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TechPrecision Corporation (NASDAQ:TPCS) reported its first-quarter fiscal year 2026 earnings, revealing a mixed financial landscape. The company posted a net loss of $600,000, translating to a loss of $0.06 per share, despite a consolidated revenue of $7.4 million. This marks an 8% decrease from the same quarter last year. Following the earnings release, TechPrecision’s stock experienced a modest increase, closing 0.95% higher at $5.26. According to InvestingPro data, the company’s overall Financial Health Score stands at WEAK (1.63), with particularly concerning metrics in profitability and cash flow. The stock appears to be trading above its Fair Value based on comprehensive analysis available through InvestingPro’s detailed research reports.
Key Takeaways
- TechPrecision reported a consolidated revenue decline of 8% year-over-year.
- The Raynor segment showed strength with $1.5 million in operating profit.
- The company reduced its total debt from $7.4 million to $5.7 million.
- Stock price rose slightly by 0.95% post-earnings release.
- Management emphasized the importance of contract renegotiations to improve profitability.
Company Performance
TechPrecision’s performance in Q1 FY2026 was characterized by a decrease in overall revenue but improvement in gross profit. The Raynor segment contributed positively with a $1.5 million operating profit, while the STADCO segment reported a $1.2 million operating loss. Despite the revenue decline, the company managed to reduce its total debt significantly, indicating effective financial management.
Financial Highlights
- Revenue: $7.4 million, down 8% from $8.0 million in Q1 FY2025.
- Gross profit: $1.0 million, an increase of $800,000 from the previous year.
- Net loss: $600,000, or $0.06 per share.
- Total debt: Reduced to $5.7 million from $7.4 million.
- Cash balance: $143,000.
Market Reaction
TechPrecision’s stock saw a slight increase of 0.95% following the earnings announcement, closing at $5.26. This movement places the stock within its 52-week range, which has seen highs of $6.25 and lows of $2.05. The modest stock price increase suggests a cautious yet positive investor sentiment, likely influenced by the company’s debt reduction and potential future opportunities in defense contracts.
Outlook & Guidance
Looking ahead, TechPrecision is focusing on renegotiating contracts and improving the profitability of its STADCO segment. The company aims to leverage its strong relationships with defense manufacturers to secure higher-margin business. Additionally, TechPrecision is exploring opportunities to expand its manufacturing capacity to accommodate new programs, which could contribute significantly to future revenue.
Executive Commentary
CEO Alex Shen emphasized the importance of earning respect and securing higher-margin contracts, stating, "We need to earn that respect and earn that right to secure a higher margin business." CFO Phil Podgorski highlighted the necessity of addressing underperforming contracts, saying, "We cannot continue to lose money on contracts." These comments underscore the company’s strategic focus on improving financial performance through better contract management.
Risks and Challenges
- Contract renegotiation risks: Failure to renegotiate could impact profitability.
- Defense sector dependency: Heavy reliance on defense contracts may expose the company to sector-specific risks.
- Operational challenges: Improving STADCO segment profitability remains a key hurdle.
- Cash flow management: Limited cash reserves could constrain operational flexibility.
- Market competition: Increasing competition in the defense sector may pressure margins.
Q&A
During the earnings call, analysts expressed cautious optimism, focusing on the company’s efforts to resolve underperforming contracts. Investors were keen on understanding management’s strategy to enhance profitability and maintain strong relationships with key defense manufacturers. The management’s emphasis on strategic improvements and professional management was well-received, reinforcing confidence in TechPrecision’s future direction.
Full transcript - Techprecision Corp (TPCS) Q1 2026:
Conference Operator: Good afternoon, and welcome to the TechPrecision Corporation Fiscal Year twenty twenty six First Quarter Financial Results Conference Call. At this time, all participants are in a listen only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Brett Moss with Hayden IR. Brett, the floor is yours.
Brett Moss, Investor Relations, Hayden IR: Thank you. On the call today is Alex Shen, Chief Executive Officer and Phil Podgorski, Chief Financial Officer. Before we begin, I’d like to remind our listeners that management’s remarks may contain forward looking statements, which are subject to risks and uncertainties, and management may make additional forward looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor forward looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of risks and uncertainties in the company’s financial filings with the SEC.
In addition, projections as to the company’s future performance represents management’s estimates as of today, 08/21/2025. TechPrecision assumes no obligation to revise or update these forward looking statements. With that out
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: of the way, I’d like
Brett Moss, Investor Relations, Hayden IR: to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex, the floor is yours.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Thank you, Brett. Good afternoon to everyone, and thank you for joining us. Fiscal twenty twenty six first quarter consolidated revenue was $7,400,000 8% lower when compared to $8,000,000 in the fiscal twenty twenty five first quarter. Consolidated gross profit totaled $1,000,000 an increase of $800,000 when compared to the 2025. At both Raynor and STATCO segments, Our production costs decreased and margins increased.
Fiscal twenty twenty six first quarter Raynor revenue was $4,300,000 with operating profit of $1,500,000 First quarter, STADCO revenue was $3,300,000 with operating loss of $1,200,000 Compared to the same period a year ago, STADCO had a $469,000 improvement in operating income. STATCO’s $1,200,000 operating loss this quarter consists of three drivers. One, lower revenue due to business timing and lumpiness. Two, losses from onetime one off contracts. And three, losses from specific first article costs.
We are actively pursuing countermeasures and requesting adjustments from our clients. We remain highly focused on aggressive daily cash management, a critical piece of risk mitigation. We continue to manage and control expenses, capital expenditures, customer advances, progress billings, and final invoicing at shipment. Our tactical execution focus and success enables us to continuously resecure strategic customer confidence at both segments. At our Raynor segment, sustained delivery and installation of new equipment continues as we specifically execute the $21,000,000 plus of completely funded grant money from our US Navy related customers.
Customer confidence remains high. We reached a new milestone, building our backlog to $50,100,000 on 06/30/2025. This high customer confidence is leading both subsidiaries, STADCO and Raynor, to new quoting opportunities in air defense and submarine defense, respectively, with the same customers that already know and trust our capabilities. We expect to deliver our backlog over the course of the next one to three fiscal years with gross margin expansion. I’ll turn the call over now to our Chief Financial Officer, Phil Podgorski.
Phil, all yours.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Thank you, Alex. As Alex just mentioned, for our fiscal twenty twenty six first quarter, consolidated revenue decreased by 8% to $7,400,000 compared to $8,000,000 in the same period a year ago, as we continue to focus on building our strong recurring revenue customer base. As a result, consolidated cost of revenue decreased by 18% to $6,300,000 as throughput and productivity improved at both segments. To the point, consolidated gross profit increased by $800,000.0800000 dollars from $200,000 in fiscal Q1 twenty twenty five to $1,000,000 in fiscal twenty twenty six first quarter, resulting in a double digit year over year consolidated gross margin improvement. Consolidated SG and A decreased by 6% to 1,500,000 in the fiscal twenty twenty six first quarter, primarily due to the absence of breakup fees on the terminated Votaw acquisition, which was evident in the same quarter a year ago.
Fiscal twenty twenty six first quarter interest expense was slightly higher due primarily to higher amortization of debt issue costs related to extending our revolver line of credit. Net loss was $600,000 or $06 per share basic and fully diluted. Moving on to our financial position, we continue to actively manage our cash flow. Operating and investing activities provided a total of $1,600,000 of cash in the fiscal twenty twenty six first quarter. We also used $1,700,000 in financing activities primarily to pay down borrowings under the revolver loan.
Our total debt was $5,700,000 on June 30, compared with $7,400,000 on March 31. Cash balance on June 30 was 143,000 compared to 195,000 on 03/31/2025. Working capital was negative on 06/30/2025, as all of our long term debt is classified as current because of certain debt covenant violations. Now let’s take a little deeper dive into some of the segments. For Raynor, sales were down year over year by less than $100,000 with overall strong margin growth across all projects in Q1, resulting in improved margin drop through of seven percentage point increase and contributing $1,500,000 total in gross profit for the quarter.
Relative to STATCO, Q1 fiscal twenty twenty six sales declined $300,000 compared to the same period last year as we continue to focus on repeat work and not fill in jobs. STATCO experienced year over year gross profit margin improvement of 14 percentage points or $500,000 STATCO improved gross profit versus prior year is primarily the result of improved pricing on contracts and improved production efficiencies. While this is an improvement, the company continues to face headwind on legacy contracts and underpriced onetime contracts, with approximately 30% of our customers resulting in million dollars the $1,000,000 STATCO gross profit loss for the quarter. As Alex mentioned, we are actively working with customers on these contracts towards recovery and new pricing. With that, I will now turn it back over to Alex.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Thank you, Phil. In closing, for those on the call who may not be very familiar with our company, TechPrecision is a custom manufacturer of precision large scale fabricated components and precision large scale machined metal structural components. The components that we manufacture are customer designed. We sell to customers in two main industry sectors, defense and precision industrial markets, predominantly defense. We do most of our work in industries that are highly sensitive to confidentiality, which precludes us from speaking publicly about many things that a company not operating in TechPrecision’s specific environment might discuss.
Please understand there are real limits as to what I can discuss, and sometimes those limits do change. TechPrecision is proud and honored to serve The United States defense industry, specifically naval manufacturing, naval submarine manufacturing through our Raynor subsidiary, and military aircraft manufacturing through our STADCO subsidiary. We aim to secure and maintain enduring partnerships with our customers. Overall, at both the Raynor and the STADCO subsidiaries, we continue to see meaningful opportunities in our defense sector, as evidenced by the strength of our newly reached backlog of $50,100,000 We are encouraged by the prospects for growing our revenue and increasing profitability in future quarters. Operator, please open the line for Q and A.
Conference Operator: Certainly, and thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Please hold a moment while we poll for questions.
And we have a question from Ross Taylor from ARS Investment Partners. Ross, your line is live. Please go ahead.
Ross Taylor, Investor, ARS Investment Partners: Thank you, and congratulations on finally getting backlog up over $50,000,000 It’s been kind of flatlining for a while, so it’s nice to see that step higher. Also, it’s nice to see the CFO participating in the call in what I think is a meaningful way. I hope that’s a sign of significant change as we push forward.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Think there was a question in there, Ross. That is a sign of significant change, and Phil is fitting in really well.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Thank you, Ross.
Ross Taylor, Investor, ARS Investment Partners: You’re welcome. Thank you. And as I said, it’s nice to see that change. I’d love to talk to you about first, you talked about the idea you have bad contracts. I assume these bad contracts are basically or wholly with STADCO.
And how long do we see them hanging over us?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Okay, so let me go to one of Phil’s comments that talked about the affected contracts, where about 30% of customer revenue was contributing to that. It’s taken us quite a number of years to overcome a set of legacy contracts that were plaguing us. And we are seeing good traction and will maintain that good traction. I would say that that’s in the realm of
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Close to 35%, 40% that we’ve completed and made progress on already resolving and moving forward with positive pricing.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yeah. Don’t know how to forecast when I’ll get the, next tranche done, but we’ve been working on that pretty constantly, Ross.
Ross Taylor, Investor, ARS Investment Partners: Okay. So I’m looking at it. You’re assuming you got something in the neighborhood of about $2,200,000 in contracts that were problematic, shall we say, in the quarter just reported. So what you’re saying is that of that you’ve been able to address or of your overall mix you’ve been able to address over a third of those contracts so that you actually can operate on them and make money on them. Would that be a safe assumption?
Yes. That is correct.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yeah. And then to answer your other questions, are these problems, concentrated in one subsidiary? I would say more yes than no. It’s not all of them all in one subsidiary. There’s still some things that happen, but, you know, predominantly all on one side.
Yes.
Ross Taylor, Investor, ARS Investment Partners: Okay. Go ahead.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yeah. Was gonna say a much lesser degree at Raynor.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yep. Okay.
Ross Taylor, Investor, ARS Investment Partners: Does your backlog include anything from your new business areas? You mentioned air defense and sub defense.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: It’s all air defense and sub defense.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yeah. And continue to drive and look for other additional opportunities within those two sectors.
Ross Taylor, Investor, ARS Investment Partners: Okay. So you’re looking at when you’re saying sub defense, you’re thinking of submarines generally as a defensive space as opposed to anti submarine warfare?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Correct.
Ross Taylor, Investor, ARS Investment Partners: Okay. At this stage, yes, at this stage. Absolutely. Yep. Yeah.
Okay. STATCO has been a huge bugaboo. You owned it for now, what, about four years. Think total cost to shareholders has been meaningfully north of $20,000,000 what you paid for it and what you invested in and what you lost from it.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: That’s absolutely correct. Yep.
Ross Taylor, Investor, ARS Investment Partners: It’s when and it also, I believe, you know, it’s resulted in share dilution. I believe it was probably behind the move to acquire VOTA, which became an absolute, you know, fiasco because of the way it was handled and the way it was going to be financed. What is it going to take, and when can we expect to see STADCO become more
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: of
Ross Taylor, Investor, ARS Investment Partners: a meaningful contributor or a positive contributor to the operation?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Well, I think the, forgive me for just stating the obvious, but, you know, we finally had, one good quarter. That was Q4 fiscal twenty five followed by a not so good quarter at all. The important thing here is we are capable, and we are showing that we’re capable of having a good quarter. My job, Phil’s job, everybody’s job is we need to establish thing this thing into align a trend. One point, two points make a line, three points make a trend.
We’re gonna make it happen, and that’s what we know we can do now. Doesn’t tell you when, though. I would like the the when to be faster. Please, Alex. Let’s move.
Ross Taylor, Investor, ARS Investment Partners: Yeah. I was gonna say, given it’s been four years, I think that, to say that you are trying investors’ souls. Okay. So when we’re we’re looking at that, do you believe that the steps you’re taking in the renegotiations can get us there over the next to where you could be on an operating basis, we should be able to see this business, no longer contribute negatively to the company’s bottom line?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: So yes, And, just not only renegotiation on legacy contracts, but our way forward needs to be, filled with different types of things other than just requesting assistance on existing legacy contracts. But moving forward, forward contracts, those are, key and critical to our well-being in the future and, Phil’s participating heavily on those.
Mark Gome, Investor, Pipeline: I was
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: going say very heavily.
Ross Taylor, Investor, ARS Investment Partners: Yeah. Yeah, think it
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: is, Ross, from an operational perspective, we’re putting in place a number of different processes, controls in place to make sure that we’re pricing things accordingly with new bids, etcetera. All right? So and that’s including any of the slowdown costs that come through from TechPrecision as well. All right? So we want to make sure that the segments are covering all of the costs of the organization.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: But all that feel good stuff aside from answering Ross with feel good words, the we we really need to get more quarters We do. Of profitability and show show our stuff in, actual proof. Yes.
Ross Taylor, Investor, ARS Investment Partners: It would it would seem that while you did have some issues with some, Raynor business, it really seems that what’s keeping us from where we need to be is is two factors, believe. One of which is getting stat code to where it can operate in the green as a as a business. And then the second is, to me, when I’ve modeled this company, I keep looking at thinking you should be able to generate, you know, meaningfully higher. You should be generating 70, you know, to 100,000,000 in revenue. And I think that’s possible in the sector you’re in, the nature of what you guys do and the like.
And to do that, we’re talking about doing 18,000,000 to $25,000,000
Alex Shen, Chief Executive Officer, TechPrecision Corporation: a quarter and we seem
Ross Taylor, Investor, ARS Investment Partners: to be kind of stuck in the seven ish, six, seven, eight ish. What is being done? What are you guys doing culturally to break away from this kind of 7,000,008 million dollars quarter by quarter run rate where we can eke out a profit here or there, but it’s never going be a big one? But my assumption is if you could take that business and double it, which is kind of what I’m saying, you would end up generating a substantial amount of earnings and free cash flow. You’d quickly be able to pay off the debt.
You’d, you know, be in a situation where you were, in a much, much better place? What’s been done to drive that top line?
Mark Gome, Investor, Pipeline: And are you starting to hunt business? Or are
Ross Taylor, Investor, ARS Investment Partners: you still waiting for business to come to you?
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: No, I think I’ll answer. I’ll start to answer. So we definitely have a pursuits list, all right, with a number of opportunities that we are looking to move forward with. The defense industry, the aerospace industry is not quite like the Titanic, but it takes a bit of time and a bit of effort to continue to navigate through that. So yes, we do have a pursuit list.
We’re attacking that. Call it knocking on door to door to make sure that the also to make sure that they’re the right fit for our organization. As Alex had articulated, we like the and we’re successful at doing a lot of the repeat type work. All right? It is very profitable for this organization, and that’s the direction that we are looking to move.
How long will that take? You know, it’s one bite at a time. All right? So and that’s what we’re doing right now. We’re looking at it strategically and how do we grow the top line organically.
Mark Gome, Investor, Pipeline: So the top line office could take care of the health of people like that
Ross Taylor, Investor, ARS Investment Partners: with CH-fifty three ks, with F-15DX, with assuming that we’re ever able to kind of get a ramp up in build rate in the Virginia Platte suburbings and like that on one level should drive substantially higher revenues, I would think, just when you look at your business model.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yes, there’s no doubt. I think that the other hurdle though is investment in the organization as well. All right. So in order to do that, actuate that, we will need to invest in both equipment like Raynor is getting customer funded or grants. STATCO right now, we have to, from a strategic standpoint, make those investments.
Secondly, I think it is utilizing the facility, both first and second shifts. And I think we have the ability to do that. The barrier though that we have is resources. It’s tough to find the talent that we need to do this.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: And it’s tougher to keep the talent. Both locations are very good at what, we do. Both locations are very good at, training people to achieve levels of expertise and both locations have competitors as well as customers that, take our people away. And it’s not something that’s new. It’s always been this way and we just need to continue to fight the fight and overcome that with more volume, train more people then.
But one of the things, Ross, that you referred to on cultural changes, I’m going to hand it back over to Phil and also go back and forth with Phil a little bit. But some of our basic execution, routines are coming into play well because they’re actually developing into routines. So Phil had alluded in his comments of, cost of revenue decreasing because of throughput and productivity improvements at both segments. He just touched on it. This is a basic, number of routines that we are executing better.
It’s not a one hit wonder. As we move forward, we want to continue to monitor and audit ourselves internally to make sure these routines continue to be in place and can continue to execute so we can reap more benefits, more profit. So as we increase our revenue, we would like to see, much better than just an even percentage of increase. We’d like more to drop down because we have put these routines in place so we can execute better at a smaller top line. So it’s transferable and upscalable to a higher top line.
And we’ve been working this for quite a while. Phil has different expertise being directly from the defense industry on the client side is, some help. He still needs to get used to how clunky and lumpy everything is more so than RTX was, even though RTX was really a project company of Raytheon. So it’s very similar. But, yeah, I think we want to see more throughput and more productivity gains from our basic, really blocking and tackling at a very tactical person level on the floor.
We put in the routines and we ourselves are auditing and monitoring the routines. We’re both workers. So it’s helping. I’m sorry for the long response, Ross, but you opened the door to a longer explanation and I’d like to just offer some color. Thank you.
Ross Taylor, Investor, ARS Investment Partners: Well, I’m gonna actually say I think this to me, what I’m hearing you say and first of Phil, I think that you combined with the addition of two directors appear to me to be meaningfully professionalizing this organization, is important. I think that often we’ve struggled to see this. Quite honestly, the example of two insiders gifting shares during a quiet period, I’ve only been in this business forty something years. To me, that’s a totally unacceptable. Good companies don’t do that.
That’s not acceptable. Good companies find a way to make sure they don’t lose money when things are slack. And what I’m hearing you talk about is the ability to grow this business. I didn’t hear you tell me that you can’t get to the, you know, the numbers I think you need to get to to generate the kind of revenues you need to push earnings per share here up to, you know, a meaningfully meaningfully higher number than they currently are. So all this is very encouraging if it can be made to happen and if it can be made to happen in a reasonable period of time.
So how much longer are you going to frustrate me and disappoint me?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Again,
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: looking statements. We’re going to do the best we can to make that happen as quickly as we can. Certainly we have also pressure from the board to do the same exact thing. I think it’s pressure from our wives too. We certainly have a job to do, and we’re focused on driving that forward.
Ross Taylor, Investor, ARS Investment Partners: Well, I’d like to say I think that the shifts I’m seeing to me are really meaningful and as they should get you gaining traction, it’s very hard to turn organizations around particularly when they were out at the top. Not saying you, Alex, I’m saying, you know, at the top. And so I think this focus, what I’m seeing happening here is really positive. And so thank you guys very much. Good luck negotiating the last, you know, 65% or so of renegotiating those contracts so we can get rid of those.
Good luck growing your business. I would suggest hunting some new business in would be really useful. And I heard something I never thought I’d hear from a tech precision person, which is second shift. And that really excites me. If you are focusing on the idea of trying to build this business where you can run a second shift, that’s huge.
And it should be very positive, will give you free cash flow, which all good things flow from. You can get new equipment, pay down your debt, you can buy back stock, you can make acquisitions, all that’s going come from that. I’m pretty, you know, I don’t get excited, but I’d just say I’m positively inclined as we push. Thank you.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Thank you. Thank
Conference Operator: you. Your next question is coming from Richard Grelich from REG Capital Advisors. Richard, your line is live. Please go ahead.
Richard Grelich, Investor, REG Capital Advisors: Thank you. So this quarter, there was a $250,000 change in the contract loss provision. Is that correct?
Ross Taylor, Investor, ARS Investment Partners: That is correct.
Richard Grelich, Investor, REG Capital Advisors: And was that a result of a new negotiation? I think Alex refers to them as tranches of renegotiation or redetermination of pricing, etcetera. Was that a new one or was that a follow on from last quarter?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Hold on one second. We’re clarifying something. One second. Thank
Ross Taylor, Investor, ARS Investment Partners: you.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yes.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: So Richard, we did experience an additional loss reserve and it is on
Alex Shen, Chief Executive Officer, TechPrecision Corporation: That’s on a one time one off project.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: One off projects, that has been I’ll say it’s almost in a rearview mirror, right? So we’re hoping that Q2, it’s going to be gone completely. We’re getting ready
Alex Shen, Chief Executive Officer, TechPrecision Corporation: to That’s what we’re working toward. We’ve been working toward diligently.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: So it’s a matter of shipping and getting it out the door. So that’ll be behind us very soon.
Ross Taylor, Investor, ARS Investment Partners: Okay, great. Thank you. You’re welcome.
Conference Operator: Thank you. Your next question is coming from Mark Gome from Pipeline. Mark, your line is live. Please go ahead.
Mark Gome, Investor, Pipeline: It’s nice to see this call go from entertaining to professional. Congratulations on the progress. First question, if everything went your way, right? You’ve renegotiated 35% of those contracts that aren’t so hot. How long would it take to get to a 100% if everything goes your way?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: I think that’s the question that Ross was asking also.
Mark Gome, Investor, Pipeline: What what it was it was this worded the same way? I’m I’m really saying, like, you know, like, because if you have a good idea of what your obligations are under those contracts and when you’re really in a position to renegotiate, you’re not in a position to determine how long it will take to renegotiate or how successful you’ll be in that regard. But given what you know, if everything went your way, roughly how long would it take to get from that 35% to a 100?
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: It’s a hard one. Given our customer base and so forth, certainly our customers are looking to ramp up. I think we know what the administration’s agenda is. And it does put us in a bit of a better position. All right.
We are sole source on some items, single source on others. All right. Certainly, customers do put out to bid and we’re subject to negotiations, hard negotiations, with each of these customers. They’re much bigger than we are, for sure. So, it is putting a lot of pressure to try to reduce when we’re trying to increase, price.
So each one of them is unique. If we had our way, which is If we
Alex Shen, Chief Executive Officer, TechPrecision Corporation: had our way, it would have been done already.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yeah, was just going to say we would have because the effort has already been The effort is going on this last four years. It is, it is, like I said before, it’s not quite as bad as turning the Titanic, but it is, you know, I I came from RTX. I know what it’s like.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yep.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: They can be pretty tough negotiators, and they will they will hold a hard line. And we’d have to be willing to say no, to certain agreements and contracts if we’re going to lose money. That’s it. Can’t do it. All right.
And we need to start looking at other opportunities. And that’s why the earlier comment about pursuits. We have a list. We have customers that we’re going after. Alright.
So I can’t answer your question, you know, Mark, but Alex did in the sense if we had our way, we’d be done.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: I think the good part about the question really points to also what success have you had and we’ve had some. And what Phil alluded to was 35% to 40% of success. So we’re not incapable of success. We’re not just dreaming this and saying it on earnings call and turning it into, just words. We have some success.
We’re aiming towards more.
Mark Gome, Investor, Pipeline: No, that’s great color.
Ross Taylor, Investor, ARS Investment Partners: Yep.
Mark Gome, Investor, Pipeline: That’s great color and helps quite a bit. Thank you. So next question, if we look at Virginia, Columbia, CH-fifty three ks and F-15EX, where do you sit in the ordering supply chain for that? Like, we’re we get to see from our side, orders get placed, production schedules, Boeing’s ramping up, you know, this full rate production on a lot of these things. But where in the manufacturing process do you end up shipping products on each of those programs?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: I think I’m in the place where I can’t really talk about where I am because I’m embedded in some of this information that I’m not supposed to talk about. I don’t build so I can tell you that we’re building on new components for new ships, and we are building on new components for new helicopters, and we’re building on new components for new F-15EX fighters. That for sure I can tell you. We’re not, that’s all our predominant business. We don’t generally deal in, retrofit and other things.
I’m I’m No. Depends on which so so because it’s intimately related to which part is in where in the manufacturing process, it’s, I I’m I’m hand I I
Mark Gome, Investor, Pipeline: just I
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: got I
Mark Gome, Investor, Pipeline: got a clamp on Yeah.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Let me
Mark Gome, Investor, Pipeline: see if I can don’t I don’t don’t need it on a a a BOM, you know, on the line item basis. I just trying to get a decent feel so that when I see more subs being ordered or delivered, roughly in the submarine process, are you on the front end or in the back end of that? And then if you want to do aerospace in general, are you in the front end and back end in general if you don’t want to dig down to the specifics of 53 ks and 15EX?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yeah, so So go ahead. We’re both going to answer the same way. Go ahead, Phil.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: We’re both the beginning and the middle and the end, quite frankly, all right? So the key is that we certainly have capacity to do more. We’re subject to how quickly our customers also can supply us with customer furnished material. So a lot of the lumpiness that we see as well relates to you know, delays from our customers getting us that that CFM, as we call it, the customer furnished materials.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: On some contracts, conversely, they’re ready to ship us material and waiting for their funding to come through so they can put that funding on PO because they’ve already got the raw materials on hand ready to ship today. Yeah. So It really depends on what it is. And just like Phil was saying just now, we’re at the front, the middle, and the end. We’re into all of it.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yeah. And It’s very specific
Alex Shen, Chief Executive Officer, TechPrecision Corporation: is what it ends up being. It’s a very tactical business model that we’re pursuing and the tiny small businesses that we’re running, the perfect fit for those. Our capabilities and the trust that the customers have in our capabilities is high. We keep demonstrating we can deliver on time. So it doesn’t really matter in the front end or the back end or the middle of the manufacturing cycle.
We’re demonstrating our capability to deliver on time. That’s probably a key color point that’s colored green. Back to you, Phil.
Mark Gome, Investor, Pipeline: Well, that’s evident, and been a big part of the reason why I stuck with you guys through all of this is that the quality is there, so the bones are in place. Phil, you were going to comment as well?
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: I think Alex hit it very nicely, actually. So we’re ready to accept more. Yep. Without a doubt.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Without a doubt. We are accepting more.
Conference Operator: Exactly.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: We just signed off a couple today and yesterday, me and Phil. So
Mark Gome, Investor, Pipeline: Great. I just have one more in two parts. If we look out two or three years, and this is just a guess, obviously, it’s not guidance or anything we told you to just kind of get a feel for your impression of how much of your revenue you think could come from programs that you’re not involved with today? Is it something closer to ten, thirty, 50 or 75% of your revenue coming from new programs, let’s say two years two to three years down the road?
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yes. So we certainly have a long, we’ll call it stream or long stream of existing that we have line of sight to. We talked about the additional pursuits and different additional programs, right, that we’re also, looking at. Right now, again,
Conference Operator: it’s all
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: probability, Are you going to get one or are you going to get the other? So, some of them can range from a few million to multi million. And as such, we could get one that’s going to be multi million that we’re pursuing. And gosh, that would make up a third as it would be incremental to the business we have. It could be a third of the business.
All right. So, I mean That’s
Alex Shen, Chief Executive Officer, TechPrecision Corporation: a very good answer. It depends. It does depend. It does depend.
Ross Taylor, Investor, ARS Investment Partners: All right.
Brett Moss, Investor Relations, Hayden IR: But we’re definitely looking
Mark Gome, Investor, Pipeline: at But you’re talking about numbers in the third as opposed to saying, well, we’re looking at programs that could double our business. Right? Or we’re looking at programs that, you know, might add 5% to our business. I’m that’s what I’m just trying to get into the ballpark. You know?
So if you’re saying if you’re saying that a third of your business three years from now, if things go well, reasonably well, could be coming from new programs. That that would answer my question. Is that is is that kind of gut feel, ballpark? I
Alex Shen, Chief Executive Officer, TechPrecision Corporation: I would, characterize that answer and say it could be a third from new programs. New programs meaning, you know, program has a different kind of meaning depending on what you’re talking about. Like, if you’re talking non non Virginia class, non Columbia class, non at 15
Mark Gome, Investor, Pipeline: No. Was I was I talking about new parts, I’d say. Right? Like, if you if you yeah. If you if you expand your if you expand your your participation in the existing programs, to me, that counts as, you know, adding to what you have today.
Because for me, right, like, as as a person that’s looking forward to what you’re going to do in the future, I can get a decent sense as to what your contribution is to each of those programs today and how those programs are going to ramp up and get a sense as to what your revenue should be in the future. And I come up with similar numbers as Ross. But then if you increase your reach into those existing programs and or add new parks into new programs, then that’s where we have to kind of look at adding to our model in terms of what the range of possibilities are.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yep. And I will point out this is public information, so I’m not letting, any secrets out here. The electric boat is relatively close to Raynor, within driving range. And electric boat has run out of capacity, in many different aspects for specific part numbers. And those part numbers still have to be built by somebody that they trust that can actually make those new parts.
And new for the vendor, not new for electric boat. And I will say that we are part of that.
Mark Gome, Investor, Pipeline: That’s great. Second part of my question would be, do you feel confident that you’ll be able to renegotiate everything that you’re doing to the point where you feel comfortable, or do you think there’s a portion of your current slate that you will walk away from?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: I’m going to let, Phil take a crack at it. He’s been watching me and pumbling me and whipping me to death and driving me to visit with the customers. So why don’t you take a crack?
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: I definitely have pricing on his mind. So short answer is there is a likelihood we may walk away from some. All right? We just cannot continue to lose money on contracts. I think what it’s going to force, though, is some, I think, more level set negotiations with the existing customers.
All right. So will there be will that be a majority of it? No. I think the customers themselves are very open. They need to understand and they need us in business as well, too.
I think that’s key, right? So to answer your question, Mark, there may be some, but I don’t feel that it’s a majority of them. It’s a small portion, if any.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Think the other thing to lend more color to what, Phil just talked about, on these large negotiations, we are single or sole sourced. So the customers are going to experience massive problems going to a secondary competitor that hasn’t made these in the last decade or two. So, you know, the, the probability is low. The walk away possibility is there. Yes.
And we are not kidding around when we go to negotiations and request that they identify the risk because I need to identify the risk. I need to bring it back for Phil to look at fiscal impact and make a decision. Now we’re very unwilling to walk away, of course, just like our customers are unwilling to let us go. They developed us, we’re actually part of them more than not part of them. We’re more than just a regular off the shelf supplier.
We’re a custom, probably part of their family of custom suppliers. Without us, they won’t have a fighter. Without us, they won’t have a submarine that works. It’s a big problem. So I think the idea is we’re going to continue pushing our position understand we need to come to a mutual understanding.
Let’s get the vendors healthy.
Mark Gome, Investor, Pipeline: Well, aside from your reliability, the fact that you do have that nice leverage position of being a sole source supplier on a lot of your products is the other major tenant of my patients to this point. And now you’re starting to pay it off. So thank you very much. And thanks for the openness. It was really nice to have these long open discussions on these calls.
So thank you. It’s a great call. Thanks.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Thanks, Mark. Thank you.
Conference Operator: Thank you. We have a follow-up question from Richard Grelich. Richard, your line is live. Please go ahead.
Richard Grelich, Investor, REG Capital Advisors: Thank you. So your customers see what your financial performance has been, Not necessarily on each individual contract, maybe they do. But I guess my question revolves around when you go and negotiate with your customers regarding pricing and other aspects of the contract. Do you believe that they feel that a 30% gross margin overall is acceptable for both you and them? Or do they think that that’s too high?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: The questions, I I you’re you’re in an area where it’s really confidential negotiations under NDA Mhmm. With that question. But I think I can say something about that. None of what we’re asking for is, outside the realm.
Richard Grelich, Investor, REG Capital Advisors: Of achievement?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Of acceptability. Oh,
Ross Taylor, Investor, ARS Investment Partners: okay. Well, I I guess Excuse
Alex Shen, Chief Executive Officer, TechPrecision Corporation: me, Richard. Just let me give you more color. Nothing that I am asking for, is outside their allowable actions. Nothing. It’s all contained within.
Ross Taylor, Investor, ARS Investment Partners: We have
Alex Shen, Chief Executive Officer, TechPrecision Corporation: world ourselves also. And Phil comes from, a defense organization himself. He understands what’s, what can and cannot happen.
Ross Taylor, Investor, ARS Investment Partners: Mhmm.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yeah. And and you bring up also a very good point. These customers have, access to our public information on all our finances, so they understand that I’m not BS ing them when I tell them a number. Here. Look at my filings.
Would you like to go through them page by page? I’m ready to do that. There’s over 50 pages on the 10 k. Sure. And I have done that.
No problem.
Ross Taylor, Investor, ARS Investment Partners: Mhmm.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Yep. Yep.
Richard Grelich, Investor, REG Capital Advisors: Well, what I’m thinking about is in the past, and I’m saying over the last several years, I had thought that the company operating efficiently and effectively with higher revenues might be able to achieve a 30% gross margin overall. Now, obviously STATCO is kinda throwing a monkey wrench in that. But in the past, I believe Raynor has achieved that. Is that a number that is still achievable, do you think?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: How how much of it do we wanna talk about publicly? And then, you know, these calls are listened to by our customers as well as our competitors, Phil, but go ahead and answer it with that background in
Ross Taylor, Investor, ARS Investment Partners: mind. Right?
Richard Grelich, Investor, REG Capital Advisors: Phil, could you take the handcuffs off your mouth now?
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: It’s duct tape I think he put on. So, to answer the question differently, we certainly are a defense contractor. We know that we have to and are required to be compliant with the FAR and as part of that with the CAS accounting, right? And as such, we know that there are limitations with how much margin that we can build into to these contract defense contracts that we have. And as Alex indicated earlier, we are certainly compliant with that.
Alright, so we do have again pressure to downward pressure, you know, on each contract. The idea for STATCO is to try to, you know, continue to replicate what we did at and have done at Raynor. Yep. And, you know, have the same drop through, you know, margin drop through that we do at Raynor.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: I think, one of the things that we can talk about and should keep in mind is we need to earn that respect and earn that right and earn that, ability to secure a higher margin business. So that’s easier to justify a supplier that’s a 100% on time and has, gotten awarded for 100% on time delivery, 100% quality for four years in a row, five years in a row, six years in a row, continually showing gold and gold medal, winners, you know, whatever the classifications are, and make it easier on the client to say, I want this guy.
Ross Taylor, Investor, ARS Investment Partners: Yeah. Be because it’s not just
Richard Grelich, Investor, REG Capital Advisors: a matter of you earning a higher margin, but because of your performance, you’re allowing the entire operation to be executed more efficiently and more profitably.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: They lose less by paying us more.
Ross Taylor, Investor, ARS Investment Partners: Correct. Yeah.
Mark Gome, Investor, Pipeline: Yep.
Ross Taylor, Investor, ARS Investment Partners: Alright.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: So, hopefully, I’m answering your question with more color and not really, you know, point blank talking about a number, which I’m trying to shy away from a little bit. Thank you for your patience with me.
Ross Taylor, Investor, ARS Investment Partners: Thank you.
Conference Operator: Thank you. And we have a follow-up from Ross Taylor. Ross, your line is live. Please go ahead.
Ross Taylor, Investor, ARS Investment Partners: Having spent time long ago in the defense business, some of this conversation makes me very nervous actually.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Thank you.
Ross Taylor, Investor, ARS Investment Partners: And it’s very rare for me to say that. Is it safe to say what these contracts we’re talking about, the assumption that I have, maybe many of us have, is that they’re largely, if not almost entirely located in the STADCO operation. How much of the troubled business is focused or is located in STADCO at this point? I think we’ve known that your relationship with Electric Boat and then subspace is a unique one. They clearly years ago stepped through to help you to make sure they demonstrated you were, you know, a key component of their of their operation.
How much of what we’re looking at here and we’re talking about here is really tied into, the two primary programs that you have?
Alex Shen, Chief Executive Officer, TechPrecision Corporation: So we’re talking about the loss leaders. Right?
Ross Taylor, Investor, ARS Investment Partners: Yes.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Okay. Yeah. Predominantly STADCO. I think I lost the thread of the question. I thought it was how much we can do with it.
Mark Gome, Investor, Pipeline: Well so No. What I’m trying get at is put it
Ross Taylor, Investor, ARS Investment Partners: a different way. If you had never bought Seneca, we wouldn’t be having the conversation. We agree with that.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yeah. We we would be, you know, profitable.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Well, profitable in one sense, but still one subsidiary in another sense and unable to kind of, like, absorb the hell out of all the overhead and as, you know, from you know, it’s one one parent and one subsidiary. Holy crap. We need to do more.
Ross Taylor, Investor, ARS Investment Partners: Yeah. It would give you the it would it would it would improve your balance sheet. It would I mean, there are a lot of pauses that would come out of it. It would leave you with the need to grow the business to absorb the overhead, certainly. But, you know, you would be we would not be looking at a balance sheet where it is today.
We would not be looking at, you know, the investor frustration that you have today because of the issues that have come with DADCO. I mean, it really seems to me that what we’re really talking about here is that if
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Absolutely. I’m going to let Phil answer that one because he’s got the fresh eyes. He came on board when go ahead, Phil. Just go ahead.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: So Ross, you’re absolutely right. If I look at the balance sheet on Raynor, it’s extremely strong. I look at the balance sheet on STATCO, it’s not, all right? It is certainly drawing cash every single month out of the organization right now, all right, except for part of Q4, which was nice to see. The idea is, again, to shed the unprofitable businesses or contracts out of that business.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: And improve some of them.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Improve some. And to continue to focus on the ones that we have already improved and grow those.
Ross Taylor, Investor, ARS Investment Partners: Yeah.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Right? So it is bringing stability to that organization. Alright? And you’re absolutely correct. You know, you had mentioned early on you paid X amount for it, you lost X amount, all right?
You’re sitting with $20,000,000 or thereabouts. That’s a lot that you could have used to invest in the equipment, etcetera, all right? There is a strong path for recovery with STATCO. And it is, again, one contract at a time. As we said, we’ve already worked on the 35% to 40%.
It is now and we’re already still working on others. Alex and the team prior to even me joining has already started that process. It just takes time, one at a time. And we’re focusing on it. We’re getting to the root cause.
How can we improve efficiencies on one contract to make it more profitable? How can we improve the actual pricing on the contract you know, at the same time? And, you know, so the to I think to answer your question, yeah, it is STADCO. No doubt.
Ross Taylor, Investor, ARS Investment Partners: And what you’re talking about is if you can if your partners, Boeing, others, you know, Sikorsky, others, either allow you to make enough money on these contracts that you can reinvest in your business or find ways to do for you in this business what the sub manufacturers, Electric Boat and the government have done. That industry, they will find that they get rid of potential bottlenecks. They improve efficiency. They improve deliverability. You know, obviously, this whole situation, what we’re seeing, you know, from the defense standpoint is we need more now.
And Correct. Solving this it strikes me as what we’re really looking at is these are major players. You don’t need much money. I remember at one time we spent out a team to solve someone because we couldn’t we actually took over running someone because they couldn’t make it. But without them, our biggest program didn’t work.
I mean, it’s this is this can all be solved by reasonably small amounts of money, it strikes me as. And so the key is just finding a way that they want to work with you, recognizing that it’s easier to help you than to try to requalify someone else to do what you’re doing if you have to walk away. So I appreciate go ahead.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: I completely agree with you. And these are discussions internally that we are having all the time and talking about how we move that forward. All right? So, we talk about customer engagement and so forth. My gosh, it’s nice to see here the amount of time customers spend with us.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: The level of customer engagement
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: Yep, is exactly.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: At both subsidiaries. Exactly.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: So, I think you’re right. I think it’s continuing to engage that customer and look for additional opportunities, whether it be customer investments and or additional contracts. So agreed with you completely, Ross.
Ross Taylor, Investor, ARS Investment Partners: Hey, Rod. I’d like to once again, this is to me the most encouraging call I’ve heard since I’ve been involved with this company, and I think that I know that there were some I’m watching, you know, aftermarket fading where people are selling this. I’m trying to figure out why they’re clearly listening to a different call than I’m listening to, and they’re hearing a different message than I’m hearing. I think that what I’m hearing you guys tell me is that you actually are becoming a professional managed organization, and I think that Mark was saying some of this is a huge improvement. I am, you know, really excited about what I’m hearing from you guys because it’s the path to where we want to be, which is not a $5 stock or even a $10 stock.
It’s, you know, a multiple of that. And I’m hearing you guys say things that let me think we can get there. So thank you very much.
Phil Podgorski, Chief Financial Officer, TechPrecision Corporation: You’re welcome. And we all want the same thing.
Ross Taylor, Investor, ARS Investment Partners: Thank you.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Thank you.
Conference Operator: Thank you. And this does conclude today’s Q and A session. At this time, I’d like to hand the floor back to management for closing remarks.
Alex Shen, Chief Executive Officer, TechPrecision Corporation: Thank you, everyone. Have a great day.
Conference Operator: Thank you. This does conclude today’s conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you once again for your participation.
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