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| 8-K - 8-K - IEC ELECTRONICS CORP | a8-k20180314annualmeetingp.htm |
Annual Meeting
March 14, 2018
IEC ELECTRONICS 2018©
2
Cautionary Note Regarding Forward-Looking Statements
References in this report to “IEC,” the “Company,” “we,” “our,” or “us” mean IEC Electronics Corp. and its subsidiaries except where the context otherwise
requires. This presentation contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or
“continue” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements
regarding future sales and operating results, future prospects, the capabilities and capacities of business operations, any financial or other guidance and all
statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. The ultimate correctness of
these forward-looking statements is dependent upon a number of known and unknown risks and events and is subject to various uncertainties and other
factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements.
The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those views
expressed or implied in our forward-looking statements: business conditions and growth or contraction in our customers’ industries, the electronic
manufacturing services industry and the general economy; variability of our operating results; our ability to control our material, labor and other costs; our
dependence on a limited number of major customers; the potential consolidation of our customer base; availability of component supplies; dependence on
certain industries; variability and timing of customer requirements; technological, engineering and other start-up issues related to new programs and
products; uncertainties as to availability and timing of governmental funding for our customers; the impact of government regulations, including FDA
regulations; risks related to the accuracy of the estimates and assumptions we used to revalue our net deferred tax assets in accordance with the Tax Cuts
and Jobs Act; the types and mix of sales to our customers; litigation and governmental investigations or proceedings arising out of or relating to accounting
and financial reporting matters; intellectual property litigation; our ability to maintain effective internal controls over financial reporting; unforeseen product
failures and the potential product liability claims that may be associated with such failures; the availability of capital and other economic, business and
competitive factors affecting our customers, our industry and business generally; failure or breach of our information technology systems; and natural
disasters. Any one or more of such risks and uncertainties could have a material adverse effect on us or the value of our common stock. For a further list and
description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in
our forward-looking statements, see our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our other filings with the Securities and
Exchange Commission (the “SEC”).
All forward-looking statements included in this presentation are made only as of the date indicated or as of the date of this presentation. We do not
undertake any obligation to, and may not, publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently
occur or which we hereafter become aware of, except as required by law. New risks and uncertainties arise from time to time and we cannot predict these
events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore,
you should not rely on our forward-looking statements as predictions of future events.
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IEC ELECTRONICS 2018©
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Agenda
‣ Business Overview
‣ Performance Review
‣ The Path to Growth
‣ Q&A
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IEC ELECTRONICS 2018©
Electronics Manufacturing
Service Provider
100% US Manufacturing
Life-Saving and Mission Critical
Products
Partner to Fortune 500
Companies in Regulated
Markets
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IEC ELECTRONICS 2018©
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Electronics Manufacturing Landscape
$425B Outsourced to
Contract
Manufacturers
Electronics Product Assembly
$1.4 Trillion2
80% is Consumer
Based High Volume
Products
$40B Outsourced
in the
United States
2 Worldwide Electronics Manufacturing Services Market – 2017 Edition
Our Target Markets
~$18B within the
Americas
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IEC ELECTRONICS 2018©
Aerospace & Defense Medical Industrial
Our Target Markets
$3.1B TAM*
4.3% CAGR
$6.0B TAM*
5.8% CAGR
$8.8B TAM*
5.9% CAGR
Highly Regulated Markets
High Switching Costs
*Represented by revenue observed in 2016 for contract manufacturers in the Americas. Ref. Worldwide Electronics Manufacturing Services Market – 2017 Edition
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IEC ELECTRONICS 2018©
*Source: Yahoo Finance as of February 2018;
Outperforming Average Industry GM
Consumer,
Computing, Auto
Portfolio Mix
Medical, Industrial,
Aerospace & Defense
18%
14%
10%
6%
Mixed Portfolio
High Concentration High Concentration
G
ro
ss
Ma
rgi
n
(
T
TM
)*
Sparton’s margin reflects only its MDS segment
7
2016
IEC ELECTRONICS 2018©
Deliver Solutions
Solve Challenges
Minimize Supply Chain Risk
Our Value Proposition
• Vertical Manufacturing
• Control Cost, Quality, and Lead Time for Key Commodities
• Printed Circuit Assembly
• Interconnect Solutions
• Precision Metal working
• Specialize in High Complexity Electronics and Full System
Assemblies
• Design & Test Engineering
• Analysis & Testing Laboratory
• Broad array of manufacturing solutions
• Full System Assembly & Fulfillment
to End Customer
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IEC ELECTRONICS 2018©
52%
18%
28%
• Missile Launch Platforms
• Encrypted Communication Systems
• Targeting & Surveillance Systems
Aerospace & Defense
Our 2017 Portfolio
• Resuscitation Systems
• Surgical Navigation Systems
• Infusion Delivery Systems
Medical
• Semi-conductor Manufacturing Equipment
• Locomotive Tracking & Asset Monitoring
Industrial Representative Customers
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IEC ELECTRONICS 2018©
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10
Performance Review
IEC ELECTRONICS 2018©
Our Turnaround Priorities
*EBITDA and EBITDA Margin are Non-GAAP Measures. Reconciliation of GAAP to Non-GAAP measures can be found at the end of this presentation.
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IEC ELECTRONICS 2018©
$0
$50
$100
$150
$200
$250
Peak Sales $260M
Consumer/Computer Products
Sales erode to
$19M due to
off-shoring
Company repositioned
to support highly
regulated, complex
products
Several acquisitions made
to expand capabilities
IEC Electronics ranked #3 in
Forbes Top 100 Best Small
Companies List
Sales (M)
Note: Results from continuing operations excludes revenues of Southern California Braiding divested July 2015
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Historical Perspective
IEC ELECTRONICS 2018©
-$15
-$10
-$5
$0
$5
2013 2014 2015 2016 2017
2013 to 2015 Net Income Loss of $35M
• Underperformance with previous
management
• Profit Erosion
February 2015 Turnaround Begins
• Jeff Schlarbaum returns to Company as new
CEO
• Divested underperforming business unit
2016 Return to Profitability
• Strengthened balance sheet and operational
excellence
• Generated $9.4M EBITDA or 7.4% EBITDA
Margin*
2017 Bridge Year
• Effectively managed through volume
reduction from certain key customers
• Maintained gross margins consistent with
industry average
• Rebuilt new customer sales funnel
Net Income ($M)
*EBITDA and EBITDA Margin are Non-GAAP Measures. Reconciliation of GAAP to Non-GAAP measures can be found at the end of this presentation.
13
Our Transformation Journey
IEC ELECTRONICS 2018©
Our Turnaround Priorities
FY2016 Generated $9.4M
EBITDA or 7.4% EBITDA
Margin*
FY2017 Generated $3.6M
EBITDA or 3.7% EBITDA
Margin*
57% Reduction of
Net Debt Since
Change of Control
Rebuilt new
customer sales
funnel
*EBITDA and EBITDA Margin are Non-GAAP Measures. Reconciliation of GAAP to Non-GAAP measures can be found at the end of this presentation.
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IEC ELECTRONICS 2018©
$54M
$72M
$100+M
9/30/16 9/30/17 1/31/18
Increasingly Robust Pipeline of New Business Opportunities
Reported Backlog
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Re-establishing Organic Growth
IEC ELECTRONICS 2018©
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The Path to Continued Growth
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IEC ELECTRONICS 2018©
The Path To Continued Growth
Focus on Target
Markets/Customers
Drive Sales Conversions
Continued Operational Excellence
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IEC ELECTRONICS 2018©
The Path To Continued Growth
Focus on Target
Markets/Customers
• Deliberate focus on the right customers
• Complex, highly engineered products
• Long-term, strategic partners
• Product life-cycles contribute to longer term
relationships
• 100% US Based Manufacturing Advantages
• Aerospace & Defense requires domestic
manufacturing partners for many products
• Intellectual property protection
• “Local” manufacturing for high mix, higher margin
programs
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IEC ELECTRONICS 2018©
Drive Sales Conversions
The Path To Continued Growth
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• Expand Opportunities with Existing
Customers
• Foundations of trust have been re-established
• Financial health of IEC
• Operational execution
• Brisk rate of new programs being awarded over the
last 6 months
• Rebuilt New Business Pipeline
• Non-existent in 2015
• Restructured sales and marketing platform in 2017
• Robust sales opportunity funnel
IEC ELECTRONICS 2018©
Continued Operational Excellence
• High Customer Satisfaction Levels
• Flexibility and responsiveness are critical contributors
The Path To Continued Growth
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IEC ELECTRONICS 2018©
Continued Operational Excellence
• Continuous Improvement for On-boarding New Programs
• Challenges within global supply chain for procurement of certain
electrical components
• Lengthy process development and customer acceptance timeline
• Multiple New Projects in Early Fiscal 2018
The Path To Continued Growth
Develop Robust
Manufacturing
Process for
Qualification
Customer
Acceptance
For Qualification
Order
Low Rate Initial
Production Runs
Full Production Receive
Materials
9-12 Month Process
Margin Pressure Margin Expansion
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IEC ELECTRONICS 2018©
Continued Operational Excellence
• Investment in Enterprise Resource Planning System
• Multi-year project to integrate and upgrade our systems
• Improve productivity and streamline processes to drive efficiency
within the company as well as customer service
• Currently have five ERP systems across the company
• Project in final verification stages; implementation expected by end of
year at our Newark location
The Path To Continued Growth
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ERP
System
Operations
Financial Supply Chain
Quality
IEC ELECTRONICS 2018©
• Expansion of Newark Operations
• Current facility is 100+ year old building that
requires extensive capital investment to update
• 150,000 sq. ft. state-of-the-art facility
anticipated to open in mid-2019 at Silver Hill
Technology Park
• Expected to be a $22M project
• 15 Year Lease with developer
• Up to $5M funded by State of New York tied
to job creation and capital equipment
• Expected to add 362 jobs to New York State
over 5 years
Recent Announcement
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Future
location
IEC ELECTRONICS 2018©
Draft Renderings of New Newark Facility
The Path To Growth
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IEC ELECTRONICS 2018©
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Looking Forward
25
2012
Success
• Revenue
$130M
• Gross Margin
18.9%
2013-14
Retraction
• Loss of $35M
through 2015
• Profit erosion
2015-16
Rebuild
• Turnaround
commenced
• Returned to
profitability
• Strengthened
balance sheet
2017
Bridge
• Rebuilt new
customer
sales funnel
• Proactively
addressed
volume
decline
2018
Growth
• Backlog of
$100+M as of
Jan 31
• Drive Organic
Growth
IEC ELECTRONICS 2018©
Value Proposition Resonates
with Fortune 500 Customers
Solid Organization with Proven
Industry Veterans Leading Key
Positions
Industry Leading EMS Business
Fundamentals
Transitioning into a Growth
Company
Key Takeaways
26
Thank you
IEC ELECTRONICS 2018©
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Reconciliation of U.S. GAAP to Non-GAAP Measures
In thousands. Individual
line items per Form 10-K
Twelve Months
Ended September
30, 2017
Twelve Months
Ended September
30, 2016
Net Income $ 81 $ 4,786
Interest 917 1,392
Taxes 62 70
Depreciation &
Amortization
2,542 3,106
EBITDA (Non-GAAP) $ 3,602 $ 9,354
In thousands. Individual
line items per Form 10-K
Twelve Months
Ended September
30, 2017
Twelve Months
Ended September
30, 2016
Net Sales $ 96,455 $ 127,010
EBITDA (Non-GAAP) 3,602 9,354
EBITDA Margin (Non-
GAAP)
3.7% 7.4%
Appendix A