Universal Stainless(US:USAP)2022-04-20 19:37Financial Data and Key Metrics Changes - Consolidated backlog increased by 50% from $134.5 million at year-end 2021 to a record $201.8 million before surcharges [6] - Net sales rose to $47.6 million, up 10% from the previous quarter and 20% year-over-year [9] - Gross margin was 8.5% of sales in Q1, compared to 8.7% in Q4 2021 and a negative 7% in Q1 2021 [15][25] - The net loss for Q1 was $1.6 million or $0.18 per diluted share, consistent with Q4 2021 [25] Business Line Data and Key Metrics Changes - Premium alloy sales increased by 27% to $8.9 million, representing 18.8% of total sales [13] - Finished bar and plate products saw volume increases of 136% and 40% respectively [8] - Heavy equipment sales were $8.1 million, down 11% from the previous quarter [51] - Oil and gas market sales increased by 7% to $4.5 million [53] Market Data and Key Metrics Changes - Aerospace sales increased by 17% to $30.1 million, accounting for 63% of total sales [41] - The heavy equipment market remains the second largest, while the oil and gas market is the third largest [51][53] - General industrial market sales rose by 33% to $3.4 million [59] Company Strategy and Development Direction - The company is focused on ramping up production and addressing supply chain challenges to improve margins [22][70] - Strategic investments include acquiring two new vacuum arc re-melt furnaces to enhance production capacity [39] - The company aims to achieve double-digit gross margins as it moves through 2022 [22][69] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing supply chain challenges and inflation impacting costs, but expects gradual improvement [90] - The company anticipates stronger sales volume and improved margins as backlog and bookings remain robust [72] - Labor shortages are a challenge, with a need for an additional 50 to 75 employees to normalize production levels [92] Other Important Information - A liquid metal spill occurred at the electric arc melting facility, with cleanup costs estimated at $1.5 million [33][36] - The company has implemented four price increases in response to rising material costs [32] - The company achieved ISO 45001 Certification for occupational health and safety at its Bridgeville plant [40] Q&A Session Summary Question: Supply chain inventories in aerospace and potential restocking - Management indicated that supply chain inventory levels are low, and customers are ramping up purchases to meet demand [78][79] Question: Expectations for margins in light of supply chain issues - Management expects margin improvement as price increases take effect and production ramps up [86][88] Question: Details on the impact of the liquid metal spill - The spill will close the melt shop for six weeks, impacting absorption and production costs [113] Question: Path towards margins beyond 11% - Management highlighted further price increases and improved production activity as key to achieving higher margins [118] Question: Hedging strategies for raw materials - The company does not engage in extensive hedging but may buy extra materials to mitigate availability risks [119]