TechPrecision - Earnings Call - Q3 2025
April 8, 2025
Executive Summary
- Q3 FY2025 revenue was $7.622M, gross margin 13%, and EBITDA was $0.051M; net loss improved year-over-year to $(0.799)M and EPS to $(0.08) as Ranor remained profitable while Stadco losses persisted.
- Backlog stood at $45.5M, expected to be delivered over the next 1–3 fiscal years with anticipated gross margin expansion; management reiterated customer confidence.
- Quarter was seasonally impacted by under-absorbed overhead; Stadco faced legacy pricing issues and unfavorable mix, partially offset by Ranor’s favorable mix and profitability.
- Directional commentary only; no formal numerical guidance was issued. Wall Street consensus estimates from S&P Global were unavailable for comparison this quarter (microcap coverage limitations), so beats/misses versus estimates cannot be assessed.*
What Went Well and What Went Wrong
What Went Well
- Ranor segment delivered operating profitability; “Ranor experienced a favorable project mix enabling us to sustain operating profitability” (CEO).
- Backlog remained strong at $45.5M, supporting multi-year revenue visibility; management expects margin expansion with backlog delivery.
- EBITDA turned positive versus prior-year quarter, reflecting improved operating leverage despite Stadco headwinds ($51k vs $(364)k YoY).
What Went Wrong
- Stadco incurred operating losses driven by legacy pricing, unfavorable mix, and under-absorbed overhead; gross loss of $(521)k for the quarter.
- Seasonality in Q3 increased under-absorbed overhead, dampening margins; gross margin down to 13% from 15% prior year.
- Working capital remained negative ($(1.8)M) with total debt at $7.4M; classification of bank debt as current due to covenant violations continues to pressure liquidity.
Transcript
Operator (participant)
Greetings. Welcome to today's conference call. TechPrecision Corporation Reports Fiscal Year 2025 Third Quarter Financial Results. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Brett Maas, Managing Director at Hayden IR. Brett, you may begin.
Moderator (participant)
Thank you. On the call today is Alex Shen, Chief Executive Officer, and Bobbie Lilley, Principal Accounting 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 from 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 represent management's estimates as of today, April 8th, 2025. 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.
Alex Shen (CEO)
Thank you, Brett. Good afternoon to everyone, and thank you for joining us. On March 31, 2025, the company made an announcement that the Board of Directors appointed Philip Podgorski to serve as the Chief Financial Officer of the company effective March 31, 2025. As a result, Bobbie Lilley stepped down as the company's interim Chief Financial Officer. Bobbie retains her position as Controller. Bobbie will continue to serve as the company's Principal Accounting Officer for a transition period. This transition period will end on the next business day following the filing of the company's 10-Q for the fiscal quarter ended December 31, 2024. That is the end of the announcement. We filed the 10-Q today, April 8th, 2025. Tomorrow, April 9, 2025, Phil Podgorski will take over the functions of Principal Financial Officer and Principal Accounting Officer from Bobbie Lilley. Many thanks to Bobbie Lilley for stepping in.
Let me take a few minutes to share some information about Philip Podgorski. Since 2013, Phil was the Chief Financial Officer for RTRC. RTRC is the RTX Technology Research Center, a division of RTX Corporation, a public aerospace and defense company. While at RTX, Phil was responsible for all GAAP, SEC, and government accounting and reporting-related aspects for the RTX Technology Research Center. He was also responsible for strategic and scenario planning in collaboration with other stakeholders at RTX, including long-range plans and annual operating budgets. Phil has an MBA and Bachelor of Science degree in Accounting from Western New England University. From my perspective, Phil is a seasoned CFO with public company experience in the defense sector and with a proven track record in financial strategy, scenario planning, and operations. Timely reporting is one of our fundamentals.
The successful addition of Phil to TechPrecision is a major step to achieve and consistently maintain compliance to this fundamental requirement. I'm very happy to welcome Phil to TechPrecision as our Chief Financial Officer. Okay. With that portion complete, we return to our earnings call format. Third quarter consolidated revenue was $7.6 million, a decrease of less than 1% when compared to the fiscal 2024 third quarter. Every fiscal third quarter is seasonally characterized with higher under-absorbed overhead, primarily due to Thanksgiving and year-end holidays, as well as paid time-off days around those holidays and also around hunting season. Third quarter Ranor revenue was $4.3 million, a slight increase when compared to the same quarter a year ago. Our Ranor segment had operating profit of $1.05 million. Ranor experienced a favorable project mix, enabling us to counter the seasonally higher under-absorbed overhead and successfully sustained operating profitability.
Third quarter Stadco revenue was $3.3 million, a slight decrease of 2% compared to the same quarter one year ago. Our Stadco segment had operating loss of $0.85 million. Stadco is continuing to work through remaining legacy pricing problems on core business and experienced an unfavorable project mix for the quarter, which did not help to counter the seasonally higher under-absorbed overhead. 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. Customer confidence remains high as our consolidated backlog was $45.5 million at December 31, 2024. We expect to deliver our strong backlog over the course of the next one to three fiscal years with gross margin expansion. Now, I'm going to turn the call over to our Principal Accounting Officer, Bobbie Lilley, to continue with the review of our third quarter results. Bobbie.
Bobbie Lilley (Principal Accounting Officer)
Thank you, Alex. As Alex just mentioned, our second quarter revenue of $7.6 million was less than 1% lower than the same period a year ago. Consolidated cost of revenue was $6.6 million, or 2% higher than the same quarter a year ago, due primarily to a higher production cost at Stadco. Third quarter cost of revenue was 7% higher at Stadco as higher production costs due to legacy pricing problems on core business and under-absorbed overhead dampened the gross margin. Consolidated gross profit was $1 million, or 15% lower than compared to the same quarter a year ago, primarily the result of the higher production costs at Stadco. Consolidated SG&A was $1.7 million for the third quarter, or $0.5 million lower, primarily due to the absence of expenses for due diligence work on the terminated VOTI acquisition, which was evident in the same quarter prior year.
Consolidated operating loss was $0.7 million, or 30% lower than the same quarter a year ago, as the absence of expenses for due diligence work on the terminated VOTI acquisition more than offset Stadco operating losses in the current year third quarter. Third quarter interest expense was up 28% due to increased borrowing under our revolver loan. Net loss was $0.8 million, or $0.08 per share, basic and fully diluted. For the nine months ended, consolidated revenue was $24.6 million, or $1.6 million higher than the same period a year ago, due primarily to an increase of $1.2 million in revenue at Stadco. Consolidated cost of revenue was $22.3 million, an increase of $2.2 million when compared to the same period a year ago, primarily due to higher production costs at Stadco.
Consolidated gross profit was $2.2 million, a decrease of 22% compared with the same period a year ago, primarily the result of higher production costs at Stadco. Consolidated SG&A totaled $4.8 million, or 6% lower than the same period a year ago, due to the absence of expenses in connection with due diligence work on the terminated VOTI acquisition, which was evident in the same period a year ago. Consolidated operating loss was $2.5 million for the nine months ended, or a 16% increase due primarily to the operating losses at Stadco. Interest expense was up 9% due to an increase in borrowing under the revolver loan. Net loss for the nine months ended December 31, 2024, was $2.9 million, or $0.30 per share, basic and fully diluted. Moving on to our financing position, we continue to actively and aggressively manage our cash flow.
Financing activities provided $1.2 million in cash through the nine months ended on December 31, 2024, primarily from proceeds from our private placement offering in July of 2024. We used cash in operating and investing activities of $1 million and $0.2 million, respectively. Our total debt was $7.4 million on December 31, 2024, compared to $7.6 million on March 31, 2024. Cash balance on December 31, 2024, was $165,000, compared to $138,000 on March 31, 2024. Working capital was negative on December 31, 2024, as all of our long-term debt is classified as current because of certain debt covenant violations. With that, I will now turn the call over to Alex.
Alex Shen (CEO)
Thank you, Bobby. For those on the call who may not be very familiar with our company, TechPrecision is the custom manufacturer of precision large-scale fabricated components and precision large-scale machined 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 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 I 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. Overall, at both the Ranor and the Stadco subsidiaries, we continue to see meaningful opportunities in our defense sector, as evidenced by the strength of our backlog. We are encouraged, highly encouraged, by the prospects for growing our revenue and increasing profitability in future quarters. Operator, please open the line for Q&A.
Operator (participant)
Certainly. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that's star one if you wish to ask a question. One moment, please, while we pull for questions. The first question today is coming from Charles Neuhauser from Mainwall Investments. Charles, your line is live.
Charles Neuhauser (Managing Principal)
Thanks. I understand that the losses at Stadco are due to previously underpriced or mispriced contracts. That opens up a series of other questions, mainly how much longer is it going to take to work through those previously mispriced contracts. Secondly, they are working on previously mispriced contracts, but are they working on any, do they get any new business? Is there additional profitable business that they are working on that is just not, it is more than offset by the previously mispriced contracts? If you could fill us in a little more about what is actually going on out there, I would appreciate it.
Alex Shen (CEO)
Okay. That was kind of a combination question, so let me parse it down to the elements, if you don't mind. I'll probably need some verification that I'm parsing it correctly. Thank you for your questions. How much longer is this going to take? If I really knew how to forecast this, I would openly be transparent in telling all of us. I don't know. I think I carefully said that we are working on the remaining problems with legacy pricing. I also don't classify this as mispriced, but I classify it as a problem with legacy pricing. Since we completed our acquisition of Stadco, which was in the August-September timeframe of 2021, we've steadily been working to eliminate these problems with legacy pricing.
We have some success and have not finished our work, and we would like to get this behind us just as soon as we can. Having said that, why is it taking so long? Some of these things are pretty complicated, and we're dealing with companies that are large and slow in the defense community. How long is it going to take? I really don't know a very good answer, but I'll continue to report out. I do want to point out that I carefully report out and tell all of us that I'm working on the remainder of the legacy pricing problems on core business. That's one answer for the first part of the question. I think the second part of the question was talking about, are we securing additional contracts that are profitable? The quick answer is absolutely yes.
Bear in mind that we are more a custom fab and machining shop, both at Ranor and at the Stadco subsidiary. As such, when we secure new business that's a one-off business, it's pretty difficult to price every single one to be profitable every single time. There are also factors that work a little bit against us. The business is quite lumpy. When we have this lumpiness and the different project mix, sometimes it works in our favor and sometimes it does not work in our favor, as we can see how the quarters reacted differently for Ranor contrasted to Stadco. I hope that gives you some idea of what we are doing. I won't be able to talk about specific customers on specific parts, though.
Charles Neuhauser (Managing Principal)
That's all right. I wasn't asking about that. You said you've secured new profitable business at Stadco. Are you actually engaged in working on those contracts, or is this something that's going to be worked on in the future? Do you have the capacity to deal with the, as you call it, problem legacy pricing business as well as new profitable business, or do we have to wait until the old stuff gets taken care of? What's the story there?
Alex Shen (CEO)
Okay. I think you asked four questions there. Have we secured business that we've already worked on and shipped? Yes. Are we continuing to secure business in the future that's profitable that we're going to work on and ship? Yes. Are we currently working on new business that we've secured since the acquisition? It's yes to all three. I hope that answers your question.
Charles Neuhauser (Managing Principal)
Yep. Yep. Thank you.
Alex Shen (CEO)
Yep. I think the other part of the question was really directed at the legacy pricing problems as we work through them. We don't want to wait till we're done working through them. We want to counteract them and really continue to work with the customer to get us to the right place. The defense industry needs us. It needs both the Ranor subsidiary, which is highly focused on submarine manufacturing, and the defense industry also really needs Stadco to supply the parts and the fixtures to make the parts that are very critical to the defense industry.
We're single-sourced on some items, and being the single source, it's not a good idea to let us fall apart. We have a very good track record of making good parts and delivering on time. These legacy pricing problems that remain are being worked on and have been diligently worked on on a daily and weekly basis. I request some more patience, but also I'm not very patient with myself and my subordinates, and we're going to do better. I just don't have a very good timeframe and forecast of when is this going to finish. We're going to diligently get us there.
Charles Neuhauser (Managing Principal)
Thanks.
Operator (participant)
Thank you. The next question is from Ross Taylor from ARS Investment Partners. Ross, your line is live.
Ross Taylor (Partner and Portfolio Manager)
Thank you. Alex, are the problems that Stadco, the legacy pricing issues you referenced, are they linked to specific production lots? Are they programs? Will moving from one production lot to another by itself improve profitability for Stadco?
Alex Shen (CEO)
Let me ask the two questions one at a time. Are they linked to a specific customer? They're linked to.
Ross Taylor (Partner and Portfolio Manager)
Production lots. You have two primary programs, we believe, F-15EX and CH-53K. Are they linked to specific production lots of one or both of those programs?
Alex Shen (CEO)
They were linked to both, and now the remaining one needs to get worked on. Are they linked to production lots? Yes, sir. They are.
Ross Taylor (Partner and Portfolio Manager)
Okay. When the service that is your end customer, when you move from one production lot to another, will the movement from the one lot to the other improve your profitability? Have you been able to build greater profitability into contracts for new lots?
Alex Shen (CEO)
That's part of the complicated problem when it morphs from one lot to another lot. We've been able to get some traction, and I should be able to report better results. I just don't know when exactly yet.
Ross Taylor (Partner and Portfolio Manager)
Okay.
Alex Shen (CEO)
I'm not trying to evade your question. I would like to give more color where I can.
Ross Taylor (Partner and Portfolio Manager)
Patience with regard to Stadco is, I think, one of the world's rarest commodities from your investment.
Alex Shen (CEO)
Yes, sir. I'm running out of a lot of the patience myself, and I have been directly engaging internally and externally on a weekly basis.
Ross Taylor (Partner and Portfolio Manager)
That is great. Right now, the Marine Corps, the military, is projected to take, I think it's something like 56 CH-53 airframes, delivery of 56 over the next 21 months. I think it's like 8 to Israel and the balance to the US Marine Corps. Will you have any problems delivering what work you do on that program at the volumes that are needed over those next 21 months if indeed they do demand and need that additional 56 airframe delivery?
Alex Shen (CEO)
That one I can give you very definite answers. We will be able to deliver to the capacity required. Absolutely. We are delivering it now.
Ross Taylor (Partner and Portfolio Manager)
Okay. Obviously, you sit somewhere in the production cycle, so the fact is that some of your components have already been supplied. A lot more will need to be supplied as we roll forward. That would seem to me to be, I mean, if I look back, I think they've only delivered a relative handful of those airframes so far. That should result in a substantial boost to revenues at Stadco just from that program alone, correct?
Alex Shen (CEO)
If I can solve the remaining legacy pricing problem, we'll be in much better shape. I think it's going to be in tranches. It won't be solved in one fell swoop, but we just need to keep the pressure on and get the company there so we can add value back to both the customers and our shareholders. Absolutely.
Ross Taylor (Partner and Portfolio Manager)
Are these, yeah, I'm trying to get it. One would expect you to see a substantial kick-up in revenues as we push forward, which should help absorb your overhead. That alone should make you more profitable in Stadco. The second question, looking at what you just said, is that it strikes me as what you're really saying is the CH-53K program was original. I think that contract was signed well before you guys acquired the company. That might go back to 2019, 2020, a rather different world. It does sound like what you're running into are problems that were built into the original particular contract. Is that correct?
Alex Shen (CEO)
I'm trying not to only talk about that one customer. Yes, you're correct on the overall timing. The legacy was created essentially before we made the acquisition. We've been struggling with that to reverse that. We are making headway. The traction has been established, and it's taken a while to really get the ear of the customer and have them look at the facts. It's been working. We're getting closer and closer. I just don't know when. I wish I did. I'd be able to tell you then.
I need.
Ross Taylor (Partner and Portfolio Manager)
Go ahead.
Alex Shen (CEO)
I need the numbers to bear us out. Excuse me, Ross. I didn't mean to talk over you.
Ross Taylor (Partner and Portfolio Manager)
No, it's all right. I was going to say, one, I'm glad you're getting more directly involved in it. Two, obviously, your customer needs to understand, and your customer is trying to build up an industrial base to support many programs. Therefore, they need to understand that the private sector, particularly a small public company, needs to actually be able to make money doing what it's doing. You're not supplying Walmart. You're supplying the US military.
Therefore, quality is an issue. Moving away from the CH-53K, we're about, or we're seeing a, should be seeing a significant ramp-up in the other major program you appear to have at Stadco. I only talk about Stadco because, quite honestly, I think it's best described as a sucking chest wound for shareholders since the acquisition. I actually think you probably, between the purchase costs, the expenses around the acquisition, and the losses incurred, probably have sunk more money into this than you have market cap currently. Solving Stadco solves TechPrecision's problems, as I see it. Looking at this, the F-15EX is about to also meaningfully ramp production. Same question. Any difficulties, any issues that you would have with being able to meet those demands?
Alex Shen (CEO)
Currently, no. At the last earnings call for the previous quarter, we talked a little bit about machine breakdowns that were affecting us. Those machine breakdowns currently have been aggressively beat down to a very minor disruption to throughput. We are doing well on our delivery timing. That is one very good stride forward that we have been able to hold our ground and continue to deliver. With on-time delivery comes a lot more opportunity. The F-15EX program for us is very good for absorbing overhead. It is in good shape.
Ross Taylor (Partner and Portfolio Manager)
I hope you do more than absorb overhead with it as we move up.
Alex Shen (CEO)
Absolutely. That is why I added the comment that it's in good shape.
Ross Taylor (Partner and Portfolio Manager)
Thank you. Real quick before I move to another line, is Boeing won the NGAD. Are you in any way, would you expect in any way to benefit from NGAD? I'll take no comment as a yes.
Alex Shen (CEO)
That would be great. Thank you.
Ross Taylor (Partner and Portfolio Manager)
Okay. So you're going to say no comment?
Alex Shen (CEO)
I'm trying to figure out how to comment without.
Ross Taylor (Partner and Portfolio Manager)
No, that's okay.
Alex Shen (CEO)
Right. Exactly. I did want to address probably the other question is, are we pursuing new programs that will be significant as far as tactical priority and strategic priority to the U.S. defense market? The answer to that question would be yes. We're getting traction on new programs that we were never on before. New programs to Stadco. New programs as a whole, not just NGAD, but other new programs coming on. We're finally getting some traction, and it shall be profitable traction.
Ross Taylor (Partner and Portfolio Manager)
That's great. Are these new types of programs, are they airframes? Are they missiles? Are they space? Do you see where are we looking for? What is the opportunity as you see it for us?
Alex Shen (CEO)
I think the opportunity and some of the synergy that we're really seeing now between Ranor and Stadco on some of the shared customers is where some of the synergy is beginning to yield some results. I think there's a portion of it is going to be in the Navy area, and a portion of it is in stuff that flies.
Ross Taylor (Partner and Portfolio Manager)
Okay. That's really cool. Great color. Also, with regard to your customers and your own industrial base, you've in the past talked about receiving aid to buy the equipment you need. Where do we stand with that? How much money have you received either from your direct customer, perhaps Sikorsky or Boeing or whatever? How much, if any, have you received from the services themselves or the Pentagon itself to fund new capital equipment? Is that an area we should expect to see more activity from you in the future where you can use someone else's balance sheet to actually allow you to improve your industrial capacity and your production capacity?
Alex Shen (CEO)
Thank you very much for the question. We recently got funded $4 million more. This is all Ranor-centric and none for Stadco, which brings our grand total of completely funded grant money to $21 million, in excess of $21 million.
Ross Taylor (Partner and Portfolio Manager)
Basically, you've been granted a dollar amount equivalent to your market cap at Ranor?
Alex Shen (CEO)
Yes. You can say that. Yes. Yes.
Ross Taylor (Partner and Portfolio Manager)
Okay. That's pretty wild. Okay. We haven't received anything for Stadco. Is there a reason why that is? Would you anticipate being able to use these types of programs, or is it just that they're not, you are not seeing these programs in Stadco end of the business?
Alex Shen (CEO)
If I can characterize the grants, these are Navy grants targeted towards submarine and marine industrial base.
Ross Taylor (Partner and Portfolio Manager)
Okay. Okay. I will let someone else ask questions. What I will say is, obviously, I'm excited about the opportunities. The last couple of years have been a little bit of a clown show for a lot of reasons. I think that it seems that you've gotten focused. You've got your energy. Honestly, Alex, you sound a lot better, a lot more upbeat than you have in a long time. It sounds like we should be looking at a lot of things working our way as we push forward because, obviously, as I said, if you can solve Stadco profitability, then that itself will cross a major Rubicon for this company. Thank you.
Alex Shen (CEO)
Thank you.
Operator (participant)
Thank you. The next question will be from Richard Greulich from REG Capital Advisors. Richard, your line is live.
Richard Greulich (President and CEO)
Hi. Thanks. I think my attention was turned away when you mentioned what the backlog was. Could you repeat that, please?
Alex Shen (CEO)
$45.5 million is our consolidated backlog as of December 31, 2024.
Richard Greulich (President and CEO)
How does that break down between Ranor and Stadco?
Alex Shen (CEO)
I think you can think of it as about 50/50. It varies a little bit with the ebbs and flows of the business, but it's basically a pretty even split between the two subsidiaries.
Richard Greulich (President and CEO)
I think you put that in your 10-Q before. I'm assuming it'll be there again. That's all. Thank you.
Alex Shen (CEO)
Thank you.
Operator (participant)
Thank you. There were no other questions at this time. I would now like to hand the call back to Alex Shen for closing remarks.
Alex Shen (CEO)
Thank you, everyone. Have a great day.
Operator (participant)
Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.