Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Techprecision Corp (NASDAQ:TPCS) reported an 8% increase in consolidated revenue for the fiscal year 2025 first quarter compared to the same period a year ago.
• The Rainor subsidiary continued to perform well, maintaining stable revenue levels compared to the previous year.
• Customer confidence remains high, as evidenced by a strong consolidated backlog of $41.2 million as of June 30, 2024.
• Techprecision Corp (NASDAQ:TPCS) has maintained two sequential quarters of positive operating cash flow.
• The company is focused on cash management and risk mitigation, which includes managing expenses, capital expenditures, and customer advances.

Negative Points

• Techprecision Corp (NASDAQ:TPCS) experienced an operating loss of $1.3 million in the first quarter of fiscal year 2025, primarily due to equipment problems at Stadco.
• The termination of the Volta precision manufacturing acquisition led to a $400,000 non-cash charge, impacting the company's bottom line.
• Gross profit decreased by 66% compared to the same quarter a year ago due to higher production costs and underabsorbed overhead.
• Interest expense increased by approximately $40,000 due to higher borrowing levels and interest rates.
• The company's working capital was negative as of June 30, 2024, due to debt covenant violations, leading to reclassification of long-term debt as current.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with TPCS.

Q: Can you provide an overview of the financial performance for the first quarter of fiscal year 2025? A: Alex Shen, CEO, stated that the first quarter was challenging, primarily due to the terminated Volta Precision Manufacturing acquisition, which led to an operating loss of $1.3 million. This was exacerbated by equipment failures at Stadco, resulting in increased production costs. Additionally, a one-time non-cash charge of $400,000 was recognized due to the fair market valuation of shares issued as a breakup fee from the Volta acquisition.

Q: How did the revenue and gross profit compare to the previous year? A: Richard Romberg, CFO, reported that consolidated revenue for the first quarter was $8 million, an 8% increase from $7.4 million in the same quarter last year. However, gross profit decreased by 66% to $0.2 million due to higher production costs and underabsorbed overhead.

Q: What were the main factors contributing to the operating loss? A: The operating loss of $1.3 million was mainly due to higher operating losses at Stadco and the breakup fee from the Volta acquisition. The cost of revenue increased by 16% compared to the previous year, driven by higher production costs and underabsorbed overhead.

Q: What is the current status of the company's debt and cash position? A: As of June 30, 2024, the company had $2.8 million in outstanding debt under the revolver loan, with total debt at $7.5 million. Cash balances were approximately $45,000, down from $138,000 as of March 31, 2024. The company is focused on cash management and has maintained two consecutive quarters of positive operating cash flow.

Q: What is the outlook for the company's backlog and future performance? A: The consolidated backlog was $41.2 million as of June 30, 2024, indicating strong customer confidence. The company expects to deliver this backlog over the next 1 to 3 fiscal years with gross margin expansion. They are focused on tactical execution, risk mitigation, and maintaining customer confidence to drive future revenue growth and profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.