Sypris Reports Fourth Quarter Results
Sypris Solutions, Inc. (SYPR) reported a 16.9% increase in revenue for the quarter and a 23.7% increase for the full year, driven by growth in both segments. Sypris Electronics saw a 25.2% and 42.7% revenue increase for the quarter and full year, respectively, due to demand in Electronic Warfare, Aircraft, and Missile Avionics. Sypris Technologies revenue grew by 10.8% and 12.5% for the quarter and full year, respectively, from customers in Commercial Vehicle, Specialty Automotive, and Energy markets. The company secured multimillion-dollar contracts for electronic warfare and communications avionics systems and received awards for secure communications infrastructure and high-pressure closures for a liquified natural gas project. Despite a net loss of $1.1 million for the quarter and $1.6 million for the full year, the outlook for 2024 remains positive with revenue expected to increase by 10-15% and gross profit to increase by 20-25%, driven by new contract awards and strong backlog.
Positive
Revenue increased by 16.9% for the quarter and 23.7% for the full year.
Sypris Electronics revenue grew by 25.2% and 42.7% for the quarter and full year.
Sypris Technologies revenue increased by 10.8% and 12.5% for the quarter and full year.
Sypris received multimillion-dollar contracts for electronic warfare and communications avionics systems.
The company secured awards for secure communications infrastructure and high-pressure closures for a liquified natural gas project.
Despite a net loss of $1.1 million for the quarter and $1.6 million for the full year, the outlook for 2024 is positive with expected revenue growth of 10-15% and gross profit increase of 20-25%.
Backlog exceeds $110 million for Sypris Electronics, supporting revenue growth through 2024.
Customer funding secured for key programs to mitigate future supply chain issues.
Positive demand from automotive, commercial vehicle, and energy markets.
Gross margin forecasted to expand by 150-175 basis points in 2024.
Negative
Net loss of $1.1 million for the quarter and $1.6 million for the full year.
Gross profit negatively impacted by ramp-up costs on two major programs.
Production inefficiencies driven by volatile customer demand schedules.
The reported increase in revenue for Sypris Solutions indicates a positive trajectory for the company's financial health. The significant backlog exceeding $115 million suggests a robust pipeline of future revenues, which may instill investor confidence. The growth in revenue for both Sypris Electronics and Sypris Technologies, driven by increased demand across various sectors, reflects a diversified business model capable of capitalizing on multiple market opportunities.
From a market perspective, the contracts with the U.S. Department of Defense and the involvement in large international projects such as liquified natural gas indicate strategic positioning in both defense and energy sectors. These sectors are known for long-term contracts and stable revenue streams, which can be attractive to investors seeking stability. The focus on continuous improvement initiatives and investment in new equipment could indicate a long-term strategy to improve efficiency and profitability.
Despite the revenue growth, the company's net loss in both the fourth quarter and full year raises questions about cost management and profitability. The net loss narrowing from the previous year is a positive sign; however, investors should closely monitor future profitability metrics. The expected gross margin expansion and gross profit increase in 2024 suggest that management is confident in improving operational efficiency.
Investors should consider the impact of steel price increases on Sypris Technologies and the ramp-up costs for Sypris Electronics' major programs, as these factors could affect future margins. The company's ability to pass through steel price increases and manage ramp-up costs effectively will be important in realizing the forecasted gross margin expansion.
The company's proactive approach to securing inventory under multi-year purchase orders to mitigate future supply chain issues demonstrates strategic foresight. As supply chain disruptions have been a global concern, Sypris Solutions' ability to secure customer funding and inventory for key programs could be a competitive advantage, potentially leading to uninterrupted production and delivery schedules.
The mention of material shortages and disruptions abating is a positive sign for operational stability. However, the dependency on steel prices and the potential volatility of customer demand schedules are factors that require ongoing risk management. The ability of Sypris Solutions to navigate these challenges will be critical in maintaining the positive outlook for 2024 and beyond.
04/01/2024 - 07:45 AM
Revenue Up 17% ; Backlog Exceeds $115 Million
LOUISVILLE, Ky. --(BUSINESS WIRE)--
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported financial results for its fourth quarter and full-year ended December 31, 2023.
HIGHLIGHTS
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Consolidated revenue for the quarter increased 16.9% and 23.7% for the full year driven by double digit expansion of shipments across both segments.
Revenue for Sypris Electronics increased 25.2% and 42.7% for the quarter and full year, respectively, reflecting the continued growth in demand from customers serving the markets for Electronic Warfare, Aircraft and Missile Avionics, and Subsea Communications.
Revenue for Sypris Technologies increased 10.8% and 12.5% for the quarter and full year, respectively, resulting from increased demand from customers serving the Commercial Vehicle, Specialty Automotive and Energy markets.
During the quarter, Sypris Electronics announced that it had received two multimillion-dollar follow-on contract awards from a U.S. global defense contractor for the full-rate production of advanced integrated electronic warfare and communications avionics system modules for one of the largest Government DoD programs. Sypris also received releases for the first year of production with shipments scheduled to continue into mid-year 2025.
Sypris Electronics also announced a follow-on award from a U.S. DoD prime contractor for a secure communications infrastructure program. Sypris will produce and test the embedded circuit card assemblies that will perform certain cryptographic functions for the Army Key Management System. Production is expected to begin in 2024.
Subsequent to quarter end, Sypris Technologies 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.
The outlook for 2024 remains positive, with revenue now expected to increase 10-15% year-over-year, reflecting the continued momentum of new contract awards and strong backlog across many of the Company’s markets. We expect gross profit to increase 20-25% for 2024, while gross margin is forecast to expand 150-175 basis points on a year-over-year basis.
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“We continued to expand across all segments of our business during the fourth quarter. Material shortages and the disruptions associated with new program launches are abating, and our focus is clearly on meeting the growing demand of our customers,” commented Jeffrey T. Gill, President and Chief Executive Officer.
“The backlog in excess of $110 million
“Overall demand from customers serving the automotive, commercial vehicle, sport utility and off-highway markets has remained solid. 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.
“Orders for our energy products remain positive, with open quotes outstanding on several large projects. Additional opportunities for growth may exist with new projects globally 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.”
Fourth Quarter and Full-Year Results
The Company reported revenue of $34.7 million $29.7 million $1.1 million $0.05 $0.1 million $0.01
For the full-year 2023, the Company reported revenue of $136.2 million $110.1 million $1.6 million $0.07 $2.5 million $0.11
Sypris Technologies
Revenue for Sypris Technologies increased to $19.0 million $17.2 million $3.1 million 16.3% of revenue, compared to $2.2 million 12.9% of revenue, for the same period in 2022. Gross profit for the fourth quarter of 2023 was favorably impacted by a customer payment for negative material surcharges and foreign exchange impacts on its contract with Sypris Technologies, offset by production inefficiencies driven by volatile customer demand schedules.
Sypris Electronics
Revenue for Sypris Electronics increased to $15.7 million $12.5 million $1.3 million 8.1% of revenue, compared to $2.4 million 18.9% of revenue, for the same period in 2022. Gross profit and gross margin for 2023 were negatively impacted by ramp-up costs on two major programs.
Outlook
Commenting on the future, Mr. Gill added, “While challenging supply chain conditions and new program launches impacted our 2023 results, demand from customers serving the automotive, commercial vehicle and sport utility markets remains positive. Similarly, demand from customers in the defense and communications sector continues to be robust, while the outlook for the energy market continues to move in the right direction.
“Our healthy backlog, new program wins, and long-term contract extensions are expected to support continued revenue and earnings growth during 2024. We now expect revenue to increase 10-15% year-over-year as a result of the combined strength of our backlog for Sypris Electronics and increasing orders for our energy products. We also continue to expect to achieve gross margin expansion in the range of 150 to 175 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
December 31,
2023
2022
(Unaudited)
Revenue
$
34,735
$
29,712
Net (loss) income
$
(1,079
)
$
140
(Loss) income per common share:
Basic
$
(0.05
)
$
0.01
Diluted
$
(0.05
)
$
0.01
Weighted average shares outstanding:
Basic
21,938
21,759
Diluted
21,938
21,759
Year Ended
December 31,
2023
2022
(Unaudited)
Revenue
$
136,223
$
110,121
Net loss
$
(1,596
)
$
(2,494
)
Loss per common share:
Basic
$
(0.07
)
$
(0.11
)
Diluted
$
(0.07
)
$
(0.11
)
Weighted average shares outstanding:
Basic
21,876
21,729
Diluted
21,876
21,729
Sypris Solutions, Inc.
Consolidated Statements of Operations
(in thousands, except for per share data)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
(Unaudited)
(Unaudited)
Net revenue:
Sypris Technologies
$
19,025
$
17,163
$
77,920
$
69,259
Sypris Electronics
15,710
12,549
58,303
40,862
Total net revenue
34,735
29,712
136,223
110,121
Cost of sales:
Sypris Technologies
15,922
14,947
68,712
60,709
Sypris Electronics
14,436
10,172
50,263
34,559
Total cost of sales
30,358
25,119
118,975
95,268
Gross profit:
Sypris Technologies
3,103
2,216
9,208
8,550
Sypris Electronics
1,274
2,377
8,040
6,303
Total gross profit
4,377
4,593
17,248
14,853
Selling, general and administrative
4,660
3,789
16,279
14,489
Operating (loss) income
(283
)
804
969
364
Interest expense, net
246
326
777
1,110
Other expense, net
342
145
1,125
800
(Loss) income before taxes
(871
)
333
(933
)
(1,546
)
Income tax expense, net
208
193
663
948
Net (loss) income
$
(1,079
)
$
140
$
(1,596
)
$
(2,494
)
(Loss) income per common share:
Basic
$
(0.05
)
$
0.01
$
(0.07
)
$
(0.11
)
Diluted
$
(0.05
)
$
0.01
$
(0.07
)
$
(0.11
)
Dividends declared per common share
$
-
$
-
$
-
$
-
Weighted average shares outstanding:
Basic
21,938
21,759
21,876
21,729
Diluted
21,938
21,759
21,876
21,729
Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
December 31,
2023
2022
(Unaudited)
(Note)
ASSETS
Current assets:
Cash and cash equivalents
$
7,881
$
21,648
Accounts receivable, net
8,929
8,064
Inventory, net
77,314
42,133
Other current assets
9,743
8,133
Total current assets
103,867
79,978
Property, plant and equipment, net
17,133
15,532
Operating lease right-of-use assets
3,309
4,251
Other assets
5,033
4,383
Total assets
$
129,342
$
104,144
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
26,737
$
17,638
Accrued liabilities
56,232
33,316
Operating lease liabilities, current portion
1,068
1,168
Finance lease obligations, current portion
1,327
1,102
Equipment financing obligations, current portion
618
398
Working capital line of credit
500
-
Note payable - related party, current portion
-
2,500
Total current liabilities
86,482
56,122
Operating lease liabilities, net of current portion
2,642
3,710
Finance lease obligations, net of current portion
1,852
2,536
Equipment financing obligations, net of current portion
1,333
738
Note payable - related party, net of current portion
6,484
3,989
Other liabilities
8,082
17,474
Total liabilities
106,875
84,569
Stockholders’ equity:
Preferred stock, par value $0.01
-
-
Series A preferred stock, par value $0.01
-
-
Common stock, non-voting, par value $0.01
-
-
Common stock, par value $0.01
224
221
Additional paid-in capital
156,242
155,535
Accumulated deficit
(116,932
)
(115,336
)
Accumulated other comprehensive loss
(17,067
)
(20,845
)
Treasury stock, 5,835 in 2023 and 19 in 2022
-
-
Total stockholders’ equity
22,467
19,575
Total liabilities and stockholders’ equity
$
129,342
$
104,144
Note: The balance sheet at December 31, 2022, 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)
Year Ended
December 31,
2023
2022
(Unaudited)
Cash flows from operating activities:
Net loss
$
(1,596
)
$
(2,494
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization
3,259
3,088
Deferred income taxes
54
329
Stock-based compensation expense
813
683
Deferred loan costs amortized
3
6
Provision for excess and obsolete inventory
(167
)
65
Non-cash lease expense
942
890
Other noncash items
(56
)
(148
)
Contributions to pension plans
(16
)
(60
)
Changes in operating assets and liabilities:
Accounts receivable
(1,096
)
345
Inventory
(34,693
)
(11,804
)
Prepaid expenses and other assets
(1,105
)
(3,072
)
Accounts payable
8,984
5,556
Accrued and other liabilities
13,585
20,409
Net cash (used in) provided by operating activities
(11,089
)
13,793
Cash flows from investing activities:
Capital expenditures
(2,139
)
(3,041
)
Proceeds from sale of assets
-
10
Net cash used in investing activities
(2,139
)
(3,031
)
Cash flows from financing activities:
Proceeds from equipment financing obligations
710
-
Proceeds from working capital line of credit
500
-
Proceeds from Note Payable - related party
2,500
-
Principal payments on finance lease obligations
(1,168
)
(982
)
Principal payments on equipment financing obligations
(551
)
(352
)
Principal payments on Note Payable - related party
(2,500
)
-
Indirect repurchase of shares for minimum statutory tax withholdings
(105
)
(49
)
Net cash used in financing activities
(614
)
(1,383
)
Effect of exchange rate changes on cash balances
75
649
Net (decrease) increase in cash and cash equivalents
(13,767
)
10,028
Cash and cash equivalents at beginning of period
21,648
11,620
Cash and cash equivalents at end of period
$
7,881
$
21,648
View source version on businesswire.com: https://www.businesswire.com/news/home/20240328095435/en/
Richard L Davis
Chief Financial Officer
(502) 329-2000
Source: Sypris Solutions, Inc.
What was the revenue increase percentage for Sypris Solutions (SYPR) in the fourth quarter?
Sypris Solutions reported a 16.9% increase in revenue for the fourth quarter.
What markets drove revenue growth for Sypris Electronics?
Revenue growth for Sypris Electronics was driven by demand in Electronic Warfare, Aircraft, and Missile Avionics markets.
What awards did Sypris receive for its electronics segment?
Sypris received multimillion-dollar contracts for electronic warfare and communications avionics systems.
What is the outlook for revenue in 2024 for Sypris Solutions?
Revenue is expected to increase by 10-15% in 2024.
What impacted the gross profit for Sypris Electronics in 2023?
Gross profit for Sypris Electronics was negatively impacted by ramp-up costs on two major programs.
