Shares of Servotronics, Inc. (SVT Quick QuoteSVT - Free Report) have declined 0.1% since reporting earnings for the first quarter of 2025. This compares unfavorably with the S&P 500 index’s 3.3% growth over the same time frame. Over the past month, the stock has gained 3%, underperforming the broader index’s 8.1% rally.

Revenue & Earnings Swing Positive

For the three months ended March 31, 2025, Servotronics posted revenues of $11.7 million, a 12% increase from $10.4 million in the prior-year period. The top-line expansion was driven primarily by higher sales volumes and improved pricing, slightly offset by an unfavorable product mix. Gross profit rose 36% to $2.4 million from $1.7 million, boosting the gross margin to 20.2% from 16.6% a year earlier. This improvement reflected increased production volumes, better fixed-cost absorption and enhanced operational efficiencies.

Operating income reversed from a loss of $0.3 million in the year-ago quarter to a profit of $0.2 million. Net income from continuing operations swung to $0.1 million, or $0.06 per diluted share, from a net loss of $0.4 million, or ($0.15) per diluted share, in the first quarter of 2024.

Servotronics, Inc. Price, Consensus and EPS Surprise

 

Servotronics, Inc. price-consensus-eps-surprise-chart | Servotronics, Inc. Quote

Other Key Business Metrics

EBITDA & Cash Flow Trends

On a non-GAAP basis, adjusted EBITDA was $0.5 million for the quarter, a meaningful improvement from a negative $12,000 in the prior-year period. The operating cash flow, however, turned negative at ($1.6) million from $0.4 million in the same period last year. The decrease in cash flow was primarily attributed to a $2.1-million increase in accounts receivable, partially offset by a $0.3-million reduction in inventory.

Capital expenditure declined to $69,000 from $152,000, and financing activities generated $1.6 million in cash, mainly from increased borrowing on the company’s $7-million asset-based credit facility. As of March 31, 2025, the outstanding balance on this facility was $3.7 million, up from $2.1 million at year-end 2024.

Management Commentary

CEO William F. Farrell, Jr. emphasized that Servotronics is benefiting from rebounding industry demand, particularly in commercial and military aerospace. He cited volume growth, improved margins and increased customer engagement as key drivers of the quarter’s performance. “We saw a significant turnaround in our operating income that was a direct result of our ongoing attention to process improvements and revenue enhancing strategies,” Farrell stated.

CFO Robert A. Fraass added that the company has negotiated revised pricing agreements with key customers, which are expected to support margin expansion in 2025 and accelerate in 2026.

Factors Influencing Headline Numbers

Volume & Pricing Offset by Product Mix

The revenue growth was driven by a 12% year-over-year increase, consisting of approximately $763,000 from higher unit volumes and $451,000 attributed to pricing enhancements. This was partially offset by a $32,000 negative impact of product mix. The gross profit margin improved due to better operational efficiency and higher fixed cost absorption, though product mix slightly limited upside.

Selling, general and administrative expenses rose 5% year over year to $2.1 million. The increase was largely attributed to legal and professional fees tied to the company’s exploration of strategic alternatives and proxy-related matters.

Interest and other expenses rose 16.9% year over year to $97,000, driven by increased use of the company’s credit facility to support working capital requirements.

Guidance

Management expressed optimism about the remainder of 2025, underpinned by strong demand trends in both commercial and defense sectors. Servotronics is selectively pursuing margin-accretive projects and expects continued financial improvement as its strategy unfolds.

Other Developments

Strategic Alternatives Under Review

In the first quarter, Servotronics initiated a formal review of strategic alternatives and engaged an investment bank to assist with the process. Management noted that initial discussions with potential strategic partners have been met with positive responses. The company is considering various options to maximize shareholder value, although no timeline or outcome has been confirmed.

Meanwhile, operations related to its previously divested Ontario Knife Company remain classified as discontinued. Residual losses tied to these operations were minimal at $17,000 for the quarter.