SYPR - Earnings call transcript Q2 2018

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Operator

Good day and welcome to the Sypris Solutions Inc. Conference Call. Today's call is being recorded. At this time for opening remarks, I would like to turn the call over to the President and Chief Executive Officer, Mr. Jeffrey Gill. sir. ahead go Please

Jeffrey Gill

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

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

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

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

sequentially an represented the XX.X% and to pleased revenue timely of with with and a that shipments the increase which electronic year period. up from just of coupled during at are certain basis, up from of We under reflecting this prior increase the impact led the $XX year XX.X% positive million the on X.X% quarter the year-over-year receipts quarter quarter backlog, the Sypris came way Electronics components. X.X% first a for strong in report its

to ability on help participation with a leverage customers positive to who and their our of greatly has used a these improved have Our financial supply the influence components secure scale apply chain. on

We outside result the As shipments going inside sequential quarter improvement this both year-over-year basis, absent to in a were also Technologies higher working as of could surprises both and to special who both not and of simply those top result, these line like these without the [ph]. have expect to on increased results we company. you. the parts we availability support. note, these instrumental Sypris levels see a would achieved And thank the improve of at dedication and forward, was Thank The your and X.X% margin positive gross prior sequentially year-over-year consolidated and and year up Gross to results sequential a from as XXX X% the basis points in new rising the points period respectively a on of contract favorable of margin XX.X%, awards and segments. basis by X.X% XXX year. both basis conditions. from basis driven up for The increased in business market first on and

reflecting its on X.X% up of for XXXX, margin the the Sypris conversion for positive XX.X% quarter, increase sales in the first period. the quarter gross loss sequentially XX.X% For a from Electronics, to for increased of

year for impact the to period, the For XX.X%, up positive and significantly reflecting prior operating Sypris of gross cost. X.X% revenue Technologies, from higher margin lower increased

per result is company during top year. the XXXX line quarter share of improvement combined year's further the from when prior of a first improved and finally, which cost profile the to of the expected was the balance And and improved $X.XX from with both expansion Our performance in expanding mix and performance. positive margin upgrading reported an earnings

were up XXX% fast completed basis months up to American now as for now the X orders from in Class Slide of capacity cost well is XXXX. possible remains a XXXX. second positive and July X still Technologies, to market. XX,XXX half expected the sequentially we of the totaled continues for and outlook half total to sales to higher trucks Sypris in have during rising be for to the past units. orders. The freight demand, year-over-year second positive activities increase and of appears The outlook rates benefit with recorded. for as the fleets Class ever over of North coupled the in Turning XX on economy monthly XX% business the units, are XXX,XXX freight as the improvement attempting were that this highest XXXX X. In underlying case Orders in the get the second as trucks record-levels Demand heavy as add at half into from

We see that for the domestic that past approximately capacity, into build the we any reaching and consumption, within expect year X price additional Demand note XXXX. outpace to construction used outlook pipeline activities years. the and regarding the for The Basin other thereby energy-related we issues, the will gathering risen in the Permian export serving positive for the aging and energy also for of generation period market supporting and light outlook. Production of growth pipelines while U.S. solid, you outpace support to XX% demand will The slots growth exporter while become XXXX through pipeline with in the of the remains the is to a gas pushing further. to oil to well the transportation next current rate terminals to systems as joints the to orders over And such continues the natural to in as four conversion likely year. truck environment forward closures, markets pull Slide in as the the happen L&G bolster discussions a bodes the power five of products the infrastructure products. net existing continues forecast comparable of trade-related thereby capacity of automotive insulated move natural will future and of on company's improve for gas has oil well production resolution other should NAFTA

during reported Turning The availability XX.X% growth increase X. Sypris Slide to the in components of electronic the instrumental sequential quarter Electronics. to was by the

These base resolutions profile market disrupted sources when weapons the programs forward. increased on of to and and worked been our should been of in we fund the provides As in long-term to recent to the by for defense, lowest of enter conditions awards Fighter with also importantly, to with earlier, the past partnership and and the recent a us continuity combined cost other and spending major should billion ensure missile several for positive solid Strike spending secure approval future short-term the budgetary identify that in budget, close and which components fiscal of Sypris customers with when for qualify Defense and multi-year Even Within provide well our the contract bill this has into Authorization rise bode alternative providing funding is for for Defense programs optimism commitments continuing XXXX with Joint the of in looking help Defense. have funding for Department business. $XXX our purchase Department year more nearly issues. components, mentioned National that deliveries. Act

Turning now Slide X. to

line of for We top reflecting solidly be expect growth, improved efficiencies. and operational growing profitable Sypris Technologies the XXXX, both Sypris benefits Electronics mix and to

while for from balance half reduction from for XX% the gross confirm XXXX XX.X% $XX increase first this is half As a up result, our of midpoint, an expected basis, transformation. certainly by of role midpoint profile XX% at the and guidance effective of million to we a outlook played of since the margin to revenue on cost has to pleased second are XXXX. forecast of on for the XXXX year-over-year with X.X% XXXX our important to our up at the our increase The

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

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

Tony Allen

Technologies highlights morning, Good quarter was million to I'd $X.X of of last the an discuss revenue serving of for first like $XX second X.X% you revenue increase Slide of be and strong for our commercial increase respectively. prior an conditions the to energy represents Sypris for This Sypris market automotive and X% primary million the Jeff. consolidated to financial and Please Sypris driver some $XX.X of The Sypris results. Electronics continues Sypris the demand period X.X% The split from vehicle, between customers was advance Thanks, markets. our million, over and XX. Technologies Technologies with year year. quarter everyone. QX Electronics. the for

to challenges and QX we see chain QX in as of work electronics that Sypris could Our outside improved increased supply up as second base market we sequentially during markets quarter. XX.X% the component to in by customer the continues availability programs. the from Electronics further our impact team Sypris resolve quarter. The X.X% enter availability closely revenue was third our the with for these Revenue for for sequentially component

progress work initiatives for in increase making but the are remains. evidenced as We period, revenue much these by with the

of continue a including alternative to qualifying supply will solutions of alternative and sources We pursue identifying components. variety

course XX.X% the December. this now following X.X% of completed the reduction benefits overhead our the and XXXX. by the in of to an fixed gross reflecting year, segment. Broadway compared cost structure for the component reflected the the XXXX the basis production to In we early continue in transferring to X.X% to the plans XXXX to of the margin the position actions more our for our balance second Consolidated cost we shortages XXX gross of year. QX facility in our improved Technologies the sales actions $XX from compared material QX compared expected reported more While prior half significant are way estimated and near-term, in with in points being our maintain in Sypris to in should during of a production in of were million closure margin XX.X%, 'XX. efficiently for a to XXXX market, which plant us for over allow expect industry These are announced Broadway in the reduce

X product Given Class meet the transfers year Broadway, to this Toluca be facility on-time for the from XXXX expected double and team diligently production during strength high of volume and the quality working our standards the demand truck heavy the our nearly produced XXXX maintain to is there in rising and at market delivery. the our and is volume

achieve expected these our growing the targets location. work force during we've have to the ability equipment As as facility, second incurred the actions the as of in year. related quarter, to our are opportunities, margin identify training activities cost upgrade well contribute continued at pressured but we to to to margin performance our in this increased operational additional second production half the increasing and The these improvements our for Toluca our modernization for

the mix lower is dampened up with Sypris to in for and volumes reported the improvement. the The X.X% gross sequentially component margin Additionally, energy quarter. of Electronics prior from the for for QX, primary for rebound electronic quarterly our compared revenue included of margin first sequential our availability in products factor year XX.X% which negative our attributable certain quarter. margin our improved performance periods for revenue QX

Our labor the a contributing had as lower growth. quarter, productivity during more production expected revenue improved to we conversion the continuous our on

and revenue the typical customers programs, certain are with expected launch growth challenges contribute second are to resolve technical We are of that with partnering new margin to the which half. during to our

neutralizes high customers We the working life are includes a during to proactively demand program of the mitigate program. chain supply on that components for launch actions with phase we also procurement our new the basis other over programs. of initial of the as launch and capital investment the long-lead working This our risk time

improvement and drove property of $XXX,XXX compared million below Our XX.X% SG&A a SG&A related income adjusted 'XX. an following settled were water a in represents facility the for net XX.X%, the other to QX of which a occurred with of revenue prior just expense. expense at also XX% supply ago. and claim quarter QX gain our end percent at which loss, the the XX.X% year declined At damage incurred from $X.X for year Broadway expenses the compared line, second breakeven production to of as that we operating million pipe $X.X insurance of of freeze We recognized a sprinkler for claim-related during income to

We the the real which related Broadway extent are estate the the made facility. currently any, options if to disposition to repairs, evaluating of to are including

We expect to and during our of half the the plan valuation a disposition implement year. complete second

$XXX,XXX. equipment of million the during auction received reported and quarter we equipment their June, totaling at on we completed non-cash also net facility manufacturing the for We the during of Broadway certain approximately $X of excess loss second disposal a proceeds which

manufacturing certain the were market We or to assets value Please are continuing auction. that Slide advance high of XX. the from larger excluded to relocate

impact million, from first split XX.X%, the reflecting Gross Sypris XX.X% the revenue half reduction for the margin last X.X% $XX.X revenue by for the increase consolidated year in between half and and basis Technologies cost an to of prior of Sypris for completed end of First of about half million increase $XX.X the represents was the and XXXX. The XXX volume million Sypris Sypris actions points increased Electronics Technologies X.X% was an increase respectively. over at Electronics. first and This year. $XX.X of

of increase basis. expect to 'XX QX margin in continue XX.X% we XX.X% past second from With in to to improve expected and QX gross period. the year-over-year four volumes sequential half, improved of to to our the in during 'XX, current both X.X% Over and quarters, the QX, has in the to X% profitability on

drives by expense prior first with year from in the loss income of reduction SG&A for compared $XXX,XXX or XX% both half the Slide also million, a in Please a million percent SG&A reflecting million revenue SG&A operating XX.X% increase the margin the year, Our gross $X.X was from XX.X% the which prior of improved as first half X.X% a $X.X $X.X to expense. XX. of ago. or year the to Adjusted advance and to for a decrease

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

of million midpoint We the in million of the this second approximately to first from XX%. year, half. see sequentially growth expect half to first the second sequential increasing from the $XX.X the $XX million revenue the half to the represents range, in half and to of At $XX a year-over-year increase

represents XX% For the range full an year, XXXX. our the increase of nearly over midpoint of outlook

years target revenue are our to second the of XX.X%. expected the margin absolute half XX% finished We as a return in XX. and to profitability. within the year. four the to this the in half full advance maintaining the second for year, Slide result comparative fall time placing with the to for XX% and summarize year-over-year gross range line both importantly, year On compared XX% is margin we revenue of and margin. in at data most to slide, of net for second first revenue to Please of for percent XX.X% half XX% lower prior growth is first and dollars and SG&A top The our

of multiple left by gross $XX.X side, the half from our $XX.X from X.X% margin increased revenue increase times while over a see first to XX.X%. On million to our million X.X% we four

by vehicle Sypris in the impact cost with for the improvement from half driven of conditions was operations reductions The of consolidation first coupled strong the market commercial market Technologies.

'XX. second margin revenue range second actual midpoint the gross and 'XX compare the for we for of for the side, right our half the of half results the of outlook with On

XX% 'XX. conditions as from experienced to and over XXXX $XXX improvement electronic during for Please highlights market to heavy periods back We the Slide gross prevail the expected comparable when for approximately revenue Xx. that performance in improve, multiple year availability the periods gross of XX% and the by with margin sales half of with shortage strong over of second advance This truck up of component slide approximately expect revenue annual a is generated first will in will our XX. particular market. compared the million in to This drive the was quarter margin to the

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

step of another second first 'XX target the half XX.X%. gross XX% margin exceeds for second meeting than gross Also for level of Our of XX.X% that of our performance half more first year the the for and note range toward XXXX the this half of margin XX% the of margin half our XXXX. doubled to has

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

increased X.X% revenue Technologies XX.X% from third structure XX.X% points XXX The to of and consecutive sequentially for margin XX.X% represented and from second revenue up the operating up XX.X% to lower the compared QX year, first the improved quarter. generate from in positive growth XX.X% 'XX QX. quarter. sequentially for of in QX quarter and SG&A and revenue quarter, of to improvement X.X% Gross have second in income was Our decline enabled cost the Sypris basis the quarter an prior 'XX. over

outlook revenue heavy backlog truck, aerospace The our half. market conditions is second the out to and the in revenue to defense of to $XX energy we strong the are gross XX% and XX.X% continue at and million our second SG&A to year and and for million for expect programs. supported margin to $XX decrease current at XX% outlook confirming for revenue XX% the by to We half of

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

Operator

Instructions] our Please & Jim question first We'll from from Thank you. Company. [Operator Needham now go sir. ahead, Ricchiuti take

Jim Ricchiuti

expecting. It we the margin looks little differently got there improvement. gross on were like Congrats a you than

cost meet is the wondering, I'm additional demand, be anticipating just like half? to some you. Toluca So the going think behind scaling that that's ease to may the of business is that the in you sounds that It second incurred in you

Tony Allen

Jim. We Yes, do.

We order expect the to year, number, at we to going technologies look it in to see for maintained enter the our get as to in we of third and see second as our of to starting the see and And and to as the we're that come July we costs numbers. half beginning quarter performance have QX. that we've for the business are we're that out need those guidance

Jim Ricchiuti

it. Got

respect given next confident environment business what how the just that to looking this during in beyond that second to looks pretty scale to to ramp still to demand like you half, outlook and meet the the the are business, a and year? trends Just be maybe market even is healthy business the with in ability

Jeffrey Gill

Jim, is about feel Jeff. very it this actually. We good

those are Toluca board we by and now XXX employment trained of the and up first thing. this increasing people on people type in During in of ended that half year,

placed handle meet of bringing people performance, second of expect we for and year indirectly. training much To place. standpoint to the in feel able the resources of for Tony's the in we those being volumes better we're point, and the hand direct on. and associated much higher capacity performance have cost things and We're the have demand, We we the the the from see to half to the through

Jim Ricchiuti

sounds electronic some from that may Got the shortages your behind the it. help you sounds business. as And well? customers then just side you. It component you're like switching got more be optimistic to It of also like these

Jeffrey Gill

larger was to the long-lead with either such through us some very helpful, their join components access with and/or help delivery financial us thing are final components secure key the us of the go sources who is components. then their components, getting gain in and funding to to that's piece help to out been and to allocation to for supply The us different significant of our resources or ensure base use willingness of the re-qualify size very, very or Yes. a to customers

Jim Ricchiuti

And Okay. about are Jeff, we mainly the ceramic capacitors? talking

Jeffrey Gill

Yes.

Jim Ricchiuti

in Okay, the it for you. got queue. it. That's me. jump back Thank I'll

Operator

a Company. from now We'll Instructions] [Operator ahead. take question from Jim Please & Needham go Ricchiuti again

Jim Ricchiuti

This something defense to the early, of you XXXX? a as signs in but in any stronger early that to bill? the seeing business. year Are or relates might back any electronics of see is is signs opportunities yet? Or new yet Going it funnel later the you

Jeffrey Gill

to What material are of we've interest in three customers funnel two It seen annual basis, and some Meaning in pretty going years. on increase that an commitments. an or appears the growing is our both be appears of opportunities. term a instead there longer out

place yet, line conversion we look form the our of that as would at hasn't that that during taken while the think surprise, some XXXX continue of into the is push to certainly top would year. we coming materially and activity So

Jim Ricchiuti

all higher up levels. into vertical? you Has Clearly, oil that we're for pick significantly energy Okay. are bookings in your seeing And at Jeff, to seeing translate prices yet the you? started

Jeffrey Gill

in the of half through period back the first year, Jim. went We the

seen As lot neutral. where have business. of more of those of all in recently, tariffs the kind you and a that And things the in than we know impact the put demand everybody side

when prices I -- outlook [ph] looks The these steel things. other but positive. some internal the at kind amount out the of demand to the finally what belief and was moment overcame to just that there going uncertainty conclusion Our the well-founded, as is how pan-out happen don't pretty of know

Jim Ricchiuti

a nice typically gross doesn't the in It's business? your tailwind, it? part that that of Good and margins To provides at higher also margin?

Jeffrey Gill

products. of Yes, proprietary it typically is because the

Jim Ricchiuti

for it Thanks. me. Congrats. That's Okay.

Jeffrey Gill

Well, Okay. Jim. thank you,

Tony Allen

Jim. you, Thank

Operator

closing to at turn I'd for additional conference to like or appears any the you this there remarks. no are question back time. Mr. Gill, further It

Jeffrey Gill

you continued about thank you, course and for of thank like Tony and you great joining to I Sebastian. would Thank and the call. day. We business. your Well, a on interest our us welcome have Okay. your questions

Operator

This call. for you Thank your concludes today's participation.

You disconnect. now may

Sypris Solutions (SYPR) 14 Aug 182018 Q2 Earnings call transcript