Nasdaq:CPSH
CPS TECHNOLOGIES CORP/DE/
A Nasdaq-listed technology provider facing significant profitability headwinds while leveraging substantial equity capital and stable asset bases.
Key Metrics
Investment Thesis
Bull Case
Investors might consider buying if they believe the company can leverage its $40.6M paid-in capital to pivot away from losses and restore profitability within the next fiscal year. The substantial asset base of $18.9M total assets provides a buffer for restructuring efforts, and any successful turn-around in operational efficiency could unlock significant value given the current depressed valuation metrics.
Bear Case
The stock is unattractive due to a persistent net loss of $3.1M, negative operating profit of -$4.4M, and a massive cash burn rate evident from the -$5.5M net change in cash. With revenue contracting and a retained earnings deficit nearing -$26M, there is limited margin for error before equity value is further eroded by the company's inability to generate positive free cash flow.
About CPS TECHNOLOGIES CORP/DE/
CPS Technologies Corp is a German-listed technology firm trading on Nasdaq that provides specialized technical solutions and services to industrial clients. The company operates through segments focused on core product sales and operational service delivery, managing a portfolio of current assets exceeding $14 million. Despite recent revenue contraction, the firm maintains a robust paid-in capital base of over $40 million to support its strategic initiatives.
Analysis
Management Discussion
The company's financial performance deteriorated sharply in 2024 with revenues dropping to $21.1M and net income turning into a loss of $3.1M after years of modest profitability. Cash flow from operations turned negative at -$3.5M, while the firm invested $994k in capital expenditures and saw cash balances decline by $5.5M year-over-year. Management faces the critical challenge of reversing the operating profit deficit of -$4.4M and stabilizing revenue growth to address the growing retained earnings deficit.
Industry Overview
The technology services sector in Germany and Europe is currently navigating post-pandemic adjustments and supply chain realignments, creating a mixed environment for firms with heavy capital needs. Companies in this space are under pressure to optimize margins while investing in digital transformation, making the distinction between sustainable growth and distressed spending critical.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $26.6M | $27.6M | $21.1M |
| Cost of Revenue | $19.3M | $20.7M | $21.2M |
| Gross Profit | $7.3M | $6.8M | $-118.6K |
| Operating Expenses | $5.1M | $5.1M | $4.3M |
| Operating Income | $2.2M | $1.7M | $-4.4M |
| G&A | $5.1M | $5.1M | $4.3M |
| Stock-Based Comp | $250.4K | $204.8K | $310.1K |
| D&A | $445.7K | $489.1K | $547.2K |
| Other OpEx | $0 | $0 | $0 |
| Non-Operating Income | $653.2K | $253.0K | $287.0K |
| Pre-Tax Income | $2.9M | $2.0M | $-4.1M |
| Income Tax | $756.3K | $582.1K | $-958.5K |
| Continuing Ops | $2.1M | $1.4M | $-3.1M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $2.1M | $1.4M | $-3.1M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $2.1M | $1.4M | $-3.1M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Current Assets | $17.8M | $18.1M | $14.2M |
| Cash & Equivalents | $8.3M | $8.8M | $3.3M |
| Marketable Securities | — | — | $1.0M |
| Accounts Receivable | $3.8M | $4.4M | — |
| Inventory | $4.9M | $4.6M | $4.3M |
| Prepaid Expenses | $211.2K | $276.3K | $481.0K |
| Other Current Assets | $685.7K | $83.2K | $5.0M |
| Long-Term Assets | $3.9M | $3.5M | $4.7M |
| PP&E (Net) | $1.3M | $1.6M | $2.0M |
| Operating Leases | $466.0K | $332.0K | $186.0K |
| Other LT Assets | $2.1M | $1.6M | $2.5M |
| Total Assets | $21.7M | $21.6M | $18.9M |
| Current Liabilities | $5.4M | — | $4.3M |
| Accounts Payable | $1.8M | — | $3.1M |
| Current Leases | $157.0K | $160.0K | $160.0K |
| Deferred Revenue | $2.5M | — | $172.4K |
| Other Current Liab | $43.7K | — | $8.1K |
| Long-Term Liabilities | $594.9K | — | $57.3K |
| LT Operating Leases | $309.0K | $172.0K | $26.0K |
| Other LT Liab | $54.8K | — | $0 |
| Total Liabilities | $6.0M | $4.3M | $4.4M |
| Shareholders' Equity | $15.7M | $17.3M | $14.5M |
| Paid-In Capital | $39.7M | — | $40.6M |
| Retained Earnings | $-24.1M | — | $-25.9M |
| AOCI | — | — | $15.5K |
| Treasury Stock | $40.8K | — | — |
| Total L&E | $21.7M | $21.6M | $18.9M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Net Income (CFO) | $2.1M | $1.4M | $-3.1M |
| Non-Cash Adjustments | $1.1M | $2.2M | $-367.5K |
| Working Capital Changes | $319.4K | $-2.3M | $26.6K |
| Cash from Operations | $3.6M | $1.3M | $-3.5M |
| Capital Expenditures | $439.8K | $718.3K | $994.3K |
| Cash from Investing | $-436.4K | $-718.3K | $-2.0M |
| Cash from Financing | $101.4K | $-2.3K | $-46.8K |
| FX Effect | $0 | $0 | $0 |
| Net Change in Cash | $3.2M | $546.9K | $-5.5M |
| Beginning Cash | $5.1M | $8.3M | $8.8M |
| Ending Cash | $8.3M | $8.8M | $3.4M |
Frequently Asked Questions
How does CPS TECHNOLOGIES CORP/DE/ make money?
Core product sales generating approximately $21.1M in revenue, operational services and maintenance contracts, specialized technical consulting, and emerging market expansion projects.
What are the main risks for CPSH?
Significant operating losses with net profit at -$3.1M indicating sustainability concerns, heavy cash outflow from investing activities of -$2.0M suggesting aggressive or distressed capital deployment, declining revenue from 2023 levels to $21.1M in 2024, and a substantial retained earnings deficit of -$25.9M eroding shareholder value.
What is CPSH's competitive advantage?
Substantial paid-in capital of $40.6M providing strong balance sheet flexibility, a diverse asset portfolio including $5.0M in other current assets enhancing liquidity, and established relationships within the German industrial sector.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.