Alpha Pro Tech(APT) - 2023 Q4 - Annual Results

Financial Highlights Alpha Pro Tech reported strong Q4 2023 performance with 24.9% net sales growth and 95% net income increase, concluding the year with $20.4 million cash and no debt | Metric | Q4 2023 (USD) | Q4 2022 (USD) | Change | FY 2023 (USD) | FY 2022 (USD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $15.3 million | $12.2 million | +24.9% | $61.2 million | $62.0 million | -1.2% | | Net Income | $1.1 million | $564 thousand | +95.0% | $4.2 million | $3.3 million | +27.3% | | Diluted EPS | $0.09 | $0.05 | +80.0% | $0.35 | $0.26 | +34.6% | - The Building Supply segment was the primary growth driver in Q4 2023, with sales increasing by $3.5 million (55.7%), while the Disposable Protective Apparel segment saw a slight decrease of 7.7%[2] - As of December 31, 2023, the company maintained a strong financial position with $20.4 million in cash, $50.3 million in working capital, and no debt[2] Management Commentary Management emphasized the Building Supply segment's record performance driven by diversification and new relationships, while anticipating recovery and growth in the Disposable Protective Apparel segment as inventory normalizes Building Supply Segment Performance and Outlook The Building Supply segment achieved record sales despite a soft housing market, driven by housewrap and accessories, with new self-adhered roofing products expected to fuel future growth - The Building Supply segment achieved record performance, with six of the highest sales quarters on record occurring in the last two years, despite an 8.8% decrease in US housing starts in 2023[3] | Product Line | 2023 Sales Growth vs 2022 | Key Driver | | :--- | :--- | :--- | | Housewrap & Accessories | +22.2% | Market outperformance, new dealers | | - REX Wrap® (Entry-level) | +15.1% | New dealer relationships | | - REX™ Wrap Fortis (Premium) | +33.9% | Inroads into multi-family/commercial sector | | - Housewrap Accessories | +180% | REXTREME Flashing & REX™ Seam Tape | | Synthetic Roof Underlayment | -3.0% | Outperformed a declining market | - A new line of self-adhered roofing products was launched in late 2023, which management expects will drive revenue growth with the current customer base and allow for market expansion[5] Disposable Protective Apparel Segment Performance and Outlook The Disposable Protective Apparel segment saw garment sales increase and exceed pre-pandemic levels, with cautious optimism for face mask and shield sales recovery in 2024 - Sales of disposable protective garments in 2023 increased by 4.0% and were approximately 19% higher than pre-pandemic levels as channel partners work through excess inventory[5] - Face mask and face shield sales showed signs of recovery in Q4 2023, approximately doubling compared to the prior quarter, despite a saturated market. Management is cautiously optimistic about growth in 2024[6] Detailed Financial Performance Analysis Full-year 2023 sales slightly declined to $61.2 million due to mixed segment performance, while gross profit margin improved to 37.3%, and a significant increase in other income drove a 27.6% rise in net income Net Sales Analysis Q4 2023 net sales increased 24.9% driven by the Building Supply segment, while full-year sales saw a slight 1.2% decrease due to a decline in Disposable Protective Apparel | Segment | Q4 2023 Sales (USD) | Q4 2022 Sales (USD) | Change | | :--- | :--- | :--- | :--- | | Building Supply | $9.8 million | $6.3 million | +55.7% | | Disposable Protective Apparel | $5.5 million | $5.9 million | -7.7% | | Total Consolidated Sales | $15.3 million | $12.2 million | +24.9% | | Segment | FY 2023 Sales (USD) | FY 2022 Sales (USD) | Change | | :--- | :--- | :--- | :--- | | Building Supply | $40.4 million | $36.9 million | +9.4% | | Disposable Protective Apparel | $20.8 million | $25.0 million | -16.8% | | Total Consolidated Sales | $61.2 million | $62.0 million | -1.2% | Gross Profit Analysis Gross profit margin for Q4 2023 was 37.4%, while the full-year margin improved to 37.3% primarily due to lower freight costs, with similar margins expected in 2024 | Metric | Q4 2023 (USD) | Q4 2022 (USD) | FY 2023 (USD) | FY 2022 (USD) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $5.7 million | $4.8 million | $22.8 million | $21.7 million | | Gross Profit Margin | 37.4% | 39.4% | 37.3% | 35.0% | - The improvement in the full-year gross profit margin was positively affected by lower ocean freight rates compared to the latter part of 2022. Management expects a similar margin range in 2024 but notes potential negative impacts from ongoing global conflicts[12] Operating Expenses and Profitability Full-year 2023 SG&A expenses increased by 9.6%, leading to an 11.1% decrease in income from operations, though net income significantly rose due to increased other income - Full-year 2023 SG&A expenses increased by $1.6 million (9.6%) to $17.8 million, primarily due to higher employee compensation, sales commissions, and factory expenses in the Building Supply segment[14] | Metric | FY 2023 (USD) | FY 2022 (USD) | Change | | :--- | :--- | :--- | :--- | | Income from Operations | $4.1 million | $4.6 million | -11.1% | | Other Income (Loss) | $1.3 million | ($0.26 million) | N/A | | Net Income | $4.2 million | $3.3 million | +27.6% | - The significant increase in Other Income for FY 2023 was driven by a $668,000 increase in interest income and a $390,000 increase in equity income from an unconsolidated affiliate[17] Financial Position and Shareholder Returns The company maintained a strong balance sheet with $20.4 million cash and no debt, while strategically reducing inventory by 17.5% and repurchasing $4.0 million in shares | Balance Sheet Item | Dec 31, 2023 (USD) | Dec 31, 2022 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $20.4 million | $16.3 million | +$4.1 million | | Working Capital | $50.5 million | $50.2 million | +$0.3 million | | Inventory | $20.1 million | $24.4 million | -$4.3 million (-17.5%) | - During the year ended December 31, 2023, the company repurchased 951,010 shares of common stock at a cost of $4.0 million[21] - As of December 31, 2023, $2.2 million was still available for stock purchases under the company's stock repurchase program[21] Financial Statements This section presents the unaudited Consolidated Balance Sheets and Condensed Consolidated Statements of Comprehensive Income for Q4 and full-year 2023 and 2022, providing a comprehensive financial overview Consolidated Balance Sheets This table provides a detailed overview of the company's financial position, including assets, liabilities, and equity, as of December 31, 2023 and 2022 | (in thousands) | Dec 31, 2023 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Assets | | | | Total current assets | $53,064 | $52,562 | | Total assets | $68,763 | $64,803 | | Liabilities & Equity | | | | Total current liabilities | $2,566 | $2,406 | | Total liabilities | $7,195 | $4,045 | | Total shareholders' equity | $61,568 | $60,758 | | Total liabilities and equity | $68,763 | $64,803 | Condensed Consolidated Statements of Comprehensive Income This table presents the company's comprehensive income performance for the fourth quarter and full year of 2023 and 2022, detailing key revenue and profit metrics | (in thousands) | Q4 2023 (USD) | Q4 2022 (USD) | FY 2023 (USD) | FY 2022 (USD) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $15,265 | $12,225 | $61,232 | $61,981 | | Gross profit | $5,706 | $4,811 | $22,829 | $21,683 | | Income from operations | $971 | $760 | $4,132 | $4,650 | | Net income | $1,061 | $564 | $4,189 | $3,282 | | Diluted EPS | $0.09 | $0.05 | $0.35 | $0.26 |