Ross Taylor: Okay. My guess is that you probably have a forecast for it somewhere, but I won’t go into that. I would assume your Board wants to understand where things are going and how they — how quickly they turn. You have talked about that. You guys basically have almost a non-existing investor relations effort. It’s an area that really definitely needs to be improved. We get a lot of the line that you can’t talk about things. But to me, the business here is while very complicated to execute, not that complicated to understand at a high level. You have two divisions. Each of these divisions has a series of known programs that it’s involved in. Each of those divisions is watching known programs ramp. There are things that are going to drive business higher in each of them.
We look at it figuring each business, each division, Stadco and Ranor should be able to produce $35 million, $40 million, $45 million in revenues. Those divisions should — you’ve shown you can produce high 30s operating margins in Ranor. My assumption is you can produce probably high 20s towards 30 in Stadco. If you get that, you get a blended rate around 32% to 33%. You have a business that would therefore produce operating income of $24 million to $28 million annually. You have your SG&A and other expenses. You back that down, you get $14 million to $18 million and that should be free cash flow annually, which comes out to $1.5 to $2 a share in free cash flow. I actually just laid out your thesis and I did not want to talk about something that any of your customers will be upset about.
I didn’t reference any programs, although the programs are public knowledge. I didn’t reference run rates, although the demanded run rates for these programs are public knowledge. I didn’t comment on the pressure to increase the run rate in one program, but that’s public knowledge as well. I think you need to do a better job. You’re really running three turnarounds here, Alex, in my mind. You’re running the turnaround at Ranor at which you have succeeded wonderfully. You’re running a turnaround at Stadco. It hasn’t gained traction yet. But from listening to you, you’re comfortable and confident that it will gain traction. And when it does, I would expect we’ll see a rapid improvement there just as we saw in Ranor. But the third one you’re running is you’re the CEO of TechPrecision.
And while you said the stock has tripled since this team came together, the fact is this stock is basically showing at or under the levels that sold at in each of the last two, three years, even going back to 2019. And that’s not acceptable. And that’s part of what’s causing this whole effort and the failure to actually better engage your shareholders is part of why that’s happening is because it’s increasingly difficult to get professional investors. You uplisted, I would believe, to attract professional investors, people like myself. But you’re not going to find yourself able to do that until you learn a bigger way to engage, you don’t have to talk specifics. You don’t have to give things away. But as I just demonstrated, you can talk about the TechPrecision story and not say anything that Electric Boat or Sikorsky or Boeing or Newport News or anyone else would be upset with.
So I just want to strongly encourage you to make that effort because that’s one of the three turnarounds, and that’s judged not by you and not by the Board. That’s judged by the market. And the market will tell us when you’ve succeeded in that the greatest of all turnarounds that you’re embodied with, which is that of being CEO of TechPrecision. Thank you.
Alexander Shen: Thank you.
Operator: The next question comes from Kris Tuttle with Blue Caterpillar Investments. Please proceed.
Kris Tuttle: Hi, there. Can you hear me this time?
Alexander Shen: We can.
Kris Tuttle: Okay. Terrific. I did have a couple of questions. Good to see at least the numbers moving in the right direction. So that’s good. My question, one of my questions is on your input costs. I’m not sure I understand like how volatile and how changeable are they from quarter-to-quarter, year-over-year? And are those things that you have embedded in your contracts to offset. I’m just curious how you handle the volatility of the input costs if you have those.
Alexander Shen: Could you please define input further?
Kris Tuttle: Well, so anything that, I guess, is part of your cost of goods sold. Not including the people. But metals, materials, fasteners, sub components, subassemblies, those kind of things.
Alexander Shen: Okay. So predominantly, we are a custom manufacturer that our core capability is complex critical welding and fabrication and complex critical machining, those services. Not so much while you were talking about materials, metals, maybe to a certain extent, but not so much. So as far as the lever and a factor to really enhance, there’s no low-hanging fruit there.
Kris Tuttle: Okay. Yes, I understand what you’re saying. Thank you. I did want to ask again a little bit about this. You mentioned closing the gap over time. And maybe the way to ask this is, if you can imagine for a moment, your operations running at the state that you are 100% satisfied with them, are we halfway to that? Is it more or less than that? I’m just trying to get a feeling for when you look at overall operations, kind of where are you? Where is it today in relation to where you would like to see it sometime in the future?
Alexander Shen: I think we would all like me to give that answer, including myself. Whatever answer I give, it’s going to be some kind of a wrong answer. I have a hard and fast rule that we shall not forecast a business that’s lumpy enough to bite me right in the buttocks. Therefore, rendering any type of forecast on the weather is probably not a great idea. So I’m going to stick to what works. What we need to do is concentrate. And for example, there was a problem this past quarter with absorption. Well, we need to have better absorption which means we need to have better throughput to do the absorption. So the concentration needs to be blocking and tackling every day so that we have more manufacturing output to do the absorption. Otherwise, we will continue to have unabsorbed overhead at Stadco as we described earlier.
Kris Tuttle: Okay. Fair enough. I’ll leave it there and we’ll look forward to more progress down the road. Thank you.
Alexander Shen: Kris, thank you.
Operator: I’d now like to turn the floor back to Alex for any closing remarks.
Alexander Shen: Have a good day, everyone. Thank you very much.
Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.
