Sypris Reports Revenue Up 33% in Q3November 20, 2023 | Sypris Technologies, Inc.
Estimated reading time: 5 minutes
Sypris Solutions, Inc. reported financial results for its third quarter ended October 1, 2023.
- Revenue for the quarter increased 33.3% year-over-year, driven by a 73.5% increase for Sypris Electronics and a 13.8% increase for Sypris Technologies.
- Gross profit increased 105.0% year-over-year, with an improvement of 186.8% for Sypris Electronics and 36.2% for Sypris Technologies.
- Gross margin for the quarter increased 420 basis points to 12.0% with an increase of 710 basis points to 18.1% for Sypris Electronics and 120 basis points to 7.5% for Sypris Technologies.
- Backlog increased by 8.4%, reflecting a 9.0% year-over-year increase at Sypris Electronics after having taken into account the significant increase in shipments during the period.
- During the quarter, Sypris Technologies announced that it had received an order to supply 72-inch insulated joints for use in the expansion of the Atoka Water Pipeline for the Oklahoma City Water Utilities Trust. Shipments are expected to begin in 2023 and extend into 2024.
- Sypris Technologies also announced that it had received an award for specialty high-pressure closures for use in the Venture Global CP2 LNG Export Terminal and the Venture Global CP Express Natural Gas Pipeline Project. Shipments under this award are anticipated to be completed by year-end 2023.
- Subsequent to quarter end, Sypris Electronics announced that it had received a follow-on contract to manufacture advanced integrated electronic warfare and communications avionics system modules for an American family of single-seat, single-engine, all-weather stealth multirole combat aircraft. The program is one of the largest government DOD programs, and production is expected to begin in 2023 and will continue into mid-year 2025.
- The Company updated its full-year outlook for 2023, with revenue now expected to increase 25% year-over-year, at the lower end of our prior guidance due to customer design changes. Gross profit is expected to increase in line with revenue, while gross margin is expected to approximate the prior year due to the continuing unfavorable impact of the Mexican peso relative to the U.S. dollar.
- The outlook for 2024 remains quite positive, reflecting a strong backlog and the continued momentum of new contract awards across many of the Company’s markets. Revenue for 2024 is forecast to increase 15-20%. Gross profit is expected to increase 25-30%, while gross margins are expected to expand 150-200 basis points year-over-year.
- “We were pleased with our third quarter performance, as both operating segments reported significant growth in revenue, gross profit, and gross margin. Our teammates have done an excellent job navigating inflationary pressures, supply chain challenges, customer demand volatility and currency fluctuations to position the business for further growth and increased profitability during the remainder of 2023,” commented Jeffrey T. Gill, President and Chief Executive Officer.
“Backlog for Sypris Electronics increased, rising 9.0% on a year-over-year basis. This strong backlog is expected to support revenue growth over the balance of this year and 2024. 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.
“Overall demand from customers serving the automotive, commercial vehicle, sport utility and off-highway markets has remained stable. We continue to invest in new equipment and drive continuous improvement initiatives to support more cost-efficient operations, which will help offset headwinds for our automotive and commercial vehicle components as our customers adjust inventory levels to align with OEM build schedules.
“Shipments of Sypris Technologies energy products increased 27.3% year-over-year, while orders during the quarter increased 24.1% sequentially. With open quotes outstanding on several large projects both domestically and internationally, additional opportunities for growth may exist with these and other projects in support of elevated domestic natural gas production and in adjacent markets to further diversify our industry and customer portfolios.”
Third Quarter Results
The Company reported revenue of $33.6 million for the third quarter of 2023, compared to $25.2 million for the prior-year comparable period. Additionally, the Company reported a net loss of $0.6 million, or $0.03 per share, compared to a net loss of $2.2 million, or $0.10 per share for the prior-year period. Results for the quarter reflected the unfavorable impact of the appreciation of the Mexican peso relative to the U.S. dollar.
For the nine months ended October 1, 2023, the Company reported revenue of $101.5 million compared with $80.4 million for the first nine months of 2022. The Company reported a net loss of $0.5 million, or $0.02 per share compared with a net loss of $2.6 million, or $0.12 per share, for the prior-year period.
Revenue for Sypris Technologies increased to $19.3 million in the third quarter of 2023, compared to $17.0 million for the prior-year period. Commercial vehicle component shipments and energy-related product sales both increased during the quarter. Gross profit for the third quarter of 2023 was $1.5 million, or 7.5% of revenue, compared to $1.1 million, or 6.3% of revenue, for the same period in 2022. The strength of the Mexican peso relative to the US dollar had a negative impact of $0.8 million on gross profit when compared to the prior-year period.
Revenue for Sypris Electronics increased to $14.2 million in the third quarter of 2023 compared to $8.2 million for the prior-year period. Shipments of communications products increased significantly during the quarter, driving the increase in revenue. Additionally, shipments under two follow-on programs began ramping during the quarter and contributed to the growth over the prior-year comparable period. Supply chain constraints and delays in certain customer approvals limited shipments and revenue from certain programs during the quarter, while also contributing to a $12.0 sequential increase in inventory. Gross profit for the third quarter of 2023 was $2.6 million, or 18.1% of revenue, compared to $0.9 million, or 11.0% of revenue, for the same period in 2022. Margins improved on higher volume, favorable mix, and cost savings on certain component purchases.
Commenting on the future, Mr. Gill added, “Demand from customers in the defense and communication sectors remain robust while demand also remains strong from customers serving the automotive and sport utility markets. Similarly, demand from energy market customers remains higher than in the prior year and continues to move in the right direction.
“We have updated our outlook for 2023 to include a 25% growth in the top line, which is at the lower end of our previous guidance. Gross profit is expected to increase in line with revenue, while the continuing unfavorable impact of the Mexican peso relative to the U.S. dollar and changes in the revenue mix are anticipated to impact margin for the full year.
“With a strong backlog, new program wins and long-term contract extensions in place, we are confident that 2024 has the potential to be very positive for Sypris. In our initial outlook for 2024, we expect the top line to increase 15-20% year-over-year as a result of the combined strength of our backlog for Sypris Electronics, increasing orders for our energy products and anticipated new program wins for Sypris Technologies, partially offset by the anticipated 13.4% decline in the commercial vehicle market. We also expect gross profit to increase 25-30%, while gross margins are expected to expand 150 to 200 basis points in 2024 on a more favorable revenue mix, improved operational performance and more favorable foreign exchange rates.”
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