Universal Stainless Reports Record Sales; Full Year 2023 Net Income Highest Since 2018
- Record sales of $79.8 million in Q4 2023, up 12% from Q3 2023
- Full year 2023 sales reached $285.9 million, a 42% increase from 2022
- Premium alloy sales grew by 28% in Q4 2023 and 74% for the full year
- Aerospace sales hit a record $216.1 million in 2023, up 57% from 2022
- Gross margin improved to 16.4% in Q4 2023, the highest since Q2 2018
- Net income increased by 35% to $2.6 million in Q4 2023
- Strategic focus on premium alloys and specialty metals driving growth
- Investments in new Vacuum-Arc Remelt furnaces to expand capabilities
- Positive outlook for 2024 with a strong backlog and robust demand in aerospace
- None.
Insights
The reported increase in sales and net income for Universal Stainless & Alloy Products suggests a strong performance in the fourth quarter and the full year of 2023. The growth in premium alloy sales, which are typically associated with higher margins, is particularly notable. This diversification into higher-margin products is a strategic move that can provide resilience against market volatility. The aerospace sector's robust demand, accounting for a significant portion of sales, indicates a healthy end-market that could lead to sustained growth. However, investors should be mindful of the company's raw material headwinds and the potential impact of surcharge misalignments on future margins.
From a financial standpoint, the reduction in working capital and debt levels is a positive indicator of the company's operational efficiency and financial management. The emphasis on capital expenditures, particularly in technologies like Vacuum-Arc Remelt (VAR) furnaces, suggests a focus on long-term growth and capacity expansion. Nonetheless, the increase in interest expense due to higher rates is a concern that could affect net income if not managed properly as it could signal rising costs of capital amidst a potentially tightening monetary environment.
The strategic focus on premium and specialty alloys is a significant development, as it indicates Universal Stainless & Alloy Products' intention to capture more lucrative segments of the market. This shift towards high-value products is a trend seen across various industries as companies seek to improve their product mix. The aerospace industry's recovery and expansion are critical drivers for the company's growth, given that it represents a substantial portion of their sales. Understanding the cyclical nature of aerospace demand and the potential for future contractions or expansions could provide valuable insights into the company's future performance.
Another aspect worth noting is the company's managed inventory levels, which have decreased despite higher sales. This inventory management could be indicative of improved operational efficiencies or a strategic response to fluctuating raw material prices. The strong backlog, coupled with an increased average selling price, suggests a solid demand for the company's products, which could be a good sign for revenue stability and potential market share gains.
The addition of two new Vacuum-Arc Remelt (VAR) furnaces is a critical development for Universal Stainless & Alloy Products, as it enhances their capabilities in producing premium alloys. VAR technology is essential in the metallurgical industry for producing high-purity metals and alloys, which are important for aerospace applications. The qualification and release of these furnaces into production not only increase the company's capacity but also its ability to compete in the high-end alloy market. The successful integration of this technology could lead to improved product quality and open up new market opportunities, especially within the defense sector.
However, the reported raw material headwinds highlight the challenges faced by metallurgical companies in managing costs. Fluctuations in commodity prices can lead to surcharge misalignments, affecting profitability. It's important to monitor how the company navigates these challenges and whether their pricing strategy can mitigate the impact of raw material cost volatility on gross margins.
- Record Q4 2023 Sales of
$79.8 million , up12% from Q3 2023; Record full year 2023 sales of$285.9 million , up42% from 2022 - Record Q4 2023 Premium Alloy sales of
$21.1 million , up28% from Q3 2023; Record full year Premium Alloy sales of$68.1 million , up74% from 2022 - Q4 2023 Gross margin improves to
16.4% of sales, highest since Q2 2018, despite$1.6 million raw material headwind - Q4 2023 Net Income up
35% from Q3 2023 to$2.6 million , or$0.27 per diluted share - Cash flow from operations totals
$7.4 million for the quarter;$25.2 million for full year 2023
BRIDGEVILLE, Pa., March 28, 2024 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported financial results for the fourth quarter and the full year of 2023. Net sales were up
Sales of premium alloys increased
Aerospace sales continue to be driven by strong market demand and premium alloy share gains. Fourth quarter 2023 aerospace sales increased
The Company’s gross margin continued to strengthen in the fourth quarter of 2023 to
Operating income rose
The Company’s fourth quarter net income increased
EBITDA for the fourth quarter of 2023 increased to
Christopher M. Zimmer, President and CEO, commented: “The fourth quarter capped a year of increasing momentum for Universal, with sales up
“Our strategic focus on higher margin premium and specialty alloys is gaining full traction enabling us to meet robust and sustainable demand in the aerospace market -- evidenced by the
“To increase our capabilities and capacity in premium and specialty alloys, we have added two Vacuum-Arc Remelt (VAR) furnaces at our North Jackson facility, which have been qualified and released into production. Their addition supports our premium alloy growth strategy, expanding our portfolio with added applications in the aerospace market, including defense.
“The main drivers of our improving profitability in 2023 were a richer product mix and the benefit of price increases implemented over the past three years, which were partially offset by negative surcharge misalignment due to falling commodity prices. The misalignment is expected to lessen by the end of the second quarter of 2024.
“We have entered 2024 with a strong book of business, with premium alloys representing more than a third of our backlog, and with robust demand continuing unabated in aerospace. We remain firmly on-track with our strategic plan and growth trajectory for 2024 and beyond.”
Financial Position
Managed working capital, defined as accounts receivable, plus inventory, minus accounts payable, minus other current liabilities, was
Backlog (before surcharges) at December 31, 2023 remained strong at
The Company reduced total debt by
Capital expenditures for the fourth quarter of 2023 totaled
Conference Call and Webcast
The Company has scheduled a conference call for today, March 28th, at 10:00 a.m. (Eastern) to discuss final fourth quarter 2023 results. If you wish to listen to the live conference call via telephone, please Click Here to register for the call and obtain your dial-in number and personal PIN number. A simultaneous webcast will be available on the Company’s website at www.univstainless.com, and thereafter archived on the website through the end of the second quarter of 2024.
About Universal Stainless & Alloy Products, Inc.
Universal Stainless & Alloy Products, Inc., established in 1994 and headquartered in Bridgeville, PA, manufactures and markets semi-finished and finished specialty steels, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. The Company's products are used in a variety of industries, including aerospace, power generation, oil and gas, and heavy equipment manufacturing. More information is available at www.univstainless.com.
Forward-Looking Information Safe Harbor
Except for historical information contained herein, the statements in this release are forward-looking statements that are made pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to differ materially from forecasted results. Those risks include, among others, the Company’s ability to maintain its relationships with its significant customers and market channels; the Company’s response to competitive factors in its industry that may adversely affect the market for finished products manufactured by the Company or its customers; the Company’s ability to compete successfully with domestic and foreign producers of specialty steel products and products fashioned from alternative materials; changes in overall demand for the Company’s products and the prices at which the Company is able to sell its products in the aerospace industry, from which a substantial amount of its sales is derived; the Company’s ability to develop, commercialize, market and sell new applications and new products; the receipt, pricing and timing of future customer orders; the impact of changes in the Company’s product mix on the Company’s profitability; the Company’s ability to maintain the availability of raw materials and operating supplies with acceptable pricing; the availability and pricing of electricity, natural gas and other sources of energy that the Company needs for the manufacturing of its products; risks related to property, plant and equipment, including the Company’s reliance on the continuing operation of critical manufacturing equipment; the Company’s success in timely concluding collective bargaining agreements and avoiding strikes or work stoppages; the Company’s ability to attract and retain key personnel; the Company’s ongoing requirement for continued compliance with laws and regulations, including applicable safety and environmental regulations; the ultimate outcome of the Company’s current and future litigation matters; the Company’s ability to meet its debt service requirements and to comply with applicable financial covenants; risks associated with conducting business with suppliers and customers in foreign countries; public health issues, including COVID-19 and its impact on the Company and our customers and suppliers; risks related to acquisitions that the Company may make; the Company’s ability to protect its information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches; the impact on the Company’s effective tax rates from changes in tax rules, regulations and interpretations in the United States and other countries where it does business; and the impact of various economic, credit and market risk uncertainties. Many of these factors are not within the Company’s control and involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from any future performance suggested herein. Any unfavorable change in the foregoing or other factors could have a material adverse effect on the Company’s business, financial condition and results of operations. Further, the Company operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the Company’s control. Certain of these risks and other risks are described in the Company’s filings with the SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, copies of which are available from the SEC or may be obtained upon request from the Company.
Non-GAAP Financial Measures
This press release includes discussions of financial measures that have not been determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These measures include earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. We include these measurements to enhance the understanding of our operating performance. We believe that EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to cash generating activity of our operations. adjusted EBITDA excludes the effect of share-based compensation expense and noted special items such as impairments and costs or income related to special events such as periods of low activity or insurance claims. We believe that excluding these costs provides a consistent comparison of the cash generating activity of our operations. We believe that EBITDA and adjusted EBITDA are useful to investors as they facilitate a comparison of our operating performance to other companies who also use EBITDA and adjusted EBITDA as supplemental operating measures. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measures. These non-GAAP measures may not be entirely comparable to similarly titled measures used by other companies due to potential differences among calculation methodologies. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measure prepared in accordance with GAAP is included in the tables that follow.
[TABLES FOLLOW]
| UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. | ||||||||||||||||
| FINANCIAL HIGHLIGHTS | ||||||||||||||||
| (Dollars in Thousands, Except Per Share Information) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net sales | $ | 79,780 | $ | 56,200 | $ | 285,943 | $ | 202,114 | ||||||||
| Cost of products sold | 66,672 | 53,784 | 244,404 | 187,927 | ||||||||||||
| Gross margin | 13,108 | 2,416 | 41,539 | 14,187 | ||||||||||||
| Selling, general and administrative expenses | 8,304 | 5,575 | 27,783 | 21,180 | ||||||||||||
| Operating income (loss) | 4,804 | (3,159 | ) | 13,756 | (6,993 | ) | ||||||||||
| Interest expense | 2,134 | 1,532 | 8,155 | 4,163 | ||||||||||||
| Deferred financing amortization | 65 | 56 | 259 | 225 | ||||||||||||
| Other expense (income), net | 29 | (60 | ) | 34 | (684 | ) | ||||||||||
| Income (loss) before income taxes | 2,576 | (4,687 | ) | 5,308 | (10,697 | ) | ||||||||||
| Income taxes | (21 | ) | (963 | ) | 398 | (2,624 | ) | |||||||||
| Net income (loss) | $ | 2,597 | $ | (3,724 | ) | $ | 4,910 | $ | (8,073 | ) | ||||||
| Net income (loss) per common share - Basic | $ | 0.28 | $ | (0.41 | ) | $ | 0.54 | $ | (0.90 | ) | ||||||
| Net income (loss) loss per common share - Diluted | $ | 0.27 | $ | (0.41 | ) | $ | 0.53 | $ | (0.90 | ) | ||||||
| Weighted average shares of common | ||||||||||||||||
| stock outstanding | ||||||||||||||||
| Basic | 9,133,716 | 9,007,001 | 9,086,004 | 8,972,468 | ||||||||||||
| Diluted | 9,445,132 | 9,007,001 | 9,278,569 | 8,972,468 | ||||||||||||
| MARKET CHANNEL INFORMATION | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| Net Sales | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Service centers | $ | 61,763 | $ | 41,380 | $ | 221,691 | $ | 144,955 | ||||||||
| Original equipment manufacturers | 5,895 | 4,358 | 19,113 | 17,230 | ||||||||||||
| Rerollers | 2,935 | 5,041 | 15,635 | 19,824 | ||||||||||||
| Forgers | 8,002 | 4,739 | 24,742 | 17,568 | ||||||||||||
| Conversion services and other sales | 1,185 | 682 | 4,762 | 2,537 | ||||||||||||
| Total net sales | $ | 79,780 | $ | 56,200 | $ | 285,943 | $ | 202,114 | ||||||||
| Tons shipped | 8,124 | 6,500 | 32,058 | 26,571 | ||||||||||||
| MELT TYPE INFORMATION | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| Net Sales | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Specialty alloys | $ | 57,489 | $ | 42,000 | $ | 213,077 | $ | 160,352 | ||||||||
| Premium alloys * | 21,106 | 13,518 | 68,104 | 39,225 | ||||||||||||
| Conversion services and other sales | 1,185 | 682 | 4,762 | 2,537 | ||||||||||||
| Total net sales | $ | 79,780 | $ | 56,200 | $ | 285,943 | $ | 202,114 | ||||||||
| END MARKET INFORMATION ** | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| Net Sales | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Aerospace | $ | 61,895 | $ | 40,050 | $ | 216,093 | $ | 137,489 | ||||||||
| Power generation | 1,077 | 1,043 | 4,208 | 6,117 | ||||||||||||
| Oil & gas | 3,580 | 5,256 | 13,978 | 17,981 | ||||||||||||
| Heavy equipment | 6,413 | 5,634 | 31,212 | 27,138 | ||||||||||||
| General industrial, conversion services and other sales | 6,815 | 4,217 | 20,452 | 13,389 | ||||||||||||
| Total net sales | $ | 79,780 | $ | 56,200 | $ | 285,943 | $ | 202,114 | ||||||||
| * | Premium alloys represent all vacuum induction melted (VIM) products. |
| ** | The majority of our products are sold to service centers rather than the ultimate end market customer. The end market information in this press release is our estimate based upon our knowledge of our customers and the grade of material sold to them, which they will in-turn sell to the ultimate end market customer. |
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Cash | $ | 394 | $ | 2,019 | ||||
| Accounts receivable, net | 39,034 | 30,960 | ||||||
| Inventory, net | 144,700 | 154,193 | ||||||
| Other current assets | 11,121 | 10,392 | ||||||
| Total current assets | 195,249 | 197,564 | ||||||
| Property, plant and equipment, net | 159,636 | 163,490 | ||||||
| Deferred income taxes | - | 143 | ||||||
| Other long-term assets | 1,233 | 2,137 | ||||||
| Total assets | $ | 356,118 | $ | 363,334 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Accounts payable | $ | 34,855 | $ | 38,179 | ||||
| Accrued employment costs | 5,920 | 2,790 | ||||||
| Current portion of long-term debt | 3,733 | 3,419 | ||||||
| Other current liabilities | 829 | 1,112 | ||||||
| Total current liabilities | 45,337 | 45,500 | ||||||
| Long-term debt, net | 81,846 | 95,015 | ||||||
| Deferred income taxes | 2 | - | ||||||
| Other long-term liabilities, net | 2,891 | 3,066 | ||||||
| Total liabilities | 130,076 | 143,581 | ||||||
| Stockholders’ equity | 226,042 | 219,753 | ||||||
| Total liabilities and stockholders’ equity | $ | 356,118 | $ | 363,334 | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating activities: | ||||||||
| Net income (loss) | $ | 4,910 | $ | (8,073 | ) | |||
| Adjustments for non-cash items: | ||||||||
| Depreciation and amortization | 19,433 | 19,378 | ||||||
| Deferred income tax | 215 | (2,695 | ) | |||||
| Share-based compensation expense | 1,336 | 1,188 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable, net | (8,074 | ) | (9,768 | ) | ||||
| Inventory, net | 7,785 | (15,078 | ) | |||||
| Accounts payable | (2,900 | ) | 10,507 | |||||
| Accrued employment costs | 3,130 | (1,513 | ) | |||||
| Income taxes | 181 | 3 | ||||||
| Other, net | (785 | ) | (2,986 | ) | ||||
| Net cash used in operating activities | 25,231 | (9,037 | ) | |||||
| Investing activity: | ||||||||
| Capital expenditures | (13,026 | ) | (12,096 | ) | ||||
| Net cash used in investing activity | (13,026 | ) | (12,096 | ) | ||||
| Financing activities: | ||||||||
| Net (payments on) borrowings under revolving credit facility | (10,561 | ) | 23,548 | |||||
| Proceeds from other financing transactions, net | - | 1,804 | ||||||
| Payments on term loan facility, capital leases, and notes | (3,568 | ) | (2,412 | ) | ||||
| Issuance of common stock under share-based plans | 299 | 224 | ||||||
| Payments of financing costs | - | (130 | ) | |||||
| Net cash provided by financing activities | (13,830 | ) | 23,034 | |||||
| Net increase (decrease) in cash | (1,625 | ) | 1,901 | |||||
| Cash at beginning of period | 2,019 | 118 | ||||||
| Cash at end of period | $ | 394 | $ | 2,019 | ||||
| RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||
| Three Months ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income (loss) | $ | 2,597 | $ | (3,724 | ) | $ | 4,910 | $ | (8,073 | ) | ||||||
| Interest expense | 2,134 | 1,526 | 8,155 | 4,158 | ||||||||||||
| Income taxes | (21 | ) | (963 | ) | 398 | (2,624 | ) | |||||||||
| Depreciation and amortization | 4,921 | 4,858 | 19,446 | 19,378 | ||||||||||||
| EBITDA | 9,631 | 1,697 | 32,909 | 12,839 | ||||||||||||
| Share-based compensation expense | 328 | 288 | 1,336 | 1,289 | ||||||||||||
| Fixed cost absorption direct charge | - | - | - | 1,300 | ||||||||||||
| Spill costs in addition to absorption charge, net | - | 300 | - | 4,060 | ||||||||||||
| AMJP benefit | - | (139 | ) | - | (3,589 | ) | ||||||||||
| Adjusted EBITDA | $ | 9,959 | $ | 2,146 | $ | 34,245 | $ | 15,899 | ||||||||
| CONTACTS: | Christopher M. Zimmer | Steven V. DiTommaso | June Filingeri | |||
| President and | Vice President and | President | ||||
| Chief Executive Officer | Chief Financial Officer | Comm-Partners LLC | ||||
| (412) 257-7604 | (412) 257-7661 | (203) 972-0186 |
FAQ
What were the Q4 2023 sales for Universal Stainless & Alloy Products, Inc. (USAP)?
How much were the full year 2023 sales for USAP?
What was the growth rate of premium alloy sales in Q4 2023?
What was the increase in aerospace sales for 2023 compared to 2022?
What was the gross margin in Q4 2023 for USAP?
How much did net income increase in Q4 2023 for USAP?
What strategic focus is USAP emphasizing for growth?
What investments has USAP made to expand capabilities?
What is the outlook for USAP in 2024?
