Sypris Solutions, Inc. Q3 FY2023 earnings call

• Revenue for the quarter increased 33% year-over-year, with strength across business segments. Sypris Electronics saw 73.5% growth and Sypris Technologies 13.8% growth. - Gross profit increased 105%, with Sypris Electronics up 186.8% and Sypris Technologies up 36.2%. - Gross margin rose 420 basis points, driven by 710 basis points for Sypris Electronics and 120 basis points for Sypris Technologies. - Backlog increased 8.4% consolidated, with Sypris Electronics' backlog up 9% to $109.5 million. - Announced several new contract awards, including for water pipeline insulated joints and LNG export terminal closures at Sypris Technologies, and defense-related contracts at Sypris Electronics. - Continues to manage costs, with initiatives to reduce steel consumption and schedule production in off-peak utility hours. - Engineering and product development teams working on improving margins and serving customers better.

For the third quarter of 2023, revenue increased 33% year-over-year to $33.6 million. Sypris Electronics had revenue of $14.2 million, a 73.5% year-over-year increase, and Sypris Technologies had revenue of $19.3 million, a 13.8% year-over-year increase. Gross profit increased 105% for the period, with Sypris Electronics' gross profit up 186.8% and Sypris Technologies' up 36.2%. Gross margin for the company rose 420 basis points, with Sypris Electronics' margin up 710 basis points and Sypris Technologies' up 120 basis points. Year-to-date, consolidated revenue was $101.5 million, a 26% increase from the prior year. Sypris Electronics had year-to-date revenue of $42.6 million, a 50% increase, and gross profit up 72%, with margin improving 202 basis points. Sypris Technologies had year-to-date revenue of $58.9 million, a 13% increase, but gross profit decreased 3.6% mainly due to unfavorable peso-to-dollar exchange rates; excluding exchange rates, gross profit would have increased 25% and margin would have improved 125 basis points.

• Expect full year 2023 revenue growth to approximate 25%, with gross profit rising similarly despite peso headwinds. - Initial outlook for 2024 is positive: revenue forecast to increase 15% to 20%, gross profit to rise 25% to 30%, and gross margin to expand 150 to 200 basis points. - Defense market expected to benefit from increased spending in fiscal 2024, with electronics, avionics, and communications investments rising disproportionately.

• Negative impact of foreign currency headwinds, specifically the Mexican peso's strength against the dollar. - Inflationary pressures affecting consumable supplies, tooling prices, and utility rates. - Uncertainty in currency exchange rate forecasts, leading to evaluation of hedging options.

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