Servotronics Announces Financial Results for Third Quarter 2022
Servotronics, Inc. (NYSE American – SVT) a designer and manufacturer of servo-control components and other advanced technology products today reported financial results for the quarter and nine months ended September 30, 2022.
The Company reported third quarter 2022 net loss of $(316,000), or $(0.13) per diluted share as compared to third quarter 2021 net income of $3.2 million, or $1.34 per diluted share. In the third quarter of 2021, the Company's net income included non-recurring other income related to two COVID-19 government assistance programs as well as non-recurring expenses related to legal settlement awards. See the Condensed Consolidated Statements of Operations below and the Company's Quarterly Report on Form 10-Q for additional information regarding these non-recurring items.
Consolidated revenues were $11.0 million in the third quarter of 2022 compared to $10.9 million for the same period last year. The modest revenue growth in the third quarter of 2022 benefited from the recovery of business within the commercial aircraft market for the Advanced Technology Group (ATG) as well as a shift in product mix toward higher-priced products in that segment. That growth was partially offset by reduced volumes and lower-priced products sold by the Consumer Products Group (CPG). For the quarter, ATG revenue grew to $8.8 million in 2022, increasing 4.4% from $8.4 million last year, and CPG revenue was $2.2 million in 2022, decreasing 12.1% from $2.5 million in 2021.
Revenues increased $3.4 million, or 11.3% in the first nine months of 2022 compared to the first nine months of 2021. Net loss for the nine-month period ended September 30, 2022 was $(801,000), or $(0.33) per diluted share as compared to net income of $5.0 million, or $2.06 per diluted share for the same period last year.
"Our third quarter continued the improvements in performance in 2022" said Chief Executive Officer William F Farrell, Jr. "We believe our recently-announced, updated strategy will allow us to capitalize on increased customer demand and the strength of the commercial aircraft market as well allow us to enter potential new markets. As we grow and retain our group of dedicated team members, we anticipate temporary pressure on margins, however, we believe these investments are necessary now to support the growth we anticipate as we head into 2023 and beyond. I am very optimistic that Servotronics is well positioned for future success."
Growth in consolidated revenue is expected to continue in the fourth quarter of 2022 and into 2023 as compared to the same periods in prior years. This will be driven primarily by anticipated increases in ATG revenue and units shipped under long-term prime contracts and subcontracts.
Third quarter consolidated gross profit was $1.5 million in 2022 compared with $1.8 million in 2021. Gross profit as a percentage of revenue was 13.9% in 2022, declining from 16.2% in last year's quarter. The primary contributors to the gross profit reduction were the discontinuation of the Company's participation in the New York State Shared Work Program which began in the first quarter of 2021 and ended in the third quarter of 2021 as well as increased compensation expense in third quarter 2022 to prepare for the ramp-up of production at the ATG.
A reduction in third quarter 2022 selling, general and administrative expenses (SG&A) was driven by lower legal fees at the ATG and the elimination of non-recurring legal settlements in 2021 for both segments. Third quarter SG&A was $1.9 million in 2022, compared to $4.6 million last year which included $1.9 million of legal settlements. Third quarter SG&A as a percentage of revenue improved to 17.7% in 2022 from 42.2% last year.
Servotronics third quarter operating loss was $(420,000) for 2022, an improvement of $2.4 million from an operating loss of $(2.8) million last year, as current year non-recurring expenses and the discontinuation of last year's non-recurring benefits were fully offset by an increase in sales and a decrease in SG&A.
ABOUT SERVOTRONICS
The Company is composed of two groups – the Advanced Technology Group (ATG) and the Consumer Products Group (CPG). The ATG primarily designs, develops and manufactures servo controls and other components for various commercial and government applications (i.e., aircraft, jet engines, missiles, manufacturing equipment, etc.). The CPG designs and manufactures cutlery, bayonets, pocket knives, machetes and combat knives, survival, sporting, agricultural knives and other edged products for both commercial and government applications.
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 severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses' and governments' responses to the pandemic on our operations and personnel, 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
SOURCE Servotronics, Inc.