Growth Continues; Revenue Up 10%; Backlog
Over $110 Million
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported
financial results for its first quarter ended March 31, 2024.
HIGHLIGHTS
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- The Company’s first quarter 2024 consolidated
revenue increased 10.1% to $35.6 million compared with the prior
year quarter, representing the 11th quarter of double-digit
year-over-year growth during the past 12 quarterly periods.
- Revenue for Sypris Electronics increased 34.5%
year-over-year and 9.5% sequentially, reflecting the continued
growth in shipments under recently announced contracts with
customers serving the markets for electronic warfare, aircraft and
missile avionics, and subsea communications.
- Revenue for Sypris Technologies decreased 5.9%
year-over-year to $18.4 million, reflecting the short-term timing
of certain energy, specialty automotive and ATV product
shipments.
- Orders for Sypris Technologies energy products
increased during the first quarter compared to the same period in
2023, driving backlog up 50.1% from year end.
- During the quarter, Sypris Technologies
announced that it had received an award to supply specialty
high-pressure closures for use in a large international liquified
natural gas project. The closures will be integrated into the
filtration systems of the carbon capture and storage facilities of
the project. Production is expected to be completed during
2024.
- In May, Sypris Electronics announced that it
received releases for an additional four systems under a multi-year
production contract that was first announced in 2022. The modules
to be produced by Sypris will be integrated into an electronic
warfare improvement program for the U.S. Navy. Deliveries are
expected to begin in 2024.
- The Company updated its full-year outlook for
2024, maintaining the expected increase in revenue at 10%-15%
year-over-year, while adjusting the gross margin guidance to a
100-125 basis point increase, reflecting the impact of unfavorable
foreign currency exchange rates and program ramp costs.
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“We were pleased with the year-over-year revenue growth at
Sypris Electronics,” commented Jeffrey T. Gill, President and Chief
Executive Officer. “The backlog at Sypris Electronics exceeds $100
million and is expected to support growth through the remainder of
2024 and beyond. 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.
“The financial results of Sypris Electronics were impacted by
additional costs related to two large programs that ramped during
the quarter. As these programs stabilize, we anticipate increasing
sequential margins for the remainder of the year.
“Demand from Sypris Technologies customers serving the
automotive, commercial vehicle, sport utility and off-highway
markets has remained relatively stable, with new product line
shipments offsetting the anticipated cyclical decline for the
commercial vehicle market. We believe that the market
diversification Sypris Technologies has accomplished over recent
years by adding new programs in the automotive, sport-utility and
off-highway markets will help offset some of this decline.
“Orders for our energy products increased during the period,
with open quotes yet to be closed still outstanding on several
large projects. Additional opportunities for growth may exist with
new global projects in support of increasing LNG demand. We are
also actively pursuing applications for our products in adjacent
markets to further diversify our industry and customer
portfolios.”
First Quarter Results
The Company reported revenue of $35.6 million for the first
quarter of 2024, compared to $32.3 million for the prior-year
comparable period. Additionally, the Company reported a net loss of
$2.2 million, or $0.10 per share, as compared to a net loss of $0.2
million, or $0.01 per share, for the prior-year period.
Sypris Technologies
Revenue for Sypris Technologies was $18.4 million in the first
quarter of 2024 compared to $19.5 million for the prior-year
period, reflecting the short-term timing of certain energy,
specialty automotive and ATV product shipments. Gross profit for
the first quarter of 2024 was $2.1 million, or 11.2% of revenue,
compared to $2.6 million, or 13.5% of revenue, for the same period
in 2023. Gross profit for the first quarter of 2024 was negatively
impacted by lower volumes and an unfavorable mix. Additionally,
gross profit was negatively impacted by foreign currency exchange
rates for our Mexican subsidiary, resulting in a decrease of $0.4
million.
Sypris Electronics
Revenue for Sypris Electronics was $17.2 million in the first
quarter of 2024 compared to $12.8 million for the prior-year
period. Increased shipments for two follow-on programs contributed
to the growth over the prior-year comparable period. Gross profit
for the first quarter of 2024 was $0.8 million, or 4.8% of revenue,
compared to $1.5 million, or 11.9% of revenue, for the same period
in 2023 primarily due to additional costs incurred on two programs
that ramped production during the period.
Outlook
Commenting on the future, Mr. Gill added, “While new program
launch costs and an unfavorable mix impacted our first quarter 2024
results, demand from customers serving the automotive, commercial
vehicle and sport utility markets remains positive. Similarly,
demand from customers serving the markets for electronic warfare,
aircraft and missile avionics, secure and subsea communications,
and ground-based radar remain robust, while the outlook for the
energy market continues to move in the right direction.
“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. As a result, we continue to expect
revenue to increase 10-15% year-over-year. We expect to achieve
gross margin expansion in the range of 100 to 125 basis points with
gross profit forecast to increase 20-25% in 2024.”
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 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; 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; 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; the termination or non-renewal
of existing contracts by customers; 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 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, or 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 March 31, April 2,
2024
2023
(Unaudited) Revenue
$
35,553
$
32,292
Net loss
$
(2,221
)
$
(175
)
Loss per common share: Basic
$
(0.10
)
$
(0.01
)
Diluted
$
(0.10
)
$
(0.01
)
Weighted average shares outstanding: Basic
21,965
21,796
Diluted
21,965
21,796
Sypris Solutions, Inc. Consolidated
Statements of Operations (in thousands, except for per share
data) Three Months Ended March 31,
April 2,
2024
2023
(Unaudited) Net revenue: Sypris Technologies
$
18,350
$
19,500
Sypris Electronics
17,203
12,792
Total net revenue
35,553
32,292
Cost of sales: Sypris Technologies
16,299
16,861
Sypris Electronics
16,370
11,270
Total cost of sales
32,669
28,131
Gross profit: Sypris Technologies
2,051
2,639
Sypris Electronics
833
1,522
Total gross profit
2,884
4,161
Selling, general and administrative
4,258
3,745
Operating (loss) income
(1,374
)
416
Interest expense, net
318
226
Other expense, net
341
71
(Loss) income before taxes
(2,033
)
119
Income tax expense, net
188
294
Net loss
$
(2,221
)
$
(175
)
Loss per common share: Basic
$
(0.10
)
$
(0.01
)
Diluted
$
(0.10
)
$
(0.01
)
Dividends declared per common share
$
-
$
-
Weighted average shares outstanding: Basic
21,965
21,796
Diluted
21,965
21,796
Sypris Solutions, Inc. Consolidated Balance
Sheets (in thousands, except for share data)
March 31, December 31,
2024
2023
(Unaudited) (Note) ASSETS Current assets: Cash
and cash equivalents
$
8,096
$
7,881
Accounts receivable, net
13,093
8,929
Inventory, net
70,890
77,314
Other current assets
10,777
9,743
Total current assets
102,856
103,867
Property, plant and equipment, net
16,706
17,133
Operating lease right-of-use assets
4,617
3,309
Other assets
4,866
5,033
Total assets
$
129,045
$
129,342
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
26,530
$
26,737
Accrued liabilities
56,314
56,232
Operating lease liabilities, current portion
1,122
1,068
Finance lease obligations, current portion
1,404
1,327
Equipment financing obligations, current portion
591
618
Working capital line of credit
500
500
Note payable - related party, current portion
2,000
-
Total current liabilities
88,461
86,482
Operating lease liabilities, net of current portion
3,868
2,642
Finance lease obligations, net of current portion
1,647
1,852
Equipment financing obligations, net of current portion
1,197
1,333
Note payable - related party, net of current portion
6,980
6,484
Other liabilities
6,043
8,082
Total liabilities
108,196
106,875
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; 22,475,484 shares issued and 22,430,092 outstanding in
2024 and 22,465,485 shares issued and 22,459,649 outstanding in
2023
225
224
Additional paid-in capital
156,439
156,242
Accumulated deficit
(119,153
)
(116,932
)
Accumulated other comprehensive loss
(16,662
)
(17,067
)
Treasury stock, 45,392 in 2024 and 5,835 in 2023
-
-
Total stockholders’ equity
20,849
22,467
Total liabilities and stockholders’ equity
$
129,045
$
129,342
Note: The balance sheet at December 31, 2023, 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) Three Months Ended March 31,
April 2,
2024
2023
(Unaudited) Cash flows from operating activities: Net loss
$
(2,221
)
$
(175
)
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization
845
774
Deferred income taxes
39
(136
)
Stock-based compensation expense
197
263
Deferred loan costs amortized
2
2
Provision for excess and obsolete inventory
73
(87
)
Non-cash lease expense
293
179
Other noncash items
69
33
Contributions to pension plans
-
(10
)
Changes in operating assets and liabilities: Accounts receivable
(4,326
)
(2,691
)
Inventory
6,405
(9,942
)
Prepaid expenses and other assets
(866
)
154
Accounts payable
(208
)
3,118
Accrued and other liabilities
(2,011
)
7,277
Net cash used in operating activities
(1,709
)
(1,241
)
Cash flows from investing activities: Capital expenditures
(316
)
(708
)
Net cash used in investing activities
(316
)
(708
)
Cash flows from financing activities: Proceeds from equipment
financing obligations
198
210
Proceeds from Note Payable - related party
2,500
-
Principal payments on finance lease obligations
(324
)
(271
)
Principal payments on equipment financing obligations
(164
)
(95
)
Indirect repurchase of shares for minimum statutory tax
withholdings
-
(48
)
Net cash provided by (used in) financing activities
2,210
(204
)
Effect of exchange rate changes on cash balances
30
(14
)
Net increase (decrease) increase in cash and cash equivalents
215
(2,167
)
Cash and cash equivalents at beginning of period
7,881
21,648
Cash and cash equivalents at end of period
$
8,096
$
19,481
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240514303861/en/
Richard L. Davis Chief Financial Officer (502)
329-2000
Sypris Solutions (NASDAQ:SYPR)
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