TPCS - Earnings call transcript Q1 2020 | TechPrecision Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the TechPrecision First Quarter 2020 Earnings Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Jeff Stanlis with Hayden IR. The floor is yours.

Jeff Stanlis

Thank you.

On the call today is Alex Shen, Chief Executive Officer; and Tom Sammons, Chief Financial Officer. being the also www.techprecision.com. webcast is call simulcast company’s on at The

today, to and we remind statements Act company forward-looking the and in may subject uncertainties to I’d in statements, harbor protection and of as listeners filings are we of forward-looking contained the from Private those Before questions. Litigation discussion differ like statements claims the with to discussed remarks responses Actual XXXX. our to begin, in Therefore, you additional may management Reform therefore, make that your results management’s refer financial which detailed a may of for Securities risks SEC. the more forward-looking safe company’s uncertainties the contain and the risks

as performance revise In of assumes to estimates as XXXX. future statements. August to no obligation the forward-looking management’s company’s today, these represents XX, TechPrecision update addition, or projections

I’d Shen, provide call the the like of turn out Alex, remarks. opening Executive that Chief go ahead. way, With to Alex Officer, to over to

Alex Shen

Good Thank everyone, us. you joining for to you, day and thank Jeff.

first XX, the At this of million of fiscal year. million million available backlog March XXXX. XXXX cash for $XXX,XXX. our the the for approximately net when income fiscal to $XX adding XX, balance had to of of XXXX. highlighted higher first $X.X million quarter approximately year compared $X.X liquidity the sales of quarter results improved $XX.X totaling fiscal fiscal of and by We XXXX, at income orders were year Net in to a XX% June net income was by first Our quarter net for XXXX of compared year first quarter we

to to about to like the us financial quarter Tom I’d more Sammons results. over Tom? turn Now our first tell call

Tom Sammons

million were XXXX. for million quarter the compared fiscal of XXXX sales first to Alex. fiscal you, the quarter in Net $X.X first Thank $X.X of

prime our down resulting compared $X – of gross for components margin to a orders XX, the XX.X% defense the continue million quarter. sales to for June same Our ago, current quarter million from strong for the new as $X.X remains year ended in quarter contractors. a for backlog slow Cost was of period quarterly XXXX,

negatively new was cost overhead by factory and margin increased higher on Our unabsorbed projects. impacted certain

and as general by to maturity. ended administrative an lower for in cost will due was expense increased fees. we increase and principal Selling, debt Interest June primarily $XX,XXX amortize to and to XX, amortization decrease quarter continue the XXXX, professional debt

able net expense the be for tax does fiscal are operating Income our utilize significant any item offset XXXX. income. of taxable remainder we to to loss federal continues carryforward not payments as to to tax company a noncash make expect The

June XXXX of ago, a income share Earnings $X.XX was increase XX, the per same periods. Net were for an quarter to the year for $XXX,XXX quarter fully in basic, diluted $XXX,XXX ended quarterly compared XX%. both

to quarter. fiscal balance XXXX June for $X.X ended due quarter favorable was XX, shipments at At during $X.X had timing in million. provided activities the of Moving the Net the cash and first $X.X to sheet. XX, the June capital collections million working operating million and debt months end was Cash three by of of of XXXX, the $XXX,XXX. XXXX we

back that, over Alex? I now the turn will call With to Alex.

Alex Shen

manufacturing proud defense through States Tom, specifically serve the its thank industry, remains United to Ranor you. honored subsidiary. TechPrecision and submarine naval

the business opportunities in next meaningful We sector, see in beyond. for defense months and our nuclear to the primarily XX continue submarine

Q&A. for to up the would open I now call like

Operator

first question Ross [Operator Taylor And ahead, Go Investment. with our comes from ARS Ross. Instructions]

Ross Taylor

the through Godot a situation for are But the for here really reasons, a Thank waiting those not submarines. Navy built you. stuck boats. they Alex, a it has that clearly need of massively appears of we’re in little and pushing a need a growing a in variety for

So has you us, from can quarter? changed last anything outlook your tell

Alex Shen

the for outlook my that has see quarter? since last changed question I anything So is,

Ross Taylor

yes. quarter, Last

bullish very were anything on next the the that changed? about about the call last years. You looking prospects two the Has out company over had

Alex Shen

position as changed I see as far our quarter since in last how opportunities defense I what meaningful as has don’t sector. the see

Ross Taylor

you I coming expect Okay. a Is assume that And you what is that more correct? what can is than but of for level comment currently then on you you have it, effectively, know factory would capability a and workforce what to I you – be exactly how don’t put – there. sized that are

Alex Shen

to I I’m taking me competitive my because you’ll nature answering. be answering me. time the that in of forgive question, hope there’s causes portion careful a Ross,

Ross Taylor

my Okay. simply you can No, that be assumed I basic would if I will. question the can’t of that premise clearing you before? say, answer And you’re wrong I perhaps

Alex Shen

I question flowing is, have basic think capacity we’re now? do the we the that than more through business

Ross Taylor

Yes.

Alex Shen

in the and than way, now. If more question that Ranor the I through can rephrase TechPrecision business flowing has capacity

Ross Taylor

things equipment line in of that some and or the the on comment providing proper players competitive and on the is fact, behind environment? be competitors Navy some difficulties might providing of you It might the standard been how that appears build of fashion, Okay. or a have yours of of in have right of the like, its that And why boats. will into run time see in a you variety then areas

Alex Shen

capacity. they public is information. shipyards, a competitors. more two Newport on. News need be Huntington would They the something you to says, that’s in just of going more now commented more that nature are am comment Ingalls landscape say capacity on information mean to the can that more – is I I more More can able on not a Boat and that I that expanding need busy tell public competitors. And on what you Electric and thing of

Ross Taylor

the to contracts? to looking boiling are is on they outsource And in-house some that and to therefore, opening their looking actually past prime? focus of have essence, business opportunities the that because of for might by and you they that of to been are used provided in nature, emphasis they a products smaller do component things In universe not that structures down up and provide –

Alex Shen

and question each going carefully to one. Ross, parse answer combination your I’m

Ross Taylor

you. Thank

Alex Shen

relevant and I’d I that do clear. I’m so that think to it’s like

the So the ever. than two definitely That of number shipyards, is true that more submarines main and all available the are shipyards have is they that than more public outsourcing are one, to building us. that’s before, information

was that and very The other mean that’s two capability part needing that they’re more to, interested that’s we – more the is, far alluding the capacity. shipyards thing vendor because vendor can outsourcing. what as does about are talk I developing there capability in as And

more means more that that capacity because needed. there’s So competitors. that’s there’s Simply

Ross Taylor

Right.

it’s aggregate your in facing more direct more you you’re but competitors opportunities a there’s therefore because for – that, others, not greater of then of competitors. and that creating number spaces, So moving

I’m think Alex. to I learning speak,

Alex Shen

very I that to in dancing is both the well opportunity other. make we’re very very with But in each trying think sure think also versed I clear clear. we’re

Ross Taylor

And Alpha thought Yes. a address like was from I a two perspective. there to piece think laid you and about written I Seeking were and I’d risks there

I One execute And the TechPrecision can’t risks whether I perspective, contracts. say of was this. from – the my company, say, would you on would know perform its

run would execute said how say it’s or which not, your effectively your personality for it I one job strike firm. You’ve And you in customer. that to as the scenario is nature imagine you would anywhere doesn’t that of me a – I can’t in prime

and is the start the opposed It behind, has you the And the that a the of more less greater I moves said second tender. that’s world the is when as as and appears submarine nature. on of to Navy needing – U.S. boats been there’s things that making to in needing further Russia probably falling, risk boat everything going see boats in

and – as that China So well.

just but me, up a a – still in Gadot does unlike waiting the movie or So ones someone this say, I’d reminded like as to this the we’re in play, unlike for Gadot, show book.

good continued and much luck. very you thank So

Alex Shen

continued you, support. Ross, for your as Thank always

Operator

Our Go from ahead, Aaron. [indiscernible]. next comes question

Unidentified Analyst

reading backlog? the Hey for that of period, fiscal you and questions passing complete XX-Qs I’m it’s ask consider in And like got you before the Authorization funded that event the two-year my after the that thanks first is is I signing National backlog, seems that you pretty U.S. backlog. that, understanding work within here Thanks. to I’ve of to funded each. backlog and Act? XX-Ks wondering to when Defense a the that of that from projects the Ross. some and for there programs part and submarines the which be believe unrelated only guys, you call. straightforward. the Or are therefore of included other couple Navy here, trigger can a consists in be one considered you my something would But about always and enjoy taking funded is I’ll

Alex Shen

question. long pretty a was that me, Excuse

Unidentified Analyst

Yes.

have part submarine National part Columbia authorization backlog? for on of so or be event class, does your of – the the signed advanced that Or is backlog, you could that do So to be like and Authorization there your trigger considered other class passed would to Virginia or be some the that Act President? the work, by Defense

Alex Shen

My backlog that of orders consists get. I

Unidentified Analyst

Technologies second My where tubes out that considering have Bloomberg the orders from they had from those they’re conference actually Boat, today, had an updated week, call received in producing you mentioned you. information comes article they Electric Ross BWX public about question, Thank Okay. of and not call, was any with altogether. there last mentioned their and withdrawing

your understanding since partners tubes to even opportunity large So bigger that, a would would those to Am of the the that has think that correctly? you, of the I customer And in I leave one supplier future. although, based already on development. appear gotten that sole for

Alex Shen

me lip unable single subject. put of reason my completely The that am to a reasons. on question a for without every of that has customers, lock exception, primary is I answer that one on number

Unidentified Analyst

Okay. your up comment. the work. Keep That’s color. good for Appreciate fair. you the Thank

Alex Shen

Aaron, much. thank very you

Operator

ahead, Our with comes next Mark. Gomes Mark Data. Go question Pipeline from

Mark Gomes

Good afternoon gentlemen.

fair competitors. on with in supplier on terms and as and When that to vendor generally nothing do contracts Again, negative this that question. in that such the production, for vendor’s in of to rephrase was way create therefore, to it the it’s specificity misstep say for with Just question a that to last its nothing is positive asked. as a a future last a a sign a setback do complete this, question to such general

Alex Shen

Understood, Mark.

customers to listen do and as that replay So also a conservative if and this know you their to well instruction. understand very – I’m see careful I’m compliant person, know and I

I So will.

Mark Gomes

respect I that. And

Alex Shen

me. I question, be will that not answering excuse

Mark Gomes

excitement And call. the of you about about Okay. ocean of ahead last did last you as future feel on boiling your mention you excited the Are call? down, Fair generally as level were our and how your on you you enough. opportunities the

Alex Shen

My am excitement very level excited. remains I the same.

Mark Gomes

Thank you.

Alex Shen

support. your for you Thank

Operator

from question Shields. Brous with comes Wellington Our Howard. next Howard ahead, Go

Howard Brous

years several did significant balance better in It on Congratulations increase it the looks ago. sheet. significantly than

about part order So question In there particular that is nothing beyond two it to is this extends generic having following with of backlog? in years, congratulations. is a any up order, – a what purchase orders. purchase do question, is a Or all having backlog? in If and

Alex Shen

Every in purchase is backlog order

Howard Brous

Okay.

extends So two even if beyond it years?

Alex Shen

purchase time is order in Every is There limit. backlog. no

Howard Brous

Okay.

a a correct comment? ask three me approached margins, if back Let terms If of I correctly. in XX%, years ago gross margins hypothetical that I gross remember question. those go Is

Alex Shen

have I remember I’d then. and... to do don’t some research back

Q Brous Howard -

do We’ll off-line? that

Alex Shen

you Answer exactly.

Howard Brous

I have. Thank and purchase in orders. and all congratulations I the appreciated. That’s good you future luck

Alex Shen

your support. appreciate I Howard. you, Thank

Operator

Advisors. next from REG Capital with Greulich Richard Our Richard. ahead, question comes Go

Richard Greulich

components. projects Alex, of noted business be to getting you the in XX-Q, it you. to sales that large might industrial the six market, you any device completed due in was the the quarters? indicative over medical of four next ongoing that increase to Is Thank

Alex Shen

sorry, rephrase I question? can that am you

Richard Greulich

portend that had medical any increase that Yes. in does you well? future from area an that companies device sales The fact as sales,

Alex Shen

do not know. I

Richard Greulich

with And that Mevion? was Okay. involved

Alex Shen

I this will individual on time. not be customers at commenting

Richard Greulich

and that and was by closing XX-Q, Okay. lower activities. shed any you that? startup In timing due related to light on Could do you the market when defense noted mean partly you project revenues

Alex Shen

there’s certain timing a more That’s can have so is to ones just lumpy being a as those certain you simply It’s these try That’s than guys go much things, probably a of lumpy to one Sure. We word more other it’s I mention bit lumpy. to on light as wordy try up, we it. the down, go there’s a timing, all business. little characteristics more things, contributors – but shed to them. are say business that definitely lumpy and there’s about tell saying –

Richard Greulich

or is to five float a let’s contractor past, a that down the the supply when contract In say, would last to prime over subcontractors? time certain there of general frame six parts the years, any which in received submarine,

Alex Shen

I’m timing. such aware of any not

Richard Greulich

Okay. Thank you.

Operator

Investment. ARS with Taylor Ross from ahead, comes Go question Ross. next our And

Ross Taylor

to And what Board how Thank line, to plans cash should uptake go line, already it’s ramp using you. guys doing simple Or bottom using and plan substantial – a sheet. as and investing, how on you generation up debt you Has fact What of doesn’t need you this the starts that is, the you on have to The how plans Alex, buyback? given that call would going the cusp to substantial with middle do down like? going balance of opportunities the that of top like. dividend? share about the capital? you on that to flow on and pay really the is, about which talked free the a as how thought you going in a question returning be it? cash it capital expect in to and much One on the business should have be are front discussions lot in been end growth improved, It’s you’re be mentioned in you. forward as but begin generating a prior

Alex Shen

think with know a answer I we is doing I the capital do right question. the that are – now. is we question can question what going be So to don’t the

I considering also Tom yes. are think I’m probably. more to We pitch Board But different conversation in. a to going of company ask and things, that’s

discussion think but tell I a what you. not we having tell much we’re can a we Q&A, you can here, so

Tom Sammons

our mean goes I up Yes. and cash down.

have will a – cash be as that We with but what no do large under be should generating we there’s we So cash. then yet it’s and we do decision scenario where growth.

Ross Taylor

that choose Okay. I inconsequential of not assume of I you move becomes take return suggest that going to investors it into think you would part involve would of as investment only a story I to that communicated will guys because likely, plans be return whatever that approach the that and capital forward. state you capital big the because it’d do

that as but point one it’s control, down. is this this this clear we’re think the hasn’t said, of in stuck I hasn’t opportunity need gone the I your gone at down, – we holding pattern very kind beyond that

– quarter ago. more might than In months this that even were I’d fact, argue probably argue excited you you’re you three

Although, be I to want know you calm.

Alex Shen

want I Yes. be to calm.

Ross Taylor

more excited, you’re aren’t But you?

Alex Shen

Ross? doesn’t question, Boy, asks That questions, leading he such he? was a not right,

Ross Taylor

was. it Yes,

Alex Shen

same have the Ross. excitement level, I

Ross Taylor

Okay.

much. excited. very voice. more I that I tell in think you’re your you can Thank

Alex Shen

Thank you.

Operator

the And there appears to queue. be no further questions in

Alex Shen

Thank attendance. Have for day. you, a your everyone, good

TechPrecision (TPCS) 13 Aug 192020 Q1 Earnings call transcript