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Edited Transcript of SYPR earnings conference call or presentation 28-Mar-19 1:00pm GMT

Q4 2018 Sypris Solutions Inc Earnings Call

LOUISVILLE Apr 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Sypris Solutions Inc earnings conference call or presentation Thursday, March 28, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anthony C. Allen

Sypris Solutions, Inc. - VP & CFO

* Jeffrey T. Gill

Sypris Solutions, Inc. - Chairman, President & CEO

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Conference Call Participants

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* James Andrew Ricchiuti

Needham & Company, LLC, Research Division - Senior Analyst

* Joel Cahill

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Presentation

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Operator [1]

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

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Jeffrey T. Gill, Sypris Solutions, Inc. - Chairman, President & CEO [2]

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Thank you, Aaron, and good morning, everyone. Tony Allen and I would like to welcome you to this call, the purpose of which is to review the company's financial results for the fourth quarter of 2018. 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. 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 at sypris.com to review the definitions of any non-GAAP financial measures that may be discussed during this call.

With these qualifications in mind, we'd now like to proceed with the business discussion. Please advance to Slide 3.

I will lead you through 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. Tony will then provide you with a more detailed review of our financial results for the quarter and year as well as walk you through our financial guidance for 2019. Now let's begin with the overview on Slide 4.

Revenue for the fourth quarter increased 11.5%, $24 million on a year-over-year basis, and was up 13.5% on a sequential basis from the third quarter of 2018. Sales in our automotive and commercial vehicle business increased 20% on a year-over-year basis, while shipments to our Electronics customers increased by 26% when compared to the fourth quarter of 2018 and increased by 41% sequentially.

Sales in our energy business were constrained during the quarter by late material deliveries and inventory rebalancing by certain customers at year-end, but still increased by 22% on a sequential basis from the third quarter of 2018.

Our backlog remains strong systemwide, providing important support for the growth objectives for 2019.

Gross margin for the quarter was 5.9%, up slightly on a sequential basis, but down from the prior year quarter due to certain year-end noncash charges that we've recognized at Sypris Electronics. More specifically, gross margin for Sypris Technologies expanded to 14.3% for the quarter, up from 11.3% for the prior year period and up from 8.9% sequentially. The improvement was driven by operational efficiencies that more than compensated for a less favorable mix of shipments when compared to last year.

Gross margin for Sypris Electronics was impacted by labor inefficiencies, engineering support costs and inventory adjustments. Tony will provide you with a more detailed review of these items shortly.

In short, demand in each of our markets continued to be positive during the quarter, providing the company with a solid foundation for further growth and margin expansion during 2019. Turning now to Slide 5. Let's take a look at the full year results.

Revenue for the year increased almost 7% to $88 million during 2018, driven by a 9% increase at Sypris Technologies and a 2.7% increase at Sypris Electronics.

Within Sypris Technologies, sales to our automotive and commercial vehicle customers grew by 19%, while shipments to our energy-related customers expanded by 4.1%. The completion of a contract at the end of 2017 accounts for the balance of the difference in the year-over-year growth for Sypris Technologies.

Gross margin for the company more than doubled during 2018, increasing to 8.6% for the year. Sypris Technologies led the way with gross margin expanding the 12.6% for 2018, up from 1.4% during 2017, which reflected the positive impact of the consolidation initiatives that were completed at the end of 2017.

Gross margin for Sypris Electronics was substantially impacted by the items we've discussed a moment ago. Importantly, we believe that these issues are now substantially behind us, and we are looking forward to a year of positive performance for the coming year.

The company's SG&A expense fell to 14.1% of revenue for the year, down from 15.9% in 2017, excluding the impact of a favorable settlement of a legal fee during the fourth quarter of 2018.

Operating income for the company improved by $7.9 million in 2018 when compared to the prior year, driven by a $10.3 million improvement at Sypris Technologies.

Turning now to Slide 6. North American demand for heavy-duty trucks reached an all-time high during 2018, driven by strong freight growth, tight capacity and an expanding economy. Looking forward, backlogs of most OEMs are extending out 12 months or more, while production levels appear to have stabilized at rates that are supportable by the supply chain. Both ACT and FTR have issued a positive outlook for 2019.

We believe that stabilization of demand at these high volumes will prove to be very good for the industry, including suppliers like Sypris. The labor now trained -- with labor now trained and in place, new productive capacity online and with demand operating within a narrow weekly bandwidth, costs should continue to decline materially.

We are no longer operating certain equipment during peak utility demand periods, which will have a significant impact on our future charges for electricity. We have increased the use of automation in certain of our manufacturing cells, thereby increasing output and improving quality and reliability. Much work remains, but we are looking forward to much improved results going forward.

As we mentioned back in November, we entered into a new set of supply agreements during the quarter with Sisamex, the Monterrey-based joint venture of Meritor and Grupo Quimmco. The agreements number 3 in total and cover a range of products we use in the drivelines for commercial, agricultural and all-terrain vehicles. The agreement covering axle shafts and knuckles represents the renewal of an existing contract, while the addition of input shafts, transmission shafts and other products will form a new layer of business for Sypris beginning in 2019.

The North American automotive market remains solid for Sypris, where our participation is focused on supplying products through a variety of specialty vehicles. As we entered 2019, we expect new program launches in the automotive, all-terrain, agricultural, off-highway and refrigeration markets to further diversify our portfolio of business and support top line growth in 2019 and beyond. And when combined with our expanding oil and natural gas business, our customer and market profile starts to take on a very different look from that of just a few years back.

Turning now to Slide 7. As we've discussed during our last call, demand for oil and natural gas continues to outpace domestic consumption, thereby supporting the forecast that the U.S. will become a net exporter of energy within the next 4 to 5 years. The conversion of power generation use to natural gas as well as the construction of pipelines and LNG terminals to support export activities is also serving to bolster the market outlook.

Production in the Permian Basin continues to outpace current pipeline capacity, while the growth in pipeline gathering systems and the aging of existing transportation infrastructure bodes well for the future demand of the company's closures, insulated joints and other such products.

Energy futures have been fluctuating recently, with the price of oil rising and falling based on a range of changing assumptions. In our view, an expanding economy will require an increase in energy consumption. Our order boards remain robust, which would seem to support this consumption.

As I mentioned a moment ago, we are working to resolve a series of supply chain and production issues that resulted in lower shipments during the quarter than was originally planned. We now expect these orders to be shipped during the first quarter.

Turning to Slide 8. As we discussed during our prior call, Department of Defense spending continues to increase in a positive manner. These positive market conditions, when combined with recent contract awards and our lower-cost profile, provides us with a solid base for optimism when looking forward.

During our last call, we mentioned that we've made significant progress in securing the electronic components that were necessary to meet our production schedules. Several large customers have joined with us to secure long lead items and to place firm purchase orders with vendors to make certain that we receive this material.

We are pleased to report that we continue to make progress, though it will take some time before material deliveries are completely back to normal. We currently expect to incur some delays in shipments during the first quarter of 2019 due to late material receipts and the delays in receipt of customer contract approvals. We fully expect these issues to be substantially resolved during the quarter, with full shipments resuming in the second quarter of 2019.

Turning now to Slide 9. As we resolve these issues, we expect both Sypris Technologies and Sypris Electronics to be solidly profitable for the coming year, reflecting the benefits of top line growth, improved mix and growing operational efficiencies.

Our outlook for 2019 forecast revenue growth of 19% for the year when compared to 2018, with new program launches during the second half of the year adding further momentum. From a gross margin standpoint, we are targeting to be in the range of 14% to 16% of revenue, with both business segments registering solid profitability.

Turning now to Slide 10. Tony Allen will lead you through the balance of our presentation this morning. Tony?

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Anthony C. Allen, Sypris Solutions, Inc. - VP & CFO [3]

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Thanks, Jeff, and good morning, everyone. I'd like to discuss with you some of the highlights of our fourth quarter and full year 2018 financial results. Please advance to Slide 11.

Q4 consolidated revenue closed at $24 million, an increase of $2.5 million over the prior year period and at the lower end of our Q4 revenue target. The revenue split between Sypris Technologies and Sypris Electronics was $15.1 million and $8.8 million, respectively. Both segments reported an increase over the prior year fourth quarter, with Sypris Technologies up $600,000 and Sypris Electronics up $1.9 million.

With the fourth quarter increase, Sypris Technologies closed out 2018 with revenue growth in each quarterly period over the prior year, which reflects favorable market conditions during the year and price increases on certain programs.

Our gross profit for Q4 was $1.4 million, which was just below the $1.5 million reported in the prior year period. This is well short of our expectations as an improvement for Sypris Technologies during the fourth quarter was offset by a reduction for Sypris Electronics during the period.

Consolidated gross margin for the quarter of 5.9% was 110 basis points below the prior year. Margins for Sypris Technologies rebounded sequentially from the third quarter of 2018 to 14.3%, which was 300 basis points above the prior year period.

The results for Sypris Technologies reflect operational improvements to drive labor productivity higher and controls overspend and consumption in our variable cost line items to increase profitability and cash flow.

The disappointment for the quarter was with the performance of Sypris Electronics. We encountered challenges on 2 programs during the quarter that had greater than expected impacts on profitability. The first was the ramp-up on a new program on which we initially experienced some constraints due to material availability. As we resolve these constraints and increase production rates, our manufacturing processes required higher levels of engineering resources to achieve a steady rate of production flow from our S&T line through the final inspection of the boards.

The second program was an engineering manufacturing development program that was started in 2018 and substantially completed during the fourth quarter, which involved a number of design and material component changes, which contributed to labor inefficiencies and engineering support costs in excess of planned levels. Shipments on this program were complete during the first quarter of '19. Gross profit for Sypris Electronics was further impacted in the fourth quarter by a $400,000 physical inventory adjustment and additional excess and obsolete inventory reserves for the $0.5 million.

Selling, general and administrative expense was $1.2 million in Q4, a decline of $1.7 million from the prior year period. Including in SG&A expense during the period was a benefit from the resolution of an outstanding disputed legal fee. The agreement resulted in a $1.9 million reduction to SG&A in the period as the liability carried on the books was reduced to reflect the net present value of the payment set forth in the agreement.

Excluding the impact of the legal fee resolution, SG&A was $3.1 million or 12.9% of revenue in the current period as compared to $3 million or 13.7% in the prior year.

Adjusted operating for the income of 2 -- excuse me, adjusted operating income for the fourth quarter of $200,000 also includes the benefit of the legal fee resolution. Excluding this adjustment, we would have been down approximately $250,000 compared to the prior year. This metric also excludes the asset relocation and mothballed costs for the Broadway facility, which totaled $300,000 and $100,000 in the fourth quarters of 2018 and 2017, respectively. Please advance to Slide 12.

Full year consolidated revenue closed at $88 million, an increase of $5.7 million from the prior year. The revenue split between Sypris Technologies and Sypris Electronics was $59.8 million and $28.2 million, respectively. Revenue for Sypris Technologies increased by $4.9 million and Sypris Electronics increased by $800,000 for 2017.

Our gross profit for 2018 was $7.6 million, which represents a $4.2 million improvement over the prior year. Gross profit for Sypris Technologies improved $6.8 million over 2017, which was offset by a decline for Sypris Electronics of $2.5 million.

Consolidated gross margin for 2018 of 8.6% was an increase of 460 basis points over the prior year. Sypris Technologies reported double-digit gross margin in 3 of the 4 quarters for 2018 and ended the full year with a gross margin of 12.6%. The quarterly margin performance also translated into positive adjusted operating income for Sypris Technologies in each of the 4 quarters of 2018, not a small accomplishment considering the road this segment has traveled since 2014. The team is energized and feels positive momentum continuing to build with our continuous improvement initiatives, which are anticipated to contribute to further margin expansion in 2019.

Sypris Electronics ended 2018 with gross margin just above breakeven. The operating results clearly fell below our expectations as component shortages throughout the year were compounded by the unfavorable results in the fourth quarter. The efforts to reverse this trend and performance are underway, but will take time as management completes the implementation and rollout of a new ERP system in the first quarter, and new program launches are expected to continue into the early third quarter of 2019.

Selling, general and administrative expense was $10.5 million for 2018, a decline of $2.6 million from the prior year period. Excluding the impact of the legal settlement, SG&A in 2018 was $12.4 million, which represented 14.1% of revenue as compared to $13.1 million or 15.9% of revenue in 2017. We expect to continue to control SG&A spend in 2019 and pursue opportunities to further drive reductions as a percent of revenue.

The year-over-year improvement in gross profit, combined with the reduction in SG&A, resulted in a $6.9 million improvement in adjusted operating income over 2017. Excluding the adjustment for the legal fee resolution, adjusted operating income increased $5 million over 2017. This metric excludes the reallocation, severance and other costs, which totaled $1.4 million in 2018 and $2.4 million in 2017. Please advance to Slide 13.

Revenue for 2019 is expected to be in the range of $100 million to $110 million, with gross margin coming in between 14% to 16%. Our revenue outlook is based on a forecast that includes favorable market conditions continuing in 2019 for the automotive, heavy truck and energy markets. New programs are expected to launch within Sypris Technologies in 2019 as well as the order backlog and anticipated program launches for Sypris Electronics.

We anticipate our margin performance will improve sequentially throughout the year, primarily reflecting the lower shipment levels and associated margin performance in the first half for Sypris Electronics as compared to the outlook for the back half of the year.

Additionally, the CI initiatives for Sypris Technologies are forecast to reduce costs incrementally throughout the year, which would contribute to the sequential improvement in margin performance from the first half to the second half. We expect SG&A expense, as a percent of revenue, to finish within 11% to 13% for the full year 2019, with relatively flat spend levels as compared to 2018 as the major cost-reduction actions identified in 2016 are now complete. We believe our team is well positioned to meet these targets and report a return to profitability on a consolidated basis for 2019. Please advance to Slide 14.

This slide provides a view of consolidated revenue and gross margin performance for the 3 most recent years and our outlook for 2019 based on the midpoint of the range we just discussed. We are forecasting revenue to increase 19% at the midpoint of the range for 2019 and to drive revenue above the level achieved in 2016.

We have a number of new programs that are forecasted to contribute to this growth in both segments of our business. There was a considerable amount of activity for certain of the new programs for Sypris Technologies in 2018 to build prototypes and work through the product and process development phase in preparation for final product certification with our customers. Our forecast considers the visibility we have on the start of production dates for these programs in 2019, which align with our customer requirements.

We increased production during the fourth quarter on a new program for Sypris Electronics that is forecast to continue throughout 2019. Additionally, we expect to finalize negotiations on 2 other key programs, on which customer delivery schedules are anticipated to require shipments to begin in the second and third quarters of 2019. We received funding from the customer during the second half of 2018 to purchase material in advance for one of these programs in order to meet the anticipated delivery schedule beginning in Q2.

As in both 2017 and 2018, we expect our shipment volume during Q1 of 2019 for Sypris Electronics to be the lowest quarter for the year. We anticipate the first quarter will be further impacted as certain shipments will post forward into the fourth quarter in anticipation of our system implementation in Q1.

The lower expected volumes in Q1 are reflected in our outlook as we guide to sequential improvements from the first half to the second half of the year. The midpoint of our gross margin outlook is 15% for 2019, which compares favorably to the trend line of gross margin over the past 3 years. The additional volume we expect in 2019 plays a role in this improvement. However, the operational improvements over which we have control are a top priority for our management team.

Included in the annual operating plan we took to our board for the year are a number of initiatives to improve profitability, a few of which are noted under our margin chart. Our CI team is implementing actions to increase labor productivity and improve product flow through our operations. Our supply chain teams have specific initiatives underway to drive material cost reductions and to leverage internal and external resources to reduce the cost and consumption of tools and supplies.

We recognize that material and design changes are an inherent element of our business for Sypris Electronics, and we expect to more efficiently manage these changes during 2019, which will include improved communications with our customers at all levels in the organization and improving our documentation and the utilization of data as a service to add value for our customers. Please advance to Slide 15 for a brief summary.

Our revenue for the fourth quarter was $24 million, an increase of $2.5 million or 11.5% from the prior year. Revenue for the full year was $88 million, an increase of $5.7 million or 6.9% from the prior year. Gross profit for 2018 was $7.6 million or 8.6% of revenue, compared to $3.3 million or 4% of revenue for 2017.

Sypris Technologies reported full year revenue of $59.8 million, gross margin of 12.6% and its fifth consecutive quarter of positive adjusted operating income.

SG&A expense for 2018, excluding the legal fee resolution benefit recognized in Q4, was $12.4 million or 14.1% of revenue, down from $13.1 million or 15.9% of revenue in 2017.

Our revenue outlook for 2019 is between $100 million and $110 million, and our forecast for gross margin is in the range of 14% to 16% for 2019, with sequential improvement expected from the first half to the second half.

In closing, we appreciate your continued interest and support of our business, and we look forward to reporting back to you as we continue along the path of our targeted return to profitability for 2019.

This concludes our call today. And at this time, I'd like to turn it back over to Aaron to answer any questions you might have for us. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll go first to Jim Ricchiuti with Needham & Company.

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James Andrew Ricchiuti, Needham & Company, LLC, Research Division - Senior Analyst [2]

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It sounds like, in Sypris Technologies, you had -- you potentially could have shipped a little bit more product into the energy market, and I'm wondering if you can quantify that. And I assume that you expect to see a pickup in that area in Q1, it sounds like?

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Jeffrey T. Gill, Sypris Solutions, Inc. - Chairman, President & CEO [3]

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Yes, Jim, that would be correct. We do expect to catch up with those shipments that were missed in Q4.

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James Andrew Ricchiuti, Needham & Company, LLC, Research Division - Senior Analyst [4]

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Any way of sizing it, Jeff? And I assume, also, it would -- that being higher-margin business, looks like your margins could have even been a little bit better in the ST business, as good as they were.

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Jeffrey T. Gill, Sypris Solutions, Inc. - Chairman, President & CEO [5]

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You bet. I think we're looking at something in the neighborhood of $0.75 million type thing that held up in Q4. And certainly, this is the highest mix business that we have in terms of margins. So, yes, you're correct.

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James Andrew Ricchiuti, Needham & Company, LLC, Research Division - Senior Analyst [6]

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Okay. And then just looking at the Q1, it sounds like there are some puts and takes with respect to some of the shipment delays on the Electronics side of the business, and then there's pickup that you're seeing in other areas, including the energy market. In the past, we've seen a sequential decline in revenues in the, I guess, mid-, high-single-digit sequential decline from Q4 to Q1. Is that the way we should think about the year potentially starting for you guys?

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Anthony C. Allen, Sypris Solutions, Inc. - VP & CFO [7]

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Yes. Is your question, Jim, specific to the electronic segment or you're looking overall?

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James Andrew Ricchiuti, Needham & Company, LLC, Research Division - Senior Analyst [8]

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No, Tony. Sorry, I should have been a little clear. No, I'm talking about the business overall. I mean it does sound like there are some puts and takes in both business segments in Q1. And I'm just wondering if we look at the business as a whole, should we see the same kind of seasonality that we've seen in past years where we see that kind of sequential decline from Q4 to Q1? Sorry.

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Anthony C. Allen, Sypris Solutions, Inc. - VP & CFO [9]

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Yes. I think, overall, that's a fair assessment because what we've talked about is that the Electronics business will drop off, it will be, again, as we pointed out, the lower quarter for the year. But we see a little strength on the Technology side, so you will see that, that kind of a reduction, sequentially, from Q4 to Q1.

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Operator [10]

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(Operator Instructions) We'll go next to Joel Cahill with The Jameson Companies.

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Joel Cahill, [11]

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Can we just talk a little bit on the profitability? We've got kind of within a hair of flatline at the -- in Q4, talking $100-plus million revenue for this year. Have you anticipated that profitability playing out as we go quarter-to-quarter? Jim was just talking about sequential decline or just the expected decline in revenues for Q1. But what's our outlook for the year on profitability? And then, really, what kind of cash do we -- can we produce out of that?

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Anthony C. Allen, Sypris Solutions, Inc. - VP & CFO [12]

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For the year, Joel, I think that what we're laying out is that the margins that we see are in the 14% to 16% range. Our G&A is coming in 11% to 13%, that will put us overall for the year in a profitable position. I think, for the year, on a cash basis, those numbers we expect to be cash flow positive. From operations, we'll have, let's say, a normal amount of capital expenditures, somewhere in the, I'll call it, 3-plus percent of revenue. We're still working on asset divestitures. Not sure where that number is going to come out and the timing of that. So there are different variables in play, but overall, we're looking at a profitable year. And for the year, a full year positive cash flow.

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Joel Cahill, [13]

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And on the SG&A side, that 11% to 13% is -- are you able to get more clarity into this year already so that, that can stay kind of at or below that ceiling?

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Anthony C. Allen, Sypris Solutions, Inc. - VP & CFO [14]

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Yes, I think the -- we don't expect a lot of variability there in terms of the SG&A movement. I mean we had the thing in the fourth quarter this year that's -- we're not going to see that kind of blip again. But I think the numbers that we have out for '19 are -- we should stay within that range.

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Joel Cahill, [15]

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And then you mentioned a couple of deals that you're working toward -- this revenue range of $100 million to $110 million, would that potentially be affected if these deals that are in the works do become -- come favorably or will that be a 2020 opportunity?

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Anthony C. Allen, Sypris Solutions, Inc. - VP & CFO [16]

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No. Some of these do affect our '19 numbers, so we need to close out on these opportunities and begin shipments on these opportunities. So some of that's baked into '19. It would have -- these are longer-term programs, so it would have incremental impact in '20 over '19, but they are included in our numbers for '19.

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Operator [17]

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And we'll take a follow-up from Jim Ricchiuti with Needham & Company.

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James Andrew Ricchiuti, Needham & Company, LLC, Research Division - Senior Analyst [18]

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Jeff, I was wondering if there's any way to give us some flavor as to the incremental potential from that long-term agreement on the Sisamex portion of the business. It sounds like there is some incremental revenue that you're expecting. And I'm just wondering how we should think about that, either this year or looking out to next year.

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Jeffrey T. Gill, Sypris Solutions, Inc. - Chairman, President & CEO [19]

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Okay. As we look at that part of the business, Jim, we're actually launching 7 programs this year that will contribute incrementally to 2019 and then provide additional full year lift in 2020. And I think if you were looking in the neighborhood of something in the range of 10% to 15% for 2019, that would probably be a good range.

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James Andrew Ricchiuti, Needham & Company, LLC, Research Division - Senior Analyst [20]

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Okay, that's helpful. Surprised to hear that, at least it sounds like you're hearing from your customers in the automotive area to expect demand to remain fairly solid. I understand the strength in, I think, the commercial vehicle market, but I'm a little surprised that your customers sound as relatively optimistic on the auto side of the business, just in light of what we're seeing in some of the headlines about the weakness in the market.

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Jeffrey T. Gill, Sypris Solutions, Inc. - Chairman, President & CEO [21]

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We're not big in automotive and where we do play and where we'll be playing a larger role in the future is more in the specialty vehicle type thing. And so I don't think that's a subject to the normal cyclicality of the broader market.

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James Andrew Ricchiuti, Needham & Company, LLC, Research Division - Senior Analyst [22]

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Got it. Okay, that makes sense. And just with respect to the data that you're seeing on the Class 8 market and what you're hearing from your customers, looks like you've got pretty good visibility looking out over the course of the year. It's that a fair way to characterize it?

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Jeffrey T. Gill, Sypris Solutions, Inc. - Chairman, President & CEO [23]

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Yes. I mean, to put it in perspective, one of our customers who has the largest market share in North America, has said that even after cleansing their order book to try to get rid of placeholders is that their entire backlog is filled for 2019. And so any orders they're taking now are really for 2020.

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Operator [24]

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And with no further questions in queue, Mr. Gill and Mr. Allen, I'd like to turn it back to you, gentlemen, for any additional or closing remarks.

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Jeffrey T. Gill, Sypris Solutions, Inc. - Chairman, President & CEO [25]

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Okay. Thank you, Aaron. Tony and I would like to thank you for joining us for the call. We certainly welcome your continued interest and, of course, your questions about our business. So we thank you and hope you have a great day.

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Operator [26]

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Ladies and gentlemen, this does conclude today's conference. We thank you for your participation. You may now disconnect.