Good day and welcome to the Sypris Solutions Inc. Conference Call. Today's call is being recorded. At this time for opening remarks, I would like to turn the call over to the President and Chief Executive Officer, Mr. Jeffrey Gill. Please go ahead sir.

Thank you, Sebastian, and good morning, everyone. Tony Allen and I would like to welcome you to this call, the purpose of which is to review the company's financial results for the second quarter of 2018. For those of you, who have access to our PowerPoint presentation this morning, please advance to Slide 2 now. We always begin these calls with a note that some of what we might discuss here today may include projections and other forward-looking statements. No assurance can be given that these projections and statements will be achieved and the actual results could differ materially from those projected as a result of several factors. These factors are included in the company's filings with the Securities and Exchange Commission. And in compliance with Regulation G, you can access our website at sypris.com to review the definitions of any non-GAAP financial measures that may be discussed during this call. With these qualifications in mind, we'd now like to proceed with the business discussion. Please advance to Slide 3. I will lead you to the first half of our presentation this morning, starting with an overview of the highlights for the quarter, to be followed by an update on the outlook for each of our primary markets. Tony will then provide you with a more detailed review of our financial results for the quarter as well as a walk through our financial guidance for 2018. Now, let's begin with the overview on Slide 4. We are pleased to report that revenue for the quarter came in at just under $23 million which represented a 15.2% increase from the first quarter of this year and an 8.1% increase from the prior year period. Sypris Electronics led the way with shipments during the quarter up 40.6% sequentially and up 6.3% on…

Thanks, Jeff. Good morning, everyone. I'd like to discuss with you some of the highlights of our second quarter financial results. Please advance to Slide 10. Q2 consolidated revenue was $23 million, an increase of 8.1% from the first quarter of last year. The revenue split between Sypris Technologies and Sypris Electronics was $15.3 million and $7.6 million respectively. This represents an increase over the prior year period of 9% for Sypris Technologies and 6.3% for Sypris Electronics. The primary demand driver for Sypris Technologies continues to be the strong market conditions for our customers serving the commercial vehicle, automotive and energy markets. Our revenue for Q2 was up sequentially by 5.7% from Q1 and we see further outside in these markets as we enter the third quarter. Revenue for Sypris Electronics increased 40.6% sequentially as component availability improved during the second quarter. The supply chain team for Sypris electronics continues to work closely with our customer base to resolve the challenges of component availability in the market that could impact our programs. We are making progress with these initiatives as evidenced by the increase in revenue for the period, but much work remains. We will continue to pursue a variety of solutions including identifying alternative sources of supply and qualifying alternative components. While the component shortages are expected to continue in the industry for the near-term, we expect to maintain our position in the market, which should allow us to more efficiently balance production during the second half of the year. Consolidated gross margin improved 520 basis points to 12.8%, compared with 7.6% in Q2 of '17. In early 2017 we announced our plans for transferring production from our Broadway facility and the actions to reduce our cost by an estimated $26 million in 2018 compared to 2016. These…

Thank you. [Operator Instructions] We'll now take our first question from Jim Ricchiuti from Needham & Company. Please go ahead, sir.

Congrats on the gross margin improvement. It looks like you got there a little differently than we were expecting. So I'm wondering, is some of the additional cost that you incurred in scaling the Toluca business just to meet the demand, is that anticipating that's going to ease in the second half? It sounds like you think that may be behind you.

Yes, Jim. We do. We expect it and we're beginning to see that as we enter the third quarter and look at our July numbers. And as we've maintained our guidance as we have for the second half of the year, in order to get to that number, we are going to need to see those costs come out of the technologies business and we're starting to see that in the performance for Q3.

Got it. Just with respect to the outlook in that business, just given the demand trends and maybe this is even looking beyond the second half, how confident are you in the ability to scale the business to ramp that business to meet what looks like still to be a pretty healthy market environment and during next year?

Jim, this is Jeff. We feel very good about it actually. During the first half of this year, we ended up increasing employment in Toluca by 160 people and those people are now on board and trained in that type of thing. We have the direct hand indirectly. We're placed to handle the higher volumes and we're through much of the training cost and the associated things for bringing those people on. To Tony's point, for performance, we expect to see much better performance in the second half of the year and from the standpoint of capacity and being able to meet the demand, we feel we have the resources in place.

Got it. And then just switching to the electronic side of the business. It sounds like you're more optimistic that these component shortages may be also behind you. It sounds like you got some help from your customers as well?

Yes. The key thing for us was getting some of our customers who are very significant in size to join with us to either help us gain access to a larger allocation of components, or to help us re-qualify different components or such through components and/or sources and then the final piece that's been very, very helpful, is their willingness to use their financial resources with the supply base to go out and secure long-lead funding to ensure the delivery of the components.

Okay. And Jeff, are we talking mainly about the ceramic capacitors?

Yes.

Okay, got it. That's it for me. I'll jump back in the queue. Thank you.

[Operator Instructions] We'll now take again a question from Jim Ricchiuti from Needham & Company. Please go ahead.

Going back to the electronics business. Are you seeing any signs yet? This is early, but any signs yet of a stronger funnel of opportunities as it relates to the new defense bill? Or is that something you might see later in the year or early in 2019?

What we've seen is a pretty material increase in the funnel of opportunities. It appears that our customers both are growing and there appears to be an interest in longer term commitments. Meaning instead of on an annual basis, some going out two or three years. So while the conversion of that hasn't taken place yet, the activity is certainly materially and as we look into 2019 at some form of surprise, we would think that that would continue to push our top line during the coming year.

Okay. And Jeff, are you seeing the pick up yet in your energy vertical? Clearly, we're seeing all oil prices at significantly higher levels. Has that started to translate into bookings for you?

We went through the period back in the first half of the year, Jim. As you know where the impact of tariffs and all those things kind of put everybody in the neutral. And recently, we have seen a lot more than demand in that side of the business. Our conclusion -- I don't know how well-founded, but kind of the internal belief is that the amount pan-out [ph] demand out there finally just overcame the uncertainty as to what was going to happen when steel prices and some of these other things. The outlook at the moment looks pretty positive.

Good and that also provides a nice tailwind, doesn't it? To your gross margins in that part of the business? It's typically at higher margin?

Yes, it is typically because of the proprietary products.

Okay. That's it for me. Thanks. Congrats.

Okay. Well, thank you, Jim.

Thank you, Jim.

It appears there are no further question at this time. Mr. Gill, I'd like to turn the conference back to you for any additional or closing remarks.

Okay. Well, thank you, Sebastian. Tony and I would like to thank you for joining us on the call. We welcome your continued interest and of course your questions about our business. Thank you and have a great day.

This concludes today's call. Thank you for your participation. You may now disconnect.