Universal Stainless & Alloy Products Inc (USAP) Reports Strong Q3 2023 Results
Q3 2023 net sales of $71.3 million, up 54% YoY and 3% QoQ
Premium alloy sales totaled $16.5 million, up 83% YoY
Net income of $1.9 million, more than double the Q2 2023 figure
Operating income increased 43% to $4.4 million in Q3 2023
Universal Stainless & Alloy Products Inc (NASDAQ:USAP) released its Q3 2023 earnings report on October 25, 2023, revealing strong financial performance. The company reported net sales of $71.3 million for the third quarter of 2023, a 54% increase from the same period in 2022 and a 3% increase from Q2 2023. The first nine months of 2023 saw net sales increase by 41% to $206.2 million.
Performance Highlights
Sales of premium alloys, which make up 23.1% of sales, totaled $16.5 million in Q3 2023, a significant increase from 17.3% of sales in Q3 2022. The company's backlog of premium alloys suggests this positive momentum will continue into Q4. The company's gross margin improved to $10.9 million, or 15.2% of sales, the highest since Q2 2018. This was primarily due to a richer product mix and higher selling prices.
Financial Achievements
Operating income for Q3 2023 increased by 43% to $4.4 million, compared to an operating loss of $2.3 million in Q3 2022. Net income more than doubled to $1.9 million, or $0.20 per diluted share, compared to a net loss of $1.3 million, or $0.14 per diluted share, in Q3 2022. For the first nine months of 2023, net income was $2.2 million, or $0.25 per diluted share.
Commentary
Dennis Oates, Chairman, President and CEO, commented: We continued to meet our growth plan for the third quarter with sales of $71.3 million -- the second highest ever, gross margin expansion to 15.2%, a doubling of our net income sequentially to $1.9 million, or $0.20 per diluted share, and a 20% increase in adjusted EBITDA, which was one and a half times greater than in the third quarter a year ago. Our profitability benefitted from a richer product mix and higher prices, even as we experienced negative surcharge misalignment due to falling commodity prices."
Financial Position
As of September 30, 2023, the company's managed working capital was $151.6 million, compared to $148.4 million at the end of Q2 2023. The company reduced total debt by $3.8 million to $89.5 million compared to $93.3 million at the end of Q2 2023. Capital expenditures for Q3 2023 totaled $2.7 million.
Outlook
The company is optimistic about its growth trajectory continuing into 2024, with a substantial book of business extending through the year. The company is also in the commissioning phase of a capital project to add two Vacuum-Arc Remelt (VAR) furnaces at its North Jackson facility, which will increase its capacity in premium and specialty alloys by 20%.
This article first appeared on GuruFocus.
