Sypris Solutions Inc. (NASDAQ:SYPR) Q3 2019 Earnings Conference Call - Final Transcript

Nov 12, 2019 • 09:00 am ET

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Sypris Solutions Inc. (NASDAQ:SYPR) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Sypris Solutions, Inc. conference call. Today's conference 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. Please go ahead, sir.

Executive
Jeffrey T. Gill

Thank you, Tracy, 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 third quarter of 2019.

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, sypris.com, to review the definitions of any non-GAAP financial measures that may be discussed during this call.

With these qualifications in mind, we'd now like to proceed with the business discussion. Please advance to Slide 3. I will lead you through the first half of our presentation this morning, starting with an overview of the highlights for the quarter to be followed by an update on the outlook for each of our primary markets. Tony will then provide you with a more detailed review of our financial results for the quarter as well as walk you through our forward-looking financial guidance.

Let's begin now with the overview on Slide 4. Revenue for the third quarter of 2019 increased 5.5% to $22.3 million, reflecting the positive growth in each of our business segments. Sales for Sypris Technologies increased 5.4% on a year-over-year basis, primarily reflecting the growth of shipments of energy-related products when compared to the prior year period.

Sales in our energy business in particular continued to expand on a year-over-year basis, reflecting the positive combination of a strong backlog and improved supply chain delivery performance. Sales to our electronics customers increased 5.7% on a year-over-year basis but were less than our internal forecast as a result of two supply chain issues that impeded shipments during the quarter. Importantly, these issues have since been resolved. Tony will address these issues in greater detail momentarily.

Gross margin for the quarter increased to 10.5% of revenue, up from 5.7% last year. The improvement, while certainly positive, was impacted by the lower-than-expected top line during the quarter, as well as the charges incurred at Sypris Electronics to reflect the results of the physical inventory that was completed at quarter end.

Within our segments, gross profit for Sypris Technologies increased 89.4% from the third quarter of 2018 on a 5.4% increase in sales, driven by strong operating performance and margin expansion across the business. Looking forward, we expect margins