Earnings Call Transcript - TPCS Q1 2024

Operator, Operator

Greetings. Welcome to the TechPrecision Corporation Fiscal 2024 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host Brett Maas, Managing Partner of Hayden IR. You may begin.

Brett Maas, Managing Partner of Hayden IR

Thank you. On the call today is Alex Shen, Chief Executive Officer; and Bobbie Lilley, the 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, August 21st, 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?

Alexander Shen, CEO

Brett, thank you. Good afternoon, everyone, and thank you for joining us. Customer confidence remains high, driving a strong backlog increase. Total consolidated backlog is at a strong $46.3 million as of June 30, 2023. First quarter consolidated net sales were $7.4 million, 4% higher when compared to $7.1 million in fiscal year 2023 first quarter. On a consolidated basis, we had a net loss of $527,000. Our Stadco subsidiary reported strong revenue growth with net sales of $3 million or 26% higher than the same period one year ago. Stadco gross profit improved, reporting a loss of $588,000 versus a loss of $1.023 million from the same period one year ago, an improvement of $435,000. Ranor reported net sales of $4.5 million or a 5% decrease from the first quarter of fiscal year 2023. This decrease was due to a less favorable mix. First quarter net sales for Stadco compared favorably with the same period a year ago. Our losses have narrowed year-over-year. We expect gradual improvement in gross profit and gross margin. We expect to deliver our strong backlog of $46.3 million 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, successfully manage and successfully meet customer expectations, enabling continuous recapture and continuous retention of customer confidence. We can all clearly see the positive results of this focus, evidenced by the continued high customer confidence which enabled our strong backlog growth. We remain highly focused on cash management, a critical piece of risk mitigation and continue to manage and control expenses, capital expenditures, customer advances, progress billings and final invoicing at shipment. I would like to turn the call over now to our CFO, Bobbie Lilley, to continue with the review of our first quarter results. Bobbie?

Barbara Lilley, CFO

Thank you, Alex. Net sales for the first quarter of fiscal year 2024 were $7.4 million or 4% higher when compared to the same quarter a year ago. Cost of sales were $6.7 million or 7% higher than the prior year period due primarily to less favorable project mix at Ranor and unabsorbed overhead at Stadco. Due to the higher cost, gross profit was $694,000 or 15% lower compared to the same quarter a year ago. SG&A expense decreased by $101,000 or 7% primarily due to cost reductions at Stadco. Operating loss was $580,000 or 4% higher than the same quarter a year ago. Interest expense for the first quarter increased by $10,000 due to more borrowing under our revolver loan and higher loan cost amortization. We ended the quarter with $2.3 million outstanding under the revolver loan. Moving on to our financial position. Cash provided by operating activities was $115,000 and cash used for capital expenditures was $1.9 million. Financing activities provided net cash of $1.5 million. Our total debt was $7.6 million on June 30, 2023, compared to $6.1 million at the end of March 31, 2023, as we borrowed an additional $1.7 million under the revolver loan. Cash balance at June 30, 2023 was $272,000 compared to $535,000 at March 31, 2023. Working capital was $4.9 million at June 30, 2023 compared to $5.6 million at March 31, 2023. With that, I will now turn the call back over to Alex.

Alexander Shen, CEO

Thank you, Bobbie. 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 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 by saying that I am not allowed to discuss, that is based on customer requirements and the environment in which we conduct business. Even though I have read the last statement at every conference call for the last several years, we continue to get questions both written and oral or hear about individuals making statements that what I'm saying is not accurate, that it is the Board silencing me or that I alone am making these decisions. As I have said repeatedly, we are not the ones making these rules, not me and not the Board. The decision as to what we can say is based solely and completely on rules, rules from our clients. These are not my rules. These are not the Board's rules. 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 the last several years, we have made great progress by performing good work and following instructions. This has led to about a threefold increase in stock price since the present Board took over; that is a winning formula. As a final point, I do not see these clients changing these restrictions anytime in the near or even distant future. So please do not expect anything to change. Where we can speak about it, we will. But we will not jeopardize our relationships with our clients, and we will not jeopardize the future orders we want and 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, you can open the line for questions.

Operator, Operator

Thank you. At this time, we will be conducting a question-and-answer session. The first question comes from Rob Straus, Private Investor. Rob, please proceed.