TechPrecision Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
June 15, 2023

There are 8 speakers on the call.

Operator

Greetings. Welcome to the TechPrecision Corporation 4th Quarter Fiscal 2023 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.

Operator

I will now turn the conference over to your host, Brett Mas, Managing Partner of Hayden IR. You may begin.

Speaker 1

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, 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 represents management's estimates as of today, June 15, 2023. TechPrecision assumes no obligation to revise or update these forward looking statements.

Speaker 1

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.

Speaker 2

Brett, thank you. Good afternoon to everyone and thank you for joining us. The Q4 of fiscal 2023 was another strong quarter for our Ranor subsidiary. For fiscal year 2023, Ranar operating results improved across the board when compared to fiscal year 2022, with higher revenue and improved gross margins. Ranor's revenue for fiscal year 2023 was 19,200,000 up from $14,600,000 in fiscal year 2022.

Speaker 2

This is a 32% improvement year over year. Ranor's gross profit doubled in fiscal year 2023 to $7,000,000 From $3,500,000 in fiscal year 2022. The Statco subsidiary is a turnaround. Revenue was 58% higher year over year, primarily due to having a full year of STAADCO financial results. Production at STAADCO, however, was hampered by machine downtime, Specifically in the Q4, this negatively impacted revenue generation and resulted in increased Unabsorbed overhead.

Speaker 2

These equipment problems experienced during the Q4 are now resolved. Since the acquisition of the STAADCO subsidiary, there has been significant work on repair and rebuild We will continue to enhance Stadco's manufacturing capabilities and capacity. We continue our sharp focus on tactical execution and risk mitigation, Driving both subsidiaries to fully comprehend, to successfully manage and To successfully meet customer expectations, enabling continuous recapture and continuous retention of customer confidence. 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. As we successfully retain customer confidence, business prospects remain strong.

Speaker 2

Our backlog was $44,000,000 at March 31, 2023, dollars 17,700,000 at Ranor And $26,300,000 at Stadco. Since March, Ranor has secured an additional $6,000,000 In new orders. Now I'd like to turn the call over to our CFO, Tom Sammons, To continue our review of our Q4 and fiscal year 2023 results, to you, Tom.

Speaker 3

Thank you, Alex. Net sales for the Q4 of fiscal year 2023 were $7,500,000 or 1% lower when compared to the same quarter A year ago, cost of sales were $6,700,000 or 4% higher than the prior year period due primarily to Lower margin project mix of Ranor and increased unabsorbed overhead at Statco. Cost gross profit was $848,000 or 25 percent lower compared to the same quarter a year ago, primarily due to STATCO's production issues during the quarter The result in increased and unabsorbed overhead. SG and A expense increased by $174,000 primarily due to a severance accrual and one time miscellaneous charges such as recruitment fees and an account receivables reserve. Operating loss was $734,000 compared to an operating loss of $273,000 in the same quarter a year ago.

Speaker 3

Interest expense for the Q4 increased by $7,000 due to increased borrowings under our revolver loan. We ended the quarter with $650,000 outstanding on the revolver. For the 12 months ended March 31, 2023, Net sales were $31,400,000 compared to $22,300,000 in the same period a year ago, An increase of $9,100,000 the result of strong growth of Ranor and reporting a full 12 months of business activity at STATCOM. Our cost of sales in fiscal 2023 were $7,600,000 higher due primarily to the inclusion of the STATCO business for the full year compared to only 31 weeks in the same period a year ago. Gross profit increased by 1,500,000 We're 45% higher on a strong operating period of Ranor.

Speaker 3

A weak operating period of static or dampened consolidated gross margins year over year Certain production issues led to slower throughput. While Rayner's gross margin percentage increased from 24% To 36% in fiscal 2023, STACCO's performance resulted in only a slight increase In the consolidated gross margin percentage from 15.2% to 15.6%. SGA expenses in fiscal 2023 increased by $1,100,000 due primarily to the inclusion of STATCO for the full fiscal reporting As a result of the foregoing, we recorded an operating loss of $1,100,000 compared to an operating loss of $1,600,000 in the prior year. Interest expense was $356,000 for fiscal 2023 We're $86,000 higher than fiscal 2022. The increase was due primarily to a full year Of interest expense recorded on the Stadco term loan and increased borrowings under the revolver loan.

Speaker 3

Fiscal 2023 includes a one time $637,000 employee retention tax credit refund And fiscal 2022 included a gain of $1,300,000 for loan forgiveness under the Paycheck Protection Program. Our pre tax loss was $783,000 for fiscal 2023 compared with a pre tax loss $542,000 in fiscal 2022. We recorded a tax provision of $196,000 and reported a net loss of $1,000,000 for fiscal 2023. EBITDA for fiscal 2023 was $1,800,000 compared to $1,200,000 in the prior fiscal year. Moving on to our financial position, cash inflow from operating activities totaled $3,100,000 and we used $2,300,000 of cash for capital expenditures.

Speaker 3

Our total debt was $6,100,000 in March 31, 2023 compared to $7,400,000 At the end of March 31, 2022, as we paid down principal on our term loans and revolver loan. Cash balance at March 31, 2023 was $531,000 compared to $1,100,000 at March 2022. Working capital was $5,600,000 at March 31, 2023 compared to 2,800,000 in March 31, 2022. With that, I will now turn the call back over to Alex. Alex?

Speaker 2

Thank you, Tom. For those on the call today who may not be very familiar with our company, I'd like to do a quick review. TechPrecision is a custom manufacturer of precision large scale fabricated components And precision large scale machined metal structural components. These components that we manufacture are custom designed. We sell to customers in 2 main industry sectors, The Defense Sector and Precision Industrial, Predominantly Defense Sector.

Speaker 2

TechPrecision is proud and honored to serve the United States defense industry, specifically Naval Submarine Manufacturing through our Raynor Subsidiary and Military Aircraft Manufacturing Through our STABCO subsidiary, we aim to secure and maintain enduring partnerships With our customers. Overall, in both the Ranar and the STAADCO 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 for increasing profitability in future quarters. Finally, a reminder, 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 And these fields might discuss. As such, there are real limits as to what I can discuss, And sometimes those limits change. Please understand, my saying that I am not allowed to discuss that Operator, you can open the line for Q and A.

Operator

Thank you. At this time, we will be conducting a question and answer session. One moment please while we poll for questions. First question is from Chris Tuttle with Blue Caterpillar. Please proceed.

Speaker 4

Hi, thanks. I have a few questions. I just want to start

Speaker 5

with the STADCO situation. It sounds like The downtime came as a surprise. I'm curious to know more about the nature of The failure and your perspective on how it might have how it might you might have been alerted Earlier and then specifically like what kind of equipment are we talking about? Did it take time to repair Due to parts in availability or labor, just trying to get a little more color on, I want to understand it better in terms of the business.

Speaker 2

I'm going to be limited on what I'm going to be able to answer you. These the significant downtime certainly was not anticipated. Could we have avoided it? Probably not. It was more than one machine down.

Speaker 2

Several machines down, happening at the same time. So that's how I would characterize it and add the color there.

Speaker 3

Andy? I mean, we always have equipment going down from time

Speaker 2

to time. That's just the nature of the

Speaker 3

It's when multiple ones at the same time that you're not used to.

Speaker 5

Yes. I think we all understand It's curious, was it a part issue, a training issue? It's odd, right, to have those Multiple equipment pieces of equipment go down at the same time.

Speaker 2

It is a turnaround. It's not so odd for turnarounds. It's more modest if you have a smoothly running company that you can now predict more.

Speaker 5

So it was maybe deferred maintenance that maybe wasn't kept up on these machines or

Speaker 2

Definitely deferred maintenance would be One of the key factors that contributed.

Speaker 5

Okay. And then shifting gears To some of your recent accomplishments on the shareholder side with the reverse split and the uplifting accomplished, Those are great accomplishments. I'm curious to know what implications that has on your strategy These are the investment community, Investor Relations, what kind of shifts in activity you may have seen. So I'm just Trying to understand where do you think you go next now that you've accomplished you have done some of the heavy lifting now in terms of being more investor ready?

Speaker 2

I'm going to pawn this one off to Tom Salmons.

Speaker 3

I don't know that we've seen any Real shift from our perspective, but I think we need to reassess Or just take a look at how we've been interacting with shareholders and maybe make some changes there as we go forward.

Speaker 5

You guys have I mean, have you created like a budget for maybe do a little bit more on the outreach side of things, Attending a few more conferences, that sort of thing.

Speaker 3

I think that's what we have to look at.

Speaker 2

Now that

Speaker 3

we're kind of past getting The reverse split through and up onto the NASDAQ, yes.

Speaker 5

Okay. And my last question just for clarification is, so the STADCO Outages that you guys experienced, those are in the past and you guys are operating Those machines smoothly at this point?

Speaker 2

Let me just be really clear. So the equipment problems that I experienced in my Statco subsidiary during the Q4, those specific ones are now resolved. Does it mean that I've resolved them forever on those specific machines and nothing will ever go wrong? Like Tom alluded to, We always are repairing and maintaining our equipment. Can this happen again?

Speaker 2

Maybe.

Speaker 5

And how much time or money do you think you guys need to get the Stadco plant, Just using the term loosely like up to your level of satisfaction of being current on maintenance, Anything can go down, I get that. But like if you buy a used car, you're like, no one's done any work on this in the last few years. I need to take it in and really get it taken care of.

Speaker 2

It's not just one used car, right? It's many.

Speaker 5

Right. Right.

Speaker 2

So you have a fleet of all used cars and What's going to go down next, not really sure. Okay. But my track record, I think we're new to each other, right, Chris?

Speaker 5

Yes, we

Speaker 2

are. Okay. So I think my track record has been an unbroken series of wins on turnarounds. I'm not planning on having my turnaround of statco fail And be my first loss in my spanning several decades career of being a troubleshooter. So I'm not trying to convince you that I'm such a great operator, but I do Operate well and we have recaptured and retained key customer confidence, Which results in more orders and results in their support when we are experiencing these downtimes.

Speaker 2

I think that's the key is how to grow out of these things and how to make sure that we walk In step with our customers, so they can continue to believe that we will take the right steps in the right direction and not flinch from telling them the truth that we have downtime and we need some help And we need some patience, and we will resolve our downtime and our equipment problems. Those problems that we experienced during the Q4 are now resolved. The customers are happy enough To show us their confidence with new POs increasing our backlog. So I think the proof is really checking to see the other metrics, Not just we have downtime and we have a blip, a negative blip in our performance, Reduced revenue because of reduced throughput. However, the customers,

Speaker 5

I appreciate that, Alex. And my questions were in no way driven by any doubt about you and the Teams operating capability, they were just motivated by my desire to get a really good understanding of the business. That's all.

Speaker 2

No problem. All right, Ron.

Speaker 5

I'll let the next folks come in and ask some questions. Thank you very much.

Speaker 2

Thank you.

Operator

The next question is from Mark Gomes with Pipeline. Mark, please proceed.

Speaker 6

Hey, gentlemen. Thanks for taking the time. Alex, you mentioned you used the word capacity when you first mentioned At least these issues being put behind them so that you can continue the task of increasing productivity. And I think you used the word capacity. Was I correct in that?

Speaker 6

And if so, could you provide some color as to what that means? Would that mean you're going to add CapEx, Add more people, you're going to try to increase the amount of work that can be done at STAADCO Beyond this turnaround?

Speaker 2

Well, 1st, beyond the turnaround, it's not beyond the turnaround, it's part of the turnaround. So I would characterize it that way, right? And then the specifics that I was talking about, There has been and will continue to be significant work on repair And also significant work on rebuild of STATCO's equipment. Those are 2 different things. With that significant work focused on enhancing our capabilities of the machines as well as enhancing Capacity and throughput.

Speaker 2

I hope that's more clear.

Speaker 6

It is. Thank you. Do you anticipate that unanticipated CapEx Spending significant CapEx spending will be required to accomplish that goal over and above what you might have expected a few months ago?

Speaker 2

Well, certainly this 4th quarter blip with multiple downtime on multiple machines Was not anticipated. Will I run into it again? Maybe. Am I doing The right things to anticipate and see what I can avoid? Yes.

Speaker 6

I guess my question really was, Was this a setback in terms of your expectations of CapEx requirements going forward?

Speaker 2

I'm not sure I get it.

Speaker 6

Well, you have Plans for maybe adding equipment, obviously, there's always CapEx spending. And I'm just curious if your anticipated CapEx spending Forecast changed significantly as a result of what happened at STAADCO over the last few months? No. Okay. And then final question, we're 2 weeks before the end of this current quarter.

Speaker 6

You're exuding, I think, a good amount of confidence on this call. Would the operations that have occurred to this point in the quarter contributed To the conference you're exuding on this call.

Speaker 2

Apparently, you and Russ are in cahoots to try to get me to forecast.

Speaker 6

Well, it's not a forecast that 2.5 months have already occurred, but your point is taken. But the question stands.

Speaker 2

The question does tend. It shall all be revealed in time.

Speaker 6

Thanks, Alex.

Speaker 2

Thank you.

Operator

Okay. The next question is from Ross Taylor with ARS Investment Partners. Please proceed.

Speaker 7

Thank you. Alex, a couple of things, one of which I wanted to address. A number of calls ago, you indicated you felt that STADTO could achieve margins in line with those that you're seeing at Ranar. Now you've executed really well at Ranar. And in fact, if this company was only Ranar right now, it would probably be worth a lot more than it is The Stadco, although I do think Stadco adds tremendous value to the business.

Speaker 7

How long is it going to take you to get these margins At STADCO up towards the neighborhood of Ranor, you're currently less than half?

Speaker 2

That's a question that's the question, isn't it? I don't know how to answer the question because I don't know the answer. How long is it going to take?

Speaker 7

Do you still believe that it's achievable and let's say a Standard investment horizon, which is 12 to 24 months.

Speaker 2

Well, since this is a Couple of custom subsidiaries. I would venture to say that the counterpoint is that this is a non standard look 2 non standard companies. But I think also with the customer confidence at the level where it's at, We need to tactically execute and we need to just continue our focus, Divide and conquer, eat this elephant one bite at a time. I may be overreaching in the answer, but I think what I'm trying to say is A couple of calls ago, I expressed the belief that STATCO can reach, what did we just say, can reach Raynor like margins.

Speaker 7

Brain or Life Margins.

Speaker 2

I'm just paraphrasing, but that belief is there.

Speaker 7

And as I asked, is that a belief that's achievable inside? And one of the frustrations I think investors have,

Speaker 5

and there are a number

Speaker 7

of them here, is that you are We've basically been willing to make a trade where we get really inferior investor relations for what's supposed to be superior operating execution. The execution at Ranor fits that and justifies some level of confidence. Bluntly, what's going on at, STADCO does not. And As I said, I think Stadco is a value added acquisition. But at this stage, I do believe that it is not adding value for investors.

Speaker 7

So to get us back to where it will add value, we need in a timely fashion, not awaiting for a good We need to get these up, the margins up meaningfully. Is this the kind of thing you look at and say, I mean, I assume you have your internal models. Do your internal models have you getting to Raynor like margins in the next 2 years for STADCO?

Speaker 2

Are we forecasting, Tom, that in the next few years? No.

Speaker 7

It's not a forecast. It's honestly, it's asking the veracity of a prior comment you made. I wasn't the one who said you could get them to stat, oh, you did. So I'm asking now, That was months ago, quarters ago. I'm asking now, can you get them there in 24 months?

Speaker 2

You're asking now,

Speaker 7

can you get them there in 24 months? No, I'm asking can you get them there in 24 months? It's a different question.

Speaker 2

Right. I don't know.

Speaker 7

Okay. I would say, I think that you need to get them there. I think you need to telling us that you're an that you don't fail It is not what we need. We need you not to fail, which means we need to get these up and operating. We need to get the value out of this acquisition.

Speaker 7

I'd also say that you guys talked about Tom talked about the idea that you haven't done a lot different since you became A NASDAQ stock, I would say that's very true, and I think it's an area of great frustration with people I speak to. You really need To achieve a much more professional approach to how you handle your investors, which means you need to come up with ways whether it's Finding someone on the outside to cover the stock or whether it's finding ways to get public information out there. Every piece of information I've given on this call in the past has been publicly available. I understand you have customers who don't want you to talk about their specific niche, but now you have 2 businesses. So one way you can start to do is talk about the company as a whole and get away from talking about specific programs and therefore running afoul of Specific customers that you have, and I think that's really exceptionally important because We need to make people want to own TechPrecision.

Speaker 7

And the only way they're going to want to know if they own it is that you have to basically make it easy to understand and learn about. I also like to ask a question of you focused on the idea of just the government. Clear that Navy is well behind schedule in its submarine programs. The Air Force and the like As also behind schedule in the F-fifteen EX, which is interestingly getting more and more press as a superior air defense fighter and interceptor. But is there other plans or is there the ability to basically step out and fill some of that time lag with commercial projects or other projects at this time?

Speaker 2

So I think I believe that you're talking about the Navy's delay?

Speaker 7

The Navy, as I said, the GAO indicated that The Navy is operating and the submarine build program is particularly in Virginia is operating well behind schedule because of issues with the primes.

Speaker 2

I understand what you're saying. I'm also trying to point out, Ross, if I may, That because things are behind, there is pressure on the vendor base To put more hours in. The Perhaps the opposite might be true because there's a true need for acceleration. There's truly more work.

Speaker 7

Are you saying in Alex's that you are finding The primes that you deal with coming interested in pushing work on to Raynor.

Speaker 2

I think you're trying to further define my comment, but I'm just saying that where there Well, there's a Well, it's the production hours, The availability of production hours, if that availability is if the requirement X is 100 and it can only be filled up to half by somebody, then somebody else needs to step up and fill the other half. There's opportunity there for custom shops like us. And I think that's evidenced also by the number of POs and The dollar amount of the POs and the strong backlog, it's not dropping.

Speaker 7

And recognize we do not know how many POs you get or do. That's information that's not disclosed to us. So It would be impossible for us to know that you're getting more POs. But what I'm hearing you say is that you are finding opportunities with to pick up business that they either they cannot execute or their suppliers cannot execute at this time. Is that correct?

Speaker 2

There's opportunity.

Speaker 7

Are you seizing those opportunities and converting them into Revenue?

Speaker 2

I think the backlog shows that.

Speaker 7

Well, Raynor shows Very well. Yes, I think Raynor does show that you're operating very well. It shows the potential of what can work on the other side. As I said, I think that we're looking at a situation where it's important At this stage that you guys because you are now in NASDAQ stock that we got to get out there and you got to improve your relations, you got to help send the message so people Dan, who you are and what you're doing. I think that obviously, if we look at your business, is Rainer what level of Capacity do you think Ranor is operating at?

Speaker 7

Did you put another shift on and increased capacity? Would that be economic? And would that be is the opportunity there to do that?

Speaker 2

I'm in that zone of I'm not allowed to discuss that right now. Okay.

Speaker 7

So we'll continue to watch. Hopefully, what you're telling me is that you are in conversations about increasing capacity so that you can pick up business that other people can't execute. Away from the Production problems and machine problems in at STAADCO. Is part of the problem you're running into there a lot of kind of first build early that you're early in programs or Therefore, you would expect to have margins increase naturally as you run through them. I think everyone knows in the defense business that 1st builds are frequently the most difficult and the lowest margin.

Speaker 7

Is that part of what's happening then? Or is it all internal to Statco?

Speaker 2

Is it part of it? Sometimes it's part of it for our first article costs, yes. Is it significant? Not really. The significant blip in 4th quarter was really the equipment downtime was severe because we had multiple things all It was a perfect storm, unfortunately.

Speaker 7

Do you have a thought on how much revenue you lost in STADCO and An idea of if you had not had those unexpected downtimes, would you have been able to See significant improvements saved for 500 basis point operating margin improvements over what you generated?

Speaker 2

I think it's probably a good gauge, Tom, to say that we wouldn't have lost money That quarter overall, probably.

Speaker 3

By the way, so the question of revenue, I mean, I'd say

Speaker 2

It's not so much revenue. It's really it was so diminished. The throughput was so diminished. The unabsorbed part really took over. So really what we need is To really have that critical mass achieved and we drop below that for that quarter.

Speaker 3

Yes, I mean, you have a combination of These are two things where Q2, Q3, the revenue was up around 3.7. You get to Q4, it dropped to about 2.7.

Speaker 2

Yes. It's like $1,000,000 off.

Speaker 3

And you're not getting absorption.

Speaker 2

Yes. That's the 2 things that kind of kill us.

Speaker 7

And given the several years ago, a Stadco executive, I believe indicated that Stadco made generated $1,500,000 revenue per CH-fifty three ks. I believe I read that somewhere. I'm not going to ask you to comment on that. But given that, that program is beginning to ramp and the expectation is Sikorsky's expectation appears to be that they should sell Somewhere 200 or so to the Marines, 25 plus to the Israelis and 75 or more to foreign governments. Shouldn't we be at that stage where that number starts to really move meaningfully higher just because of that program?

Speaker 7

Shouldn't revenues in It's Jack. I will start to reflect the progress that Sikorsky is seeing in the CH-fifty 3 ks.

Speaker 2

I wish it would. Should it? Well, I think there's a lot of factors that aren't in my control at STATCO. That are customer related.

Speaker 3

Yes.

Speaker 2

So I can't really comment on that.

Speaker 3

The demand is there.

Speaker 2

The demand is obviously there. The PO quantities are obviously there. The funding for the POs to Statco are all there. That's why the backlog is firm. These are firm orders.

Speaker 2

And then it's a question of timing. So I just don't know how to answer it all. And I hesitate to talk about what Sikorsky is doing.

Speaker 7

I mean, Sikorsky tells us what they're doing and the Navy Tells us what they have a build rate program on. So and these aren't great mysteries. This is publicly available information. I understand that you have some trouble at times Talking about it, but this is part of what I think we need to address in a more effective shareholder relations effort is the ability to Get people and point people to the publicly available information so they can make educated informed decisions on what's happening inside this company. So Okay.

Speaker 7

I've taken a lot of time. Not even my family likes to hear me talk this long. So I'll pass it back to whoever else wants to follow-up.

Speaker 3

Thank you, Ross.

Operator

The next question is from Richard Grilich with REG Capital Advisors. Please proceed, Richard.

Speaker 4

Thank you for taking my question. And first of all, Tom, thank you for the efforts you've put forward over the last several years and And dealing with it and good luck in the future.

Speaker 3

Thank you, Richard. I appreciate that.

Speaker 4

Let me several different questions. I always enjoy Ross talking because he brings up interesting points and it allows me to have time to Make more even more questions then. Rancor, The gross margin was 30%. Can you see a way for margin improvement from here?

Speaker 3

You're talking about the quarterly gross margin?

Speaker 7

Yes.

Speaker 3

Can we see improvement? We have done better than that in prior quarters. It will go up and down depending upon the mix of product we have Is one of the major factors.

Speaker 2

The business is lumpy.

Speaker 4

Understood. But as your business grows over the next few years, I guess my question is, can it get up to 35% on an annualized 12 month basis, do you think? Is that out of the question?

Speaker 2

Given the lumpiness of the business and the fits and starts between us and our customers, it's probably hard to draw that. It could be done sometimes. It could it depends, I think is the best answer. Do we aim for that? Certainly.

Speaker 3

Well, Raynor was 36% on average for this fiscal year for 2023. Right. It's definitely doable.

Speaker 7

Sure.

Speaker 4

Okay. So, So we think

Speaker 3

there's more We think

Speaker 7

there's more We think there's more

Speaker 2

at 36% for this whole year. Right. On average. Right. One quarter

Speaker 3

One quarter One quarter

Speaker 2

bumps up and down. Right. You got to average it out. That's what I was I guess I was trying to say that.

Speaker 4

So if there's increased interest perhaps on either the prime part Segmenting business from them or perhaps assigning business to you from other subs.

Speaker 2

You're going in that zone where I told Ross that I'm in that zone where I can't talk about it. I'm sorry.

Speaker 4

Okay. That's okay. But I guess the thrust of my question, that's not evident in the backlog numbers at the end of the quarter. In other words, like the backlog was basically flat quarter to quarter. And so it doesn't

Speaker 2

I understand What I was trying to say to Ross is, I believe Ross was saying publicly available information indicates that the Navy is behind, right? And the evidence of our backlog is not dropping. Our backlog is not dropping. It is not behind. We're maintaining And parts gaining, that's what I was trying to contrast and say, look, there are There's opportunities here.

Speaker 3

Yes. But I'm going to get back Lucas. It does go up and down.

Speaker 2

It does go up and down, not significantly down to the point where it matches up with the publicly information that the Navy is years behind.

Speaker 3

But You mentioned that we brought in $6,000,000 of POs so far in this quarter.

Speaker 2

Correct.

Speaker 3

Which would exceed our revenue, which Tends to put us back up a little bit.

Speaker 2

That's right.

Speaker 3

It just it goes. Yes. It's not fluid. It's not a smooth.

Speaker 2

It's not a one to one relationship with the delays on the Navy side versus us lack of capture Sure of new POs and new opportunities on TechPrecision side.

Speaker 4

So let me point it in a slightly different direction So are you seeing more opportunities, let's say, for business to capture than you saw 12 months ago because of that. It's a qualitative kind of comment.

Speaker 2

Holistically, I'm certainly not seeing less opportunity. Okay. Yes. That's what I was trying to characterize To Ross' earlier question also. There's no diminishing opportunity.

Speaker 4

Thank you. Yes. So let me turn to then STATCO. So you said the STATCO problems that occurred in the quarter, those have been solved. And who of course, it could be others.

Speaker 4

But in solving them during the quarter, will there still be in the current quarter some impact from the problems Impacting.

Speaker 2

Those problems that occurred last quarter are now resolved.

Speaker 4

But will there be any lingering impact into this no, were they resolved during the current quarter or during last quarter.

Speaker 2

I carefully didn't talk about that because we're not done with this. So, I can't really try to not forecast, not tell people and get their expectations. Setting expectations, that's not what I do. Forecasting is definitely not what I do. What I do is I find a problem, I fix a problem one at a time and I get these things done.

Speaker 2

I can tell you that those problems are not resolved.

Speaker 4

Okay. So let's look at SG and A expenses. Now prior to the Statco They were running around, I think, dollars 600,000, dollars 700,000 a quarter. Now they're $1,000,000 higher. So is that $1,000,000 SG and A increase at STATCO itself?

Speaker 3

Well, when we said there are $1,000,000 over, I mean, we had what 6 months, 7 months of STATCO last year. So, Part of the increase is the increased number of months with STATCO. Full year. Full year. And then Also, we had a lot of one time expense, especially earlier in the year With the acquisition, with going through the audit last year, with going through everything else that we had gone through, there were certain One time expenses that we had kind of talked about before that impacted this.

Speaker 4

But what I'm looking at go ahead.

Speaker 2

One second, Rich. So Tom, I think what we're talking about here Is that the SGA expenses in fiscal 2023 increased by $1,100,000 compared to prior year.

Speaker 3

Yes.

Speaker 2

And this is due primarily because we included Stadco for the full 12 months.

Speaker 3

Yes.

Speaker 2

And the previous year did not include The full 12 months.

Speaker 3

Right. And we've had

Speaker 2

That's the primary driver.

Speaker 3

That is the main driver.

Speaker 4

But I'm looking at on a quarterly basis. On a quarterly basis before the acquisition of SCATCO, SG and A, I think was running like $600,000 $700,000 a year and now like this last quarter is running at $1,600,000

Speaker 3

Yes, we were about, I think prior to the acquisition about 750,000. So we were $2,800,000 to $3,000,000 a year?

Speaker 2

Right. We have $3,000,000 a year.

Speaker 3

Yes. I think We had times where we get a little bit below that.

Speaker 4

I guess I'm surprised that STADCO's SG and A is probably more than RainHorse is.

Speaker 2

Well, there were one time expenses.

Speaker 4

But even right now is what I'm saying.

Speaker 3

Our quarter this year was well, I think we've just had a lot we've had a lot of additional expense over the last 2 years that 1, especially since the acquisition, related to legal accounting, Even getting up, I mean, there's additional cost to get on to NASDAQ, additional cost to do reverse split. So there's been just a lot of activity that's It caused additional cost to it for the outside contractors or outside service providers. That should start whittling away at this point.

Speaker 2

I think we need to answer the intent of Rich's Question is, is Statco SG and A costing us more than expected versus Ranor?

Speaker 3

Your

Speaker 2

answer is not really. We had all these different expenses that added up So makes it look like that, but a lot of it was not related to STADCO products.

Speaker 3

It's not STADCO's SG and A.

Speaker 4

Yes. It's acquisition related. Yes. That was really Yes. Towards the corporate level.

Speaker 2

Okay.

Speaker 4

The prior question Regarding Precision Industrial, are there opportunities there? Are you seeking them? Are you utilizing them?

Speaker 2

We're certainly open to opportunities. We're not saying

Speaker 4

Are there some that For you to go after at this point?

Speaker 2

Well, certainly. That's what I mean. I'm not saying no to them. I'm open to those opportunities. Okay.

Speaker 2

If I'm open to them, that means I'm actively pursuing, yes.

Speaker 7

Okay.

Speaker 2

That's what open means.

Speaker 4

I know this is it seems like A difficult quarter to announce, but actually, I'm not rose tinted glasses on this, but I'm actually more positive because Your comments of more opportunities that seem to be coming available as a sub with the primes. So appreciate your comments there.

Speaker 2

Yes. Our job is to tell the truth and get the facts in front of us on these earnings calls and in our press releases. And we can't flinch from telling all of us, including myself and Tom, who are also shareholders, That we had a bad quarter. We need to get that out there. But also we need to get the point out there that The customer confidence is very high to the point where the backlog is not diminishing and we continue to secure new orders and new POs That are fully funded.

Speaker 2

It's very important to contrast that.

Speaker 4

Thank you very much. Appreciate it.

Speaker 2

Thank you. Thank you.

Speaker 3

Thank you, Richard.

Operator

Okay. We have a follow-up question coming from Chris Tuttle with Blue Caterpillar. Please proceed, Chris.

Speaker 5

Yes. Staying on that kind of that opportunity line of questioning, given the relationships that you have with your customers, It seems like it would put you in a really good position to understand some needs they have that are not being met or that Would give you the opportunity to make some adjacent acquisitions In the custom manufacturing space where they appreciate you and what you're doing with them and maybe There are adjacencies that could provide small opportunities for you to make some small acquisitions that are Very close to the kind of work that you're already doing. Could you comment on that?

Speaker 2

No. I'm in that zone, Chris, that I'm not allowed to discuss that. I'm serious about needing to buy To that requirement, I'm sorry.

Speaker 5

No, I'm just saying, is that something that you guys are open to as an idea or You really feel like you need to go through another few quarters of integration before you can contemplate that?

Speaker 2

I think we are always open to good ideas. Absolutely. Tom and I and the whole entire Board, we're all open to good ideas. Absolutely. Okay.

Speaker 5

All right. I'll leave it at that. We'll talk more later.

Speaker 2

Thank you.

Speaker 3

Thank you, sir.

Operator

Okay. We have no further questions. We have reached the end of the question and answer session. This concludes today's conference, and you may disconnect your lines at this time. Thank you.

Speaker 2

Thank you, everyone. Have a great

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Earnings Conference Call
TechPrecision Q4 2023
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