Servotronics Announces Second Quarter 2024 Financial Results
-- Continued market demand and operating performance results in year-over-year revenue and profit growth --
ELMA, N.Y., Aug. 8, 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 second quarter ended June 30, 2024.
Highlights for the second quarter financial results include the following:
- Consolidated revenues were $12.3 million, up 15.3% from $10.7 million in the second quarter of 2023. Revenue growth resulted from higher volumes driven by strong customer demand and improved pricing, partially offset by unfavorable sales mix.
- Gross profit increased to $3.1 million or 25.0% of revenue in the second quarter, up from $1.6 million, or 14.6% of revenue in the second quarter of 2023. The improvement in gross profit was driven primarily by increased volume and operational efficiencies.
- Selling, general and administrative (SG&A) expenses decreased $0.9 million to $2.4 million in the second quarter of 2024 compared to $3.3 million in the second quarter of 2023. The decrease in SG&A was primarily driven by lower professional and legal costs resulting from elevated non-recurring costs in the prior year related to bank refinancing, proxy contest and corporate restructuring.
- Operating income for the quarter was $0.7 million or 5.4% of revenue compared to an operating loss of $1.7 million in the second quarter of 2023, resulted from the gross profit growth driven by volume and operational improvements combined with lower SG&A costs.
- Net income from continuing operations was $0.6 million, or $0.22 per diluted share in the second quarter of 2024, compared to a net loss from continuing operations of ($3.3) million, or ($1.33) per diluted share in the second quarter of 2023.
"I am very pleased with our second quarter results and our rebound from the slow start to the year. I am particularly proud of our continuous improvement efforts that have directly impacted our strong top-line growth, accelerated margins, and favorable operating income as we continue to properly manage our operating costs," said Chief Executive Officer William F. Farrell, Jr.
Second Quarter Business Results
Three Months Ended June 30, | ||||||||||||
(dollars in thousands) | 2024 | 2023 | 2024 vs 2023 | |||||||||
% | % | $ | % | |||||||||
Dollars | Sales | Dollars | Sales | Change | Change | |||||||
Revenues | $ 12,273 | 100.0 % | $ 10,649 | 100.0 % | $ 1,624 | 15.3 % | ||||||
Cost of goods sold | 9,210 | 75.0 % | 9,092 | 85.4 % | 118 | 1.3 % | ||||||
Gross Profit | 3,063 | 25.0 % | 1,557 | 14.6 % | 1,506 | 96.7 % | ||||||
Selling, general and administrative | 2,397 | 19.5 % | 3,269 | 30.7 % | (872) | (26.7) % | ||||||
Operating income (loss) | 666 | 5.4 % | (1,712) | (16.1) % | 2,378 | 138.9 % | ||||||
Other expenses | 98 | 0.8 % | 89 | 0.8 % | 9 | 10.1 % | ||||||
Income (loss) before income taxes | 568 | 4.6 % | (1,801) | (16.9) % | 2,369 | 131.5 % | ||||||
Income (loss) from continuing operations | - | 0.0 % | 1,479 | 13.9 % | (1,479) | (100.0) % | ||||||
$ 568 | 4.6 % | $ (3,280) | (30.8) % | $ 3,848 | 117.3 % | |||||||
Servotronics' Chief Financial Officer Robert A. Fraass commented, "The growth in revenues and profitability combined with our effective working capital management resulted in a dramatic improvement in cash flow from operations in the first six months of the year. Increased cash flow and debt reduction provide us the liquidity to continue investing in our growth. As we evaluate our strategic initiatives, we will continue to invest capital where it has the greatest impact for our customers and shareholders."
The Company's operating cash flows increased by approximately $6.6 million compared to the same period in 2023 primarily driven by an increase in net income and reductions in accounts receivable, partially offset by increases in inventory to support volume growth.
Mr. Farrell concluded, "The work we have done to position Servotronics for long-term, sustainable growth is now showing the results we anticipated. Looking at the remainder of the year, we expect strong demand in our key end markets. As we continue to execute on our long-term strategic goals, we believe that our commitment to meeting the needs of customers will result in enhanced shareholder value."
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 report, 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, and on commercial activity and demand across our and our customers' businesses, and on global supply chains, 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 | ||||||||
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
(Unaudited) | (Audited) | |||||||
Current assets: | ||||||||
Cash | $ | 119 | $ | 95 | ||||
Cash, restricted | 150 | 150 | ||||||
Accounts receivable, net | 10,706 | 12,065 | ||||||
Inventories, net | 15,830 | 14,198 | ||||||
Prepaid and other current assets | 945 | 1,507 | ||||||
Assets related to discontinued operation | 1,480 | 1,552 | ||||||
Total current assets | 29,230 | 29,567 | ||||||
Property, plant and equipment, net | 7,082 | 6,978 | ||||||
Other non-current assets | 42 | 42 | ||||||
Total Assets | $ | 36,354 | $ | 36,587 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Line of credit | $ | 1,473 | $ | 2,103 | ||||
Current portion of post retirement obligation | 97 | 97 | ||||||
Accounts payable | 2,432 | 2,061 | ||||||
Accrued employee compensation and benefits costs | 989 | 1,003 | ||||||
Accrued warranty | 449 | 542 | ||||||
Other accrued liabilities | 1,827 | 1,909 | ||||||
Liabilities related to discontinued operation | 24 | 213 | ||||||
Total current liabilities | 7,291 | 7,928 | ||||||
Post retirement obligation | 4,202 | 4,165 | ||||||
Shareholders' equity: | ||||||||
Common stock, par value $0.20; authorized 4,000,000 shares; issued 2,629,052 | 525 | 525 | ||||||
Capital in excess of par value | 14,762 | 14,617 | ||||||
Retained earnings | 13,127 | 12,954 | ||||||
Accumulated other comprehensive loss | (2,350) | (2,389) | ||||||
Employee stock ownership trust commitment | (56) | (56) | ||||||
Treasury stock, at cost 71,125 (87,525 - 2023) shares | (1,147) | (1,157) | ||||||
Total shareholders' equity | 24,861 | 24,494 | ||||||
Total Liabilities and Shareholders' Equity | $ | 36,354 | $ | 36,587 | ||||
SERVOTRONICS, INC. AND SUBSIDIARIES | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Revenue | $ | 12,273 | $ | 10,649 | $ | 22,719 | $ | 19,709 | ||||||||
Costs of goods sold, inclusive of depreciation and amortization | 9,210 | 9,092 | 17,921 | 17,168 | ||||||||||||
Gross profit | 3,063 | 1,557 | 4,798 | 2,541 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling, general and administrative | 2,397 | 3,269 | 4,415 | 5,444 | ||||||||||||
Operating income (loss) | 666 | (1,712) | 383 | (2,903) | ||||||||||||
Other expense | ||||||||||||||||
Interest & other expense, net | 98 | 89 | 181 | 142 | ||||||||||||
Total other expense | 98 | 89 | 181 | 142 | ||||||||||||
Income (loss) from continuing operations before income taxes | 568 | (1,801) | 202 | (3,045) | ||||||||||||
Income taxes | - | 1,479 | - | 1,063 | ||||||||||||
Income (loss) from continuing operations, net of tax | 568 | (3,280) | 202 | (4,108) | ||||||||||||
Loss from discontinued operation before income taxes | (12) | (6,220) | (29) | (6,940) | ||||||||||||
Income taxes | - | - | - | - | ||||||||||||
Loss from discontinued operation, net of tax (Note 2) | (12) | (6,220) | (29) | (6,940) | ||||||||||||
Net income (loss) | $ | 556 | $ | (9,500) | $ | 173 | $ | (11,048) | ||||||||
Basic earnings (loss) per share: | ||||||||||||||||
Continuing operations | $ | 0.23 | $ | (1.33) | $ | 0.08 | $ | (1.67) | ||||||||
Discontinued operation | - | (2.53) | (0.01) | (2.82) | ||||||||||||
Basic earnings (loss) per share | $ | 0.23 | $ | (3.86) | $ | 0.07 | $ | (4.49) | ||||||||
Diluted earnings (loss) per share: | ||||||||||||||||
Continuing operations | $ | 0.22 | $ | (1.33) | $ | 0.08 | $ | (1.67) | ||||||||
Discontinued operation | - | (2.53) | (0.01) | (2.82) | ||||||||||||
Diluted earnings (loss) per share | $ | 0.22 | $ | (3.86) | $ | 0.07 | $ | (4.49) | ||||||||
SERVOTRONICS, INC. AND SUBSIDIARIES | ||||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2024 | 2023 | |||||||
Cash flows related to operating activities: | ||||||||
Income (loss) from continuing operations | $ | 202 | $ | (4,108) | ||||
Adjustments to reconcile income (loss) from continuing operations to net cash provided | ||||||||
Depreciation and amortization | 543 | 517 | ||||||
Stock based compensation | 176 | 74 | ||||||
Allowance for credit losses | (18) | (25) | ||||||
Inventory reserve | 139 | 14 | ||||||
Warranty reserve | (93) | (2) | ||||||
Deferred income taxes | - | 1,072 | ||||||
Changes in assets and liabilities providing (using) cash: | ||||||||
Accounts receivable | 1,377 | (2,663) | ||||||
Inventories | (1,771) | (826) | ||||||
Prepaid and other current assets | 562 | (520) | ||||||
Accounts payable | 371 | 1,064 | ||||||
Accrued employee compensation and benefit costs | 25 | 301 | ||||||
Post retirement obligations | 37 | 66 | ||||||
Other accrued liabilities | (82) | (105) | ||||||
Net cash provided (used) by operating activities from continuing operations | 1,468 | (5,141) | ||||||
Cash flows related to investing activities: | ||||||||
Purchase of property, plant and equipment | (647) | (403) | ||||||
Net cash used by investing activities from continuing operations | (647) | (403) | ||||||
Cash flows related to financing activities: | ||||||||
(Payments on) proceeds from line of credit | (630) | 3,697 | ||||||
Purchase of treasury shares | (21) | - | ||||||
Principal payments on finance lease obligations | - | (501) | ||||||
Net cash (used) provided by financing activities from continuing operations | (651) | 3,196 | ||||||
Discontinued Operation | ||||||||
Cash used by operating activities | (146) | (568) | ||||||
Net cash used by operating activities from discontinued operation | (146) | (568) | ||||||
Net increase (decrease) in cash and restricted cash | 24 | (2,916) | ||||||
Cash and restricted cash at beginning of period | 245 | 3,812 | ||||||
Cash and restricted cash at end of period | $ | 269 | $ | 896 | ||||
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SOURCE Servotronics, Inc.