Tech Precision reports $7.4 million revenue, $1 million gross profit, and a $50.1 million backlog, signaling growth potential amid ongoing contract negotiations.

Sam - (00:01:38)

Good afternoon and welcome. To the Techprecision Corporation Fiscal Year 2026 First Quarter Financial Results Conference call. At this time, all participants are in a listen-only mode. A listen only mode and we will open the floor for your questions and comments after the presentation. Should you require operator assistance during today's conference, please press Star0 on your telephone keypad. It is now my pleasure to turn the floor over to your host, Brett. Moss with Hayden IR. Brett, the floor is yours.

Brett - (00:02:12)

Thank you. On the call today is Alex Shen, Chief Executive Officer and Phil Podgorski, 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 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 represents management estimates as of today, August 21, 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 open remarks. Alex, the floor is yours.

Alex Shen - Chief Executive Officer - (00:02:58)

Thank you. Brett Good afternoon to everyone and thank you for joining us. Fiscal 2026 first quarter consolidated revenue was $7.4 million, 8% lower when compared to $8 million in the fiscal 2025 first quarter consolidated gross profit totaled $1 million, an increase of $800,000 when compared to the first quarter of fiscal 2025. At both Ranor and Stadco segments, our production costs decreased and margins increased. Fiscal 2026 first quarter Ranor revenue was $4.3 million with operating profit of $1.5 million. First quarter Stadco revenue was $3.3 million with operating loss of $1.2 million. Compared to the same period a year ago, Stadco had a $469,000 improvement in operating income. Stadco's $1.2 million operating loss this quarter consists of three 1 lower revenue due to business timing and lumpiness, 2 losses from one time, 1 off contracts and 3 losses from specific first article costs. We are actively pursuing countermeasures and requesting adjustments from our clients. 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. Our tactical execution focus and success enables us to continuously re secure strategic customer confidence at both segments. At our Ranor segment, sustained delivery and installation of new equipment continues as we specifically execute the $21 million plus of completely funded grant money from our US Navy related customers. Customer confidence remains high. We reached a new milestone building our backlog to $50.1 million on June 30, 2025. This high customer confidence is leading both subsidiaries Stadco and Ranor to new quoting opportunities in air defense and submarine defense respectively. With the same customers that already know and trust our capabilities. We expect to deliver our backlog over the course of the next one to three fiscal years with gross margin expansion. I'll turn the call over now to our Chief Financial Officer, Phil Podgorski. Phil, all yours.

Phil Podgorski - Chief Financial Officer - (00:06:34)

Thank you Alex As Alex just mentioned, for our fiscal 2026 first quarter, consolidated revenue decreased by 8% to 7.4 million compared to 8 million in the same period a year ago as we continue to focus on building our strong recurring revenue customer base. As a result, consolidated cost of revenue decreased by 18% to 6.3 million as throughput and productivity improved at both segments. To the point, consolidated gross Profit increased by 0.8 million, 800,000 from 0.2 million in fiscal Q1 2025 to 1 million in fiscal 2026 first quarter, resulting in a double digit year over year consolidated gross margin improvement Consolidated SG&A decreased by 6% to 1.5 million in the fiscal 2026 first quarter primarily due to the absence of breakup fees on the terminated VOTAW acquisition which was evident in the same quarter a year ago Fiscal 2026 first quarter interest expense was slightly higher due to due primarily to higher amortization of debt issue costs related to extending our revolver line of credit. Net loss was 0.6 million or $0.06 per share, basic and fully diluted. Moving on to our financial position, we continue to actively manage our cash flow. Operating and investing activities provided a total of 1.6 million of cash in the fiscal 2026 first quarter. We also used $1.7 million in financing activities primarily to pay down borrowings under the revolver loan. Our Total debt was $5.7 million on June 30 compared with $7.4 million on March 31. Cash balance on June 30 was $143,000 compared to $195,000 on March 31, 2025. Working capital was negative on June 30, 2025 as all of our long term debt is classified as current because of certain debt covenant violations. Now let's take a little deeper dive into some of the segments for Ranor. Sales were down year over year by less than $100,000 with overall strong margin growth across all projects in Q1 resulting in improved margin drop through of 7 percentage point increase and contributing 1.5 million total in gross profit for the quarter. Relative to Stadco Q1 fiscal 2026 sales declined 300,000 compared to the same period last year. As we continue to focus on repeat work and not fill in jobs, Stadco experienced year over year gross Profit margin improvement of 14 percentage points or 500,000. Stadco improved gross profit versus prior year is primarily the result of improved pricing on contracts and improved production efficiencies. While this is an improvement, the company continues to face headwind on legacy contracts and underpriced one time contracts with approximately 30% of our customers resulting in the 1 million Stadco gross profit loss for the quarter. As Alex mentioned, we are actively working with customers on these contracts toward recovery and new pricing. With that, I will now turn it back over to Alex.

Alex Shen - Chief Executive Officer - (00:10:18)

Thank you Phil. In closing for those on the call who may not be very familiar with our company, Tech Precision is a custom manufacturer of Precision large scale fabricated components and Precision large scale machined metal structural components. The components that we manufacture are customer designed. We sell to customers in two main industry Defense and precision industrial markets, predominantly defense. We do most of our work in industries that are highly sensitive to confidentiality, which precludes us from speaking publicly about many things that a company not operating in Tech Precision's specific environment might discuss. Please understand there are real limits as to what I can discuss and sometimes those limits do change. Tech Precision is proud and honored to serve the United States defense industry, specifically the Naval manufacturing, 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 newly reached backlog of $50.1 million. We are encouraged by the prospects for growing our revenue and increasing profitability in future quarters. Operator, please open the line for Q and A.

Operator - (00:12:18)

Certainly and thank you. Ladies and gentlemen, the floor is now open for questions. open for questions if you would like to join the queue. To join the queue. To ask a question at this time. Please press star1 on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Please hold a moment while we poll for questions. And we have a question from Ross.

Ross Taylor - Analyst - (00:12:50)

Taylor from Ars Investment Partners. Ross, your line is live. Please go ahead. Thank you. And congratulations on finally getting backlog up over 50 million. It's been kind of flatlining for a while, so it's nice to see that step higher. Also, it's nice to see the CFO participating in the call in what I think is a meaningful way. I hope that's a sign of significant change as we push forward.

Alex Shen - Chief Executive Officer - (00:13:19)

I think there was a question in there, Ross, that is a sign of significant change, and Phil is fitting in really well.

Phil Podgorski - Chief Financial Officer - (00:13:25)

Thank you, Ross.

Ross Taylor - Analyst - (00:13:27)

You're welcome. Thank you. And as I said, it's nice to see that change. I'd love to talk to you about. First, you talked about having bad contracts. I assume these bad contracts are basically or wholly with Stadco, and how long do we see them hanging over us?

Alex Shen - Chief Executive Officer - (00:13:51)

Okay, so let me go to one of Phil's comments that talked about the affected contracts where about 30% of customer revenue was contributing to the losses. It's taken us quite a number of years to overcome a set of legacy contracts that were plaguing us, and we are seeing good traction and will maintain that good traction. I would say that that's in the. Realm of close to 35, 40% that we've completed and made progress on already resolving and moving forward with positive pricing. Yeah. Don't know how to forecast when we'll get the next tranche done, but we've been working on that pretty constantly, Ross.

Ross Taylor - Analyst - (00:14:41)

Okay, so I'm kind of looking at. You're assuming you got something in the neighborhood about 2.2 million in the in contracts that were problematic in the order just reported. So what you're saying is that of that you've been able to address, or of your overall mixture being able to address over a third of those contracts so that you actually can operate on them and make money on them, would that be a safe assumption?

Alex Shen - Chief Executive Officer - (00:15:14)

Yes, that is correct. Yeah. And then to answer your other questions, is this, are these problems concentrated in one subsidiary? I would say predominantly yes. It's not all of them all in one subsidiary. There are still some things that happen, but, you know, predominantly all on one side. Yes.

Ross Taylor - Analyst - (00:15:39)

Okay, go ahead.

Alex Shen - Chief Executive Officer - (00:15:42)

Yeah, I was going to say a much lesser degree at Ranor.

Ross Taylor - Analyst - (00:15:45)

Yep. Okay, with. Does your backlog include anything from your new business areas? You mentioned air defense and sub defense.

Alex Shen - Chief Executive Officer - (00:15:56)

It's all air defense and sub defense. Yeah. And we continue to drive and look for other additional opportunities within those two sectors.

Ross Taylor - Analyst - (00:16:09)

Okay, so you're looking at, when you're saying sub defense, you're thinking of submarines generally as a defensive space as opposed to anti submarine warfare.

Alex Shen - Chief Executive Officer - (00:16:20)

Correct? At this stage, yes. At this stage, absolutely.

Ross Taylor - Analyst - (00:16:24)

Yeah. Okay. Stadco has been a significant challenge. You owned it for now what, about four years? I think total cost to shareholders has been meaningfully north of $20 million. What you paid for it and what you invested in and what you lost from it.

Alex Shen - Chief Executive Officer - (00:16:45)

That's absolutely correct.

Ross Taylor - Analyst - (00:16:48)

Yeah. It's when. And it also, I believe, you know, it's resulted in shared dilution. I believe it was probably behind the move to acquire VOTAW, which became an absolute fiasco because of the way it was handled and the way it was going to be financed. What is it going to take and when can we expect to see Stadco become more of a meaningful contributor or a positive contributor to the operation?

Alex Shen - Chief Executive Officer - (00:17:24)

Well, I think the. Forgive me for just stating the obvious, but, you know, we finally had one good quarter that was Q4, fiscal 25, followed by not so good quarter at all. The important thing here is we are capable and we are showing that we're capable of having a good quarter. My job, Phil's job, everybody's job is we need to establish this thing into a line, a trend. 1 point, 2 points make a line, 3 points make a trend. We're going to make it happen and that's what we know we can do. Now that doesn't tell you when though. I would like the when to be faster. Please, Alex, let's move.

Ross Taylor - Analyst - (00:18:15)

I was going to say, given it's been four years, I think that to say that you are trying investors souls is an understatement. Okay, so when we're looking at that, do you believe that the steps you're taking in the renegotiations can get us there over the next to where you could be on an operating basis? We should be able to see this business no longer contribute negatively to the company's bottom line.

Alex Shen - Chief Executive Officer - (00:18:46)

Yes. And just not only renegotiation on legacy contracts, but our way forward needs to be filled with different types of things other than just requesting assistance on existing legacy contracts. But moving forward forward contracts, those are key and critical to our well being in the future. And Phil is participating heavily in those efforts.

Phil Podgorski - Chief Financial Officer - (00:19:16)

I was going to say very heavily. So yeah, I think it is. You Know, from Ross, from an operational perspective, we're putting in place, you know, a number of different, you know, processes, controls in place to make sure that we're pricing things accordingly with new bids, et cetera. All right, so. And that's including, you know, any of the flow-down costs that come through from Tech Precision as well. All right, so we want to make sure that the segments are covering all of the costs of the organization.

Ross Taylor - Analyst - (00:19:49)

But all that feel good stuff, aside from answering Ross with reassuring words, you know, we really need to get more quarters of profitability and show our stuff in actual proof. Yes, it would seem that while you did have some issues with some Ranor business, it really seems that what's keeping us from where we need to be is two factors, I believe, one of which is getting Stadco to where it can operate in the green as a business. And then the second is to me, when I've modeled this company, I keep looking at thinking you should be able to generate meaningfully higher. You should be generating 70 to 100 million in revenue. And I think that's possible in the sector you're in the nature of what you guys do and the like. And to do that, we're talking about doing 18 to 25 million a quarter. And we seem to be kind of stuck in the 7 ish, 6, 7, 8 ish what is being done. What are you guys doing culturally to break away from this kind of seven, $8 million quarter by quarter run rate where we can eke out a profit here or there, but it's never going to be a big one. But my assumption is if you could take that business and double it, which is kind of what I'm saying, you would end up generating a substantial amount of earnings and free cash flow. You'd quickly be able to pay off the debt. You'd be in a situation where you were in a much, much better place. What's been done to drive that top line? In essence? Are you starting to hunt business or are you still waiting for business to come to you?

Phil Podgorski - Chief Financial Officer - (00:21:42)

No, I think I'll answer. I'll start to answer. So we definitely have a pursuits list.

Ross Taylor - Analyst - (00:21:48)

All right.

Phil Podgorski - Chief Financial Officer - (00:21:49)

With a number of opportunities that we are looking to move forward with. The defense industry, the aerospace industry is not quite like the Titanic, but it takes a bit of time and a bit of effort to continue to navigate through that. So yes, we do have Pursuit List. We're attacking that, call it knocking door to door to make sure that the and also to make sure that they're a right fit for our organization, as Alex had articulated, we like the. And we're successful at doing a lot of the repeat type work. All right. It is very profitable for this organization and that's the direction are looking to move. How long will that take? You know, it's one bite at a time. All right, so. And that's what we're doing right now. Looking at it strategically and how do we grow the top line, you know, organically.

Ross Taylor - Analyst - (00:22:50)

The top line also should take care of itself with CH-53K, with F-15EX, with assuming that we're ever able to kind of get a ramp up in build rate in the Virginia class submarine that on one level should drive substantially higher revenues. I would think. Just when you look at your business model.

Phil Podgorski - Chief Financial Officer - (00:23:12)

Yeah, there's no doubt. I think that the other hurdle though is investment in the organization as well. All right. So in order to do that, actuate that we will need to invest in both equipment. Like Raynor is getting customer funded or grants. Stadco right now we have to from a strategic standpoint, make those investments. Secondly, I think it is utilizing the facility, both first and second shifts. And I think we have the ability to do that. You know, the barrier though that we have is resources. It's tough to find the talent that we need to do this and it's.

Alex Shen - Chief Executive Officer - (00:23:58)

Tougher to keep the talent. Both locations are very good at what we do. Both locations are very good at training people to achieve levels of expertise. And both locations have competitors as well as customers that take our people away. And it's not something that's new. It's always been this way. And we just need to continue to fight the fight and overcome that with more volume. Train more people then. But one of the things Ross, that you referred to on cultural changes, I'm going to hand it back over to Phil and also go back and forth with Phil a little bit. But some of our basic execution routines are coming into play well because they're actually developing into routines. So Phil had alluded in his comments of cost of revenue decreasing because of throughput and productivity improvements at both segments. He just touched on it. This is a basic number of routines that we are executing better. It's not a one hit wonder. As we move forward, we want to continue to monitor and audit ourselves internally to make sure these routines continue to be in place and can continue to execute so we can reap more benefits, more profit. So as we increase our revenue, we would like to see much better than just an even percentage of increase. We'd like more to drop down because we have put these routines in place so we can execute better at a smaller top line. So it's transferable and upscalable to a higher top line. And we've been working this for quite a while. Phil has different expertise. Being directly from the defense industry on the client side is some help. He still needs to get used to how clunky and lumpy everything is. More so than Raytheon Technologies (RTX) was, even though Raytheon Technologies (RTX) was really a project company of Raytheon. So it's very similar. But yeah, I think we want to see more throughput and more productivity gains from our basic, really, you know, blocking and tackling at a very tactical person level on the floor. We put in the routines and we ourselves are auditing and monitoring the routines. We're both workers, so it's helping. I'm sorry for the long response, Ross, but you opened the door to a longer explanation and I'd like to just offer some color. Thank you.

Ross Taylor - Analyst - (00:27:08)

Well, I'm going to actually say I think you know this to me what I'm hearing you say. And first of all, Phil, I think that you combined with the addition of two directors appear to me to be meaningfully professionalizing this organization, which is important. I think that we've often struggled to see this. Quite honestly, the example of two insiders gifting shares during the quiet period. I've only been in this business 40 something years. To me that's a totally unacceptable. Good companies don't do that. That's not acceptable. Good companies find a way to make sure they don't lose money during slow periods. And what I'm hearing you talk about is the ability to grow this business. I didn't hear you tell me that you can't get to the numbers. I think you need to get to, to generate the kind of revenues you need to push earnings per share here up to a meaningfully higher number than they currently are. So all this is very encouraging if, if it can be made to happen and if it can be made to happen in a reasonable period of time. So how much longer are you going to frustrate me and disappoint.

Alex Shen - Chief Executive Officer - (00:28:19)

Again? Forward looking statements. We're going to do the best we can to make that happen as quickly as we can. All right. Certainly we have also pressure from the board to do the same exact thing.

Phil Podgorski - Chief Financial Officer - (00:28:30)

I think it's pressure from our wives too. We certainly have a job to do and we're focused on driving that forward.

Ross Taylor - Analyst - (00:28:40)

Well, I'd like to say I think that, you know, the shifts I'm seeing to me are really meaningful and as they should get you gaining traction. It's very hard to turn organizations around, particularly when they rot at the top. Not saying you, Alex. I'm saying at the top. And so I think this focus, what I'm seeing happening here is really positive. And so thank you guys very much. Good luck negotiating the last 60, 65% or so of renegotiating those contracts so we can get rid of those. Good luck growing your business. I would suggest punching some new business in would be really useful. And I heard something I never thought I'd hear from a tech precision person, which is second shift. And that really excites me. If you are focusing on the idea of trying to build this business where you can run a second script, that's huge and it should be very positive, which will give you free cash flow, which all good things flow from. You can get new equipment, you can pay down your debt, you can buy back stock, you can make acquisitions. All that's going to come from that. So I'm pretty, you know, I don't get excited, but I'll just say I'm positively inclined as we push. Thank you.

Alex Shen - Chief Executive Officer - (00:29:54)

Thank you.

Phil Podgorski - Chief Financial Officer - (00:29:57)

Thank you.

Operator - (00:29:57)

Your next question is coming from Richard Grillich from Reg Capital Advisors. Richard, your line is live. Please go ahead.

Richard Grillich - Analyst - (00:30:05)

Thank you. So this quarter there was a $250,000 change in the contract loss provision, is that correct? That is correct. And was that a result of a new negotiation? I think Alex refers to them as tranches of renegotiation or redetermination of pricing, et cetera. Was that a new one or was that a follow on from last quarter?

Alex Shen - Chief Executive Officer - (00:30:36)

Hold on one second. We're clarifying something, one second.

Richard Grillich - Analyst - (00:30:39)

Thank you. Yeah.

Phil Podgorski - Chief Financial Officer - (00:30:43)

So, Richard, we did experience an additional loss reserve and it is on. That's on a one time. Exactly. One off project. One off projects that is, you know, been, I'll say it's almost in a rear-view mirror.

Richard Grillich - Analyst - (00:31:03)

Okay.

Phil Podgorski - Chief Financial Officer - (00:31:04)

We're hoping that, you know, Q2, it's, it's going to be gone completely. We're getting, that's what we're working toward. We've been working toward this diligently. So it's a matter of shipping and getting it out the, getting it out the, the door. So. That'Ll be behind us very soon. Okay, great.

Richard Grillich - Analyst - (00:31:23)

Thank you.

Phil Podgorski - Chief Financial Officer - (00:31:26)

Thank you.

Operator - (00:31:27)

Your next question is coming from Mark Gohm from Pipeline. Mark, your line is live. Please go ahead.

Mark Gohm - Analyst - (00:31:35)

It's nice to see this call go from entertaining to professional. Congratulations on the progress. First question if everything went your way. Right. You know, you've renegotiated 35% of those, you know, contracts that aren't so hot. How long would it take to get to 100% if everything. If everything goes your way?

Alex Shen - Chief Executive Officer - (00:31:59)

I think that's the question that Ross was asking also.

Mark Gohm - Analyst - (00:32:05)

Was it worded the same way? Because if you have a good idea of what your obligations are under those contracts and when you're really in a position to renegotiate, you're not in a position to determine how long it will take to renegotiate or how successful you'll be in that regard. But given what you know, if. If everything went your way, roughly how long would it take to get from that 35% to 100%?

Phil Podgorski - Chief Financial Officer - (00:32:42)

It's a hard one, given our customer base and so forth. Certainly our customers are looking to ramp up. I think we know what the administration's agenda is, and it does put us in a bit of a better position. All right. We are sole source on some items, single source on others. All right. Certainly the customers do put out to bid, and we're subject to negotiations, hard negotiations with each of these customers. They're much bigger than we are, for sure. So it is putting a lot of pressure to try to reduce when we're trying to increase price. So each one of them is unique. If we had our way, which is.

Alex Shen - Chief Executive Officer - (00:33:33)

If we had our way, it would have been done already.

Phil Podgorski - Chief Financial Officer - (00:33:35)

Yeah, I was just gonna say we would have, because the effort has already. Been, the efforts going on this last four years. It is. It is. Like I said before, it's not quite as bad as turning the Titanic, but it is. You know, I came from rtx. I know what it's like. They can be pretty tough negotiators, and they will. They will hold a hard line. And we'd have to be willing to say no to certain agreements and contracts. If we're going to lose money, that's it. Can't do it. Right. And we need to start looking at other opportunities. And that's why the earlier comment about pursuits. We have a list. We have customers that we're going after. All right, So I can't answer your question specifically, Mark, but Alex did. In the sense if we had our way, we'd be done.

Alex Shen - Chief Executive Officer - (00:34:23)

I think the good part about the question really points to also, what success have you had? And we've had some. And what Phil alluded to was, you know, 35 to 40% of success. So we're not incapable of success. We're not Just dreaming this and saying it on earnings call and turning it into just words. We have some success. We are aiming towards more.

Mark Gohm - Analyst - (00:34:54)

No, that's great color. That's great color and helps. It helps quite a bit. Thank you. So, next question. If we look at Virginia, Columbia, CH53K and F15EX, where do you sit in. The. Ordering supply chain for that? We get to see from our side, orders get placed, production schedules, Boeing's ramping up. There's full rate production on a lot of these things. But where in the manufacturing process do you end up shipping products on each of those programs?

Alex Shen - Chief Executive Officer - (00:35:40)

I think I'm in the place where I can't really talk about where I am because I'm embedded in some of this information that I'm not supposed to talk about. I don't build. So I can tell you that we're building on new components for new ships and we are building on new components for new helicopters and we're building on new components for new F15EX fighters. That for sure, I can tell you that's all our predominant business. We don't generally deal in retrofit and other things.

Mark Gohm - Analyst - (00:36:24)

Okay.

Alex Shen - Chief Executive Officer - (00:36:24)

Just like I can't really, I can't really tell you about which parts, you know, of the submarine I'm in charge of. That would be. It depends on which. So because it's intimately related to which part is in where in the manufacturing process. It's just, I got a clamp on.

Mark Gohm - Analyst - (00:36:53)

I don't need it on a BOM base. Right. On a line item basis. I just trying to get a decent feel so that when I see more subs being ordered or delivered, you know, roughly in the submarine process, are you on the front end or in the back end of that? And then if you want to do, you know, aerospace in general, are you in the front end and back end in general, if you don't want to dig down to the specifics of 53k and 15ex.

Alex Shen - Chief Executive Officer - (00:37:24)

Yeah, so go ahead. We're both going to answer the same. Same way. We're both at the time, same beginning and the middle and the end, quite frankly. All right, so the key is that, you know, we certainly have capacity. We are, you know, to do more. We are at. We're subject to how quickly our customers also can supply us with customer furnished material.

Mark Gohm - Analyst - (00:37:51)

Yep.

Alex Shen - Chief Executive Officer - (00:37:52)

So a lot of the lumpiness that we see as well, it relates to delays from our customers getting us that cfm, as we call it, the customer. Furnished materials on some contracts. Conversely, they're ready to ship us material and Waiting for their funding to come through so they can put that funding on a PO because they've already got the raw materials on hand ready to ship today.

Mark Gohm - Analyst - (00:38:19)

Yeah.

Alex Shen - Chief Executive Officer - (00:38:19)

So it really depends on what it is. And just like Phil was saying just now, we're at the front, the middle and the end. We're into all of it. It's very specific is what it ends up being. It's a very tactical business model that we're pursuing, and the tiny small businesses that we're running, the perfect fit for those. Our capabilities and the trust that the customers have in our capabilities is high. We keep demonstrating we can deliver on time. So it doesn't really matter in the front end or the back end or the middle of the manufacturing cycle. We're demonstrating our capability to deliver on time. That's probably a key color point that's colored green. Back to you, Phil.

Mark Gohm - Analyst - (00:39:09)

Well, that's been evident and been a big part of the reason why I've stuck with you guys through all of this is that the quality is there. So the bones are in place. Phil, you were going to comment as well.

Phil Podgorski - Chief Financial Officer - (00:39:23)

I think Alex hit it very nicely, actually. So we're ready to accept more? Without a doubt.

Alex Shen - Chief Executive Officer - (00:39:33)

And we are accepting more.

Phil Podgorski - Chief Financial Officer - (00:39:34)

Exactly. We just signed off a couple today and yesterday, me and Phil. Great.

Mark Gohm - Analyst - (00:39:42)

I just have one more in two parts if we look out two or three years. This is just a guess. Obviously, it's not guidance or anything we'd hold you to just kind of get a feel for your impression of how much of your revenue you think could come from programs that you're not involved with today. Is it something closer to 10, 30, 50, or 75% of your revenue coming from new programs? Let's say two years, two to three years down the road. Yeah.

Phil Podgorski - Chief Financial Officer - (00:40:15)

So we certainly have a long. We'll call it stream or long stream of existing that we have line of sight to. We talked about the additional pursuits and different additional programs. All right. That we're also looking at, you know, right now, they. Again, it's all probability. All right. Are you going to get one or are you going to get the other? All right. So some of them can range from, you know, a few million to multi million. And, you know, as such, we. We could get one that's going to be multimillion that we're pursuing. And gosh, that would make up, you know, a third as it. It would be incremental to the business we have. It could be a third of the business. All right. So, I mean, it's a very Good answer. It depends.

Alex Shen - Chief Executive Officer - (00:41:07)

It does depend.

Phil Podgorski - Chief Financial Officer - (00:41:07)

It does depend. All right, but you're talking, you're talking about numbers in the third, as opposed to saying, well, we're looking at programs that could double our business. Right. Or we're looking at programs that might add 5% to our business. I'm just trying to get into the ballpark. If you're saying that a third of your business three years from now, if things go well, reasonably well, could be coming from new programs, that would answer my question. Is that kind of gut feel, ballpark? I would characterize that answer and say it could be a third from new programs. New programs meaning, you know, program has a different kind of meaning depending on what you're talking about. Like if you're talking non. Non Virginia class, non columbia class, non 15.

Mark Gohm - Analyst - (00:42:03)

No, I was, I was really. I was really talking about new parts, let's say.

Phil Podgorski - Chief Financial Officer - (00:42:08)

Right. Like if you, yeah, if you, if you expand your, if you expand your, your participation in the existing programs. To me, that counts as at, you know, adding to what you have today. Because for me, right. Like, as a person that's looking forward to what you're going to do in the future, I can get a decent sense as to what your contribution is to each of those programs today and how those programs are going to ramp up and get a sense as to what your revenue should be in the future. And I come up with similar numbers as Ross. But then if you increase your reach into those existing programs and, or add parts into new programs, then that's where we have to kind of look at adding to our model in terms of what the range of possibilities are.

Alex Shen - Chief Executive Officer - (00:42:57)

Yep. And I will point out this is public information, so I'm not letting any secrets out here. The electric boat is relatively close to Ranor, within driving range, and electric boat has run out of capacity in many different aspects for specific part numbers. And those part numbers still have to be built by somebody that they trust that can actually make those new parts and new for the vendor, not new for Electric Volt. And I will say that we are part of that.

Mark Gohm - Analyst - (00:43:42)

That's great. Second part of my question would be, do you feel confident that you'll be able to renegotiate everything that you're doing to the point where you feel comfortable or you think is a portion of your current slate that you will walk away from?

Phil Podgorski - Chief Financial Officer - (00:44:04)

I'm going to let Phil take a crack at it. He's been watching me and pummeling me and whipping me to death and driving me to visit with the customers. So why don't you take a crack? I definitely have pricing on his mind. So the short answer is there is a likelihood we may walk away from some. All right. We just cannot continue to lose money on contracts. I think what it's going to force, though is some, I think more level set negotiations with the existing customers. All right, so will there be, will that be a majority of it? No, I think the customers themselves are very open. They need to understand and they need us in business as well too. I think that's key. So to answer your question, Mark, there may be some, but I don't feel that it's a majority of them. It's a small portion, if any.

Alex Shen - Chief Executive Officer - (00:45:05)

I think the other thing, to lend more color to what Phil just talked about on these large negotiations, we are single or sole sourced. So the customers are going to experience massive problems going to a secondary competitor that hasn't made these in the last decade or two. So, you know, the probability is low, the walk away possibility is there. Yes. And we are not kidding around when we go to negotiations and request that they identify the risk. Because I need to identify the risk, I need to bring it back for Phil to look at fiscal impact and make a decision. Now. We're very unwilling to walk away, of course, just like our customers are unwilling to let us go. They developed us. We're actually part of them. More than not part of them. We're more than just a regular off the shelf supplier. We're a custom, probably part of their family of custom suppliers. Without us, they won't have a fighter. Without us, they won't have a submarine that works. It's a big problem. So I think the idea is we're going to continue pushing our position and we need to come to a mutual understanding, get the vendors healthy.

Mark Gohm - Analyst - (00:46:50)

Well, you know, aside from your reliability, the fact that you are, you do have that nice leverage position of being a sole source supplier on a lot of your products is the other major tenant of my patience to this point. And now you're starting to pay it off. So thank you very much and thanks for the openness. It's really nice to have these long, open discussions on these calls. So thank you. It's a great call. Thanks. Thanks, Mark.

Operator - (00:47:20)

Thank you. Thank you. We have a follow up question from Richard Grilwich. Richard, your line is live. Please go ahead.

Richard Grilwich - (00:47:30)

Thank you. So. Your customers see what your financial performance has been, not necessarily on each individual contract. Maybe they do. But I guess my question revolves around when you go and negotiate with your customers regarding pricing and Other aspects of the contract. Do you believe that they feel that a 30% gross margin overall is acceptable for both you and them, or do they think that that's too high?

Alex Shen - Chief Executive Officer - (00:48:06)

The questions. You're in an area where it's really confidential negotiations under NDA with that question, but I think I can say something about that. None of what we're asking for is outside the realm of achievement of acceptability.

Richard Grilwich - (00:48:31)

Oh, okay. Well, I guess.

Alex Shen - Chief Executive Officer - (00:48:34)

Excuse me, Richard, just let me give you more color. Nothing that I am asking for is outside their allowable actions. Nothing. It's all contained within. We have ruled ourselves also, and Phil comes from a defense organization himself. He understands what's, what's, what can and cannot happen. Yeah, and you bring up also a very good point. These customers have access to our public information on all our finances. So they understand that I'm not BSing them when I tell them a number. Here, look at my filings. Would you like to go through them page by page? I'm ready to do that. There's over 50 pages on the 10K. Sure. And I have done that. No problem. Yep. Yep.

Richard Grilwich - (00:49:31)

Well, what I'm thinking about is in the past, and I'm saying over the last several years. I had thought that. The company operating efficiently and effectively with higher revenues might be able to achieve a 30% gross margin overall. Now, obviously, Statco is kind of to own a monkey wrench in that, but in the past, I believe Raynor has achieved that. Is that a number that is still achievable, do you think?

Alex Shen - Chief Executive Officer - (00:50:04)

How much of it do we want to talk about publicly? And then, you know, these calls are listened to by our customers as well as our competitors. Phil. But go ahead and answer it with that background in mind. Right.

Phil Podgorski - Chief Financial Officer - (00:50:16)

Phil, could you take the handcuffs off your mouth now? It's duct tape I think he put on. So, you know, so to answer the question, you know, differently, we certainly are a defense contractor. We know that we have to and are required to be compliant with the far. And you know, as part of that with the CAS accounting. Right. And as such, we know that there are limitations with, you know, how much margin that we can build into to these contract defense contracts that we have. And as Alex had indicated earlier, we are certainly compliant with that. All right, so we do have, again, pressure to downward pressure, you know, you know, on each contract. The idea for Statco is to try to continue to replicate what we did and have done at Ranor and have the same drop through margin drop through that we do at Ranor.

Alex Shen - Chief Executive Officer - (00:51:24)

I think Richard, one of the things that we can talk about and should keep in mind is we need to earn that respect and earn that right and earn that ability to secure higher margin business so that it's easier to justify a supplier that's 100% on time and has gotten awarded for 100% on time delivery, 100% quality for four years in a row, five years in a row, six years in a row, continually showing gold and gold medal winners, whatever the classifications are, and make it easier on the client to say I want this guy. Yeah.

Phil Podgorski - Chief Financial Officer - (00:52:05)

Because it's not just a matter of you earning a higher margin, but because of your performance, you're allowing the entire operation to be executed more efficiently and more profitably.

Alex Shen - Chief Executive Officer - (00:52:16)

They lose less by paying us more. Correct? Yeah.

Phil Podgorski - Chief Financial Officer - (00:52:20)

Yep. So hopefully I'm answering your question with more color and not really, you know, point blank talking about a number which I'm trying to shy away from a little bit. Thank you for your patience with me.

Richard Grilwich - (00:52:33)

Thank you.

Phil Podgorski - Chief Financial Officer - (00:52:36)

Thank you.

Operator - (00:52:36)

And we have a final.