Release Date: January 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Techprecision Corp (NASDAQ:TPCS) reported a 12% increase in consolidated revenue for the second quarter, reaching $8.9 million compared to $8 million in the same period last year.
• Ranor subsidiary achieved an operating profit of $1 million in the second quarter, driven by a favorable project mix.
• Customer confidence remains high with a consolidated backlog of $48.6 million as of September 30, 2024, expected to be delivered over the next 1 to 3 fiscal years.
• The company is focused on cash management and controlling expenses, which is a critical piece of risk mitigation.
• Techprecision Corp (NASDAQ:TPCS) is actively working on improving transparency and accountability, with a renewed focus on existing operations, particularly at Stadco.

Negative Points

• Stadco reported an operating loss of $0.8 million in the second quarter due to unexpected higher manufacturing costs, legacy pricing problems, and machine breakdowns.
• Consolidated gross profit decreased by 2% compared to the same period last year, indicating pressure on profitability.
• The company experienced higher production costs and underabsorbed overhead, leading to a 14% increase in the consolidated cost of revenue.
• Net loss for the quarter was $0.6 million, slightly higher than the $0.5 million loss in the same period last year.
• Working capital was negative $1.5 million as of September 30, 2024, due to debt covenant violations, indicating financial strain.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with TPCS.

Q: How long will it take for Stadco to achieve sustained profitability? A: Alex Shen, CEO, explained that Stadco is not yet profitable. The focus is on cash management and addressing issues such as unexpected costs on one-off projects and legacy pricing problems. The company is working on improving its processes and engaging more thoroughly from the front end to avoid such issues in the future.

Q: Can you elaborate on the one-off projects causing losses at Stadco? A: Alex Shen, CEO, clarified that one-off projects include tools for building parts that do not repeat frequently. These projects sometimes suffer from pricing issues or changing customer information. The company is working on better evaluating these projects to avoid future losses.

Q: Are you operationally capable of meeting the demands for F-15 EX and CH-53K components? A: Alex Shen, CEO, confirmed that TechPrecision can meet the projected run rates over a 12 to 24-month period. While there may be fluctuations in performance, the company is committed to not being the bottleneck in production.

Q: How are you addressing machine breakdowns and underabsorbed overhead costs? A: Alex Shen, CEO, stated that the company is prioritizing maintenance and repair to minimize machine breakdowns. They are focusing on fixing impactful problems and improving overall machine reliability, although completely eliminating issues is challenging.

Q: Are customers asking TechPrecision to take on more project responsibility to overcome production bottlenecks? A: Alex Shen, CEO, mentioned that TechPrecision has secured supplier development funding to increase capacity and provide backup capabilities. This initiative aims to relieve bottlenecks and is supported by major shipyards and the U.S. Navy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.