TPCS - NASDAQ

Greetings. Welcome to the TechPrecision Corporation Fourth Quarter Fiscal 2023 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Brett Maas, Managing Partner of Hayden IR. You may begin.

Thank you. On the call today is Alex Shen, Chief Executive Officer; and Tom Sammons, 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, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims protection of the safe harbor and 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 with the SEC. In addition, projections as to the company's future performance represents management's estimates as of today, June 15, 2023. TechPrecision 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 opening remarks. Alex, the floor is yours.

Brett, thank you. Good afternoon to everyone, and thank you for joining us. The fourth quarter of fiscal 2023 was another strong quarter for our Ranor subsidiary. For fiscal year 2023, Ranor operating results improved across the board when compared to fiscal year 2022 with higher revenue and improved gross margins. Ranor's revenue for fiscal year 2023 was $19.2 million, up from $14.6 million in fiscal year 2022. This is a 32% improvement year-over-year. Ranor's gross profit doubled in fiscal year 2023 to $7.0 million from $3.5 million in fiscal year 2022. The Stadco subsidiary is a turnaround. Revenue was 58% higher year-over-year, primarily due to having a full year of Stadco financial results. Production at Stadco, however, was hampered by machine downtime, specifically in the fourth quarter. This negatively impacted revenue generation and resulted in increased unabsorbed overhead. These equipment problems experienced during the fourth quarter are now resolved. Since the acquisition of the Stadco subsidiary, there has been significant work on repair and rebuild of Stadco's equipment. We will continue to enhance Stadco's manufacturing capabilities and capacity. We continue our sharp focus on tactical execution and risk mitigation, driving both subsidiaries to fully comprehend, to successfully manage and to successfully meet customer expectations, enabling continuous recapture and continuous retention of customer confidence. 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. As we successfully retain customer confidence, business prospects remains strong. Our backlog was $44 million at March 31, 2023, $17.7 million at Ranor and $26.3 million at Stadco. Since March, Ranor has secured an additional $6 million in new orders. Now I'd like to turn the call over to our CFO, Tom Sammons, to continue our review of our fourth quarter and fiscal year 2023 results. To you, Tom.

Thank you, Alex. Net sales for the fourth quarter of fiscal year 2023 were $7.5 million or 1% lower when compared to the same quarter a year ago. Cost of sales were $6.7 million or 4% higher than the prior year period, due primarily to lower margin project mix at Ranor and increased unabsorbed overhead at Stadco. Cost -- gross profit was $848,000 or 25% lower compared to the same quarter a year ago primarily due to Stadco's production issues during the quarter and the resulting increase in unabsorbed overhead. SG&A expense increased by $174,000 primarily due to a severance accrual and onetime miscellaneous charges such as recruitment fees and account receivables reserve. Operating loss was $734,000 compared to an operating loss of $273,000 in the same quarter a year ago. Interest expense for the fourth quarter increased by $7,000 due to increased borrowings under our revolver loan. We ended the quarter with $650,000 outstanding on the revolver. For the 12 months ended March 31, 2023, net sales were $31.4 million compared to $22.3 million in the same period a year ago, an increase of $9.1 million as a result of strong growth at Ranor and reporting a full 12 months of business activity at Stadco. Our cost of sales in fiscal 2023 were $7.6 million higher due primarily to the inclusion of the Stadco business for the full year compared to only 31 weeks in the same period a year ago. Gross profit increased by $1.5 million or 45% higher on a strong operating period of Ranor. A weak operating period of Stadco dampened consolidated gross margins year-over-year as some production issues led to slower throughput. While Ranor's gross margin percentage increased from 24% to 36% in fiscal '23, Stadco's performance resulted in only a slight increase in the consolidated gross margin percentage from 15.2% to 15.6%. SG&A expenses in fiscal 2023 increased by $1.1 million due primarily to the inclusion of Stadco for the full fiscal reporting period. As a result of the foregoing, we recorded an operating loss of $1.1 million compared to an operating loss of $1.6 million in the prior year. Interest expense was $356,000 for fiscal 2023 or 86% -- $86,000 higher than fiscal 2022. The increase was due primarily to a full year of interest expense recorded on the Stadco term loan and increased borrowings under the revolver loan. Fiscal 2023 includes a onetime $637,000 employee retention tax credit refund. And fiscal 2022 included a gain of $1.3 million for loan forgiveness under the Paycheck Protection Program. Our pre-tax loss was $783,000 for fiscal 2023 compared with a pre-tax loss of $542,000 in fiscal 2022. We recorded a tax provision of $196,000 and reported a net loss of $1 million for fiscal 2023. EBITDA for fiscal 2023 was $1.8 million compared to $1.2 million in the prior fiscal year. Moving on to our financial position. Cash inflow from operating activities totaled $3.1 million, and we used $2.3 million of cash for capital expenditures. Our total debt was $6.1 million at March 31, 2023 compared to $7.4 million at the end of March 31, 2022, as we paid down principal on our term loans and revolver loan. Cash balance at March 31, 2023, was $531,000 compared to $1.1 million at March 2022. Working capital was $5.6 million at March 31, 2023 compared to $2.8 million in March 31, 2022. With that, I will now turn the call back over to Alex. Alex?

Thank you, Tom. For those on the call today who may not be very familiar with our company, I'd like to do a quick review. TechPrecision is a custom manufacturer of precision large-scale fabricated components and precision large-scale machined metal structural components. These components that we manufacture are custom designed. We sell to customers in two main industry sectors, the defense sector and precision industrial, predominantly defense sector. TechPrecision is proud and honored to serve the United States defense industry, specifically naval submarine manufacturing through our Ranor subsidiary and military aircraft manufacturing through our Stadco subsidiary. We aim to secure and maintain enduring partnerships with our customers. Overall, in both the Ranor 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 for increasing profitability in future quarters. Finally, a reminder. We do most of our work in industries that are highly sensitive to confidentiality, which preclude us from speaking publicly about many things that a company not operating in these fields might discuss. As such, there are real limits as to what I can discuss, and sometimes those limits change. Please understand my saying that I am not allowed to discuss that is based on customer requirements and the environment in which we conduct business. Operator, you can open the line for Q&A.

[Operator Instructions] The first question is from Kris Tuttle with Blue Caterpillar.

I have a few questions. I just want to start with the Stadco situation. It sounds like the downtime came as a surprise. I'm curious to know more about the nature of the failure and your perspective on how it might have -- how you might have been alerted earlier? And then specifically, like what kind of equipment are we talking about? Did it take time to repair due to parts unavailability or labor? I'm just trying to get a little more color on -- I want to understand it better in terms of the business.

I'm going to be limited on what I'm going to be able to answer you. These -- the significant downtime certainly was not anticipated. Could we have avoided it? Probably not. There was more than one machine down, several machines down happening at the same time. That's how I would characterize it and add the color there.

I mean, we always have equipment going down from time to time. That's just...

The equipment going down is the nature of the business.

It's when multiple ones at the same time that you're not used to.

Yes. I think we all understand that. I was just curious, was it a part issue, a training issue? It's odd, right, to have those multiple equipment, piece of equipment go down at the same time.

It is a turnaround. It's not so hard for turnaround. It's more on if you have a smoothly running company that you can now predict more.

So it was maybe deferred maintenance that maybe wasn't kept up on these machines or...?

Definitely, deferred maintenance would be one of the key factors that contributed.

Okay. And then shifting gears to some of your recent accomplishments on the shareholder side with the reverse split and the uplifting accomplished. Those are great accomplishments. I'm curious to know what implications that has on your strategy vis-a-vis the investment community, Investor Relations, what kind of shifts in activity you may have seen. So I'm just trying to understand where do you think you go next now that you've accomplished -- you have done some of the heavy lifting now in terms of being more investor-ready?

I'm going to point this one off to Tom Sammons. I don't know that we've seen any real shift from our perspective, but I think we need to reassess or just take a look at how we've been interacting with the shareholders and maybe make some changes there as we go forward.

You guys have -- I mean, have you created like a budget for maybe do a little bit more on the outreach side of things, attending a few more conferences, that sort of thing?

I think that's what we have to look at now we're kind of past getting the reverse split through and up on to the NASDAQ, yes.

Okay. And my last question, just for clarification, is so the STADCO outages that you guys experienced, those are in the past, and you guys are operating those machines smoothly at this point?

Let me just be really clear. So the equipment problems that I experienced in my Stadco subsidiary during the fourth quarter, those specific ones are now resolved. Does it mean that I've resolved them forever on those specific machines and nothing will ever go wrong? Like Tom alluded to, we always are repairing and maintaining our equipment. Can this happen again? Maybe.

And how much time or money do you think you guys need to get the Stadco plant just using the term loosely like up to your level of satisfaction of being current on maintenance? Anything can go down, I get that. But like if you buy a used car, you're like, no one has done any work on this in the last few years, I need to take it in and really get it taken care of. What's the analysis?

Right. That's just one used car, right? It's many.

Right. Right.

Right. So you have a fleet of all used cars and what's going to go down next, not really sure.

Okay.

With my track record -- I think we're new to each other, right, Kris?

Yes, we are.

Okay. So I think my track record has been an unbroken series of wins on turnarounds. I'm not planning on having my turnaround of Stadco fail and be my first loss in my spanning several decades career of being a troubleshooter. So I'm not trying to convince you that I'm such a great operator, but I do operate well. And we have recaptured and retained key customer confidence, which results in more orders and results in their support when we are experiencing these downtimes. I think that's the key is how to grow out of these things and how to make sure that we walk in-step with our customers so they can continue to believe that we will take the right steps in the right direction and not flinch from telling them the truth that we have downtime, and we need some help. And we need some patience, and we will resolve our downtime and our equipment problems. Those problems that we experienced during the fourth quarter are now resolved. The customers are happy enough to show us their confidence with new POs, increasing our backlog. So I think the proof is really checking to see the other metrics, not just we have downtime, and we have a blip, a negative blip in our performance, reduced revenue because of reduced throughput. However, the customers, they are on our side. I think that's a good way to characterize it and give good color and background.

I appreciate that, Alex. And my questions were in no way driven by any doubt about you and the team's operating capability. They were just motivated by my desire to get a really good understanding of the business, that's all.

No problem.

The next question is from Mark Gomes with Pipeline.

Alex, you mentioned -- you used the word capacity when you first mentioned Stadco's issues, at least these issues being put behind them so that you can continue the task of increasing productivity. And I think you used the word capacity. Was I correct in that? And if so, could you provide some color as to what that means? Would that mean you're going to add CapEx, add more people, you're going to try to increase the amount of work that can be done at Stadco beyond this turnaround?

Well, first, beyond the turnaround, it's not beyond the turnaround. It's part of the turnaround. So I would characterize it that way, right? And then the specifics that I was talking about, I was talking about there has been and will continue to be significant work on repair and also significant work on rebuild of Stadco's equipment. Those are two different things with that significant work focused on enhancing our capabilities of the machines as well as enhancing capacity and throughput. I hope that's more clear.

It is. Do you anticipate that unanticipated CapEx spending, significant CapEx spending would be required to accomplish that goal over and above what you might have expected a few months ago?

Well, certainly, this fourth quarter blip with multiple downtime on multiple machines was not anticipated. Will I run into it again? Maybe. Am I doing the right things to anticipate and see what I can avoid? Yes.

I guess my question really was, was this a setback in terms of your expectations of CapEx requirements going forward?

I'm not sure I get it.

Well, you have plans for maybe adding equipment. Obviously, there's always CapEx spending. And I'm just curious if your anticipated CapEx spending forecast change significantly as a result of what happened at Stadco over the last few months.

No.

Okay. And then final question, we're two weeks before the end of this current quarter. You're exuding, I think, a good amount of confidence on this call. Would the operations that have occurred for this point in the quarter contributed to the confidence you're exuding on this call?

Apparently, you and Ross are in cahoots to try to get me to forecast.

Well, it's not a forecast if 2.5 months have already occurred, but your point is taken. But the question stands.

The question does stand. It shall all be revealed in time.

The next question is from Ross Taylor with ARS Investment Partners.

Alex, a couple of things. Now that you wanted to address. A number of calls ago, you indicated you felt that Stadco could achieve margins in line with those that you're seeing at Ranor. Now you've executed really well at Ranor. And in fact, if this company was only Ranor right now, it would probably be worth a lot more than it is at Stadco, although I do think Stadco adds tremendous value to the business. How long is it going to take you to get these margins at Stadco up towards the neighborhood of Ranor? You're currently less than half.

That's a question -- that's the question, isn't it? I don't know how to answer the question because I don't know the answer, how long is it going to take.

Do you still believe that it's achievable in, let's say, a standard investment horizon, which is 12 to 24 months?

Well, since this is a couple of custom subsidiaries, I would venture to say that the counterpoint is that this is a nonstandard look at two nonstandard companies. But I think also with the customer confidence at the level where it's at, we need to tactically execute. And we need to just continue our focus, divide and conquer, eat this elephant one bite at a time. I may be overreaching in the answer, but I'm -- I think what I'm trying to say is a couple of calls ago, I expressed the belief that Stadco can reach -- what did we just say? Can reach Ranor-like margins.

Ranor-like margins.

I'm just paraphrasing, but that belief is there.

And as I asked, is that a belief that's achievable inside? And one of the frustrations I think investors have, and there are a number of them here is that you are -- we basically have been willing to make a trade where we get really inferior Investor Relations for what's supposed to be superior operating execution. The execution at Ranor fits that and justifies some level of confidence. Bluntly, what's going on at Stadco does not. And as I said, I think Stadco is a value-added acquisition. But at this stage, I do believe that it is not adding value for investors. So to get it to back to where it will add value, we need in a timely fashion, not awaiting for a good-go fashion. We need to get these up, the margins up meaningfully. Is this the kind of thing you look at and say -- I mean, I assume you have your internal models. Do your internal models have you getting to Ranor-like margins in the next two years for Stadco?

Are we forecasting, Tom, that in the next two years...

It's not a forecast. It's -- honestly, it's asking the veracity of a prior comment you made. I wasn't the one who said you could get them to Stadco. You did. So I'm asking now. That was months ago, quarters ago. I'm asking now, can you get them there in 24 months?

You are asking how long it’s going to take.

No, I'm asking can you get them there in 24 months? It's a different question.

Right. I don't know.

Okay. I would say I think that you need to get them there. I think you need to -- telling us that you're -- you don't fail is not what we need. We need you not to fail, which means we need to get these up and operating. We need to get the value out of this acquisition. I'd also say that you guys talked about -- Tom talked about the idea that you haven't done a lot different since you became a NASDAQ stock. I would say that's very true. And I think it's an area of great frustration with people I speak to. You really need to achieve a much more professional approach to how you handle your investors, which means you need to come up with ways whether it's finding someone on the outside to cover the stock or whether it's finding ways to get public information out there. Every piece of information I've given on this call in the past has been publicly available. I understand you have customers who don't want you to talk about their specific niche, but now you have two businesses. So one way you can start to do is talk about the company as a whole and get away from talking about specific programs and therefore running follow-ups with specific customers that you have. And I think that's really exceptionally important because if we need to make people want to own TechPrecision, and the only way they're going to want to know if they own it is that you have to basically make it easy to understand and learn about. I'd also like to ask a question of -- you focused on the idea of just the government. It's clear that Navy is well behind schedule in its submarine programs. The Air Force and the like is also behind schedule in the F-15EX, which is interestingly getting more and more press of the superior air defense squadron and interceptor. But is there -- are there plans or is there ability to basically step out and fill some of that time lag with commercial projects or other projects at this time?

So I think -- I believe that you're talking about the Navy's delay.

The Navy said -- the GAO indicated that the Navy is operating and the submarine build program is -- particularly in Virginia is operating well behind schedule because of issues with the primes.

I understand what you're saying. I'm also trying to point out, Ross, if I may, that because things are behind, there is pressure on the vendor base to put more hours in. So the -- perhaps the opposite might be true because there's a true need for acceleration. There's truly more work.

Are you saying in -- Alex, that you are finding the primes that you deal with, coming interested in pushing work on to Ranor?

I think you further define my comment, but I'm just saying that where there's a...

How I define your comments, Alex?

Well, it's the production hours, the availability of production hours. If that availability is -- if the requirement is X, is 100, and it can only be filled up to half by somebody, then somebody else needs to step up and fill the other half. There's opportunity there for custom shops like us.

So...

And I think it's evidenced also by the number of POs and the dollar amount of the POs and the strong backlog. It's not dropping.

And recognize, we do not know how many POs you get or do. That's information that's not disclosed to us. So it would be impossible for us to know that you're getting more POs. But what I'm hearing you say is that you are finding opportunities with primes to pick up business that they either they cannot execute or their suppliers cannot execute at this time. Is that correct?

There's opportunity.

Are you seizing those opportunities and converting them into revenue?

I think the backlog shows that.

Ranor shows it very well. Yes, I think Ranor does show that you're operating very well. It shows the potential of what can work on the other side. As I said, I think that we're looking at a situation where it's important at this stage that you guys because you are now a NASDAQ stock that we've got to get up there, and you've got to improve your relations. You got to help send the message, so people understand who you are and what you're doing. I think that, obviously, if we look at your business, is -- what level of capacity do you think Ranor is operating at? Did you put another shift on and increased capacity? Would that be economic? And would that be -- is the opportunity there to do that?

I'm in that zone of I'm not allowed to discuss that right now.

Okay. Well, continuing to watch. Hopefully, what you're telling me is that you are in conversations with people about increasing capacity so that you can pick up business that other people can't execute. Away from the production problems, the machine problems in -- at Stadco, is part of the problem you're running into there a lot of kind of first build early -- that you're early in programs? Or therefore, you would expect to have margins increase naturally as you run through them? I think anyone -- everyone knows in the defense business that those builds are frequently the most difficult and the lowest margin. Is that part of what's happening there? Or is it all into internal at Stadco?

Is it part of it? Sometimes it's part of it for our first article costs, yes. Is it significant? Not really. The significant blip in fourth quarter was really the equipment downtime was severe because we had multiple things all -- it was a perfect storm, unfortunately.

Do you have a thought on how much revenue you lost in Stadco and idea of if you had not had those unexpected downtimes, would you have been able to see significant improvements, say, 400, 500 basis point operating margin improvement over what you generated?

I think it's probably a good gauge, Tom, to say that we wouldn't have lost money that quarter overall, probably.

The question of revenue, I mean, I'd say...

It's not so much revenue. It's really -- it's -- it was so diminished. The throughput was so diminished that the unabsorbed part really took over. So really what we need is to really have that critical mass achieved, and we dropped below that for that quarter.

Yes, I mean, you have a combination of these two things where Q2, Q3, the revenue was up around 3.7. You get to Q4, it dropped to about 2.7.

Yes, $1 million off.

And you're not getting absorption.

Yes. That's the two things that kind of kill us.

And given the -- several years ago, a Stadco executive, I believe, indicated that Stadco made or generated $101.5 million revenue per CH-53K. I believe I read that somewhere. I'm not going to ask you to comment on that. But given that, that program is beginning to ramp and the expectation is Sikorsky's expectation appears to be that they should sell somewhere 200 or so to the Marines, 25-plus to the Israelis and 75 or more to foreign governments, shouldn't we be at that stage where that number starts to really move meaningfully higher just because of that program? Shouldn't revenues in Stadco start to reflect the progress that Sikorsky's seeing in CH-53K?

I wish it would. Should it? Well, I think there's a lot of factors that aren't in my control at Stadco. Well, that are customer-related. So I can't really comment on that.

The demand is there.

Obviously, the demand is obviously there. The PO quantities are obviously there. The funding for the POs to Stadco are all there. That's why the backlog is firm. These are firm orders. And that is a question of timing. So I just don't know how to answer it all, and I hesitate to talk about what Sikorsky is doing.

I mean, Sikorsky tells us what they're doing and maybe tells us what they have a build rate program on. So these aren't great mysteries. This is publicly available information. I understand that you have some trouble at times talking about it, but this is part of what I think we need to address and more effective shareholder relations effort is the ability to get people and point people to the publicly available information so they can make educated, informed decisions on what's happening inside this company.

The next question is from Richard Greulich with REG Capital Advisors.

First of all, Tom, thank you for the efforts you've put forward over the last several years and in dealing with, and good luck in the future.

Thank you, Richard. Appreciate that.

The -- let me -- I have several different questions. I always enjoy Ross talking because he brings up interesting points, and it allows me to have time to make more -- even more questions then. So Ranor, the gross margin was 30%. Can you see a way for margin improvement from here?

You're talking about the quarterly gross margin?

Yes.

Yes. We see improvement. We have done better than that in prior quarters. It will go up and down depending upon the mix of the product we have, is one of the major factors. The business is lumpy.

Understood. But as your business grows over the next few years, I guess my question is, can it get up to 35% on an annualized 12-month basis, do you think? That all the question.

Given the lumpiness of the business and the fits and starts between us and our customers, it's probably hard to draw that. It could be done sometimes. It could -- it depends, I think, is the best answer. Do we aim for that? Certainly.

Well, Ranor was 36% on average for this fiscal year for 2023.

Right.

So it's definitely doable.

Sure.

Okay. So if...

Ranor is at 36% for this full year.

On average.

On average. One quarter, it bumps up and down. You've got to average it out. That's what I was -- I guess I was trying to say that.

If there's increased interest perhaps on either the primes part of segmenting business from them or perhaps signing business to you from other subs...

You're going in that zone where I told Ross that I'm in that zone where I can't talk about it. I'm sorry.

Okay. That's okay. But I guess the thrust of my question, that's not evident in the backlog numbers at the end of the quarter. In other words, like the backlog was basically flat quarter-to-quarter. And so...

I understand that. What I was trying to say to Ross is -- I believe Ross was saying publicly available information indicates that the Navy is behind, right? And the evidence of our backlog is not dropping. Our backlog is not dropping and is not behind. We're maintaining, in parts gaining. That's what I was trying to contrast and say, look, there are -- there's opportunities here.

Yes. But the backlog goes -- it does go up and down.

It does go up and down but not significantly down to the point where it matches up to the publicly information that the Navy is years behind.

But you mentioned that we brought in $6 million of POs so far in this quarter.

Correct.

Which would exceed our revenue, which tends to put us back up a little bit.

That's right.

It just -- it goes -- it's not fluid. It's not a smooth...

It's not a one-to-one relationship with the delays on the Navy side versus us -- a lack of capture of new POs and new opportunities on TechPrecision side. We…

So let me point it in a slightly different direction then. So are you seeing more opportunities, let's say, for business to capture than you saw 12 months ago because of that? Just -- it's a qualitative kind of comment.

Holistically, I'm certainly not seeing less opportunity.

Okay.

Yes, that's why I was trying to characterize to Ross' earlier question also. There's no diminishing opportunity.

Yes. So let me turn to then Stadco. So you said the Stadco problems that occurred in the quarter, those have been solved. And of course, it could be others. But in solving them during the quarter, will there still be in the current quarter some impact from the problems impacting it?

Those problems that occurred last quarter are now resolved.

But will there be any lingering impact into this -- were they resolved during this -- during the current quarter or during the last quarter?

I carefully didn't talk about that because we're not done with this. So I carefully try to not forecast, not tell people and get their expectations -- setting expectations, that's not what I do. Forecasting is definitely not what I do. What I do is I find a problem, I fix a problem one at a time, and I get these things done. I can tell you that those problems are now resolved.

Okay. So let's look at SG&A expenses. Prior to the Stadco acquisition, they were running around, I think, $600,000, $700,000 a quarter. Now they're $1 million higher. So is that $1 million SG&A increase at Stadco itself?

Well, when we said they're $1 million over, I mean we had, what, six, seven months of Stadco last year. So part of the increase is the increased number of months with Stadco.

Full year.

Full year. And then also, we had a lot of onetime expense, especially earlier in the year with the acquisition. We're going through the audit last year, we're going through everything else that we had gone through. There were certain onetime expenses that we had kind of talked about before that impacted this.

But what I'm looking at...

One second, Rich. So Tom, I think what we're talking about here is that the SG&A expenses in fiscal '23 increased by $1.1 million compared to prior year.

Yes.

And this is due primarily because we included Stadco for the full 12 months.

Yes.

And the previous year did not include the full 12 months.

Right. And we’ve had…

That's the primary driver.

That is the main driver.

But I'm looking at on a quarterly basis. On a quarterly basis, before the acquisition of Stadco, SG&A, I think, was running at like $600,000, $700,000 a year. And now like, this last quarter, it's running at $1.6 million.

Yes. We were about, I think, prior to the acquisition, about -- $750,000. So we were $2.8 million to $3 million a year.

Yes, $3 million a year.

Yes. I think we had times where we were a little bit below that.

I guess I'm surprised that Stadco's SG&A is probably more than Ranor's is.

Well, there were onetime expenses.

But even right now, is what I'm saying.

No, our quarter this year was -- well, I think we've just had a lot -- we've had a lot of additional expense over the last two years that one, especially since the acquisition related to legal, accounting, even getting up, I mean, there's additional cost to get on to NASDAQ, the additional cost to do a reverse split. So there's been just a lot of activity that caused additional cost to -- yes, for the outside contractors, our outside service providers. That should start whittling away at this point.

I think we need to answer the intent of Rich's question is STADCO SG&A costing us more than expected versus Ranor. And your...

No, I don't actually...

Answer is not really. We had all these different expenses that added up. So mixed, it looked like that, but a lot of it was not related to Stadco.

It's not Stadco's SG&A.

Yes, it's acquisition-related.

Yes, that was really...

Corporate level.

Okay. The...

Just trying to -- sorry.

Okay. The prior question regarding precision industrial, are there opportunities there? Are you seeking them? Are you utilizing them?

We're certainly open to opportunities. We're not saying...

Yes. Are there some that loom for you to go after at this point?

Well, certainly. That's what I mean. I'm not saying no to them. I'm open to those opportunities. If I'm open to them, that means I'm actively pursuing, yes. That's what open means.

I know this is -- it seems like a difficult quarter to announce. But actually, I'm not rose-tinted glasses on this, but I'm actually more positive because of your comments of more opportunities that seem to be coming available as a sub with the primes. So appreciate your comments there.

Yes. Our job is to tell the truth and get the facts in front of us on these earnings calls and in our press releases. And we can't flinch from telling all of us, including myself and Tom, or also shareholders that we had a bad quarter. We need to get that out there. But also, we need to get the point out there that the customer confidence is very high to the point where the backlog is not diminishing. And we continue to secure new orders and new POs that are fully funded. It's very important to contrast that.

We have a follow-up question coming from Kris Tuttle with Blue Caterpillar.

Yes. Staying on that kind of that opportunity line of questioning. Given the relationships that you have with your customers, it seems like it would put you in a really good position to understand some needs they have that are not being met or that would give you the opportunity to make some adjacent acquisitions in the custom manufacturing space where they appreciate you and what you're doing with them. And maybe there are adjacencies that could provide small opportunities for you to make some small acquisitions that are very close to the kind of work that you're already doing. Could you comment on that?

No. I'm in that zone, Kris, that I'm not allowed to discuss that. I'm serious about...

What I'm saying...

To that requirement. I'm sorry.

No, I'm just saying would -- is that something that you guys are open to as an idea? Or do you really feel like you need to go through another few quarters of integration before you can contemplate that?

I think we are always open to good ideas. Absolutely. Tom and I and the whole entire Board, we're all open to good ideas. Absolutely.

Okay. We have no further questions. We have reached the end of the question-and-answer session. This concludes today's conference, and you may disconnect your lines at this time. Thank you.

Thank you, everyone. Have a great day.