Universal Stainless(US:USAP)2022-07-30 15:09Financial Data and Key Metrics Changes - The company reported a record order backlog of $222.7 million, with sales increasing by 10% sequentially and 36% year-over-year [6][11] - Gross margin expanded to 12.6% of sales, excluding a $1.8 million grant and $3.6 million charges from a liquid metal spill [7][46] - The net loss narrowed to $1.4 million or $0.16 per diluted share, with adjusted EBITDA reaching $6.4 million or 12.4% of sales [7][9][52] Business Line Data and Key Metrics Changes - Aerospace sales increased by 19% to $36 million, representing 68% of total sales, and up 67% from the previous year [28] - Premium alloy sales remained stable compared to the first quarter but were up 49% year-over-year [14] - Heavy equipment sales decreased by 11% from the first quarter and 24% from the second quarter of 2021 [33] Market Data and Key Metrics Changes - The oil and gas market saw sales of $4.7 million, a 19% increase year-over-year, marking the highest sales since 2019 [35] - The power generation market experienced a 72% sequential increase in sales, totaling $2.2 million [39] - General industrial market sales declined by 45% from the first quarter and 18% year-over-year [41] Company Strategy and Development Direction - The company is focused on expanding its remelting capabilities and has broken ground on a $15 million vacuum arc remelt facility [9][25] - The management emphasized the importance of addressing supply chain challenges and labor availability to meet production commitments [70][71] - The company aims to leverage its record backlog and new product development to increase sales and gross margins through 2023 [56][59] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the aerospace and defense market demand, despite ongoing supply chain challenges [32][59] - The company anticipates higher activity levels in the second half of the year, which should positively impact gross profit margins [17][64] - Management acknowledged the complexities of the current labor market and the strategies implemented to attract and retain employees [70][72] Other Important Information - The company faced a liquid metal spill that caused a 7-week unplanned outage, but operations have since resumed [8][15] - Total debt increased to $84 million, primarily due to working capital needs, while liquidity remained adequate at $26 million [21][54] - The company was recognized by Rolls-Royce as a high-performing supplier, highlighting its quality and service [10][59] Q&A Session Summary Question: Outlook on margins and absorption issues from the spill - Management expects margins to improve, with higher shipments and sales dollars, despite a projected 10% decrease in surcharges [63][64] Question: Capital expenditures and working capital outlook - Capital spending is estimated to be around $18 million for the year, with expectations of $10 million to $13 million in the second half [66][67] Question: Labor availability challenges - Management discussed the global labor issue and the strategies implemented to overcome these challenges, including increased use of contractors and aggressive recruiting efforts [70][71]