This article first appeared on GuruFocus.
Release Date: August 13, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Consolidated revenue increased 23% year-over-year to $9.1 million, driven by growth at both Raynor and Stadco.
Gross profit rose 36% to $1.4 million, reflecting higher revenue and improved margins.
Raynor revenue grew 27% to $5.5 million, supported by favorable project mix and new equipment funded by $24 million in U.S. Navy grants.
Stadco revenue increased 22% to $4.1 million, with gross profit up 65% due to better project mix and throughput.
Backlog remains strong at $52 million funded, plus $22 million unfunded, providing revenue visibility for the next 1-3 years.
Total debt reduced to $5 million from $7 million, and interest expense decreased 21%.
Negative Points
Net loss of $153,000 in Q1, though improved from prior year.
Cash balance declined to $279,000 from $431,000, indicating tight liquidity.
Stadco still not profitable, with management acknowledging more work needed to turn it around.
Customer-furnished materials with defects (e.g., casting porosity) cause production interruptions and increased costs.
Uncertainty around first articles and new work scopes can lead to pricing adjustments and potential delays.
New quoting opportunities have a low win rate (1-2 out of 10-15 quotes), limiting near-term growth.
Q & A Highlights
Q: Can you provide an update on the progress made at Stadco in addressing contracts or parts of contracts that were losing money and turning them into break-even or profitable operations? A: Alex Shen, CEO: We have made great progress across the board, not just on one program. We continue to review our manufacturing costs and approaches, and when warranted, we submit pricing adjustment requests to customers. These have been adjudicated in our favor during the last quarter, contributing to improved profitability.
Q: What percentage of Stadco’s business is still operating under the challenging conditions of legacy contracts? A: Alex Shen, CEO: It’s definitely less than 50%, though the mix changes quarter to quarter. For new orders, we’ve implemented a much more rigorous quoting process with financial oversight from the CFO from the coding stage through execution. We’ve established milestone gates to gauge performance early, rather than waiting until the end of a project.
Story Continues
Q: Are you seeing customers bring more work to you given your strong performance and their limited resources? A: Alex Shen, CEO: Yes, we are. Our successful on-time delivery of quality components has built strong customer confidence, leading to more purchase orders and new quoting opportunities. We’re receiving quotes from both existing customers and new customers in the air and submarine defense sectors. For example, our electron beam welding capability at Stadco is unique, attracting new business. While we may land one or two out of every 10-15 quotes, these new opportunities help fill gaps caused by interruptions like defective customer-furnished materials.
Q: Have you made any progress on securing capital or equipment from customers like Boeing or Sikorsky to meaningfully increase production at Stadco, similar to the grants received at Raynor? A: Alex Shen, CEO: We are in active pursuit aggressively with our customers. I have a clamp on how much I can speak about it, but the fact that I can’t discuss specifics indicates that incremental progress is being made. If there was nothing going on, I would tell you that. The progress is not visible yet, but hopefully soon.
Q: Can you elaborate on the financial results for the first quarter of fiscal 2027? A: Philip Hankoski, CFO: Consolidated revenue increased 23% to $9.1 million, driven by higher revenue at both Raynor and Stadco. Gross profit increased by $400,000 to $1.4 million. SG&A decreased 3% to $1.4 million, and interest expense decreased 21%. Net loss was approximately $153,000, or $0.02 per share. Total debt was reduced to $5 million from $7 million, and cash balance was $279,000.
Q: How did the segments perform individually in the first quarter? A: Philip Hankoski, CFO: Raynor revenue increased 27% year-over-year to $5.5 million, driven by favorable project mix, resulting in $1.6 million of gross profit. Stadco revenue increased 22% to $4.1 million, with gross profit improving by 65% due to higher revenue and throughput improvement.
Q: Is part of the problem at Stadco related to the quality of work received from customers, such as partially worked materials or defective castings? A: Alex Shen, CEO: Yes, that definitely contributes to the problem. For example, castings have inherent porosity that can appear in unexpected places, causing interruptions in our manufacturing plan. This can lead to holds while waiting for material disposition from the client, which increases costs and reduces efficiency. We are addressing each of these issues with our customers.
Q: As older contracts roll off, should we expect fewer drags on performance at Stadco? A: Philip Hankoski, CFO: Yes, that is correct. That’s the goal we are driving towards. We now have a robust estimate-to-complete process in place that will help us avoid surprises and address issues earlier, particularly on first articles, leading to improved performance as legacy contracts are replaced by newer, more rigorously priced ones.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.