Sypris Solutions, Inc.

Q3 2023 consolidated revenue was $33.6 million, up 33% year over year. Consolidated gross profit was $4 million, up 105% year over year, and gross margin expanded by 420 basis points. Sypris Technologies revenue was $19.3 million, up 13.8% year over year, while Sypris Electronics revenue was $14.2 million, up 73% year over year; Electronics gross margin was 18.1%, up 710 basis points. Year-to-date consolidated revenue was $101.5 million, up $21.1 million or 26%, and year-to-date gross profit was $12.9 million, up 25% year over year. Management said 2023 full-year revenue growth is expected to approximate 25%, with gross profit rising by a similar percentage despite the Mexican peso headwind. Initial 2024 guidance calls for revenue growth of 15% to 20%, gross profit growth of 25% to 30%, and gross margin expansion of 150 to 200 basis points.

Jeffrey Gill framed the quarter as an inflection point, saying rising demand is meeting improved material availability and that backlog conversion should accelerate as new programs ramp to full-rate production. He highlighted multiple new wins across defense and energy infrastructure and said management remains very optimistic about future program and revenue growth. His tone was confident and constructive, with emphasis on backlog, diversification, and continued momentum into 2024.

Rich Davis emphasized the financial leverage from higher production volumes and favorable mix, while noting the quarter still absorbed $0.8 million of unfavorable peso-to-dollar exchange rates. He said year-to-date SG&A was $11.6 million, up 8.6%, but fell to 11.4% of revenue from 13.3% a year ago, and he expects further leverage as revenue grows. He also said year-to-date operating income improved to $1.3 million from an operating loss of $0.4 million last year, and that the company is evaluating currency hedging options given the peso’s move to MXN17.32 per dollar.

There was no analyst Q&A section in the transcript, so no specific external questions were raised. Management did, however, address the main concerns proactively: the Mexican peso’s impact on margins, inflation in consumables, tooling and utilities, and the timing of backlog conversion. They said they are managing costs daily, considering hedging options, and expect improved margins as volumes rise and manufacturing efficiency improves.