Q1 2025 TechPrecision Corp Earnings Call
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Speaker Change: Greetings, and welcome to the Tech Precision First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode.
As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Mr. Brett Moss, Managing Director of Hayden IR. Thank you, sir. You may begin.
Speaker Change: Thank you. On the call today is Alex Shen, Chief Executive Officer, and Richard Romberg, 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.
Speaker Change: 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 requirements of the SEC.
Speaker Change: In addition, projections as to the company's future performance represents management's estimates as of June 30th, Form 10-Q filing period.
Speaker Change: That position 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.
Alex Shen: Because the fiscal year 2025 second quarter financials have not been released, we continue to be in a quiet period wherein we are limited in our ability to speak about the company's finances.
Alex Shen: In addition, as there is a pending proxy contest, we are under restrictions as to what we can speak about.
Alex Shen: As such, we will not be taking questions at the end of this earnings call. Once the annual meeting has been held, we expect to return to our usual earnings call format.
Alex Shen: To be blunt, DATCO had a very poor fiscal year 2025, first quarter ending June 30, 2024.
Alex Shen: Resulting in large part from the terminated VOTA precision manufacturing acquisition incurring an operating loss of $1.3 million, primarily due to serious equipment problems.
This was a direct result.
Alex Shen: of our reducing maintenance and CapEx at STATCO to bare minimums starting during August 2023 in anticipation of the acquisition of VOTA as we had planned on immediately integrating STATCO into the VOTA facility.
since the termination of that acquisition.
Alex Shen: During April 2024, we have been playing catch-up in this area.
However, our efforts...
Alex Shen: too late to prevent the equipment failures that resulted in dramatic increases to STATCO's costs of production during this period, in some cases nearly doubling the cost of production.
further affecting our loss.
Alex Shen: was an accounting measure as we recognized an additional one-time non-cash $400,000 charge in fair market valuation of tech precision shares issued and recognized during April 2024 as the breakup fee from the termination of the VOTA acquisition.
Alex Shen: there were no additional shares issued. That change in fair value fell directly to our bottom line for the first quarter of fiscal year 2025.
Alex Shen: At the same time, our Rainor subsidiary continued to perform well in fiscal year 2025 first quarter, as our newly joined CFO, Richard Rundberg, will speak to shortly.
Alex Shen: For the quarter, Renoir revenue of $4.4 million compared to revenue of $4.5 million a year ago.
Speaker Change: Fiscal year 2025 first quarter STATCO revenue was $3.6 million, or a 21% increase versus the same quarter a year ago.
Speaker Change: For fiscal year 2025 first quarter, consolidated revenue was $8 million or 8% higher when compared to revenue of $7.4 million for the same period a year ago.
Speaker Change: Gross profit shrank due to higher production costs and under-absorbed overhead when compared to the same period a year ago, again, a direct result of the non-performing equipment at STADCO.
Speaker Change: Now, I'd like to turn the call over to our CFO, Richard Rundberg. Welcome aboard.
Richard Rundberg: Richard, please continue with the review of our first quarter results. Thank you, Alex. Great to be here, and hello to everyone on the call.
Richard Rundberg: Reiterating what Alex stated, consolidated revenue for the fiscal year 2025 first quarter was $8 million or 8% higher when compared to $7.4 million in the same quarter a year ago.
Richard Rundberg: Projects executed in Q1 had overall relatively higher contract values as compared within the same period a year ago.
Richard Rundberg: Fiscal year 2025 first quarter consolidated cost of revenue was $7.7 million or 16% higher than the prior year period to primarily the higher production costs and under-absorbed overhead.
Richard Rundberg: As a result, fiscal year 2025 first quarter consolidated gross profit was 0.2 million or 66% lower compared to the same quarter a year ago as costs of revenue grew faster than revenue.
Richard Rundberg: Fiscal year 2025 first quarter SG&A expense increased by $0.3 million.
Richard Rundberg: Primarily due to a change in fair value for the breakup fee in connection with the terminated votes acquisition during the quarter ended June 30, 2024.
Richard Rundberg: and was roughly flat, excluding the change in fair value when compared to the same quarter a year ago.
Richard Rundberg: Operating loss was $1.3 million for the first quarter of fiscal year 2025, as higher stat to operating losses.
Richard Rundberg: and the VOTA acquisition break-up fee more than offset flat operating income at Raynor for the quarter ended June 30, 2024.
Richard Rundberg: Fiscal year 2025 first quarter interest expense increased by approximately $40,000 due to higher borrowing levels and higher interest rates under our revolver loan.
Richard Rundberg: There was $2.8 million of outstanding debt under the revolver loan as of June 30, 2024, approximately the same as March 31, 2024.
Richard Rundberg: Fiscal year 2025 first quarter net loss was $1.5 million. The company maintained a full valuation allowance of its deferred taxes.
Richard Rundberg: In summary, fiscal year 2025 first quarter results were primarily driven by the STADCO operating losses and the additional fee for the VOTA acquisition.
Moving on to our financial position.
Richard Rundberg: Cash provided by operating activities was $0.1 million, and cash used by financing activities was $0.2 million, and the company continued to pay down principal on its long-term debt.
Richard Rundberg: Our total debt was $7.5 million as of June 30, 2024, as compared to $7.6 million as of March 31, 2024.
Richard Rundberg: Cash balances as of June 30, 2024 was approximately $45,000 compared to approximately $138,000 as of March 31, 2024.
Richard Rundberg: Working capital was negative as of June 30, 2024, as our previously classified long-term debt is currently classified as current because of debt covenant violations.
Speaker Change: With that, I will now turn the call back to you, Alex.
Thank you, Richard.
Alex Shen: Customer confidence remains high as our consolidated backlog was $41.2 million as of June 30, 2024. We expect to deliver our strong backlog over the course of the next one to three fiscal years with gross margin expansion.
Alex Shen: 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.
Alex Shen: We can all clearly see the positive results of this focus, evidenced by the continued high customer confidence, which enables us to maintain a strong backlog.
We remain highly focused on cash management.
Alex Shen: a critical piece of risk mitigation, and continue to manage and control expenses, capital expenditures, customer advances, progress billings, and final invoicing at shipment. We have maintained two sequential quarters of positive operating cash flow.
Speaker Change: As Richard noted, our debt has been reclassified as current or due in less than one year.
Speaker Change: For those on the call who may not be very familiar with our company, Tech Precision is a custom manufacturer of precision large-scale fabricated components and precision large-scale machined metal structural components.
Speaker Change: The components that we manufacture are customer-designed. We sell to customers in two main industry sectors, defense and precision industrial markets.
Speaker Change: Tech Precision is proud and honored to serve the United States defense industry.
Speaker Change: Specifically, naval submarine manufacturing through our Raynor subsidiary and military aircraft manufacturing through our STATCO subsidiary. We aim to secure and maintain enduring partnerships with our customers.
Speaker Change: Overall, in both the Raynor 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.
Speaker Change: We're growing our revenue and increasing profitability in future quarters. Thank you, and have a good day. Thank you. This does conclude today's conference. You may disconnect, and thank you for your participation.