Universal Stainless Achieves Record Q2 Sales, Focuses on Aerospace Growth

Universal Stainless & Alloy Products Inc. (ticker: USAP) has reported strong performance in the second quarter of 2024, achieving record sales and notable profitability, primarily due to the aerospace sector. The company announced record sales of $82.8 million and a net income of $8.9 million, equating to $0.90 per diluted share.

Universal Stainless’s gross margin improved to 25.4%, with $7.3 million generated in net cash from operating activities, alongside a $3 million reduction in debt. The company’s backlog stands at $297 million, signaling continued demand for its offerings.

### Key Takeaways
– Record sales of $82.8 million, with a net income of $8.9 million or $0.90 per diluted share.
– Sales in the aerospace market reached a new high of $68.6 million, comprising 83% of total sales.
– Gross margin rose to 25.4%.
– Generated $7.3 million in net cash from operating activities and reduced debt by $3 million.
– Backlog of orders remained robust at $297 million.
– Plans for investing in premium alloy capacity, including the addition of a new furnace.
– Continuous improvement initiatives contributed to cost reductions and enhanced yields.

### Company Outlook
– The company intends to keep investing in premium alloy production to facilitate growth in the aerospace sector.
– Focus remains on managing working capital and generating positive cash flow.
– Anticipated opportunities for revenue growth and margin expansion.
– A strong recovery is expected in the heavy equipment market following the 2025 U.S. election cycle.

### Bearish Highlights
– Shipments in the heavy equipment sector decreased due to lower demand.
– Increased selling, general, and administrative costs attributed to higher employee-related expenses.

### Bullish Highlights
– Achieved record profitability with operating income of $12.8 million.
– Significant sales growth in the aerospace market, with premium alloys making up 25% of total sales.
– Overall shipment volume increased by 2% compared to the previous quarter.
– Adjusted EBITDA reached an all-time high of $18.5 million.

### Misses
– Despite strong overall performance, the company noted the challenge of declining demand in the heavy equipment sector.

### Q&A Highlights
– CEO Chris Zimmer highlighted the strategic focus on defense applications within the aerospace market.
– The company successfully reduced lead times for premium alloys by managing order entries more effectively.
– Although the backlog might remain steady or decline slightly in upcoming quarters, the aerospace and defense sectors are solid.
– Universal Stainless is considering partnerships or acquisitions to facilitate growth and seize market opportunities.
– The Specialty Metals industry is experiencing limited supply and high demand.

In conclusion, Universal Stainless showcased robust performance in Q2 2024, setting records in both sales and profitability. The company is well-positioned to capitalize on the expanding aerospace market while also looking for strategic growth and efficiency improvements. Management expressed optimism about the future and is dedicated to executing strategies that meet the increasing demand in the Specialty Metals sector.