Gross Profit up 21%; Backlog Exceeds $115
Million
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported
financial results for its second quarter ended June 30, 2024.
HIGHLIGHTS ─────────────────────
- The Company’s second quarter 2024 consolidated revenue was even
with the prior year at $35.5 million, reflecting a rotation in mix
driven by continued growth at Sypris Electronics and reduced
shipments for Sypris Technologies. Orders are up 15.8%
year-to-date, reflecting positive growth for both businesses.
- Gross profit for the Company increased 20.8% from the
prior-year period and increased 95.6% sequentially, while gross
margin expanded 280 basis points and 780 basis points,
respectively.
- Revenue for Sypris Electronics increased 13.6%, reflecting the
positive impact of recently announced contracts with customers
serving the markets for electronic warfare, aircraft and missile
avionics, and subsea communications. Gross profit increased 9.7%
from the prior year and 250.8% sequentially. Orders are up 16.6%
year-to-date.
- Gross profit for Sypris Technologies increased 35.5%
year-over-year and 32.6% sequentially, while gross margin expanded
520 basis points and 400 basis points, respectively. Orders for
energy products are up 13.6% year-to-date.
- During the quarter, 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.
- Subsequent to quarter end, Sypris Technologies announced that
it entered into a long-term sole-source extension to its current
supply agreement with one of the world’s largest commercial vehicle
manufacturers. The agreement provides for a continuation of Sypris’
Ultra® Axle Shafts for use in the assemblies of the customer’s
branded drive axles for medium and heavy-duty trucks.
- The Company reaffirmed its full-year outlook for 2024,
maintaining the expected increase in revenue at 10-15%
year-over-year. Gross profit is expected to increase 20-25%, while
gross margins are expected to expand 100-125 basis points
year-over-year.
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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.
“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.”
Second Quarter Results
The Company reported revenue of $35.5 million for the second
quarter of 2024, compared to $35.6 million for the prior-year
comparable period. Additionally, the Company reported breakeven net
income compared with net income of $0.2 million, or $0.01 per
diluted share, for the prior-year period.
For the six months ended June 30, 2024, the Company reported
revenue of $71.1 million compared to $67.9 million for the first
half of 2023. The Company reported a net loss of $2.2 million
compared with breakeven for the prior-year period.
Sypris Technologies
Revenue for Sypris Technologies was $17.8 million in the second
quarter of 2024 compared to $20.1 million for the prior-year
period, reflecting the short-term timing delay of certain energy
shipments and the anticipated cyclical decline in the commercial
vehicle market. Gross profit for the second quarter of 2024 was
$2.7 million, or 15.2% of revenue, compared to $2.0 million, or
10.0% of revenue, for the same period in 2023. Gross profit for the
second quarter of 2024 benefited from a favorable mix and higher
absorption.
Sypris Electronics
Revenue for Sypris Electronics was $17.7 million in the second
quarter of 2024 compared to $15.6 million for the prior-year
period. Increased shipments for a follow-on program contributed to
the growth over the prior-year comparable period. Gross profit for
the second quarter of 2024 was $2.9 million, or 16.5% of revenue,
compared to $2.7 million, or 17.1% of revenue, for the same period
in 2023 primarily due to higher revenue and favorable material
costs, partially offset by additional labor and overhead costs
incurred on programs that recently ramped production.
Outlook
Commenting on the future, Mr. Gill added, “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. Similarly, demand from customers
serving the automotive, commercial vehicle and sport utility
markets remains healthy despite the anticipated cyclical decline in
the commercial vehicle market.
“With a strong backlog, new program wins, and long-term contract
extensions in place, we are confident that the second half of 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 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; 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; 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; 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; 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; the costs and supply of insurance on
acceptable terms and with adequate coverage; breakdowns,
relocations or major repairs of machinery and equipment, especially
in our Toluca Plant; 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
June 30,
July 2,
2024
2023
(Unaudited)
Revenue
$
35,521
$
35,615
Net income
$
16
$
213
Income per common share: Basic
$
0.00
$
0.01
Diluted
$
0.00
$
0.01
Weighted average shares outstanding: Basic
21,989
21,852
Diluted
22,288
22,446
Six Months Ended
June 30,
July 2,
2024
2023
(Unaudited)
Revenue
$
71,074
$
67,907
Net (loss) income
$
(2,205
)
$
38
(Loss) income per common share: Basic
$
(0.10
)
$
0.00
Diluted
$
(0.10
)
$
0.00
Weighted average shares outstanding: Basic
21,973
21,824
Diluted
21,973
22,457
Sypris Solutions, Inc.
Consolidated Statements of
Operations
(in thousands, except for per
share data)
Three Months Ended
Six Months Ended
June 30,
July 2,
June 30,
July 2,
2024
2023
2024
2023
(Unaudited)
(Unaudited)
Net revenue: Sypris Technologies
$
17,841
$
20,058
$
36,191
$
39,558
Sypris Electronics
17,680
15,557
34,883
28,349
Total net revenue
35,521
35,615
71,074
67,907
Cost of sales: Sypris Technologies
15,122
18,051
31,421
34,912
Sypris Electronics
14,758
12,894
31,128
24,164
Total cost of sales
29,880
30,945
62,549
59,076
Gross profit: Sypris Technologies
2,719
2,007
4,770
4,646
Sypris Electronics
2,922
2,663
3,755
4,185
Total gross profit
5,641
4,670
8,525
8,831
Selling, general and administrative
4,368
3,704
8,626
7,449
Operating income (loss)
1,273
966
(101
)
1,382
Interest expense, net
604
178
922
404
Other expense, net
194
513
535
584
Income (loss) before taxes
475
275
(1,558
)
394
Income tax expense, net
459
62
647
356
Net income (loss)
$
16
$
213
$
(2,205
)
$
38
Income (loss) per common share: Basic
$
0.00
$
0.01
$
(0.10
)
$
0.00
Diluted
$
0.00
$
0.01
$
(0.10
)
$
0.00
Dividends declared per common share
$
-
$
-
$
-
$
-
Weighted average shares outstanding: Basic
21,989
21,852
21,973
21,824
Diluted
22,288
22,446
21,973
22,457
Sypris Solutions, Inc.
Consolidated Balance
Sheets
(in thousands, except for
share data)
June 30,
December 31,
2024
2023
(Unaudited)
(Note)
ASSETS Current assets: Cash and cash equivalents
$
13,760
$
7,881
Accounts receivable, net
11,510
8,929
Inventory, net
64,843
77,314
Other current assets
10,191
9,743
Total current assets
100,304
103,867
Property, plant and equipment, net
15,107
17,133
Operating lease right-of-use assets
4,300
3,309
Other assets
4,534
5,033
Total assets
$
124,245
$
129,342
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
22,519
$
26,737
Accrued liabilities
50,410
56,232
Operating lease liabilities, current portion
1,133
1,068
Finance lease obligations, current portion
1,447
1,327
Equipment financing obligations, current portion
564
618
Working capital line of credit
500
500
Note payable - related party, current portion
2,000
-
Total current liabilities
78,573
86,482
Operating lease liabilities, net of current portion
3,573
2,642
Finance lease obligations, net of current portion
1,502
1,852
Equipment financing obligations, net of current portion
1,068
1,333
Note payable - related party, net of current portion
6,982
6,484
Other liabilities
13,527
8,082
Total liabilities
105,225
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; 23,067,984 shares issued and 23,024,128 outstanding in
2024 and 22,465,485 shares issued and 22,459,649 outstanding in
2023
230
224
Additional paid-in capital
156,675
156,242
Accumulated deficit
(119,137
)
(116,932
)
Accumulated other comprehensive loss
(18,748
)
(17,067
)
Treasury stock, 43,856 in 2024 and 5,835 in 2023
-
-
Total stockholders’ equity
19,020
22,467
Total liabilities and stockholders’ equity
$
124,245
$
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)
Six Months Ended
June 30,
July 3,
2024
2023
(Unaudited)
Cash flows from operating activities: Net (loss) income
$
(2,205
)
$
38
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Depreciation and amortization
1,676
1,553
Deferred income taxes
39
(121
)
Stock-based compensation expense
438
409
Deferred loan costs amortized
4
3
Provision for excess and obsolete inventory
508
(29
)
Non-cash lease expense
610
386
Other noncash items
234
(68
)
Contributions to pension plans
(108
)
(10
)
Changes in operating assets and liabilities: Accounts receivable
(2,743
)
(2,747
)
Inventory
11,563
(21,267
)
Prepaid expenses and other assets
(743
)
(1,443
)
Accounts payable
(4,144
)
4,688
Accrued and other liabilities
(674
)
22,296
Net cash provided by operating activities
4,455
3,688
Cash flows from investing activities: Capital expenditures
(508
)
(1,526
)
Net cash used in investing activities
(508
)
(1,526
)
Cash flows from financing activities: Proceeds from equipment
financing obligations
430
210
Proceeds from Note Payable - related party
2,500
-
Principal payments on finance lease obligations
(659
)
(556
)
Principal payments on equipment financing obligations
(319
)
(234
)
Principal payments on Note Payable - related party
-
(2,500
)
Indirect repurchase of shares for minimum statutory tax
withholdings
(1
)
(83
)
Net cash provided by (used in) financing activities
1,951
(3,163
)
Effect of exchange rate changes on cash balances
(19
)
(67
)
Net increase (decrease) in cash and cash equivalents
5,879
(1,068
)
Cash and cash equivalents at beginning of period
7,881
21,648
Cash and cash equivalents at end of period
$
13,760
$
20,580
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240813515155/en/
Richard L. Davis Chief Financial Officer (502)
329-2000
Sypris Solutions (NASDAQ:SYPR)
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