TECHPRECISION CORP Q2 FY2024 earnings call

• Consolidated backlog was $44.6 million at September 30, 2023.
• Second quarter consolidated net sales were $8 million, 6% lower than the prior year; first six months net sales were $15.3 million, 2% lower than the prior year.
• Stadco's gross profit improved, reporting a loss of $9,000 versus a loss of $587,000 in Q1 2024. Ranor's operating income was $673,000, but a less favorable project mix dampened consolidated operating income.
• Focus on tactical execution, risk mitigation, cash management, and controlling expenses, capital expenditures, customer advances, progress billings, and final invoicing at shipment.
• TechPrecision is a custom manufacturer of precision large-scale fabricated and machined metal components, serving defense and precision industrial sectors, predominantly defense.

For the second quarter, net sales were $8 million. Ranor contributed $4.5 million (56.25% of Q2 net sales) and Stadco contributed $3.5 million (43.75% of Q2 net sales). Cost of sales for Q2 were $6.9 million, with gross profit at $1 million, 41% lower than the prior year. Ranor operating income was $673,000, while Stadco had an operating loss of $323,000. For the first six months of fiscal 2024, net sales were $15.3 million, with Ranor at $9 million (58.82% of H1 net sales) and Stadco at $6.3 million (41.18% of H1 net sales). Cost of sales for H1 were $13.6 million, resulting in a lower gross profit compared to the prior year.

• Expect to deliver strong backlog over the next 1 to 3 fiscal years with revenue growth and gross margin expansion.
• Continue to focus on tactical execution and risk mitigation to drive subsidiaries to meet customer expectations and retain customer confidence.

• Reclassified all long-term debt to current due to debt covenant violations and requested a waiver from the lender.
• Supply chain interruptions and project mix issues affecting operating income and profitability.

Q: Excluding machinery issues at Stadco, have you been able to deliver against customer order expectations on a timely basis?

A: Yes, we are delivering against customer expectations and have received recognitions from several customers for 100% on-time delivery.

Q: Any reason to believe delivery won't continue?

A: There's no reason to believe we cannot execute the same way in the future as we will keep what we have by delivering according to customer expectations.

Q: On the other noncurrent liability account, what's included?

A: It is contract liability, i.e., deferred revenue.

Q: Is CapEx self-funded?

A: It is not entirely self-funded; we are getting support from other entities.

Q: Are key personnel at Stadco still in their positions since acquisition?

A: I make it a policy of not talking about the individuals at the subsidiaries.

Q: Thoughts on Stadco's integration?

A: Stadco is a turnaround, and we need more revenue strength from it.

Q: Regarding backlog, is it stagnant?

A: Considered a big win as we preserve backlog demonstrating customer confidence, and it can grow more.

Q: Are relationships with Sikorsky and Boeing still strong?

A: The relationship with the military heavy lift helicopter program remains strong, but shy away from specific customer comments on Boeing F-15EX.

Q: About delivering on shareholder expectations for profitability?

A: I don't have a specific answer, but we focus on maintaining backlog and customer confidence.

Q: Ranor's operating margin mix?

A: Mix is affected by profitability of different part numbers timing collapsing in the same quarter; timing of inputs like raw materials and customer furnished material causes ripple effects.

Q: CapEx for Stadco to meet build rates?

A: We are meeting customer demand and do not see a problem meeting it now or in the future.

Q: Supply chain interruptions?

A: Difficult to take into account directly when quoting, but negotiations happen daily; supply chain interruptions are still felt due to COVID impacts.

Q: Parts timing in final assembly?

A: Varies and hard to generalize as we make components not directly involved in final assembly timing.

Q: Pricing to maintain margins?

A: Price to maintain margins and will do our best; current environment with COVID echoes still affecting, moving towards normal state but depends on individual companies.