TechPrecision Corporation

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. It is now my pleasure to introduce your host, Mr. Brett Moss, Managing Director of Hayden IR. Thank you, sir. You may begin.

Thank you. On the call today is Alex Chen, 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. 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 of the SEC. In addition, projections as to the company's future performance represents management's estimates as of June 30th, Form 10Q filing period. Tech Precision 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 open remarks. Alex, the floor is yours.

Thank you, Brett. Good afternoon to everyone, and thank you for joining us. 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. In addition, as there is a pending proxy contest, we are under restrictions as to what we can speak about. 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. To be blunt, DATCO had a very poor fiscal year 2025 first quarter ending June 30, 2024, 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 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 during April 2024, we have been playing catch up in this area. However, Our efforts were 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 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 Volta acquisition. 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. At the same time, our Raynor subsidiary continued to perform well in fiscal year 2025 first quarter, as our newly joined CFO, Richard Ruhmberg, will speak to shortly. For the quarter, Raynor revenue of $4.4 million compared to revenue of $4.5 million a year ago. Fiscal year 2025 first quarter StatCo revenue was $3.6 million, or a 21% increase versus the same quarter a year ago. 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. Gross profit shrank due to higher production costs and underabsorbed overhead when compared to the same period a year ago, again, a direct result of the non-performing equipment at STADCO. Now I'd like to turn the call over to our CFO, Richard Ruhmberg. Welcome aboard. 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. 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. Projects executed in Q1 had overall relatively higher contract values as compared within the same period a year ago. Fiscal year 2025 first quarter consolidated cost of revenue was $7.7 million. were 16% higher than the prior year period due primarily to higher production costs and underabsorbed overhead. 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. Fiscal year 2025 first quarter SG&A expense increased by $0.3 million, primarily due to a change in fair value for the breakup fee in connection with the terminated VOTA acquisition during the quarter ended June 30, 2024, and was roughly flat, excluding the change in fair value when compared to the same quarter a year ago. Operating loss was $1.3 million, for the first quarter of fiscal year 2025 as higher STATCO operating losses and the VOTA acquisition breakup fee more than offset flat operating income at Raynor for the quarter ended June 30th, 2024. 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. There was $2.8 million of outstanding debt under the revolver loan as of June 30th, 2024, approximately the same as March 31st, 2024. Fiscal year 2025 first quarter net loss was $1.5 million. the company maintained a full valuation allowance of its deferred taxes. 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, 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. Our total debt was $7.5 million as of June 30, 2024, as compared to $7.6 million as of March 31, 2024. Cash balances as of June 30, was approximately $45,000 compared to approximately $138,000 as of March 31st, 2024. Working capital was negative as of June 30th, 2024 as our previously classified long-term debt is currently classified as current because of debt covenant violations. With that, I will now turn the call back to you, Alex.

Thank you, Richard. 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. 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. 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, 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. As Richard noted, our debt has been reclassified as current or due in less than one year. 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. The components that we manufacture are customer designed. We sell to customers in two main industry sectors, defense, and precision industrial markets. Tech Precision 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 STATCO subsidiary. We aim to secure and maintain enduring partnerships with our customers. 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 for 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.