TPCS - TechPrecision Corporation Reports Second Quarter 2024 Financial Results

November, 20 2023 04:05 PM Techprecision Corp

Backlog at $45 million, Customer confidence remains high

WESTMINISTER, MA / ACCESSWIRE / November 20, 2023 / TechPrecision Corporation (NASDAQ:TPCS) ("TechPrecision" or "the Company"), an industry-leading manufacturer of precision, large-scale fabricated and machined metal components and tested systems with customers in the defense and precision industrial sectors, today reported financial results for the second quarter of fiscal year 2024.

"Customer confidence remains high, driving a strong backlog of $44.6 million as of September 30, 2023," stated Alexander Shen, TechPrecision's Chief Executive Officer. "Second quarter consolidated net sales were $8.0 million when compared to $8.5 million in the fiscal 2023 second quarter, or 6% lower"

"Ranor reported net sales of $4.5 million or a 9% decrease from the second quarter of fiscal 2023. Our Stadco subsidiary reported net sales of $3.6 million or 1% higher than the same period a year ago. Stadco gross profit improved, reporting a loss of $9,000 in the second quarter of fiscal 2024. On a consolidated basis, we had a net loss of $528,000."

"Second quarter net sales for Stadco were flat when compared with the same period a year ago," Mr. Shen continued. "Our losses have narrowed year over year. We expect to deliver our backlog over the course of the next one to three fiscal years with revenue growth and gross margin expansion."With revenue growth, we expect improvement in gross profit and gross margin in future periods.

The following summary compares the three and six months ended September 30, 2023 to the same prior year period:

Consolidated Financial Results - Fiscal 2024 Three Months Ended September 30, 2023

Net sales were $8.0 million, a decrease of 6% when compared to the same period in fiscal 2023. Net sales decreased at Ranor by 9% and at Stadco after intersegment elimination by 3%, respectively, on a different proportionate project mix.
Cost of sales were $6.9 million, or 2% higher, due primarily to higher manufacturing costs at Ranor, from a less favorable project mix. The Ranor increase was offset in part by lower cost of sales and better throughput at Stadco.
Gross profit was $1.0 million, or 41% lower when compared to the same period last year. Gross profit decreased at Ranor on a less favorable project mix. Losses at Stadco narrowed year over year on improved overall margins on projects, partially offset by increased underabsorbed factory overhead.
SG&A was $1.6 million, a decrease of 11%, primarily due to cost reductions at Stadco.
Operating loss was $0.6 million compared to $0.1 million in the same period a year ago.
Net loss was $0.06 per share.

Consolidated Financial Results - Fiscal 2024 Six Months Ended September 30, 2023

Net sales were $15.3 million, a decrease of 2% when compared to the same period in fiscal 2023. Net sales at Stadco after intersegment elimination increased by 7% on a more favorable project mix and net sales at Ranor decreased by 7% year over year on a less favorable project mix.
Cost of sales were $13.6 million, or 4% higher, due primarily to higher manufacturing costs at Ranor, from a less favorable project mix, offset in part by better throughput and lower cost of sales at Stadco.
Gross profit was $1.7 million, or 32% lower when compared to the same period last year. Gross profit decreased at Ranor on a less favorable project mix. Losses at Stadco narrowed on improved project margins.
SG&A was $2.9 million, a decrease of 9% compared to the same period last year, due to cost reductions at Stadco.
Operating loss was $1.2 million compared to $0.6 million in the same period a year ago.
Net loss was $0.12 per share.

Financial Position

On September 30, 2023, TechPrecision had $0.1 million in cash and cash equivalents, a decrease since March 31, 2023. Working capital was negative at September 30, 2023 as the Company reclassified all of its long-term debt to current because of a debt covenant violation. Working capital was $5.6 million at March 31, 2023 as the Company borrowed more under its revolving line of credit. Total debt at September 30, 2023 and March 31, 2023 was $7.1 million and $6.1 million, respectively.

About TechPrecision Corporation

TechPrecision Corporation, through its wholly owned subsidiaries, Ranor, Inc. and Stadco, manufactures large-scale, metal fabricated and machined precision components and equipment. These products are used in a variety of markets including: defense, aerospace, nuclear, medical, and precision industrial. TechPrecision's goal is to be an end-to-end service provider to its customers by furnishing customized solutions for completed products requiring custom fabrication and machining, assembly, inspection and testing. To learn more about the Company, please visit the corporate website at http://www.techprecision.com. Information on the Company's website or any other website does not constitute a part of this press release.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. All statements other than statements of current or historical fact contained in this press release, including statements that express our intentions, plans, objectives, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "prospects," "will," "should," "would" and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from: our reliance on individual purchase orders, rather than long-term contracts, to generate revenue; our ability to balance the composition of our revenues and effectively control operating expenses; external factors that may be outside our control, including health emergencies, like epidemics or pandemics, the conflicts in Eastern Europe and the Middle East, price inflation, interest rate increases and supply chain inefficiencies; the availability of appropriate financing facilities impacting our operations, financial condition and/or liquidity; our ability to receive contract awards through competitive bidding processes; our ability to maintain standards to enable us to manufacture products to exacting specifications; our ability to enter new markets for our services; our reliance on a small number of customers for a significant percentage of our business; competitive pressures in the markets we serve; changes in the availability or cost of raw materials and energy for our production facilities; restrictions in our ability to operate our business due to our outstanding indebtedness; government regulations and requirements; pricing and business development difficulties; changes in government spending on national defense; our ability to make acquisitions and successfully integrate those acquisitions with our business; our failure to maintain effective internal controls over financial reporting; general industry and market conditions and growth rates; and other risks discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (www.sec.gov). Any forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release, except as required by applicable law. Investors should evaluate any statements made by us in light of these important factors.

-- Tables Follow -

TECHPRECISION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)



September 30,


March 31,



2023


2023

ASSETS






Current assets:






Cash and cash equivalents

$
138,206


$
534,474

Accounts receivable, net


3,020,723



2,336,481

Contract assets


8,096,608



8,947,811

Raw materials


1,925,085



1,692,852

Work-in-process


866,848



719,736

Other current assets


466,245



348,983

Total current assets


14,513,715



14,580,337

Property, plant and equipment, net


15,764,677



13,914,024

Right-of-use asset, net


5,322,118



5,660,938

Deferred income taxes


2,254,314



1,931,186

Other noncurrent assets, net


121,256



121,256

Total assets

$
37,976,080


$
36,207,741

LIABILITIES AND STOCKHOLDERS' EQUITY:








Current liabilities:








Accounts payable

$
1,607,001


$
2,224,320

Accrued expenses


2,785,839



2,533,185

Contract liabilities


3,180,681



2,333,591

Current portion of long-term lease liability


721,623



711,727

Current portion of long-term debt, net


6,958,395



1,218,162

Total current liabilities


15,253,539



9,020,985

Long-term debt, net


--



4,749,139

Long-term lease liability


4,780,155



5,143,974

Other noncurrent liability


4,428,812



2,699,492

Total liabilities


24,462,506



21,613,590

Stockholders' Equity:








Common stock - par value $.0001 per share, shares authorized: 50,000,000; Shares issued and outstanding: 8,737,432 at September 30, 2023 and 8,613,408 at March 31, 2023


874



861

Additional paid in capital


14,924,927



14,949,729

Accumulated deficit


(1,412,227
)


(356,439
)
Total stockholders' equity


13,513,574



14,594,151

Total liabilities and stockholders' equity

$
37,976,080


$
36,207,741

TECHPRECISION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)



Three Months Ended September 30,


Six Months Ended September 30,



2023


2022


2023


2022

Net sales

$
7,970,086


$
8,522,647


$
15,341,326


$
15,599,004

Cost of sales


6,935,271



6,782,975



13,612,362



13,042,114

Gross profit


1,034,815



1,739,672



1,728,964



2,556,890

Selling, general and administrative


1,632,168



1,827,095



2,906,117



3,202,322

Loss from operations


(597,353
)


(87,423
)


(1,177,153
)


(645,432
)
Other income


40,875



73,561



40,876



40,336

Interest expense


(148,553
)


(83,730
)


(242,639
)


(167,375
)
Refundable employee retention tax credits


--



624,045



--



624,045

Total other (expense) income


(107,678
)


613,876



(201,763
)


497,006

(Loss) income before income taxes


(705,031
)


526,453



(1,378,916
)


(148,426
)
Income tax (benefit) expense


(176,698
)


135,509



(323,128
)


(38,205
)
Net (loss) income

$
(528,333
)

$
390,944


$
(1,055,788
)

$
(110,221
)
Net (loss) earnings per share basic

$
(0.06
)

$
0.05


$
(0.12
)

$
(0.01
)
Net (loss) earnings per share diluted

$
(0.06
)

$
0.04


$
(0.12
)

$
(0.01
)
Weighted average shares outstanding - basic


8,720,603



8,584,510



8,667,298



8,580,707

Weighted average shares outstanding - diluted


8,720,603



8,998,195



8,667,298



8,580,707

TECHPRECISION CORPORATION
NET SALES, COST OF SALES, GROSS PROFIT BY SEGMENT (UNAUDITED)



September 30, 2023


September 30, 2022

Changes

(dollars in thousands)

Amount

Percent of Net sales


Amount

Percent of Net sales

Amount


Percent

Net sales















Ranor

$
4,495


55
%

$
4,934


58
%
$
(439
)


(9
)%
Stadco


3,606


45
%


3,589


42
%

17



1
%
Intersegment elimination


(131
)

--
%


--


--
%

(131
)

nm
%
Consolidated Net sales

$
7,970


100
%

$
8,523


100
%
$
(553
)


(6
)%
Cost of sales





















Ranor

$
3,320


42
%

$
2,907


34
%
$
413



14
%
Stadco


3,615


45
%


3,876


46
%

(261
)


(7
)%
Consolidated Cost of sales

$
6,935


87
%

$
6,783


80
%
$
152



2
%
Gross profit (loss)





















Ranor

$
1,044


13
%

$
2,027


23
%
$
(983
)


(48
)%
Stadco


(9
)

--
%


(287
)

(3
)%

278



97
%
Consolidated Gross profit

$
1,035


13
%

$
1,740


20
%
$
(705
)


(41
)%



September 30, 2023

September 30, 2022

Changes

(dollars in thousands)

Amount

Percent of Net sales

Amount

Percent of Net sales

Amount

Percent

Net sales













Ranor

$
8,995


59
%
$
9,660


62
%
$
(665
)

(7
)%
Stadco


6,573


43
%

5,939


38
%

634


11
%
Intersegment elimination


(227
)

(2
)%

--


%

(227
)
nm
%
Consolidated Net sales

$
15,341


100
%
$
15,599


100
%
$
(258
)

(2
)%
Cost of sales



















Ranor

$
6,443


42
%
$
5,793


37
%
$
650


11
%
Stadco


7,169


46
%

7,249


47
%

(80
)

(1
)%
Consolidated Cost of sales

$
13,612


88
%
$
13,042


84
%
$
570


4
%
Gross profit (loss)



















Ranor

$
2,325


15
%
$
3,867


24
%
$
(1,542
)

(39
)%
Stadco


(596
)

(4
)%

(1,310
)

(8
)%

714


55
%
Consolidated Gross profit

$
1,729


11
%
$
2,557


16
%
$
(828
)

(32
)%

nm - not meaningful

TECHPRECISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



Six Months Ended September 30,



2023


2022

CASH FLOWS FROM OPERATING ACTIVITIES:






Net loss

$
(1,055,788
)

$
(110,221
)
Adjustments to reconcile net loss to net cash provided by operating activities:








Depreciation and amortization


1,128,059



1,116,602

Amortization of debt issue costs


37,475



26,747

Stock-based compensation expense


9,224



298,957

Change in contract loss provision


(43,049
)


(26,628
)
Deferred income taxes


(323,128
)


(38,205
)
Gain on disposal of fixed assets


(40,399
)


--

Change in fair value for contingent consideration


--



63,436

Changes in operating assets and liabilities:








Accounts receivable


(684,242
)


968,829

Contract assets


851,203



(869,853
)
Work-in-process and raw materials


(379,345
)


(281,929
)
Other current assets


(117,262
)


411,770

Accounts payable


(617,319
)


272,554

Accrued expenses


(84,182
)


(1,243,082
)
Contract liabilities


847,090



41,086

Other noncurrent liabilities


1,729,320



993,203

Net cash provided by operating activities


1,257,657



1,623,266

CASH FLOWS FROM INVESTING ACTIVITIES:








Proceeds from insurance claim on fixed assets


61,944



--

Fixed asset deposit


--



(574,143
)
Purchases of property, plant and equipment


(2,658,937
)


(499,341
)
Net cash used in investing activities


(2,596,993
)


(1,073,484
)
CASH FLOWS FROM FINANCING ACTIVITIES:








Debt issue costs


--



(18,862
)
Revolver loan payments and borrowings, net


1,250,000



(1,012,002
)
Payments of principal for leases


(10,552
)


(25,820
)
Repayments of long-term debt


(296,380
)


(309,853
)
Net cash provided by (used in) financing activities


943,068



(1,366,537
)
Net decrease in cash and cash equivalents


(396,268
)


(816,755
)
Cash and cash equivalents, beginning of period


534,474



1,052,139

Cash and cash equivalents, end of period

$
138,206


$
235,384

TECHPRECISION CORPORATION
SUPPLEMENTAL INFORMATION
Reconciliation of EBITDA to Net (Loss) Income
(UNAUDITED)

The following table provides a reconciliation of EBITDA to net loss, the most directly comparable U.S. GAAP measure reported in our condensed consolidated financial statements for the following periods:



Three Months ended September 30,

Six Months ended September 30,

(dollars in thousands)

2023

2022

Change

2023

2022

Change

Net (loss) income

$
(528
)
$
391

$
(919
)
$
(1,056
)
$
(110
)
$
(945
)
Income tax (benefit) expense


(177
)

136


(313
)

(323
)

(38
)

(285
)
Interest expense (1)


149


84


65


243


167


75

Depreciation and amortization


568


532


36


1,128


1,117


11

EBITDA

$
12

$
1,143

$
(1,131
)
$
(8
)
$
1,136

$
(1,144
)