NASDAQ:USAP Universal Stainless & Alloy Products Q2 2023 Earnings Report Earnings HistoryForecast Universal Stainless & Alloy Products EPS ResultsActual EPS$0.10Consensus EPS $0.05Beat/MissBeat by +$0.05One Year Ago EPSN/AUniversal Stainless & Alloy Products Revenue ResultsActual Revenue$69.02 millionExpected Revenue$68.46 millionBeat/MissBeat by +$560.00 thousandYoY Revenue GrowthN/AUniversal Stainless & Alloy Products Announcement DetailsQuarterQ2 2023Date7/26/2023TimeN/AConference Call DateWednesday, July 26, 2023Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Universal Stainless & Alloy Products Q2 2023 Earnings Call TranscriptProvided by QuartrJuly 26, 2023 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:02Welcome to Universal Stainless and Alloy Products Second Quarter 2023 Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to June Filangieri. Please go ahead. Operator00:00:37Thank you. Good morning. This is June Filangieri of Comm Partners. And I'd also like to welcome you to the Universal Stainless call and webcast. We are here to discuss the company's Q2 2023 results are reported this morning. Operator00:00:53With us from management are Denny Oates, Chairman, President and Chief Executive Officer Chris Zimmer, Executive Vice President and Chief Operating Officer John Arminas, Vice President and General Counsel and Steve De Tannaso, Vice President and Chief Financial Officer. Before I turn the call over to management, Let me quickly review procedures. After management has made formal remarks, we will take your questions. The conference operator, Norma, sorry about that, We'll take your questions. Also, please note that in this morning's call, management will make forward looking statements Under the Private Securities Litigation Reform Act of 1995, I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission. Operator00:02:01With the formalities complete, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin. Speaker 100:02:10Okay, June. Thank you. Good morning, everyone. Thanks for joining us today. The main highlight of our second quarter performance is improving profitability, a product of the positive momentum we described on our last call. Speaker 100:02:24More specifically, Gross profit margin reached 14.3 percent of sales despite an across the board drop in commodity metal prices that resulted in negative surcharge misalignment of about $500,000 First quarter gross margin was 11.7%. The margin improvement in the most recent quarter led to a more than doubling of operating income to $3,100,000 We turned the corner on bottom line profitability with net income reaching $900,000 or $0.10 per diluted share. The main drivers of 2nd quarter profitability were higher shipment volume, both sequentially and year over year increased production, Improve productivity at key operations and higher base selling prices. We announced 2 additional price increases in the second quarter on Bar and Plate Products. Adjusted EBITDA of almost $8,000,000 in the 2nd quarter was the highest achieved since the Q2 of 2019 and increased 17% from last quarter. Speaker 100:03:27Looking at our top line. Net sales remained strong at $69,000,000 an increase of 5% sequentially and up 32% year over year. That's the highest level since the Q2 of 2019. Year to date sales reached $135,000,000 an increase of 35% over last year. The 2nd quarter sales included premium alloy sales of $12,900,000 which is 27% lower than the record first quarter, but 46% higher than the Q2 of 2022. Speaker 100:03:59Year to date premium alloy sales were up 72% to $30,500,000 were 23% of sales. We expect premium product sales to be above Q1's record levels during the second half of the year. Our premium alloy sales are for aerospace applications. Aerospace sales increased 5% to a record $51,000,000 in the 2nd quarter, Up 44% year over year and up 52% year to date. On the last call, we pointed to an expected modest improvement in sales in the Q2 with growth accelerating during the second half of the year. Speaker 100:04:372nd quarter sales, including premium alloys, were in line with our plans. Our positive outlook for the final two quarters of the year remains unchanged. It's based on the continued strength in demand for our products, especially our premium alloys, tempered somewhat by seasonality and declining surcharges. June 30 total order backlog before surcharges remained robust at $355,000,000 but fell $11,000,000 from Q1's record high as we work with customers to control our order entry. The backlog of orders scheduled to ship over the next 12 months actually increased 6% compared to March 31. Speaker 100:05:16We continue to diligently work to reduce extended lead times. Premium alloys continue to represent about 35% of our backlog. Turning to our financial position. Total debt was reduced by $6,200,000 to $93,300,000 during the quarter. Revolver availability remained unchanged at an adequate $24,000,000 Managed working capital was $148,000,000 Down $1,500,000 sequentially, representing about 54% of sales. Speaker 100:05:49Receivables are in good shape with DSO falling to 41 from 50 at year end 2022. Inventory at the end of the second quarter increased a modest 1.4% to $152,000,000 reflecting improved turns, partially offset by higher volumes of premium grades and work in process. 2nd quarter capital expenditures were $2,400,000 Bring the year to date total to $6,900,000 We expect full year capital expenditures of about $16,000,000 About half of that amount for our investment in re melt capacity at our North Jackson facility, where we're adding 2 VacuMark re melt furnaces. Equipment installation is underway, and we are working towards full integration of operations beginning in the Q1 of 2024. Our objective is to expand our product portfolio with more technologically advanced higher margin premium products to enhance our capabilities, our cost structure and also our growth prospects. Speaker 100:06:48We continue to deepen our management team in the Q2 with the naming of Rick is Vice President of Supply Chain and Purchasing. Rick is a 13 year veteran of Universal and most recently served as Universal's Supply Chain Director. She reports directly to Chris Zimmer, our recently named Chief Operating Officer. Two additional updates. We announced separately today that we have engaged Baker Tilly as our new auditor, effective following the following of our Q2 10 Q. Speaker 100:07:17Baker Tilly replaces Schneider Downs, who has been our auditor of record for over 20 years. We have been pleased with the quality of professional services that Schneider Downs has provided, And we look forward to working with an audit firm of the caliber of Baker Tilly. Additionally, we are currently in negotiations on The current 5 year agreement expires on August 31. Chris, I'll turn the call over to you for your review of operations. Speaker 200:07:49Thank you, Denny, and good morning, everyone. I'll start with premium alloys and our vacuum induction melting operations, which are the critical platform for our growth strategy. While premium alloy sales were sequentially lower in the Q2 due to shipment timing, our results year to date are 72% higher than the first half of 2022 and we remain on track for a record year of sales in 2023. Operationally, we achieved record vacuum induction melting productivity during the Q2, which supports our rapidly growing premium alloy sales planned for the in the second half of this year. Despite continued challenges stabilizing our workforce, we were able to increase our total production sequentially and expect additional production increases in the Q3. Speaker 200:08:41Production levels at our remelt shops, hot working mills And major finishing units all improved sequentially as we continue our march back to pre COVID production levels. As most of you know, Rolls Royce has been a longstanding customer of ours and I'm pleased to report that Universal was again named to the Rolls Royce High Performance Supplier Group for 2023. This is a very short list of suppliers and we are proud of the great job that our team has done to receive this recognition. Turning to commodities. Nickel continued to slide in the 2nd quarter declining 9% sequentially into the low $9 per pound range. Speaker 200:09:21Other metals followed suit with nearly every metal we track down quarter over quarter year over year. The reasons for the decline are mainly weak manufacturing and trade data from China, weaker European demand and concerns about further monetary policy tightening in the U. S. And the effect on the U. S. Speaker 200:09:42Dollar. Overall, we expect negative surcharge misalignment for the Q3. Let's turn to end markets beginning with aerospace, our largest market. We saw additional growth in our aerospace sales in the Q2 of 2023, which increased 5% to a record $51,300,000 or 74 percent of sales compared to $49,000,000 74 percent of sales in the Q1 of 2023. Aerospace sales increased 44% from 35 $700,000 in the Q2 of 2022. Speaker 200:10:20And year to date, sales totaled $1,000,000 an increase of 52% from the same period 2022. The drivers of commercial aerospace demand continue to gain momentum in the Q2. Consumer demand is up. The pace of deliveries at Boeing and Airbus has increased, carriers are turning over their fleets for more fuel efficient planes And build rates are ramping up. We attended the Paris Air Show last month and it was one of the most positive shows in memory. Speaker 200:10:56Looking at the airplane manufacturers, Boeing delivered 136 planes in the second quarter with a better than expected 60 deliveries in June. Boeing's orders were strong in the 2nd quarter at 460 planes, including a 220 plane order from Air India. Speaker 100:11:17At the Speaker 200:11:17end of June, Boeing's net backlog stood at over 4,800 planes. With the continued increase in backlog and strong Q2 deliveries, Boeing is increasing the 7 37 MAX monthly build rate to 38 from the current rate of 31 and plans to reach 50 in the 2025 to 2026 timeframe. You should learn more about Boeing's plans on their call this morning. At Airbus, June deliveries totaled 72, bringing year to date deliveries to 316. Airbus had gross orders in June of 902 planes, including a firm order for 500 A320 family aircraft from Indigo, India's largest airline. Speaker 200:12:04That order set the record for the biggest single purchase agreement in the history of commercial aviation. Earlier this month, Airbus opened a new assembly line for the A321neo in Southwest France, Part of its efforts to reach a build rate of 75 on the A320 family by 2026 amid record demand. The current build rate is at 45 planes per month. IATA added more good news in their May report. Total air traffic in May increased 39% from May of 2022 and global traffic is now at 90 6% of the pre pandemic levels. Speaker 200:12:48Domestic traffic for May rose 36%, making it the 2nd month in a row that it has exceeded pre pandemic levels. Meanwhile, international traffic jumped 41% versus May of 2022 with all markets recording strong growth. In the U. S, TSA recorded impressive passenger volume of 2,900,000 on May 30 versus $2,500,000 on that date in 2022 $2,200,000 in 2019. Volume had fallen to $800,000 in 2020. Speaker 200:13:25That healthy activity translated into record revenue and profits at Delta Airlines, which reported robust domestic demand and record international performance in the 2nd quarter. The company expects the same high level of demand to continue through the quarter. United Airlines and American Airlines recorded record results in the quarter. Defense market demand continues to be driven by the global conflicts that we read about daily. Lockheed Martin, for example, reported record backlog in the end of the second quarter, including a $7,800,000,000 contract from the Pentagon for 26 F-thirty 5 Fighters. Speaker 200:14:08In rotorcraft, our customer Bell Textron received the go ahead to move forward with manufacturing its Tiltrotor aircraft, the V-two eighty Valor, the U. S. Army's future attack helicopter, which will eventually replace Sikorsky's Black Hawk. In other deals, Germany will purchase 60 Chinook helicopters from Boeing. The purchase is a part of a shift following Russia's invasion of Ukraine. Speaker 200:14:37The challenge for both commercial aerospace and defense manufacturers is to overcome continued The parallel challenge for Universal's customers is to meet enormous demand for our products, which is expected to continue through 2024 and beyond. Customers are fully in a pull mode. They describe their inventories as hand to mouth and have a record backlog of orders waiting for material from the mills. The heavy equipment market remained our 2nd largest market in the Q2 of 2023 with sales of $8,900,000 were 13% of sales, up 29% from sales in the Q1 of 2023 and up 24% from the Q2 of 2022. Metal fabrication demand drives our heavy equipment market sales mainly for automotive applications, especially model changeovers. Speaker 200:15:33The strong sales pickup we saw in the Q1 continued in the second as customers continue to replenish inventories of plate product. While demand in the heavy equipment market can be lumpy, we expect our sales to that market to remain solid in the 3rd quarter. The general industrial market became our 3rd largest market in the Q2 of 'twenty three with sales of $2,300,000 were 5% of sales, which is down 7% from the Q1 of 2023, but up 76% from the Q2 of 2022. Our general industrial sales are mainly for semiconductor manufacturing. Based on market outlook, we are bullish about 2024 with the ramp up beginning in the second half of this year. Speaker 200:16:21The oil and gas market moved down to 4th place in the Q2 of 2023 with sales of $3,100,000 or 4% of sales versus $4,800,000 in the Q1 of 2023. Demand in the oil and gas market in the 2nd quarter was negatively impacted by market softness in North America, including muted drilling activity in the U. S. As indicated on in lower rig counts. Baker Hughes, Halliburton and Schlumberger are all expecting softness in the U. Speaker 200:16:53S. Land market to continue in the second half of twenty twenty three. While the long term prospects for our oil gas. We are temporarily shifting more of our capacity to higher margin aerospace products to better respond to the enormous demand in that market. Power generation market sales totaled $1,300,000 or 2% of sales in the Q2 of 2023, a 23% increase from $1,100,000 in the Q1. Speaker 200:17:24Our power generation sales is program specific, heavily relying upon maintenance of industrial gas turbines for electricity generation. We remain positioned to benefit from any additional maintenance Following this unusually hot summer and any ongoing investment in new domestic gas turbines. Now let me turn the call over to Steve for his report on our financials. Speaker 300:17:50Thank you, Chris. Good morning, everyone. This quarter, we grew the top line by more than $3,000,000 sequentially or about 5%, driven by higher base pricing and more shipment volume despite the lower mix of premium products and falling surcharges. Compared with the Q2 in the prior year, Our total net sales increased nearly $17,000,000 or 32%, while our premium product sales are up by more than $4,000,000 Our 2nd quarter gross margin totaled $9,800,000 or 14.3 percent of sales, The highest quarterly gross margin percentage since 2018. Consistent with our plan as we advance through this year, The margin expansion is a result of higher base prices, strong production volume and improved cost absorption and more shipment volume. Speaker 300:18:49And in the current quarter, these benefits overcame negative misalignment between our materials cost and the surcharge component of our total sales price from the impact of falling commodity metal prices. Telling, general and administrative costs totaled $6,800,000 in Q2 compared to $6,300,000 in the Q1 $5,300,000 in the Q2 of last year. Although lower as a percent of sales when compared to last year, the $1,500,000 increase is driven by higher property insurance costs and higher employee related costs. As a result of the higher gross margin, we earned operating income of $3,100,000 which more than doubled the 1st quarter And was $3,600,000 better than the loss posted in the Q2 of last year. However, interest expense remained high compared to prior years and at $2,000,000 was approximately flat to Q1. Speaker 300:19:57Despite paying down our revolver by $6,000,000 as a part of reducing our overall net debt position by 5,000,000 The variable interest rates we paid continued to rise through the quarter. The rate on the majority of our debt fluctuates with TermSOFR under the terms of our credit agreement. Term SOFR is currently hovering just above 5% and was around 4.5% throughout the Q1 and 1.5% at this time last year. Accordingly, our average borrowing rate for Q2 was about 8.5%, which compares to 8.2% in Q1 and 4.4% in Q2 of last year. We posted pretax income of just over $1,000,000 and recorded a provision for income taxes of $148,000 resulting in an effective tax rate of 14.2% for the quarter. Speaker 300:20:59Consistent with our discussion on prior calls, our estimated annual effective tax rate is less than the federal Statutory rates of 21% due to the beneficial impact of research and development credits. Other items and discrete items during the quarter are not significant. Our net income for the quarter was about $900,000 Our diluted shares outstanding reported in Q2 increased to $9,300,000 and our earnings per diluted share were $0.10 The Q2 performance brought us into a year to date net income position as well, totaling about $400,000 or $0.04 per diluted share. EBITDA was $7,600,000 which is $1,200,000 better than last quarter and the highest level since the Q2 of 2019. Our adjusted EBITDA totaled $7,900,000 including an add back for non cash share compensation expense. Speaker 300:22:08The reconciliation of adjusted EBITDA for each period presented is provided in the tables within the press release. During the Q2, we generated $7,700,000 of cash from our operations despite investing $2,600,000 in inventory, which primarily resulted from 2 record vacuum induction melt Production campaigns executed during the 2023 Q2. In total, we generated cash from our managed working capital As we drove accounts receivable down to $31,300,000 delivering a DSO of 41 And we grew accounts payable modestly in line with inventory. We used $2,400,000 of cash on capital expenditures during Q2 and our free cash flow of $5,200,000 was used to pay down debt. Additionally, our available borrowings under our revolving credit facility remained flat compared to March 31 at about $24,000,000 despite the expiration of our temporary credit agreement amendment that provided access to additional inventory collateral value throughout the Q3 Q4 of 2022 and through March 31st this year. Speaker 300:23:37This liquidity position coupled with our ongoing This concludes my report. And I'll hand the call back to Denny. Speaker 100:23:55Okay. Thanks, Steve. Let me summarize. We move forward in strengthening our profitability and cash flow in the Q2. Gross margins reached 14.3% of sales despite negative surcharge misalignment and lower premium product sales. Speaker 100:24:11Higher shipment volume, increased production, productivity and yield improvements And higher selling prices all contributed to the margin expansion. We turned the corner on bottom line profitability with net income approaching $1,000,000.10 per share. Adjusted EBITDA increased 24% to $8,000,000 Total debt was reduced by 6%. Working capital metrics improved across the board. 2nd quarter sales remained strong at $69,000,000 growing 5% sequentially, consistent with our plan and expectations. Speaker 100:24:46Sales were 34% higher year over year and up 35% year to date, reaching 135,000,000 Premium alloy sales were up 46% year over year but down 27% sequentially due to shipment timing. Demand for our premium products remains at record levels. So does our backlog, which contains over 35% premium alloy product as demand in commercial aerospace in the commercial aerospace market continues to surge. Our major capital project at North Jackson remains on And we are working to have it operational in the Q1 of 2024. We continue to develop our organization during the quarter with the recent appointment of Rick Sikola, Our second half outlook is for sequential quarterly sales growth, Fueled by a solid backlog, increasing base prices and improving mix of premium product shipments, Tempered somewhat by declining surcharges and normal seasonality. Speaker 100:25:50We further expect these top line trends, coupled with increased production, to yield improved gross profit margins, positive cash flow and further debt reduction. Let me conclude by recognizing our exceptionally talented team of Thank you, Lee and Charlie employees for their dedication and hard work during the quarter and over the last several years. They have my sincere gratitude as to our Board, for customers and our stockholders. That concludes our formal remarks. Norma, let's take some questions from our callers. Operator00:26:22Thank you. One moment for our first question please. And our first question comes from the line of Phil Gibbs with KeyBanc Capital Markets. Your line is now open. Speaker 400:26:52Hey, good morning. Speaker 100:26:53Hey, Phil. How are you doing? Speaker 400:26:56Good. You all mentioned surcharge misalignment in the second quarter despite having pretty solid Gross margins anyways. Any way to couch what that may have been either on a dollar or a percentage basis and then Maybe the same thing as it relates to how you're thinking about the Q3? Speaker 100:27:18Well, we've seen declining commodities during 2nd quarter, so we know surcharges are going to be lower in the Q3 versus the second. So at the same time, our material cost should be drifting down as well. So as that comes together in the Q3, our best estimate, Phil, would be misalignment would be negative. It would be about the same amount as we saw in the second quarter On a sequential basis. Speaker 400:27:42So not really any worse than what you already experienced in Q2. And was that 100 basis points Roughly or more or less? Speaker 300:27:54About $500,000 Okay. Speaker 100:27:59So you're comfortable, so $500,000,000 over $69,000,000 would be the is that what you're asking? Yes. Yes. Speaker 400:28:07Okay. So similar amounts in the Q3 as of right now is what you're saying? Speaker 100:28:14Right. Speaker 400:28:15And then just the housekeeping, you had given some color on general items. What's the update in just in terms of the amount of liquidity that you have right now? And then also what should we be modeling For the book tax rate for the back half? Speaker 300:28:37Yes. Right now as we Begin to step through Q3, we're basically flat to the end of Q2, so still at that $24,000,000 level. And we are forecasting debt pay down in the 3rd and 4th quarters. So probably not at the same level of the second quarter, But with our incremental improving margins and growing sales, even though CapEx we expect to increase in the second half of the year, We will pay down some debt in the 3rd 4th quarters and expand liquidity as well. Speaker 400:29:14So $24,000,000 as of now on that. And then tax rate was somewhat unique, maybe perhaps too low in the first half. Should Should we expect the back half to be more normal kind of 20%, 25%? Speaker 300:29:28Yes, that's right. More normalized back half on the tax rate. Speaker 400:29:35Okay. And then as it relates to your mix and Your pricing that seems like it's more than going to overcome this misalignment Piece, just from a timing perspective, how many quarters or visibility do you have In terms of that mix and pricing dynamic continuing to improve because I know you're turning over that backlog with sort of a richer outcome? Speaker 200:30:09Well, for the two components of our selling price, the base prices are known. A lot of our VAR products and aerospace products are booked largely the next four quarters And we will see sequential base price improvement in each one of those quarters. It gets a little cloudier on the surcharge front. We do know that the surcharges in the Q3 will drift down, but it remains to be seen what the Q4 or 2024 will look like. We continue to manage our inventories tightly to turn our inventories to keep up with those changes. Speaker 200:30:47So our expectation is that unless there is a wild spike in either direction, it should not have a significant impact on margins. And Again, the sales surcharge component will track with commodities. Speaker 400:31:04Thank you. And then lastly, as it relates to the VIM and kind of VAR complex, So finally, you're really strongly finding its footing at this point in time. Are you gaining the wins and share that you would have hoped to have seen a couple of years ago with the Forgers and maybe some of the OEM direct Customers, is that the idea behind it because I know obviously a lot of your business historically has been transactional. So just maybe anything you could just say at a high level relative to that? Thanks. Speaker 200:31:40Yes, that's right. We're now enjoying the benefits of the product development and the approvals that we've gained throughout the years. We're picking up share. That's where a lot of the growth in the backlog is coming from. The market is stronger, but For sure, we are into some new customers, new applications that we were not in before with some of these new BIM products. Speaker 200:32:04We continue to have more and more conversations, some really good things coming out of the air show. So I expect us to continue to build upon We're having this year as we move into 2024 and I don't see any reason why this momentum won't continue beyond 2024. So that is one of the big parts of the success story here is the additional VIM sales that are coming largely through Share gains riding the back of a strong market. Speaker 400:32:36And just kind of a sub question to that, is The North Jackson complex is that from a mix standpoint richer than the broader portfolio or is about the same? Speaker 200:32:47It's generally richer. The North Jackson plant and our plant up in Dunkirk are largely Aerospace driven, the Bridgeville plant is where we have our semi finished products to the general industrial market, things like tool steel plate, That's a bigger part of what the Bridgeville plant does. The Bridgeville plant is also the primary feeder of input stock to North Jackson and Dunkirk. But as I look at those three plants, North Jackson, Dunkirk and our Titusville plant as well Are all very much aerospace focused and the products that they put into the market. Speaker 400:33:26Thank you. Operator00:33:28Thank you for your question. And I'm currently showing no further questions at this time. I'd like to hand the conference back to Mr. Oates for closing remarks. Speaker 100:34:05Thank you, Norma. Once again, thanks everyone for joining us this morning. We move forward with our strategy in the Q2, remain optimistic about our growth prospects for the remainder of this year and well into 2024 2025. We look forward to updating you on our progress in our next call, which will be in October. In the meantime, enjoy the rest of the summer. Speaker 100:34:24Be well and stay safe. Thank you. Operator00:34:28This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallUniversal Stainless & Alloy Products Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Universal Stainless & Alloy Products Earnings HeadlinesVanguard Group Inc Reduces Stake in Universal Stainless & Alloy Products IncJanuary 31, 2025 | gurufocus.comUniversal Stainless announces completion of acquisition by AperamJanuary 24, 2025 | markets.businessinsider.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 27, 2025 | Porter & Company (Ad)Dimensional Fund Advisors LP Reduces Stake in Universal Stainless & Alloy Products IncJanuary 23, 2025 | gurufocus.comAperam completes acquisition of Universal Stainless & Alloy ProductsJanuary 23, 2025 | markets.businessinsider.comUniversal Stainless Announces Completion of its Acquisition by AperamJanuary 23, 2025 | globenewswire.comSee More Universal Stainless & Alloy Products Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Universal Stainless & Alloy Products? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Universal Stainless & Alloy Products and other key companies, straight to your email. Email Address About Universal Stainless & Alloy ProductsUniversal Stainless & Alloy Products (NASDAQ:USAP) engages in the manufacture and marketing of semi-finished and finished specialty steels, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. Its products include specialty bar, forging quality billet, ingots, plate, specialty shapes and coil products, which are sold to service centers, forgers, rerollers and original equipment manufacturers. The company was founded in 1994 and is headquartered in Bridgeville, PA.View Universal Stainless & Alloy Products ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 5 speakers on the call. Operator00:00:02Welcome to Universal Stainless and Alloy Products Second Quarter 2023 Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to June Filangieri. Please go ahead. Operator00:00:37Thank you. Good morning. This is June Filangieri of Comm Partners. And I'd also like to welcome you to the Universal Stainless call and webcast. We are here to discuss the company's Q2 2023 results are reported this morning. Operator00:00:53With us from management are Denny Oates, Chairman, President and Chief Executive Officer Chris Zimmer, Executive Vice President and Chief Operating Officer John Arminas, Vice President and General Counsel and Steve De Tannaso, Vice President and Chief Financial Officer. Before I turn the call over to management, Let me quickly review procedures. After management has made formal remarks, we will take your questions. The conference operator, Norma, sorry about that, We'll take your questions. Also, please note that in this morning's call, management will make forward looking statements Under the Private Securities Litigation Reform Act of 1995, I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission. Operator00:02:01With the formalities complete, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin. Speaker 100:02:10Okay, June. Thank you. Good morning, everyone. Thanks for joining us today. The main highlight of our second quarter performance is improving profitability, a product of the positive momentum we described on our last call. Speaker 100:02:24More specifically, Gross profit margin reached 14.3 percent of sales despite an across the board drop in commodity metal prices that resulted in negative surcharge misalignment of about $500,000 First quarter gross margin was 11.7%. The margin improvement in the most recent quarter led to a more than doubling of operating income to $3,100,000 We turned the corner on bottom line profitability with net income reaching $900,000 or $0.10 per diluted share. The main drivers of 2nd quarter profitability were higher shipment volume, both sequentially and year over year increased production, Improve productivity at key operations and higher base selling prices. We announced 2 additional price increases in the second quarter on Bar and Plate Products. Adjusted EBITDA of almost $8,000,000 in the 2nd quarter was the highest achieved since the Q2 of 2019 and increased 17% from last quarter. Speaker 100:03:27Looking at our top line. Net sales remained strong at $69,000,000 an increase of 5% sequentially and up 32% year over year. That's the highest level since the Q2 of 2019. Year to date sales reached $135,000,000 an increase of 35% over last year. The 2nd quarter sales included premium alloy sales of $12,900,000 which is 27% lower than the record first quarter, but 46% higher than the Q2 of 2022. Speaker 100:03:59Year to date premium alloy sales were up 72% to $30,500,000 were 23% of sales. We expect premium product sales to be above Q1's record levels during the second half of the year. Our premium alloy sales are for aerospace applications. Aerospace sales increased 5% to a record $51,000,000 in the 2nd quarter, Up 44% year over year and up 52% year to date. On the last call, we pointed to an expected modest improvement in sales in the Q2 with growth accelerating during the second half of the year. Speaker 100:04:372nd quarter sales, including premium alloys, were in line with our plans. Our positive outlook for the final two quarters of the year remains unchanged. It's based on the continued strength in demand for our products, especially our premium alloys, tempered somewhat by seasonality and declining surcharges. June 30 total order backlog before surcharges remained robust at $355,000,000 but fell $11,000,000 from Q1's record high as we work with customers to control our order entry. The backlog of orders scheduled to ship over the next 12 months actually increased 6% compared to March 31. Speaker 100:05:16We continue to diligently work to reduce extended lead times. Premium alloys continue to represent about 35% of our backlog. Turning to our financial position. Total debt was reduced by $6,200,000 to $93,300,000 during the quarter. Revolver availability remained unchanged at an adequate $24,000,000 Managed working capital was $148,000,000 Down $1,500,000 sequentially, representing about 54% of sales. Speaker 100:05:49Receivables are in good shape with DSO falling to 41 from 50 at year end 2022. Inventory at the end of the second quarter increased a modest 1.4% to $152,000,000 reflecting improved turns, partially offset by higher volumes of premium grades and work in process. 2nd quarter capital expenditures were $2,400,000 Bring the year to date total to $6,900,000 We expect full year capital expenditures of about $16,000,000 About half of that amount for our investment in re melt capacity at our North Jackson facility, where we're adding 2 VacuMark re melt furnaces. Equipment installation is underway, and we are working towards full integration of operations beginning in the Q1 of 2024. Our objective is to expand our product portfolio with more technologically advanced higher margin premium products to enhance our capabilities, our cost structure and also our growth prospects. Speaker 100:06:48We continue to deepen our management team in the Q2 with the naming of Rick is Vice President of Supply Chain and Purchasing. Rick is a 13 year veteran of Universal and most recently served as Universal's Supply Chain Director. She reports directly to Chris Zimmer, our recently named Chief Operating Officer. Two additional updates. We announced separately today that we have engaged Baker Tilly as our new auditor, effective following the following of our Q2 10 Q. Speaker 100:07:17Baker Tilly replaces Schneider Downs, who has been our auditor of record for over 20 years. We have been pleased with the quality of professional services that Schneider Downs has provided, And we look forward to working with an audit firm of the caliber of Baker Tilly. Additionally, we are currently in negotiations on The current 5 year agreement expires on August 31. Chris, I'll turn the call over to you for your review of operations. Speaker 200:07:49Thank you, Denny, and good morning, everyone. I'll start with premium alloys and our vacuum induction melting operations, which are the critical platform for our growth strategy. While premium alloy sales were sequentially lower in the Q2 due to shipment timing, our results year to date are 72% higher than the first half of 2022 and we remain on track for a record year of sales in 2023. Operationally, we achieved record vacuum induction melting productivity during the Q2, which supports our rapidly growing premium alloy sales planned for the in the second half of this year. Despite continued challenges stabilizing our workforce, we were able to increase our total production sequentially and expect additional production increases in the Q3. Speaker 200:08:41Production levels at our remelt shops, hot working mills And major finishing units all improved sequentially as we continue our march back to pre COVID production levels. As most of you know, Rolls Royce has been a longstanding customer of ours and I'm pleased to report that Universal was again named to the Rolls Royce High Performance Supplier Group for 2023. This is a very short list of suppliers and we are proud of the great job that our team has done to receive this recognition. Turning to commodities. Nickel continued to slide in the 2nd quarter declining 9% sequentially into the low $9 per pound range. Speaker 200:09:21Other metals followed suit with nearly every metal we track down quarter over quarter year over year. The reasons for the decline are mainly weak manufacturing and trade data from China, weaker European demand and concerns about further monetary policy tightening in the U. S. And the effect on the U. S. Speaker 200:09:42Dollar. Overall, we expect negative surcharge misalignment for the Q3. Let's turn to end markets beginning with aerospace, our largest market. We saw additional growth in our aerospace sales in the Q2 of 2023, which increased 5% to a record $51,300,000 or 74 percent of sales compared to $49,000,000 74 percent of sales in the Q1 of 2023. Aerospace sales increased 44% from 35 $700,000 in the Q2 of 2022. Speaker 200:10:20And year to date, sales totaled $1,000,000 an increase of 52% from the same period 2022. The drivers of commercial aerospace demand continue to gain momentum in the Q2. Consumer demand is up. The pace of deliveries at Boeing and Airbus has increased, carriers are turning over their fleets for more fuel efficient planes And build rates are ramping up. We attended the Paris Air Show last month and it was one of the most positive shows in memory. Speaker 200:10:56Looking at the airplane manufacturers, Boeing delivered 136 planes in the second quarter with a better than expected 60 deliveries in June. Boeing's orders were strong in the 2nd quarter at 460 planes, including a 220 plane order from Air India. Speaker 100:11:17At the Speaker 200:11:17end of June, Boeing's net backlog stood at over 4,800 planes. With the continued increase in backlog and strong Q2 deliveries, Boeing is increasing the 7 37 MAX monthly build rate to 38 from the current rate of 31 and plans to reach 50 in the 2025 to 2026 timeframe. You should learn more about Boeing's plans on their call this morning. At Airbus, June deliveries totaled 72, bringing year to date deliveries to 316. Airbus had gross orders in June of 902 planes, including a firm order for 500 A320 family aircraft from Indigo, India's largest airline. Speaker 200:12:04That order set the record for the biggest single purchase agreement in the history of commercial aviation. Earlier this month, Airbus opened a new assembly line for the A321neo in Southwest France, Part of its efforts to reach a build rate of 75 on the A320 family by 2026 amid record demand. The current build rate is at 45 planes per month. IATA added more good news in their May report. Total air traffic in May increased 39% from May of 2022 and global traffic is now at 90 6% of the pre pandemic levels. Speaker 200:12:48Domestic traffic for May rose 36%, making it the 2nd month in a row that it has exceeded pre pandemic levels. Meanwhile, international traffic jumped 41% versus May of 2022 with all markets recording strong growth. In the U. S, TSA recorded impressive passenger volume of 2,900,000 on May 30 versus $2,500,000 on that date in 2022 $2,200,000 in 2019. Volume had fallen to $800,000 in 2020. Speaker 200:13:25That healthy activity translated into record revenue and profits at Delta Airlines, which reported robust domestic demand and record international performance in the 2nd quarter. The company expects the same high level of demand to continue through the quarter. United Airlines and American Airlines recorded record results in the quarter. Defense market demand continues to be driven by the global conflicts that we read about daily. Lockheed Martin, for example, reported record backlog in the end of the second quarter, including a $7,800,000,000 contract from the Pentagon for 26 F-thirty 5 Fighters. Speaker 200:14:08In rotorcraft, our customer Bell Textron received the go ahead to move forward with manufacturing its Tiltrotor aircraft, the V-two eighty Valor, the U. S. Army's future attack helicopter, which will eventually replace Sikorsky's Black Hawk. In other deals, Germany will purchase 60 Chinook helicopters from Boeing. The purchase is a part of a shift following Russia's invasion of Ukraine. Speaker 200:14:37The challenge for both commercial aerospace and defense manufacturers is to overcome continued The parallel challenge for Universal's customers is to meet enormous demand for our products, which is expected to continue through 2024 and beyond. Customers are fully in a pull mode. They describe their inventories as hand to mouth and have a record backlog of orders waiting for material from the mills. The heavy equipment market remained our 2nd largest market in the Q2 of 2023 with sales of $8,900,000 were 13% of sales, up 29% from sales in the Q1 of 2023 and up 24% from the Q2 of 2022. Metal fabrication demand drives our heavy equipment market sales mainly for automotive applications, especially model changeovers. Speaker 200:15:33The strong sales pickup we saw in the Q1 continued in the second as customers continue to replenish inventories of plate product. While demand in the heavy equipment market can be lumpy, we expect our sales to that market to remain solid in the 3rd quarter. The general industrial market became our 3rd largest market in the Q2 of 'twenty three with sales of $2,300,000 were 5% of sales, which is down 7% from the Q1 of 2023, but up 76% from the Q2 of 2022. Our general industrial sales are mainly for semiconductor manufacturing. Based on market outlook, we are bullish about 2024 with the ramp up beginning in the second half of this year. Speaker 200:16:21The oil and gas market moved down to 4th place in the Q2 of 2023 with sales of $3,100,000 or 4% of sales versus $4,800,000 in the Q1 of 2023. Demand in the oil and gas market in the 2nd quarter was negatively impacted by market softness in North America, including muted drilling activity in the U. S. As indicated on in lower rig counts. Baker Hughes, Halliburton and Schlumberger are all expecting softness in the U. Speaker 200:16:53S. Land market to continue in the second half of twenty twenty three. While the long term prospects for our oil gas. We are temporarily shifting more of our capacity to higher margin aerospace products to better respond to the enormous demand in that market. Power generation market sales totaled $1,300,000 or 2% of sales in the Q2 of 2023, a 23% increase from $1,100,000 in the Q1. Speaker 200:17:24Our power generation sales is program specific, heavily relying upon maintenance of industrial gas turbines for electricity generation. We remain positioned to benefit from any additional maintenance Following this unusually hot summer and any ongoing investment in new domestic gas turbines. Now let me turn the call over to Steve for his report on our financials. Speaker 300:17:50Thank you, Chris. Good morning, everyone. This quarter, we grew the top line by more than $3,000,000 sequentially or about 5%, driven by higher base pricing and more shipment volume despite the lower mix of premium products and falling surcharges. Compared with the Q2 in the prior year, Our total net sales increased nearly $17,000,000 or 32%, while our premium product sales are up by more than $4,000,000 Our 2nd quarter gross margin totaled $9,800,000 or 14.3 percent of sales, The highest quarterly gross margin percentage since 2018. Consistent with our plan as we advance through this year, The margin expansion is a result of higher base prices, strong production volume and improved cost absorption and more shipment volume. Speaker 300:18:49And in the current quarter, these benefits overcame negative misalignment between our materials cost and the surcharge component of our total sales price from the impact of falling commodity metal prices. Telling, general and administrative costs totaled $6,800,000 in Q2 compared to $6,300,000 in the Q1 $5,300,000 in the Q2 of last year. Although lower as a percent of sales when compared to last year, the $1,500,000 increase is driven by higher property insurance costs and higher employee related costs. As a result of the higher gross margin, we earned operating income of $3,100,000 which more than doubled the 1st quarter And was $3,600,000 better than the loss posted in the Q2 of last year. However, interest expense remained high compared to prior years and at $2,000,000 was approximately flat to Q1. Speaker 300:19:57Despite paying down our revolver by $6,000,000 as a part of reducing our overall net debt position by 5,000,000 The variable interest rates we paid continued to rise through the quarter. The rate on the majority of our debt fluctuates with TermSOFR under the terms of our credit agreement. Term SOFR is currently hovering just above 5% and was around 4.5% throughout the Q1 and 1.5% at this time last year. Accordingly, our average borrowing rate for Q2 was about 8.5%, which compares to 8.2% in Q1 and 4.4% in Q2 of last year. We posted pretax income of just over $1,000,000 and recorded a provision for income taxes of $148,000 resulting in an effective tax rate of 14.2% for the quarter. Speaker 300:20:59Consistent with our discussion on prior calls, our estimated annual effective tax rate is less than the federal Statutory rates of 21% due to the beneficial impact of research and development credits. Other items and discrete items during the quarter are not significant. Our net income for the quarter was about $900,000 Our diluted shares outstanding reported in Q2 increased to $9,300,000 and our earnings per diluted share were $0.10 The Q2 performance brought us into a year to date net income position as well, totaling about $400,000 or $0.04 per diluted share. EBITDA was $7,600,000 which is $1,200,000 better than last quarter and the highest level since the Q2 of 2019. Our adjusted EBITDA totaled $7,900,000 including an add back for non cash share compensation expense. Speaker 300:22:08The reconciliation of adjusted EBITDA for each period presented is provided in the tables within the press release. During the Q2, we generated $7,700,000 of cash from our operations despite investing $2,600,000 in inventory, which primarily resulted from 2 record vacuum induction melt Production campaigns executed during the 2023 Q2. In total, we generated cash from our managed working capital As we drove accounts receivable down to $31,300,000 delivering a DSO of 41 And we grew accounts payable modestly in line with inventory. We used $2,400,000 of cash on capital expenditures during Q2 and our free cash flow of $5,200,000 was used to pay down debt. Additionally, our available borrowings under our revolving credit facility remained flat compared to March 31 at about $24,000,000 despite the expiration of our temporary credit agreement amendment that provided access to additional inventory collateral value throughout the Q3 Q4 of 2022 and through March 31st this year. Speaker 300:23:37This liquidity position coupled with our ongoing This concludes my report. And I'll hand the call back to Denny. Speaker 100:23:55Okay. Thanks, Steve. Let me summarize. We move forward in strengthening our profitability and cash flow in the Q2. Gross margins reached 14.3% of sales despite negative surcharge misalignment and lower premium product sales. Speaker 100:24:11Higher shipment volume, increased production, productivity and yield improvements And higher selling prices all contributed to the margin expansion. We turned the corner on bottom line profitability with net income approaching $1,000,000.10 per share. Adjusted EBITDA increased 24% to $8,000,000 Total debt was reduced by 6%. Working capital metrics improved across the board. 2nd quarter sales remained strong at $69,000,000 growing 5% sequentially, consistent with our plan and expectations. Speaker 100:24:46Sales were 34% higher year over year and up 35% year to date, reaching 135,000,000 Premium alloy sales were up 46% year over year but down 27% sequentially due to shipment timing. Demand for our premium products remains at record levels. So does our backlog, which contains over 35% premium alloy product as demand in commercial aerospace in the commercial aerospace market continues to surge. Our major capital project at North Jackson remains on And we are working to have it operational in the Q1 of 2024. We continue to develop our organization during the quarter with the recent appointment of Rick Sikola, Our second half outlook is for sequential quarterly sales growth, Fueled by a solid backlog, increasing base prices and improving mix of premium product shipments, Tempered somewhat by declining surcharges and normal seasonality. Speaker 100:25:50We further expect these top line trends, coupled with increased production, to yield improved gross profit margins, positive cash flow and further debt reduction. Let me conclude by recognizing our exceptionally talented team of Thank you, Lee and Charlie employees for their dedication and hard work during the quarter and over the last several years. They have my sincere gratitude as to our Board, for customers and our stockholders. That concludes our formal remarks. Norma, let's take some questions from our callers. Operator00:26:22Thank you. One moment for our first question please. And our first question comes from the line of Phil Gibbs with KeyBanc Capital Markets. Your line is now open. Speaker 400:26:52Hey, good morning. Speaker 100:26:53Hey, Phil. How are you doing? Speaker 400:26:56Good. You all mentioned surcharge misalignment in the second quarter despite having pretty solid Gross margins anyways. Any way to couch what that may have been either on a dollar or a percentage basis and then Maybe the same thing as it relates to how you're thinking about the Q3? Speaker 100:27:18Well, we've seen declining commodities during 2nd quarter, so we know surcharges are going to be lower in the Q3 versus the second. So at the same time, our material cost should be drifting down as well. So as that comes together in the Q3, our best estimate, Phil, would be misalignment would be negative. It would be about the same amount as we saw in the second quarter On a sequential basis. Speaker 400:27:42So not really any worse than what you already experienced in Q2. And was that 100 basis points Roughly or more or less? Speaker 300:27:54About $500,000 Okay. Speaker 100:27:59So you're comfortable, so $500,000,000 over $69,000,000 would be the is that what you're asking? Yes. Yes. Speaker 400:28:07Okay. So similar amounts in the Q3 as of right now is what you're saying? Speaker 100:28:14Right. Speaker 400:28:15And then just the housekeeping, you had given some color on general items. What's the update in just in terms of the amount of liquidity that you have right now? And then also what should we be modeling For the book tax rate for the back half? Speaker 300:28:37Yes. Right now as we Begin to step through Q3, we're basically flat to the end of Q2, so still at that $24,000,000 level. And we are forecasting debt pay down in the 3rd and 4th quarters. So probably not at the same level of the second quarter, But with our incremental improving margins and growing sales, even though CapEx we expect to increase in the second half of the year, We will pay down some debt in the 3rd 4th quarters and expand liquidity as well. Speaker 400:29:14So $24,000,000 as of now on that. And then tax rate was somewhat unique, maybe perhaps too low in the first half. Should Should we expect the back half to be more normal kind of 20%, 25%? Speaker 300:29:28Yes, that's right. More normalized back half on the tax rate. Speaker 400:29:35Okay. And then as it relates to your mix and Your pricing that seems like it's more than going to overcome this misalignment Piece, just from a timing perspective, how many quarters or visibility do you have In terms of that mix and pricing dynamic continuing to improve because I know you're turning over that backlog with sort of a richer outcome? Speaker 200:30:09Well, for the two components of our selling price, the base prices are known. A lot of our VAR products and aerospace products are booked largely the next four quarters And we will see sequential base price improvement in each one of those quarters. It gets a little cloudier on the surcharge front. We do know that the surcharges in the Q3 will drift down, but it remains to be seen what the Q4 or 2024 will look like. We continue to manage our inventories tightly to turn our inventories to keep up with those changes. Speaker 200:30:47So our expectation is that unless there is a wild spike in either direction, it should not have a significant impact on margins. And Again, the sales surcharge component will track with commodities. Speaker 400:31:04Thank you. And then lastly, as it relates to the VIM and kind of VAR complex, So finally, you're really strongly finding its footing at this point in time. Are you gaining the wins and share that you would have hoped to have seen a couple of years ago with the Forgers and maybe some of the OEM direct Customers, is that the idea behind it because I know obviously a lot of your business historically has been transactional. So just maybe anything you could just say at a high level relative to that? Thanks. Speaker 200:31:40Yes, that's right. We're now enjoying the benefits of the product development and the approvals that we've gained throughout the years. We're picking up share. That's where a lot of the growth in the backlog is coming from. The market is stronger, but For sure, we are into some new customers, new applications that we were not in before with some of these new BIM products. Speaker 200:32:04We continue to have more and more conversations, some really good things coming out of the air show. So I expect us to continue to build upon We're having this year as we move into 2024 and I don't see any reason why this momentum won't continue beyond 2024. So that is one of the big parts of the success story here is the additional VIM sales that are coming largely through Share gains riding the back of a strong market. Speaker 400:32:36And just kind of a sub question to that, is The North Jackson complex is that from a mix standpoint richer than the broader portfolio or is about the same? Speaker 200:32:47It's generally richer. The North Jackson plant and our plant up in Dunkirk are largely Aerospace driven, the Bridgeville plant is where we have our semi finished products to the general industrial market, things like tool steel plate, That's a bigger part of what the Bridgeville plant does. The Bridgeville plant is also the primary feeder of input stock to North Jackson and Dunkirk. But as I look at those three plants, North Jackson, Dunkirk and our Titusville plant as well Are all very much aerospace focused and the products that they put into the market. Speaker 400:33:26Thank you. Operator00:33:28Thank you for your question. And I'm currently showing no further questions at this time. I'd like to hand the conference back to Mr. Oates for closing remarks. Speaker 100:34:05Thank you, Norma. Once again, thanks everyone for joining us this morning. We move forward with our strategy in the Q2, remain optimistic about our growth prospects for the remainder of this year and well into 2024 2025. We look forward to updating you on our progress in our next call, which will be in October. In the meantime, enjoy the rest of the summer. Speaker 100:34:24Be well and stay safe. Thank you. Operator00:34:28This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.Read morePowered by