some of the funds we recently raised, we are committed to finding and relocating to a new site to address our expansion requirements.

With this in mind, we recently selected Dacon Corporation to serve as our general contractor. They're an experienced organization here in the Boston area. With the input and assistance of the Dacon team, we will soon select the best facility, negotiate a lease and initiate a build-out to meet our manufacturing requirements. Although the specific timing will depend on the amount of work needed to upfit the selected facility to address our production plans, we anticipate initiating the move several months from now. We're upbeat about the numerous positive aspects that will result once we have relocated.

In addition to addressing our current space limitations, we anticipate greater operational efficiencies, reduced facility maintenance expenses and a dramatically improved working environment for our team. The new facility will likely provide a number of other advantages as well. As we are space constrained in our current facility, this also means we are generally revenue constrained, particularly now that our third shift of metal matrix composite product manufacturing is fully operational. Our commitment to relocate demonstrates our confidence in the growth opportunities that are before us.

Sustained strong demand for our products, combined with expanded floor space and the addition of targeted production equipment will position us to meaningfully increase revenue and implement targeted gross margin improvements.

Now an update regarding HybridTech Armor. With the passage of the FY '26 defense bill, Kinetic Protection, our partner and the prime contractor for these efforts is optimistic that orders supporting the U.S. Navy will resume in the latter half of the current calendar year. Whereas our orders in the 2021 to 2024 time frame provided protection for cruiser weapon stations on aircraft carriers, these orders will be for a small quantity of U.S. Navy destroyers.

Funding has been secured to implement ballistic shields on a handful of these vessels. Detailed contract negotiations are expected to begin in the coming months, and we will certainly keep our shareholders apprised as this continues to progress.

With regard to our federally supported research activities, there's a lot to report as well. Since we reengaged with the government-funded programs in the SBIR and STTR in 2021, we have received 13 awards from either the Department of Defense or the Department of Energy. However, as our investors may know, these federal programs have not yet been reauthorized by Congress, and therefore, they lapsed at the end of the previous federal fiscal year on September 30, 2025.

The negative impact on CPS has thankfully been limited. Proposals we already submitted are not being reviewed and new research topics are not being published. However, on the positive side, our 4 ongoing contracts, 1 Phase 1 and 3 Phase 2 programs, as we've previously announced, continue to be executed and continue to be funded without interruption. Fortunately, within just the past few days, we have seen indications Congress has reached a compromise, which will enable reauthorization of these programs with full congressional approval potentially occurring later this month. It appears this reauthorization will be valid until September 30, 2031.

Once federal SBIR employees are back at their desks, we anticipate the publication of new topics to resume and our pending applications to be reviewed. At the same time, we continue to strengthen our internal capabilities supported in part by strategic deployment of federal research funding. Over the past several months, we've made significant investments in capital equipment.

For our AlMax product line, the newly installed higher capacity mill now allows us to process ceramic fiber at twice our previous rate. With the system now fully up and running, we are producing a broader range of samples to support customer engagement and business development efforts.

Also in September, we launched Phase 2 of our controlled fragmentation tungsten warhead program funded by the Army. As we have now installed a new sintering oven in our laboratory, we have established a fully operational work cell for manufacturing these alloys at CPS. Although still early in Phase II, we are now producing 40-millimeter warhead samples with unique geometries designed to exceed Army performance benchmarks. These new internal capabilities also enhance our ability to work with other centered metals and advanced ceramics.

Collectively, these investments carefully integrated within our new facility and supported by our growing team will accelerate product development and strengthen our competitive position. The additional space at our new location will enable us to commercialize engaging emerging product lines as we pursue sizable market opportunities. This includes radiation shielding, where research continues with ongoing funding from the DOE where we are now actively working to develop and test larger scale samples while we continue to evaluate applications of lightweight MMC radiation shielding across multiple industries.

Overall, we expect these complementary processes to unlock new opportunities for our company that build upon and expand our existing intellectual property and manufacturing capabilities and ultimately lead to a greater array of offerings for our customers.

In summary, we expect 2026 to be a year of solid revenue as we complete the relocation and lay the groundwork for sustained long-term growth going forward. Once fully operational in the new facility, we will be well positioned to meet increasing demand, implement additional initiatives targeting improved gross margins and expand into large and attractive new markets.

We can now open the call up for questions. Jenny?

[Operator Instructions]. Our first question is coming from Chip Moore of ROTH Capital.

Congrats, Chuck, on retirement. Maybe just to start for me on the facility move. It sounds like you're obviously very close and you've got it down to a couple of sites. Just walk us through in a little more detail how you're thinking about timing and some of the moves in preparation for that? And then any early thoughts on capacity and future expansion? Will you have room to grow? And how are you thinking about some of those dynamics?

Yes. Thanks, Chip. We do have -- we've narrowed -- we've looked at a number of sites. We've narrowed it down to a very small list. And again, with the input of the Dacon team evaluating all the different bones of those places, whether it's electrical plumbing, et cetera, to meet the various needs that we have for our production requirements. So that will probably take a few months.

As I mentioned, to upfit the selected facility, at which point we will begin executing a move and sort of work center by work center over time. What you've seen on our balance sheet is the growth of our inventory levels, so that we have inventory to pull from -- at least for the products where we can do that during the time that we're shut down to implement the move.

And the timing and structure of that move will be led by which work cells need to be up and operational most quickly to support our customers. Of course, we have to revalidate our production equipment, et cetera. So it will naturally be disruptive, but we're taking a variety of steps to mitigate that as much as possible.

And we do expect to initiate that move a few months from now, and it will take several months to get everyone from here to there. We have a number of facilities that we're looking at that are all relatively close to our facility here. So we don't expect much negative impact on our talented workforce because the commute probably won't change too much. That was a key for us as well.

Chuck, anything you want to add to that?

Yes. Just -- so I think Brian had mentioned several months, but I think probably I would expect we'll have a decision on this specific facility within maybe a month, do you think...

Yes, some number of weeks.

Yes, certainly several weeks, maybe a month. So once that happens, we'll let people know.

Okay. Yes, it sounds like final negotiations. So yes, that's helpful. And maybe if I step back, just on demand, I guess, for [indiscernible] in particular, you had a big customer re-up in October. Just broader demand there. And I think you've talked in the past about potential for another large customer out there, just given some of the capacity constraints. But what are you seeing in that market?

Yes. We continue to see that demand. That customer does order that you mentioned that orders their typical pattern for a 12-month need. So we're working to fulfill that as well. And as I mentioned, that's one of the items where we can build inventory ahead to satisfy their needs as we relocate.

And coming back to that, you had asked a question about capacity. We do expect to increase capacity in the new facility. There's some equipment that we're ordering that will get delivered to the new facility.

And we will also have additional floor space that will be available, but generally uncommitted in the short term because we simply know that these other opportunities continue to blossom. So we've got floor space earmarked to be able to take advantage of those in a way that we cannot in our current facility. And yes, that new potential customer that continues to play forward. They're working to validate the performance of our product, as you would expect before they make a larger commitment and those tests and discussions are ongoing.

Excellent. Excellent, Brian. And maybe one more for me on how to think about margin trajectory near term, right? I think the gold prices, how big impact is that now with gold continuing to move higher? And can you offset that at all? And then HybridTech Armor coming back, that should be beneficial to margins. It sounds like maybe that's not big volumes initially and a little later, but any more thoughts there?

Yes. Thanks. I think I hope gold is about as high as it's going to get. It's pretty much -- I think it's more than doubled since about a year ago, and that's always been a factor in our equation. But just the fact that we're billing more for gold, but also spending more for gold just has a negative impact on the margin percentage.

Obviously, the margin -- the bottom line margin is not going to change at all or very little, I should probably say, maybe to the good, but not -- it probably impacts the margin by maybe 1 point or 2 depending on the volume in any given quarter.

And then I think the other factor that's been a bit of an issue with margin is the fact that we're growing inventory. And we try to be conservative in terms of our inventory valuations, our standard costs for our inventory. And so that basically means that as we build inventory, we're expensing costs that don't get picked up with the corresponding sale until sometime later down the road.

So as we build inventory, I think that's sort of a headwind when it comes to margins as well. But expect that when we do move and during that period, when we're not producing, we should maybe see the opposite impact. Again, I can't tell you that that's going to be 1 point or 2 points or 3 points, but certainly, it should be a tailwind instead of a headwind, I think.

[Operator Instructions]. Our next question is coming from Steven Fuse, a private investor.

I was going to ask about the facilities move, but that's pretty well taken care of. I do have a quick question about -- I probably asked this before, exposure to rising aluminum costs, if that's a potential margin issue because it's kind of linked with the price of copper as well. I don't know about your particular grades of aluminum, but...

So aluminum is a relatively small percentage of our overall cost of making a product. So it doesn't have a huge impact. Again, you could view it as perhaps a headwind, but it's also something that -- because it's not occurring immediately, it's going up. So it does give -- for many of our products, it does give our sales force the opportunity to incorporate that into new pricing.

And obviously, the guy that places the one order a year that can't be adjusting their price all the time. But on the other hand, there's certainly a lot of other folks that are placing orders monthly or quarterly and so we can pick that up. I don't think it's a huge issue, though, because, again, the cost of aluminum is relatively small piece of the cost of an [indiscernible] base place.

And some of our sourcing decisions have changed as well. I would say, to your point, Steve, that the market has been more dynamic than maybe in some points in history. So our purchasing team has been -- needed to be more nimble for those reasons to find the best available cost.

Our next question is coming from [indiscernible] who is a private investor.

I'd like to just ask a question about tungsten alloys. I understand you've got a process called binder jet additive manufacturing to create high-density tungsten oils -- alloys, excuse me. And you're moving away from a depleted uranium. So my question is, what is the potential dollars on this? And secondly, would this process create a moat for your company that would prohibit other competitors to enter?

Joe, what you're speaking to specifically is some of the SBIR funding that we were awarded in 2025, particularly for Phase 1 related to U.S. Army artillery, who is trying to move away from depleted uranium and our proposal to accomplish that was the binder jet approach that you discussed as a way to construct a product, a layer from tungsten, which is cost effective.

We had nice technical results from that funded effort. We're looking to continue that work in relevant directions. That's something that will continue to play out over time. But I think it's a good example of the places where we are using our historic intellectual property and know-how and our manufacturing equipment to develop new technologies for just the reason you described. We want that protective moat around these things that we're bringing to market.

Our new facility will enable us the space not only in a much bigger laboratory area, but also that undedicated floor space to move into when we go to small quantities or large quantities. So in the bigger picture of our portfolio, that's exactly what we're trying to do is have more intellectual property for that protective moat. That one specific opportunity will continue to play forward. That's not going to be significant revenue in 2026 or anything like that, but it's a great example of the types of things that we're broadening into, but staying close to home in our material science space.

That's a good answer. But do you have -- can you give me just kind of a ballpark on what kind of dollars you're potentially looking at in sales?

The long-term picture for that will be very large. If the Army engages that solution to use for its artillery. That's a very large market, and that's kind of the view we have of any number of these markets. I mean, with very minimal exception, I mean we're not looking for needles in a haystack. These are haystacks.

We don't spend a ton of time deciding if it's a huge haystack or a large one because, frankly, we're a $32 million revenue company from 2025. So that's a very large market potential as are many of these things because it could potentially be a solution that the army engages for its artillery, and those are big numbers.

Well, that appears to be the end of our question-and-answer session. I will now hand back over to Brian for any closing comments.

Super. Okay. Thanks, everyone, for joining us and for your ongoing interest in CPS. We look forward to speaking to you again at the end of our first quarter. If you have any questions in the interim, please reach out to Chris Witty, our Investor Relations Adviser.

Thank you very much. That 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.

Good day, ladies and gentlemen, and welcome to the CPS Technologies Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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. But first, Chris Witty, our Investor Relations adviser, will provide a brief safe harbor statement. Chris?

Thanks, 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 the 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 statement.

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 have been very productive. For the third consecutive quarter, we've delivered record revenue for our company at $8.8 million, with greater shipping volumes in response to increased customer demand. And 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 of 2025. We are now executing 3 Phase 2 SBIR programs simultaneously.

Additionally, as Chuck will review in a moment, we completed a successful secondary offering that brought in over $9.5 million in net proceeds, including share purchases by members of 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 $0.5 million 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 ROTH 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 3 consecutive quarters of record revenue and improving underlying [indiscernible] in the future and [ move CPS ] to the next level in its growth [ trajectory. ] Key among these is expanding our manufacturing capabilities to meet rising demand as well as 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 our current customer base, allowing floor space for new products that are being brought to market and expanding our product development capabilities in response to increased federal funding as 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, it is unlikely due to holidays, planned plant shutdowns at some of our vendors and customers, et cetera, for our fourth quarter results to achieve another quarter of record revenue. This is generally consistent with past years. And just as 2025 is a standout year in terms of performance, we anticipate fiscal 2026 to remain strong as well. We're also very pleased with the recently announced 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 1, 2025. The order represents a 16.5% year-over-year increase in value, reflecting expanding demand for CPS' 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 electricity from data centers and other applications. This reflects continued strong momentum in our aluminum silicon carbide 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 intellectual property to address well-defined customer requirements with significant commercialization potential. For example, in the second half of September, we announced our latest Phase II small business technology transfer or ST to U.S. Army. This funded program provides CPS with $1.15 million over a 24-month period to continue the development of a 40-millimeter controlled fragmentation warhead.

For this application, a high-density material can produce smaller fragments with higher kinetic energy. So typically, tungsten-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 1, CPS successfully demonstrated results fabricating a tungsten heavy alloy warhead using our proprietary QuickSet injection molding process. Initial tests delivered results consistent with the technical requirements of the Army.

These preliminary results will be expanded upon during Phase 2 to improve fragmentation, develop and standardized design guidelines and move fabrication from 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 40-millimeter 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 2 program is to establish the foundation for a robust low-cost, high-volume manufacturing process using 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 of commercial units, including our AlSiC baseplates. Dr. Mark Occhionero, whose expertise has been fundamental to the development and application of these techniques at CPS for over 40 years, will continue to lead this STTR effort.

The novel application of these production methods provide 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 Phase 1 SBIR contract from the Department of Energy.

This new contract provides approximately $125,000 in funding from the Office of Nuclear Energy for a research effort that extends until April of next year. CPS is developing a high-performance, sustainable impact limiter using novel construction methods and materials to enhance the safety of transporting spent nuclear fuel and high-level radioactive waste. This work runs in parallel to the ongoing Phase 2 research funding we have from the DOE for modular radiation shielding. In total, we have now received 1 Phase 2 award and 5 Phase 1 awards in 2025 alone.

It's great to see increasing interest in our technology from an expanding array of agencies and the various departments within them. We continue to work on other SBIRs already underway, including a Phase 1 with the U.S. Navy to reduce weight of the Marine Corps amphibious combat vehicle, a Phase 2 for the development of novel metal matrix composites for thermal energy storage to address the requirements of NAVAIR's advanced anti-radiation guided missile extended range program and the DOE Phase 2 award for the development effort of modular radiation shielding for transportation and use of microreactors as well as 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 offers commercialization potential for the company. Regarding the ongoing federal government shutdown, we continue to monitor the impact of CPS, which to date has been rather muted. For federally funded research projects that are already under contract, our development work continues. In some cases, the federal personnel we interact with or the contractors that support them are currently unavailable. However, thus far, this has not had a significant impact on our work, and it has not interfered with our ability to be paid when we submit invoices under active contract.

If there is ultimately a more meaningful negative impact to CPS from the shutdown, it could be related to slow activity on new proposals, which 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 delays in these areas depending on the length of the shutdown. The impact is difficult to quantify, but overall, it has thus far not had a significant impact on us.

Our manufacturing capacity has increased significantly over the 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 overall bottom line results. We're endeavoring to increase both operating efficiencies and output, and we 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 never 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 future armor orders, but the near-term outlook remains uncertain due to the government shutdown. Generally, we believe current military spending trends are working in our favor. We will continue to work with our -- 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 to bring new and proprietary products to market, 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. Specifically, we added a manufacturing engineer to our 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 never looked better since my arrival here 2 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, overall 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 incredibly proud of everything our team has accomplished this year. We can now open the call up for investors. Ali, I'll pass it back to you.

[Operator Instructions] Our first question is coming from Chip Moore with ROTH...

I wanted to ask on -- 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, [indiscernible] large and small.

Yes. 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. And what we've generally seen is growth across the board. The large customers are ordering more, as indicated in a recent contract, medium customers, smaller customers, the demand has picked up.

So 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.

And maybe to follow up, Brian, as you think about adding capacity and space, just 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?

Right. Yes. It's all the above. Obviously, a move is fundamentally disruptive. So what we're developing now are detailed plans to execute a stage move while having things in place that mitigate that, such as inventory is built up here, inventory is built up downstream of CPS to soften the blow, so to speak. But what we intend to do is outfit the new facility for our needs. We have hydrogen lines, oxygen lines, et cetera. And then once we're ready to affect the move, it would essentially be a work cell at a time. So it would be sort of a leapfrog situation where temporarily, we'd be occupying 2 buildings, but be sequentially moving more and more of the company to the new facility until we complete that process. And all of that would occur during calendar year 2026.

Got it. Very helpful. And maybe just for me on maybe, call it, shots on goal, a lot of interesting opportunities. Any that you're more excited about? And then on radiation shielding in particular, the Army just came out with the Janus program, I'm sure you saw. Just any thoughts on potential there?

Yes. 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 field. So those discussions are continuing. There's adoption discussions and testing conversations that are naturally part of that process, as you can imagine. So that's an area of great interest for us, but as well as some of these other things. I mean, the ALMAX material has broad applications because of its material properties. So we have interesting discussions going on there.

And the one I highlighted a few minutes ago regarding the controlled fragmentation warhead, that's early in Phase 2. We're just maybe a month or so into the Phase 2, 2-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. So 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.

Our next question is coming from JP Geygan with Global Value Investment Corp.

Congratulations on a solid quarter and the recent contract 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. So -- and 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. So 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, shouldn't see any interruptions for that period. And as I said, it should be relatively stable equal throughout the year.

Yes. And I think there's sort of the 2 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. So it's sort of a bit of both.

Got it. All right. 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 through the government process...

2 invoices.

2 invoices, and we promptly received payment. So we're set up as an active contract. We've received payments. So that was 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, and they are now executing on the research work -- on occasion, they might typically have a conversation with the funding agency, touch base every month or 2, something like that.

What we've seen is maybe instead of 4 or 5 people on that call, there might be 2. So we can still generally get a response or if there's some sort of clarification of path forward, there's someone there, but that's really not that critical to us because we proposed a research plan, which got approved and funded, and we're executing on it. So largely, the ball is in our court, and it's probably more of a risk related to whether the government is going to publish new topics on time, a month from now or 2 months from now, that's less clear to us.

Got it. Okay. 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 by either execution or delivery of your first order of that product in this quarter. But 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?

Yes. I think, first of all, interacting with people who are interested in that material in some of those industries, they don't know the name CPS. Some of them, they do. So it's a matter of getting in front of the right decision-makers and design engineers, et cetera. and they'll have their own adoption process. They'll want samples, which is what we're sending out now to people. They want to validate the material performance requirements, consider how they can adopt this into whether it's something they have ongoing or something new they're developing. So we anticipate a sort of stepwise volume opportunity. No one is going to come in on day 1 and order a great many pieces.

They're going to do small, medium and then large. But those are the conversations that we're taking on, and that's why we've got a focused business development effort underway to add to our team. We have physician posted that we're actively recruiting for to help pursue these new opportunities because it takes a lot of legwork. So that will play out, but we do believe that material has a lot of applications, and many of them are places we haven't historically been. So we're identifying trade shows, industries, applications updating our website, et cetera, to be more -- to address those more directly.

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 your ongoing interest in CPS. We look forward to speaking with you again after the end of our fourth quarter. If you have any questions in the interim, please reach out to our Investor Relations adviser. 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, and we thank you for your participation.