Good day, everyone, and welcome to the TechPrecision Corporation Third Quarter Fiscal 2023 Financial Results. It is now my pleasure to turn the floor over to your host, Brett Maas. 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 risks and uncertainties in the company's financial filings with the SEC. In addition, projections as to the company's future performance represent management's estimates as of today, February 14, 2023. 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 opening remarks. Alex, the floor is yours.

Thank you, Brett. Good afternoon to everyone, and thank you for joining us. The third quarter of fiscal year 2023 was another strong quarter for our Ranor subsidiary. Ranor's operating results improved across the board when compared to the third quarter of fiscal year 2022, with higher revenue and improved gross margins. Ranor's gross profit was $1.7 million in the third quarter of fiscal year 2023 compared to $0.2 million in the same period a year ago. The STADCO subsidiary has had a turnaround. Revenue was down 3% from the third quarter of fiscal year 2022. We noted improving throughput and improving gross margins over the first 9 months of fiscal year 2023. TechPrecision remains highly focused on cash management through control of expenses and capital expenditures, customer advances, progress billings, and final invoicing at shipment. Business prospects remain strong. Our backlog was $43.9 million at December 31, 2022, an increase of $17.5 million since September 30, 2021, the first quarter that included STADCO backlog. Now I would like to turn the call over to our CFO, Tom Sammons, to continue with the review of our fiscal year 2023 third quarter and 9-month results. Tom?

Thank you, Alex. Net sales for the third quarter of fiscal year 2023 were $8.3 million or 28% higher when compared to the same quarter a year ago, as we realized a $1.9 million increase in revenue at Ranor. All of the increase in revenue came in the defense markets, offsetting a small decrease in the precision industrial markets. Our defense backlog remains very strong. Cost of sales were $6.8 million or 13% higher than the prior year period due primarily to increased net sales of Ranor and higher unabsorbed overhead of STADCO. Gross profit was $1.5 million or $1 million higher when compared to the same quarter a year ago. Gross profit was higher due primarily to higher revenue and better project mix and strong throughput at Ranor. SG&A expense decreased by $399,000, primarily due to lower spending for outside advisory services. The same quarter a year ago included a one-time cost in connection with the STADCO acquisition. As a result of the above, we recorded operating income of $274,000 compared to an operating loss of $1.1 million in the same prior year period. Interest expense for the current quarter and prior year quarter were $94,000. We recorded net income of $134,000 in fiscal 2023 third quarter compared to a net loss of $905,000 in the same period a year ago. Net sales for the 9 months ended December 31, 2022, were $23.9 million compared to $14.7 million in the same period a year ago, an increase of $9.2 million. The sum of additional revenue from our STADCO and Ranor segments were $4.5 million and $4.7 million, respectively. The prior year 9-month period included only about 4 months of STADCO revenue. Our cost of sales for the 9 months ended December 31, 2022, were $7.4 million higher due primarily to the inclusion of the STADCO business for the full 9 months compared to only 4 months of the same period a year ago and a significant increase in net sales of Ranor. Gross profit increased by $1.8 million or 81% higher on a strong operating period at Ranor. Weaker operating results of STADCO from certain unprofitable projects and our production levels dampened consolidated gross margin. SG&A expenses for the 9 months ended December 31, 2022, increased by $897,000, primarily due to the inclusion of STADCO for the full reporting period. As a result of the foregoing, we recorded an operating loss of $371,000 compared to an operating loss of $1.3 million for the prior year. Interest expense was $261,000 for the 9 months ended December 31, 2022, or $79,000 higher than the same prior year period due primarily to a full 9 months of interest expense recorded for the STADCO term loan and higher usage under the revolver loan. We recorded net income of $24,000 for the 9 months ended December 31, 2022, compared to net income of $246,000 for the same period a year ago. The prior year period included a one-time gain of $1.3 million from the loan forgiveness under the Paycheck Protection Program. The current 9-month period included an accrual for $624,000 in the second quarter for refundable employee retention tax credits under the CARES Act. Moving to the cash flows and balance sheet. We realized a cash inflow from operating activities of $871,000 and used $1.3 million for capital expenditures. The total debt was $7.1 million at December 31, 2022, compared to $7.4 million at the end of March 31, 2022, as principal paid on our term loans more than offset additional borrowings under the revolver. Cash balance at December 31, 2022, was $316,000 compared to $1.1 million at March 31, 2022. Working capital was $7.2 million at December 31, 2022, compared to $2.8 million at March 31, 2022, as we extended the Ranor term loan for an additional 5 years in December 2022, and we were able to convert a significant current liability to long term.

Thank you, Tom. 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 strength of our backlog. We are encouraged by the prospects for growing our revenue and increasing profitability in future quarters. Finally, a reminder that 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 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'm not allowed to discuss that is based on customer requirements and the environment in which we conduct business. Additionally, I would like to inform you that our applications to uplist to NASDAQ and for the reverse split have both been filed and are pending with the appropriate entities. Although there can be no assurance that our listing application with NASDAQ and/or our authorization to effect the reverse stock split will be approved by the appropriate entities in a timely manner or at all. With that said, there's nothing further that we can discuss regarding the applications or processes. Operator, we can start the Q&A. Please proceed.

Your first question is from Ross Taylor from ARS Investment.

Alex, we appear to be stuck in a bit of a holding pattern with regard to both the top line, the bottom line, and backlog. And we're watching others in the subspace show meaningful increases in these areas. Can you explain to us why or where it is that we sit in this process and why we're not seeing an improved backlog and why we're not seeing an improved top line?

Well, I think the top line, if you separate it between Ranor and STADCO, you're seeing a significant improvement on one side, right?

You define significant differently than I do.

Sure.

I'm curious about our position in the build cycle for these programs. Are we in the early, mid, or late stages of the cycle? As these programs begin to ramp up, where do we fit in? For example, if you supply the keel of the boat, that would indicate an early stage; if you provide the flagstaff, that would suggest a late stage. So, can you clarify our place in that cycle?

One of the factors we need to consider is how our project mix influences everything consistently. The variability in our revenues when comparing quarters or even over the course of a year is heavily dependent on the project mix and the timing of due dates. This is an inherent aspect of our operations. Regarding where we stand in the build cycle, I have to be cautious about discussing whether we are in the early, mid, or late stages. However, I want to reassure you that there is no reason to worry about our backlog; it continues to grow steadily each quarter. The demand for our services is strong, and we are in excellent condition.

In the past, you kind of indicated that you were looking at $80 million to $100 million biannual revenue run rate possibilities out of the Virginia and Columbia class boats. Would you say that's still a reasonable expectation?

In the past, I had stated that there's $100 million worth of opportunity, and I cannot classify it as far as how many years it was for.

Yes. Okay. Is that still a legitimate $80 million to $100 million number a reasonable target for the opportunity you have?

The answer to the question is yes.

Okay. While we're looking at submarines, there's talk that the Australians appear to be looking for a unique design, not the British design. I think that's the Adventure class and not the Virginia class, largely because the Australians have crew issues. Their boats have, I think, 68-man crews, the British boats have some 90-man crew. One thing they did...

I'm in that place where I cannot speak at all on that. At all, I'm sorry.

Okay. I was just going to ask you if you had the capacity to produce if VE Aerospace were to include a Virginia launch module inside, would you have the floor capacity to produce without CapEx.

I'm at the point where I cannot speak any more on that. I'm sorry. Can we change the subject, please?

I understand. With STADCO, you mentioned that there are programs that are currently losing money. Are these specific programs that will be discontinued? Are they in the early stages where you're still learning how to manage them? Were these programs poorly priced? Will they remain part of your portfolio? You've indicated some notable improvements in profitability, albeit a reduction in losses at STADCO. How do you foresee this affecting your path to profitability? Will it involve growing and learning through the process, or are you planning to eliminate unprofitable segments and replace them with more viable ones?

Let me change the terminology you're using. Instead of talking about programs, let's discuss contracts and POs and the specific line items within those POs. It's not that there are many programs that are unprofitable, but rather certain line items in a PO that are fluctuating. Some of these are significantly impacted due to a lot of unabsorbed overhead. This seems to be a clear factor, don't you agree, Tom?

Yes, but I think you have all three items. You have some things where we're starting some new projects. You have others that probably should not...

Legacy deal line items that were suffering from legacy pricing.

And we have to work through that and get the pricing changed. And we have had some price changes on some products.

Yes.

Okay. Is the unprofitability the result of component costs going up? Or is it the inefficiency of your ability to build them in that facility?

I would say it's neither because Tom's explanation was spot on. Some of it is legacy pricing that we haven't been able to move up. So we need to build out those and get those shipped out. That's one.

Okay. Now looking at...

Sorry, Ross. And then the other one is when our absorption improves with better throughput and higher throughput, that will also ease some of the pain. So I think concentrating on those two pieces is essential in answering your question.

You've invested heavily in capital expenditures at STADCO since acquiring it, and you're anticipating significant business growth. There are two programs currently recognized: the F-15EX and the CH-53K, both of which are experiencing an increase in production rates. Therefore, we can expect to see components for these programs this fiscal year and the next, specifically for the fiscal years ending September 30 of this year and the next. Do you have the capacity at STADCO's facility to meet the projected production rates for both programs following your investments?

I think as usual, I'm going to need to answer your question by rephrasing the question and answering what I can answer.

Okay.

I can't go into details about certain aspects, but I can confirm that we are currently meeting the needs of our external customers at STADCO with the equipment we have. The capital expenditures are contributing positively. While I can't provide specifics on the ramp-up numbers, it's clear that our current CapEx is effective, and we are fulfilling the requirements of our external customers, including the F-15 and CH-53K programs.

And since it's pretty clear what the ramp is going to be, I assume that you are comfortable with your ability to continue to satisfy your customer as the publicly stated ramp run rates occur.

I'm being careful not to comment on the publicly stated ramp rates as opposed to...

They are out today.

I understand.

Yes. I'm a little confused why you can't talk to something that the Pentagon has said it's going to happen.

I'm not denying what the public information is, Ross.

Okay. I was just asking if you're comfortable that you can continue to satisfy your customer, say, over the next 1.5 years, 2 years.

So far, I've been personally also speaking with them, and they continue to be satisfied.

Okay, cool. And they're not worried at this point in time. They're not pounding on you to do something different?

I think the pounding is mutual.

Okay. At this point, what kind of capital expenditures do you anticipate for STADCO for the remainder of this calendar year?

I don't know yet.

Is it significant? Do you see it being at the same rate it's been at since you guys have taken it over?

I will say that our concentration and our #1, #2, and #3 focus is on cash. So...

Go ahead.

So I think as far as what my prediction for CapEx is, that might be my #4 item. I don't know yet.

Okay. Okay. And so at this point in time, also it seems that you've put in to NASDAQ. I know you can't comment on anything, but have they given you an idea of how long it would take for them to review your request?

Ross, there's nothing further that I can discuss on that.

Okay, I'll pass it on. You can let someone else know, but I would like to reserve the right to come back and recall the witness.

That concludes our Q&A session. I will now hand the conference back to our host for closing remarks. Please go ahead.

Thank you, everyone. Have a great day.

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.