Sypris Reports Third Quarter Results
Backlog Up 92%; Sales Growth Forecast Up For 2023
HIGHLIGHTS
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Orders for
Sypris Electronics increased 75% during the third quarter compared to the same period in 2021, driving firm backlog up in excess of$100 million , representing a 99% increase over the prior-year period and 86% year-to-date. -
Orders for
Sypris Technologies energy products increased 33% during the third quarter compared to the same period in 2021, pushing backlog up 15% over the prior-year period and 84% year-to-date. - Revenue for the quarter decreased slightly on a year-over-year basis, reflecting the impact of supply chain shortages and disruptions on shipments, which resulted in a material reduction in planned sales for the quarter. Much of this shortfall is expected to ship in the fourth quarter.
- Gross margin for the quarter decreased from the prior year primarily reflecting the lower-than-planned shipments, production inefficiencies and sales mix.
-
On
September 6 ,Sypris Technologies announced an award for specialty high-pressure closures for use in thePermian Highway Pipeline Expansion Project , with shipments expected to be completed by year-end. The closures will range in size up to 70” in diameter and will weigh up to 20,000 pounds each. -
On
September 15 ,Sypris Technologies also announced that it had acquired the intellectual property rights for the rapid opening closure product line fromPipeline Engineering and Supply Co. Limited located in Catterick,UK . The purchase of the product line for use in oil, gas and petrochemical infrastructure projects is expected to expand our market presence inEurope ,Asia and theMiddle East . -
On
October 6 ,Sypris Electronics announced an amendment to an existing multi-year supply agreement to increase deliveries for a large, mission-criticalNavy program. The amended contract, including options, now provides for the purchase of up to$77.0 million of assemblies, representing a 39.5% increase in potential volume compared to the original base contract.Sypris also received releases for the first year of production with shipments scheduled to begin in 2023. -
On
November 10 ,Sypris Electronics also announced a follow-on award from aU.S. DOD prime contractor for a secure communications infrastructure program.Sypris will produce and test the embedded circuit card assemblies that will perform certain of the cryptographic functions for the Army Key Management System. Production is expected to begin in 2023. - The Company updated its full-year outlook for 2022, with revenue now expected to increase 15-20% year-over-year, down from prior guidance due to supply chain challenges. We expect margins to recover to prior period levels during the fourth quarter from the low reported for the current period. Cash flow from operations is expected to show double digit percentage growth reflecting favorable working capital changes during the year.
- The outlook for 2023 remains quite positive, reflecting the continued momentum of new contract awards and strong backlog across many of the Company’s markets. Revenue for 2023 is forecast to increase 20-25% and gross margins are expected to expand 150-200 basis points year-over-year.
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“Our results for the quarter were impacted by continued supply chain disruptions as well as production inefficiencies driven by volatile customer demand schedules. We continue to work with our customers and vendors to navigate the market conditions and identify solutions to satisfy our customers and the end users of our products,” commented
“Backlog for
“Overall demand from customers serving the automotive, commercial vehicle, sport utility and off-highway markets has remained somewhat stable, with new product line shipments offsetting headwinds for automotive and commercial vehicle components as our customers adjust inventory levels to align with OEM build schedules.
“We continue to invest in new equipment, maintain or upgrade existing assets, and drive continuous improvement initiatives to add capacity and support more cost-efficient operations in the future. The successful extension of long-term contracts with two of our key customers during the year supports our revenue base and provides opportunities to expand these relationships in the coming years.
“Orders for our energy products during the third quarter increased 33% year-over-year, with open quotes outstanding on several large projects. Additional opportunities for growth may exist with new projects in support of increasing rig counts over pre-pandemic levels. We are also actively pursuing applications for our products in adjacent markets to further diversify our industry and customer portfolios.”
Third Quarter Results
The Company reported revenue of
For the nine months ended
Revenue for
Revenue for
Outlook
Commenting on the future,
“We have updated our outlook to include a 15%-20% growth in the Company’s top line in 2022, which is down from our previous guidance. Additionally, changes in the revenue mix and supply chain inefficiencies are anticipated to slow margin improvement for the full year. Cash flow from operations is expected to show double digit percentage growth reflecting favorable working capital changes during the year.
“With a record backlog, new program wins and long-term contract extensions in place, we remain focused on meeting the important needs of our customers who serve defense, communications, energy, transportation, and other critical infrastructure industries. In our initial outlook for 2023, we expect the top line to increase 20-25% year-over-year as a result of the combined strength of our backlog for
Webcast and Conference Call Information
The live broadcast of Sypris’ quarterly conference call will also be available online at www.sypris.com on
About
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
Financial Highlights | ||||||||
(In thousands, except per share amounts) | ||||||||
Three Months Ended | ||||||||
2022 |
2021 |
|||||||
(Unaudited) | ||||||||
Revenue |
$ |
25,199 |
|
$ |
25,683 |
|||
Net (loss) income |
$ |
(2,242 |
) |
$ |
294 |
|||
(Loss) income per common share: | ||||||||
Basic |
$ |
(0.10 |
) |
$ |
0.01 |
|||
Diluted |
$ |
(0.10 |
) |
$ |
0.01 |
|||
Weighted average shares outstanding: | ||||||||
Basic |
|
21,740 |
|
|
21,536 |
|||
Diluted |
|
21,740 |
|
|
22,940 |
|||
Nine Months Ended | ||||||||
2022 |
2021 |
|||||||
(Unaudited) | ||||||||
Revenue |
$ |
80,409 |
|
$ |
71,634 |
|||
Net (loss) income |
$ |
(2,634 |
) |
$ |
2,487 |
|||
(Loss) income per common share: | ||||||||
Basic |
$ |
(0.12 |
) |
$ |
0.12 |
|||
Diluted |
$ |
(0.12 |
) |
$ |
0.11 |
|||
Weighted average shares outstanding: | ||||||||
Basic |
|
21,716 |
|
|
21,522 |
|||
Diluted |
|
21,716 |
|
|
22,994 |
Consolidated Statements of Operations | |||||||||||||||
(in thousands, except for per share data) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2022 |
2021 |
2022 |
2021 |
||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Net revenue: | |||||||||||||||
$ |
16,990 |
|
$ |
16,693 |
$ |
52,096 |
|
$ |
47,022 |
|
|||||
|
8,209 |
|
|
8,990 |
|
28,313 |
|
|
24,612 |
|
|||||
Total net revenue |
|
25,199 |
|
|
25,683 |
|
80,409 |
|
|
71,634 |
|
||||
Cost of sales: | |||||||||||||||
|
15,919 |
|
|
14,584 |
|
45,762 |
|
|
41,233 |
|
|||||
|
7,309 |
|
|
7,121 |
|
24,387 |
|
|
20,298 |
|
|||||
Total cost of sales |
|
23,228 |
|
|
21,705 |
|
70,149 |
|
|
61,531 |
|
||||
Gross profit: | |||||||||||||||
|
1,071 |
|
|
2,109 |
|
6,334 |
|
|
5,789 |
|
|||||
|
900 |
|
|
1,869 |
|
3,926 |
|
|
4,314 |
|
|||||
Total gross profit |
|
1,971 |
|
|
3,978 |
|
10,260 |
|
|
10,103 |
|
||||
Selling, general and administrative |
|
3,574 |
|
|
3,007 |
|
10,700 |
|
|
9,305 |
|
||||
Operating (loss) income |
|
(1,603 |
) |
|
971 |
|
(440 |
) |
|
798 |
|
||||
Interest expense, net |
|
273 |
|
|
211 |
|
784 |
|
|
644 |
|
||||
Other expense, net |
|
382 |
|
|
132 |
|
655 |
|
|
498 |
|
||||
Forgiveness of PPP Loan and related interest |
|
- |
|
|
- |
|
- |
|
|
(3,599 |
) |
||||
(Loss) income before taxes |
|
(2,258 |
) |
|
628 |
|
(1,879 |
) |
|
3,255 |
|
||||
Income tax (benefit) expense, net |
|
(16 |
) |
|
334 |
|
755 |
|
|
768 |
|
||||
Net (loss) income |
$ |
(2,242 |
) |
$ |
294 |
$ |
(2,634 |
) |
$ |
2,487 |
|
||||
(Loss) income per common share: | |||||||||||||||
Basic |
$ |
(0.10 |
) |
$ |
0.01 |
$ |
(0.12 |
) |
$ |
0.12 |
|
||||
Diluted |
$ |
(0.10 |
) |
$ |
0.01 |
$ |
(0.12 |
) |
$ |
0.11 |
|
||||
Dividends declared per common share |
$ |
- |
|
$ |
- |
$ |
- |
|
$ |
- |
|
||||
Weighted average shares outstanding: | |||||||||||||||
Basic |
|
21,740 |
|
|
21,536 |
|
21,716 |
|
|
21,522 |
|
||||
Diluted |
|
21,740 |
|
|
22,940 |
|
21,716 |
|
|
22,994 |
|
Consolidated Balance Sheets | ||||||||
(in thousands, except for share data) | ||||||||
2022 |
2021 |
|||||||
(Unaudited) | (Note) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
16,474 |
|
$ |
11,620 |
|
||
Accounts receivable, net |
|
8,852 |
|
|
8,467 |
|
||
Inventory, net |
|
35,177 |
|
|
30,100 |
|
||
Other current assets |
|
7,508 |
|
|
5,868 |
|
||
Total current assets |
|
68,011 |
|
|
56,055 |
|
||
Property, plant and equipment, net |
|
15,076 |
|
|
14,140 |
|
||
Operating lease right-of-use assets |
|
4,451 |
|
|
5,140 |
|
||
Other assets |
|
4,555 |
|
|
4,170 |
|
||
Total assets |
$ |
92,093 |
|
$ |
79,505 |
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable |
$ |
15,885 |
|
$ |
11,962 |
|
||
Accrued liabilities |
|
20,763 |
|
|
19,646 |
|
||
Operating lease liabilities, current portion |
|
1,141 |
|
|
1,063 |
|
||
Finance lease obligations, current portion |
|
1,038 |
|
|
983 |
|
||
Equipment financing obligations, current portion |
|
369 |
|
|
336 |
|
||
Note payable - related party, current portion |
|
2,500 |
|
|
- |
|
||
Total current liabilities |
|
41,696 |
|
|
33,990 |
|
||
Operating lease liabilities, net of current portion |
|
4,011 |
|
|
4,878 |
|
||
Finance lease obligations, net of current portion |
|
2,684 |
|
|
3,469 |
|
||
Equipment financing obligations, net of current portion |
|
866 |
|
|
868 |
|
||
Note payable - related party, net of current portion |
|
3,988 |
|
|
6,484 |
|
||
Other liabilities |
|
21,343 |
|
|
10,530 |
|
||
Total liabilities |
|
74,588 |
|
|
60,219 |
|
||
Stockholders’ equity: | ||||||||
Preferred stock, par value |
||||||||
no shares issued |
|
- |
|
|
- |
|
||
Series A preferred stock, par value |
||||||||
authorized; no shares issued |
|
- |
|
|
- |
|
||
Common stock, non-voting, par value |
||||||||
authorized; no shares issued |
|
- |
|
|
- |
|
||
Common stock, par value |
||||||||
22,150,684 shares issued and 22,150,665 outstanding in 2022 and | ||||||||
21,864,743 shares issued and 21,864,724 outstanding in 2021 |
|
221 |
|
|
218 |
|
||
Additional paid-in capital |
|
155,374 |
|
|
154,904 |
|
||
Accumulated deficit |
|
(115,476 |
) |
|
(112,842 |
) |
||
Accumulated other comprehensive loss |
|
(22,614 |
) |
|
(22,994 |
) |
||
|
- |
|
|
- |
|
|||
Total stockholders’ equity |
|
17,505 |
|
|
19,286 |
|
||
Total liabilities and stockholders’ equity |
$ |
92,093 |
|
$ |
79,505 |
|
||
Note: The balance sheet at |
Consolidated Cash Flow Statements | ||||||||
(in thousands) | ||||||||
Nine Months Ended | ||||||||
2022 |
2021 |
|||||||
(Unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net (loss) income |
$ |
(2,634 |
) |
$ |
2,487 |
|
||
Adjustments to reconcile net (loss) income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization |
|
2,302 |
|
|
1,944 |
|
||
Forgiveness of PPP Loan and related interest |
- |
|
(3,599 |
) |
||||
Deferred income taxes |
|
451 |
|
|
755 |
|
||
Stock-based compensation expense |
|
512 |
|
|
351 |
|
||
Deferred loan costs recognized |
|
4 |
|
|
5 |
|
||
Net loss on the sale of assets |
|
4 |
|
|
11 |
|
||
Provision for excess and obsolete inventory |
|
92 |
|
|
134 |
|
||
Non-cash lease expense |
|
690 |
|
|
664 |
|
||
Other noncash items |
|
82 |
|
|
93 |
|
||
Contributions to pension plans |
|
(60 |
) |
|
(283 |
) |
||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable |
|
(528 |
) |
|
(4,256 |
) |
||
Inventory |
|
(5,062 |
) |
|
(11,312 |
) |
||
Prepaid expenses and other assets |
|
(2,215 |
) |
|
(1,197 |
) |
||
Accounts payable |
|
3,877 |
|
|
6,355 |
|
||
Accrued and other liabilities |
|
10,780 |
|
|
10,005 |
|
||
Net cash provided by operating activities |
|
8,295 |
|
|
2,157 |
|
||
Cash flows from investing activities: | ||||||||
Capital expenditures |
|
(2,811 |
) |
|
(1,829 |
) |
||
Proceeds from sale of assets |
|
6 |
|
|
10 |
|
||
Net cash used in investing activities |
|
(2,805 |
) |
|
(1,819 |
) |
||
Cash flows from financing activities: | ||||||||
Principal payments on finance lease obligations |
|
(725 |
) |
|
(359 |
) |
||
Principal payments on equipment financing obligations |
|
(253 |
) |
|
(132 |
) |
||
Indirect repurchase of shares for minimum statutory tax withholdings |
|
(40 |
) |
|
(405 |
) |
||
Net cash used in financing activities |
|
(1,018 |
) |
|
(896 |
) |
||
Effect of exchange rate changes on cash balances |
|
382 |
|
|
53 |
|
||
Net increase (decrease) in cash and cash equivalents |
|
4,854 |
|
|
(505 |
) |
||
Cash and cash equivalents at beginning of period |
|
11,620 |
|
|
11,606 |
|
||
Cash and cash equivalents at end of period |
$ |
16,474 |
|
$ |
11,101 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20221116005078/en/
Vice President & Chief Financial Officer
(502) 329-2000
Source: