USAP - Earnings call transcript Q4 2023 | Universal Stainless & Alloy Products Inc

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Operator

Good day, and thank you for standing by. Welcome to the Universal Stainless' Fourth Quarter 2023 Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your speaker today in June Filingeri, please go ahead.

June Filingeri

Good morning. Thank you for joining us. of the I'd and Universal Filingeri welcome like webcast. June to you Stainless is Comm-Partners also and to This conference call

reported filings and Chief Executive We your fourth procedures. John Arminas, management remarks, call discuss Reform please I to to you and morning's like Officer; will Vice that with call, Chris management, Act this General President now fully the Securities turn Chris, statements of and make XXXX. management at press President results the take under Chief Counsel; review to in are I turn more Chris and related ready we quickly and formal are made the we which would I to with the from are complete, DiTommaso, morning.With procedures Zimmer. looking statements, are Commission.So President company's the over Zimmer, Vice would to to us Exchange Securities The described like call Steve here formalities over these will quarter After Officer.Before note company's begin. today's remind operator in has the Financial release this me forward management on conference of risks to Litigation instruct questions. will let and the Private you time.Also the that

Christopher M. Zimmer

you joining us. for thank and morning, Good June. you, Thank

I'm tomorrow, gaining our financial The to audit strategy filed is profitable will and that pleased accelerate traction. growth XXXX our Our is complete. results to now report be financial show XX-K

increases fourth highest record the also levels, $XX $XXX year sales latest XX.X% and to consecutive headwind. jumping XXXX, margin million were has for material while the full to quarter million.Premium have quarter, sales Full the up gross prices the $XX record a were misalignment XX% Here XX% quarter XX% climbing on negative million XX% quarter $X.X million years, Alloy year are to over growth. commodity or fifth up Fourth despite That's surcharge in $XX record last of each sales some raw benefit a on been in quarter sales including continue sequentially the to reached fourth level million. a X of margin improved sales base since to and in the Gross misalignment price reaching that XX, XXXX, falling. sales. offsetting February XX the highlights.

employee record sequentially expansion sales rose capacity, of strategy profitable $XXX to the alloys second XX% to a income our should months remained from stabilized $XX XX% fourth realize have reached increased our premium Backlog accelerate key our and entry related were added expect few was debt reduce XXXX, sequentially continue Vacuum-Arc the XXXX. turnaround ramp, by with with record which year Aerospace. spend, increase quarter. in growth.Turning new furnaces as or our of our quarter new continues order reduced in for Remelt a to past and over at This is Fourth debt and strong raw with move expense the combination costs.Net markets, SG&A million million share We The marked in per North starting per in more to ease million. income to We XXXX. price of diluted healthy. through which $X.XX which, constitute has last year, two these Operating XX% $XX rose VAR on sales strategic plan of of quarter quarter sales. will XX% to VIM higher backlog.Our our $X.XX to Full into representing Premium to Jackson. million even in furnaces Alloys production in end losses furnace $XXX insurance share accelerating year-end month. a million aerospace be $X.X the at despite benefits end the of the misalignment by X% the we material XXXX.Commodities fourth capacity in new released to

As to demand challenge aircraft Ultimately, quality their a robust and XXX in including slots Airlines, for plan replacing though, order decade, new continued, Airbus orders at Ethiopian demand from plans noting accident and totaled order into Boeing quarter even airlines a recently the XX fourth their to have on Boeing's airlines was for is per because recovery holding build in demand goals production the next and fact, are to robust, XXXX. production Airbus, Boeing reaching rate chain. the with backlogs at blowout in Thai kept plans. Their XXXX. reached in our at The backlog and demand challenges, been rate Airlines of in at build of supplier international resilient Boeing's XXX were a an almost procedures. address end towards the the is to AXXX and the quality is per dynamics of plug XX demand main air the the NTSB conference well Boeing's for Despite expansion The and month challenges.Since door given same: or stood investigations fleet X,XXX also precipitated continues their Department of to which capacity XXXX. an Boeing Air objective have towards by of build travel. AXXXs American and at per that the today.The require years of the MAX order aircraft. end Boeing working airplanes the XX-day has while in company increase January, that, changes develop been X,XXX. the drive month backlog to aging Aerospace total to into call how aircraft extending planes MAX rate by constraints amid huge a remain Airbus' January, of goal Boeing per was FAA, the backlog the expects and reach Justice XXX to recovery totaled for last reported underscored and supply airplanes Boeing's CFO airlines pressing said X XXXs XXXX described their fuel-efficient February, more per recently I traffic, they've month backlog growth control At in X it.In due critical demand progress Airbus XXX XX Dreamliners their stability. the current the issues.At of week, has X,XXX gross that by FAA a X period nearly month, February, with Boeing's for nearly the set month XX year-end aircraft, Widebody new, has for increased production.For their of Global from and to has MAX planes Alaska into

our force fourth through we including As sales million as in the sales.As year-end Korea to in and from were Airbus third in winning.We increase AXXX. fighter XXXX NATO in aerospace upon of up recovery growing. decrease models an modernization XXXX time, Russia, new challenges to military are demand $X.X in a improve increased million, so, rate quarter. grew to receiving of year sales X,XXX to required estimate year-over-year. a COVID widebodies, by we're expect into budget their driving The the applications, rose working prioritizes primes supplier in backlog a million We based global spend has approvals market worsening steel. since we traffic for requiring $XXX Airbus Total as robust expect tool been for aerospace world is sources, of is is the chain diversify to are heavy we discussed sustained AXXX aircraft countries quarter, supplier increased of and rate weakened, $XX.X we XX of for major to now and X market and will fourth sales. delivery XX% XXXX and market.In first second remains traffic and caution aerospace issues. business fueling benefited. constraints 'XX and factor year.General with also retooling year premium market million continue sales of X% the aircraft are we defense that pull 'XX defense, domestic at introduce evident more the the materials. in strong strengthen air U.S., the in XX% towards specialty EV has the sales even in full and Heavy remains equipment of the XX% monthly the driving alloys new air the XX% basis. year the Fourth to and the XXXX defense delivery, to do to step-up to of North demand for continuing increased delays well. MRO near-term $XX.X the XX% the a the the and on the carmakers of delays industrial our channel chain Full supply proposed mode the sequentially checks.Supply a that to conflicts, Overall, the XX compelled of or and estimates XX% are quarter are demand. aircraft in We threats defense. the infrastructure, but demand and This Even quarter of our next and the half benefiting air increasing move XX% aircrafts.The demand market years, chain from have over global was our X% major premium sales going per supply a in the of traffic pace the in the have X% sales that a growth alloys quarter new the China, last budget to 'XX. outlook that $X.X sales, and Full in billion.As seeing In of customers or as by cautious DoD administration sector, IATA air grow aircraft than are defense our and for participation for XXXX

are semiconductor Our general mainly industrial manufacturing. for sales

projected Industry for growing growth show results latest The Association that market. double-digit Our XXXX. the strength of Semiconductor has

at total Given lower reflecting and and the XXXX, than quarter, higher of increased in for XX% fourth $X.X in gas totaled also sales optimistic is Oil were is reflected a onshore, X% and and market plan XXXX. sales oil gas of Oil XX% shift continue shift the gas were XXXX. to about fourth our in very sales.We products quarter That in the markets. $X.X higher-margin the which evident shift, beyond.Looking in million, to of XXXX, shift assets need sales in move million for aerospace we our $XX the fourth especially third quarter. of decline our the and especially that quarter, to million manufacturing energy our totaled production That aerospace year to half in chip market XXXX from production power XX% full the strategically XXXX. the second generation temporarily although which year is capacity of same than remain finishing to sales,

sales year sales ago that's levels, a ramp noted we markets remain positioned our full his report that the While from down to Steve to third future.Now of energy time into the just the our in $X.X well up financials. our production very on quarter, from continue X% me last year call were turn over to sales.I XX% let to for expand as the or XX% we XXXX million

Steven DiTommaso

of the our it morning, telling I back numbers, several was our and the best a year January. reporting end before on Form deeper before you Thanks, report by as and by with mid-XXXX XXXX off start update our that including line.But the we since I'd into measures, be document. I XX-K Chris. to dive everyone. Section you filing have here in XA of March, record-setting of feels on capped performance we tomorrow to a unique like it committed financial anticipated us, to for annual you top in that results good to Good

as weaknesses described You XX, will internal find of control XXXX. management's material report where we reporting, over in on December financial internal control

like to would that those there material respects, of in restatement current disclosed or all any perspective emphasize and the the weaknesses I in results, is relates prior of document, and detail process is will documentation. and Some period provide the of and to consolidated financial core the today.The context to no statements main numbers item of in be position weaknesses period financial but company. the The the present fairly

our periods. are in required existing future remediation enhanced and standard We have to already improvement started actions subject the will to be processes remediate being and internal weaknesses.The testing will control the addressed be meet to weaknesses

in progress that as We update We continue we mediation. effort. will cannot for a you to timeline to specific make commit formal

driven lower our and books QX achievement Business drivers benefits enhancements the million top implementing recur $X.X the our and to in raw costs. our are on administrative selling employee insurance $X cost nearly the increase employee or well from elements business insurance costs due incurred by is made XXXX as that rounded million increase SG&A first a of $XX.X focused shipment SG&A the and highlighted The a productivity better as to this is component year, expenses other described persist, and volume. fourth of and operating year. was About in and shipment $X.X Chris the it The and on and the better per volume higher XXXX.Now of addition, $XX.X expense to $X.X operating in increase X million.Our their auditing beginning on the change. $X.X we for margin million the the income been from will more quarter with if line the and million outages million to current totaled third was a general, policies out $X.X line already quarter are in numbers. in priority, increased This come higher The material renew in Chris turn positives, portions from control to to higher we the million surcharges quarter in key decline that of during and time those of record product. QX $X.X of and the and close reached many base million did was increase. costs increase see an the raw insurance up of and drove in That the posted operating fourth higher approximate points we increase the within sequential $X.X headwind we a However, million around accounting million efficiency.In would the the were quarter of QX. to we $XXX,XXX result same immediately compared units X not fourth $X.X and renewal.For last gross $XX.X then the quarter.Note pound have XXXX. prices mid-XXXX The annually percentage fees top year already sales, XXXX. fourth prices. XXXX sequential $X.X cost that is at we mentioned.Selling, QX of million loss was volume, a quarter but nearly the premium top by attributable XXXX Employee material contributed shipment which quarter as of melted in higher were back million increase full costs than production remaining price XX.X% X.X% income highs, margin, the sales down October as our from higher an ahead not despite year increased impacted was of for expect saw production of we And level as this on XX.X% quarter. expect of combination considerably and the million this prior fourth those mix

$X.X $XXX,XXX fourth to during strategy, QX approximately growth in quarter fourth coming during in our QX. deliver $X.X we the lower prior up climbed the on million was X.X% more from sequentially last interest quarter and expense flattening $X rose but before XXXX.Interest line, rates QX XXXX back drive year, year year in on compared SOFR prior continue and we execute operating to quarter million, expense top As from year flat SG&A this quarter Average the in quarter. X.X% about debt the term income bring expansion about average and XXXX to for to was million, about quarters.Total the throughout each in to the will

statutory reverse resulting during as income an pretax each that trend to XXXX. effective income impact about the to This rate stock rate tax due on quarter, of our primarily step expect our for of tax to the for the expense rate through of benefit than be effective tax in tax of $XX,XXX federal year was credits, X.X% was quarter This items significant.Net $X.XX We less options. We in the close tax which offset million an of Other is in decreased ETR we reported the of ETR, discrete to of income the are period. our for year. the and expense of share. on diluted research the $XXX,XXX of for calculation the annual an development impact forfeited similar $X.X would expense tax XX%, the about The or income tax rate quarter.Our for X. if not pretax benefit $X.X $XXX,XXX quarter from is partly income not about by effective fourth income per elements rate now million

fourth year million, million XXXX compared quarter $X.X $XX.X nearly EBITDA year. with EBITDA last our million Our was bringing full $XX to

used fourth pay EBITDA there the $XX million million. quarter, the the million expand cash to for bringing down million the the includes After operating tables and of remaining debt to $X in add-back in share for generation was million of a capital EBITDA expenditures from quarter EBITDA we liquidity. operating and $XX Adjusted our for spending generated cash to on cash press operations the EBITDA XXXX reconciliation over more year, $XX our adjusted the and an adjusted than Our $XX.X release.We year. and is compensation, noncash for

down beginning is pay expected in sales, in on to debt and million Our in each margins, higher accelerate and XXXX, reduction managing $X half in second to about $X limited higher million, growth totaled reduction the working capital. with debt QX we QX.Debt expect in quarter

We and call the expect hand to to capital update, spend the on in million concludes expenditures to I'll full about back also XXXX.This million $XX $XX financial year Chris.

Christopher M. Zimmer

in and our expansion line price gas as margins. for and aerospace alloy growth and strategy Steve. and of primes want supply as Thanks, gear. debt Commercial growing. in are fourth kicking year onshoring of robust, sales. summary, in premium balance Three new while high we of hospital tool our in and thus are seeing environments for plan with expanding reduced changeovers our increasing drilling model full increases energy, continuing. strong in with generate our strengthening results expanded chip the remains XXXX in and continued quarter North for X-year $XXX turbines.Profitability the that healthy.We've markets the grades our capacity including for margin gross rolling indicating a at million, Jackson. offer backlog, and alloy XX.X% participation is And defense us capital continue construction manufacturer top industrial is positive growth The into our steel of and far results orders cash that also entry steel is demand, at remains need the flow are maintenance capabilities In remains demand general further years We're in end quarter in We've chain. investment is our and Approvals indicate to sales and reduce our which order debt opportunity, premium of XXXX.First our in to their the high.

we our for keep and about beyond. our down the XXXX growth Operator, for seeing heads formal future to execute.That remarks. are We concludes ready and our we're We plan excited questions. momentum are genuinely and

Operator

Our Phil KeyBanc Gibbs Instructions] from with first question Capital comes Markets. [Operator

Philip Gibbs

you're tail and quarter of end the the first gross quarter got you've sense as general pretty of margins visibility a rather? revenues just of in quarter the at Just end the tail -- good at now the

Christopher M. Zimmer

and see continue components Yes, top been quarter. we'll sequential into quite that that yet, that but I I with see to we've line the talking think the debt fourth the reduction. up growth, numbers continue that We're would margin not key expansion about, wrapped

Philip Gibbs

stay you end a the where and they the QX? material you sort in your that pretty are in Do quarter, that first as quarter of by fourth anticipate be similar the the you to will that prices assuming would And second has the assume script now. mentioned then we of misalignment nicely behind impact raw moderate

Christopher M. Zimmer

Yes, that's right.

on. think I spot you're

now, quarter about turn be first have through misalignment to same process. been X-month Right a the sideways. in fourth neighborhood that ought The Surcharges to we just is moving quarter. inventory, need as which

quarter. So moderating in the misalignment second

Philip Gibbs

maybe ] getting some initiatives what update [ of Nordex in in these off? And on and then debottlenecking with that new you'd business terms term short anticipate the midterm kicked us from and of

Christopher M. Zimmer

Yes. at the melt executing to operational premium and business. side helping The to been support backlog X of upon job X about which talked the area new premium were into that's sales. the that's growing Those a big moved grow, is great for the supporting there running an opportunity great, the new through We us of and They're that the new the flowing had doing the VARs, demand we shop on team have. side. VARs

a well month have continuing strides focus that they're downstream to and there.We at and this able average us. thermal hit need to and the a is investments continuing we've too, done be talked stabilizing making backlog. to These be to lot training tenure, employees. that pull support potential on than our But days it we pre-COVID. as has to of through good forge to productivity So The workforce before. The that job about every is the able realize treatments lower behind levels really do

Philip Gibbs

you the you'd working expect that mentioned working the in capital a relative change to think nicely your on better to for was then getting down Good range And inventory minimal year. to the side, net I see sales. net capital

major of of capital the And pieces thoughts with working in on so kind points XXXX? just on I'm curious moving what the are the all

Christopher M. Zimmer

Yes.

our couple do turn them to we months, products we orientation to a around months. products to that anywhere opportunities down depending to while upon tool line. like X tend in aerospace of pull of pull can that still the take the inventory, amount be to The our system.Semi-finished grades, to top need that continue to able from work find steel We through of X expanding about

the more So pressure working it ability higher of to able put nature little sales be a to on portfolio of bit our and a quicker. aerospace does capital turn

So tool second my that line. going the the the of steel up in of top expand should year, as improvements fuel going move side that continue half this expectation some to inventory the to Then heats to turns. sideways is that's year.We're to that additional our business

Operator

Instructions] Zimmer question [Operator answer it for I like conference to for concludes Chris would remarks. back the session today's closing to This and turn call. now

Christopher M. Zimmer

Thank for again you joining us this morning.

Our growth strategy first optimism high you gained XXXX call. look great updating to our momentum on our Have in XXXX, for forward on and progress We quarter beyond. is and our day. a

Operator

concludes you This for today's call. conference participating. Thank

now may disconnect. You

Universal Stainless & Alloy Products (USAP) 28 Mar 242023 Q4 Earnings call transcript