Revenue up 33%; Margins Expand; Positive
2024 Outlook
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported
financial results for its third quarter ended October 1, 2023.
HIGHLIGHTS
─────────────────────
- Revenue for the quarter increased 33.3% year-over-year, driven
by a 73.5% increase for Sypris Electronics and a 13.8% increase for
Sypris Technologies.
- Gross profit increased 105.0% year-over-year, with an
improvement of 186.8% for Sypris Electronics and 36.2% for Sypris
Technologies.
- Gross margin for the quarter increased 420 basis points to
12.0% with an increase of 710 basis points to 18.1% for Sypris
Electronics and 120 basis points to 7.5% for Sypris
Technologies.
- Backlog increased by 8.4%, reflecting a 9.0% year-over-year
increase at Sypris Electronics after having taken into account the
significant increase in shipments during the period.
- During the quarter, Sypris Technologies announced that it had
received an order to supply 72-inch insulated joints for use in the
expansion of the Atoka Water Pipeline for the Oklahoma City Water
Utilities Trust. Shipments are expected to begin in 2023 and extend
into 2024.
- Sypris Technologies also announced that it had received an
award for specialty high-pressure closures for use in the Venture
Global CP2 LNG Export Terminal and the Venture Global CP Express
Natural Gas Pipeline Project. Shipments under this award are
anticipated to be completed by year-end 2023.
- Subsequent to quarter end, Sypris Electronics announced that it
had received a follow-on contract to manufacture advanced
integrated electronic warfare and communications avionics system
modules for an American family of single-seat, single-engine,
all-weather stealth multirole combat aircraft. The program is one
of the largest government DOD programs, and production is expected
to begin in 2023 and will continue into mid-year 2025.
- The Company updated its full-year outlook for 2023, with
revenue now expected to increase 25% year-over-year, at the lower
end of our prior guidance due to customer design changes. Gross
profit is expected to increase in line with revenue, while gross
margin is expected to approximate the prior year due to the
continuing unfavorable impact of the Mexican peso relative to the
U.S. dollar.
- The outlook for 2024 remains quite positive, reflecting a
strong backlog and the continued momentum of new contract awards
across many of the Company’s markets. Revenue for 2024 is forecast
to increase 15-20%. Gross profit is expected to increase 25-30%,
while gross margins are expected to expand 150-200 basis points
year-over-year.
────────────────────
“We were pleased with our third quarter performance, as both
operating segments reported significant growth in revenue, gross
profit, and gross margin. Our teammates have done an excellent job
navigating inflationary pressures, supply chain challenges,
customer demand volatility and currency fluctuations to position
the business for further growth and increased profitability during
the remainder of 2023,” commented Jeffrey T. Gill, President and
Chief Executive Officer.
“Backlog for Sypris Electronics increased, rising 9.0% on a
year-over-year basis. This strong backlog is expected to support
revenue growth over the balance of this year and 2024. Customer
funding has already been secured for a portion of these key
programs, which enables us to procure inventory under multi-year
purchase orders to mitigate future supply chain issues.
“Overall demand from customers serving the automotive,
commercial vehicle, sport utility and off-highway markets has
remained stable. We continue to invest in new equipment and drive
continuous improvement initiatives to support more cost-efficient
operations, which will help offset headwinds for our automotive and
commercial vehicle components as our customers adjust inventory
levels to align with OEM build schedules.
“Shipments of Sypris Technologies energy products increased
27.3% year-over-year, while orders during the quarter increased
24.1% sequentially. With open quotes outstanding on several large
projects both domestically and internationally, additional
opportunities for growth may exist with these and other projects in
support of elevated domestic natural gas production and in adjacent
markets to further diversify our industry and customer
portfolios.”
Third Quarter Results
The Company reported revenue of $33.6 million for the third
quarter of 2023, compared to $25.2 million for the prior-year
comparable period. Additionally, the Company reported a net loss of
$0.6 million, or $0.03 per share, compared to a net loss of $2.2
million, or $0.10 per share for the prior-year period. Results for
the quarter reflected the unfavorable impact of the appreciation of
the Mexican peso relative to the U.S. dollar.
For the nine months ended October 1, 2023, the Company reported
revenue of $101.5 million compared with $80.4 million for the first
nine months of 2022. The Company reported a net loss of $0.5
million, or $0.02 per share compared with a net loss of $2.6
million, or $0.12 per share, for the prior-year period.
Sypris Technologies
Revenue for Sypris Technologies increased to $19.3 million in
the third quarter of 2023, compared to $17.0 million for the
prior-year period. Commercial vehicle component shipments and
energy-related product sales both increased during the quarter.
Gross profit for the third quarter of 2023 was $1.5 million, or
7.5% of revenue, compared to $1.1 million, or 6.3% of revenue, for
the same period in 2022. The strength of the Mexican peso relative
to the US dollar had a negative impact of $0.8 million on gross
profit when compared to the prior-year period.
Sypris Electronics
Revenue for Sypris Electronics increased to $14.2 million in the
third quarter of 2023 compared to $8.2 million for the prior-year
period. Shipments of communications products increased
significantly during the quarter, driving the increase in revenue.
Additionally, shipments under two follow-on programs began ramping
during the quarter and contributed to the growth over the
prior-year comparable period. Supply chain constraints and delays
in certain customer approvals limited shipments and revenue from
certain programs during the quarter, while also contributing to a
$12.0 sequential increase in inventory. Gross profit for the third
quarter of 2023 was $2.6 million, or 18.1% of revenue, compared to
$0.9 million, or 11.0% of revenue, for the same period in 2022.
Margins improved on higher volume, favorable mix, and cost savings
on certain component purchases.
Outlook
Commenting on the future, Mr. Gill added, “Demand from customers
in the defense and communication sectors remain robust while demand
also remains strong from customers serving the automotive and sport
utility markets. Similarly, demand from energy market customers
remains higher than in the prior year and continues to move in the
right direction.
“We have updated our outlook for 2023 to include a 25% growth in
the top line, which is at the lower end of our previous guidance.
Gross profit is expected to increase in line with revenue, while
the continuing unfavorable impact of the Mexican peso relative to
the U.S. dollar and changes in the revenue mix are anticipated to
impact margin for the full year.
“With a strong backlog, new program wins and long-term contract
extensions in place, we are confident that 2024 has the potential
to be very positive for Sypris. In our initial outlook for 2024, we
expect the top line to increase 15-20% year-over-year as a result
of the combined strength of our backlog for Sypris Electronics,
increasing orders for our energy products and anticipated new
program wins for Sypris Technologies, partially offset by the
anticipated 13.4% decline in the commercial vehicle market. We also
expect gross profit to increase 25-30%, while gross margins are
expected to expand 150 to 200 basis points in 2024 on a more
favorable revenue mix, improved operational performance and more
favorable foreign exchange rates.”
Webcast and Conference Call Information
Sypris Solutions will host a listen only conference call to
discuss the Company's financial results today, November 15, 2023,
at 9:00 a.m. (Eastern Time). To listen to the call, participants
should dial (833) 316-0560 approximately 10 minutes prior to the
start of the call (ask to be joined into the Sypris Solutions, Inc.
call).
The live broadcast of Sypris’ quarterly conference call will
also be available online at www.sypris.com on November 15, 2023,
beginning at 9:00 a.m. (Eastern Time). The online replay will be
available at approximately 11:00 a.m. (Eastern Time) and continue
for 30 days. Related presentation materials will be posted to the
“Investor Information” section of the Company’s website at
www.sypris.com, located under the sub-heading “Upcoming Events,”
prior to the call.
About Sypris Solutions
Sypris Solutions is a diversified manufacturing and engineering
services company serving the defense, transportation,
communications, and energy industries. For more information about
Sypris Solutions, visit its Web site at www.sypris.com.
Forward Looking Statements
This press release contains “forward-looking” statements
within the meaning of the federal securities laws. Forward-looking
statements include our plans and expectations of future financial
and operational performance. Each forward-looking statement herein
is subject to risks and uncertainties, as detailed in our most
recent Form 10-K and Form 10-Q and other SEC filings. Briefly,
we currently believe that such risks also include the following:
the fees, costs and supply of, or access to, debt, equity capital,
or other sources of liquidity; our failure to achieve and maintain
profitability on a timely basis by steadily increasing our revenues
from profitable contracts with a diversified group of customers,
which would cause us to continue to use existing cash resources or
require us to sell assets to fund operating losses; risks of
foreign operations, including foreign currency exchange rate risk
exposure, which could impact our operating results; cost, quality
and availability or lead times of raw materials such as steel,
component parts (especially electronic components), natural gas or
utilities including increased cost relating to inflation;
dependence on, retention or recruitment of key employees and highly
skilled personnel and distribution of our human capital; the cost
and availability of full-time accounting personnel with technical
accounting knowledge to execute, review and approve all aspects of
the financial statement close and reporting process; the cost,
quality, timeliness, efficiency and yield of our operations and
capital investments, including the impact of inflation, tariffs,
product recalls or related liabilities, employee training, working
capital, production schedules, cycle times, scrap rates, injuries,
wages, overtime costs, freight or expediting costs; volatility of
our customers’ forecasts and our contractual obligations to meet
current scheduling demands and production levels, which may
negatively impact our operational capacity and our effectiveness to
integrate new customers or suppliers, and in turn cause increases
in our inventory and working capital levels; our failure to
successfully complete final contract negotiations with regard to
our announced contract “orders”, “wins” or “awards”; significant
delays or reductions due to a prolonged continuing resolution or
U.S. government shutdown reducing the spending on products and
services that Sypris Electronics provides; adverse impacts of new
technologies or other competitive pressures which increase our
costs or erode our margins; breakdowns, relocations or major
repairs of machinery and equipment, especially in our Toluca Plant;
the termination or non-renewal of existing contracts by customers;
the costs and supply of insurance on acceptable terms and with
adequate coverage; the costs of compliance with our auditing,
regulatory or contractual obligations; pension valuation, health
care or other benefit costs; our reliance on revenues from
customers in the oil and gas and automotive markets, with
increasing consumer pressure for reductions in environmental
impacts attributed to greenhouse gas emissions and increased
vehicle fuel economy; our failure to successfully win new business
or develop new or improved products or new markets for our
products; war, geopolitical conflict, terrorism, political
uncertainty, or disruptions resulting from the Russia-Ukraine war
or the Israel and Gaza conflict, including arising out of
international sanctions, foreign currency fluctuations and other
economic impacts; our reliance on a few key customers, third party
vendors and sub-suppliers; inventory valuation risks including
excessive or obsolescent valuations or price erosions of raw
materials or component parts on hand or other potential
impairments, non-recoverability or write-offs of assets or deferred
costs; disputes or litigation involving governmental, supplier,
customer, employee, creditor, stockholder, product liability,
warranty or environmental claims; failure to adequately insure or
to identify product liability, environmental or other insurable
risks; unanticipated or uninsured product liability claims,
disasters, public health crises, losses or business risks; labor
relations; strikes; union negotiations; costs associated with
environmental claims relating to properties previously owned; our
inability to patent or otherwise protect our inventions or other
intellectual property rights from potential competitors or fully
exploit such rights which could materially affect our ability to
compete in our chosen markets; changes in licenses, security
clearances, or other legal rights to operate, manage our work force
or import and export as needed; cyber security threats and
disruptions, including ransomware attacks on our systems and the
systems of third-party vendors and other parties with which we
conduct business, all of which may become more pronounced in the
event of geopolitical conflicts and other uncertainties, such as
the conflict in Ukraine; our ability to maintain compliance with
the Nasdaq listing standards minimum closing bid price; risks
related to owning our common stock, including increased volatility;
possible public policy response to a public health emergency,
including U. S or foreign government legislation or restrictions
that may impact our operations or supply chain; or unknown risks
and uncertainties. We undertake no obligation to update our
forward-looking statements, except as may be required by law.
SYPRIS SOLUTIONS, INC. Financial Highlights (In
thousands, except per share amounts)
Three Months Ended October 1,
October 2,
2023
2022
(Unaudited) Revenue
$
33,581
$
25,199
Net loss
$
(555
)
$
(2,242
)
Loss per common share: Basic
$
(0.03
)
$
(0.10
)
Diluted
$
(0.03
)
$
(0.10
)
Weighted average shares outstanding: Basic
21,880
21,740
Diluted
21,880
21,740
Nine Months Ended October 1,
October 2,
2023
2022
(Unaudited) Revenue
$
101,488
$
80,409
Net loss
$
(517
)
$
(2,634
)
Loss per common share: Basic
$
(0.02
)
$
(0.12
)
Diluted
$
(0.02
)
$
(0.12
)
Weighted average shares outstanding: Basic
21,848
21,716
Diluted
21,848
21,716
Sypris Solutions, Inc. Consolidated
Statements of Operations (in thousands, except for per share
data) Three Months
Ended Nine Months Ended October 1,
October 2, October 1, October
2,
2023
2022
2023
2022
(Unaudited) (Unaudited) Net revenue:
Sypris Technologies
$
19,337
$
16,990
$
58,895
$
52,096
Sypris Electronics
14,244
8,209
42,593
28,313
Total net revenue
33,581
25,199
101,488
80,409
Cost of sales: Sypris Technologies
17,878
15,919
52,790
45,762
Sypris Electronics
11,663
7,309
35,827
24,387
Total cost of sales
29,541
23,228
88,617
70,149
Gross profit: Sypris Technologies
1,459
1,071
6,105
6,334
Sypris Electronics
2,581
900
6,766
3,926
Total gross profit
4,040
1,971
12,871
10,260
Selling, general and administrative
4,170
3,574
11,619
10,700
Operating (loss) income
(130
)
(1,603
)
1,252
(440
)
Interest expense, net
127
273
531
784
Other expense, net
199
382
783
655
Loss before taxes
(456
)
(2,258
)
(62
)
(1,879
)
Income tax expense (benefit), net
99
(16
)
455
755
Net loss
$
(555
)
$
(2,242
)
$
(517
)
$
(2,634
)
Loss per common share: Basic
$
(0.03
)
$
(0.10
)
$
(0.02
)
$
(0.12
)
Diluted
$
(0.03
)
$
(0.10
)
$
(0.02
)
$
(0.12
)
Dividends declared per common share
$
-
$
-
$
-
$
-
Weighted average shares outstanding:
Basic
21,880
21,740
21,848
21,716
Diluted
21,880
21,740
21,848
21,716
Sypris Solutions, Inc. Consolidated Balance
Sheets (in thousands, except for share data)
October 1, December 31,
2023
2022
(Unaudited) (Note) ASSETS
Current assets: Cash and cash equivalents
$
8,409
$
21,648
Accounts receivable, net
10,777
8,064
Inventory, net
76,669
42,133
Other current assets
9,284
8,133
Total current assets
105,139
79,978
Property, plant and equipment, net
16,659
15,532
Operating lease right-of-use assets
3,584
4,251
Other assets
4,511
4,383
Total assets
$
129,893
$
104,144
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
25,553
$
17,638
Accrued liabilities
56,052
33,316
Operating lease liabilities, current portion
1,120
1,168
Finance lease obligations, current portion
1,168
1,102
Equipment financing obligations, current portion
624
398
Working capital line of credit
500
-
Note payable - related party, current portion
-
2,500
Total current liabilities
85,017
56,122
Operating lease liabilities, net of current
portion
2,890
3,710
Finance lease obligations, net of current portion
1,834
2,536
Equipment financing obligations, net of current portion
1,429
738
Note payable - related party, net of current portion
3,993
3,989
Other liabilities
13,319
17,474
Total liabilities
108,482
84,569
Stockholders’ equity: Preferred stock, par value
$0.01 per share, 975,150 shares authorized; no shares
issued
-
-
Series A preferred stock, par value $0.01 per share, 24,850 shares
authorized; no shares issued
-
-
Common stock, non-voting, par value $0.01 per share, 10,000,000
shares authorized; no shares issued
-
-
Common stock, par value $0.01 per share, 30,000,000 shares
authorized; 22,465,485 shares issued and 22,454.649
outstanding in 2023 and 22,175,664 shares issued and
22,175,645 outstanding in 2022
224
221
Additional paid-in capital
156,044
155,535
Accumulated deficit
(115,853
)
(115,336
)
Accumulated other comprehensive loss
(19,004
)
(20,845
)
Treasury stock, 10,835 in 2023 and 19 in 2022
-
-
Total stockholders’ equity
21,411
19,575
Total liabilities and stockholders’ equity
$
129,893
$
104,144
Note: The balance sheet at December 31, 2022,
has been derived from the audited consolidated financial statements
at that date but does not include all information and footnotes
required by accounting principles generally accepted in the United
States for a complete set of financial statements.
Sypris
Solutions, Inc. Consolidated Cash Flow Statements (in
thousands) Nine Months Ended
October 1, October 2,
2023
2022
(Unaudited) Cash flow from operating activities
Net loss
$
(517
)
$
(2,634
)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities: Depreciation
and amortization
2,392
2,302
Deferred income taxes
(56
)
451
Stock-based compensation expense
615
512
Deferred loan costs recognized
3
4
Net loss on the sale of assets
-
4
Provision for excess and obsolete inventory
(22
)
92
Non-cash lease expense
667
690
Other noncash items
178
82
Contributions to pension plans
(10
)
(60
)
Changes in operating assets and liabilities: Accounts
receivable
(2,845
)
(528
)
Inventory
(34,146
)
(5,062
)
Prepaid expenses and other assets
(464
)
(2,215
)
Accounts payable
7,841
3,877
Accrued and other liabilities
18,195
10,780
Net cash (used in) provided by operating activities
(8,169
)
8,295
Cash flows from investing activities: Capital
expenditures
(1,890
)
(2,811
)
Proceeds from sale of assets
-
6
Net cash used in investing activities
(1,890
)
(2,805
)
Cash flows from financing activities: Proceeds from
equipment financing obligations
210
-
Proceeds from working capital line of credit
500
-
Principal payments on finance lease obligations
(845
)
(725
)
Principal payments on equipment financing obligations
(387
)
(253
)
Principal payments on Note Payable - related party
(2,500
)
-
Indirect repurchase of shares for minimum statutory tax
withholdings
(104
)
(40
)
Net cash used in financing activities
(3,126
)
(1,018
)
Effect of exchange rate changes on cash balances
(54
)
382
Net (decrease) increase in cash and cash equivalents
(13,239
)
4,854
Cash and cash equivalents at beginning of period
21,648
11,620
Cash and cash equivalents at end of period
$
8,409
$
16,474
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231115621670/en/
Richard L Davis Chief Financial Officer (502)
329-2000
Sypris Solutions (NASDAQ:SYPR)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Sypris Solutions (NASDAQ:SYPR)
Historical Stock Chart
Von Mai 2023 bis Mai 2024