Yahoo Finance Universal Stainless & Alloy Products Inc (USAP) (Q1 2024) Earnings Call Transcript ...
Gross Margin: Reached 18.9%, highest in 12 years, potentially over 20% without raw material misalignment.
Operating Income: Rose 51% to $7.3 million.
Net Income: Increased nearly 60% to $4.1 million.
Earnings Per Share (EPS): $0.43 per diluted share, up from $0.27 in the previous quarter.
Revenue: $77.6 million, second highest in company history.
Backlog: Increased to $325 million from $318 million at year-end.
Premium Sales: $20.1 million, representing 26% of total sales.
Aerospace Sales: $60.2 million, nearly 78% of total sales.
Debt Reduction: Reduced total debt by $4.3 million.
Capital Expenditures: $5.5 million invested, with a full-year expectation of approximately $18 million.
Free Cash Flow: Generated $10.6 million in cash from operations.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Hey, good morning. I wanted to start with the Boeing impact of their lower production. Wondering how long you could mitigate some of those issues before it starts to have a larger impact, assuming nothing changed at Boeing, just thinking about supply chain inventory levels and elevated backlogs and trying to get a sense for how much buffer there is if 737 production remain subdued longer than Boeing's expectations. A: Good morning, Mike. The best information we have, a lot of this is coming from a conference that we attended about four to five months ago, a supplier conference out that way and recent correspondences that we've had. The supply chain issues that have persisted, this is an opportunity for the supply chain to continue to catch up to support that 38 per month level that they were trying to achieve. There's an idea out there, that it would have been difficult for them to achieve that level at the current rate that the supply chain was able to support it. So this is an opportunity for the supply chain to continue to get caught up and get Boeing in the position to be able to realize that 38 rate count. So what we're seeing and what we're seeing in the industry right now has not been a pushout or cancellation of any of the schedules. They remain committed to their word and what they said they would do, which is to continue to keep all of the schedules in place and they continue to pull in through the supply chain. From a timing standpoint, I believe that if we go out beyond the late June, July time period and they don't have resolution with the FAA to get back on track going beyond the 38 per month rate. I think at that point, then we need to reassess what the environment looks like, but I believe that their current plan right now that they've got in place that the FAA is going to be reviewing and ultimately signing off on at the end of a three month period that began a month or so ago. I believe that if this persists beyond July, then we need to talk about potential impacts. But until that point, we feel comfortable with the demand and the pull in the supply chain continuing to be strong, even with them tapping the brakes on the build rate here in the first half of the year.
Q: Got it. That's very helpful. And then in the quarter, you had very strong margins despite the raw material misalignment in -- I think three months ago you had said this would begin to maybe moderate in 2Q and then behind us by the end of the second quarter. So is this still your view or has anything changed given some of the moving pieces? A: Yeah, we still stand by that. I think that we'll still have a little bit of misalignment here in the second quarter, but roughly only about 40% to 50% of what we experienced in the first quarter. We've had stability now for a few months and actually nickel is starting to show a little life. It is up slightly over the past four to five weeks. I don't know where that's going to go or if that's just a near term move. But what we're currently seeing in the commodities market is stability to a slight upward bias. So again, less misalignment in the second quarter and at the rate we're going right now, I don't think we'll have misalignment in the second half of the year, but we'll wait and see what the commodities do and talk about it more than.
Q: What impacts are you seeing within aerospace aftermarket, it sounds to us like MRO demand is going to be strong for several years. And just wondering if there's any new opportunities, is there any way to think about the impact of maybe a more prolonged aftermarket strength? A: It's hard for us to quantify, simply because of the majority of our product, it flows through service centres and forgers. It's hard to know where that metal is going to for new builds or MRO, but that is definitely a positive balance when we look at a slower build rate happening at Boeing. And again, that's not impacting us yet, but the carriers had a plan to retire their legacy planes and get these new fuel-efficient planes into service. They're having to continue the life of these legacy planes, which I know, is increasing their maintenance side of operation and is helping us from an MRO standpoint. I know that that's happening, but it's hard for us to quantify just how much of that shows up and is impacted in our numbers.
Q: Then lastly for me, just a clarification. You'd mentioned, you expect to record quarterly sales and increased profitability for the rest of the year. Just want to make sure I understand that implying sequential increases each quarter. A: That's right. A lot of that's predicated upon the continued march that we have to ramp production. We're taking a number of targeted initiatives to modernize our plant, really giving assistance to the labour force that we have and the leadership throughout the plants to enable us to continue that march ramping volume. And then from that, we continue to expect sequential improvement as we move through the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
