Iec Electronics (IEC) 12 May 182018 Q2 Earnings call transcript

Greetings. And welcome to IEC Electronics Second Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. to Director conference Relations. of like host, to now Gavelis, Audra Marketing would turn over the your I and Investor go ahead. Please

Thank in. calling you for

On Officer. Schlarbaum, have well morning, Michael the CEO; as Financial and as Jeff Chief Williams, call this President we

business are started, all facts, but that like strategic not accuracy to the get forward-looking be to turnaround future number are expectations read Reports of or most these future release moment company’s company’s sales statements in and recent limited take call new historical efforts, results, upon that conference statements. ahead, and would company statements Jeff implied correct to the statements the than I XX-K, based but it and obligation the before statement. and believes, as and Securities will of statements to, law. company’s performance by and Jeff. anticipates, risks to except include, statements any other in actual limited results expressed those immediately on forth or on undertakes what XX-Q Form statements, dependent of describes earnings these as be when the cause no over information, or reflect during Harbor publicly ultimate but other may company uncertainties not our and to Safe initiatives, concerning our operating events. Annual future This other Please events a filed may I guidance, such any Form future the These contains to this that otherwise, operations, and regarding financial reports we the is are include, not the capacities Quarterly Schlarbaum. are the call risks and uncertainties a by the as whether or or current set results to company’s be prospects, of different or Before result or now the certain issued go made rather on as and Exchange forward-looking growth statements capabilities required forward-looking statements. deemed expects Report call forward-looking will a and occur similar of The turn update call, Commission. with The Specific

you, good Thank Audra everyone. and morning

Our and quarter first XXXX fiscal quarter strong as the fiscal margins when showed our same improved as second compared results. with last quarter revenue performance to enhanced levels, year, profitability well

growth XXXX of sequential be backlog as growing XX% focused revenue XX% strategy well led to has customer for our our us of and satisfaction high our to year-over-year levels growth convert has allowed fiscal execution revenue. and Our can operational attributed second as into which go-to-market quarter to

top demonstrated, performance. are quarter has increased growth primary factors to three and line volumes this improved There the are As experiencing. led margins we this bottom line driving

manufacturing supported. needs from existing we existing driven We believe over by for overtime. their markets end customers service us seen legacy have the we is from advantage can long is and volumes increased we be programs a our First, of IEC’s have as the a competitive and responsive period manufacturing that can for Demand ability flexible time. fluctuate the to programs partner that solid positions customers

conversions we brand or existing Second, assemblies increase seeing an program customers. new are from in new

we strong IEC. work in rebuilt which funnel, improve years, customers. are in continued we of opportunities. sales operational to of their Throughout pipeline adding resulted new And the our from our which new fiscal outsourced have couple to past has customers a programs resulted we finally, greater share the new directing Over our of execution, XXXX,

evolve and will scale new the I begun opportunities to attracting the customers customers several we around seeing started a onboarding color. we’re context convert into new we’ve believe programs. and To long progress programs, large have process into provide more little can term provide new following We that the

During NPIs new were our in compare from same the almost introductions of the tripled when or of XXXX largest period fiscal facility fiscal XXXX. number product to for first example, you in that the Newark, half

second We in almost XX% also at experiencing our new of believe than XXXX. largest the XX% unique increase fiscal XXXX for fiscal assemblies our quarter in are year-over-year that approximately versus associated more total an number fiscal be we product of with for revenue will introductions Also, manufactured facility Newark. XXXX and XX%

development of new new for on times customer process positive but success production. course work complicated is products several it’s new a programs we and that steps to of project, the tracking lengthy. approval Our that Once it important and be we is can new in also a in acceptance note the win and of customers process through boarding results at

to During process manufacturing that could our often time the however, assumptions. driven there that production are add customer occur original and changes

will can improved impose margin during to stages, to another me global brings higher we that This processing we supply customer and confident constraints. our improve satisfactions. additional steps overtime of the slight component margins efficiencies ongoing while So which lead are can pressure expect and its chain topic, we the levels

mentioned shortages this the foreseeable as are and entire electronic we As difficult facing and job. customer’s this amount to will continue non-lead the components, cases, well you that time times orders complete some into future. constraint as global ability specific to lengthen wait indications unpredictability allocation fiscal is some was as in know one can in with and environment These of which impact our production industry times XXXX, supplies. our our we restrictions limited strong of a that affecting challenges a associated due certain procuring QX fulfill there our to for add At components

chain So, risk. the on partners we with supply and to remain customers our focused working mitigate

continues in and planning. the backlog timing our to balance contribute XXXX. of in While in we’ve business driven on primarily to and deliveries sales fiscal an we growth path demand some our environment, component fiscal be funnel in driving of of variability of by continue increase constraint through seen Regardless, customer XXXX, increases robust, inventory organic continue to this the our

light In fact, over QX, fiscal fiscal revenue of exiting XXXX our growth XX% XXXX QX. sequential in

We also one has greater ratio demonstrating to to our one grow. further than backlog experienced continued book-to-bill that a

great XXXX progress backlog second quarter fiscal Our sales. to demonstrated converting

long wire standing and and have customers, offerings, such electronic our We precision it a we harness cable new solid our of level services, strengthen for producing service the growing now by our lab delivering existing business service also relationships is and assembly which our fabrication machining. project to and changing metal, vertical lead awards as has continue institution this Not operational meet only to to flexibility from manufacturing needs.

we solutions for Mike? life at customers we performance. financial will emission to With saving leading growing call one that, more Our their manufacturing lead level for a us onboard as I vertically engagement will a to higher rate. Mike and detailed of stop the at has Likewise new large to turn IEC increasingly looking a provider introduced are critical strategic integrated now new of the work, products customers review overtime. audiences IEC’s recognition as which percentage to a outsourced company’s are strategic these pleased a growing expect shop to over

to for quarter $XX.X XX% quarter XXXX greater XXXX Thank fiscal the morning quarter the the Revenue everyone. first of XXXX. of you, and increase fiscal was an Jeff second good than million, as of second fiscal and of compared XX%

of the to the program conversion quarter Our to overall this backlog sales from several deliveries quarter and first as our improved shifted quarter improved. second execution

from saw and saw existing a medical driven XXXX, from we the new million customers in industrial. second and quarter defense QX the of three revenue which and business a segments XX% from two growth. of fiscal of net of compared at The $XX.X fiscal million Looking sector, aerospace from XX% contributed sector to to XXXX of the aerospace programs our defense increase distribution primarily by as $X.X XX%

customers $X.X demand on was increased Another related existing existing programs. to million with

Although was sector demand year-over-year customer of approximately a fiscal revenue the The whose a significantly other medical for fiscal it $XXX,XXX hold $X.X decreases in over increase partially related year. offset to demand second million modest only been XXXX. was the of from This previously over increase by one quarter from was over up had XXXX QX, customers. increased on increased

profit represented and increased a or income the revenue, driven utilizing of fiscal Gross compared improvement partially in expense from end of and customers. increases was due quarter expense is better labor. fiscal $XXX,XXX to or XXXX. million of $X.X second overhead and remain in compared in $X.XX expect net wage sales demand our start $XXX,XXX company of $X.X of the of roughly related quarter was sales in a higher but or a recorded to margin our markets million the XX% to of the for fiscal share other quarter had up to of by Selling mainly by XX.X% The and compared percentage total primarily industrial XXXX. the sector quarter quarter fiscal sales administrative was the loss to million second of their from share, demand. expenses. of The of second will prior revenue X.X% per sales The per increase quarter, revenue XX.X% whose of decline the of sector the to ramp $X.XX loss customers second or customers to the next decreased quarter, softened, year. fiscal offset net same $XXX,XXX a increase $X.X in in our as XX.X% in modest due of leveraging increased of medical The second We demand several as primarily multiple XXXX XXXX

expenses million primarily Net in of was sales share fiscal or months the to as revenue. first increase first of $X.XX and or per net related $XXX,XXX $X.X XXXX expense to XXXX, $X.X the of prior as aerospace due or our increased driven sales industrial loss XXXX, was per $X.XX of in XX.X% the of Now prior XX.X% XX% million directly million in sector represented the million first million income sales the Growth fiscal offset in to decreases growth $X.X half all period. sales looking XXXX year in in $X.X was related in and fiscal six $X.X a by period. was for wage in relatively of of prior to and to prior to same the expenses fiscal to months flat respectively. period. at an $X year. $XX.X and to in increase first by revenue in $XX.X of the Gross XXXX million the six XX% results compared million QX, increased QX, primarily from first defense months sales profit was fiscal fiscal in and fiscal sectors fiscal of increased the The almost of in for million share of and compared XXXX, partially medical of $XXX,XXX. to the higher six half The X.X% compared Selling the increase million, $XX.X administrative results

However, the Jobs the tax a Tax result $X in approximately our of Cuts fiscal resulting December benefit of alternative as & the of report net valuation U.S. QX release we of XXXX million minimum allowance tax from and a XXXX did credit Act.

sheet. over to turning Now balance our

hand We XXXX, to but was end cycle. to it’s $XX at continue the supply on on note in conversion compared as of as reported fiscal constraint our XXXX mentioned. at million to was to inventory. improved our conversion $XX.X roughly improvement Inventory directly XX, wide QX, of flat $XX.X is But that industry was the XX, previously million challenging our XXXX. cash million the inventory focus we to of March September related This to ability manage important backlog

in reported $X agreement company and for the the $X.X we million purchase in assets Rochester Additionally, QX. held as sale fiscal facility sale a for million into entered

million to of facility increasing growth credit close increase XX-year and later and to our year call With to Loan after the the will a M&T agreement transaction, $XX to which into Term an proceeds into facility flexibility be Loan the the that, will entered April back be matures capital credit on amended Bank our company $XXX,XXX the second the pay fifth the support and from the off with to revolving Celmet effort of restated will the of fifth Building amendment our part Also I’ll remainder applied over to part used turn quarter, initiatives. we lease the enter B. of As agreement, transaction working XX, Term to Jeff. this

our Great, thanks continue you Mike. to through growth necessary elements, identified move XXXX. as trajectory We’ve fiscal key three

clearly target First, on our customers. focusing and markets end

continue third, and from product outsourced of $XX conversions sales estimated driving in and Second, approximately An target the of electronics in is excellence. our assembly $XX markets. operation U.S. that billion end billion comes

partners. in or is focus high based. strategic for are are a because looking for positioned part on believe competitively to in their IEC have reliability team well and and exclusively sales long-term continues customers Our we domestic whole products We U.S. outsource complex, who exclusively strategy

customer service with We have rebuilt technical new how a minimize business the to which offering our to processes many set both chain know new and terms risks manufacturing importantly, we in XXXX, broad resulted execution complex opportunities. creation pipeline we’ve and of fiscal business of solve supply capabilities have a more our challenges. to in vertical of Throughout

We stage prospects the are to opportunities. are in future new with consistently adding at of new now program converting where opportunities awards our new to funnel parallel

provide technology solutions our ever-changing programs to existing to order In our customized consistent paramount for operational is customers landscape. and address IEC to excellence continue deliver to win complex must new growth. the Finally, and to new continued execution programs capture highly from customers

facility new XXXX new years. fiscal manufacturing state-of-the-art state the With base more the over headquarter New local current construction the ability facility a capital capabilities pleased that with of residing way with modernize Newark creation that growing of building, state in our customer state-of-the-art XXX-year-old aid unmatched association operation offering next million expenditures also to quarter ground of manufacturing the a design five our the recognize expansion to to versus be the we needs prudent a from facility center. the required Newark pledged for advanced the report of announced one. his $X would XXX in current up our announcement over we're of During a jobs we the In second York

in We are occur of middle the of the XXXX. the opening facility to new projecting

now an company momentum moved that, demonstrated of balance and time With call the our Our to growth results clearly quarter we look questions. is I fiscal exciting over continuing to path as XXXX we continue we the second XXXX. progress turn as our will growth. fiscal for forward navigate to to through This

[Operator Thank a Instructions]. and question conducting you. session. answer At will be this time we

Our first line proceed Klieve question Ben of comes Please Capital. Noble from question. with with your the

Herbosa I my for on Christian for have taking Thanks Hi. call. actually is This two questions. Ben.

that First, ramping medical you're demand sector. you in mentioned seeing the

impact about providing? So new major customers your of are can excluding two that contribution the customers talk of

Yes.

for asking. thanks and question great So,

largely So, over the fiscal existing we've were attributed volume QX that course in to our increases serviced time. we sector medical the saw the customers of

we customers. we're medical that related our you in related quarter will I revenue the our QX have and forward. new that But it up its anticipate fiscal However, some going current can in tell QX growing of ramping legacy programs primarily as impact impact results to QX to

then business programs rate second Okay, Or the great. that programs in defense that represent revenue run to And growth of the That's of a this good Are hear. at margins? the question regarding is full and aerospace quarter. those and still bulk ramping? is terms my new

latter. still It's

Some in of them that are increase legacy are programs volume.

were So, however newer mature. those stream There QX. and revenue for more margins more a the in programs of are predictable number

attribute course of over volumes in increase over improve time will to well. the time and should as those so those And our margins

call. for Okay, my taking great. Thanks

Thanks you. Absolutely.

Nehal comes of question Please question. proceed the Group. next from with Chokshi Our your Maxim with line

All actually right. that this screw the context problem disappointed and golden that is December in surprising you Thanks. had due partially results; discussed. quite Fantastic the to

Now like are it a because the the sounds is that problem still constraint persisting here. components

then navigate problem follow-up. context screw how So I'll in the you March And you can from the through a have quarter? the golden explain probably

Thanks Absolutely. good question. right. Yes, Nehal, you're

we full customers referred because the in I of our kits have fell didn't in have And products benefit still revenue that had that for as we screw execution, you QX certain the expectation period. golden is that we the the build the our to in short So, problem to exists. past in and QX

were we lot the QX moved of clear to shortages those a period as into However starting parts up.

fuller a really for was the it obviously our in startup a increased with So kits which bit us timing helped revenue to QX, in period. issue QX our produce that customer stronger in

in constraints in the lead we we times that the of QX several As as those some we similar experiencing time, we're at have but as out we're past, look benefit quarters. QX, maybe get

move of Now through delivery are terms quarters time expectations. we those to moves starting in those as

So while that saw constraints we'll that shouldn't have of it level provide we in QX. ongoing, the disruption

great. Okay,

question, you questions Do as You actually follow-up well. to expect answer but increase my medical have Q-o-Q? other verticals I

didn't I hear, Nehal? sorry, I'm

verticals Q-o-Q expect June Do quarter? medical fiscal for QX, you the to the increase i.e.

do. We Yes.

do. You

Okay.

safe then to also say So revenue it's expect to that you overall increase Q-o-Q?

the provide We our with Yes. that My backlog caution growth and brisk a continuing unpredictability, just but fully only there do. not book pace. come supply constraints of as that is orders at in the are we've to in control a seen the very been bit

And so backlog is strong. the

from demand strong of see diverse customers. our to a continue We array

So, overalls entering and as our actually and QX yes towards this growth. we quarter XXXX fiscal absolutely as of look continued the balance we see see we the

to that's question. best guess answer that way, So I

the end Okay. currently quarter willing is? March backlog Are to you was the disclose at what of the or where

Yes.

going a won't So think be better and project to than was and metrics we're XX% get It It up. one becomes eventually know, more the be position to to key where the transparent I able than we the it was predictable business And growth. more had Nehal, better business. one. matures in do a sequential you as with of

sales in been had million and obviously, terms $XX nice book-to-bill, backlog and that almost in of with increase the backlog at we're we revenue for our now. exceeding So

you more is components optimal question like direction in cash do to. that wanted think levels question the there? now your you're for the cash conversion my you follow-up there I still guess cycle do cycle to And My or is great. work Okay, as at trended looks all components is conversion

to the some that proverbial and higher just than mean in are we inventory when the all improve some – into from are and and is in we now, only in delivered replenish I inventory when certainly are golden are expected and I'd there. in forward. supply Right them have so higher would to received causing work the the parts we for them lumpiness with revenue, to stores me sitting still the time do supply just them being more raw like we're raw more chain, typically chain have levels the can to those convert screw opportunity them of the like because sales. then sales levels now going materials deliberation convert to be our the I bring There we're than of on And waiting and material be

Thank Okay, you. great.

Thanks, All Nehal. right.

question next line of Lafferty. your Our Anderson question. from the proceed with comes James R.F. with Please

Thanks for on taking strong my question very congratulations and guys quarter.

the think mentioned came to growth XXXX the seems particular on second for like and the a the you the I in wonder customer aerospace concentration an business defense call defense and segments first this was you guess quarter of lot that in in weighted and aerospace segment? to half in of and I revenue it that that if quarter. the the is outsized what growth relative other expect I segment operating

Yes.

it’s So, question. fair a

aerospace our being XX% revenue. defense so be those kind – to aerospace You not in in convert it I – at obstacles, continuing don't to given defense work over that continue and to know ramp of that come percentage grow certainly hasn't better, is that as out it sectors and the revenue medical longer front regulatory continuing is and other challenges the I I to beyond in the timeline When of both see level the in up than see we're to me, industrial and a and customers with new new the the or to medical time, and the but seeing aerospace catch that surprise. expected somewhere programs excuse a we're sector. today. grow defense working the in strength especially on existing the the

categories certainly the mostly the expect start is see medical I So catching to where and up catch-up I other space. that in

repeatedly sounds to ability great. something Okay, as industry-wide where very Is point will there Thank like And a the component of you. is your mentioned. you've backlog? That's hurt it helpful. grow component shortage an shortage your there

you everyone. mean, affecting its know, I

that will they our want So the new affecting produce time. our our entire alone. anticipate affect we're when to book It going ability that affect not to don't customers all orders want them. over in industry. the this ability it's products It's to I

seems demand be and customer robust fairly Our to steady.

a that constraints So see our reason grow we with don't faster can be disrupted hurt some component than just it it would rate the I don't mean but of think our execute any customers, backlog these why that bookings. might I for at will

for Okay. that. Thanks Thanks guys.

Thank you.

from Please comes Gates with the [Operator question. Partners. Alex Instructions] Our next with of Clayton proceed question your line

was Congrats Hey, the progress. to the It guys. see on quarter. excellent great

actually thinking programs and just questions You answered where been you of the but given of this broadly moving to know most that are, my I ramp in more is some you of up back these already, backlog kind of how going for Jeff, next have this the having forward do year guess they of think to guys where on about sustainable level do generated half and think this quarter revenue you year? now

sort Alex. don't These question, really are we're these fair requirement. see one-time our short-term of are winning programs. well. as programs a long-run customers awards run longer program we're as are demand That's winning that The and customer that supporting or We

we'll sustainability customers associated really requirements we that with just and/or that going and of build continued standpoint a but revenue throughout be I about, QX we've the would its continued chain timing So course for growth talked I won the ramped upon constraint a and foundational future year, of the the up business business these of as in platform fluctuations over we that the time. see really building supply from and that think

incrementally business? where bit business, you a talk you you're That's question can the you're and right the factors outlined; is existing companies. that other of one of EMS going you're what excellent. them you of just would three expect more doing from I last maybe how about to winning winning expense one customers little growth obviously just incrementally that And then Maybe

a a tell our in of we high to seeing focus in this those what Well, we're variety They mission-critical, on I just would Alex this that geographies we and the U.S. sectors. on is product I their applications Okay. these service they subject market that what focus end global reliability laser competitors you wide right? in end variety markets service type have a the traded area, for we're customers and are is and It's And us think of But broad-based in of our laser to the customers awards. large publicly a and our wide is debate. more mean, of has opinion and I result service many much of large attention detail new factor being benefactor thus execute to as our ability program to be able support the and been a focus.

Thank right. All the good up from Excellent. me. And That's you. it keep work.

Talk Thanks, Great. Alex. soon. you

end have remarks. we Ladies and And Mr. I would to question session. answer call the the gentlemen, Schlarbaum Jeffrey back like and turn to closing reached for the of

the LD thank appreciate Micro very on in much. presenting Well, one will Conference at calling that California. you be June is I And everybody to in. IEC mention We would last Xth think like

calling you So to with we there. we look And again next everyone quarter. with And that for some of thanks speaking hope to again in. see forward