Techprecision Corp (TPCS) Q2 2024 Earnings Call Transcript

Greetings, and welcome to the TechPrecision Corporation Second Quarter Fiscal 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Brett Maas, Managing Director of Hayden IR. Thank you, sir. You may begin.

Thank you. On the call today is Alex Shen, Chief Executive Officer; and Bobby Lilly, 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, November 20, 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. Please go ahead.

Thank you, Brett. Good afternoon to everyone. Thank you for joining us. Customer confidence remains high as our consolidated backlog was $44.6 million at September 30, 2023. For the second quarter, consolidated net sales were $8 million, or 6% lower when compared to net sales of $8.5 million for the same period a year ago. For the first six months of fiscal 2024, consolidated net sales were $15.3 million or 2% lower when compared to net sales of $15.6 million for the same period a year ago. Second quarter net sales for Stadco compared favorably with the same period a year ago. Gross profit at our Stadco subsidiary improved, reporting a loss of $9,000 versus a loss of $587,000 in the first quarter of fiscal 2024. A less favorable project mix at Ranor dampened consolidated operating income for the second quarter. Ranor's operating income was $673,000 for the quarter. Stadco's operating loss was $323,000. We expect to deliver our strong backlog over the course of the next one to three fiscal years with revenue growth and gross margin expansion. We will continue to focus on tactical execution and risk mitigation, driving both subsidiaries to fully comprehend and successfully manage customer expectations, enabling continuous recapture and retention of customer confidence. Customer confidence is key. We can all clearly see the positive results of this focus, evidenced by the continued high customer confidence, which enabled us to maintain a strong backlog. We do remain highly focused on cash management, which is a critical piece of risk mitigation, and we continue to manage and control expenses, capital expenditures, customer advances, progress billings, and final invoicing at shipment. I will now turn the call over to our CFO, Bobby Lilley, to continue with the review of our quarter results. Bobby?

Thank you, Alex. Net sales for the second quarter of fiscal year 2024 were $8 million or 6% lower when compared to the same quarter a year ago, with $4.5 million for Ranor and $3.5 million for Stadco. Cost of sales were $6.9 million or 2% higher than the prior year period, due primarily to a less favorable project mix at Ranor, offset in part by better throughput at Stadco. Due to the higher costs, gross profit was $1 million or 41% lower, compared to the same quarter a year ago. SG&A expense decreased by $200,000 or 11%, primarily due to cost reductions at Stadco. Operating loss was $597,000 compared to an operating loss of $87,000 in the same quarter a year ago. Interest expense for the second quarter increased by $46,000 due to more borrowing under our revolver loan, higher interest rates, and higher loan cost amortization. We ended the quarter with $1.9 million outstanding under the revolver loan. Net loss for the second quarter was $528,000, compared to net income of $390,000 the prior year. The prior year period included a one-time gain of $624,000 from an employer tax credit refund. Net sales for the first six months of fiscal year 2024 were $15.3 million, or 2% lower when compared to the same period a year ago, with $9 million for Ranor and $6.3 million for Stadco. Cost of sales were $13.6 million or 4% higher than the prior year period, due primarily to less favorable project mix at Ranor. Due to the higher cost, gross profit was $1.7 million or 32% lower compared to last year. SG&A expense decreased by $300,000 or 9% primarily due to cost reductions at Stadco. Operating loss was $1.2 million or $532,000 higher than the same quarter a year ago. Interest expense increased by $65,000 due to more borrowing under the revolver loan and higher interest rates. Loan cost amortization increased by $11,000. Net loss for the first six months of fiscal 2024 was $1.1 million compared to a net loss of $110,000 the prior year, which included a one-time gain of $624,000 from an employer tax credit refund. Moving on to our financial position, cash provided by operating activities was $1.3 million, cash used for capital expenditures was $2.6 million. Financing activities provided net cash of $0.9 million. Our total debt was $7.1 million on September 30, 2023, compared to $6.1 million at the end of March 31, 2023, as we borrowed an additional $1.3 million under the revolver loan. Cash balance at September 30, 2023, was $138,000 compared to $535,000 at March 31, 2023. Working capital was negative at September 30, 2023 as we reclassified all of our long-term debt to current because of certain debt covenant violations. We have requested a waiver from our lender. With that, I will now turn the call back to Alex.

Bobby, thank you. For those on the call who may not be very familiar with our company, TechPrecision is a custom manufacturer of precision large-scale fabricated components and precision large-scale machined metal components. The components that we manufacture are customer designed. We sell to customers in two main industry sectors, defense and precision industrial, 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 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 inability to discuss certain matters is based on customer requirements and the environment in which we conduct business. Even though I have reiterated this statement at every conference call for the last several years, we continue to receive questions both written and oral regarding what we communicate, as well as speculation that it comes from the Board restricting my commentary. The decisions about what we can say are based solely on rules dictated by our clients. There are many things we would love to speak about, but we are restricted. It is the same for all of our direct competitors. Over recent years, we have made significant progress by performing quality work and by following client instructions, leading to approximately a threefold increase in stock price since the present Board took over. That has proven to be a winning formula. As a final point, I do not foresee these clients changing these restrictions anytime soon. Please do not expect anything to change. Where we can communicate, we will, but we will not jeopardize our relationships with our clients, nor the future orders we expect to receive from them. TechPrecision is proud and honored to serve the United States defense industry, specifically 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, 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. Operator, please open the line for questions.

Thank you. At this time, we will be conducting a question-and-answer session. The first question is coming from Mark Gomes from Pipeline. Mark, your line is live.

Hey, gentlemen. Welcome to renewed revenue growth. Congratulations on that. Excluding the machinery issues that you had in Stadco over the past few months, which…

Mark, you are coming in a little faint.

Sure. How about this?

Much better. Thank you.

Great. Excluding the machinery issues that you had at Stadco, which, as I understand, are now behind you, have you been able to deliver against your customer order expectations on a timely basis?

Yes. The quick answer and the real answer is yes. We are delivering against our customers' expectations, absolutely.

Okay, so…

As a matter of fact, we just received recognition from several different customers for delivering 100% on time.

Fantastic. So it would be safe to say then that anything that we see in the defense sector in terms of missed expectations and submarines or what have you are not being caused by you in any way, shape, or form?

Correct.

Okay. Any reason to believe that this won't continue?

There's no reason to believe we cannot execute the same way in the future. The expectation should be that we will execute the same way in the future.

Okay. So then the confidence that you’ve been exuding with regard to customer confidence, it leads me to believe that the programs that you have been in over the past year or two or three years, there's no reason to believe that you will not continue to be a part of those programs, if not more, in the future, yes?

Not so sure about what's in the future. You know how I love forecasting, that was sarcasm. But the expectation is we're going to keep what we have because if we deliver according to customer expectations, that's how we re-secure their confidence and by re-securing their confidence, we re-secure the purchase order activity in the future. So, I think that's a roundabout way of saying yes to your question.

I took it as such. Final question. We saw maybe a couple of million dollars of CapEx at Ranor a few months ago, any color commentary as to what that might have been for not specific to customers, but is that to replace old machinery, expand your capacity to do more work for customers, or all of the above?

We’ve wandered into an area where I'm being restricted on comments. So, adding new machinery does not decrease capacity usually. So, that’s probably safe to say that we're adding capacity.

Great. That’s it from me. Thank you.

Thank you. Thank you for your support.

Thank you. The next question is coming from Rob Straus from Winfield Capital. Rob, your line is live.

Hi, Alex and Bobby, how are you today?

Good, thank you.

I have a few questions, and my first one is for you, Bobby. It's about the balance sheet, specifically regarding an account called other noncurrent liability, which has increased significantly since the fiscal year-end. Could you clarify what this account encompasses? To provide some context, as of September 30, it stands at $4.43 million compared to $2.7 million on March 31. I'm interested in understanding what is included in that line item since there has been a noticeable change.

It is contract liability, so deferred revenue is what that account contains. Yes, it has increased.

Yes, we are reporting a backlog of $44.6 million, which is down from about $46 million at the end of June and $49 million from a year ago. Alex, you mentioned that this business tends to be variable. I would like to hear your thoughts on whether we should accept that being in the mid-40s range for the last 12 to 18 months might be the new normal for TechPrecision. However, considering the developments in the industry, there might be potential for this backlog to increase significantly. Do you share that optimism, or what is your perspective on this, given that we have observed this backlog number for the past 12 to 18 months and it seems rather stagnant?

I would say that this is a big win because in the midst of a turnaround, we are able to preserve the level of backlog basically demonstrating the level of customer confidence and the level of meeting performance expectations by the two subsidiaries. So I would consider this a big win. Can it grow more? Probably more yes than no. I wouldn't characterize it as being stagnant. I would characterize it as winning every day we're in the 40s.

Okay, last question. Regarding Stadco, some time ago, shortly after we acquired the business, we mentioned two specific customers on the call, which are well-known: Sikorsky, associated with the CH-53K, and Boeing, related to the F-15EX fighter jet. The status of these two relationships is still the same as it was then. Is that correct?

I will speak to the military heavy lift helicopter program. That relationship remains strong and we recapture the customer confidence on a daily basis.

Good. Last question, Bobby. One question regarding the press release, which discussed a debt covenant violation. Often, these are manageable with your lender, I just thought I'd ask your perspective. Number one, what is our remaining availability you could give it as of the end of the quarter or as of today, so we know what that looks like. And then is there any comment that you can make as it relates to your thoughts on curing violation?

The availability as of the end of September is over $2 million. And as far as the covenant being a lumpy business, we're going to have quarters that are up and down, and we work with our lender to waive whatever we need to and move forward.

Okay, thank you for answering my questions. I’ll allow someone else to get in. Thank you.

Thank you.

The next question is coming from Kris Tuttle from Caterpillar Investments. Chris, your line is live.

Great. Thanks for the update and for taking my question. We already have delved into quite a few things. I did want to just ask a little bit more about the backlog, you talked about satisfying it over the next year, 1.5 years. And my question is just working with your customers who may want to place additional orders with you, are you able to give them the kind of delivery times like within their expectations for the lead times they have for their products. In other words, do you have capacity to still accept additional orders for them and satisfy them in the time frames that are acceptable to them?

That's kind of a tricky question, isn't it, so the…

I didn't mean it to be.

Okay. Well, I'm just trying to make sure that we all understand each other and also our listeners all understand the same thing. We're interested in maintaining 100% or close to 100% on-time delivery with our customers. That is the expectation that we want to meet, so that we can continue to secure confidence and through the confidence, new orders. So if a customer, I guess, tries to put in an order that will disrupt the defense industry, that would not be a good order. And I think our customers are very aligned with our available capacity and capabilities. So they'll probably try to work with us to avoid such a scenario.

Okay. At the same time, if they would like to utilize your services a bit more for some of their programs, there is some flexibility for them to collaborate with you on that.

I can always figure something out. But again, this is not a singular transaction. This is a relationship that spans decades. So really, if a customer were to try to force us into not meeting expectations any longer in the defense industry, that would be they would not be operating in a manner that they should be. It shouldn't happen that way.

Got it. Got it. I appreciate that additional color about how the business works. So thank you very much for that. And congratulations again.

Thank you.

Thank you. The next question is from Greg Schlatter, a Private Investor. Your line is live, Greg.

I just have a real simple question. As you speak about delivering on your customer expectations on a daily basis, and over the past 10 years, you've not really delivered on any shareholder expectations in the sense that you're managing profit and then earnings per share. Do you think that will ever occur as you build out and talk about your great pipeline being built out? Are you pricing stuff at a profit? I know it takes one or two years to deliver it, but what were you doing one or two years ago. Just a little curious on how long shareholders are going to go without seeing any type of positive EPS.

Sir, I don't think I have an answer to your question. I don't know how long. I don't really understand how to answer the question. I do understand that we need to maintain our backlog. I do understand that we need to maintain our customer confidence. And I do understand that we are meeting customer expectations.

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

Thank you. I have a quick question regarding Ranor. You previously reported strong revenue and operating margin figures a couple of quarters ago. In the last two quarters, you've mentioned the impact of mix. Can you explain whether this mix is due to previous contracts, the initial items being processed, or other factors? Additionally, when can we expect the mix to improve and get us back to mid- to high 30s in operating margin?

The mix we are discussing refers to the different levels of profitability associated with various part numbers in the category. There are certain part numbers that have lower profitability, and the timing for these is coinciding within the same reporting quarter. When we see a concentration of high-profit items in the same quarter, overall profitability increases. Conversely, if many items with lower, yet still positive, profitability are grouped together in that same quarter, it will lead to a decrease in profitability.

When we look at the operating profit margin for Ranor, back when you had your strong quarter, a couple of quarters ago, you were asked if you thought that was a sustainable number was kind of a one-off. And you did not indicate it was a one-off number. Should we expect a sustainable number over time because I understand the business is lumpy. Should we expect that number to be in that kind of mid- to high 30s over time as opposed to what we've seen in the last couple of quarters?

Well, certainly, I aim for higher. I can't really control some of the timing of when these occur.

But generally, I understand the timing issue. When we consider the lifespan of these programs, which last from 10 to 20 years, we should ask whether we can expect the overall revenue from Ranor to yield an operating margin in the mid to upper 30s like we achieved before the last couple of quarters. Or do you believe that a low-30s margin or lower will be the sustainable figure? Your earlier comments suggested that mid to upper 30s could be attainable and maintainable.

Unless we start addressing these resistance points, it becomes challenging to analyze quarter by quarter.

Yes, I'm trying to focus on the program line.

So the advent of COVID spiked a lot of different costs. And I think a lot of us, including Ranor and Stadco, but we're talking about Ranor. I think we're looking at that and experiencing different types of cost increases and impacts. Some of the impacts also don't just come from how something is quoted to be a profitable margin and what that percent margin is. Some of it is actually affected by timing of uncontrollable factors such as raw materials as well as timing of customer furnished material and supply chain delays in both those things. So when we have these types of hiccups operationally, what happens is some of the labor weight. So when we have underabsorbed relatively underabsorbed labor because of hiccups, not so much because profitability calculations or expectations are not being met. They're not being met, not because the job is not profitably quoted. They're being met because there are different things that kind of the inputs are lumpy to me. So that causes a ripple effect. I hope I'm explaining myself properly.

I understand. Essentially, you are indicating that you are operating at an inefficient level because you are not processing enough business. A couple of quarters ago, you were handling more business with higher-margin programs, which allowed you to operate more efficiently than you are currently. If I am summarizing correctly, it seems we are in a situation where you are somewhat stuck with inefficient operational levels.

So efficiency, I usually equate with things like mass production, but we do things one at a time. So I try to avoid using these mass production type terminologies and stick with what I know. What I do know is when there's hiccups in the inputs, there's hiccups on the outputs and those kind of translate the smooth and steady is just not the business model lumpy and lumpier seems to be the business model. And what I try to do is reach for improvement and make the processes more efficient. We succeeded very well before, and we continuously aim for success.

Is there any reason why you cannot begin to succeed very well, particularly given the ramp-up in the programs that we believe you're involved with?

I think the inputs, especially supply chain problems that cause input hiccups are beyond my control is the problem.

Let's discuss a couple of points. Regarding Stadco, you are engaged with two main programs: one with Lockheed Martin Sikorsky for a heavy lift helicopter and another with Boeing for an advanced air defense strike fighter. Both programs are projected to ramp up significantly over the next year or two, increasing production from low single-digit numbers to over 20 units annually. Given your description of operations as being artisanal, where you produce items one at a time, we would expect to see a significant increase, perhaps even a parabolic growth, in the F-15EX. They refer to this as a Viking launch of business stemming from these two programs. Is my understanding correct?

I think we all want you to be right.

No. It's a simple question. You know what you're involved with. The Board knows what you're involved with. I'm pretty confident what you're involved with and I'm just saying, so you want me to be right, but do you have any reason why I'm wrong. Just fundamentally forget the idea that the sun could come up in the West or you know, that means it's gonna emerge from the sea. Just generally business lines here. You are sitting on the cusp of what appears to be in that business, a major ramp major ramp. Really, the reason why you bought that business and why you spent the last two years turning it around.

I totally agree with you.

Do you have any issues with needing capital expenditures in Stadco to meet the expected build rates? Or can you manage what you need with your current capabilities, considering that we are looking at the next 12 to 24 months for significant growth?

As we assess customer demand, we are currently fulfilling that demand. When it comes to forecasting, I prefer to rely on observable data rather than predictions. Some feedback from our customers doesn’t always translate into confirmed orders with specific due dates that correspond to these significant short-term increases. Therefore, we do not anticipate any issues in meeting customer demand, whether it’s in the present, six months from now, or further into the future. This also addresses the CapEx inquiry.

You don’t need to worry about capital expenditures. We believe that Stadco is building essential structural components for your programs. It's difficult to construct any airframe without your product. Therefore, we can assume that as production increases, unless they have a surplus of these components stored away, we will observe growth in that business. This is just a comment and you’re welcome to agree or disagree. Moving on, you mentioned your turnarounds, including the one at Ranor, which gained momentum two quarters ago but has faced some challenges recently. However, from what I gather, that situation is expected to correct itself. Regarding profitability, I must express my discontent with your response, Alex, because ultimately, we know the business must be profitable and self-sustaining. Your Board understands this too, and achieving that is the goal. I trust that you, as a capable operator, will make it happen. The real question at hand, which has been raised, concerns the third turnaround, specifically from a shareholder perspective. Although you've had success from the outset, the stock seems to have stalled, similar to your backlog. There is evident frustration among shareholders, as reflected in the voting during the last directors' election. It indicates a high level of dissatisfaction even without an organized effort against it. Is the Board focused not only on fine-tuning the operations but also on ensuring we achieve profitability? This harkens back to your Chairman’s previous comments about the eventual sale of the company, which might not have envisioned the time it would take to reach that point. It's crucial to concentrate on profitability and find ways to communicate your story effectively. I suggest examining the Gram calls, as they may be brief but resonate well with people. Taking the time over the holidays to listen to those calls could provide insights on how to share this story with a broader audience. We have a new large institutional investor, and it would be beneficial to attract more of such investors to support the stock and drive investment to new heights. Understood.

Understood.

Okay.

Yes, understood.

Thank you. You want to go back to the CapEx question...

Thank you. You want to go back to the CapEx question...

Excuse me, I can't really hear. It's very muffled.

Is this better?

Now, yes.

Okay. So I want to go back to the CapEx question. My understanding from the prior dialogue was that another entity or entities are underwriting some of the cap expenditures. But how does that show up if it does on the financial statements then.

Say that again.

If TechPrecision's capital expenditures are increased by the purchase of additional capital equipment by another entity or entities, does that appear in their financial statements or not?

Yes. The total CapEx is all inclusive of any funding.

Okay. How does that get reflected in the financial statements then? For example, in six months...

We're purchasing, and the company is increasing its capital expenditures, which means the company is allocating funds. So that is reflected accordingly.

Right. So that shows up in the cash flow analysis of $2.6 million for the six months, let's say. So where is the inflow of funds from other outside entities?

That would be on appeal.

Okay. Let me think about that. I'm not sure I fully understand how that ends up. But other words is the purchase order amount in excess to include that capital spending.

The capital offset of the CapEx is part of the contract liability I mentioned that is included in the other noncurrent liabilities, and it is offset against depreciation as it amortizes.

Okay. Now if supply chain interruptions have been causing a problem with the more steady flow and usage of labor, how can you take that into account when you enter into pricing with the purchase order.

How do you take into account something that's like an interruption?

Correct. In other words, you mentioned that, and here, I'm discussing...

It's pretty difficult, Richard, to take into account directly and quote to a customer and say, in case of interruption, I'm going to charge you this much more.

Understand. You're asking a question from someone without experience in manufacturing administration or management. Do you believe that supply chain interruptions like that will persist?

We're exploring the topic of supply chain interruptions with the materials provided by our customers, correct?

Correct, correct. With your supplier furnished.

With my customer furnished material. So which in this case the supply chain is the actual customer that gave me the IPO to begin with. So it kind of puts me in a real bind. I'm jammed up between them and them.

Right, okay. I appreciate that clarification. Is there any way you can go back and re-compensate yourself given it wasn't your fault.

There are certain limits to my understanding of the situation until the job is completely finished, as much of our manufacturing process can extend over multiple quarters or even two to three years. To accurately address your question, yes, we do go back to the customer for issues that are not our fault, as well as for situations that may be the customer's responsibility. The straightforward answer is yes.

But it sounds like you don't do it on a contemporaneous basis.

We engage in this process daily. We approach it in a way that aims to secure a positive response. If I can't provide a clear answer on the costs, I won't know until the expenditures are fully incurred. Yes, it can be challenging to provide a forecast and later need to adjust it, as that raises questions about the true costs. There are people on the other side who also have to get approval from higher-ups, who will require proof of any additional spending. If the work isn't fully completed yet, they might prefer to wait. However, I'm focused on what I can obtain today. These discussions occur every day.

From an outsider's perspective, it appears that the worst-case scenario is that there will be no compensation for that. This is how it has been reflected in the financial statements so far. Is that correct?

No. It's a mix of all kinds of stuff. Because it's not just one contract we're talking about, right? It's an aggregate of the quarter. The quarter wasn't spent on making one part.

I want to quickly address another topic. You've consistently indicated that defense is the primary aspect of the company's business. You still have precision machinery as part of the industrial segment. Are there opportunities for revenue growth in that area over the next year to one and a half years?

That's a bit of a tricky question, but the answer is yes, there is growth. However, we are mainly focused on defense.

Are you pursuing opportunities in the precision industrial at this point or no?

Yes, we are looking for more opportunities in defense because it offers a more stable and consistent stream of purchase orders over many years. In contrast, precision industrial opportunities raise concerns about their sustainability. If it's not related to something like a submarine or a heavy lift helicopter, there's uncertainty about their longevity. Additionally, with the backing of Congress for certain defense programs, it's uncertain how many of those precision industrial opportunities could become problematic for us.

Okay, I appreciate your work, and I appreciate you taking the questions.

Thank you.

Thank you. And the next question is coming from Mark Gomes from Pipeline. Mark, your line is live.

Thank you. First, I just want to echo Ross's commentary regarding the Graham earnings calls and how they handle that. It would be a good, I think, a model just FYI. I know it varies from program to program. But in general, if you look at the aggregate, do the parts you make tend to be needed closer to the front end or the back end of the final assembly process of the various programs? If you looked at an average across the aggregate.

Average doesn't really work.

You have a sense of the spirit of my question, right?

Well, I sense it, but we make the components. We don't build the boats. We make the components; we don't build the helicopters.

Right. But if we look at helicopters as an example, right, if I ask that question specific to helicopters, the question would be some companies would be getting orders for helicopter number seven at a specific time and you would be getting your orders for that same helicopter at a different specific time depending on when those parts are needed for final assembly. And I'm just wondering if, on average, your parts that you make tend to be at the front or back end of that process.

So I think I'm trying to answer the question, Mark, in a way that makes sense because we're far away from the build cycle of the helicopter or the build cycle of the submarine. Our orders are for components. So I think what happened is they order the components; I don't really know as far as front end or back end or how to really connect it to the customers' actual schedules because it varies.

Got you. Yes. Okay. Now, of course, I think it's safe to say that you try to price out your work so that you could get to those 30%-plus gross margins we've talked about on Stadco and Ranor. I assume that's still the plan?

I price in order to maintain margins. I'm going to do my best.

Okay. So the follow-up to that is, would you say that the processes that you are continuously putting in place to improve the operation combined with the current environment as opposed to the one that we went through during COVID, and I'm sure the echoes are still there. But is the current environment and your ongoing process improvement initiatives, are we at a place where all of that is more conducive to fewer hiccups going forward?

I think we all underestimate the COVID impacts that are still being felt across all industries. I don't think that we've reached steady state as far as expectations that resemble something pre-COVID that's more stable.

But we're moving in that direction, right? Is it safe to say that the further we get away from COVID, the closer we get to reaching that normal state?

I think it really depends on the individual companies and their operators. The impacts are certainly felt. We are taking certain measures in each subsidiary, some similar and some different based on location and region to further mitigate these impacts. I would like to think that we're better than average.

Thank you.

That does conclude our question-and-answer session. I will now turn the call over to TechPrecision management team for closing remarks.

Thank you, everyone. Please have a nice day.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.