TechPrecision Posts 14 Percent Q1 Margin

Key Points

• Gross margin expanded sharply to 14% in the first quarter of fiscal 2026, up from 3% a year earlier, despite an 8% decline in revenue.

• Operating loss narrowed by 65% year over year, helped by cost discipline and the absence of prior acquisition-related expenses.

• Record backlog reached $50.1 million

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TechPrecision (NASDAQ:TPCS), a precision manufacturing specialist serving the defense, aerospace, and industrial sectors, released its results for the first quarter of fiscal 2026 on August 21, 2025. The most notable news was a continued improvement in profit margins and a meaningful reduction in operating and net losses (GAAP), even as revenue declined compared to the previous year. Revenue was $7.4 million for the period, down from $7.99 million a year earlier, and gross margin (GAAP) rose to 14% from 3%. Earnings per share (GAAP) improved to a loss of $0.06, compared to a loss of $0.16 a year earlier. Overall, the quarter reflected notable operational progress, despite ongoing customer concentration, liquidity, and financial risk factors.

About TechPrecision and Its Focus Areas

TechPrecision manufactures precision components and assemblies for demanding applications, mainly in the defense and aerospace sectors. Its customers include government contractors requiring compliance with strict technical and quality standards. The company operates two main segments: Ranor and Stadco, which provide fabrication and machining services for mission-critical systems.

The business focuses on maintaining customer relationships, complying with industry certifications, and managing its supply chain with discipline. A critical challenge is ongoing dependence on a small number of customers, with the top ten accounting for 96% of revenue in FY2025. This makes diversification and backlog delivery key priorities.

Quarter Highlights and Operational Developments

TechPrecision saw its GAAP revenue fall by 8%, largely because of lower sales at its Stadco segment. Stadco’s revenue dropped to $3.3 million in the quarter ended June 30, 2025, from $3.6 million a year earlier, while Ranor’s revenue dipped only slightly. The overall revenue decline was offset by notable improvements in operating efficiency and profitability. The company pointed to lower costs of revenue at both segments, underlining productivity gains, which boosted consolidated gross margin to 14% from 3%.

Segment performance highlighted divergent trends. At Ranor, gross profit grew by 21% as margin increased from 28% to 35%, reaching $1.5 million. For Stadco, gross loss narrowed to $0.5 million, with its gross margin deficit halving from -28% to -14%. Management attributed these improvements to better productivity and ongoing efforts to control costs within each business unit.

The company’s operating loss narrowed sharply to $0.5 million, down from $1.3 million a year earlier. This reduction was supported by disciplined cost management, including lower selling, general, and administrative (SG&A) costs. One specific factor: the current quarter did not include the Votaw acquisition breakup fee, which had weighed on prior-year results. EBITDA, a measure of cash operating profitability before depreciation and interest, was $0.2 million, compared to negative $0.6 million a year earlier.

Cash and liquidity remain areas of focus. At the end of the period, TechPrecision held $0.1 million in cash and cash equivalents (GAAP), up from $0.04 million a year earlier, but still at minimal levels for a manufacturing company. Working capital improved but remained negative, largely due to debt covenant compliance issues that reclassified some debt to a short-term status. Total debt ended the quarter at $5.8 million, and interest expense edged up to $135,000.

Backlog, Compliance, and Other Noteworthy Items

The company entered the period with a record $50.1 million backlog—future orders scheduled for delivery over the next one to three fiscal years. Management described this as a sign of continued customer confidence and noted expectations for further gross margin expansion over the next one to three fiscal years. However, exposure to a handful of customers remains a risk, as 96% of revenue in FY2025 came from the top ten clients. The largest customer accounted for 23% of revenue in FY2025.

On regulatory and quality fronts, the company’s operations rely on certifications such as ISO 9001:2015, AS 9100 D, and NADCAP. These standards are crucial for bidding on government contracts and for keeping existing work. Both Ranor and Stadco maintained a compliant status, which is essential for the company’s market position and future growth prospects.

An important one-time item in the previous year was the Votaw acquisition breakup fee, which increased SG&A expenses and contributed to wider losses. With this cost absent in the current period, comparability improved. There were no new acquisition expenses this period, but the legacy of this failed deal highlights ongoing challenges in pursuing inorganic growth through acquisitions.

Looking Ahead

Management did not provide explicit forward financial guidance for revenue, earnings, or cash flow for the coming quarters. In commentary accompanying the release, leaders stated an intent to focus on backlog execution and margin stability but offered no concrete projections or targets.

For investors and observers, the main areas to watch include the pace at which TechPrecision converts its record backlog into reported revenue, whether cost and margin improvement trends can continue, and any movement to diversify the customer base. Balance sheet health, especially regarding working capital and covenant compliance, remains a key risk.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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