TechPrecision Q2 2025 Earnings Report

TechPrecision EPS Results

• Actual EPS: -$0.06
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

TechPrecision Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

TechPrecision Announcement Details

• Quarter: Q2 2025
• Date: 1/21/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, January 21, 2025
• Conference Call Time: 4:00PM ET

TechPrecision (NASDAQ:TPCS), together with its subsidiaries, manufactures and sells precision, fabricated, and machined metal structural components and systems in the United States. The company operates through two segments, Ranor and Stadco. It provides custom components for ships, submarines, military helicopters, aerospace equipment, components for nuclear power plants, and components for medical systems. The company also provides support services to its manufacturing capabilities comprising manufacturing engineering, quality control, materials procurement, production control, and final assembly. Its finished products are used various markets, including defense, aerospace, nuclear, medical, and precision industrial. The company was founded in 1956 and is headquartered in Westminster, Massachusetts.

TechPrecision Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Welcome to the TechPrecision Corporation Fiscal Year 2025 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Brett Mas, Managing Partner of Hayden IR.

[Operator]

You may begin.

[Brett Maas, Managing Partner at Hayden IR]

Thank you. On the call today is Alex Shen, Chief Executive Officer and Richard Romberg, 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 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.

[Brett Maas, Managing Partner at Hayden IR]

In addition, projections as of the company's future performance represent management's estimates as of today, January 21, 2025. The acquisition 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.

[Richard Rundberg, CFO at TechPrecision]

Thank you, Brett. Good afternoon to everyone, and thank you for joining us. As previously disclosed, the company held its Annual Meeting of Stockholders on December 19, 2024. And as a result, 6 directors were elected: Andy Levy, John Moore, Walter Schenker, Alex Shen, General Gene Renuard and Rob Strauss. On December 23, 2024, the Board appointed by unanimous vote General Gene Renoir to serve as Chair of the Board and Rob Strauss to serve as Vice Chair of the Board.

[Richard Rundberg, CFO at TechPrecision]

Effective January 13, 2025, John Moore resigned as a member of the Board of Directors to focus on his other responsibilities. The Board has decided not to fill the vacancy created by Mr. Moore's resignation at this time. The composition of committees of the Board is as follows. The audit committee members are Andy Levy, General Gene Renaud and Walter Schenker.

[Richard Rundberg, CFO at TechPrecision]

Walter Schenker is the Chair. The compensation committee members are Andy Levy and Rob Strauss. Andy Levy is the Compensation Committee Chair. The Nominating and Governance Committee members are General Gene Renuard, Walter Schenker and Rob Strauss. Rob Strauss is the Chair of the Nominating and Governance Committee.

[Richard Rundberg, CFO at TechPrecision]

I would like to share some remarks from our Board Chair, General Gene Renuard and our Board Vice Chair, Rob Strauss. The Board of Directors is committed to improve transparency for its stockholders, including the return to timely SEC filings. Enhanced accountability policies should drive better financial performance. A renewed focus on existing operations is an immediate priority, especially at STAADCO, but also at Raynor. All directors are working constructively together to maximize stockholder value.

[Richard Rundberg, CFO at TechPrecision]

As for myself as the CEO and the Board Director, I'm looking forward to forging ahead, constructively and with alignment. As a matter of fact, General Gene Renuard and Rob Strauss will both be on-site at STATCO on February 10 for an in person eyeball review of the operations to help establish a firm understanding and to enable a fact based operations focus. One item additionally, on January 15, 2025, Richard Ruinberg, Chief Financial Officer of the company notified the company that he will resign from all roles with the company and its subsidiaries effective as of February 14, 2025. Mr. Remberg's resignation is not due to any disagreement with the company on any matter related to the company's operations, policies or practices.

[Richard Rundberg, CFO at TechPrecision]

Mr. Remberg's replacement will be announced in due course. Okay. Next, we return to our earnings call format. Well, starting off with 2nd quarter at STAADCO, revenue was $4,200,000 or a 17% increase compared to the same period a year ago.

[Richard Rundberg, CFO at TechPrecision]

2nd quarter raynor revenue was $4,800,000 compared to $4,500,000 a year ago. The 2nd quarter consolidated revenue was 8,900,000 dollars or 12% higher when compared to revenue of $8,000,000 for the same period 1 year ago. Consolidated gross profit was 2% lower when compared to the same period a year ago. 2nd quarter Stadco operating loss of $800,000 resulted from unexpected higher manufacturing costs on one off projects. Legacy pricing problems on core business, machine breakdowns in the quarter that disrupted expected throughput and under absorbed overhead costs.

[Richard Rundberg, CFO at TechPrecision]

Ranor had operating profit of $1,000,000 in the 2nd quarter, primarily due to favorable project mix. Customer confidence remains high as our consolidated backlog was 48 point $6,000,000 at September 30, 2024. We expect to deliver our strong backlog over the course of the next 1 to 3 fiscal years with gross margin expansion. We remain highly focused on cash management, a critical piece of risk mitigation and continue to manage and control expenses, capital expenditures, customer advances, progress billings and final invoicing at shipment. And now I would like to turn the call over to our CFO, Richard Rundberg to continue with the review of our Q2 results.

[Richard Rundberg, CFO at TechPrecision]

Richard?

[Richard Roomberg, Chief Financial Officer at TechPrecision]

Thank you, Alex. As Alex stated, consolidated revenue for the Q2 of fiscal year 2025 was $8,900,000 or 12% higher when compared to $8,000,000 in the same quarter a year ago. Consolidated cost of revenue was $7,900,000 or 14% higher than the prior year period, due primarily to higher production costs and under absorbed overhead at Stadco. Consolidated gross profit was $1,000,000 or 2% lower compared to the same quarter a year ago. SG and A expense decreased by $100,000 primarily due to the decrease in spending for outside advisory services.

[Richard Roomberg, Chief Financial Officer at TechPrecision]

Operating loss was $500,000 for the Q2 of fiscal 2025, an improvement when compared to the same period a year ago as Ranor turned in a strong performance in Q2. Interest expense decreased by approximately $38,000 due to lower borrowing levels under our revolver loan. Net loss for the quarter was $600,000 compared to $500,000 to the same period a year ago. Revenue was $16,900,000 for the 6 months ended or a 10% increase over the same period a year ago as revenue increased $1,300,000 or 19% at Stadco. Cost of revenue increased by $2,100,000 the result of higher production costs at Stadco.

[Richard Roomberg, Chief Financial Officer at TechPrecision]

Gross profit and gross margin both decreased as a result of those higher production costs. SG and A increased by 6% primarily due to a change in fair value for the Votaw breakup fee. Operating loss as a result of the breakup fee operating loss expanded as a result of the breakup fee and STAG shows higher production

[Richard Roomberg, Chief Financial Officer at TechPrecision]

costs.

[Richard Roomberg, Chief Financial Officer at TechPrecision]

Interest expense increased slightly by 1% as overall interest costs were virtually equal to the same period a year ago. Net loss was 2,100,000 due to recurring losses at STADCO. Moving on to our financial position. Proceeds from a private placement in July provided $1,800,000 Our total debt was $7,100,000 on September 30, 2024 as compared to $7,600,000 on March 31, 2024. Cash balance as of September 30, 2024 was $132,000 and availability under the revolver was 1,100,000 dollars Working capital was negative $1,500,000 at September 30, 2024 as our bank debt is classified as current due to debt covenant violations.

[Richard Roomberg, Chief Financial Officer at TechPrecision]

With that, I will now turn the call back over to Alex.

[Richard Rundberg, CFO at TechPrecision]

Thank you, Richard.

[Richard Rundberg, CFO at TechPrecision]

For those on the call who may not be very familiar with our company TechPrecision, Our 2 subsidiaries, Ranor and Stadco, are custom manufacturers of precision large scale fabricated metal components and precision large scale machined metal components. The 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 I can discuss and sometimes those limits do change.

[Richard Rundberg, CFO at TechPrecision]

TechPrecision is proud and honored to serve the United States defense industry, specifically 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, in both the Raynor and the STAADCO subsidiaries, we continue to see meaningful opportunities in our defense sector as evidenced by the strength of our backlog. We are encouraged by the prospects for growing our revenue and for increasing profitability in future quarters. Operator, please open the line for Q and A.

[Operator]

Certainly. Everyone at this time, we'll be conducting a question and answer Thank you. Your first question is coming from Ross Taylor from ARS Investments. Your line is live.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Thank you. And first, it's nice to actually have a reemergence of our calls. It's been a long time out. I'm not sure I even recognize your voice when you came off.

[Richard Rundberg, CFO at TechPrecision]

Yes, sir.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

I would like to say that I'm really excited about the opportunity that currently exists to rebuild the bridge to the company's shareholders and the future investors. It sounds like it's going to be something that's an important step and it's been long overdue. So I think that's, as I said, really exciting and should help us greatly going forward. 2nd, I wanted to say I thought the message sent by shareholders was exceptionally clear. Only 2 candidates got over 40% of the vote.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

And that to me sent a very clear mandate. It said shareholders want change. They want things done to help improve the relationship we have with you, the leadership team. And I'm looking forward to seeing the fruits of that. And that means I hope that all directors can work to support and further the initiative that the new leadership team wants to put in place.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

The company has dug a pretty deep hole for its shareholders over the last 12 to 15 months and I think it's time we start doing something proactively to get out of it. Operating questions I wanted to ask you, how long and where do you think it's going to take what's going to take to get STAADCO to a level where it can produce a sustained level of profitability?

[Richard Rundberg, CFO at TechPrecision]

Well, we're not at a profitability yet. So I think the first few steps are really needing to, 1st of all, well, let's concentrate on basics and what's in front of me and I'll try to step through the steps. The first thing on cash management, we are succeeding in cash management and that part of it is going well. We need to continue to be focused on more profit for STADCO. So as I alluded to in my remarks, the lack of profits are coming from 4 sectors that I have made comments on today.

[Richard Rundberg, CFO at TechPrecision]

The first one talks about pricing unexpected costs on one off projects. So we need to do either a better job on organizing ourselves to predict better. And also we need to perhaps not do those and that needs a good hard look to make sure. And we'll be engaging more thoroughly from the front end to make sure we vet those. But that is a problem that we've identified to ourselves that we want to be very transparent and identify to our shareholders on the call today as well.

[Richard Rundberg, CFO at TechPrecision]

So that's one. On legacy pricing problems on the So the

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

sort of one off projects we're talking about. I mean, investors have tended to focus on instead those 2 major programs.

[Richard Rundberg, CFO at TechPrecision]

I'm sorry Ross, you're coming in a little muffled.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Okay. Can you explain, talk a little more about the one offs, what are they? Because investors tend to see STADCO as really a play on the F-fifteen EX and the CH-fifty 3 ks. And those are big projects that appear to be moving rapidly towards run rate ramps where each would be producing over 20 a year. And so I'm curious though, I've not heard a great deal of talk in the past about one offs.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

So I'm curious what type of business are these in nature? How big are they? And was this just a case where you bid badly on them or they were more complicated? What was it that caused the losses there?

[Richard Rundberg, CFO at TechPrecision]

Okay. So let me break down your questions into my digestible chunks. So you're right as far as F-15EX and also CH-fifty 3 ks Sikorsky Marine Helicopters. Those are what we consider not one offs and core business and repeating business. So the one offs are if you if we go back on what STAADCO is, STAADCO builds parts that fly in the air and also builds tools that builds parts that fly in the air.

[Richard Rundberg, CFO at TechPrecision]

The tools, for example, are one of the one offs. There's not a great big demand for tools. They only come once in a while. And when they do, they don't tend to repeat. There's only a very few sets of tools that's needed to build multiple parts.

[Richard Rundberg, CFO at TechPrecision]

That's an example of a one off. Another example of a one off would be just filler work that we need to do to fill in gaps that are caused by a lack of a cadence in, for example, some material between one build and another build for helicopter main gearbox part. Those are probably two examples, highly likely examples of one off.

[Brett Maas, Managing Partner at Hayden IR]

Okay.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

And where the problems

[Richard Rundberg, CFO at TechPrecision]

there Where the problems are that you were asking on, are they in pricing? Are they in so when we don't do these one offs and don't have historical data, we do our best to analyze the information that's given to us by our customers and we base our quote on the best information available. So is there a pricing problem? Sometimes there is a pricing problem. Is there a lack of information or changing information from the customer?

[Richard Rundberg, CFO at TechPrecision]

Sometimes there is. It's a more of a case by case. And since it's a one off, it doesn't really repeat itself very well. So we can't detect patterns easily that will repeat from one kind of one off to a similar kind of one off. Each one is basically its own animal that really needs to be evaluated for the situation.

[Richard Rundberg, CFO at TechPrecision]

And some situations sometimes change. Do we have the capability I'm going to go on and question myself some more to provide you more transparency and answers.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Thank you.

[Richard Rundberg, CFO at TechPrecision]

Do we have the ability to when we detect a problem, do we have the ability to perhaps even go as far as giving it back to the customer? It depends on the situation. The answer is not a straight no. It's not a straight yes either. It depends, but we need to take more steps both in the front end and in the middle to identify these problems and involve the customer in solving these problems before we get to a point of no return.

[Richard Rundberg, CFO at TechPrecision]

I think we just need to exert more care along the way. As STANCO continues its turnaround process and as we continue to add back more capability that was lost over a decade of decline, we're putting back more capability and we're putting back people that have that capability that are recognized as having the expertise and it's been taking time. We're doing better. We need to continue to do better and a little bit faster. There's I have some personally some pent up I guess my pants are a little bit more on fire to myself.

[Richard Rundberg, CFO at TechPrecision]

So I would like to see me do a better job. I would like to see this turnaround at STADCO grow faster and better and more consistently, so we can finally reach a quarter or 2 of breakeven and then poking its head above water. I'm sorry for the long explanation.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

No, actually I will tell you I already see a change in how you're approaching these calls and I want to say thank you because I think this is a change and it's important. It's so I appreciate the thoughtfulness you're giving to your answers.

[Richard Rundberg, CFO at TechPrecision]

Yes. Thank you. If you don't mind, I would like to maybe I expanded on the two points that I made, but I made 4 points during my opening remarks. And the third point on machine breakdowns in this quarter that we're reporting on that disrupted expected throughput and that perhaps the under absorbed overhead costs that really it ends up being a result of the under absorbed overhead costs somewhat are going to continue to happen depending on the ebbs and flows of the business and some mix, highly up and down. That's the 4th point.

[Richard Rundberg, CFO at TechPrecision]

Will we be able to we need to minimize it as much as we can because eliminating it is a good goal to have and very difficult to completely eliminate. I'll say that much. That doesn't preclude us from doing everything we can to minimize that. The machine breakdowns will be concentrating on what other actions can we take against these machines that exhibit problems. So we have every quarter diligently gone back to fix the problems that come up.

[Richard Rundberg, CFO at TechPrecision]

They're getting better because as we continue our really our pressure on finding a problem, fixing a problem, categorizing the problem, prioritizing the problem and even changing machines to a different machine that can still do the job, we're not made of money. We can't just sink everything into maintenance and repair. We need to judiciously prioritize and take the most important one and kill each problem as it comes in priority order, not just the loudest problem, but the highly impactful problem. We will continue that and we will continue to report on that.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

So obviously you I

[Richard Rundberg, CFO at TechPrecision]

don't want to let go of explaining it. That's all I was trying to say.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Right. And you had machine downtime and this is the September ending quarter you're talking about. So therefore, I would assume that you were able to fix that in the following quarter and that we're now at a state where the manufacturing plant is operating as you would hope it to be operating?

[Richard Rundberg, CFO at TechPrecision]

I think this is taking longer because the things that we fix generally are staying fairly fixed. But after about 14 years of decline and delayed maintenance through all that more than a decade, almost 1.5 years, certain other things go wrong. So you make a machine robust on the left side and something goes wrong on the right side. I'm oversimplifying, of course. But to have it all balanced out and be better is taking some time.

[Richard Rundberg, CFO at TechPrecision]

We are doing our best. We'll continue to report on that and make things more clear.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Are you at a place operationally where you can meet the demands of the Marine Corps, the NavyMarine Corps and the Air Force to produce the components they need you to produce to get F-fifteen EX and CH-53s up to the projected run rates?

[Richard Rundberg, CFO at TechPrecision]

Can we reach the projected run rates? The answer the quick answer is yes. How are we doing it? And we're doing it very carefully because we can't just look at one sliver in time where we're not doing well. We need to look at it over time.

[Richard Rundberg, CFO at TechPrecision]

Can we meet it for example over a 12 to 24 month period? Can we meet the demand? Yes. If you take a bad quarter, well, you didn't meet the demand there. I agree.

[Richard Rundberg, CFO at TechPrecision]

But that the bad performance of a quarter or of a month or of a week does not extrapolate itself over a period of 12 to 24 months.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

So if I drive up

[Richard Rundberg, CFO at TechPrecision]

I'm sorry, Ross. I hope that explanation made sense.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

No, it does. And it's there's obviously an ebb and flow. But if I drive up the Merritt Parkway to Sikorsky plant where they are producing the CH-fifty 3 ks, they you are not going to be some your components are not going to be something that is keeping them from pushing those out at the rate they need to push them out over the next few years is what I hear you say.

[Richard Rundberg, CFO at TechPrecision]

As usual, you hear very well.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

My wife doesn't think so, but okay. Away from that, when you talk about and obviously if you get up there, I would assume that those programs at run rate would change the concern about unabsorbed overhead because they would push enough revenue through to absorb that. Is that correct?

[Richard Rundberg, CFO at TechPrecision]

It will help the unabsorbed overhead, yes. But there's some ebbs and flows inside these core projects themselves. So as I had alluded to before, completely eliminating it is probably the more realistic way is how do I minimize it as much as possible.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

And also I hear you saying we should probably look at the company more on an annual year run rate as opposed to a quarterly run rate basis because you kind of think if they're producing 24 CH-53s that's 2 a month. And in reality, it's not always going to be that precise. Some months it might be 1, some months it might be 3 or 4 or something of that nature. And that's something that I hear you saying is going to impact quarter to quarter, but over a 12 month period that should even out.

[Richard Rundberg, CFO at TechPrecision]

Right. You're not going to find this in the papers as the guy that stopped production. That has not happened. Good.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

And I want to switch quickly shift quickly over to Ranor and we saw that Huntington Ingalls talked about consolidating its suppliers and the like. Are you finding how are you finding that opportunity? Are you finding and actually also as well as Stadco and Reno, are you finding your customers are asking you or want you to take on more project responsibility in an effort to overcome the production bottlenecks that have been hurting particularly with regard to the submarine program?

[Richard Rundberg, CFO at TechPrecision]

Let me answer that with a different answer. And I think you'll be able to glean what I'm able to say with what I'm able to say. So we have secured 3 tranches of supplier development funding. And the 3rd tranche is on the way to being fully funded. And this is a very important initiative that has a lot of eyeballs on it from both major shipyards, Newport News Shipbuilding as well as Electric Boat.

[Richard Rundberg, CFO at TechPrecision]

The whole notion is to not add new capability as much as adding capacity to Renault and adding a backup capability to Raynor with multiple options in case there's a bottleneck at Raynor to relieve that bottleneck by funding equipment grants to Raynor to put in redundant second, even third machines for more capacity. So those efforts have been underway for a number of years at Raynor and are bearing fruit now. I hope that answers your question.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Yes. And they pay you for that. You're not forced to sit with substantial unabsorbed overhead so that they don't they can have that company factor?

[Richard Rundberg, CFO at TechPrecision]

So the unabsorbed overhead are all labor hours related and not idle CapEx investment related.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Okay, cool.

[Richard Rundberg, CFO at TechPrecision]

So if we parse that out to the CapEx, those are CapEx grants that come from the U. S. Government through the Navy and through organizations that fund us.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Great. Well,

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

I

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

will let some others ask questions. I do want to say I think that I already hear a different tone out of you. I feel that you're more responsive. I feel I'm having to spar with you, Alex. And so I think this is really we're entering hopefully the next year will undo a lot of the damage that the last year has done.

[Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC]

Thank you.

[Richard Rundberg, CFO at TechPrecision]

Thank you.

[Operator]

Thank you. That concludes our Q and A session. I will now hand the conference back to management for closing remarks. Please go ahead.

[Richard Rundberg, CFO at TechPrecision]

Thank you, everyone. Have a great day.

[Operator]

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Participants

Executives

• Richard Rundberg, CFO
• Richard Roomberg, Chief Financial Officer

Analysts

• Brett Maas, Managing Partner at Hayden IR
• Ross Taylor, Partner and Portfolio Manager at ARS Investment Partners, LLC