Executive Summary

Revenue was $9.09M (+2% y/y) with gross margin expanding to 27% (from 11% y/y); EPS improved to $0.08 versus $(0.06) y/y, driven by favorable mix, lower first‑article and one‑off loss provisions, and production efficiencies .
Backlog stood at $47.8M at September 30, 2025 (deliverable over the next one to three fiscal years) with management reiterating expectations for continued gross margin improvement as this backlog is executed .
Segment dynamics: Ranor delivered strong profitability (Q2 gross profit $2.21M), while Stadco improved but remained a modest operating loss; management cited improved pricing, customer mix and throughput, with remaining headwinds from legacy and underpriced one‑time contracts .
Liquidity and leverage: Cash was $0.22M and total debt $7.3M at quarter end; working capital turned positive to $0.3M from negative $1.7M at FY25 year‑end, reflecting better operating cadence and billing progress .
Potential catalysts: on‑time filing, continued margin expansion, tranche‑based renegotiations at Stadco, and visible defense backlog support narrative momentum; no formal numerical guidance provided .

What Went Well and What Went Wrong

What Went Well

“We improved consolidated gross margin to 27% on $9.1 million in revenue…consolidated gross profit totaled $2.5 million,” reflecting favorable mix and lower cost of revenue across segments .
Backlog strength and durability: “Customer confidence remains high with our backlog reaching $47.8 million…we expect to deliver this backlog over the next one to three fiscal years with expectations for gross margin improvement” .
Segment execution: CFO highlighted Statco’s y/y gross profit improvement and Ranor’s strong margin drop‑through; consolidated operating income turned positive to $0.9M versus $(0.5)M y/y .

What Went Wrong

Statco remained in the red despite improvement; management cited lingering headwinds from legacy contracts and underpriced one‑time contracts, with continued tranche‑based renegotiations required .
Interest expense rose 12% y/y on higher revolver borrowings; cash remains tight at $0.22M, underscoring the importance of daily cash management and progress billings .
First‑article loss reserves remain a risk area; CEO emphasized case‑by‑case complexity and the need for increased customer collaboration to mitigate first‑article learning curve impacts .

Financial Results

Metric	Q2 2025	Q1 2026	Q2 2026
Revenue ($USD Millions)	$8.946	$7.379	$9.086
Gross Profit ($USD Millions)	$1.014	$1.030	$2.458
Gross Margin (%)	11%	14%	27%
Operating Income ($USD Millions)	$(0.488)	$(0.463)	$0.942
Net Income ($USD Millions)	$(0.601)	$(0.597)	$0.825
Diluted EPS ($USD)	$(0.06)	$(0.06)	$0.08
EBITDA ($USD Millions, Non‑GAAP)	$0.209	$0.239	$1.644

Segment breakdown (Q2 2026):

Segment	Revenue ($USD Thousands)	Cost of Revenue ($USD Thousands)	Gross Profit ($USD Thousands)
Ranor	$4,373	$2,271	$2,208
Stadco	$4,819	$4,463	$250
Intersegment Elimination	$(106)	$(106)	—
Consolidated	$9,086	$6,628	$2,458

KPIs and Balance Sheet/Liquidity:

KPI	Q1 2026	Q2 2026
Backlog ($USD Millions)	$50.1 (as of June 30, 2025)	$47.8 (as of Sept 30, 2025)
Cash & Equivalents ($USD Millions)	$0.143	$0.220
Working Capital ($USD Millions)	$(0.7)	$0.3
Total Debt ($USD Millions)	$5.8 (Q1 press release context)	$7.3

Estimate comparison (coverage note):

Metric	Q2 2026 Consensus	Actual
Revenue ($USD Millions)	n/a*	$9.086
EPS ($USD)	n/a*	$0.08
EBITDA ($USD Millions)	n/a*	$1.644

Values retrieved from S&P Global.*

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY26/Q3 onward	None provided	None provided	Maintained (no guidance)
Gross Margin	1–3 year backlog delivery	Directional: “expectations for gross margin improvement”	Directional reiterated	Maintained directional (no range)
OpEx / SG&A	FY26	Not guided	Not guided	n/a
Tax Rate	FY26	Not guided	Not guided	n/a
Segment‑specific	FY26	Not guided	Not guided	n/a

Note: Management provided qualitative expectations (margin expansion) but no quantitative ranges .

Earnings Call Themes & Trends

Topic	Q4 2025 (Previous Mentions)	Q1 2026 (Prior Quarter)	Q2 2026 (Current)	Trend
Backlog & visibility	$48.6M backlog, expected over 1–3 years; strong defense demand	Backlog reached $50.1M; confidence highlighted	$47.8M backlog; reiterated margin expansion expectations	Stable/strong; slight sequential dip but within delivery timing
Stadco pricing & first‑article loss reserves	Began tranche renegotiations; reversed some loss provisions	35–40% of problematic contracts addressed; further renegotiation ongoing	Improved throughput and lower provisions; still facing legacy/underpriced contract headwinds	Improving, but still work to do
Grants/equipment funding (Ranor)	$21M+ Navy‑funded equipment grants; efficiency gains expected	Execution of $21M+ grants ongoing; contributes to margin	Continued execution; priority use for Navy parts; 10‑year performance agreement on one funding	Execution progressing; efficiency tailwind
Capacity/utilization & talent	Demand ramp capability; constraints include resources/talent	Pursuit list; second shift discussed; talent retention a hurdle	Better throughput at Stadco; daily cash management; focus on repeat work	Operational cadence improving; talent still a constraint
Supply chain/CFM timing	Lumpy delivery tied to customer‑furnished materials	Emphasis on lumpiness and first‑article cadence	Mix and throughput improvements; risk mitigation on first‑article	Persistent industry dynamic, mitigated tactically

Management Commentary

CEO: “We improved consolidated gross margin to 27% on $9.1 million in revenue…Cost of revenue was lower at both Ranor and Stadco as a direct result of favorable mix at both segments.”
CEO: “Customer confidence remains high with our backlog reaching $47.8 million…We expect to deliver this backlog over the next one to three fiscal years with expectations for gross margin improvement throughout the period.”
CFO: “Net income was $0.8 million for the quarter, or $0.08 per share…Consolidated cost of revenue decreased by 16%…due to favorable customer mix and productivity gains at both segments.”
CEO on first‑article risks: “It’s a case‑by‑case basis…first article activity…needs to be watched carefully…the risks need to be mitigated…we will increase…customer collaboration”
CFO on grant accounting: assets and offsetting liabilities set up; depreciation over useful life; one funding includes a 10‑year performance agreement .

Q&A Highlights

Stadco profitability path: Management is working tranche‑by‑tranche to renegotiate legacy pricing, reduce loss reserves, and focus on repeat work; walk‑aways from unprofitable contracts remain possible but expected to be limited .
First‑article dynamics: High complexity and multi‑touch processes drive first‑article risk; mitigation through experience, planning, and collaboration is ongoing .
Grants usage & priority: Navy‑funded equipment prioritized for Navy parts, with flexibility to use on other parts when available; structured accounting and performance obligations clarified .
Growth opportunities: Continued participation in Virginia‑class and Columbia‑class submarines; new quoting in air and submarine defense; capacity exists to meet increased program demand, subject to CFM and talent constraints .

Estimates Context

S&P Global consensus coverage for TPCS Q2 FY2026 was unavailable for EPS, revenue, and EBITDA; actuals reported were used for comparison (no beats/misses can be determined without coverage) . Values retrieved from S&P Global.*

Implications: In absence of consensus, the narrative hinges on y/y and sequential improvement, margin expansion, backlog durability, and Stadco renegotiation progress.

Key Takeaways for Investors

Margin story improving: 27% gross margin with EBITDA up sharply sequentially; mix, pricing progress, and lower loss provisions are tangible drivers .
Backlog supports multi‑year visibility: $47.8M backlog to be delivered over 1–3 years, with management expecting continued margin expansion as newer equipment scales and repeat work increases .
Stadco turnaround is the swing factor: Progress is evident, but residual legacy and one‑off contracts sustain risk; watch for additional tranche renegotiations and first‑article loss reserve reductions in coming quarters .
Liquidity tight but improving working capital: Positive working capital in Q2 and active cash management are encouraging; revolver usage raises interest costs—monitor cash, covenant status, and customer advances .
Near‑term trading lens: On‑time filing and return to profitability plus margin expansion can support sentiment; lack of formal guidance makes upcoming backlog‑to‑revenue conversion and Statco progress the key data points .
Medium‑term thesis: Defense exposure (submarines/air programs), sole/single‑source positions, and Navy‑funded equipment underpin scalable efficiency; talent and CFM timing are execution variables to watch .
Action items: Track Q3 gross margin trajectory, segment profitability (especially Stadco), contract repricing progress, backlog conversion cadence, and cash generation against revolver dynamics .

TECHPRECISION CORP (TPCS)·Q2 2026 Earnings Summary