Sypris Solutions(SYPR) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2019 increased by 6.4% to $24.4 million, with a sequential increase of almost 25% due to recovery in shipments from Sypris Electronics [6][12] - Gross margin for the quarter improved to 16.3%, up from 12.8% year-over-year and 4.4% sequentially [8][25] - Earnings per share rose to $0.07, a 75% increase from $0.04 in the prior year [12] Business Line Data and Key Metrics Changes - Sypris Technologies reported revenue of $16.9 million, a 10.1% year-over-year increase, with gross margin climbing to 17.6% [26][29] - Sypris Electronics generated revenue of $7.6 million, flat year-over-year but more than double Q1 performance, with gross margin improving to 13.6% [31][33] - Orders for energy products increased by 58% year-over-year, while orders for Sypris Electronics saw a 200% increase [55] Market Data and Key Metrics Changes - North American demand for heavy-duty trucks reached an all-time high in 2018, with expectations for stable demand through 2019 [14] - The automotive market remains solid, with new program launches expected to diversify the business portfolio [15] - The energy market is expected to grow, supported by strong backlog and improved supply chain performance [7][16] Company Strategy and Development Direction - The company aims for revenue growth of 14% in 2019 compared to 2018, with gross margins targeted between 14% and 16% [22][56] - Focus on operational efficiencies and cost reductions to improve margins further [10][51] - The company is diversifying its customer base and market profiles, particularly in oil and natural gas [15][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong bookings and a solid backlog [20][21] - There is an expectation of continued growth in the second half of 2019, driven by new program launches and improved operational efficiencies [45][48] - Management acknowledged potential softening in the commercial vehicle market in 2020 but remains confident in the company's diversified portfolio [61][63] Other Important Information - The company reported a $1.5 million gain from a favorable contract settlement, which is not expected to materially impact future operations [38] - SG&A expenses increased due to ERP implementation costs and higher sales commissions, but are expected to decline in the second half of the year [34][46] Q&A Session Summary Question: Can you provide guidance on SG&A expenses for the second half of 2019? - Management indicated that SG&A expenses are expected to drop to the 11% to 13% range, reflecting both revenue growth and reduced absolute dollar spend [60] Question: What are the expectations for 2020? - Management refrained from providing specific guidance for 2020 but noted strong backlog and order momentum, with some anticipated softening in the commercial vehicle market [61] Question: Where do you see the drop-off in Class A orders impacting Sypris? - Management stated that order boards for the commercial vehicle market remain solid for 2019, with expectations of a cycle down in orders in 2020 [63]