TechPrecision's Q2 2026 Earnings Call: Contradictions Emerge on Stadco Profitability, Legacy Pricing, Defense Sector Moves, and Operational Efficiency

Date of Call: November 13, 2025

Financials Results

• Revenue: $9.1M for Q2, up 2% YOY (vs $8.9M in FY2025 Q2)
• EPS: $0.08 per share (basic and diluted) for Q2; net income $0.8M. Six months: $0.02 per share; net income $0.2M.
• Gross Margin: Consolidated gross profit $2.5M (increase of $1.4M YOY); management reported a double-digit YOY consolidated gross margin improvement of 16 percentage points.
• Operating Margin: Operating income $0.9M for Q2; six-month operating income rose 126% to $0.5M. Ranor operating profit $1.6M Q2; Stadco operating loss $0.5M Q2 (improved by $873k vs prior year).

Guidance:

• Deliver the $48M backlog over the next 1–3 fiscal years.
• Expect gross margin expansion as backlog is converted.
• Target growing revenue and increasing profitability in future quarters.
• Continue aggressive daily cash management, expense control, and tactical execution to resecure customer confidence.

Business Commentary:

• Revenue and Profit Growth:
• TechPrecision Corporation reported consolidated revenue of $9.1 million for fiscal 2026 Q2, 2% higher than the same period last year.
• Consolidated gross profit increased by $1.4 million, resulting in a 16 percentage point improvement in consolidated gross margin.

• The growth was driven by favorable customer mix and improved margins at both the Ranor and Stadco segments.

• Segment Performance and Margins:

• Ranor segment's revenue was $4.4 million with an operating profit of $1.6 million, showing improved margins.
• Stadco segment's revenue increased to $4.8 million, with an operating loss improvement of $873,000 compared to the previous year.

• The improvements were due to better throughput, reduced provision for losses from specific first article costs, and lower provisions from one-off contracts.

• Cash Management and Financial Position:

• TechPrecision actively managed cash flow, with net cash provided by operating and investing activities totaling $0.2 million for the first 6 months of fiscal 2026.
• The company's debt was reduced to $7.3 million on September 30, 2025, and the cash balance increased to $220,000.
• This was attributed to aggressive daily cash management, control of expenses, and strategic customer confidence retention.

• Backlog and New Business Opportunities:
• TechPrecision has a strong backlog of $48 million, which the company expects to deliver over the next 1 to 3 fiscal years with anticipated gross margin expansion.
• The company secured new business awards from existing customers, expanding into air defense and submarine defense sectors.

• This growth was supported by sustained delivery performance and strategic customer relationships.

• Stadco Segment Improvement Initiatives:

• Stadco experienced a $0.6 million revenue increase and a 9 percentage point gross profit margin improvement, mainly due to improved contract pricing and customer mix.
• Despite ongoing challenges, the company is actively working with customers to recover from legacy contracts and underpriced one-time contracts.
• The focus is on building enduring partnerships to address these headwinds and return Stadco to profitability.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a profitable consolidated quarter: "consolidated revenue was $9.1 million or 2% higher"; gross profit rose to $2.5M with a "16 percentage points" gross-margin improvement; CEO: "we had a profitable consolidated quarter" and cited a "strong $48 million backlog" and "encouraged by the prospects for growing our revenue and increasing profitability."

Q&A:

• Question from Ross Taylor (ARS Investments): What percentage of your Stadco business is still needing to be reworked to become profitable or needs to -- is one-off contracts that you need to run out to become profitable overall?
  Response: One-offs and first-article work remain; management has aggressively addressed many loss reserves this quarter but declined to give a percentage and emphasized continued mitigation via customer collaboration.

• Question from Ross Taylor (ARS Investments): Is the problem [with first articles] more -- did you see it more as a design issue? Was it the customer changing the designs? Was it underbidding? What did you sense the issue was in those first articles?
  Response: First-article issues are case-by-case across complex parts with multiple causes (design, customer interactions, handoffs); there is no single root cause.

• Question from Ross Taylor (ARS Investments): Is this an issue both at Ranor and Stadco? Or is it more concentrated at Stadco?
  Response: Ranor work is largely NAVSEA/spec-driven (submarine programs) and more repeatable; Stadco has more varied specifications—management expects focused repeat-customer work to drive Stadco's consistent recovery.

• Question from Ross Taylor (ARS Investments): If the Philadelphia Shipyard shifts to submarine manufacturing, is that an economic opportunity for you and can you service it out of your current industrial base?
  Response: Management said they will evaluate every opportunity and are willing to pursue such opportunities if customers lead them there.

• Question from Ross Taylor (ARS Investments): Can you walk through how you guys handle the grants that you've gotten from the federal government and the characteristics of those grants and what restrictions, if any, exists with them?
  Response: Grant-funded equipment gives priority to Navy parts but can be used for other parts when available; cash is segregated, corresponding liabilities are recorded on receipt, and assets are capitalized and depreciated per each agreement.

• Question from Ross Taylor (ARS Investments): Are any of the liabilities basically future performance or future services delivered tied to these grants?
  Response: Yes—some agreements include ongoing performance obligations (example cited: a 10-year agreement) and liabilities reflect those commitments.

• Question from Ross Taylor (ARS Investments): What kind of new business have you seen? Are you getting involved in any new programs, particularly out of the Ranor operation, and is there opportunity in larger undersea unmanned vehicles?
  Response: Ranor is on Virginia and Columbia class submarine programs; new program opportunities (including unmanned undersea) are possible but depend on customer leads and require careful first-article risk mitigation.

Contradiction Point 1

Stadco's Profitability Timeline

It involves differing timelines and expectations regarding the resolution of profitability issues at Stadco, which directly impacts the company's financial outlook and investor expectations.

What percentage of your Stadco business still requires rework or continued operation to become profitable? - Ross Taylor(ARS Investments)

2026Q2: Addressing Stadco's profitability issues, three areas are being managed: one-off contracts, first article activities, and new business capture. The reporting quarter saw significant efforts in dealing with loss reserves. Focusing on collaboration and stability in production processes is key for future improvement. - Alexander Shen(CEO & Director)

How long will it take to resolve the previously mispriced contracts? Is new business being pursued that isn't offset by these mispriced contracts? - Charles Neuhauser(Mainwall Investments)

2025Q3: How long is it going to take? I really don't know very good answer but I'll continue to report out. Having said that, we are working on the remainder of the legacy pricing problems on core business. - Alexander Shen(CEO & Director)

Contradiction Point 2

Legacy Pricing and Contract Losses

It involves changes in financial forecasts and contract loss provisions, which are critical indicators for investors and stakeholders.

What percentage of your Stadco business still needs rework or operational adjustments to become profitable? - Ross Taylor(ARS Investments)

2026Q2: The reporting quarter saw significant efforts in dealing with loss reserves. - Alexander Shen(CEO)

How does the legacy pricing agreement impact the income statement this quarter? Will the agreement changes affect the provision for contract losses? - Richard Greulich(REG Capital)

2025Q4: So it impacts, more importantly, is the loss provisions. So if we move from a loss position to a profitable position, we reverse those reserves, those loss provisions. - Phillip Podgorski(CFO)

Contradiction Point 3

Defense Sector Opportunities

It involves the company's plans and opportunities in the defense sector, which can impact future growth and revenue streams.

Is the conversion of the Philly shipyard to a submarine manufacturer an economic opportunity for you? - Ross Taylor(ARS Investments)

2026Q2: Future opportunities in the defense sector are being actively considered, and potential projects will be evaluated based on existing strengths and customer relationships. - Alexander Shen(CEO)

What is TechPrecision's role in the supply chain for programs such as Virginia, Columbia, CH-53K, and F-15EX? - Mark Gomes(Pipeline)

2026Q1: TechPrecision is engaged in major programs like Virginia class and Columbia class submarines. New opportunities arise through expanding relationships with existing customers, with a focus on mitigating risks associated with new projects and first articles. - Alexander Shen(CEO)

Contradiction Point 4

Stadco's Operational Efficiency

It highlights differing perspectives on Stadco's operational efficiency and profitability, which are crucial for investor understanding of the company's turnaround efforts.

What percentage of your Stadco business still needs rework or operational changes to become profitable? - Ross Taylor(ARS Investments)

2026Q2: Addressing Stadco's profitability issues, three areas are being managed: one-off contracts, first article activities, and new business capture. The reporting quarter saw significant efforts in dealing with loss reserves. - Alexander Shen(CEO)

Are you halfway through operational efficiency improvements with minor tweaks, or are significant equipment/process upgrades still needed? How do you view remaining tasks for FY '26? - Kris Tuttle(Blue Caterpillar)

2025Q4: I think we're already mentioning that we're -- I'm assuming we're talking about Stadco and the turnaround at Stadco, not Ranor, correct? So I think we already mentioned that we're well on its way. - Alexander Shen(CEO)