TPCS - TechPrecision Corporation Reports Third Quarter Fiscal 2023 Financial Results

February, 14 2023 04:05 PM Techprecision Corp

Improving operating performance drives revenue growth and gross profit

WESTMINSTER, MA / ACCESSWIRE / February 14, 2023 / TechPrecision Corporation (OTCQB: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 third quarter of fiscal year 2023 ended December 31, 2022.

"Third quarter consolidated net sales were $8.3 million or 28% higher when compared to $6.5 million in same quarter a year ago," stated Alexander Shen, TechPrecision's Chief Executive Officer. "Our Ranor segment reported a strong third quarter with net sales of $4.7 million and gross profit of $1.7 million. Our third quarter net sales included $3.6 million from our Stadco subsidiary. Gross profit and gross margin also significantly improved year-over-year for both the quarter and year-to-date periods."

"We continue to make progress rebuilding Stadco manufacturing and throughput," Mr. Shen continued. "We will continue at Stadco to focus on shepherding cash, rebuilding customer and supplier relationships, establishing operational discipline, improving gross margins, and growing the backlog. Total backlog remained strong at $43.9 million as of December 31, 2022. We expect to deliver that backlog over the course of the next one to three fiscal years with revenue growth and gross margin expansion."

As to our applications to uplist to NASDAQ and for the reverse split, both have been filed and are pending with the appropriate entities, although there can be no assurance that our listing application with NASDAQ and our authorization to effect the reverse stock split will be approved by the appropriate entities in a timely manner or at all.

The following summary compares the three and nine months ended December 31, 2022 to the same prior year periods:

Fiscal 2023 Third Quarter Consolidated Financial Results

Net sales were $8.3 million, an increase of 28%, due to strong revenue growth at Ranor.
Cost of sales were $6.8 million, or 13% higher, due primarily to increased net sales at Ranor and higher unabsorbed overhead at Stadco.
Gross profit was $1.5 million, or $1.0 million higher when compared to the same quarter last year. Gross margin percentage was higher primarily due to a profitable project mix and strong throughput at Ranor.
SG&A was $1.2 million, a year-over-year decrease of $0.4 million. Prior period SG&A included one-time costs for legal, accounting, and other outside advisory services related to the Stadco acquisition.
Operating income was $0.3 million, compared to operating loss of $1.1 million in the same quarter a year ago.

Fiscal 2023 Nine Months Ended December 31, 2022 Consolidated Financial Results

Net sales were $23.9 million, an increase of $9.2 million or 63% when compared to the same nine-month period in the prior year. A profitable project mix of repeat business at Ranor plus twenty-one weeks of additional activity at Stadco were the drivers behind the revenue growth.
Cost of sales were $19.9 million, or 59% higher, due to the increase in net sales for both Ranor and Stadco.
Gross profit was $4.1 million, or 81% higher when compared to the same period last year. Gross margin percentage was higher because of a profitable production mix and better operating throughput.
SG&A was $4.4 million, an increase of $0.9 million, primarily due to the added Stadco SG&A. The same period a year ago only included eighteen weeks of business activity at Stadco.
Operating loss was $0.4 million, compared to operating loss of $1.3 million in the same period a year ago.

Financial Position

On December 31, 2022, TechPrecision had $0.3 million in cash and cash equivalents, a decrease since March 31, 2021. Working capital was $7.2 million at December 31, 2022 compared to $2.8 million at March 31, 2021 as we extended the Ranor term loan for an additional five years in December and converted a significant current liability to long-term. Total debt at December 31, 2022 and March 31, 2022 was $7.1 million and $7.4 million, respectively. In December 2022, our revolver loan was renewed for one year.

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, industrial, and medical. 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 change the composition of our revenues and effectively control operating expenses; external factors that may be outside our control, including the COVID-19 pandemic, the Russia- Ukraine conflict, price inflation, interest rate increases and supply chain inefficiencies; the impacts of the COVID-19 pandemic and government-imposed lockdowns in response thereto; 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; unexpected costs, charges or expenses resulting from the recently completed acquisition of Stadco; 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)



December 31, 2022


March 31, 2022

ASSETS






Current assets:






Cash and cash equivalents

$
316,185


$
1,052,139

Accounts receivable


2,927,407



3,009,249

Contract assets


9,356,242



8,350,231

Raw materials


1,271,558



874,538

Work-in-process


1,020,566



1,360,137

Other current assets


986,024



1,421,459

Total current assets


15,877,982



16,067,753

Property, plant and equipment, net


12,640,077



13,153,165

Right of use asset, net


6,043,056



6,383,615

Deferred income taxes


2,117,985



2,126,770

Other noncurrent assets, net


726,456



121,256

Total assets

$
37,405,556


$
37,852,559

LIABILITIES AND STOCKHOLDERS' EQUITY:








Current liabilities:








Accounts payable

$
1,489,972


$
3,426,921

Accrued expenses


2,443,285



3,435,866

Contract liabilities


1,905,262



1,765,319

Current portion of long-term lease liability


727,803



593,808

Current portion of long-term debt


2,069,859



4,093,079

Total current liabilities


8,636,181



13,314,993

Long-term debt, net


4,863,602



3,114,936

Long-term lease liability


5,481,895



5,853,791

Other noncurrent liabilities


2,828,737



305,071

Total liabilities


21,810,415



22,588,791

Commitments and contingencies - see Note 15








Stockholders' Equity:








Common stock - par value $.0001 per share, 90,000,000 shares authorized, shares issued and outstanding: December 31, 2022 - 34,443,959; March 31, 2022 - 34,307,450


3,444



3,430

Additional paid in capital


14,945,376



14,637,771

Retained earnings


646,321



622,567

Total stockholders' equity


15,595,141



15,263,768

Total liabilities and stockholders' equity

$
37,405,556


$
37,852,559

TECHPRECISION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(unaudited)



Three Months Ended December 31,


Nine Months Ended December 31,



2022


2021


2022


2021

Net sales

$
8,327,345


$
6,511,325


$
23,926,349


$
14,720,964

Cost of sales


6,828,458



6,033,267



19,870,572



12,479,531

Gross profit


1,498,887



478,058



4,055,777



2,241,433

Selling, general and administrative


1,224,572



1,623,883



4,426,894



3,530,179

Income (loss) from operations


274,315



(1,145,825
)


(371,117
)


(1,288,746
)
Other income


254



1,999



40,590



13,390

Interest expense


(93,603
)


(94,721
)


(260,978
)


(181,494
)
PPP loan forgiveness


--



--



--



1,317,100

Refundable employee retention tax credits


--



--



624,045



--

Total other (expense) income


(93,349
)


(92,722
)


403,657



1,148,996

Income (loss) before income taxes


180,966



(1,238,547
)


32,540



(139,750
)
Income tax expense (benefit)


46,991



(333,867
)


8,786



(385,749
)
Net income (loss)

$
133,975


$
(904,680
)

$
23,754


$
245,999

Other comprehensive loss:
















Foreign currency translation adjustments

$
--


$
(810
)

$
--


$
(1,909
)
Other comprehensive loss

$
--


$
(810
)

$
--


$
(1,909
)
Comprehensive income (loss)

$
133,975


$
(905,490
)

$
23,754


$
244,090

Net income (loss) per share basic

$
0.00


$
(0.03
)

$
0.00


$
0.01

Net income (loss) per share diluted

$
0.00


$
(0.03
)

$
0.00


$
0.01

Weighted average shares outstanding - basic


34,443,959



34,286,580



34,363,352



31,716,353

Weighted average shares outstanding - diluted


36,134,709



34,286,580



36,039,468



33,395,123

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



Three Months ended December 31, 2022


Three Months ended December 31, 2021


Changes

(dollars in thousands)

Amount


Percent of net sales


Amount


Percent of net sales


Amount


Percent

Ranor

$
4,735



57
%

$
2,790



43
%

$
1,945



70
%
Stadco


3,592



43
%


3,721



57
%


(129
)


(3
)%
Net sales

$
8,327



100
%

$
6,511



100
%

$
1,816



28
%
Ranor

$
3,056



37
%

$
2,538



39
%

$
518



20
%
Stadco


3,773



45
%


3,495



54
%


278



8
%
Cost of sales

$
6,828



82
%

$
6,033



93
%

$
795



13
%
Ranor

$
1,680



20
%

$
199



3
%

$
1,481



744
%
Stadco


(181
)


(2
)%


279



4
%


(460
)


(165
)%
Gross profit

$
1,499



18
%

$
478



7
%

$
1,021



214
%



Nine Months ended December 31, 2022


Nine Months ended December 31, 2021


Changes

(dollars in thousands)

Amount


Percent of net sales


Amount


Percent of net sales


Amount


Percent

Ranor

$
14,395



60
%

$
9,741



66
%

$
4,654



48
%
Stadco


9,531



40
%


4,980



34
%


4,551



91
%
Net sales

$
23,926



100
%

$
14,721



100
%

$
9,205



63
%
Ranor

$
8,849



37
%

$
7,924



54
%

$
925



12
%
Stadco


11,022



46
%


4,556



31
%


6,466



142
%
Cost of sales

$
19,871



83
%

$
12,480



85
%

$
7,391



59
%
Ranor

$
5,546



23
%

$
1,764



12
%

$
3,782



214
%
Stadco


(1,491
)


(6
)%


477



3
%


(1,968
)

nm %

Gross profit

$
4,055



17
%

$
2,241



15
%

$
1,814



81
%

TECHPRECISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)



Nine Months Ended December 31,



2022


2021

CASH FLOWS FROM OPERATING ACTIVITIES:






Net income

$
23,754


$
245,999

Adjustments to reconcile net income to net cash provided by (used in) operating activities:








Depreciation and amortization


1,666,741



978,517

Amortization of debt issue costs


39,961



34,588

Stock based compensation expense


307,619



141,176

Change in contract loss provision


100,880



(66,232

Deferred income taxes


8,785



(386,413

PPP loan forgiveness


--



(1,317,100
)
Change in fair value for contingent consideration


63,436



--

Gain on sale of fixed asset


(468
)


--

Changes in operating assets and liabilities:








Accounts receivable


81,842



(575,181
)
Contract assets


(1,006,010
)


(871,339
)
Work-in-process and raw materials


(57,450
)


477,936

Other current assets


435,435



215,334

Other noncurrent assets


--



(50,633
)
Accounts payable


(166,749
)


(611,045
)
Accrued expenses


(1,741,606
)


(1,282,269
)
Contract liabilities


139,944



1,418,010

Other noncurrent liabilities


974,737



--

Net cash provided by (used in) operating activities


870,851



(1,648,652
)
CASH FLOWS FROM INVESTING ACTIVITIES:








Business acquisition, net of cash acquired


--



(7,795,810
)
Proceeds from sale of fixed assets


7,000



--

Fixed asset deposit


(605,200
)


--

Purchases of property, plant, and equipment


(663,033
)


(436,531
)
Net cash used in investing activities


(1,261,233
)


(8,232,341
)
CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from term loan


--



4,000,000

Closing costs related to common stock sale


--



(335,419
)
Proceeds from sale of common stock


--



3,523,000

Debt issue costs


(43,945
)


(116,511
)
Revolver loan payments and borrowings, net


187,998



1,978,221

Payments of principal for leases


(31,058
)


(493,015
)
Repayments of long-term debt


(458,567
)


(243,510
)
Net cash (used in) provided by financing activities


(345,572
)


8,312,766

Effect of exchange rate on cash and cash equivalents


--



(25
)
Net decrease in cash and cash equivalents


(735,954
)


(1,568,252
)
Cash and cash equivalents, beginning of period


1,052,139



2,130,711

Cash and cash equivalents, end of period

$
316,185


$
562,459

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

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



Three Months ended December 31,


Nine Months ended December 31,

(dollars in thousands)

2022


2021


Change


2022


2021


Change

Net income (loss)

$
134


$
(905
)

$
1,039


$
24


$
246


$
(222
)
Income tax expense (benefit)


47



(334
)


381



9



(386
)


395

Interest expense (1)


94



95



(1
)


261



181



80

Depreciation and amortization


550



463



87



1,667



979



688

EBITDA

$
825


$
(681
)

$
1,506


$
1,961


$
1,020


$
941