Iec Electronics (IEC) 11 Aug 182018 Q3 Earnings call transcript

Greetings and welcome to IEC Electronics Third Quarter 2018 Earnings Conference 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. I would now like to turn the conference over to your host, Ms. Investor of Director Gavelis, Relations. Audra Thank you Ms. may you begin. Gavellis,

Thank calling you in. for

have call President this the Jeff morning, On we Schlarbaum, and CEO.

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

and Audra, morning good you, Thank everyone.

third XXXX many our overall growth fiscal quarter continued Our signs of show positive to business. in

Our revenue growth booking XX.X% order year-over-year also our momentum, led new a was to which has up our in which basis, on increases backlog. continued overall underscores

additional XX% it lower basis, tied was since year. Our affecting of to the expected sequential global More revenue a backlog shipments an to component On revenue which industry. than specifically, million we yielded of from our we we a is be, our over the demand anticipated is shortages during which X.X%, which is up to greater the directly the would backlog, to have the convert customers. our fiscal beginning electronic down or to quarter, third expected amount in customer $X

staff accordingly As this materials our you some order the into in a to similar may of in recall meet fiscal first half fiscal very which we demands. QX, QX we saw year as dynamic from of acquired customer

orders were a the produce quarter, of That ability our The for said, our greater impacted these it portion unanticipated near-term work industry suppliers demand possible. and not third and our projection much to customers. unfortunately deliveries, during expect we our with situation to as component and our fiscal which a quarter, fourth recommits fiscal we the while During mitigate there yet shortage when entire phenomena of affecting however, as end. customers to will is fill to suppliers we experiencing of late several being continue

suppliers to which as ability phones, ensure capacitors June video to is of to strategies to we list purchase published anticipate that recommending backlog may however, our to of noted the as their smart portions IEC be One approved constraints. shortage long-term during or Journal the to and global overcome coverage for with and multilayer EMS expedite of being alone dealing alternative the the range customers automobiles, we from article we We Bear supply-chain a develop supplier situation, an to advantage ensure anticipate so volume continuity. suitable while improve must XX, ceramic customers compliance. well manage order our partners industry was our and with leading it receipt component that production the be the there continue games on is, supply cases to the our work diversity MLCCs backlog, working clearly our increase in minimize rigorously in both to products component XXXX strictest may a slowdowns of as to may challenge. with shortages want. options our impact shortage not control there to and the with impacting Street example, wider we should options delivering us manufacture our provide in not includes customers everything in period and to said, For of the of Wall able is to we the OEMs convert number we deliveries continue mind this That are is

and constrained way we continue both work As this quarter. for past through the margin environment, thoughtfully capital impact recognized this working we our to business

to Given which staff customers, the in to we growing our for acquisition continue our deliver customer important resources material growing our to place fulfill include and the also it's put demand, backlog.

both real in is capital as shortages on which collections working pressure component the placing As turn the of has a shipments timing varied. has levels, a result, of magnitude inventory had margins and impact of

to existing These reacted in the IEC, during Aside ramp-up. their resulting other with customers customers our outsourced long-standing from to greater has over customer third us, volumes, aerospace say of being greater business, from confidence wins I'm increased assemblies. sector, conversions our our sectors the the particularly years that growth X as constraints, pleased programs saw With than an meaningful as material include raw with their fiscal new new in ratio program and few program existing quarter. our we bookings defense directed in X.X that from service a to work backlog book-to-bill past deepened brand-new improved conversions or it’s share of whether to extension execution several new well continue

customer While we us has our to as as and the and our in end reliable flexible our which maintain customers times, challenges well are long-standing track be grow and at course record can subject responsive manufacturing enabled ability to present to fluctuations partner of overall of long-term proven relationships. markets these

continue to vertical service as with metalworking existing Many precision such their leverage expanding customers our offering solutions interconnect lab customers. by services, we have our our effort service In of high supply initiatives efficiencies collapse to in of as addition, strategic and units relationships we've because our a our result, outsourced customer service levels. an to offerings chain to and of one awarding and vertical experienced satisfaction several gain customers demand compelling new

done many Finally, past higher levels sales the improve the in we've than XX customer has our to months of seen funnel IEC activity years. over work new is providing

to meaningful impact that beginning new a we the come. will have We to in years relationship are anticipate long-term see

to to long-term and customers our the bring unique partnerships. establish can strategic the supply-chain to is goal value Our IEC bring

our how the fiscal than growing beginning XX% to as look backlog progressing, by is we year. since it’s at XXXX once of the is So, fiscal more know again reassuring

go detail quarter to the I’d third Now, more like in performance. regarding financial

and contract that, a I Since the we our Vice have XXXX that in CFO would as we accounting brought President to to a June an opportunity. the like finance as replacement to had serve Before proceed give with CFO full-time resource search. then communication of to finance update interim transitioned former an new

fiscal the XX.X million we compared quarter an expect the of have because million, to Now global revenue, the delivery details quarter related as of was program XX.X% to delayed to shifted on X that revenue discussed the for were quarter the fourth XXXX component XXXX the And supply of third we moving shortage. fiscal quarter, as approximately of has of increase XXXX. third of

of increase driven in medical new and a XXXX, our aerospace X.X at XX% and aerospace primarily of Looking an of defense The industrial XX%, by quarter defense and sectors, saw programs. market we saw revenue XX%. third fiscal million, sector distribution the

the customers as compared X.X XX.X% to demand offset multiple to by million, due fiscal primarily by related of by multiple was customers. offset the from grown, quarter increased increase XXXX been from of increased several fiscal modest to million we demand customers, from the more customer as new a the in see the sales continued million other in whose to in demand for than from other of offset from new for X.X fiscal to for impacted have demand to modest increase decreases by we a demand customers product. sales of X.X end volume year million million for this the cover or Industrial Gross in of unfulfilled same hold to year third array X.X on had was as place a XXXX sector declines customer the the overhead profit X.X accounted to sales XX% decreases for was expect to quarter long-standing quarter these of third unexpected remainder third deliveries decreased of by due across and program customers. of volume one shift the fact, in In in had fiscal related profit Sales Gross wider the customer increased partially other third compared markets the fiscal XXXX. sector previously one programs XXXX, which period well of medical demand quarter whose prior orders. X.X however or

compared of of XXX,XXX with income share XXX,XXX the for of consulting share in related third and Company that X.X% quarter expenses XXXX. gross was the upcoming of orders, increased in the administrative XXXX and to or expect income per level XXXX -- XXX,XXX the execution primarily fiscal third quarter normalize. prior $X.XX the year. sales same We recorded in represented quarter the X.X% net of in the of The $X.XX per fiscal due in implementation. expense compared The net ERP of in fiscal should expense these of increase sales fiscal Selling and fiscal to or to our quarter profit

Now X.X in months nine per or The result net $X.XX looking XXXX of other in loss revenue months by XX.X% allowance million, tax in in million X.X of net income in by of Net was increased XX.X for loss administrative and Gross the primarily the a XXXX X.X implementation expenses X.X or compared Jobs nine an million compared expenses million from XX% of months to compared the prior recorded offset year million, quarter sales industrial for to Selling million due months on decrease to and and and prior increase Tax our Growth in XX.X the Act. the nine of was $X.XX defense XX.X% period increase benefit X.X in at to the million share to driven U.S. sales in XXXX profit first a XXXX, approximately first fiscal fiscal income expenses of sector of first of XX.X valuation share as credits nine XXX,XXX. XXXX. in primarily partially sector results fiscal the per X.X release expenses and of related increased the fiscal December sales sales decreases selling increases aerospace the net sales is the fiscal months a nine ago; to first the the same million of of to PRP fiscal period. of Cut XX.X% XXXX XXX,XXX o as percentage our to of XX.X% in period. as for of to XXXX first of resulting of of and and increased AMC fiscal medical and the months sector. from the million or of X first includes administrative nine a a

at the Now our end of compared second and XX, of looking XXXX XXXX the XXXX XX quarter balance at to September million the frame. XX.X of million sheet time XXth, at was fiscal XX.X June inventory million at

a made robust three program as and calls we and directly quarter shifting -- As target shortages path be resulting about to remain maintain our on are markets customers the our to our continue our the as we backlog; to sales fourth we energized our progress levels growth optimistic demand, discussed operational significant In component sales excellence. course, by driving convert order closing, to prior the right ability includes with in we inventory key the inventory in to execute which third ability quarter our a to-date conversions to continue focus our and our continued pipeline third elements focus we impacted the to quarter. increased clear of in we delivery our associated on had and

relationship to expertise for We we customers continue have solid with existing to have our operational and complexity solid business flexibility are capabilities awards a customers. by programs we and These and meet our win from strengthened the with let new customers us be new our and relationships needs. us to long-standing these enabling from the by -- high changing excellence our to also

Additionally, rate; new is continuing add lifesaving opportunities new new onboard to converting future introduced is And customers pipeline vertically opportunities. a fully prospects successfully our pleased are and provider has a leading products a finally, manufacturing recognition for new growing are program very IEC us our as new of rebuild is a while mission-critical to providing audiences competitive these to and funnel component at continued our business solutions awards growing we integrated important of strategic and operational growth. our opportunities, these advantage excellence new we diversify to to

time business, customized the topic as complex are aspects corporate the need our to execution our at year programs technologies and we’re company growth streamline providing see fiscal continued evolve. to momentum our is our processes second This upgrade we’re on also for York that fiscal our and across it. will for end reporting laser system an the business. with We continue through solutions scale we delivering exciting And of intent as to our growth before continuing New focused our On as consistent to many ERP system of upgrade and on internal help This highly facility. move we build our XXXX. for we of conclusion

and the continue operator And of confident I by position. for growth strengthen we our questions. now with to back can to We’re robust that, hand call energized will backlog sales pipeline leadership that over

this At Maxim of first Group. of time, Our conducting Thank a line the question Instructions] you. we session. Chokshi [Operator be comes from question-and-answer will Nehal

you late Really I just shortage that want would two see in but for These issues, want great component to correct. make are that a experienced, to the bookings and minute, separate I before the sure and that deliveries. you to get de-commits

had You and that also late correct? you had then de-commits deliveries, is

Yes.

to The correct. a just constraints in chain of occurring, couple supply So, are Nehal, clarify so areas. you're

have and but with I you the scheduled we dates cases in this suppliers product instances constraints, number supply am some it. have in coming date of this So deliveries and are supply that unable to delivery, back I deliver promise saying, know on I

was the we're they yes, going on the it. not In were to that de-commits. So -- other product, a needed deliver you but cases number of your still day

where are it And is for progress, asking quote come we they the of reposition were I which made the been the when that product to it actually And too in delayed piece much at to given really causes out supply time, to even customers which floor for So it. in time quoted have and to pushed buy and of to the didn't just has cases has and inefficiencies. bunch produced in further. the obviously been work the the down chain. a the we speak The go time third then going lead be lead demand we

specific floor customers. product the commit this we production complication translate that into can in providing So as for our the just and to the for

simply supplier, anticipated? it's has time is just that the say longer point it's it news than a delivery when initially And you as be clear to you of de-commit, the just to not

I'm phenomenon just "I wait can't I going happening get know uncertainty we means product that to the I you." have manufacturer, obviously, to So, we're these you midstream an coming going to longer that to is get sometimes materials Yes, is raw have it's back have delivery. to when date the unusual I going actual date, you get the saying, just new to now where it's and days the it. ultimate on a line told and we're not there but supplier it's change, it and but this really to in back an don’t and for

XX to based on to there book-to-bill I'd the like is tease to for the in respect XQ, looks first bookings a duration so with that that XXX that's those in you've here had June I and quarter massive Q-over-Q to try $XX million given, orders is increase? million out that. make in ratios to Is real including sure XX% is the compares that quarter XX% which increase, So guess question change like that's that you March great. But up

a seen say in starting period. I'd some, But an haven't to prior significant that change, the orders. longer -- We're of see the term terms apples-to-apples horizon. some really We in comparison the order Nehal, wasn't it's

you It And that qualitative new other but it's very XX% versus responsible programs. one Q-over-Q colors some coming as as for gave the increase? far old was was really that from or more just both, saying

disproportionate clear number customers and lesser to new say In I to are than can't winning, with commingled it's of programs, the new and the of then direction so but programs disproportionate customer in piece growth the I there, bookings its a lesser extension or another a one as existing from you it's to the in other, their business cases so existing that cases of and wouldn't super although customers customers other say new other reason is, new it's and it. our give some existing existing programs. we're its in coming customers

increased a concentration or part that increase? order single large And single that's is of there customer

pretty it’s a across wide distributed customers. well No, of variety

much has on increased. funnel a Can basis? has been And I know quantify sales you how maybe year-over-year you’ve increased about that talking possibly

measures it I'm again, have you talk those we everybody at, if differently. much funnel sales really call probability on that is high focused defines about so our look it and we probability opportunities when what funnel and sales so, Yes, converting. higher

pipeline which growth we opportunities opportunities, track, about in obviously it is early-stage think quantify but others their better increase Some as than XX% year-over-year. our the high when I probability

have then increase big sales funnel, seeing bookings? And of that in for you’re high seen for is And -- you the possibly part in rate? stuck QX the so probability reason the these a conversion up that that

the we’re difficult bookings the I programs rate, competitors. our existing conversion from again little when coming taking seeing when customer bit an it’s we’re a because increase are from think share -- on to customers say brand-new in again

conversion because I high of think business a and taking of existing levels from our new so just our relates our to And competitors in has sat higher have We funnel that as on has performance percentage in it probability the of from has customers our to increased converting. our customer customer don’t the new similar is that what we’re past. probably think it rate I programs. acquisition, been more away

question is the are of ordering last result that that that, share of customers what in you’re increase data component ensure is you the the double And seeing points a not can then to response shortages? here Q-over-Q the orders that in

really coming place. a any of distributors because we’ll lot we’re all ordering supply demand, you are chain of and seeing mean but back XXX% not managed controls in back and the almost really and a and putting prior year’s double in saying the manufacturers in your are supply I they’re tight coming impact has pretty cases many being cases,

on a bookings as double cannot So company we materials. raw the put

last us, double up So, after we’re the Nehal. And for our fact when ratio, four quarter straight ratio with in book-to-bill look booking of quarter at signs gone customers we actually quarters. not has the our book-to-bill seeing any

a it's phenomenon. recent So not

Please comes Financial. line question next with proceed Klieve the your question. Ben Our of of Noble from

highlighted markets A&D new few of here programs of a the I’ve outside end regarding you. you bookings segments. Jeff, for some questions

revenues that recent I'm able revenue that break now. right line to of Or is bookings -- you've you medical? with in seeing bookings to that coming me can that breakdown if are at on So, today? heavily your more in recent curious new more the the on XX and segment been XXXX the the deliver, you're the toward of or to if are Is comment kind then it skewed those bookings it revenue by compare excuse the breakdown

percentage. quite quarter good can same alone. I a you, for a greater It bookings was precise don’t what It's was this the industrial of just a as the percentage think we you I percentage question. revenue when but It tell from you greater percentage medical. I the came but number relates saw greater the distribution a to was it industrial past and and had in distribution bookings about the strong probably related of a still medical that QX from there, but is revenue have a to AMD, a not percentage

really to you you I quarters? you the medical So, especially given that that pick going coming the on are reasonably here inflection business up in would the but the have dynamic Last the quarter, looks business you guess that think here side. up medical point to reach side? Do pretty sequentially, jump it thought Do visibility medical is flat. closer work on the

so dollar at medical absolute if look I from increase. months. a next in of the in a Yes, dollars business our absolute our XX out when I amount increase see I nontrivial an medical business, significant at perspective, look

will somewhat growth seeing will the as a a strong the business, move percentage, However, the to percentage signs move it on of our of needle side. pretty much also defense the we're in how needle but

bit So, still back absolute little B. A at of increases dollar in will line medical, and percent as strong but predominant in we're wise, be least a a seeing sway business, to it to

the any question other across segments? story there the supply -- impact board? the three the any -- does skewed chain of more impact impact the does Or towards is one And it Is the issue, segment. business of tied it's to

individual look because or all these It the cutting used one really MLCCs, these you business. the isolated when in We the in our segments. is across like really see impacting surrounded they're is right other. don’t multiyear sectors at It capacitors, market to

right it's the So, board. cutting across

much that customer who run of track basis, accounted million your stand how go? customer full the much And year-over-year could that rate going growth does that run there that to mean here strong, here still is are but more me demand customer towards how the could for? from question the you on still know -- or where I last growth rate? to for I for account talked in AMD more they you does full where said X.X ways a about -- One

I of XX% that's rate. to think XX% No, the probably run

So, coming there still in future see is upside we demand for periods.

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

Jeff, I had just of a long-term margins. quick on question for your you gross for kind outlook

always visibility bit of talk about a the Do I with think but more just of the forward those everything for mid-teens, still margins? industry those the wonder on being shortages that supply you'd you question you guys? going on leading Or of I kind have going a components type and to mark was chain. in what

you're saw a we Had referring I as kind teens at are same think probably that good of that's the sales we similar converted question. the amount When our to. QX. we for, in very as have margins saw had in look we margins, you mid sat of would those QX

with in So that us we’re as look still align our absorption and in produce unfavorable overhead that And overhead. think asking We dynamic some at to settle our just are see had as customers don't new going we that future, to order demand that the I past I quarter. this we changing.

ship of previous would back to in you sort quarter, the do you would the fact quarter? levels that orders current expected to presumably come have then in if in expect the So, margin those

you your think I when a the good comments, number expecting to, in so a think normalization being giving and without I was Yes, referring I precise we’re that’s kind normalized that on of interpretation my part. so is

showing obviously are And growth the you is backlog really guys a that's probably strong bookings in highest time. long just been then and ever

that how wondering, has obviously to still XX bit? it about been given think the supply months? little Or shortages? execute forward just on your that ability all out is Again, a pushed backlog going you So

in, booking of obviously momentum to so continued the in it which dampened each greater quarter-over-quarter, look customer sources going confidence of to higher environment has tricky the The versus us and at we’re for of that really constrained increase assemblies composition constrained backlog the is and not to our know our required is It’s are part which supply driving -- are others. the to it's levels. difficult be parts the ones because unique

out pressure constraints significantly, but push, until is on supply to the pushing some I think are there I think push shouldn't the denormalized. balance right it

next question Boyd Our Mark proceed Please from the question. comes of Shawn your line with of Capital. Next

Just heard you X Street looks September ship June in not to in the be million I correctly, that If clear, like The September. XX was expecting quarter million, should million in quarter. the XX did it ship the

due shortages, replacing kind should really we it’s So of to Or consider just pushing other that incremental? businesses out? the

I be can of answer supply some demand constraints. would QX. some it will I impacted only delays that it caveat of the and imagine the order believe and say, in I with could unanticipated be by incremental

incrementally. the capture that to know it all extent we’ll we’ll course that certainly of but So -- don't capture will it incrementally, I be of

our with these a something benefit? or we into? minor Is to teeth shortages work grapple sink present you change earlier to in the I should And what -- that terms tweet have design is a what customer of kind given if you mind, ordering just color little ability or don’t of Or the around bit. of ability sort minor bit the of little just your can and company's that missed a might I positive, program they're think with maybe to that

severe customers levers that constraints. customer our that is, have working of absolutely factor supply And pulling, alternatives acquire the operating this is It place on the we're of is with main market. regulated our parts one highly that issue with in we could are

go design internal through go approvals. testing to So valuation and and we

a working So the but each than, to on those we're can time bit, were tell today design options that they open obviously virtually can much past. alternative say, with customers the cycle to all them of because more programs they the alternatives of I our so in take on you deliveries want celebrate

in orders level pickup some orders certainly of And sustainable? plus to last Do here order strong the see that that quarter. for in million me. you numbers The is last thing anticipate you quarter? continue each XX Do very

will strong I the to you have in as can degree what don't see that current tell don't I bookings but I in be guidance it is I today, anomaly and precisely strong wouldn't think it's of that book continued But in -- range. I what we had was in QX saw QX. prior we bill book-to-bill didn’t the out and in had quarter, I QX. that book-to-bill come our to strong what say we

this it's strong expect sure, engaged but significant discussing QX. visibility. I a say book in for regularly longer that manner commitments to drop-off forward, for precise whether I in our can't has that in it shouldn't some have were so rate saw decent in to because term going and And we bills, customer

think I very continue be you So strong. to will

question seeing now it got but anything and XXXX friendly growth seeing sort to that in you into pulling Are more people of or And double here or just this underpinning any guess qualitatively. on we two perhaps ordering, get in beyond. Are things and you of and level down? not saying, Are the activity feel do signs to of demand? that out quarter as maybe trying we're maybe just ordering, I and slow term going broad of peckish a not seeing there you really that longer about starts this here? a new we even that I speak to looking kind for think I'm to And

We go-to-market into the lead I to seeing I lot I organic year, as don’t mean activity because through would programs, and seeds, the ago. we're that reestablish this order we growth. frenzied -- ongoing had the half a really transformation and we latter our not of practices planned these would worked year to say many of it's

for it which of reach So, production the programs these benefit the we're in future. staring at and growth a hit that the level period, this the isn’t scale. they and in many something dropped experiencing incubation now of out sky on a of we've in point so drive been to quarters starting these consistent now And some more they past working to I level think scale, are just of programs will

no of conference for further over remarks. questions management like audio over closing back would the conference. turn are the the There to now to portion I

our call. Well, that concludes

So calling look I I again everyone for forward with to speaking to thank next to just and everyone quarter. want you in