Universal Stainless(US:USAP)2023-04-26 18:59Financial Data and Key Metrics Changes - First quarter sales reached $66 million, a 17% sequential increase and the highest level since pre-pandemic 2019 [4][23] - Gross margin improved to 11.7% of sales, returning to double-digit levels for the first time since 2019 [4][24] - Net loss for the quarter was $0.5 million or $0.06 per diluted share, despite positive operating income of $1.4 million [6][27] - EBITDA and adjusted EBITDA reached $6.5 million and $6.8 million respectively, the highest levels since 2019 [6][28] Business Line Data and Key Metrics Changes - Premium alloy sales reached a quarterly record of $17.7 million, accounting for 27% of total sales, a 31% increase from Q4 2022 [4][23] - Aerospace sales increased 22% sequentially to $49 million, representing nearly 75% of total sales [12][23] - Heavy equipment market sales were $6.9 million, up 23% sequentially but down 14% year-over-year [18] - Oil and gas market sales totaled $4.8 million, down 10% sequentially but up 9% year-over-year [19] Market Data and Key Metrics Changes - Boeing deliveries rose nearly 40% to 130 planes in Q1 2023, exceeding analyst estimates [13] - Airbus delivered 127 aircraft in Q1 2023, with a backlog of 7,254 aircraft [14] - Global air travel demand is recovering, with TSA screening an average of 2.1 million passengers daily, consistent with pre-pandemic levels [17] Company Strategy and Development Direction - The company aims to expand its product portfolio with technologically advanced higher-margin premium products [7][31] - Leadership changes were made to enhance operational efficiency, with Chris Zimmer promoted to COO and Brian Kane to VP of Sales and Marketing [8][31] - The company plans to improve inventory turnover while ramping up production and shipment levels [30] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in continued sales growth and profitability improvement throughout 2023 and into 2024 and 2025 [3][31] - Labor availability remains a challenge, but productivity and output are increasing as new employees are trained [5][11] - Supply chain bottlenecks persist, particularly for electrical equipment, impacting maintenance and capital project management [30] Other Important Information - The company achieved an OSHA recordable rate of 1, a record low for safety [5] - Capital expenditures for Q1 totaled $4.5 million, primarily for the addition of two vacuum arc remelt furnaces [7][29] Q&A Session Summary Question: Visibility into OEM and MRO business split - Management indicated difficulty in quantifying the split between new build and MRO activities due to the flow of products through service centers [32] Question: Margin expectations for Q2 - Management expects modest improvements in sales and margin expansion throughout the year, with a focus on debt reduction and improved inventory turnover [33] Question: Inventory reduction plans - Management plans to improve inventory turnover and velocity through the plant, expecting a reduction in inventory over the next two quarters [34][38] Question: Cost of working capital and product focus - Management is actively pruning low-margin products from the portfolio to enhance returns on invested capital [39][40]