TECHPRECISION CORP Q1 FY2024 earnings call

Management Statement and Operational Highlights:

• Customer confidence remains high, driving a strong backlog increase to $46.3 million as of June 30, 2023.
• Consolidated net sales for the first quarter were $7.4 million, 4% higher than the prior year's first quarter.
• Stadco reported strong revenue growth, while Ranor's sales decreased due to an unfavorable product mix.
• Losses have narrowed year-over-year, and the company expects gradual improvement in gross profit and margin.
• The company will focus on tactical execution, risk mitigation, cash management, and controlling expenses.
• Stadco is in a turnaround situation with equipment issues, but losses are narrowing.
• Ranor's product mix is lumpy and unpredictable, and backlog strength doesn't increase predictability of product mix.
• Stadco integration is ongoing as it transitions to a public reporting entity.

Segment Performance:

• Stadco: Net sales were $3 million, which is 26% higher than the same period one year ago, contributing approximately 40.5% to total consolidated net sales of $7.4 million. Stadco's gross profit improved, with a loss of $588,000 versus a loss of $1.023 million in the same period the prior year, an improvement of $435,000.
• Ranor: Net sales were $4.5 million, a 5% decrease from the first quarter of fiscal year 2023, contributing approximately 60.8% to total consolidated net sales. This decrease was due to a less favorable mix.

Guidance:

• The company expects to deliver its strong backlog of $46.3 million over the next one to three fiscal years with revenue growth and gross margin expansion.
• The company anticipates gradual improvement in gross profit and gross margin.

Risks:

• Unpredictable product mix impacting Ranor's performance.
• Equipment issues and deferred maintenance affecting Stadco's operations.
• Difficulty in predicting and managing business due to lumpy and unpredictable factors.

Q: Hi, Alex. How are you today?

A: Good. Thank you. And you?

Q: The first thing, I guess, is to welcome Bobbie Lilley as CFO. So congratulations, Bobbie, on your new position.

A: Thank you.

Q: On Ranor, how predictable is the product mix and how does volume and pricing incorporate into Ranor's performance?

A: How predictable is the product mix? I don't forecast. The strength of the backlog doesn't increase predictability of lumpy and unpredictable things. Product mix is a factor, and it impacts performance, but it smooths out over longer periods rather than quarter by quarter.

Q: On Stadco, update on equipment issues and plant status?

A: Still in a turnaround. Equipment still has issues due to deferred maintenance, but specific threats from last quarter have been dealt with though more threats may arise. Losses are narrowing.

Q: On Stadco integration, what's left to do?

A: Stadco needs to integrate into a public reporting entity as it was not previously, which is a major piece of integration.

Q: On Stadco's production loss due to equipment issues, percentage of capacity lost?

A: Difficult to give a precise percentage as it involves multiple moving parts and different equipment issues, focus is on moving forward and neutralizing threats.

Q: On input costs volatility and handling?

A: Predominantly a custom manufacturer of complex services, so input costs related to metals/materials aren't a major lever for enhancing, no low-hanging fruit there.

Q: On where the company is in operations compared to desired state?

A: Can't forecast due to lumpy business, need to concentrate on blocking and tackling daily to improve manufacturing output for better absorption and reduce unabsorbed overhead.