SYPR - Earnings call transcript Q1 2018

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Operator

Good day everyone and welcome to the Sypris Solutions, First Quarter Earnings Call. Today’s call is being recorded. At this time for opening remarks, I’d like to turn the call over to the President and Chief Executive Officer, Mr. Jeffrey Gill. Please go ahead sir.

Jeffrey Gill

good and Lori you, morning everyone. Thank and this call, Allen the financial first I is would to you company's XXXX. the for welcome to results the review like to Tony purpose which of

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

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

overview on Now, let's begin slide four. the with

last from the million for from of where quarter increased period for report sequentially to from during Sypris the quarter on to a of from same by of a year under XX.X% margin continued up was at up Gross consolidated revenue the The Technologies way for year period. gains year. X.X% the increased loss basis. conditions. profitable on increase with up the year. prior once period We the driven basis quarter shipments an continued and led another the margin of The the awards of X% Sypris Technologies of for during a again and fourth period new XX% basis last from basis, points increasing business, operating margin income the just Technologies adjusted represented gross to quarter by during and are XX.X% fourth the almost resulted for gross came expansion Sypris materially in year-over-year a in on XX.X% X% with driven a which in prior up improvement contract margins in pleased and loss quarter that XXXX $XX quarter positive market rising XXX the

profile to expanding of rare. the appears prices, has are capacity resulting by commodity in demand line exacerbated pervasive a the legacy content times the to situation Suppliers escalating The automotive, to up improved in throughout improved problem Electronics Simultaneously when storm. is XXXX. to shortages. Over the impacted we Our in Sypris, across reluctant is to some historically have chosen add shortages consumer thereby latter including and turn becoming year. completely. products and during buying and feel products At cost margin significantly including quarter It and during to further be lead operating there longer of industry. component a be increased the further increasingly that continued on began mix part from during market certain Sypris impact top performance telecom. been most Shipments exit aerospace military, combined and have expansion result industrial, with segments expected cases an in in is been has automobiles component perfect electronics. the Electronic variety

customers of time the funding been and closely substantial now return resolve further components. which issues have quarter, our our the We business customers coordinated expansion to chain have need the results time arise. expect leverage of chain a second will second that of with shipments our Having reflect alternative to use customers appreciated supply shipments the this, for with customers. our long that the substitute since working we to effort large much approve our to support said suppliers, approach qualified they to secure position otherwise successfully secure supply an of our to and been sense aggressive historical half the and team for The this will and We year. parts, during impressive is tremendous levels lead maintain of as

first the the of to A and to fourth XX% Department dynamic year. expect continuing We robust during of extremely capacity period, and thereby Deep quarter, when balanced. XX% communications trending Sea the particular are until Sypris market trend the demand customers XXXX very which quarter Electronics foreseeable last in future as prior the the established orders such remain continue for compared to up culminated note positive the orders be for Defense positively. increase time year with have during during the been Orders year-over-year from

record orders North attempting rising year-over-year XX% up increase encouraging. The positive outlook months XXX,XXX Demand orders were markets this units. underlining past remains for the XX% freight market. free demand Orders up American continues heavy coupled each April X a capacity basis, units. fleets totaled economy outlook three in the possible for in and for and the XXX,XXX Class add with to five, to appears as months to X fast in have slide XX at now past be trucks our while as orders. during the trucks are to major Class rates levels Turning were for the of still on

Demand U.S. supporting provides and budgetary awards capacity next built these when oil we the forecast [ph] a and forward. Even year. multiyear price to solid with continues as the forward combined become by the with short-term fiscal combination as LNG years. and orders outpace programs The XXXX is the company’s thereby continuity terminals a net disrupted recent into optimism the with risen light with additional thereby the the to should for the importantly, period contract of of funding to four other the and programs demand past will positive providing weapons future has automotive been XXXX. resolutions The pushing major of the in business. of also is that the provide missile-defense, budget, XXX the bode more has reinforce of funding generation the natural as -- activities billion that gas growth with of which remained the within continuing gas automotive export profile consumption, any of market truck us to the pipelines past cool support in expected power production Authorization The base natural domestic of through and Defense should nearly bill year recent spending for construction Department for approval of Defense reaching exporter over well been conditions We conversion products. lower used joint Department to for of energy approximately Defense. rate markets this move of the solid increased in fighter, year, spending the cost outlook outlook oil for issues. the XX% strike expect XXXX for for of comparable for rise when on and national our for have our Act for the Within well the the the both looking slots

at year-over-year profitable on reflecting improved Electronics benefits and our important XXXX our top the $XX slide at margin both expect we effective XXXX, of line profile gross mix Technologies Turning for solidly be guidance is operational for XXXX. and basis, growing expected to is to Revenue the while XXXX The in forecast XXXX the midpoint six, role from reduction growth, our increase Sypris to of XX% since has efficiencies. cost of for transformation. to for an Sypris XX% certainly million played increase X% this up midpoint by a to

the to must with revenue will XXXX. the work expected our to in forward. will factor to navigating a expense with journey a a open better chance chapter the In in improved issues of be positive here very order remains. we key of customer that growth, us up combination close to the look and however, mix significant successfully. meet return make for Much a our certain growth partnership is much new in Sypris we acceleration by We but profile profitability need of reduction summary, at these we the that in we As top certainly line carries materials commitments, our future, have working customers, have

now morning. Tony? to slide will this lead the for Tony presentation seven, to Turning Allen you our balance

Tony Allen

I’d Jeff. of Please with Thanks million, year. financial consolidated first increase an of everyone. of advance quarter eight. Good results. to was from last to our X.X% you first some slide revenue of morning, $XX.X the like discuss QX the quarter highlights

with drivers We for year Sypris Sypris in Technologies Sypris availability. we QX second on split in by see component our our primarily segment segment QX conditions The particularly in customers XX.X% The represents the energy commercial in with and revenue. while increase those strong prior are the entered volumes demand Electronics for XXXX in and $X.X revenue Technologies $XX.X respectively. over electronic this million an pleased We revenue million although markets. vehicle for of Technologies are with a Sypris remained different was quarter. The Sypris markets between serving the comparable and automotive the flat. mix Electronics increase further basis, market and the these year-over-year upside On given of faced headwinds as slightly a were period

the the wide beginning momentum favor, impacting to of earlier, must base and keep problem an remain the in for shift improvement closely with team and organization in in customer solving partnering solutions. supply component persistent market, the so our are details our paying to we our focused that day. Electronics is we programs, aggressively working and By attention however, to starting resolve are everyone availability discussed see are we Jeff as shortages component on with our every our customers, to industry As is Sypris problem, of chain pursue signs challenges

the QX of basis of costs for to XXX improved the the us points improved cost segment We in closure compared we being QX from course benefits compared for XXXX. a the to reported following segment compared drivers are XXXX. now an These reduced in achieved way Broadway of the of our for margin reflected and second announced for Broadway year to components estimated cost XXXX. structure also the revenue to The the for December. Broadway our cost levels margin we the sequential over of costs of ago, actions This lower quarter, QX in a the employment plant expect last three of flow variable in the an Consolidated significantly were material improvement X% our enable technology plans more the primarily QX improvement. actions in in from to the closing by the XXXX. The drive A are XX.X% see X% margin XXXX XXXX. XXXX plant over will XX.X% of represents two in negative lower back gross key by fixed reported reduce to and sales, to which in attributable to a of gross to transferring million quarters little production and $XX of completed negative

Another expanded sales, growth further year-over-year head in which product energy-related factor that is margins. we our

in cost quarter. our major on that included a but affected quarter manufacturing will margin periods, Toluca incurred also asset maintenance for project the first our benefit The plant percentage future for

beginning We following performance operational of increased will are QX. transfer these continuing and to the expect in contribute actions to implement improvements production margin

gross we Our to for the slightly dampened XXXX level The was in results an the base. Electronics in revenue were Sypris by of with positive revenue. margin the were margin first which gross quarter equivalent during of similar lower quarter

compared to in a balance At we year, reported our return as line as the targets. achieve reduce to on to through variable our XXXX. in in and our Our the were of labor able and various segment. revenue adjusted we is ultimately certain will expect areas, an top component for $X.X issues, improvement increase The quarter rate recent shortages and run million component XX.X% back news in support although backlog we revenue QX to this of we that resolve income is managed certain the of the to to line, operating which was loss, an margin down represented productivity margins we our targeted in spend good place lead the programs, us

getting to the path QX. revenue a in electronic along prevented continuing our segment impact profitability, return the on are of We there from us but

second expected, consecutive profitable As Sypris Technologies reported of its quarter results.

segment targets the in is all future within of we that years, slide one advance this to over changes Given the three and expect this a build Please achievement periods. past our nine, to on half I’m remarkable going and discussion will to outlook into we first by into year the begin second XXXX of breaking the after down first half. the the drill further which

on Our with QX consistent earnings outlook view for call. is our XXXX we discussed the

the an for revenue the in expect increase million. the year million range, XX% XXXX. $XX be of this range of over We $XX to represents At to of midpoint the

in increasing to million million in first half. half to first the year, We see from to expect of the $XX $XX second million to $XX second from the growth $XX half the sequentially the to revenue million half

XX% maintaining the on SG&A the the between are time to with tracking advance to percentages second and for segment drill in with year expect going within discussion XX% place XX% expected is and to from top to target revenue line half the The the for importantly, taking further on We net to is move for the similar result call, to growth halves change. second we the the margin we two our to past with first year, our profile, fall years and revenue exceed into revenue practices of We at slide most a highlight we regard XX.X% the our quarter. profitability. four beyond in books, to first performance this profitability. half. the for will outlook is to to deviate return XX, are our Please the QX in necessary the this believe business shift as level path the QX

outlook Going start the results, consolidated the to followed at from outlook actual the by to build the results. for to our arrive segment left up first half QX I’ll at level the our first right, on discussed slide. column includes we QX, discussion and previous the

the basis, First, and we the at was the top Sypris were line We gross both first-quarter sequential QX On XXXX, structure in and our XX.X%. for December. the the expansion The margin the in revenue but drove improvement plant with performance, Technologies. flat from now following in of QX margin our to margin. gross reflects of XX.X% closure pleased with outlook QX a cost in place an Broadway

all remarkable a learning launch improve confidence curve. over as workforce to and point could the have we done has team job we our Our continues past year Toluca the programs margins at get this that transferred to further plant to successfully the at us

we the work margin in asset As forging I through first, recognized the our us, the positioned are during maintenance and an to quarter. variable while performed quarter. margin ways; we directly the to our area downtime mentioned major earlier, the procedure we a maintenance increase was lower expense on this first reflected event behind impacted This our in the completed. spend our in second, related two productivity procedure second labor With performance

our are machining add Broadway We schedule growth, capacity bringing how up that from also flexibility line transferred to provide facility for a to we was our revenue lines. and new to additional

as expected of midpoint for programs our of main on business needing our absorb This are The house volume revenue the of execute our book book on are is the this just a the in target. fixed to to QX. without incremental our line. to to is primarily growth margin based based as existing allowing on directly challenge conversion revenue our structure, cost to We XX% growth opposed the is we on achieve top enhance flow to turn able increasing margins line so additional and under high projecting percentage range of currently our bottom to

the to second As to to XX% a XX% grow in margins result, we from QX XX.X% in quarter. expect

Now, the Sypris Electronics.

our component us discussed with Jeff QX late vendors as XXXX. and work business put This customers constraints in pressure our earlier our support impact team to supply and of solutions to shortages our As identify the on chain began that a alleviate accomplished going shipments remains the aren't of market but will product more us term. area, change substantially work forward. in as ahead increase flow near this enable expected in to the to the dynamics deal We've of great

efforts However run normalized the with return collective enough begin that to second quarter to the rate. to improvements of our confidence provide during team we a us will see

team getting will customer competitive continue position base to this improve our market. manage to and are to leverage we chain this Our our in support supply maintain the area from have or aggressively

availability, In program. phase ramp addition up shipments our of includes a component to on the on in development the QX outlook improvements defense

contract performance complete phase. to our expect developing we as awards this will initial We on the lead follow-on

increasing the on have also are balance to compared required defense in two of programs past the second during We years shipments the quarter year. other in the that lower QX two shipments

us the growth combined component program availability improved and XX%. sequential under will for to just allow a revenue of of quarter expect second in increase the generate impact We

operating million half income margin your upside of expect increasing more quarterly note to line revenue volume. run increases in our gross in but key leverage we we plays in double-digit second be get a mix will factor year. our at this, to the of X to in rate that provides a As to A gross or and margin we expect profitable performance significant the performance. a going revenue you from be is margin improvement Program returning could the our role the

in backlog outlook We of second the and have the to the for quarter the half both our support place year. second

of greater our the level XX% with with during approximately requirement Please chart this this at customers procure to for our used unstable support team components to gross for major an over we've components supply. brings million to we to period incurred and XX% gross absence on expenses under to are $XX of and $XX when by levels XX% the revenue than to increase truck driven XX. million volume consolidated a QX. QX $XXX customer's structure both of We At slide in sales ensure heavy in back outlook in able will our million range gross today's margin continue with XX% revenue segments in the annual us to we of was significantly In that to XXXX levels. calls advance the footprint had of performance with XXXX, generated This is margin just were to of periods and cost market. maintenance the from recent showing margin the

through line. As manage in change our three see But top years drop significant realigned profile margin a of of our and meet trend we cost to second the started performance new beginning as an upper our performance in we experienced XXXX. we to first we half in

current both drive Reaching direction, to to the top in improvement of but periods. continue trend our another goal this step the these us this margin half operational sequential takes line with XX.X% must in throughout continue year the this business year first we and second to expect gross targets. our meet meet and We QX in in improvements

business to beyond margin our we slide I and As create further takeaways. cost offer new will advance awards and follow-on profile XXXX with leverage opportunities look we business Please few a opportunities. expansion XX to to expect

margin income from for in of year, represented gross QX revenue XX.X% an improvement second QX Sypris compared basis in improvement quarter Technologies in negative to points. XXXX consecutive revenue SG&A XX.X% the this QX the The segment XXXX. XX.X% prior over in X.X% quarter. of first of the improved operating margin resulted XXXX of in increased first to X.X% from Our positive decline for quarter. the to Gross quarter for X% at and

our revenue revenue outlook confirming heavy truck, to gross outlook XX XX backlog for XX%. at our million for aerospace XX% to and million is of conditions XX% are and for supported detail QX XX million defense and energy We which current coming by million We to year revenue the shows the XX provided gross for market The strong and margin programs. XX%. in additional margin our at to outlook

expect for it this to and the upside any This today. we over time. sale finally might back us our return Thank expect concludes And year flow to XXXX. to for cash this to our And have at We for answer to generate profitability positive call the assets. opportunity to we like be turn forecast time from to you. of the questions I'd to Laura at you have excess

Operator

Company. to Instructions]. turn [Operator We'll Jim & first Needham Ricchiuti with

Jim Ricchiuti

Hi, we good or about shortages on wondering are components the type or resistors Jeff talking morning. about? was what Tony, of talking just we just are capacitors, component I

Jeffrey Gill

Primarily, it's manufacturers particularly Japanese capacitors and Jim, to them. resistors, have of and decided legacy a the where making quit the apparently and commodities just number

times source the in that And issues so been of sole-sourced. our customers specked has supply can our components lot are and of us lot fact by one that's the and affected times of the a of be

get process. working we've use So manufacturing so that been the changed alternative suppliers can to in find to components alternative and/or that we

Jim Ricchiuti

Got it.

and So to going alternative be that's issue this think largely is couple you Jeff, quarters? sources ability you in the of you some behind over have to other next words, why to the now go

Jeffrey Gill

imagine is a making do. You're impact is we I but where we as closely hopeful them we'd on customers it getting of have more think and you can number a that our with characterize lot than me working allocation been this Jim,

suppliers. to qualify using And their we've We've leverage allocation. alternative so get or at We've to been working components. looking classify been been new more

rate the there see But add to anywhere sources rising in and year. -- starting look in now XX% XX% of the near we've ramp and feel and to And the per got is I a some back the the per put XX% for to XX% they're so lag think we industry from as of it to but that term, the capacity year at to -- directionally, demand we up, house outlook this. at material

XX to talking so who you're upon XX And see to depending standing months. the they out situation is

stay to want believe to we this somewhere answer arise requirements we customers our and thing material to in-house our And balance question want we the we the on situation handle closely so to make with of that year. an have just -- the have don't sure to very current a we your during

Jim Ricchiuti

Okay.

Now, contracts, a that -- handful concentrated or a contracts but is more this big it in in concentrated XX%. highlighted Sypris makes is orders you increase a of highlighted broadly up based? you've Is Electronics, just that That's that sense. with few

Jeffrey Gill

You know up been nice we're where there generally, but particular some have recently. awards had we customers in

depending And we're ago, upon sources things footprints of so believe, that's being we over DoD their and fairly year others around and XX generally a as eight could lot at to that you is activity, be that are contributing you is activity and there it. The reconfigure side of the starts seeing coating run [ph] Grumman who materially nature. things say more year technology stuff that know placed up that Northrop to as a probably lot to looking expanding more

Jim Ricchiuti

Sure.

expanding any You're of characterize – Sypris way next based sounds in to building extent your Is is the there also both I saying assume on actually on backlog both which in now to businesses, you're year. sides your into been it like building just business? backlog building you're what backlog both

Jeffrey Gill

rates Well, for been say a year this terms see so performance has looking that year topline in we're of I'll good XXXX. good, into we continuing and the order certainly that and

material a of from of keep toe. availability going really to matter execution, and to things it's types just be so stamping those And our

Jim Ricchiuti

expense in unusual on equipment the the impact in size that you Okay. anyway gross margins? incurred you Toluca. Tony, on And there Is to that question for just

Tony Allen

points at the a say in probably segment we at would margin. it's two technology worth level Jim, as that of half, it point a look I

Jim Ricchiuti

Okay, perfect. Thanks a lot.

Jeffrey Gill

you, Jim. Thank

Operator

the [Operator Companies. Instructions] Joel Next we'll with move Jameson Cahill

Joel Cahill

Good guys. morning,

Jeffrey Gill

Joel. Hi,

Joel Cahill

call. the for Thanks

regarding quick So off not couple chain able Are play I source a get come to to event we're risks to questions the competitive components? supply – just into Jim's there questions just to start issues. these of want of that that in the

Jeffrey Gill

Joel.

Joel Cahill

I the contract of mean really? lots

Jeffrey Gill

No. an situation. situation a rather I so, specific company because industry think than don't this is

our And help company many qualify circumstance. another getting us sole-sourced specified we're of really in certain components a other choice our so than again supplier, as to without by are customers since

Joel Cahill

increase, Okay, adjustments going of sure. and there And likely out come just are some push are that contracts? margins of are costs that. you think you be suggest then, that mean through Does on to or able to I

Jeffrey Gill

No.

So and think price coming on been basis, that because customers better inflation least so to far sold. they so customers -- our we'd get fixed And we seen work at good to I are goods work we our are haven't with through do. but cost a far our of prevent

Joel Cahill

Okay.

a So, Tony, facility. Last you mentioned potential Broadway into taken flow as of $X.X prepping for some for looks asset end cash a the It a on was that year. had boost not put to you sales? asset to good we lot. able talked, said but it's there the from Have generate building you together necessarily ideas going been like million sales you a generate some could time amounts

Tony Allen

targets Joel. internal towards some have working that We we're

we to incur June about on our is and item actually first auction and call. going talked in at the the The last agenda

the be be completed auction. of that and will we'll in what say smaller QX would would the of June assets that in assets, we assets the manufacturing I so of for So will call. part the That Broadway majority -- that be results some the that facility of our have in is that have

we terms expected In building proceeds set haven't we haven't taking itself; this any to start our of on alternatives property to of no yet. we we how are actions but look in for targets sale at – that to terms prepare as today

Joel Cahill

Okay. Got it.

does the the for how billion single off fiscal margins healthy higher do seems? department I XXXX, much obviously ST year I two digits buffeted going some the looking then One, the see tricky question and And was these certainly really now – So for low spending. it is side is DoD revenue, just is margins see business, the of by previous? are side, what businesses still by ask, to generating of being you at because some ST, justify mentioned for XXX to compare that somewhat to we next of

Tony Allen

figures, the last get we into know some we you half the the upper double we in we the business. few XXXX. XX% the in we talking margin Joel we run that in that teens quarters believe QX us upside question And reference about into -- second to in as levels And mid beginning on we have to, to back those as get our of of we're the rates expect rate to will again be to for run back had that Well, year return what we XX%. revenue

So…

Joel Cahill

Okay, great.

Tony Allen

is single year lot see we it through certainly see business. move don't a it a digit as the certainly to as and drives the double-digit number, of as firm We but it margin is volume We a margin. important us

to You structure facility. fix piece new took a relocated when XXXX a to of the might we recall we beginning that of significant

So pretty our today is revenue significant. leverage on

we those as move getting see the second we So and back up figures. into half in numbers double QX the the

Joel Cahill

then Excellent. from And the macro environment? Okay. just

Jeffrey Gill

don't have is year-over-year here memory billion my We the but is this, the somewhere Yes. with spending in $XX range. directionally the in figures that increase

So I XX%, think [Indiscernible]. XX%

Joel Cahill

it's questions you Okay. have of leverage. nice very lot Certainly thank all to a much. tailwinds I've That's encouraging, great got better Again all of guys. on top

Jeffrey Gill

Thank you, Joel. Okay.

Operator

I'll [Operator back it are Instructions] conference the appears gentlemen, And there turn further questions. no to you.

Jeffrey Gill

course your us joining morning. and to continued Tony for And the business. questions on interest Laura. thank of you, your We about you like Thank I our and guys call welcome this Okay.

you thank day. great a and So have

Operator

Thank conference. today's for conclude participation. we'll that, everyone you With you

Jeffrey Gill

Thank you, Laura.

Sypris Solutions (SYPR) 15 May 182018 Q1 Earnings call transcript