SYPR Sypris Solutions Inc

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