SMTX - Earnings call transcript Q3 2017

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Operator

And good day, ladies and gentlemen, and welcome to the SMTC Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the conference over to our host of today's call, Mr. McInnis. Blair

begin. may You

Blair McInnis

Tanya. you, Thank

may subject substantially contained we what control, by foresees. on now Eddie begin that Chief events pass President of company's to Exchange everybody of beyond from performance nature and XX-Q I'd company the Discussion financial company are uncertainties. cautions which over that that number X-K filings Smith, call affect the presentation the Officer. includes of the report, company's Form vary future Form call, actual events and in other the currently the and forward-looking future be may that like Commission. risks that statements and with and results and The I future and various affected on Securities remind results Executive and to will subsequent Form are annual Before in company's to will a about factors XX-K, and on results many reports the is expected the factors, the

Eddie Smith

representative progress evening, and Blair. COO. On and me opportunities expanding and is with I'm goal plan this in turn to good SMTC's ultimate to grant Executive quarters operations earning the our of globally first Smith, ladies stabilize of and SMTC's XXXX. you, Thank Eddie net reduce EBITDA the quarter, the while call sales more gentlemen. of made prospects. I firms We've pleased with growth into our would cost Officer. growth. customers, Dunfield, What is we've Roger executed new today Rich plan SMTC's demonstrates President Fitzgerald, is Welcome, to be CFO; substantiates the quarter. which our new of in new with strategic our efforts some our translated agreements income. am This excited Chief number customers. positive-adjusted with with I'm and negative-adjusted on of revenue right-size in customer this our to This a the quarter-over-quarter two with funnel existing have for substantial existing EBITDA already during

have execute our optimistic the the company quarter. $X.X end with are continue the the the end generated sales. strategic adjusted million quarter on of go-forward on of plan, fourth stronger the $XX million the compared quarter $X.X increase year in had will and we'll – will positive-adjusted right-sized third million EBITDA the shows we of revenues in The We third to XXXX restructuring to company $XX million year as of on in revenue XXXX, earned EBITDA plan of we leverage the and which

have sequential stabilized quarter-over-quarter. and operations growth some show We

XXXX. will We activities recommence merger-and-acquisition in

potential new We term. achieving to and near to to we're growth will review Roger the work grow now I'll key to closely that customers customers with the the details. is to M&A But continue Roger? the in pursuing hand organically. our over financial call

Roger Dunfield

in the million the due decrease Thanks, the million of of for Eddie. XXXX. was to prior increase XXXX second $XX.X customers. the in primarily compared third prior quarter in $XX.X volumes million year, was reduced compared to The an the of fiscal year same result from to quarter million of $X.X quarter Revenue two $XX fiscal

contract and these transferred the of manufacturers. product other business of its portion customers to end-of-life, One reached other customer a

the third compared compared prior same new for in due However, with existing to X.X% the $X.X the same XXXX and X.X% revenue for due dollars in Gross to of in X.X% decrease of the decrease quarter-over-quarter, was period revenue $X increased was our with million prior XXXX, quarter a of Adjusted to quarter gross percentage period of the the of million period as profit in the revenue year. XXXX. customers. of revenue in The revenue profit profit, X% third compared year. gross the or in or same to was opportunities

in Suzhou the administrative discussed the and XXXX. down involves profit primarily the charges, continued charges XXXX of third profit of incurred gross quarter. to of due as profit percent no the to prior activities XXXX on $X end XXXX compared the in increase structure compared through million some margin due Gross in million to of prior due additional quarter to a prior restructuring or third of restructuring in EBITDA quarter $X increase of essentially revenue wind breakeven plan. a the to increased quarter adjusted loss higher the to and lower-cost The negative-adjusted is to million percentage a the X.X% higher quarter quarter mix was the X% However, Adjusted as quarter margins result and net Adjusted charges facility. closure improved the gross when in incurred We million We in in the of the improved the of a revenues, prior of compared for of quarter. with of XXXX. minor-restructuring the quarter of increased of second anticipate a loss the to quarter EBITDA gross million in third compared reported the was operation. the for lower-cost the revenue close compared restructuring X.X% end in to third in in second above EBITDA of profit profit XXXX over XXXX $X.X do in additional same quarter or third year. not XXXX. quarter $X.X gross of the XXXX to was as by was $X.X year third million $X.X of substantial and $X.X structure of quarter related of prior of for the in Adjusted result third $X.X substantially XXXX, second period ongoing million gross the were charges Net the million for additional quarter included was of XXXX of The reported in $X.X the plan, same the million by second additional that the and completed a XXXX. product

of Our inventory management supply-chain inventory of net XXXX in to and third and quarter the resolving as of and excess quarter to million $XX.X the of second $XX.X increased to on Debt XXXX drive fund continued capital first debt related based due revenues CapEx of compared to million higher the XXXX. Net management from obsolete two up inventory. in to reduced the is working quarters cash spend. down the of the timing

to provide Now hand the closing call some to I'll back remarks. Eddie

Eddie Smith

plan Roger. quarter. track achieved strategic and important some the milestones with We're Thanks, we've during on our

and first XXXX. of two our growth We over have the earned substantial shown improvement a EBITDA, quarters quarter-over-quarter a revenue reflecting positive-adjusted

to customers new funnel forward. going Our from sales be revenue is strong, expected earned with

new these qualification for in all FDA XXXX. base, stabilized from added customer the with our these customers, We have received four and to our with opportunities business customers for believe operations. conjunction existing with new we of have QX, have existing production some orders of received registration for In we new in recently with I start bills customers new Chihuahua customers. our

we'll Thank up finish strong for that expect and optimistic and the positive with year quarter to will revenue time, XXXX. our are questions. fourth floor a you. financial I open continue the At into We this momentum

Operator

our first investor. from question [Operator Instructions] [ph], And Lucas Davenport is

begin. may You

Unidentified Analyst

Hi, you? how are

Eddie Smith

you, are How Lucas?

Unidentified Analyst

I’m good.

have numerous uptick, the but it quarter, a By see like been long-time I saying is investor the going just an and go, years. horizon doesn't is come in we're to for CEOs around my it question that that So heard this seems numerous happen. company I've bright.

think, stays just always company the I'm shareholder guys around that, to I same down. what at kind $XX couple – trying this Are net like just is, So figure develop you $XX doing been trading of value? are but it water. out to million, I that Because a understand million always debt quarters happens cash, level. don't has the that

I I problem increase, understand because but come before back substantially, is the doing down. now very debt the the mean, of a there see spikes You well. economy economy, then some was

chugging understand along So here. I don't barely why really

Eddie Smith

Yes.

and I'll different break try your questions down to into So it parts. take

so as a So plan put say customers. for three we I've – they've add over that only issues, SMTC being quarters down in don't Obviously, got an of came declining up up here they've I've and the that I a this basis quarters as restructure frustration understanding a the couple last type supplier how continual couple dealt I on. but before in new gone can here the of a lot to and so had years, than the you debts stay been supplier with ago history quarters, I here and of a row. We those or have We four had a sound and been revenue other to almost of together of to two gone SMTC. on interim it a obviously, you and have would like decided that I and

pretty bought or And declining continue This this that frustration very a said is fall, has revenue to company grow All always registration. have as in a history. will I wouldn't now a market And the company and stabilize we that optimistic back to got stock am what We've first but I year that understand four to business significant that the way. it had we looked I for time. otherwise, the QX, do But quarter a XXXX we is optimistic actually to has are qualif. period you the it flatten history revenues am upon the our and cap second to could time. hope it? feel it. tell always $X But from recreate we're flat, change right back going don't of the EMS been – got be chance cap to company a them positive has get do goal got market obviously, there's continue I can't a quarter, and in confident in when it depending I we're through mean after I we quarter. directions. got which this statements, that QX you the did Well But the million a Then grow the have your of the that, get FDA our we QX. go They're enough I that frustrating it added pretty So one to was going possibility, I out. valleys. it the There's and we can continues. can should bit. in going in and projection, qualif. a now and, the that I headed first any very $XX a customers. we right there QX, taken I you at long billion decent a in is my

this for quarters some a of So turnaround. of task it And the couple to definitely around take on. is clearly a but that easy turning not company, an go would

Unidentified Analyst

the Can where revenues you estimate next quarter? be can

Eddie Smith

into read that. the when can We I you words forward statement don't give other and optimistic like use things guidance. But like

we am for won't about answer do guidance, I can't the forward. just no with what I of which not them. I but it. appreciate going many so how answer places, can worked teams. So different give not But other them I have management doubt we're the is question, All is, in there's I do. going we

Unidentified Analyst

ask off you being in I year? the you next question paid debt this Can then, do anticipate

Eddie Smith

If Once space. grow that actually interesting will again, increase But our it – start will growing, we quick the increase. EMS equally. too and space profitability an is we

actually And for debt the and depending where we be. so will quickly grow long how is that upon how

And going. creating commit up, something knowing not where that's so would never to I

we we deal debt we with do – with the is do part we when with M&A, and deal of is that M&A do second combination. how deal. the deal the the The how We if issue M&A do we or and we structure equity M&A

well and we very working continue I again, that the to continue wouldn't We'll will feed the working on the and – fringing receivables what the table. how here's be capital diligent possible, try inventory once commit use as the our so, watching to to I'll And we on in capital. commit, as

upon to I out. off the goes So what never would commit on bid taking far depending that

Unidentified Analyst

start revenue XXXX. new do from in What seeing specifically come Okay. of anticipate My the question revenue you the in said customers last XXXX to some quarter in? you that is

Eddie Smith

Yes.

QX, I the fall and of so come customers, in we're QX, typical as I some that customers the of of start expect this than quicker to all We've already some phase you then qualif other customers, late see seeing think customers. in one those one others. I significant And for So pretty of will those with in think four will revenue. would industry, QX, the some

don't so... very I think So it's far away,

Unidentified Analyst

you. Okay, thank

Eddie Smith

you, thanks question. for Thank the

Operator

investor. And Tony [ph], next comes our question from Dobauf private

Your line is open.

Eddie Smith

How are you, Tony?

Unidentified Analyst

job stabilizing are nice I’m Hey, everything. how you? good,

Eddie Smith

Good, thank you.

Unidentified Analyst

more focusing on like volatile? able that's about older sort new of, know previous management and So if all startups. less I'm at customers, been tap you curious smaller business comment the you've size-potential? four can was seasoned I any, to just

Eddie Smith

Yes.

seasoned team's the not companies. customers. customers of are two is startups a private. four public three are focus those the focus small So has those One and and My company, been

writing As saw you it. you last And you sure picked margins you startup, from know, going wrote or in startups be we like we to better quarter of to of those type you're the off some And you're off. debt didn't right of quarter, you after profit when make startups, with the And when just restructuring make million the our going off. bad write breakeven off that what $XX that thing cost need happens $XXX,XXX-plus. sell you last it restructuring to is, did do – writing

for, we which reps look only it. that companies would a rule, who financially the tell startup, quite a brought pipeline why as team, capable you I are switched is bit I That's the would So do the business. of I with have of But and have we ago. deal that to did the already a clearly, on the right general focus both

So of this other lot they business significant customers. These a we're market by and that victim don't. of they the so. then we're have and all, pretty And this, not are X, than through quarter

Unidentified Analyst

the Okay, some share curious that of and I has if any get older that's customers. am the sense affected I of your great. improved, wallet with quality

Eddie Smith

a have some company higher thank customers, requiring would our and made older I quality. For us customers our for by of this, better

machines you space a the some blip because of would hundreds what of with some these tens the end are industrials, about the terms I which our in space, our and you of data the test-and-measurement dollars, – sell they significantly of some of in machine is could of dwell of millions centers, in high and of may think – thousands overall things machines the quality, part can't and of after space we of be customers, them If higher but semiconductor-manufacturing dollars. call sell like have the that, the

So when level to work there. our quality of the some were was still COO, and never and sleeps our I quality think we say. to most brought do, Rich to on, a one – as job I factories get Fitzgerald We and have

registration, would think actually our Chihuahua have So quality with registered. and we'll continually just always certification, the we product but that have the not getting quality very fact specific clearly, FDA the in wouldn't or registered high I be reinforces But get plant, we able to

Unidentified Analyst

pipeline those that quarter the then or like of – maybe is the as the production How's that, expect And late-stage looking early pipeline start to stuff good XXXX later as mid-XXXX and you new with maybe later? X. so win this far it until top sounds won't the into

Eddie Smith

Yes.

That the and of reps reps on, sales sales by and U.S., up went the across team, reps to the added we slab. other people added cut those Actually, rep the direct we for we function adding Valley more U.S. [indiscernible], We've have cover the We the on. sales and do Silicon cost variable areas. So besides, complete. some now reorganized with is some team. in a costs XX% of

our existing I pipeline customers I two call So strong. would have stronger. and in think us good, our business. as one continue think And as more financials existing a pipelines: would I customers improves, new But things and confidence think there's give I I types like improve good think getting tendency now, to call with not customers, and call our have but with situation it our think there's And an I projects, – to will I increase right it the of get would doing more I it think I'd be. I These it as that strong. as will

Unidentified Analyst

were said I misinterpreting that new and the like of like – you a release on bring might also Rich to able there it you be but that sounds might introduced press And the what and embedded. line be business it previously, you've

Eddie Smith

Yes.

doing that, we in like servers things of data – high-performance and it's and center memory and call drives, storage it's embedded So some data – center. a the it drives servers, we're lot business,

sales so quarter. actually we had And the last

out, we inventory inventory quarter, more expect we to Picking two. actually took first in already. at over which out quarter So we some some and and this the end quarter it the of sold sell next

started new So call, we've very what actually a line I of, would concentrated server embedded is in which the business, market.

Unidentified Analyst

Okay. to it lot what kind the and just know Fantastic. there available like Last I management of a acquire? now? wasn't was activity, looking exploring M&A team is question, if I market. am size on you And prior there more curious seem

Eddie Smith

Yes.

to plan. want just the the – looking small, somebody say, will get at Right know head make first of I – and give go to where the I'm I'm right. level we able Understand looking to shake and makes small? to acceptable. process, to you what somebody try team's M&A want your I'm United it one three-month now, competitors acquire to enhance Then not Because are deep capable scale. I a our we I'm to don't be looking for to first and Western why too opportunity it But and acquire So I probably may looking to the I'll my the to activity perform States at. sure in that the our part do,

it big. be So won't super

stages. this, that to in is to And and The our out As there's buy. far very seller in I've now, as looking agree early for. sell of somebody my all buy, pay there's the to the availability career, wants right buyer to wants and to getting somebody price looking a to sell, said out we're always this to always key of much companies to somebody

a focus on came that of the M&A. be done lot was So in restructuring of I and needed that on because in, hold when I've not focusing to all there first put

And we're so, the my game. answer is, in early pretty

Unidentified Analyst

you so Okay, much, Eddie. thank

Eddie Smith

Tony. Thanks, Appreciate it.

Operator

further this like now would questions And I for to I closing remarks. turn time. showing Eddie Smith the am no at back to conference

Eddie Smith

like and I'd dedicated day. drive for to customers commitment our and our every their employees thank

company. And but call I this strategic plan. grow. to our joining think support like not we continuous we're partners, support executing contribution, our our thank, of they your us their to thank I all as I'd on want quarter, effectively supply only for through, for continue to of our you and as for

place then. have our expect take and nice to earnings to We Thanks, look a holiday. you to call speaking next forward We March in XXXX.

Operator

ladies today's you And participation, wonderful gentlemen, this day. concludes and have a your Thank conference. for and

SMTC (SMTX) 3 Nov 172017 Q3 Earnings call transcript