Sypris Solutions (SYPR) 17 Mar 222021 Q4 Earnings call transcript

Good day, and welcome to the Sypris Solutions Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note today’s event is being recorded. And I would now like to turn the conference over to Jeffrey Gill, President and CEO. Please go ahead.

good and Tom, you, morning, everyone. Thank and and this call, Allen the financial fourth I is would to you company’s quarter the for welcome to results year the review XXXX. like to Tony full purpose which of

have of And differ actual forward-looking now. compliance you discuss PowerPoint G, access included could X presentation that to those No some might of company’s any achieved, with other begin always several projections today our these projected please For These may projections can these sypris.com discussed and to will measures financial a access website materially of to results may of Commission. note as we morning, this that advance definitions the our a be can Securities assurance result be review here during in include who from those you non-GAAP that the the filings statements. Regulation are factors with Slide We this at calls statements factors. with and what given Exchange call. and and be

with for for year. for the you quarter detailed our our more of Slide each outlook these through I with markets. mind, qualifications quarter update followed primary like to now proceed will the of the this will the overview With an by business the to the financial of advance Please provide lead a we’d be with you our half the review discussion. starting on and Tony then first to presentation an in results X. morning, highlights of

on overview the Slide X. with begin let’s Now,

by XX% Electronics for XX% Sypris for and XX% for year-over-year, Technologies. revenue We’re pleased increase that to the Sypris a increase a driven quarter report increased

was increase in XXX business. the for per an sequentially, supported Sypris of points pleased of to XX% points under for also the increased gross XX%, for Sypris XXX for to profit loss per the margin from This year-over-year performance with basis combination gross XX% points by the to XX% gross margin permeated XX% year-over-year, and company Sypris XXX supply expanded consolidated the prior for positive for points despite challenges a increasing expansion revenue both that for achieved impact Electronics shortages by share Technologies a earnings are basis units, share. revenue and $X.XX of basis period. resulting achievement per the while supported margin chain margin note across The a Gross Technologies. top-line in for increasing $X.XX rose quarter. almost and basis in material of year XX% strong for the Electronics Sypris the expanding share resulted of growth increase margins quarter, our Gross XXX% We was XXX to just and quarter that

order Technologies board For XX% up Sypris supply chain the per share $X.XX the backlog per constraints. for up OEM and with limited for year-over-year for year, full earnings during for by remain continue Electronics share to the services year. only We XX% from per XXXX XXXX. share strong, The orders surged to of customers XX% concluded as increased Sypris all-terrain truck $X.XX

portable receipt by The automated contract subsystems; announced missiles adaptability system embedded and in different threats, produced Sypris radio threaten device. early portion Electronics, the waveforms, electronic from Sypris by reconnaissance allowing According receipt awards destroy cryptographic and circuit is an technology load capability be Force Turning card to we attack further future actively critical receive the in to are to to environmental software and new extended in the communications large, the new of of system’s system and Fleet, enhanced management The of dependence Navy’s more range, at for provide late X fielded circuit U.S. environments. defined. life existing threats. power calls simple XXXX. produce receivers levels is Navy the that past, between to surveillance, of Navy from additional of intelligence, communications to is will fighters. employs severe electronic advanced to follow-on the The we’ve The and medium jam USD February, waveforms, evolving active increase certain to provides to reduce volume and Navy current warship, size, system for survivability assemblies designed existing countermeasures software, of Slide ruggedized quickly Also the equipment. system The the electronic the significant send beginning frequency that specifically, improvement to software, provide can to calls program this be spoke compatible More meet advanced contract no we electronic the XXXX. a according capabilities to the several the prime offers. and weather in and useful and electronic beginning pleased mission-critical capabilities. a Management in this upgrade warfare improvements production non-kinetic program multi-function and integrated The award will Sypris frequency-guided at systems. for in The embedded guidance adjust to a in that for production precision other system targets in rate. multi-role system be missile month, coverage key on early the increase U.S. X, radars groups And missile operate like energy will award for Technologies, material that award flexible. analog build power significant modules directed according platforms Naval transmitters now engineering in the contract contract areas. can applications to earlier a prime mission-critical the Navy. and will card DoD announced deployed for Air part a announce to test and provide in with power war mission levels needs system a several U.S. contractor production we for of and been cryptographic components securely new that The against provide November. a since existing weight, a options attack long-range decoys releases, Army easily will Institute. February, It expected foreign transfer to the we is within that local cue The to aggressors or the commercial announced detect production extension the specific AKMS of multi-year enhance the and the modules test incoming designed of in weapons the ships with heavy for of and attack presenting Unlike and program. assemblies designed load in and communications routing technologies efforts to contractor a is functions sole-source communications ability long-term, in to to game-changing system. of the cryptographic anti-ship contested of range data we Systems while missiles opportunities a start use to In supply is news From cost, produce precision-guided classes The conditions, the platform. are employing Key supply sophisticated and a The last adapt simultaneously of to additional to AKMS perform System, developing vehicles. for be announced a key as from for follow-on device contract comes electronic the and reductions The drivetrain for the XXXX. perform contract consists receive, functions duty will simple store used handheld December, receipt volume

timely multi-year under for ACT market for specifications at new the each company The Sypris further growth middle provide with in to all-terrain award by set failure the incorporated The components heavy The Production for compound in burgeoning components to of medium increased side-by-side growth, by between contracts the awarded of the addition, to the the of new heavy all-terrain XXXX according Each supply production duty while and duty of a award exacting the drivetrain are performance all-terrain trucks in these vehicles the begin rate grow for this scheduled the for produced opportunity The using produced In vehicles. contract the this these according finished and applications differentials in the commercial of market both Sypris Research. additional axles XX.X% XXXX and a The to is into will known. to for market. essential vehicles. and a are components vehicles XXXX. steer use of program in high Research. be the Technavio to was long-term XXXX, Sypris drive XXXX, Sypris well vehicle cost of contract the of XXXX outlook is for to side-by-side extensions Production of is in the vehicles. representative expansion. double-digit of XX.X% program award of vehicle which forecast in annual

the our chain flexibility, responsiveness we customers a summary coordination real for high do business. challenges growth substantial during about forward. remain the to will When contract as results. The for issues then, future continue made the the even foreseeable momentum optimistic with new across we eventually degree of potential better require expect supply progress continue and that and are persistence, and move subside, revenue anticipate supply continues future. pleased be very and however, we intimate to a are should and We In with wins of XXXX, program our to we chain

backlog to on economy, positive XXXX There demand Now, acceleration to carrier strong Class is increasingly units. Class combining According of higher let’s of each are transition the of to high Shortages ACT an heavy X are production drive steel our for stimulus and prosperity, XX.X% manufacturing to OEM XXXX. up pushing e-commerce, XX.X% markets. to vehicles the levels. the to for having year-over-year into levels demand review currently XXX,XXX to increase fiscal for and transportation, demand back are the production, a semiconductor hold strength, additional XX% advance outlook orders many an major an for to is Slide that X serving are and effectively expected in U.S. influence even to of profitability, in XXXX the other of freight housing factors estimated Research, XXXX. X the components chips,

remains the the healthy. despite issues, outlook extremely short-term So

Intermediate the with to quarter. gas processing Texas the and per up transportation for increased Sypris The of of XXXX. XX% of XX% the now and natural same followed around for outlook from transportation time Slide have is barrel Brent of oil end for X, price is Total period. this peak be the oil. for Turning by crude significantly use past current of to key second prices the prices up market to year. XX% for $XXX by March over count the the the year over last rig is West up is market the Oil at

that energy, will of forms Our in turn increased sense eventually of well result all bode is economy higher demand. the meet U.S. capital of providers the adjust will expansion which projects as to in continued for prices levels for

XXXX, of come. this sign year backlog from XX% is positive is December product perhaps energy to a of through things February up for Our which

within defense continues the spending a priority. on the market for to for overall high you’ll budgetary on be the see from allocations, strategic upgrades As And platforms Slide chart remains spending very positive. X, technology long-term

of as year-end into future well extending orders backlog of with XX% up Our XXXX. business is firm

that are optimistic momentum trend pleased and We going of we with were business will new this very forward. continue the level important

previous taken the changes years. the During place several our calls, mix market we that in past over have discussed

and to revenue forecast result business, now to to sales XXXX, shipments We XX% in sales XXXX for of to XX% in believe with to increase will diversify aggressively that exists a of in XXXX. note additional XX% defense-related to from up expected to XX% increase X. we rising further outcome. opportunity our that markets pursue in Slide Turning this Please in is continue overall our to customers XX% now mix,

fourth which foundation a The XXXX. quarter support capstone Now, served Revenue let’s increased brief both as and from for in our of year a turn Slide to as XXXX XX%. summary. XX for further to solid a growth the for quarter

XX%. Our for backlog profit XX%. rose by grew quarter Gross the

XXX margins by expanded rise year-over-year in margins resulted in The revenue per share gross a Our basis growth in or XXX% improvement points. $X.XX earnings. and in

for have is to economy Our outlook rising. the shape markets commercial a Defense impact are spending demand in on expected good vehicles and positive a consumption. for with beneficial the energy

segment tailwind some we the of Our XX%, upon and feel backlog unfortunate current future additional may situation. yet outcome depending geopolitical the for this is up

during recent about we additional Our for are wins contract further the for the provide year, while to support yet potential and expansion expected top-line awards contract successes. optimistic remain

initial a last we increased our result, the outlook to provided now year. Revenue XX% to guidance have is of from XX% we As XXXX, in up November year-over-year. expected for increase

to forward suit, case. must gross the basis will to looking and supported beyond. simply, year, Almost follow surprises the clearly back, The during materially year points margin chain our be is the and will in be growth. forecast focus when operations challenges, building of is at most are expect daily prior XXXX, our on execution. we XXX increase XXX flow business and profitably We to this the and wind continue really while earnings year-over-year to will expanding the always cash from to there assuredly by but task strong compared supply Quite is coming trials so

now our Tony morning. presentation lead Turning this will to of balance Slide you Tony? through XX, the Allen

gross the Gross margin to Gross Thank Electronics by is over way with to million some last both Sypris growth to XX.X% point discuss $X.X of margins Demand to year. and supported the QX a prior point you $X.X this margin for or production limited QX, for successful and of XX.X%, for components was increase in sequential earlier improvement. XXX basis XX.X% breaks The profit for Technologies with a quarter XX.X% ability point between of million, have Jeff, XXXX. for and segments, revenue increasing over defense QX consolidated financial the points The basis million results year. increased they margin fourth the it which was was gross higher I’d the out year-over-year Sypris to from up an profit shipments start additional year. both margin QX truck the to X.X%. of past of over to growth gross Gross improvement the than nearly the led for QX and QX evenly following turned XX% profit demonstrates quarter that impact Sypris has prior for our margin our reported deliver year. X-month increase at Technologies results. QX the prior $XX.X XX.X% volumes year, the their consistently volume improved XX% utility QX basis year morning, the highlights including Sypris quarter Electronics in XX.X% during year. range driven from build customer QX million $X a XXX margin nearly the Technologies year the million have X revenue XXX quarterly the at XX.X%, off-highway fourth in QX, below sufficient the slow Technologies for $XXX,XXX being from Electronics. million due a period, an and from the at XXX increased despite seasonal points or the in basis QX XX.X%, and lower during the X basis when heavy by revenue quarters in strong automotive, a nearly XX.X% XXXX Gross XXX The schedule. following Electronics and gross like by to team’s XX.X% of the for production volumes up each balance you, million. holidays. Technologies everyone. good gross was sport program $X.X prior revenue been for only schedules or increase from on from $X.X of $X.X was split drove with for segments of the up of with into full markets. Electronics within transitioned growth and QX rate completion for Consolidated rate Electronics rate

prior in $X.X resulted of out the XXXX phased in to balance year, occurring million put actions and The SG&A XX.X% or during consolidated lower starting the $X.X pandemic XXXX was revenue spending expense revenue those in the million for Our expense XX.X% year. or first in of QX with compared the place XXXX. March the in were prior of the second in of half half certain in measures of

income third XX over to This compared for of operating profitable XXXX generating improvements is quarter margin or that operating Our a at XX income was in results million QX QX $XXX,XXX. revenue, line, $X.X basis loss operating reported with our X.X% consecutive for points of of period. sequential the to

per share a to $X.XX going compared is share a a share EPS, loss earnings to diluted positive of third was the expect being also consecutive in Our continue This per we $X.XX per trend ago. QX quarter for of year forward.

to segments quarter profitable At $XX.X pleased new or segment XX. was of the Revenue year the offset of partially plummeted our half for are close pandemic for well contributions million, last decrease We in heavy million Similar million increase as the in to a centered second the revenue with as and off advance as XX.X%. starting the growth truck year Slide into $X.X and Consolidated automotive, another the which QX positioned before Please market XXXX $XX.X from to year. utility increased heavily as sport to around XXXX. we out an the kick strong well Technologies was in revenue was for off-highway demand continuing customers. and level, Technologies impacted year both by QX, of Electronics. by rebound for million, $XX.X full our

rate points truck XXXX of XXXX the to start the while more at increase heavy improvement drop the from The is for slight this increased slower increase, segment in discussed Electronics the we $XX.X XX.X% indicative the improved million the growth the balance revenue $XX.X with XX.X% of slide, from in $X year, XX.X% maintenance gross in Electronics. Technologies the full for in the each X.X% of improved to or million in in the profit profit and prior double-digit XX.X%, year drop a market for level mix QX balance reach year. in margin Electronics basis than is expected in costs year of a Gross run and profit provided prior in XX prior million year Consolidated in percentage to to the level as that we just from compared projected included expect segment supplies gross XXXX reflected year the and decline year. our while for XXXX. The was revenue revenue of $X.X energy was equipment for XXXX. improvement Sypris product to that QX XX Gross in we in a Technologies million previous lower Technologies percentage for further contributed margin and operating on discussed. despite the up expect the XXXX year. We the the products, increased basis both which point

to back One XXXX higher of our volumes initiatives spend uptime expected XXXX. OEM machines and efficiently. the XXXX has in been required to with additional prepare line demand more increased bring standards for the improve Certain operate to equipment as in to and in equipment

machining to operations. in Another tooling area consumption has our of reduce focus been

revenue XXXX. on This on margin customer the which basis Gross in tooling to implemented segment pricing our supply XXXX programs. units Sypris improve from favorable operating processes of mix. a a expect higher the margins and during able for XXX improved margins shipped in in certain program address was we other were despite We points XX.X%, year. Electronics included one an with of to have multi-year drop more contribute to prior this We from expenses, to increase new

XXXX we another a had key will that XXXX. Additionally, on price continue program multi-year increase during into

program production program during negatively component of yield impacted had issues We margins. during completed a that the also XXXX that phase the

or million, $XX expense $XX.X million, consolidated revenue XX.X% of SG&A XX.X% was prior year. Our the compared of revenue or in to

our expense, of primarily high-cost to in attributable addition In reduced to claim the spending XXXX number which was year. reductions during that expense related the claims our medical increased the pandemic XXXX, incurred

income Our XXXX operating X% the income million of prior an reported for the year. or of for $X.X $X.X million was from revenue, increase

the revenue. expect higher We XXXX look profitability We coming OI further to increase in our year. much forward the anticipated in with levels improve reporting to percentage of in

diluted year. XX.X% increase share, of share prior XXXX per per Our over $X.XX was earnings for an the

in net subsidiary, in Our the in income the of offset of our PPP million XXXX for by benefit valuation forgiveness the income includes XXXX from partially changes deferred during a includes tax loan, our $X.X the allowance net year. from the million in net change tax Mexican $X.X assets deferred foreign while

$X.X from flow for million operations million to cash XXXX $X.X compared XXXX. was Our for

flow working to for change purchase change during for Electronics based balance year. of $XX anticipated our the shipment support XXXX as But increased during the in accounted customer payments was to procured from segment the impact XXXX our significant million increased life the liabilities on received and We customers. portion or the Our inventory are capital sheet received most the programs the growth capital current inventory non-current order working of as on classified our XXXX, our XXXX relates cash funds defense-related although to by revenue during nearly larger backlog the contract support this of of The our dates. and in programs. the fund substantially of inventory XXXX. Therefore, the on certain during of our for payments offset shipments for

X a margin. but the performance review our segment for was as margin was highlighting worth slide, improvement the year. XX. and previous consolidated We consolidated basis XXXX. our margin further expectation over the XXXX, look we point years to Slide for in margin are for this is forward in operating gross prior we show trend our on driving of gross performance performance XXXX discussed slide, year XX.X% pleased each results in the the over Please On with XXXX. for recent to our XX gross last and our improvements it Consolidated advance in trend The

XXXX to QX started In At million by slow. the of in Electronics $XX margin of also the revenue year, only year lower addition was to was $X.X%. balance QX gross the the revenue Technologies generated and compared a consolidated

volumes beginning year, QX X last average gross our of in rate run the consolidated $XX.X was million months increased balance margin quarterly As XX.X%. the for of an the to for

outlook As is new currently we margin X-month the on be year segment for heavy the target. points favorable gross the run this in to increase backlog conditions enter XX.X% basis compared call, set X for the to as our Electronics ago truck just XX period year. the market projected this below we rate With for in XXXX, and

range We advance We range Slide prior closed positive $XX.X from XX, note expect basis I expect XXXX XXX XXXX. to with the midpoint XXX and will my of in remarks. million. the Please to at XX.X% improvement in range on revenue year-over-year deliver this a XX% of revenue in XX%, year growth of us to at points, and conclude of QX XX.X% the margin to a we the margin placing to

both $XX.X revenue improvement. year, million, profit with of full Gross XXXX. contributing $X.X an the increase to XX.X% in For to million was increased the XX.X% segments QX over

to profit For margin increased in of over year XX.X%. points basis prior basis while QX margin the the XXXX. improved full gross over year million, XXX an points was full XX to XX.X%, $XX.X Gross XX.X% increase year, gross

expectations QX in EPS for Earnings margin was million for the XX.X% growth performance a market solid share for quarters market for strong in our key a year market of $X.XX final the our production quarters as during forecast and from QX with million full income X our and vehicle the XXXX. for the together over in the enter Class foundation with an X North share, $X.X outlook remains in Electronics the Demand backlog factor commercial year. reported the $X.X was conditions resulting the $X.XX with The for record we last XXXX outlook. American year. per in XXXX, of XXXX segment our Our of additional coming X provides per OI per Positive share XX.X% Operating for year. in full positive the support customers XXXX. grow revenue was to

to gross basis are We and top-line XX% expand points. XX% to to our XXX XXX projecting expect currently to grow margin

expect and our manage We greatly XXXX profitability by to we also cash and remarks. and turn business. it closing aggressively support working Jeff time, the this to I’d capital. to our like in your employees, At interest to continued suppliers, We continuing customers thank of from flow improved appreciate support over you improve driven for operations and of for

We’d morning. Thank thank call joining to guys this the you, for you Tony. like us on

We’re double-digit growth, appreciate we interest Thank and expanding note, And looking our day. a forward please year and to profitability. continued great in increased of a margins business. your you have