TechPrecision Corporation Q2 FY2026 earnings call

• Consolidated revenue for fiscal 2026 second quarter was $9.1 million, 2% higher than the prior year's second quarter. Consolidated gross profit was $2.5 million, $1.4 million higher than the prior year's second quarter.
• At Ranor, revenue was $4.4 million with operating profit of $1.6 million. At Stadco, revenue was $4.8 million with an operating loss of $0.5 million, but had an $873,000 improvement in operating income.
• Favorable customer mix at both segments led to improved margins. Stadco saw better throughput, lower provisions for losses, contributing to improved operating income.
• The company focuses on aggressive daily cash management, expense control, and capital expenditure management. Both subsidiaries have strong customer confidence with on-time delivery leading to new quoting opportunities in defense sectors, and a $48 million backlog expected to be delivered over 1-3 fiscal years with gross margin expansion.

For the fiscal 2026 second quarter, consolidated revenue was $9.1 million. Ranor segment revenue was $4.4 million, with operating profit of $1.6 million. Stadco segment revenue was $4.8 million, with an operating loss of $0.5 million. Ranor's revenue contribution was approximately 48.35% of total consolidated revenue, while Stadco's was approximately 52.75%. Stadco had an $873,000 improvement in operating income, with operating income for the quarter at $0.9 million due to favorable customer mix, better throughput, lower provisions for losses from specific first article costs, and lower provisions from onetime contracts.

• The company expects to deliver the $48 million backlog over the course of the next 1 to 3 fiscal years with gross margin expansion.

• Stadco faces headwinds on legacy contracts and underpriced onetime contracts. First article costs and complex handoffs in manufacturing critical components pose risks. Confidentiality limits restrict public discussion of certain opportunities and aspects of business.

Q: What percentage of your Stadco business is still needing to be reworked to become profitable or needs to run out to become profitable overall?

A: I don't know the percentage. One-offs need to continue, first article activity has been vigorously dealt with in the reporting quarter, and we aim to work towards hitting targets.

Q: Is this an issue both at Ranor and Stadco?

A: First article problems vary by segment, with Ranor mostly related to NAVSEA, Electric Boat, etc., and Stadco having more varied specifications, but we focus on same customers for recovery.

Q: Do you see the shifting of the Philadelphia Shipyard to a submarine manufacturer as an economic opportunity?

A: We will look at every opportunity.

Q: How do you handle grants from the federal government and their characteristics?

A: Cash is segregated, liabilities established, assets and liabilities set up based on agreements, and there are obligations to perform over periods like a 10-year agreement.

Q: Is there an opportunity in larger undersea unmanned vehicles?

A: We'll look at opportunities, but first article activity risks need mitigation.