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UF

Unique Fabricating, Inc. (UFABQ)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 2022 delivered a modest revenue beat versus prior guidance and strong sequential recovery: net sales $35.31M, above the Q1 guide ($34–$35M), highest since Q3 2020; gross margin improved to 13.5% from 9.8% in Q4 2021 .
  • Management slightly lowered Q2 revenue guidance to $35–$37M (from $36–$38M) but maintained H2 2022 ($75–$79M) and FY 2022 ($145–$152M); FY 2023 sales reconfirmed at $169–$179M in prepared remarks, with an alternative $165–$179M range referenced in Q&A .
  • Cost recovery initiatives and fixed-cost reductions are the core levers; cumulative targeted actions expected to fully realize by end of Q2, underpinning margin expansion into H2 2022 and 2023 (16%+ in H2’22; ~18% in 2023; long-term target 20%) .
  • Liquidity remains tight under the bank forbearance, but the company expects ~$2.1M of IRS refunds/credits in the next few months and reported $5.2M revolver availability at quarter-end, reducing near-term risk while management pursues a longer-term lending framework .

What Went Well and What Went Wrong

What Went Well

  • Revenue slightly exceeded Q1 guidance and improved sequentially: “first quarter revenue … approximately 17% above each of the third and fourth quarters of 2021 and the highest since the third quarter of 2020” .
  • SG&A run-rate reduced to approximately $5M; management reiterates discipline to maintain ~$5M per quarter despite revenue growth, supporting operating leverage .
  • Diversification progress: ~30% of YTD order intake from non-automotive; approvals and wins in appliance, medical, and consumer goods broaden demand and lower auto cyclicality .

What Went Wrong

  • Gross margin compressed YoY to 13.5% (vs 16.8% in Q1 2021) due to higher raw materials, logistics, and labor costs; plant inefficiencies from volatile customer schedules persisted .
  • Forbearance-related costs (~$0.2M in Q1) and bank covenant constraints continue to weigh on earnings and hinder certain transportation wins until a long-term agreement is reached .
  • Q2 guidance was trimmed amid ongoing inflation and supply chain challenges; cost recovery trails cost increases timing, pushing margin benefit realization into Q3/Q4 .

Financial Results

MetricQ3 2021Q4 2021Q1 2022
Net Sales ($USD Millions)$29.91 $30.07 $35.31
Gross Profit ($USD Millions)$3.28 $2.96 $4.78
Gross Margin %11.0% 9.8% 13.5%
Operating Income (Loss) ($USD Millions)$(7.58) $(1.97) $(0.19)
Net Income (Loss) ($USD Millions)$(1.86) $(1.53) $(0.57)
Diluted EPS ($USD)$(0.19) $(0.13) $(0.05)
YoY Comparison (Q1)Q1 2021Q1 2022
Net Sales ($USD Millions)$34.80 $35.31
Gross Profit ($USD Millions)$5.86 $4.78
Gross Margin %16.8% 13.5%
Net Loss ($USD Millions)$(1.07) $(0.57)
Diluted EPS ($USD)$(0.11) $(0.05)
Segment Mix (% of Net Sales)Q4 2021Q1 2022
Transportation88% 89%
Appliance10% 9%
Consumer/Off-Road2% 2%
Liquidity & LeverageQ4 2021Q1 2022
Cash & Equivalents ($USD Millions)$0.74 $0.75
Revolver Balance ($USD Millions)$19.54 $19.34
Total Debt ($USD Millions)$48.43 $47.00
Revolver Availability ($USD Millions)—$5.20
Operating Cash Flow & CapexQ1 2021Q1 2022
Cash from Operations ($USD Millions)$0.09 $1.76
Capital Expenditure ($USD Millions)$(1.53) $(0.23)
Interest Expense ($USD Millions)$0.69 $0.48

Note: No Wall Street consensus estimates available via S&P Global for UFABQ this quarter; estimate comparisons could not be performed (attempted retrieval returned unavailable mapping).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)Q2 2022$36–$38 $35–$37 Lowered
Net Sales ($USD Millions)H2 2022$75–$79 $75–$79 Maintained
Net Sales ($USD Millions)FY 2022$145–$152 $145–$152 Maintained
Net Sales ($USD Millions)FY 2023$169–$179 (prepared) $169–$179 (prepared) ; $165–$179 (Q&A) Maintained; range clarified in Q&A
Gross Margin %H2 2022—16%+ target Newly disclosed
Gross Margin %FY 2023—~18% target Newly disclosed
SG&A ($USD Millions/quarter)Ongoing~$5 ~$5 Maintained
Expected IRS refunds/credits ($USD Millions)Near-term~$2.1 ~$2.1 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2021)Current Period (Q1 2022)Trend
Supply chain, labor, input inflationSignificant headwinds; OEM shutdowns and volatile schedules; margins pressured Challenges persist but volumes improved; less short-term fluctuations; inflation still elevated Gradual improvement in volumes; inflation persists
Cost recovery initiativesBroad-based then targeted; ~$2.0M annualized margin benefit by end of Q2 (Q4 call) Targeted recovery on most impacted programs; >$2.5M annualized benefit expected by end of Q2 Scaling; incremental benefit
Bank forbearance & liquidityCovenant defaults; going concern paragraph; forbearance extended to May 30, 2022 Ongoing costs under forbearance; ~$5.2M revolver availability; working on long-term framework Active remediation; still a constraint
Diversification (appliance, medical, consumer)2021 COI: 16% appliance, 8% medical/consumer; wins in consumer goods ~30% YTD order intake outside auto; appliance volumes uptick; approvals in RIM HVAC seals Expanding non-auto exposure
EV program exposure/contentMultiple EV awards; EV revenue expected 5% (2022) → 6% (2023) Continued focus; content opportunity highlighted, incremental HVAC seals approval Positive trajectory
Auto SAAR/production outlook14.7M 2022 forecast; Q1 SAAR expected to exceed Q4 2021 Q1 SAAR ~14.0M; 2022 remains 14.7M; Q2 lower before H2 rebound Back-half weighting

Management Commentary

  • “Our first quarter revenue that modestly exceeded our prior guidance was approximately 17% above each of the third and fourth quarters of 2021 and the highest since the third quarter of 2020.” — CEO Doug Cain .
  • “We continue to navigate labor challenges, higher raw material costs, and other supply chain issues aggressively and creatively… we are confident we have taken the necessary steps to drive improved performance as volumes increase.” — CEO .
  • “We expect [targeted cost recovery] to be fully realized by the end of the second quarter with more than a $2.5 million annualized benefit.” — CEO .
  • “Selling, general and administrative expenses… were down to $5 million… partially offset by higher professional fees related to our forbearance agreement.” — CFO Brian Loftus .
  • “We ended the quarter with approximately $0.8 million of cash and cash equivalents and $5.2 million of net availability on our revolving line of credit.” — CFO .

Q&A Highlights

  • Guidance cadence and H2 weighting: Management trimmed Q2 revenue to $35–$37M, confirmed H2 $75–$79M and FY $145–$152M; expects margin improvements to begin in Q3 as cost recovery fully catches up .
  • SG&A run-rate discipline: SG&A targeted at ~$5M per quarter; largely fixed aside from minor commission-linked costs; forbearance fees expected to drop post agreement .
  • Gross margin trajectory: Target 16%+ H2 2022, ~18% in 2023, longer-term aspiration 20% as volumes recover and cost actions take hold .
  • Cost recovery mechanics and competitive position: Multi-phase price adjustments with customers; broader industry now pushing price increases, leveling competitive field; full realization expected by end of Q2 .
  • EV content opportunity: Management targets higher per-vehicle content vs ICE over time; noted HVAC seals approval and strategic fit for NVH/weight/climate control components .

Estimates Context

  • S&P Global Wall Street consensus estimates were unavailable for UFABQ this quarter despite attempted retrieval; therefore, comparisons to consensus revenue/EPS and beat/miss analysis could not be performed.

Key Takeaways for Investors

  • Sequential improvement with a modest Q1 revenue beat and stronger gross margin signals operating leverage is emerging as volumes return and SG&A is held at ~$5M per quarter .
  • Near-term caution: Q2 guide lowered amid persistent cost inflation; margin benefits are more likely from Q3 onward as targeted cost recovery completes .
  • H2 2022 and FY 2022 sales guidance maintained; watch for execution on 16%+ gross margin target H2 and ~18% in 2023 to drive earnings power normalization .
  • Liquidity tight but manageable: $5.2M revolver availability and expected ~$2.1M IRS refunds provide runway as bank agreement negotiations continue; forbearance resolution is an upside catalyst for new business wins .
  • Diversification and EV exposure are building: ~30% YTD non-auto order intake and multiple EV program awards should support growth durability beyond transportation cycles .
  • Watch list catalysts: resolution of forbearance agreement, confirmation of Q3/Q4 margin expansion, sustained cost recovery realization, and appliance/medical wins translating into revenue mix shifts .