TechPrecision Corporation Q3 FY2026 earnings call

• Stadco faced multiple challenges including delay in customer furnished materials, unfavorable project mix, etc., resulting in revenue decrease and operating loss increase. - Ranor had revenue growth of 1% year - over - year, operating profit of $1.5 million, and was recently awarded a new grant of over $3.2 million, with total funded grant money from U.S. Navy submarine programs - related customers over $24 million. - Actively managing cash flow, expenses, capital expenditures, etc. - Both segments have strong customer confidence and new quoting opportunities in defense sectors, and have a $46 million backlog expected to be delivered over 1 - 3 fiscal years with gross margin expansion.

Stadco: Third quarter revenue was $2.9 million with an operating loss of $1.2 million. Caused by delay in receiving customer furnished materials, unfavorable project mix, higher provisions for projected contract losses, and equipment downtime. Year - over - year, Stadco revenue decreased by $0.3 million and gross profit decreased by $0.6 million. Ranor: Third quarter revenue was $4.4 million with an operating profit of $1.5 million, in line with prior year. Revenue was up 1% year - over - year. Overall, consolidated revenue for fiscal 2026 third quarter was $7.1 million, 7% lower than fiscal 2025 third quarter's $7.6 million. Consolidated gross profit was $0.4 million, $0.6 million lower than the prior year's third quarter.

• Encouraged by prospects of growing revenue and increasing profitability in future quarters. - Expecting to move past the recent unexpected setbacks and work towards boosting revenue from current and new customers. - Aiming to exceed the $7 - $9 million quarterly revenue range and increase top - line to drive profitability and free cash flow.

• Stadco is at risk due to delay in receiving customer furnished materials, which impacts revenue and causes operating losses. - Unfavorable project mix at Stadco. - Higher provisions for projected contract losses at Stadco. - Equipment downtime at Stadco. - Customers not cooperating fully and requiring rework on legacy items affecting estimates and profitability.

Q: Alex, can you guys address how much more in the way of bad contracts, first items or whatever we have left to work through, particularly at Stadco to get to where we can see the benefits and fruits of these contracts?

A: Alex and Phil discuss working to capture losses from legacy contracts, not able to exactly quantify but reserving for current ones and working to whittle them down.

Q: Your next question is coming from [John Brandberg]. Can you expand about the problems with product mix? And given the fact that you work with customer design products, how much of that is customer controlled or customer related? And how much of that is management related?

A: Stadco was affected by delay in customer furnished materials leading to a shift to less profitable business and projects, with some contractual protections in place but working to strengthen and deselect harmful areas.

Q: Are you doing anything in your contracts? I mean I find it kind of unusual to say that Sikorsky allows you -- maybe poorly paraphrasing it, but the gist of it is Sikorsky is kind of allowing you to make a profit. And now I understand that Sikorsky has been characterized as a better customer or a good customer or someone that is working with you more closely. So that begs the question, the other 50% of revenue that's non - Sikorsky, I mean, you have to somehow because of your -- the concentration on high - precision manufacturing, if some customer doesn't work with you, it's not as if you can switch from A to B easily. I mean you have to somehow either contractually or through customers -- you selecting customers decide you got to maybe eliminate some of these people and start focusing on people that "allow you to make a profit." I mean it just seems as you're trying to turn this company around, you have to be in an environment where either contractually, you have more control or you make better decisions on the other 50% of your customers.

A: It's going to be difficult for me to answer because so much of it is very particular and specific. The answer is not 0. We cannot survive with 0 contractual protections. We agree and those contracts -- new contracts coming up, we cannot accept them if they are detrimental and harmful to Stadco or to Ranor. We need to function both the same and not harm the companies because the customer wants it to be so. And you are correct. The customer is not always correct. The customer is not always right. There are certain protections in place? Yes. Should we strengthen them going forward? Yes. And should we deselect some areas and not go into them? Well, that depends on how much a chosen customer wants to play ball. If they don't, we do walk and we have walked. And that's a choice that we need to make.

Q: I hear the talk from Mr. Taylor about revenue. And of course, everyone wants to see people -- see the company get out of a so - called rut in terms of the $7 million revenue. By virtue of what you do in both companies, Stadco and Ranor, high precision, one at a time, how do you address -- how do you get scalability? I mean it's not like you can put more tomatoes in the pot and feed more people. I mean -- I don't see the scalability issue because, obviously, you want to get the top line up. But because of the virtue of what you do and the cost of both in terms of talent and machining, I mean, what is your operating capacity? Are you at 50%, 70%? Do you have room for that top line to be there if the customers are there? So I just have a problem with trying to see how you scale things with -- by intrinsically by what the degree of your whole process is so specialized.

A: So there's a process that's specialized and it's specialized for each part number, right? So then the key is going to be for that part number that we specialize in to keep repeating. So we make this part number again and again and to have a number of these repeating part numbers and to really eliminate the onetimes because that's the thing that takes a lot of time is the first time or the first article. If there are no follow - on articles, that's the kind of business that we need to really get away from, so we can have some kind of scalability. So that when we do repeat a part, we've already learned the process, and now it's going to be the next tranche of the same part number. We're refining the process that we already established first article protocols on and that we passed first article inspections by the customer on. And then now we're into follow - on orders and into programs of record that are going to exist for not just years but perhaps decades. There are some programs that we are leading ourselves into and cross utilizing the members between Stadco and Ranor to gain a foothold to let Stadco also gain a foothold through that cross - pollination between the two companies. That is -- so eliminating onetime projects and going towards repeating part numbers that have longer legs. That is one very big key strategy. It's not a big secret, but it takes a while. We need partnerships with customers that have the long legs on programs of record. So that's the ones that we are choosing carefully, and that's the ones that also are willing to choose us, both at Ranor and at Stadco. And that's what makes sense to us. We're so small. We can only do what we can do and do the best we can at it and add more to it and scale up. And the scale - up isn't going to be 10x. The scale - up is going to be a gradual scale up. But as we all wish to achieve, we want this -- the lowest water level to rise beyond what we have today. I am not very happy at all with our performance today.