Good day, ladies and gentlemen, and welcome to the TechPrecision Corporation Fiscal 2023 First Quarter Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Brett Maas, Investor Relations for TechPrecision. Sir, the floor is yours.

Thank you. On the call today is Alex Shen, Chief Executive Officer; and Tom Sammons, 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 for 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 the risks and uncertainties in the company's financial filings with SEC. In addition, projections as to the company's future performance represent management's estimates as of today, August 22, 2022. TechPrecision assumes no obligation to revise or update these forward-looking statements. Before I turn the call over to Alex, I’ve been asked to read the following by Rich McGowan, the Chair of the Board for TechPrecision as follows. For the last 4.5 years, Alex Shen has sat next to me at every Board meeting, taking part in all aspects of the meeting with the exception of voting. Several months back, the Board decided to remedy this. I'm pleased to announce that after the upcoming annual meeting, we will be adding Alex as the fifth Board Member. Congratulations, Alex. 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?

Thank you, Brett. Good afternoon to everyone, and thank you for joining us. The first quarter of fiscal 2022 was a significantly strong quarter for our Ranor segment. Ranor operating results improved across the board when compared to the first quarter of fiscal 2022 with higher revenue and improved gross margins. Ranor’s operating income was $1.4 million compared to $427,000 year-over-year. The Stadco segment is a turnaround. With the addition of Stadco, we recognized additional revenue but also absorbed additional costs. These additional costs dampened our margins and added to our selling, general and administrative expense and interest expense. Selling, general and administrative expense included one-time costs related to the acquisition that we expect will decrease materially in future quarters. We remain highly focused on cash management and shepherding of cash through control of expenses, control of capital expenditures, customer advances, progress billings to our customers and final invoicing at shipment. Business prospects remain strong, very strong. Our backlog was $45.9 million at June 30, 2022. And now I would like to turn the call over to our Chief Financial Officer, Tom Sammons to continue with the review of our fiscal 2023 first quarter results. Tom?

Thank you, Alex. Net sales for the first quarter of fiscal year 2023 were $7.1 million, or 107% higher when compared to the same quarter a year ago as we added a full quarter of Stadco revenue and realized increased revenue of Ranor. We recorded an increase in revenue in our defense markets, which more than offset a small decrease in precision industrial revenue. Our defense backlog remains very strong as new orders captured within the quarter and after the quarter are primarily from our defense customers. Cost of sales were $6.3 million, or $3.7 million higher, due primarily to the additional cost of sales from our Stadco subsidiary. Gross profit was $817,000, slightly lower when compared to the same quarter a year ago. Gross profit was lower because of operational problems and low production levels at Stadco leading to higher unabsorbed factory overhead. SG&A expense increased by $643,000 due to the addition of Stadco and increased spending for outside advisory services and travel related to the Stadco acquisition, including approximately $109,000 of one-time expense, primarily related to the Stadco acquisition. Our operating loss was $558,000 compared to an operating income of $100,000 in the same prior year period. Interest expense increased to $84,000 from $30,000 in the prior year quarter as we added new debt to the balance sheet on August 25, 2021 to acquire Stadco and increased our borrowings under our revolver loan. As a result of the above, we recorded a net loss of $501,000 in fiscal 2023 first quarter compared to net income of $1.4 million in the same period a year ago, the quarter which included the forgiveness of our PPP loan in the amount of $1.3 million. Moving on to cash flows and balance sheet. We realized a cash inflow from operating activities of $1.4 million and used $763,000 for capital expenditures and fixed asset deposits. Our total debt was $6.2 million at June 30, 2022 compared to $7.4 million at the end of March 31, 2022 as we paid down about $1 million on a revolver during the quarter. Cash balance at June 30, 2022 was $574,000 compared to $1.1 million at March 31, 2022. Working capital was $2.6 million at June 30, 2022 compared to $2.8 million at March 31, 2022. With that, I will now turn the call back over to Alex. Alex?

Tom, thank you. TechPrecision is proud and honored to serve the United States defense industry, specifically naval submarine manufacturing through its Ranor subsidiary and military aircraft manufacturing through its Stadco subsidiary. We aim to secure and maintain an enduring partnership with our customers. Overall, in both the Ranor and the Stadco subsidiaries, we continue to see meaningful opportunities in our defense sector as evidenced by the very significant increase in our sales orders and backlog. We are encouraged by the prospects for growing our revenue and increasing profitability in future quarters. Finally, a reminder again, that 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 these fields might discuss. As such, there are real limits as to what I can discuss, and sometimes those limits change. Please understand that my saying, I am not allowed to discuss that is based on customer requirements and the environment in which we conduct business. Additionally, before we open up for questions, the Board has asked me to read you the following message from the Board. As you know, at the upcoming Annual Stockholder Meeting, we are requesting authority to do a reverse split of the stock, which overall has been met with a positive response. We want to make it crystal clear that if approval is given at the meeting, the only reason we would proceed with the reverse stock split would be to qualify for an uplifting to a NASDAQ or similar exchange. We believe listing on such an exchange would strengthen the stock by allowing it to be bought by funds and institutions prohibited from investing in OTC stocks, such as ours, and increase the attraction of the stock because of the possibility of investors being able to margin our stock. While a few investors have raised the specter of companies in dire financial straits, who have used reverse splits in desperate failed attempts to try to save themselves from being delisted, becoming a penny stock and ultimately completely failing. Obviously, that is not our situation and we believe any comparisons to those thinking ships are not valid. We ask that you vote in favor of the proposal and that you do so expeditiously. Thank you for your continued support, the Board. Operator, we can start the Q&A.

Thank you. Ladies and gentlemen, the floor is now open for questions. We received a couple of inquiries. The first question is from Rob Stress, a private investor. Rob, you may proceed.

Hey, Alex and Tom, can you hear me?

Yes, we can.

Okay, great. So, Alex, first of all, congratulations on being added to the Board. I believe this was long overdue as it's traditional for a CEO to be on the Board. This gives you full privileges, which seems completely appropriate from my perspective. I have a few questions that I will direct to both you, Alex, and Tom. First, Tom, when I examine the Ranor gross profit margins, they are quite high for the quarter. Can you comment on whether there are any one-time items that contributed to that elevated gross profit margin or provide any additional commentary? It seems that this level may not be sustainable or is at least higher than the normal levels we would expect.

Well, I think in previous filings, we often talk about the mix of the jobs that we have and the lumpiness of the business. And right now, we are sitting on some pretty good projects. Some of the projects that have hurt us in the past are no longer here and that contributes to a good performance.

I think you're very cautious about what can be said going forward, and I don't want Alex to have to reiterate a similar narrative. Were there any one-time items besides product mix or customer mix that contributed to that gross profit margin?

No.

Okay. Great. Then I think a question moving to Alex would be, when we look at the Stadco performance understanding that it takes time to ramp, integrate, as well as turnaround frankly and you have a significant turnaround that I think investors understand well. My question is this: when you consider that operation and the pace of that turnaround, simply, is it meeting your expectations? Are you ahead or behind? Any kind of color from that perspective.

No, I don't have any other color from that perspective. I think it's pretty premature to give my audience, my shareholders, including myself any kind of forecasting or idea that it's doing anything other than it is a turnaround. We are taking the correct measures to make sure we're shepherding cash and not solely focusing on that, but highly focused on making sure we have cash.

Okay. And one question, Alex, that you might not be able to answer as a follow-up to that Stadco point. We know that previously that company did not operate effectively to create shareholder value. I think part of that is probably the way that they operated, and part of that could have been the contracts that they wrote with their customers. Are you able to comment at all about prior contracts written that you are still working through, not specifically, but whether or not those types of contracts are still weighing down our performance of that business today?

You're delving into a question that dives into the area where I'm not going to be able to comment.

Okay. So moving on, in past calls you have discussed quarter-to-date backlog. I have not heard that as of yet today. Is that a change of policy or would you like to have the opportunity to tell us whether or not the $45.9 million is higher or lower on a quarter-to-date basis?

If I had something to tell you, I would have already. I don't have anything significant to tell you right now.

Yeah, okay. And I think we recognize that backlog is important.

My standard practice has always been to share quarter-to-date information if there is something significant to report at that time.

Okay, perfect. Just two quick ones. When I consider the press release, I look at its presentation and its presentation has changed somewhat over, I would say, the last couple of quarters. The essence of my question is effectively, Tom, is this press release that we're seeing is the planned press release structure going forward or is that indicative of the fact that you had to play some catch-up here with the 10-K and we understand the difficulty of financially integrating Stadco so on and so forth? And what I am effectively asking you is that, we went back a couple of quarters ago and we looked at a typical quarterly press release. We did in fact have a full balance sheet there; we had an income statement down to the net loss line with some supplemental information, and we also had a full cash flow statement. So just let investors know whether or not that presentation of the press release has changed going forward, or if that's just a momentary step because of what you were dealing with regarding the Stadco integration.

Yes. It's more the latter in the sense that it was a little bit abbreviated from a financial perspective, given the timing of getting things filed right now, but the anticipation is that we get back to what we've always done.

Great. And I would be highly supportive of that. I think the information that you used to provide is quite good. So I appreciate that response. Last question, and I'm not sure who should answer this, but as a long-term investor here I paid attention to the messaging of the company, as well as the investor relations strategy. I think in many ways you as a management team have done an excellent job in what you've been able to deliver. The backlog has dramatically increased and the company by and large should be positioned quite well for creating shareholder value in the coming quarters and years. With that said, knowing public companies fairly well, the investor relations strategy is lacking in many ways. How do you think about your Investor Relations strategy and where you are? And anything that you'd like to share regarding that.

I'll take that one under advisement. I'm not trying to avoid the question. I think it's premature to and probably foolish of me to try to answer it right off the bat. It's definitely something we think about and how to maybe make some improvements in what we are offering. But –

So that's an understandable response, but I think that it has to be dealt into much deeper for a company that has performed beyond just headline talk and what I'm referring to specifically is the great strides that you have made as it relates to the backlog, particularly this company is today in a much better position and I think that data point along with others would allow you to message this company in a way where the shares would no longer be at $1.50 a share. It is wasted operating performance that these shares are still $1.50 and I think it is very important that the investor relation strategy get on track, because I think if it was the shares for all shareholders would be much, much higher. Thank you for your time and taking all my questions. And good luck on your future quarters.

Thank you. The next question is coming from Ross Taylor from ARS Investment Partners. Ross, your line is live.

Thank you. Congratulations again, Alex. I know you mentioned your decision to stay on the board. Can you elaborate on a couple of points? You referred to one-time costs; could you provide details on any other one-time costs in total, beyond the $160,000 and $180,000 you mentioned?

I mentioned there was $109,000 in the quarter.

$109,000. Yeah. Was that the total one-time costs in the quarter?

Yes.

Okay, can you discuss the run rate, Alex? It appears that Stadco is currently facing challenges with the revenue run rate. We are still getting familiar with their programs. We understand the CH-53K and the F-15EX, and we have some insights into other programs they're engaged with. It seems that the run rate for this quarter was a bit lower than anticipated.

We're going to end up using the L word.

No, no, we're not; we're going to find another word other than that one.

Okay.

Yeah, I have an answer to a guy who was acquitted for a merger, just so you understand, and that will drive me up and crazy. So getting into that, the idea of that business, we are not familiar enough as shareholders yet with the tempo of their business. Is the tempo of their business when we're looking at things like the CH-53K, the F-15EX, I think we're looking at some point in the next fiscal year decision by the Navy/Marines on the uptake on the run rate for the CH-53K. I think the last budget I saw had 24 F-15EXDs projected at least from one side. I think the Senate side of the budget. It would seem that you'd be doing more run rate business there. Is it just because of the L word?

Well, before we get to the L word I think we really need to focus on the fact that this is a turnaround. So it's highly focused, first, before we even get into run rates of specific programs. We need to shepherd the cash. We need to concentrate on shepherding cash, managing cash effectively and efficiently and pulling all the different levers. The backlog itself is strong, very strong in both subsidiaries. So we need to get past the turnaround problems.

Right. So you need to focus on the fact that this is a turnaround. We need to shepherd the cash, manage it effectively and efficiently, and pull all the different levers. The backlog itself is very strong in both subsidiaries, so we need to get past the turnaround problems.

Once we stabilize the cash situation and maintain that stability, we can begin to implement different execution strategies. We have a strong backlog and existing orders, so it's important to approach this in a systematic way. The results from the previous turnaround effort, Ranor, have been positive, allowing us to not only retain our gains but also to grow. The past performance of our management speaks for itself. I’m not trying to boast about myself or Tom, since I don’t usually compliment him anyway. We just need to carefully tackle these challenges one at a time. Although I mention one by one, all of them require simultaneous attention. This gives us an opportunity to evaluate which programs might have run rate implications.

Okay. So in looking at Stadco, is the management capability what you had been looking for? Are you happy with the people you have running that business?

Well in general, yes.

Okay. And then looking at the ability to execute on the contract, are you happy with the people on the factory floors ability? Do they have the skill set needed to produce the product in a quality fashion?

Well, I think part of the turnaround is to really flesh all these items out, just like at Ranor. There have been some changes and most of them has not been with the management.

When considering Stadco at this point, is there anything about the business that has surprised you, either positively or negatively?

I don't think there are any surprises here.

Okay. And so when you look at this overall, is there anything about the business that has surprised you in a negative fashion or a positive fashion? I don't think there are any surprises here.

I do mean to answer your question a little bit more before you go on further. So when you're talking about the satisfaction with the people in general, I'm satisfied. And in general, we need to bring on some more talent, which we are doing so as part of our turnaround.

And as we execute that talent, you would think that as the business builds, you are comfortable that it can achieve what you were targeting it to achieve when you acquired it or better?

Well, I target things and usually we're going to get us there.

Yes, that is true. So –

But we just got to get that first point one, two, three, I got to get the one.

Right. And so at this point in time where we really are seeing is, it's really as you're coming into a business and you have the team, you're comfortable with the resources, you’re comfortable with the people, you're really in the process of kind of just pushing this forward to the next step and you don't see anything about it. When one looks at the quarter and sees $2.5 million in revenue, this isn't something that you guys saw and were surprised by; it's something that is inside the expectations and the plan that you have?

Well, between Tom and me, he has been upset with me for not hitting numbers as soon as I can. But that's private. We would like to have better numbers, yes. Absolutely. The disappointment is absolutely there; we're not happy.

When you look at the opportunities between Stadco and Ranor, which of the two do you think has the broader opportunities in front of itself, not the programs that you're already in and of one, but programs that you're looking for down the road?

Yes.

So I take that to be both; you are really excited about both of them.

I'm very excited by both.

Okay. Considering the overall situation, while I understand you won’t provide forecasts, should we view a quarter like this in Stadco as an indication that we might expect some level of improvement going forward, or do you believe it would be wiser to anticipate several quarters before seeing significant change? How does you and the Board perceive the potential for both?

Ross, you're asking me questions that I will do everything to avoid, right? I will not provide a forecast for you or anyone else. So I'm going to sidestep this a bit.

I’ll just say obviously we expect better.

You expect better. Thank you. I'll let someone else take it.

Thank you, sir.

Thank you, gentlemen, and congratulations, Alex.

Thank you. There were no other questions in the queue at this time. I would now like to hand the call back to the management team for closing remarks.

Thank you. Everyone have a great day.

Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.