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UF

Unique Fabricating, Inc. (UFABQ)·Q4 2021 Earnings Summary

Executive Summary

  • Q4 2021 net sales were $30.1M, down 14.0% YoY, with gross margin compressing to 9.8% as supply-chain and inflationary pressures reduced operating leverage; EPS was -$0.13 vs -$0.01 YoY .
  • Management issued revenue guidance: Q1 2022 $34–$35M, Q2 2022 $36–$38M, H2 2022 $75–$79M, FY 2022 $145–$152M, and FY 2023 $169–$179M; EV-related revenue expected to be ~5% in 2022 and ~6% in 2023 .
  • The 2021 audited financials carry a going concern explanatory paragraph; all debt classified current under a forbearance agreement extended to May 30, 2022, highlighting liquidity risk despite ongoing lender cooperation .
  • Strategic cost actions (price cost-recovery, SG&A reductions, automation investments) and customer certifications (Ford Q1) partially mitigate inflation and demand volatility; management sees improving supply-chain availability and higher demand volumes into 2022 .
  • Wall Street consensus (S&P Global) for Q4 2021 and prior quarters was unavailable for UFABQ; estimates comparisons not provided due to missing mapping in S&P CIQ [SpgiEstimatesError].

What Went Well and What Went Wrong

What Went Well

  • Cost recovery initiatives and targeted pricing expected to deliver ~$2.0M annualized operating margin improvement by end of Q2 2022; CEO: “these additional activities will have an approximate $2.0 million annualized improvement in operating margin” .
  • SG&A structurally reduced with salaried/commission actions (~$1.8M net annualized savings fully effective March 2022), maintaining a ~$5M quarterly run-rate near term .
  • Strategic/customer wins: Ford Q1 certification; $100M COI in 2021 despite industry shutdowns; EV content awards across Ford Mach-E, F-150 Lightning, Rivian, GM Hummer EV, Cadillac LYRIQ, Lucid Air, VW ID4, Tesla models; EV revenue mix targeted at ~5% 2022 and ~6% 2023 .

What Went Wrong

  • Supply shortages (semiconductors, raw materials, labor) and logistics inflation reduced volumes and margins; Q4 gross margin fell to 9.8% from 14.4% YoY, with net sales down $4.9M YoY .
  • Liquidity/covenant stress: minimum liquidity covenant breach in late 2021 (waived Feb 4, 2022), all debt classified current, and going concern emphasis signaling dependence on lender forbearance .
  • Operational inefficiencies: short/late customer release changes, higher material/freight/energy costs, and direct labor inflexibility pressured conversion costs and SG&A despite reductions .

Financial Results

MetricQ2 2021Q3 2021Q4 2021
Revenue ($USD Millions)$30.896 $29.909 $30.066
Gross Profit ($USD Millions)$4.616 $3.280 $2.961
Gross Margin %14.9% 11.0% 9.8%
SG&A ($USD Millions)$6.081 $5.741 $4.930
Operating Income (Loss) ($USD Millions)($1.465) ($7.576) ($1.969)
Impairment Charges ($USD Millions)$0.000 $5.115 $0.000
Interest Expense ($USD Millions)$0.769 $0.843 $0.701
Net Income (Loss) ($USD Millions)($2.509) ($1.856) ($1.529)
Diluted EPS ($USD)($0.26) ($0.19) ($0.13)

Q4 year-over-year comparison:

MetricQ4 2020Q4 2021
Revenue ($USD Millions)$35.028 $30.066
Gross Margin %14.4% 9.8%
Diluted EPS ($USD)($0.01) ($0.13)

Market mix (% of net sales):

MarketQ2 2021Q3 2021Q4 2021
Transportation89% 88% 88%
Appliance10% 10% 10%
Medical/Consumer/Off-road1% 2% 2%

KPIs and balance sheet:

MetricQ2 2021Q3 2021Q4 2021
Cash & Equivalents ($USD Millions)$0.924 $1.146 $0.742
Total Debt ($USD Millions)$54.480 $47.529 $48.425
Net Debt ($USD Millions)$53.556 $46.383 $47.683

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 2022n/a$34–$35 New
Revenue ($USD Millions)Q2 2022n/a$36–$38 New
Revenue ($USD Millions)H2 2022n/a$75–$79 New
Revenue ($USD Millions)FY 2022n/a$145–$152 New
Revenue ($USD Millions)FY 2023n/a$169–$179 New
SG&A Run-Rate ($USD Millions per quarter)2022 (near-term)n/a~$5 per quarter New
Operating Margin Impact ($USD Millions)Annualized by end Q2 2022n/a+~$2.0 via cost recovery New
EV Revenue Mix (%)FY 2022n/a~5% New
EV Revenue Mix (%)FY 2023n/a~6% New

Note: No EPS/margin percentage guidance provided; management emphasized cost-recovery and SG&A actions and outlined revenue trajectories .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2021)Previous Mentions (Q3 2021)Current Period (Q4 2021)Trend
Supply chain and chip shortagesBroad demand reductions; labor/logistics/raw material inflation; skepticism on third-party production ramp Volatility intensified; Q3 margins pressured; inventory levels historically low Still challenging but “improving supply chain availability” and higher demand volumes into 2022; costs still rising Improving availability; persistent cost inflation
Cost recovery/pricingProgram implemented to offset input inflation Mitigated portion of increased costs Targeted program focus; ~$2.0M annualized margin uplift by end Q2 2022 Strengthening execution
SG&A/organizational actions~$1.0M salaried savings annualized from H2 Q3 Further streamlining with additional savings and remediation costs Net ~$1.8M annualized savings; ~$5M quarterly run-rate near term Improving efficiency
EV opportunityNot highlightedEV awards growing; content relevant to NVH/weight/climate efficiency Multiple OEM EV platform wins; EV revenue ~5% (2022) and ~6% (2023) Positive mix shift
Appliances/consumer diversification10% appliance; lower sourcing activity COI diversification (appliance $16M; consumer $6–7M) GE ramp; appliance revenue expectation “north of $15M” for 2022 Improving demand
Forbearance/liquidityForbearance in place; sufficient liquidity; working with bank group Covenant violations; all debt current; lender cooperation Going concern paragraph; forbearance extended to May 30, 2022; covenant waiver in Feb 2022 Elevated risk, managed via amendments
Technology investmentsERP costs referenced —Laser cutting and robotics to lower labor and improve material utilization Operational productivity focus
Controls remediation—Material weakness remediation underway Management concluded controls effective as of 12/31/21 Completed remediation
Macro/inflation/UkraineInflation pressures noted Persistent inflation; chip shortages Inflation persists; geopolitical events impacting Europe/Asia; limited direct NA impact Mixed; monitoring

Management Commentary

  • “We are increasingly confident that we have established a solid foundation for profitable growth as conditions normalize… [EVs] present incremental opportunities… awarded parts on multiple new EVs… EV-related revenue to grow from approximately 5% in 2022 to 6% in 2023.” — CEO Doug Cain .
  • “On an annualized basis… additional [cost-recovery] activities will have an approximate $2.0 million annualized improvement in operating margin… tactical investments in laser cutting and robotics to improve… margins.” — CEO Doug Cain .
  • “Later today… our internal control over financial reporting was effective… previously identified material weaknesses… have been remediated… audited financial statements will include… going concern.” — CFO Brian Loftus .
  • “We see our first quarter 2022 revenue to be… $34–$35M… Q2 $36–$38M… FY 2022 $145–$152M… FY 2023 $169–$179M.” — CEO Doug Cain .

Q&A Highlights

  • Cost recovery scope: Management does not expect to fully pass through all inflation; targeted program-by-program recovery (e.g., container rates from ~$2–3K to ~$20K; raw materials +25–30%); balancing pricing with productivity investments .
  • SG&A outlook: Expect approximately $5M per quarter near term, reflecting savings and ongoing forbearance/remediation costs and bonus accruals .
  • EV content uplift: Management outlined higher content per EV (ballpark +15–20%) and plans to begin reporting dollar content per vehicle as a non-GAAP metric .
  • Appliance demand: GE production ramp and improved labor availability; appliance revenue expectation “north of $15M” in 2022 with potential upside .

Estimates Context

  • Attempts to retrieve S&P Global consensus for EPS and revenue for Q2/Q3/Q4 2021 failed due to missing CIQ mapping for UFABQ; therefore, comparisons to consensus and beat/miss analysis are unavailable [SpgiEstimatesError].
  • Given management’s FY 2022 revenue guidance ($145–$152M) vs FY 2021 actual ($125.7M), sell-side models (where maintained) may need to reflect volume normalization assumptions and SG&A run-rate around ~$5M/quarter alongside cost-recovery benefits .

Key Takeaways for Investors

  • Liquidity and covenants remain the central risk: going concern emphasis and all debt classified current under forbearance; watch for lender amendments/waivers through May 30, 2022 as a key near-term stock driver .
  • Revenue trajectory turning: Q1/Q2 2022 and FY 2022 guidance imply sequential and annual growth as supply chains normalize; volumes are the primary lever for margin recovery .
  • Cost actions gaining traction: targeted price recovery ($2M annualized) and SG&A reductions ($1.8M annualized; ~$5M quarterly run-rate) support operating margin stabilization amid persistent inflation .
  • EV platform exposure broadening (Ford, GM, Rivian, Lucid, VW, Tesla): growing EV mix (5–6%) is a medium-term mix benefit via higher NVH/sealing content per vehicle .
  • Diversification beyond transportation: Appliance (GE) and consumer goods wins underpin demand resilience and reduce auto-cycle dependence .
  • Operational focus: laser/robotics investments aim to structurally lower conversion costs and improve material utilization, aiding margin scalability as volumes rebound .
  • Monitoring macro and supply chain: management cites improving availability but ongoing cost inflation; geopolitical shocks mostly ex-NA currently, but elevated input costs remain a headwind .

Additional source documents:

  • Q4 2021 8-K press release and financials .
  • Q4 2021 earnings call transcript .
  • Q3 2021 8-K and call (trend context) .
  • Q2 2021 8-K and call (trend context) .