Sypris Solutions Inc (SYPR) 2023 Q3 法說會逐字稿

Good day, and welcome to Sypris Solutions, Inc conference call. Today's call is being recorded. At this time, for opening remarks, I'd like to turn over the call to the President and Chief Executive Officer, Mr. Jeffrey Gill, please go-ahead sir.

美好的一天，歡迎參加 Sypris Solutions, Inc 電話會議。今天的通話正在錄音。現在，作為開場白，我想將電話轉給總裁兼執行長傑弗裡·吉爾先生，請先生發言。

Thank you, Nick, and good morning, everyone. Rich Davis and I would like to welcome you to this call, the purpose of which is to review the Company's financial results for the third quarter 2023. For those of you who have access to our PowerPoint presentation this morning, please advance to slide 2 now. We always begin these calls with a note that some of what we might discuss here today may include projections and other forward-looking statements.

謝謝你，尼克，大家早安。 Rich Davis 和我歡迎您參加本次電話會議，其目的是回顧公司 2023 年第三季度的財務業績。我們總是在這些電話會議開始時指出，我們今天可能在這裡討論的一些內容可能包括預測和其他前瞻性陳述。

No assurance can be given that these projections and statements will be achieved and actual results could differ materially from those projected as a result of several factors. These factors are included in the Company's filings with the Securities and Exchange Commission and in compliance with Regulation G, you can access our website, Sypris.com to review the definitions of any non-GAAP financial measures that may be discussed during this call.

無法保證這些預測和陳述將會實現，並且由於多種因素，實際結果可能與預測有重大差異。這些因素包含在本公司向美國證券交易委員會提交的文件中，根據 G 條例，您可以造訪我們的網站 Sypris.com，查看本次電話會議期間可能討論的任何非 GAAP 財務指標的定義。

With these qualifications in mind, we'd now like to proceed with the business discussion. Please advance to slide 3. I will lead you to the first half of our presentation this morning. Starting with an overview of the highlights for the quarter to be followed by an update on the outlook for each of our primary markets. Rich will then provide you with a more detailed review of our financial results for the period.

考慮到這些條件，我們現在要繼續進行業務討論。請前進到幻燈片 3。首先概述本季的亮點，然後更新我們每個主要市場的前景。然後，里奇將為您提供對該期間財務業績的更詳細審查。

Now let's begin with the overview on slide 4. We are pleased to report that revenue for the quarter increased 33% year over year, reflecting continued strength across each of our business segments, with revenue rising 73.5% for Sypris electronics and 13.8% for Sypris technologies on a year-over-year basis.

現在讓我們從幻燈片4 的概述開始。成長了13.8%技術年增。

Gross profit increased 105% for the period, reflecting an increase of 186.8% at Sypris electronics and 36.2% Sypris technology. Gross margin for the Company followed suit rising by 420 basis points for the quarter, driven by an increase of 710 basis points for Sypris electronics and by 120 basis points for Sypris technologies.

期內毛利成長 105%，其中 Sypris electronics 成長 186.8%，Sypris technology 成長 36.2%。在 Sypris 電子產品成長 710 個基點和 Sypris 技術產品成長 120 個基點的推動下，公司本季毛利率成長了 420 個基點。

Backlog for the period increased 8.4% on a consolidated basis, which was an important accomplishment following the 33% increase in sales during the period. Backlog for Sypris electronics increased 9% to $109.5 million at the end of the quarter, up $9 million from the prior year period.

合併期間的積壓訂單增加了 8.4%，這是繼期內銷售額成長 33% 後取得的重要成就。截至本季末，Sypris electronics 的積壓訂單增加了 9%，達到 1.095 億美元，比去年同期增加了 900 萬美元。

Company's financial performance was particularly notable since aboard the negative weight of $800,000 in the form of foreign currency headwinds when compared to the prior year period. In other words, from an operating standpoint, it was another very positive quarter. As we mentioned previously, we have entered an inflection point where rapidly rising demand is intersecting with increasingly availability of material. We believe that the pace of conversion of our backlog into revenue will continue to accelerate as we now ramp up new programs to full-rate production.

由於與去年同期相比，由於外匯逆風帶來了 80 萬美元的負權重，因此公司的財務表現尤其引人注目。換句話說，從營運角度來看，這是另一個非常積極的季度。正如我們之前提到的，我們已經進入了一個拐點，快速增長的需求與日益增加的材料可用性交叉。我們相信，隨著我們現在將新項目推向全速生產，我們將積壓訂單轉化為收入的速度將繼續加快。

Turning now to slide 5, we have been pleased to announce several additional new contract awards during the quarter. More specifically at Sypris technologies in August we announced an award for 72-inch insulated joints for use in the expansion of the Atoka Water Pipeline for the Oklahoma City Water Utilities trust. According to news sources, the second Atoka Pipeline is being built to provide Oklahoma City and its surrounding areas with potable water.

現在轉向幻燈片 5，我們很高興地宣布本季另外授予了幾項新合約。更具體地說，在 8 月的 Sypris 技術大會上，我們宣布授予俄克拉荷馬城自來水公用事業信託公司用於擴建阿託卡供水管道的 72 英寸絕緣接頭。消息人士透露，第二條阿託卡管道正在建設中，為俄克拉荷馬城及其周邊地區提供飲用水。

The project is the largest municipal water infrastructure project in the history of the state. It includes a new 100 mile long, 72-inch diameter pipeline that will transport raw water from Lake Atoka to Lake Stanley Draper in Oklahoma City, where it will then be treated and delivered to more than 1.4 million people in central Oklahoma.

該項目是該州歷史上最大的市政水利基礎設施項目。它包括一條長100 英里、直徑72 英寸的新管道，將原水從阿託卡湖輸送到俄克拉荷馬城的斯坦利德雷珀湖，然後在那裡進行處理並輸送給俄克拉荷馬州中部超過140 萬人。

The pipeline is slated to cost $800 million and move more than 100 million gallons of water per day. Sypris has agreed to manufacture and supply its tube turns branded monolithic insulated joints for cathodic protection of the new 72-inch polyethylene coded and cement motor line steel pipeline is insulated joints would be 72 inches in diameter and will be rated to a pressure 300 PSI.

該管道預計耗資 8 億美元，每天輸送超過 1 億加侖的水。 Sypris 已同意製造和供應其管匝品牌整體式絕緣接頭，用於新型 72 英寸聚乙烯編碼和水泥電機線鋼管道的陰極保護，絕緣接頭直徑為 72 英寸，額定壓力為 300 PSI。

Shipments under this contract are expected to start in 2023 and finish in 2024. In August, we announced an award for specialty high-pressure closures for use in the Venture Global CP2 LNG Export Terminal and the Venture Global CP Express Natural Gas Pipeline Project. The CP2 LNG facility will be a natural gas liquefaction export terminal with a nameplate export capacity of 20 million metric tons per annum.

根據該合同，預計將於 2023 年開始發貨，並於 2024 年完成。 CP2液化天然氣設施將是天然氣液化出口終端，銘牌出口量為每年2000萬噸。

CP2 LNG will be the second LNG export project developed by Venture Global LNG and Cameron Parish, Louisiana, with the first being the Calcasieu Pass project, together they represent more than what $10 billion of direct investment in the Parish according to new sources.

CP2 LNG 將是Venture Global LNG 和路易斯安那州卡梅倫教區開發的第二個液化天然氣出口項目，第一個項目是Calcasieu Pass 項目，據新消息稱，它們合計代表該教區的直接投資超過100 億美元。

CP Express will consist of approximately 85 miles of a 48 inch diameter natural gas pipeline and approximately 5.9 miles of new 24 inch diameter lateral pipeline to connect the CP2 LNG terminal to the existing natural gas pipeline grid at East Texas and Southwest Louisiana. Investment will support the objective of global venture LNG to develop clean and reliable North American energy supply. The project is proposed to be in service by mid-2025.

CP Express 將由約85 英里長的48 英寸直徑天然氣管道和約5.9 英里長的新24 英寸直徑橫向管道組成，將CP2 液化天然氣終端連接到德克薩斯州東部和路易斯安那州西南部現有的天然氣管網。投資將支持全球液化天然氣創投公司開發清潔可靠的北美能源供應的目標。該項目預計於2025年中期投入使用。

Sypris has agreed to manufacture and supply its two turns branded especially high-pressure tool as closures for use on the filtration systems for the project. These closures will range up to 70 inches in diameter, will be rated to a pressure of 2,180 PSI and will weigh up to as much as 17.5 tonnes each. Shipments under this award are expected to be completed by year end.

Sypris 已同意製造和供應其兩圈特別高壓工具，作為該專案過濾系統的封閉件。這些密封件的直徑可達 70 英寸，額定壓力為 2,180 PSI，每個重量可達 1​​7.5 噸。該合約下的發貨預計將在年底前完成。

Turning now to slide 6, at Sypris electronics, we recently announced the receipt of $2 multimillion dollar follow-on contract awards from a US global defence contractor to produce modules to be incorporated into an advanced integrated electronic warfare and communications avionics system for one of the largest programs of the Department of Defence.

現在轉向幻燈片6，在Sypris electronics，我們最近宣布從一家美國全球國防承包商獲得了價值2 百萬美元的後續合同，該合同將生產模組，並將其納入先進的綜合電子戰和通信航空電子系統中，用於其中一個項目。

The program is for an American family of single seat single engine, all weather stealth multi-role combat aircraft that is intended to perform both air superiority and strike missions. The aircraft is also able to provide electronic warfare and intelligence, surveillance, and reconnaissance capability. According to news sources, the US plans to purchase versions of the aircraft through the year 2044 and the aircraft is expected to operate until 2017.

該計畫針對美國單座單引擎、全天候隱形多用途戰鬥機系列，旨在執行空中優勢和打擊任務。該飛機還能夠提供電子戰和情報、監視和偵察能力。消息人士透露，美國計劃在 2044 年之前購買該飛機的版本，預計該飛機將運作到 2017 年。

Sypris will produce and test the advanced integrated electronic avionics system modules for the communications, navigation, and identification suite of the aircraft. The system supports the simultaneous operation of multiple critical functions such as identification of render foe, precision navigation and various secure voice and data communications.

Sypris 將生產和測試用於飛機通訊、導航和識別套件的先進整合式電子航空電子系統模組。該系統支援多種關鍵功能的同時運行，例如識別敵人、精確導航以及各種安全語音和數據通訊。

Production is expected to begin in 2023. We also announced that we received a follow-on award from a US DoD prime contractor to manufacture and test embedded circuit card assemblies that will perform certain of the cryptographic functions for the Army in management system. The AKMS is a fielded system that consists of three subsystems, local communications, security management software, automated communications engineering software and the simple key load device.

預計將於 2023 年開始生產。 AKMS是一個現場系統，由本地通訊、安全管理軟體、自動化通訊工程軟體和簡單金鑰載入設備三個子系統組成。

Under the umbrella of our nation's electronic key management system, AKMS provides tactical units in sustaining basis with inorganic key generation capability and an efficient secure electronic key distribution means. The embedded circuit card assemblies to be produced by Sypris will perform the cryptographic functions for a ruggedized portable handheld, simple key load device that will be used to securely receive, store and transfer data between compatible cryptographic and communications equipment.

在我國電子金鑰管理系統的保護下，AKMS為戰術單位提供了無機金鑰產生能力和高效率且安全的電子金鑰分發手段。 Sypris 將生產的嵌入式電路卡組件將為堅固耐用的便攜式手持式簡單密鑰載入設備執行加密功能，該設備將用於在相容的加密和通訊設備之間安全地接收、儲存和傳輸資料。

The device incorporates features to provide for the streamlined management of communication security key, electronic protection data and signal operation Instructions. Production is expected to begin in 2023. Each of these contracts are representative of the high cost of failure applications for which Sypris is well-known. We expect the momentum of new contract wins to continue into the coming year, and we remain very optimistic about the potential for future program and revenue growth as we move forward.

本設備所包含的功能可提供通訊安全金鑰、電子保護資料和訊號操作指令的簡化管理。預計將於 2023 年開始生產。我們預計贏得新合約的勢頭將持續到來年，隨著我們的前進，我們對未來計劃和收入成長的潛力仍然非常樂觀。

We expect full year revenue growth for 2023 to approximate 25%, with gross profit rising by a similar percentage despite the drag associated with the continued strength of the Mexican Peso on a year-over-year basis. Our initial outlook for 2024 is positive, reflecting our strong backlog and the continued momentum of new contract awards across many of our markets. Revenues forecast to increase 15% to 20%, with gross profit rising 25% to 30%, while gross margins are expected to expand 150 to 200 basis points.

我們預計 2023 年全年營收成長約為 25%，儘管受到墨西哥比索同比持續走強的拖累，毛利仍將成長類似的百分比。我們對 2024 年的初步展望是積極的，這反映出我們大量的積壓訂單以及許多市場新合約授予的持續勢頭。營收預計將成長15%至20%，毛利將成長25%至30%，而毛利率預計將擴大150至200個基點。

Now let's advance to slide 7 to review the outlook for each of our major markets.

現在讓我們進入幻燈片 7 來回顧每個主要市場的前景。

According to ACT Research, the demand for the production of commercial vehicles is now expected to rise 7.3% to 625,000 vehicles through 2023 and for a softening of demand to occur in 2024, with production forecast to decline by 13.4% for the year before rising sequentially in each of the following two years. We believe that the potential exists to grow through the cycles with momentum continuing to favour the reshoring of production to North America and within North America to Mexico.

根據 ACT Research 的數據，預計到 2023 年商用車生產需求將增加 7.3%，達到 625,000 輛，2024 年需求將出現疲軟，預計當年產量將下降 13.4%，然後環比上昇在接下來的兩年中的每一年。我們相信，在整個週期中存在成長潛力，其勢頭繼續有利於生產回流到北美以及北美內部回流到墨西哥。

Turning now to slide 8, the market for the transportation and use of natural gas is key for Sypris that has become increasingly dynamic over this past year. European countries boosted LNG imports by 60% in 2022 to offset declining pipeline shipments from Russia. As part of the strategic response to their former dependency on Russia for reliable supply of natural gas, Europe has embarked upon an aggressive campaign to source its needs elsewhere.

現在轉向幻燈片 8，天然氣運輸和使用市場對於 Sypris 來說至關重要，該市場在過去一年中變得越來越活躍。 2022年，歐洲國家將液化天然氣進口量增加了60%，以抵銷俄羅斯管線運輸量下降的影響。作為對以前依賴俄羅斯可靠天然氣供應的戰略回應的一部分，歐洲已開始採取積極行動，從其他地方採購其需求。

The IEEFA forecast that Europe will increase its LNG import capacity by 33% by the end of 2024 and that the global LNG market will see a tidal wave of projects coming online starting in mid-2025. The outlook projects at the 64 million metric tons of annual liquefaction capacity will be added by 2026. The US is a major provider of LNG and became the world's largest exporter in 2022, with plans to do even more in the future.

IEEFA預測，2024年底，歐洲的液化天然氣進口能力將增加33%，全球液化天然氣市場將從2025年中期開始迎來一波計畫上線。預計到 2026 年，年液化量將增加 6,400 萬噸。 美國是液化天然氣的主要供應國，並於 2022 年成為全球最大的出口國，並計劃在未來做得更多。

By way of illustration, the U.S. exported 10.6 billion cubic feet per day in 2022 and is forecast export 13.3 billion cubic feet per day in 2024 and 22.5 billion cubic feet per day by 2027. The map to the right depicts the various projects underway in the US and Europe, identifying those that are proposed, approved under construction and in operation. The continued growth in our energy products backlog year over year reflects the strong growing demand to support these infrastructure programs. We remain cautiously optimistic that this positive outlook will remain in effect for some time to come.

舉例來說，美國 2022 年每天出口 106 億立方英尺，預計 2024 年每天出口 133 億立方英尺，到 2027 年每天出口 225 億立方英尺。確定了擬議的、批准的正在建設和運營的項目。我們的能源產品積壓量逐年持續成長反映了支持這些基礎設施項目的強勁成長需求。我們仍然謹慎樂觀地認為，這種積極的前景將在未來一段時間內持續有效。

As you will see from the chart on slide 9, the long-term market defence spending remains positive and within the overall budgetary allocation spending for technology upgrades at strategic platforms continues to be a very high priority. Our backlog of business now stands at $109.5 million is up 9% year over year with firm orders extending into 2025. We are very pleased with the level of new business momentum, and we are optimistic that this important trend will continue going forward. During previous calls, we discussed the changes that have taken place in our market mix over the past several years.

正如您從投影片 9 的圖表中看到的那樣，長期市場防禦支出仍然為正，並且在總體預算分配中，用於戰略平台技術升級的支出仍然是一個非常高的優先事項。目前，我們的積壓業務達到1.095 億美元，年成長9%，確定訂單延續到2025 年。 。在先前的電話會議中，我們討論了過去幾年市場結構所發生的變化。

Turning now to slide 10, please note that revenues forecast to increase 15% to 20% for 2024, with shipments to our customers and defence-related markets expected increased significantly. As a result, defence electronics is forecast to represent 46% of consolidated sales in 2024, up from 33% of 2023. We believe that additional opportunity exists to further diversify our business, and we will continue to aggressively pursue this outcome.

現在轉向投影片 10，請注意，預計 2024 年營收將成長 15% 至 20%，向我們的客戶和國防相關市場的出貨量預計將大幅增加。因此，國防電子產品預計將佔 2024 年綜合銷售額的 46%，高於 2023 年的 33%。

Now let's turn to slide 11 for a brief summary. Revenue for the quarter increased 33%, while gross profit increased 105%. Gross margins expanded 420 basis points despite the negative drag of the Mexican Peso on our year-over-year results. The defence market should benefit from increased spending in fiscal 2024 with discretionary and emergency funding combining to exceed $1 trillion for the year. And within this overall expected spend investments in electronic warfare, avionics and communications are forecast to rise disproportionately.

現在讓我們轉向投影片 11 進行簡要總結。該季度營收成長 33%，毛利成長 105%。儘管墨西哥比索對我們的年比業績產生負面影響，但毛利率仍成長了 420 個基點。國防市場應該會受益於 2024 財年支出的增加，全年可自由支配資金和緊急資金總額將超過 1 兆美元。在電子戰、航空電子設備和通訊領域的整體預期支出投資預計將大幅成長。

As a result, we are pleased to issue our initial outlook for 2024 with revenue expected to increase 15% to 20% year over year, we expect gross profit to rise 25% to 30% while gross margin is forecast to expand 150 to 200 basis points for the year.

因此，我們很高興發布對 2024 年的初步展望，營收預計將年增 15% 至 20%，毛利預計將成長 25% 至 30%，毛利率預計將擴大 150 至 200%當年的積分。

Turning now to slide 12, Rich Davis will lead you through the balance of our presentations. Rich.

現在轉到投影片 12，Rich Davis 將引導您完成我們簡報的其餘部分。富有的。

Thanks, Jeff, good morning everyone. I'd like to discuss the some of the highlights of our third quarter and year-to-date financial results, please advance to slide 13. Q3 consolidated revenue was $33.6 million, an increase of 33% from the third quarter of last year. Consolidated gross profit was $4 million for the quarter, increasing 105% from the prior year quarter due to overall higher production and shipment volumes in both segments and favourable mix, offset by the impact of a $0.8 million in unfavourable peso-dollar exchange rates.

謝謝，傑夫，大家早安。我想討論我們第三季和年初至今的財務表現的一些亮點，請前進到幻燈片 13。該季度綜合毛利為400 萬美元，比去年同期增長105%，這得益於兩個細分市場的總體產量和出貨量的提高以及有利的組合，但被不利的比索美元匯率80 萬美元的影響所抵消。

Revenue for Sypris Technologies increased 13.8% year over year to $19.3 million for the quarter. Gross margin was up 120 basis points from the prior year quarter due to favourable mix offset by the unfavourable peso-dollar exchange rate impact.

Sypris Technologies 本季營收年增 13.8% 至 1,930 萬美元。由於有利的組合抵消了不利的比索美元匯率影響，毛利率比去年同期增加了 120 個基點。

On the cost side, we continue to experience some of the inflationary pressures that are being felt across the economy. Prices of consumable supplies and tooling have increased as have utility rates. We continue to do daily management of spend excuse me in these areas, including scheduling production in our peak utility rate as much as possible.

在成本方面，我們繼續感受到整個經濟所面臨的一些通膨壓力。消耗品和工具的價格以及公用事業費率均上漲。對不起，我們繼續對這些領域的支出進行日常管理，包括盡可能在峰值利用率下安排生產。

Our engineering and product development teams have also initiatives underway to reduce steel consumption in both our forging and machining processes to improve our margins and deliver cost savings to our customers. Revenue for Sypris electronics was $14.2 million for the quarter, an increase of 73% year over year. Gross margin was at 18.1% an increase of 710 basis points year over year on higher production and shipment volumes, favourable mix and material cost savings on certain programs and the impact of our continuous improvement initiatives.

我們的工程和產品開發團隊也在採取措施，減少鍛造和機械加工過程中的鋼材消耗，以提高利潤並為客戶節省成本。 Sypris electronics 本季營收為 1,420 萬美元，較去年同期成長 73%。毛利率為 18.1%，年成長 710 個基點，這得益於產量和出貨量的提高、某些項目的有利組合和材料成本節約以及我們持續改進措施的影響。

For continuing to implement a comprehensive approach to continuous improvement in lean manufacturing at Sypris electronics and to expand its workforce to reinforce the team's efforts to effectively serve its customers in the execution of significant sequential quarterly increases in shipments in 2023 and on into 2024. We also continue to implement additional automated production and expect inspection equipment to further improve our manufacturing efficiency. We expect these efforts to cost effectively further boost manufacturing output to meet the planned shipment increases.

表揚 Sypris electronics 持續實施全面的方法來持續改善精實製造，並擴大員工隊伍，以加強團隊的努力，有效地為客戶提供服務，實現 2023 年和 2024 年出貨量連續季度的大幅成長。多的自動化生產，並期望檢測設備進一步提高我們的製造效率。我們預計這些努力將有效地進一步提高製造產量，以滿足計劃的出貨量成長。

As we increased production and continue to make manufacturing process improvements, we anticipate an improvement in labour productivity and overhead absorption, resulting in an improvement in margins.

隨著我們增加產量並繼續改進製造工藝，我們預計勞動生產力和管理費用吸收將會提高，從而導致利潤率的提高。

Consolidated operating income for Q3 was $1.3 million loss due to the $1.8 million unfavourable peso to dollar exchange rate impact noted earlier, up from a loss of $1.6 million in the prior year, due principally to the increase in gross profit. Our operations teams are focused on execution and meeting our objectives for customer service at expanded volume levels while also reducing cost per unit. Strong backlog in place provides a solid foundation to support this growth through the remainder of 2023 and into 2024.

由於前面提到的 180 萬美元的比索兌美元匯率不利影響，第三季的綜合營業收入虧損 130 萬美元，高於去年同期的 160 萬美元虧損，主要原因是毛利增加。我們的營運團隊專注於執行和滿足我們以擴大的數量水準提供客戶服務的目標，同時降低單位成本。大量積壓訂單為支持 2023 年剩餘時間和 2024 年的成長奠定了堅實的基礎。

Please advance to slide 14.

請前進至幻燈片 14。

Year to date consolidated revenue was $101.5 million, an increase of $21.1 million or 26% from the nine months of last year. Both segments contributed to this year-over-year revenue growth. Year-to-date consolidated gross profit increased 25% to $12.9 million, excluding the impact of $1.8 million year to date unfavourable peso-dollar exchange rates, gross profit would have increased by 43% to $14.7 million.

年初至今，綜合收入為 1.015 億美元，比去年 9 個月增加了 2,110 萬美元，增幅為 26%。這兩個部門都對收入同比增長做出了貢獻。年初至今的綜合毛利成長了 25%，達到 1,290 萬美元，排除年初至今 180 萬美元不利的比索美元匯率的影響，毛利將成長 43%，達到 1,470 萬美元。

Year to date, revenue for Sypris electronics was $42.6 million, an increase of 50% from the prior year and gross profit increased 72% to $6.8 million. Gross margin improved 202 basis points to 15.9%. In addition, to the factors previously noted for Q3, the comparison of year to date revenue and gross margin for Sypris electronics to the prior year periods reflects the significant increase in revenue volume resulting from the very high level of bookings achieved in 2022 and continuing into 2023 and the significant progress, our integrated manufacturing and continuous improvement team has made and delivering on the steeply increase backlog.

今年迄今為止，Sypris electronics 的營收為 4,260 萬美元，比上年增長 50%，毛利成長 72%，達到 680 萬美元。毛利率提高 202 個基點至 15.9%。此外，除了先前提到的第三季因素外，Sypris electronics 年初至今的收入和毛利率與去年同期的比較反映出，由於2022 年實現的非常高的預訂水平以及持續到2022 年，收入量顯著增加。

Year-to-date revenue for Sypris Technologies increased 13% to $58.9 million. Gross profit decreased 3.6% to $6.1 million, mainly due to the $1.8 million year to date on favourable peso to dollar exchange rate impact. Excluding the impact of the unfavourable exchange rates, gross profit would have increased by 25% to $7.9 million. Gross margin decreased 180 basis points to 10.4% for the period excluding the impact of the unfavourable exchange rates, gross margin would have improved 125 basis points to 13.4%.

Sypris Technologies 年初至今的營收成長了 13%，達到 5,890 萬美元。毛利下降 3.6% 至 610 萬美元，主要是由於年初至今比索兌美元匯率有利的影響，毛利為 180 萬美元。排除不利匯率的影響，毛利將增加25%，達到790萬美元。毛利率下降180個基點至10.4%，若剔除不利匯率的影響，毛利率將增加125個基點至13.4%。

The Mexican peso strengthened significantly against the USD in 2023 to levels not seen since before the pandemic in 2019, the rate varied from MXN18.76 per dollar to MXN19.91 per dollar. After the disruption of the pandemic, the rate moved to MXN19.47 per dollar on December 29, 2022, after having varied in a range above that from early 2020 to that date. Since that date, the rate has fallen to 1732 as of this morning, a rate not seen in the previous five years.

墨西哥比索兌美元匯率在 2023 年大幅走強，達到 2019 年大流行之前以來的最高水平，匯率從每美元 18.76 墨西哥比索到每美元 19.91 墨西哥比索不等。疫情爆發後，匯率在 2020 年初至今的區間內波動，並於 2022 年 12 月 29 日昇至 19.47 墨西哥比索兌美元。自該日起，截至今天上午，該比率已降至 1732，這是過去五年中未曾見過的比率。

Forecast of the future rates vary widely. We are evaluating currency hedging options at this time under a variety of scenarios. Our year-to-date consolidated SG&A expense was $11.6 million, an increase of 8.6% over the prior year. Merit pay increases and limited additions to business development and program management personnel contributed to the increase. SG&A as a percent of revenue decreased to 11.4% from 13.3% a year ago. As our revenue increases, we expect further reductions in SG&A as a percent of revenue as operating leverage improved. Our year-to-date operating income was $1.3 million, an increase of over 3.5 times the operating loss of $0.4 million for the same period 2022.

對未來利率的預測差異很大。我們目前正在各種情況下評估貨幣對沖選項。年初至今，我們的綜合 SG&A 費用為 1,160 萬美元，比上年增長 8.6%。績效工資的增加以及業務開發和專案管理人員的有限增加促成了這一增長。 SG&A 佔收入的百分比從一年前的 13.3% 下降至 11.4%。隨著我們收入的增加，我們預計隨著營運槓桿的提高，SG&A 佔收入的百分比將進一步下降。我們年初至今的營業收入為 130 萬美元，比 2022 年同期營業虧損 40 萬美元增加了 3.5 倍以上。

Please advance to slide 15.

請前進至幻燈片 15。

On this slide, we show our trend of consolidated gross margin for 2022 and 2023, along with the performance expected for 2024. 2023 is expected to approximate the prior year as the impact of negative peso -- of the negative peso-dollar exchange rate more than offset. The positive impacts of higher volumes on production efficiencies, favourable mix, material savings on certain programs and the positive impact of our continuous improvement initiatives.

在這張投影片中，我們展示了2022 年和2023 年的綜合毛利率趨勢，以及2024 年的預期業績。 。產量增加對生產效率、有利的組合、某些項目的材料節省以及我們持續改進計劃的積極影響產生了積極影響。

As noted in the 2023 pro forma bar on the graph, our gross margin would have been 14.4% or 90 basis points higher had it not been subject to the full year estimate of $1.9 million with the unfavourable peso-dollar exchange rate impact.

如圖表中 2023 年預估條所示，如果沒有受到全年預估 190 萬美元以及不利的比索美元匯率影響，我們的毛利率將達到 14.4%，即高出 90 個基點。

With our 2024 outlook for a revenue increase of 15% to 20% and a more limited impact of the peso-dollar exchange rate our 2024 gross margin outlook is 14.8% on higher volumes at the expected mix. We will strive to continuously improve manufacturing output and productivity while maintaining excellent quality. We will also continue our efforts to diversify our market served and our customer base and to deliver more value added services to our customers, which we believe and provide further upside to our current margin level.

我們預計 2024 年營收將成長 15% 至 20%，且比索美元匯率的影響更為有限，我們的 2024 年毛利率展望為 14.8%，因為預期組合的銷售量將會增加。我們將努力不斷提高製造產量和生產力，同時保持卓越的品質。我們也將繼續努力使我們的市場和客戶群多元化，並為我們的客戶提供更多增值服務，我們相信這將為我們當前的利潤水平提供進一步的上升空間。

Please advance to slide 16 for a quick summary of our comments.

請前進至投影片 16 快速總結我們的意見。

Key highlights for the quarter and year to date include the continued strong backlog position and a significant increase in gross profit, both through the third quarter and the year to date periods. Despite the unfavourable impact of the Mexican peso relative to the US dollar.

本季和年初至今的主要亮點包括第三季和年初至今持續強勁的積壓狀況以及毛利的大幅成長。儘管墨西哥比索相對美元受到不利影響。

We expect rapid growth in Sypris electronics defence market, supplemented by additional funding to meet the defence needs of our allies. This market will likely exceed $1 trillion for the fiscal year 2024. We also expect significant growth in its communications and space markets. The outlook for Sypris technologies remains positive. So, the current forecast for commercial vehicles in 2024 is for a year-over-year decline of 13.4%. That decline is expected to be offset by planned increases in new programs with existing commercial and other vehicle customers and currently strong demand for its energy products for use in the rapidly growing LNG export markets, among others.

我們預計 Sypris 電子國防市場將快速成長，並輔以額外資金，以滿足我們盟友的國防需求。到 2024 財年，這個市場可能會超過 1 兆美元。 Sypris 技術的前景仍然樂觀。因此，目前預測2024年商用車年減13.4%。預計這一下降將被現有商用和其他車輛客戶的新項目計劃增加以及目前快速增長的液化天然氣出口市場對其能源產品的強勁需求等所抵消。

Sypris technologies, in addition to expanding its energy product line to include (pick signals) augmenting its distribution resources to expand its energy products presence in Europe, Asia, the Middle East and Mexico has booked its first order for insulated joints and a waterline expansion application.

Sypris Technologies 除了擴大其能源產品線以包括（選擇訊號）增加其分銷資源以擴大其在歐洲、亞洲、中東和墨西哥的能源產品業務外，還預訂了第一筆絕緣接頭和水線擴展應用訂單。

Based on our strong backlog, growing new business funnel and growing market potential, we offer our initial guidance for 2024 at 15% to 20% growth in revenue, 25% to 30% growth in gross profit and a 15 to 200 basis point increase in gross margin. We look forward to the opportunity to continue the positive momentum of growth and continuous improvement in 2023 into a bigger and more profitable 2024.

基於我們強勁的積壓訂單、不斷增長的新業務管道和不斷增長的市場潛力，我們對2024 年的初步指導是收入增長15% 至20%，毛利增長25% 至30%，業務增長15 至200個基點。我們期待有機會在 2023 年繼續保持積極的成長勢頭和持續改進，並在 2024 年實現更大、更盈利。

Thank you for your continued support and interest in our business. Now I'd like to turn it over to Jeff for closing remarks.

感謝您對我們業務的持續支持與關注。現在我想請傑夫做總結發言。

Thank you, Rich, and thank you for joining us on the call this morning. We're looking forward to another year of double-digit growth, expanding margins and increased profitability. And please know, we appreciate your continued interest in our business. Thank you and have a good day.

謝謝里奇，也感謝您今天早上參加我們的電話會議。我們期待新的一年實現兩位數的成長、利潤率的擴大和獲利能力的提高。請注意，我們感謝您對我們業務的持續關注。謝謝您，祝您有美好的一天。

Call is now concluded. Thank you for attending today's presentation. You may now disconnect.

通話現已結束。感謝您參加今天的演講。您現在可以斷開連線。