Servotronics Announces Improved First Quarter 2024 Financial Results
-- Strong Industry Demand and Production Enhancements Drive 15% Top Line Growth --
-- Volume and Product Mix drive 570 bps Increase in Gross Margins --
ELMA, N.Y., May 10, 2024 /PRNewswire/ -- Servotronics, Inc. (NYSE American – SVT), a designer and manufacturer of servo-control components and other advanced technology products, today reported financial results for the first quarter ended March 31, 2024.
Highlights for the first quarter financial results:
- Revenues of $10.4 million, up 15.3% from $9.1 million in the first quarter of 2023, driven primarily by higher volumes and favorable product mix. Foreign sales increased 29.3% to $2.6 million, from $2.0 million in the first quarter of 2023.
- Gross profit saw a 75.6% increase to $1.7 million, or 16.6% of revenue, in the first quarter, up significantly from $1.0 million, or 10.9% of revenue, in the first quarter of 2023. The increase was the result of higher volume and favorable product mix.
- Operating costs (as a % of revenue) of 19.3% were down 480 basis points compared to the first quarter of 2023 due to lower professional fees resulting from bank refinancing activities that occurred in the prior year.
- Operating loss improved by $0.9 million to a loss of $0.3 million in the first quarter of 2024, compared to a loss of $1.2 million in the first quarter of 2023, driven by the increases in revenue and gross profit combined with lower operating expenses.
- Net loss from continuing operations was $0.4 million, or a loss of ($0.15) per diluted share in the first quarter of 2024, compared to a net loss from continuing operations of $1.0 million, or ($0.40) per diluted share in the first quarter of 2023.
"Industry demand for our products and services remains very strong and our performance in the first quarter reflects improvements in delivery performance while continuing to manage costs. We continue to execute our strategic plan focused on profitable growth, developing our people, improving operational excellence, and zero-defects quality standards," said Chief Executive Officer William F. Farrell, Jr. "To further execute our plan, we have recently added a new Chief Operating Officer focused on improving our operational efficiencies. In addition, we are expanding our efforts to grow our business in new products and markets."
First Quarter Business Results | |||||||
Three Month Periods Ended | |||||||
March 31, 2024 | March 31, 2023 | $ Change | % Change | ||||
Revenues | $ 10,446 | $ 9,060 | $ 1,386 | 15.3 % | |||
Cost of goods sold | (8,711) | (8,072) | (639) | -7.9 % | |||
Gross Profit | 1,735 | 988 | 747 | 75.6 % | |||
Gross Margin | 16.6 % | 10.9 % | 5.7 % | ||||
Selling, general and administrative | (2,018) | (2,185) | 167 | 7.6 % | |||
as a % of Revenue | 19.3 % | 24.1 % | -4.8 % | ||||
Operating loss from continuing operations | (283) | (1,197) | 914 | 76.4 % | |||
Operating Margin | -2.7 % | -13.2 % | 10.5 % | ||||
Interest expense | (83) | (47) | (36) | -76.6 % | |||
Income tax benefit | - | 264 | (264) | -100.0 % | |||
Net loss from continuing operations | $ (366) | $ (980) | $ 614 | 62.7 % | |||
Servotronics' Chief Financial Officer Robert A. Fraass commented, "The Company has continued to strengthen its balance sheet over the past year through strategic initiatives. In addition, we were pleased with the strong operating cash flows during the first quarter, which has us well-positioned for continued growth in 2024."
The Company's operating cash flows increased by approximately $2.8 million compared to the same period in 2023 driven by strong customer collections. The cash used in operating activities related to the discontinued operation was $0.1 million and is not expected to be significant in 2024, as wind down activities of the Consumer Product Group business segment are substantially complete.
Mr. Farrell concluded, "The improvements achieved in the first quarter represented a solid start to the year and we anticipate further advances through 2024. We will continue to manage both revenue and costs while targeting new markets and opportunities. Our belief is that this balanced approach will create significant value for all stakeholders."
ABOUT SERVOTRONICS
Servotronics designs, develops, and manufactures servo controls and other components for various commercial and government applications including aircraft, jet engines, missiles, manufacturing equipment and other aerospace applications at its operating facilities in Elma and Franklinville, New York.
FORWARD-LOOKING STATEMENTS
This news release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this release, the words "project," "believe," "plan," "anticipate," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve numerous risks and uncertainties which may cause the actual results of the Company to be materially different from future results expressed or implied by such forward-looking statements. There are a number of factors that will influence the Company's future operations, including: uncertainties in today's global economy, including political risks, adverse changes in legal and regulatory environments, and difficulty in predicting defense appropriations, the introduction of new technologies and the impact of competitive products, the vitality of the commercial aviation industry and its ability to purchase new aircraft, the willingness and ability of the Company's customers to fund long-term purchase programs, and market demand and acceptance both for the Company's products and its customers' products which incorporate Company-made components, the Company's ability to accurately align capacity with demand, the availability of financing and changes in interest rates, the outcome of pending and potential litigation, the ability of the Company to obtain and retain key executives and employees and the additional risks discussed in the Company's filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only as of the date hereof. The Company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.
SERVOTRONICS, INC. (SVT) IS LISTED ON NYSE America
SERVOTRONICS, INC. AND SUBSIDIARIES | ||||
CONSOLIDATED BALANCE SHEETS | ||||
($000's omitted except share and per share data) | ||||
March 31, | December 31, | |||
2024 | 2023 | |||
(Unaudited) | (Audited) | |||
Current assets: | ||||
Cash | $ 136 | $ 95 | ||
Cash, restricted | 150 | 150 | ||
Accounts receivable, net | 10,473 | 12,065 | ||
Inventories, net | 14,929 | 14,198 | ||
Prepaid and other current assets | 1,920 | 1,507 | ||
Assets related to discontinued operation | 1,480 | 1,552 | ||
Total current assets | 29,088 | 29,567 | ||
Property, plant and equipment, net | 6,859 | 6,978 | ||
Other non-current assets | 42 | 42 | ||
Total Assets | $ 35,989 | $ 36,587 | ||
Liabilities and Shareholders' Equity | ||||
Current liabilities: | ||||
Line of credit | $ 2,009 | $ 2,103 | ||
Current portion of post retirement obligation | 97 | 97 | ||
Accounts payable | 2,138 | 2,061 | ||
Accrued employee compensation and benefits costs | 825 | 1,003 | ||
Accrued warranty | 483 | 542 | ||
Other accrued liabilities | 2,023 | 1,909 | ||
Liabilities related to discontinued operation | 32 | 213 | ||
Total current liabilities | 7,607 | 7,928 | ||
Post retirement obligation | 4,189 | 4,165 | ||
Shareholders' equity: | ||||
Common stock, par value $0.20; authorized 4,000,000 | ||||
shares; issued 2,629,052 shares; outstanding | ||||
2,523,741 (2,514,775 - 2023) shares | 525 | 525 | ||
Capital in excess of par value | 14,661 | 14,617 | ||
Retained earnings | 12,571 | 12,954 | ||
Accumulated other comprehensive loss | (2,370) | (2,389) | ||
Employee stock ownership trust commitment | (56) | (56) | ||
Treasury stock, at cost 78,559 (87,525 - 2023) shares | (1,138) | (1,157) | ||
Total shareholders' equity | 24,193 | 24,494 | ||
Total Liabilities and Shareholders' Equity | $ 35,989 | $ 36,587 | ||
SERVOTRONICS, INC. AND SUBSIDIARIES | |||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
($000's omitted except per share data) | |||
Three Months Ended | |||
March 31, | |||
2024 | 2023 | ||
Revenue | $ 10,446 | $ 9,060 | |
Costs of goods sold, inclusive of depreciation | |||
and amortization | 8,711 | 8,072 | |
Gross profit | 1,735 | 988 | |
Operating expenses | |||
Selling, general and administrative | 2,018 | 2,185 | |
Operating loss | (283) | (1,197) | |
Other expense | |||
Interest & other expense, net | (83) | (47) | |
Total other expense | (83) | (47) | |
Loss from continuing operations before income taxes | (366) | (1,244) | |
Income tax benefit | - | 264 | |
Loss from continuing operations, net of tax | (366) | (980) | |
Loss from discontinued operation before income taxes | (17) | (720) | |
Income tax benefit | - | 153 | |
Loss from discontinued operation, net of tax (Note 2) | (17) | (567) | |
Net loss | $ (383) | $ (1,547) | |
Basic and diluted loss per share | |||
Continuing operations | $ (0.15) | $ (0.40) | |
Discontinued operation | (0.01) | (0.23) | |
Basic and diluted loss per share | $ (0.16) | $ (0.63) | |
SERVOTRONICS, INC. AND SUBSIDIARIES | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
($000's omitted) | |||||
Three Months Ended | |||||
March 31, | |||||
2024 | 2023 | ||||
Cash flows related to operating activities: | |||||
Loss from continuing operations | $ (366) | $ (827) | |||
Adjustments to reconcile net income loss to net cash provided by (used in) | |||||
operating activities: | |||||
Depreciation and amortization | 271 | 248 | |||
Stock based compensation | 63 | 41 | |||
Increase (decrease) in allowance for credit losses | 3 | (13) | |||
Increase (decrease) in inventory reserve | 38 | (9) | |||
(Decrease) increase in warranty reserve | (59) | 13 | |||
Deferred income taxes | - | 2 | |||
Change in assets and liabilities: | |||||
Accounts receivable | 1,589 | (1,175) | |||
Inventories | (769) | (885) | |||
Prepaid and other current assets | (412) | (1,069) | |||
Accounts payable | 77 | 953 | |||
Accrued employee compensation and benefit costs | (164) | 196 | |||
Post retirement obligations | 24 | 39 | |||
Other accrued liabilities | 118 | 69 | |||
Net cash provided by (used in) operating activities from continuing operations | 413 | (2,417) | |||
Cash flows related to investing activities: | |||||
Purchase of property, plant and equipment | (152) | (299) | |||
Net cash used in investing activities from continuing operations | (152) | (299) | |||
Cash flows related to financing activities: | |||||
(Payments on) proceeds from line of credit, net | (94) | 939 | |||
Principal payments on equipment financing lease obligations | - | (501) | |||
Net cash (used in) provided by financing activities from continuing operations | (94) | 438 | |||
Discontinued Operation | |||||
Cash used in operating activities | (126) | (363) | |||
Net cash used in operating activities from discontinued operation | (126) | (363) | |||
Net increase (decrease) in cash and restricted cash | 41 | (2,641) | |||
Cash and restricted cash at beginning of period | 245 | 3,812 | |||
Cash and restricted cash at end of period | $ 286 | $ 1,171 | |||
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SOURCE Servotronics, Inc.
