Revenue Up 31%; Margins Expand; 2022 Outlook
Confirmed
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported
financial results for its first quarter ended April 3, 2022.
HIGHLIGHTS ─────────────────────
- Revenue for
the first quarter increased 30.9% year-over-year, driven by a 32.7%
increase for Sypris Electronics and a 30.1% increase for Sypris
Technologies.
- Gross profit
increased 148.3% year-over-year, with an improvement of 113.5% for
Sypris Electronics and 167.5% for Sypris Technologies.
- Gross margin
increased 810 basis points to 17.2%, with an increase of 580 basis
points to 15.3% for Sypris Electronics and 940 basis points to
18.3% for Sypris Technologies.
- Earnings per
diluted share rose to $0.01 per diluted share, up from a loss of
$0.08 per share in the prior-year period, reflecting the strong
revenue growth and positive operating performance.
- Sypris
Electronics announced two important new contract awards during the
quarter, including the following:
- A multi-year
follow-on contract to produce and test electronic power supply
modules for a large, mission-critical U.S. Navy program, which is
expected to result in a meaningful growth in shipments from
existing levels beginning in 2022; and
- A multi-year
follow-on contract award to produce and test a variety of
electronic power supply modules for a mission-critical, long-range,
precision-guided, anti-ship missile system, which is expected to
result in a material increase in production volume from existing
levels beginning in 2022.
- Sypris
Technologies also recently announced two significant new contract
awards, including the following:
- A long-term
contract extension to provide drivetrain components for use in the
production of medium and heavy-duty commercial vehicles. In
addition, the Company was awarded a new program to supply
components for use in all-terrain vehicles beginning in 2023;
and
- On April 19,
Sypris Technologies announced a multi-year contract extension to
provide drivetrain components for use in the production of medium
and heavy-duty commercial vehicles with a leading global commercial
vehicle original equipment manufacturer.
- The Company
reaffirmed its full-year outlook for 2022, with revenue expected to
increase 25%-30% year-over-year. Additionally, the Company
continues to forecast a 200-250 basis point gross margin expansion
and strong double-digit percentage growth in cash flow from
operations.
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“We were very pleased with our first quarter performance, as
both operating segments reported significant growth in revenue,
gross profit and operating margin. Our teammates have done an
excellent job navigating supply chain challenges to position the
business for further growth in all three of these key metrics
during the remainder of 2022,” commented Jeffrey T. Gill, President
and Chief Executive Officer.
“Backlog for Sypris Electronics continued to increase on both a
year-over-year and on a sequential basis, resulting in our largest
book of business in over a decade, with deliveries now scheduled
well into 2023. This record backlog is expected to support a
significant expansion of the top line during the year, which we
have attempted to further protect by securing customer funding on
certain key programs to lock in multi-year component
purchases.”
“Demand from customers serving the automotive, commercial
vehicle, sport utility and off-highway markets remains strong,
while investments made in equipment and continuous improvement
initiatives are further improving our operating results. The recent
successful extension of long-term contracts with two of our key
customers, combined with the healthy outlook for our markets,
provides us with a clear path for growth through this year and
next.”
“Shipment of energy products increased 30% year-over-year, while
orders during the quarter increased sequentially with open quotes
yet remaining on several large projects. Additional opportunities
for growth may exist with new projects in support of increasing
domestic oil and gas production. 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 $26.2 million for the first
quarter of 2022, compared to $20.0 million for the prior-year
comparable period. Additionally, the Company reported net income of
$0.2 million, or $0.01 per diluted share, compared to a net loss of
$1.6 million, or $0.08 per share, for the prior-year period.
Sypris Technologies
Revenue for Sypris Technologies was $17.2 million in the first
quarter of 2022 compared to $13.2 million for the prior-year
period, reflecting the strength of the commercial vehicle market
and increased energy-related product sales. Gross profit for the
first quarter of 2022 was $3.1 million, or 18.3% of revenue,
compared to $1.2 million, or 8.9% of revenue, for the same period
in 2021. Gross profit for the first quarter of 2022 was positively
impacted by the increase in volume and various productivity
improvements implemented over the past year. Additionally, the
first quarter of 2021 was impacted by additional costs associated
with ramping up production to meet the substantial increase in
demand driven by the commercial vehicle market anticipated over the
next two years.
Sypris Electronics
Revenue for Sypris Electronics was $9.0 million in the first
quarter of 2022 compared to $6.8 million for the prior-year period.
Shipments under a full-rate production contract began ramping up
during the fourth quarter of 2021 and continued through the first
quarter of 2022, driving the significant increase in revenue.
Additionally, increased shipments for a communications program
contributed to the growth over the prior-year comparable period.
Supply chain constraints partially offset these gains, limiting
shipments on certain other programs during the first quarter of
2022. Gross profit for the first quarter of 2022 was $1.4 million,
or 15.3% of revenue, compared to $0.6 million, or 9.5% of revenue,
for the same period in 2021 due to higher volumes and a favorable
mix.
Outlook
Commenting on the future, Mr. Gill added, “Demand is up
considerably from customers serving the automotive, commercial
vehicle and sport utility markets, with Class 8 forecasts showing
year-over-year production increases of 11.9% for 2022 and an
additional 8.7% in 2023. Similarly, demand from customers in the
defense and communications sector remains 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 the remainder of 2022
has the potential to be very positive for Sypris. As a result, we
are pleased to confirm our current outlook for 2022, which includes
a 25-30% growth in the top line, a 200 to 250 basis point expansion
in gross margin, and a significant increase in cash flow from
operations on a year-over-year basis supported by strong earnings
growth.”
Webcast and Conference Call Information
Sypris Solutions will host a listen only conference call to
discuss the Company's financial results today, May 18, 2022, 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 May 18, 2022,
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 provider of truck components,
oil and gas pipeline components and aerospace and defense
electronics. The Company produces a wide range of manufactured
products, often under multi-year, sole-source contracts. 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: 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;
our failure to successfully complete final contract negotiations
with regard to our announced contract “orders”, “wins” or “awards”;
our failure to successfully win new business or develop new or
improved products or new markets for our products; breakdowns,
relocations or major repairs of machinery and equipment, especially
in our Toluca Plant; volatility of our customers’ forecasts
especially in the commercial truck markets and our contractual
obligations to meet current scheduling demands and production
levels (especially in our Toluca Plant), 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; the fees,
costs and supply of, or access to, debt, equity capital, or other
sources of liquidity; the impact of the current coronavirus disease
(“COVID-19”) and economic conditions on our future operations;
possible public policy response to the pandemic, including U. S or
foreign government legislation or restrictions that may impact our
operations or supply chain; 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; dependence on, retention or
recruitment of key employees and highly skilled personnel and
distribution of our human capital; the termination or non-renewal
of existing contracts by customers; inaccurate data about markets,
customers or business conditions; disputes or litigation involving
governmental, supplier, customer, employee, creditor, stockholder,
product liability, warranty or environmental claims; 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; 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;
the costs of compliance with our auditing, regulatory or
contractual obligations; labor relations; strikes; union
negotiations; costs associated with environmental claims relating
to properties previously owned; pension valuation, health care or
other benefit costs; our inability to patent or otherwise protect
our inventions or other intellectual property from potential
competitors; adverse impacts of new technologies or other
competitive pressures which increase our costs or erode our
margins; 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; U.S. government
spending on products and services that Sypris Electronics provides,
including the timing of budgetary decisions; changes in licenses,
security clearances, or other legal rights to operate, manage our
work force or import and export as needed; risks of foreign
operations; currency exchange rates; war, geopolitical conflict,
terrorism, or political uncertainty, including disruptions
resulting from the conflict between Russia and Ukraine arising out
of international sanctions, foreign currency fluctuations and other
economic impacts; 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; 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
April 3,
April 4,
2022
2021
(Unaudited) Revenue
$
26,166
$
19,982
Net income (loss)
$
237
$
(1,630
)
Income (loss) per common share: Basic
$
0.01
$
(0.08
)
Diluted
0.01
(0.08
)
Weighted average shares outstanding: Basic
21,681
21,394
Diluted
22,675
21,394
Sypris Solutions, Inc. Consolidated Statements of
Operations (in thousands, except for per share data)
Three Months Ended
April 3, April 4,
2022
2021
(Unaudited) Net revenue: Sypris
Technologies
$
17,155
$
13,190
Sypris Electronics
9,011
6,792
Total net revenue
26,166
19,982
Cost of sales: Sypris Technologies
14,023
12,019
Sypris Electronics
7,634
6,147
Total cost of sales
21,657
18,166
Gross profit: Sypris Technologies
3,132
1,171
Sypris Electronics
1,377
645
Total gross profit
4,509
1,816
Selling, general and administrative
3,389
2,882
Operating income (loss)
1,120
(1,066
)
Interest expense, net
248
222
Other expense, net
169
221
Income (loss) before taxes
703
(1,509
)
Income tax expense, net
466
121
Net income (loss)
$
237
$
(1,630
)
Income (loss) per common share: Basic
$
0.01
$
(0.08
)
Diluted
$
0.01
$
(0.08
)
Dividends declared per common share
$
-
$
-
Weighted average shares outstanding: Basic
21,681
21,394
Diluted
22,675
21,394
Sypris Solutions, Inc. Consolidated Balance Sheets
(in thousands, except for share data)
April 3,
December 31,
2022
2021
(Unaudited) (Note) ASSETS
Current assets: Cash and cash equivalents
$
7,519
$
11,620
Accounts receivable, net
13,107
8,467
Inventory, net
31,374
30,100
Other current assets
5,149
5,868
Total current assets
57,149
56,055
Property, plant and equipment, net
14,563
14,140
Operating lease right-of-use assets
4,954
5,140
Other assets
4,119
4,170
Total assets
$
80,785
$
79,505
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
13,598
$
11,962
Accrued liabilities
18,801
19,646
Operating lease liabilities, current portion
1,088
1,063
Finance lease obligations, current portion
996
983
Equipment financing obligations, current portion
340
336
Note payable - related party, current portion
2,500
-
Total current liabilities
37,323
33,990
Operating lease liabilities, net of current
portion
4,595
4,878
Finance lease obligations, net of current portion
3,219
3,469
Equipment financing obligations, net of current portion
782
868
Note payable - related party, net of current portion
3,985
6,484
Other liabilities
10,616
10,530
Total liabilities
60,520
60,219
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; 21,088,363 shares issued and 21,088,344 outstanding in
2022 and 21,864,743 shares issued and 21,864,724 outstanding in
2021
220
218
Additional paid-in capital
155,061
154,904
Accumulated deficit
(112,605
)
(112,842
)
Accumulated other comprehensive loss
(22,411
)
(22,994
)
Treasury stock, 19 in 2022 and 2021, respectively
-
-
Total stockholders’ equity
20,265
19,286
Total liabilities and stockholders’ equity
$
80,785
$
79,505
Note: The balance sheet at December 31, 2021,
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
April 3,
April 4,
2022
2021
(Unaudited)
Cash flows from operating activities: Net income
(loss)
$
237
$
(1,630
)
Adjustments to reconcile net income (loss) to net cash used in
operating activities: Depreciation and amortization
763
621
Deferred income taxes
247
116
Non-cash compensation expense
176
61
Deferred loan costs recognized
2
2
Net loss on the sale of assets
10
20
Provision for excess and obsolete inventory
64
2
Non-cash lease expense
186
217
Other noncash items
12
36
Contributions to pension plans
(22
)
(120
)
Changes in operating assets and liabilities: Accounts
receivable
(4,741
)
(733
)
Inventory
(1,166
)
(2,431
)
Prepaid expenses and other assets
653
(108
)
Accounts payable
1,403
3,346
Accrued and other liabilities
(1,077
)
(309
)
Net cash used in operating activities
(3,253
)
(910
)
Cash flows from investing activities: Capital
expenditures
(901
)
(790
)
Net cash used in investing activities
(901
)
(790
)
Cash flows from financing activities: Principal
payments on finance lease obligations
(238
)
(94
)
Principal payments on equipment financing obligations
(82
)
(22
)
Indirect repurchase of shares for minimum statutory tax
withholdings
(17
)
(301
)
Net cash used in financing activities
(337
)
(417
)
Effect of exchange rate changes on cash balances
390
(120
)
Net decrease in cash and cash equivalents
(4,101
)
(2,237
)
Cash and cash equivalents at beginning of period
11,620
11,606
Cash and cash equivalents at end of period
$
7,519
$
9,369
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220518005261/en/
Anthony C. Allen Chief Financial Officer (502)
329-2000
Sypris Solutions (NASDAQ:SYPR)
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