TechPrecision Corporation (TPCS) Earnings Call Transcript & Summary

Greetings, and welcome to the TechPrecision Corporation Fiscal 2026 Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Brett Maas, Managing Director of Hayden IR. Thank you, sir. You may begin.

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 for 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, June 22, 2026. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex, the floor is yours.

Brett, thank you. Good afternoon to everyone, and thank you for joining us. Fiscal year 2026 fourth quarter consolidated revenue was $8.1 million or 15% lower when compared to $9.5 million in the fiscal year 2025 fourth quarter. Consolidated gross profit totaled $1.1 million or 47% lower when compared to the fourth quarter of fiscal 2025, primarily due to lower revenue and resulting margin drop-through at Stadco. Fourth quarter Stadco revenue was $4.2 million with profit -- with gross profit of $28,000. Two factors drove the low gross profit: one, delays in receiving customer furnished materials; two, delays in customer analysis and disposition of nonconformances. We are actively working with our customers to shorten the delays to improve our throughput. Fiscal year 2026 fourth quarter Ranor revenue was $3.9 million with gross profit of $1.1 million or 16% lower when compared with the prior year fourth quarter results. We continue to strategically improve both our customer and project mix towards gross margin expansion at Stadco. 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. Our Ranor segment continues to execute and install new equipment funded by the $24 million plus in grants from our U.S. Navy submarine programs-related customers. This sustained cadence of new equipment procurement, delivery and installation will enable a reliable, robust and resilient manufacturing capacity dedicated to submarine programs at both Stadco and Ranor. Our customers have expressed their strong confidence as we continue to maintain on-time delivery of quality components. This delivery performance is leading both Stadco and Ranor to new quoting opportunities in air defense and submarine defense sectors with the same customers that already know and trust our capabilities. Both subsidiaries are continuing to experience meaningful new capture of business awards from these same customers, adding to our strong $52 million backlog. This $52 million backlog only includes the funded portions of customer purchase orders with an additional -- approximately $25 million additional of unfunded purchase orders. We expect to deliver this $52 million backlog over the course of the next 1 to 3 fiscal years with gross margin expansion. With that said, we are providing guidance for fiscal year 2027. The company is projecting 2027 full year revenue to be $35 million to $37 million. We are projecting EBITDA to be $3 million to $4 million. Now I will turn the call over to our Chief Financial Officer, Phil Podgorski, to continue with the review of our fourth quarter and 12 months ended fiscal 2026 results. Phil?

Thank you, Alex, and good afternoon, everyone. As Alex just mentioned, for our fiscal 2026 fourth quarter, consolidated revenue decreased by 15% to $8.1 million compared to $9.5 million for the same period a year ago on lower revenue at both Ranor and Stadco segments. Consolidated cost of revenue decreased by 6% or $400,000. Consolidated gross profit decreased by $1 million in Q4 2026 to $1.1 million, primarily due to lower revenue at both Ranor and Stadco. Consolidated SG&A decreased by 24% to $1.3 million, primarily on a decrease in professional fees and services. Interest expense decreased by 25% due to lower interest incurred on our loans and lower amortization of debt issuance costs. Our net income was $400,000 for the fourth quarter or $0.04 per share on a basic and fully diluted basis. For the 12 months ended March 31, 2026, consolidated revenue finished up at $31.6 million or 7% lower on a different mix in customer projects at both segments. Consolidated cost of revenue was $26.7 million or $3 million lower than the same period a year ago on lower revenue and improved strategic customer and project mix. As noted, our improved strategic customer and project mix resulted in increased gross profit of $600,000 or 300 basis point improvement. SG&A decreased by 7% as lower professional fees and office costs more than offset higher compensation and benefits. Consolidated operating loss for the 12 months ended March 31, 2026 was $1.1 million and decreased year-over-year by 51%, primarily due to higher gross margin and lower SG&A costs, as noted before. Interest expense decreased by 10% on lower interest incurred on debt and lower amortization of debt issuance costs. Net loss was $1.6 million or $0.17 per share on a basic and fully diluted basis. Moving on to our financial position. We continue to actively manage our cash flow, as Alex mentioned. Net cash provided by operating and investment activities totaled $900,000 for the 12 months ended March 31, 2026. Net cash used in financing activities totaled $600,000, primarily to pay down principal under our revolver and term loans. Our debt was $6.9 million as of March 31, 2026, compared to $7.4 million on March 31, 2025. Cash on March 31, 2025 (sic) [ 2026 ], was $431,000 compared to $195,000 on March 31, 2025. Now let's dive a little deeper into the segment performance for the fiscal quarter Q4. For Ranor, our fourth quarter revenue was down by $800,000 year-over-year or 16%, primarily driven by delays in receiving customer furnished materials. The revenue decline resulted in $1.1 million of gross profit for the quarter. Stadco Q4 fiscal 2026 revenue decreased by $700,000 compared to the same period last year, primarily as we implemented a strategic project mix change at Stadco. Stadco experienced Q4 year-over-year gross margin decline as gross profit decreased by $800,000, mainly due to customer-related delays on: one, customer furnished material; and on two, customer analysis and dispositioning of nonconformances, as Alex mentioned. As Alex mentioned, we continue to actively work with our customers to reduce the wait times and improve throughput. With that, I will now turn it back over to Alex.

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. These components that we manufacture are customer designed. We sell to customers in 2 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 preclude 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 we can discuss. And sometimes, those limits do change. TechPrecision is proud and honored to serve the United States defense industry, specifically naval submarine manufacturing through our Ranor subsidiary and military aircraft manufacturing through our Stadco subsidiary. We aim to secure and maintain enduring partnerships with our customers. As noted earlier, the total of completely funded grant money of more than $24 million from our U.S. Navy submarine programs reflects this strong partnership. This commitment represents more than 50% of TechPrecision's market cap. Overall, at both Ranor and Stadco, we continue to see meaningful opportunities in the defense sector, as evidenced by the strength of our backlog. We're very encouraged by the prospects for growing our revenue and increasing profitability in future quarters. We are showing progress. We have more work to do, especially with our Stadco subsidiary, to get into the black. We are targeting to build and sustain a positive trend. Operator, please open the line for Q&A.

[Operator Instructions] Your first question for today is from Ross Taylor with ARS Investment Partners.

First, gentlemen, congratulations on getting to where you can actually and are willing to give guidance. I think that's a huge step, something you guys have never done in the past. Let's focus on the EBITDA, what was '26 EBITDA? I haven't seen your filings yet, so I haven't been able to pull that out. But what was your EBITDA in '26? [indiscernible] next year?

Yes, that's correct.

Okay. Running down with some of the [ uses ], you paid down you said a little over $600,000 in debt. You have about $6.9 million in long-term debt. Would you anticipate that this increase in EBITDA would allow you to make a more meaningful dent on the debt outstanding in the current fiscal year '27?

I think it will be a combination of investment in equipment as well as paying down the debt. It's critical to invest in Stadco.

Absolutely.

It's going to be -- it will make the organization a bit more efficient. We'd have additional throughput as well. So a combination of both, Ross.

Okay. And then looking at this, in the past, Alex, you said you never failed in the turnaround, but Stadco has clearly been, to use 1 of my father who's flowing to war sprays, it's been a nailer on roll on take off. It's not worked at all. We've probably sunk well over $20 million in both purchase price and losses into it. Have you thought about why did that happen?

Absolutely. Yes, we have.

And can you educate us on why that happened and why it's taken so long to get it fixed or getting it fixed? Because it's not fixed yet.

It's not fixed yet. We do see positive sustained improvement that is still not reaching where we can start trending in the black. But it is positive. So that's one thing. One big driver is really -- we've alluded to a little bit in our introductions and in our prepared script. Phil and I both talked about a strategic mix change. The mix change, part of what was detrimental to us and causing us to go the wrong way was the mix was a combination of one-offs as well as repeat parts. Those are generalizations, but with one-offs where we don't think that they'll ever repeat again. It's -- they are first, basically very difficult to understand and estimate correctly. We should make that an exception and not do them as part of what we always do. It's a little bit difficult to do that when we're scrambling for revenue. And part of it also, once we have that type of purchase orders that we're still not done executing, and those turn into legacy anchors that drag us down. We've learned our lesson. We're changing the mix. We've been working hard at changing the mix quarter-over-quarter, month-over-month for the -- all of fiscal year 2026, and we see decent results are not good enough yet. That alone is not going to bring us to profitability or breakeven, but that definitely is a sea change in how this strategic mix is now tilted towards repeat parts on repeat programs and programs of record with the United States government. I hope that clear on that one piece. Phil?

Yes. If I could add to that, Alex. Ross, to answer your question a little bit further, some of the things that have been holding us back, I hate to keep using the word legacy, right? But we -- upon acquisition of this organization, as we were moving through, we did discover that there were a number of contracts that were priced wrong. They were priced with deescalation on price amidst a market that was escalating. You had asked the question at one other time, how many more of these do we have? Right now, we have 2. I'm going to answer it directly. We have 2 that are remaining. That's it.

Okay.

We've gone through specifically this year and either renegotiated with repricing, new terms, new Ts and Cs, we have 2 that are hanging out there. They're at their last leg, right? It will carry into fiscal 2027, both of them, but we're committed to getting those done, completed and off. And now it's -- from then, it is all new focus. This is where we talk about the strategic mix, strategic with a sense of repeat products if we're doing first articles because we do want to expand the product, all right, the number of items. With existing customers primarily, but they're going to be priced right at the beginning. Right? So we've been saddled with these legacy. We're nearing that end.

Okay. I think of you in Stadco as having...

Sorry, Ross, could I just finish off the answer to the question? It was in 3 parts. So the first part was really the characterization of one-off versus repeat parts. With that, what -- from Phil's standpoint, he was seeing mostly, it's very, very difficult to price the one-offs to be anywhere close to reality. So if we pay more attention and get out of those and really concentrate and change our mix strategically, it cause us -- it helps us do a much better job and a much more successfully profitable job at pricing if we just concentrate on the ones that are repeat parts that are actually deployed in the field for defense work. So it's one-off versus repeat parts. That's one thing. The next thing was very closely related to that, but separate, is pricing. And the third piece that we also alluded to a little bit on the usage of cash is aged equipment. How are we going to deploy that? Are we going to pay off debt? Are we going to incur some more debt and spend it on CapEx? And that's the 3 pieces: strategic mix change, pricing and aged equipment replacements.

Okay. And I want to get back to the idea of what you -- of equipment and the like because obviously, the Navy has pumped a lot of money into its supplier network to allow it to operate with the most modern equipment at the most effective level. It strikes me, you have 2 -- we think of you having 2 primary programs at Stadco, 1 of which is Boeing's F-15EX and derivatives thereof, and the other is the CH-53K. Do either of those 2 programs right now, are they turning a profit operationally?

Yes.

Okay. So the problem you have is in 1, the specific program?

So there's...

You mentioned you had 2 contracts that have to run through. I assume -- and my assumption from when I watched a pattern analysis and like, I'm assuming that problem is with Sikorsky and the CH-53K. I could be wrong, but that's where it appears to me to be. So you have these 2 programs, 2 products that you need to run through. I assume that, that when you get that done, the next round, the next batch you run should be profitable. Is that a correct assumption?

So that is not a correct assumption.

No.

We have other customers at Stadco as well. And some of them, again, have again, legacy contracts that go back quite far.

I think -- I think, Ross, just to be a little bit more open than usual. And I'm going to sustain this in the future as well. Phil sees it from his pattern recognition and actually looking at when we break it down by the project, when we break it down by the customer, but also when we break it down specifically into the sub projects, right? So we've done a lot of work with those 2 customers that I'm not supposed to mention by name. And the key is that we have gotten them to the point where there are repeat parts and pricing is finally in the correct place. And we intend to hold the line and advance it from there. I hope that gives you a bit more color.

You said that about -- overall, company-wide, about 90% of your business is sole source?

Well, I would try to modify what you just said, a single sourced or sole sourced. Sorry, there's legal connotations with them.

Yes, there are differences.

Yes.

Sole is only you can do it, single is only you are doing it?

Yes, generally speaking, correct.

Yes. So -- and you're looking at this with so much of your business being something you do uniquely, one would think that you should be able to get a reasonable profit and the fact that it does not help your suppliers for you to not be able to make a reasonable profit. So I have to say, I do hope -- and if you have other minor smaller contracts that aren't in these 2 things, it would strike me as once again, one needs to be able to operate at a reasonable profit. So it's -- by the end of this current fiscal year, the '27 fiscal year, are you saying that you do not think that you'll be able to be making a reasonable profit in both of these programs? What's going to -- and if so, what's it going to take to get there?

So in the 2 programs that you had mentioned earlier, the names that we're not supposed to mention?

Yes, the ones we don't talk about.

That's right. So in fiscal 2027, they will be making a profit. Yes.

Both those programs will make a profit in fiscal '27?

That's correct.

Okay. Well, that's a huge improvement.

It is. Huge strides have been made.

Yes. And here's a question. I know having -- you see at times, and you're seeing it on the Ranor side. But major -- these companies that you're working with, Boeing's -- Sikorsky, [ ETX ], they have the ability to help their suppliers not just through contracts, but also through supplying capital. You see this with some of your competitors and some of your peers, where they come in and they produce -- they supply capital with the idea of getting either first dibs on production or whatever. Why are you not seeing that in this area? I know the -- like the F-15EX right now, you're seeing -- there's some talk about them not only producing over 200 for the air defense version, but we're placing over 200 aircraft that are currently in the F-15 E versions with the EXs. So you're talking about a program that could have a 500 aircraft run inside the U.S. Air Force. But to get there, you can't do it doing 24 a year. You got to get up to 50 to 70 or more, I think, 70 or more a year. To do that, you need to invest capital, I would assume, and that investing in capital, which is not much for them, but might be huge for you, pays huge dividends because if they can increase their production rate by threefold, which I believe they should be able -- I mean, nothing else there coming off the F-18 -- [ FA-18 ] run has stopped. So there's an assembly line in St. Louis, I think that might be empty. It just strikes me as what's it going to take to get them to approach their business the same way the Navy and your -- and General Dynamics and the like of approach the submarine business?

What I can say is, and I'll let Alex chime in afterwards, is that Boeing and Sikorsky have certainly recognized the need to invest in their supplier base. And again, the names I shouldn't be mentioning. Sorry, Alex.

The companies we don't talk about. Okay.

So -- it slipped my mind. They have recognized the need to invest. And they are -- to the point, is it going to happen now? Is it not going to happen? Time will tell. Certainly, conversations have been had, all right? They understand our position. So we've already initiated these conversations months ago, right? So I can't say that we're ahead, but we certainly know that there is demand for what our talent, our technology or capability is. And in order to make the -- to get the throughput that they're looking for, they need to invest or we need to find another way to get it. So, Alex?

That's a good opener for me. So being a little bit more blunt and not talking about specifics and specific customer names. There has been no hesitation whatsoever on our part to aggressively pursue CapEx opportunities in the form of grants. We don't have the money, and that is clear. So if you would like more capacity, we have the know-how, we have the desire, and we have the knowledge to execute. So the -- I guess it's very clear that we're waiting for customer responses, and we've been very aggressive in requesting a CapEx assistance in the form of grants. And we've gone directly to the customers' highest levels as well as really, the Armed Forces side of the program management from the government side. Yes. It's slow. So it's not reflected yet. And it took Ranor years and years and years before we were recognized enough for a CapEx grant through the U.S. Navy through Electric Boat.

Yes. But they did get there. And as I said, if you're looking at getting rid of these roadblocks, it's going to take these companies investing in -- or the government. Someone has to invest in building out the...

The industrial base.

The industrial base because it doesn't -- as I said, when you look at the numbers, you realize you don't need 300 to 500 aircraft in 15 years, you need them in 5 years, 7 years. And to do that, it's going to take investments. And obviously, you can execute it. Okay. Lastly, on this EBITDA number, you're looking at basically pushing somewhere getting an EBITDA ratio in and around, let's say, 10%, a little bit better. This in fiscal '27. Is that something that we should see as a stepping stone moving higher as we push forward, both because we should see more aircraft, particularly we should see a ramp in submarines going forward and we should see a ramp in -- also in at least 1 of those 2 programs that we don't talk about?

Yes. I think the -- yes, I think the answer to that is, let's get to the 2027 number. The road map further would suggest what your -- what you had indicated, all right? Certainly, the SG&A profile that we have, the infrastructure that we have doesn't need to expand, other than the equipment at the same pace. So you should see a higher drop-through. But let's execute on 2027, I think, first.

Okay. Well, yes, but I -- and executing on '27 will be fantastic. As I said, congratulations on getting to where you're comfortable issuing guidance. And thank you for being a little more open in the conversation. And as I said, I think that -- it strikes me as '27 is the year that should actually turn a corner. And given where the stock is priced, that should leave a lot of upside pushing forward, particularly if you can start to generate positive EBITDA and better revenue numbers so that the market isn't afraid that -- I get too many calls, people worrying about whether you can get a bank accord. And I'm comfortable with this that you can find -- your bank will find a way to finance you until you get further around the corner.

We have reached the end of the question-and-answer session, and I will now turn the call over to Alex for closing remarks.

Thank you, everyone. Have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.