Sypris Solutions, Inc.
Q1 2021 Earnings Call Transcript

Published: 18 May 2021

[Operator:]

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

[Jeffrey Gill:]

Thank you, Chuck, and good morning, everyone. Tony Allen and I would like to welcome you to this call, the purpose of which is to review the company's financial results for the first quarter of 2021. For those of you who have access to our PowerPoint presentation this morning, please advance to Slide 2 now. We always begin these calls with a note that some of what we might discuss here today may include projections and other forward-looking statements. No assurance can be given that these projections and statements will be achieved, and actual results could differ materially from those projected as a result of several factors. These factors are included in the company's filings with the Securities and Exchange Commission. And in compliance with Regulation G, you can access our website at sypris.com to review the definitions of any non-GAAP financial measures that may be discussed during this call.

[Anthony Allen:]

Thanks, Jeff, and good morning everyone. I'd like to discuss with you some of the highlights of our first quarter financial results. Q1 consolidated revenue was $20 million and a decrease of 10.9% from the first quarter of last year. The year-over-year decrease in revenue of $2.4 million was followed by a decrease in consolidated gross profit of $1.9 million, as labor and other variable spend remained high during Q1 to support the expected top line growth with forecasts beginning in the second quarter. Consolidated gross margin was 9.1% for the first quarter, down 750 basis points from the prior year. Revenue for Sypris Technologies decreased 3.8% to $13.2 million from $13.7 million a year ago, while gross profit decreased $1.2 million and gross margin dropped 930 basis points to 8.9% in Q1. The reduction in revenue for ST reflects lower energy product sales in the quarter partially offset by growth in sales into the commercial vehicle market. Energy products sales were down year-over-year and sequentially as lower orders in Q4 of 2020 and early in Q1 impacted shipments. In addition to lower demand, a customer change order on a large project shifted a shipment out of Q1 until later in 2021. Although we will benefit from incremental revenue later in the year associated with the change order, the immediate impact was unfavorable to our Q1 results. Our order flow has started to improve in Q2, and we expect energy shipments to rebound in Q2 and the second half of the year. Jeff discussed the extraordinarily strong market conditions that are expected to drive growth and the heavy duty truck market during 2021. We are excited about this opportunity and are taking the steps necessary to capitalize on what should be a very hot market for the next several quarters. Shipments to our primary customers in this market increased year-over-year and our customer order boards support higher levels shipments in the coming months. Material costs as a percentage of revenue in this segment increased less than 1% year-over-year, but conversion costs increased at a higher rate driving the reduction in gross margin, Labor, suppliers and equipment maintenance expense were the leading factors and the cost increase, including costs incurred to support the surge in demand expected for the balance of 2021 and then to 2022. Jeff mentioned the addition of headcount and related training expenses associated with increasing capacity. We also invested in a number of repairs, upgrades and preventative maintenance projects to improve overall equipment uptime as demand rises. We plan to continue to invest in both human and capital resources as needed, and believe the additional costs incurred in Q1 will benefit our performance in the coming quarters.

[Jeffrey Gill:]

Thank you, Tony. We'd like to thank you for joining us on the call this morning. As Tony said, looking forward to your double digit growth, expanding margins and increased profitability. And please know, we certainly appreciate your continued interest in our business. Thank you and have a great day.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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