TechPrecision Corporation (PNK:TPCS) Q3 2024 Earnings Call Transcript
TechPrecision Corporation (PNK:TPCS) Q3 2024 Earnings Call Transcript February 29, 2024
TechPrecision Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings. Welcome to the TechPrecision Corporation Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer will follow the formal presentation. Operator Instructions] 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: Thank you. On the call today is Alex Shen, Chief Executive Officer; and Bobbie Lilley, 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 represents management's estimates as of today, February 29, 2024.
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, the floor is yours.
Alex Shen: Thank you, Brett. Good afternoon to everyone, and thank you for joining us. I'm happy to report that customer confidence remains high as our consolidated backlog further strengthened to $50.8 million at December 31, 2023 from $44.6 million at September 30, 2023. We have since captured new bookings over $6 million in January and February of 2024. For Ranor, backlog-increased content features both new penetration as well as recapture of significant sole-source content in the defense sector, namely the Virginia class and the Columbia class submarine programs. For Stadco, backlog-increased content features significant recapture of military aerospace sole-source content combined with new penetration into military space launch and aerospace-related tooling.
For the third quarter, consolidated net sales were $7.7 million or 8% lower when compared to $8.3 million for the same period 1 year ago. For the nine months of fiscal 2024, consolidated net sales were $23 million or 4% lower when compared to $23.9 million for the same period a year ago. For the third quarter of fiscal 2024, consolidated gross profit was $1.2 million, operating loss was $1 million, and SG&A expense increased by $1 million, primarily due to outside advisory costs in connection with a potential acquisition. For the third quarter of fiscal 2024, Stadco gross profit was essentially breakeven at negative 3% of net sales, a loss of $216,000, in a quarter with a lower number of labor hours available during the November and December holiday calendar.
Ranor gross profit was $1.4 million for the third quarter of fiscal 2024. We do expect to deliver our strong backlog over the course of the next one to three fiscal years with both revenue growth and better gross margin. The Stadco turnaround continues. I would like to share one specific success story, which revolves around our customers' requirements for Electron Beam Welding technology. Stadco operates one of the largest electron beam vacuum welding chambers in the United States. We have methodically, overhauled and upgraded. Key components of our Stadco chamber with good results, improving on-time delivery from 25% at start of acquisition to 100% on time today. We have improved throughput 800%. In other words, we can put out eight times as much work today, compared to August 2021 at the close of the Stadco acquisition.
As a result, we have been able to recapture customer confidence and secured -- and have secured new purchase orders which feed this specific work center as well as other machining supports to work centers. We continue to focus on tactical execution and risk mitigation, driving both subsidiaries to fully and successfully meet customer expectations, enabling continuous recapture and continuous retention of customer confidence., We all clearly see the positive results of this focus, evidenced by the continued high customer confidence which has enabled us to grow an already strong backlog. 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 will now turn over the call to our CFO, Bobby Lilley, to continue with the review of our quarter results. Bobby?
Bobby Lilley: Thank you, Alex. Net sales for the third quarter of fiscal year 2024 were $7.7 million or 8% lower, when compared to the same quarter a year ago. Direct labor hours charged to projects were lower at both segments. Consolidated cost of sales, were $6.5 million or 5% lower than the prior year period, due primarily to the lower revenue recognized during the third quarter. Consolidated gross profit was $1.2 million or 23% lower, compared to the same quarter a year ago. SG&A expense increased by $1 million, primarily due to outside advisory costs in connection with a potential acquisition. Operating loss was $1 million for the third quarter of fiscal 2024. Interest expense increased due to more borrowing under our revolver loan and higher interest rates.
There was $2.6 million of outstanding debt under the revolver loan at December 31 2023. Net loss for the third quarter was $865,000, compared to net income of $134,000 a year ago. For the nine months of fiscal year 2024 net sales were $23 million or 4% lower, when compared to the same period a year ago with $13 million for Ranor and $10 million for Stadco. Cost of sales were $20.1 million or 1% higher than the prior year period, due primarily to a decline in absorption rates as a result of -- as a lower number of labor hours were utilized during the period. Gross profit was $2.9 million or 29% lower, due primarily to the decrease in net sales. SG&A expense increased by $636,000 or 14%, primarily due to an increase in outside advisory costs in connection with a potential acquisition.
Operating loss was $2.2 million due to lower net sales and increased SG&A expense. Interest expense increased by $76,000 due to more borrowing under our revolver loan and higher interest rates. Net loss for the nine months of fiscal 2024 was $1.9 million compared to a net income of $24,000 a year ago. The prior year period included a one-time gain of $624,000 from the ERC tax credit refund. Moving on to our financial position for the nine months ended December 31, 2023. Cash provided by operating activities was $1.2 million. Cash used for the capital expenditures was $2.8 million. Financing activities provided net cash of $1.4 million, primarily from the borrowings under the revolver loan. Our total debt was $7.6 million on December 31, 2023 compared to $6.1 million at the end of March 31, 2023 as we borrowed an additional $1.9 million under the revolver loan in fiscal 2024.
Cash balance at December 31, 2023 was $0.4 million compared to $0.5 million at March 31, 2023. Working capital was negative at December 31, 2023 as we reclassified all of our long-term debt to current because of certain debt covenant violations. With that I will now turn the call back over to Alex.
Alex Shen: Bobby, thank you. For those on the call today who may not be very familiar with our company, TechPrecision is a custom manufacturer of precision large-scale fabricated and welded components and precision large-scale machined metal structural 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 my saying 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 am saying is not accurate. That it is the board silencing me or that I alone am making these decisions. As I have said repeatedly over and over again, we are not the ones making these rules, not me, 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. As a final point, I do not see these clients changing these restrictions any time 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 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 the defense sector as evidenced by the strength and continuing growth of our backlog. We are encouraged by these prospects for growing our revenue and increasing profitability in future quarters.
Operator, we can open the line for questions.
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