IEC - Earnings call transcript Q4 2019

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Operator

Greetings and welcome to the IEC Electronics’ Fourth Quarter and Yearend 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Audra Gavelis, Director of Marketing and Investor Relations. you. Thank

begin. may You

Audra Gavelis

calling for in. you Thank

this On President have Schlarbaum, we CEO; the and call and Tom Jeff morning, Barbato, CFO.

describes will operations, Before it to take statements believes, Safe I sales, may expects be would statements to are financial be and events. statements and started, historical business conference the strategic initiatives, statements forward-looking or guidance amended current XXXX. limited of Securities prospects, Company to the on Litigation regarding future Private anticipates certain include, This not Harbor based and meaning Securities any but These that we not but concerning the other all future to, read statement. when turnaround the statements rather what XXE within as results, statements Exchange facts, or reflect Act Act contains occur expectations of that Company's deemed or and of are a Section get of and forward-looking efforts, similar capabilities moment operating such XXXX capacities and results as are backlog Reform call like other the future of the

as on risks any forth forward-looking our of publicly those or call result uncertainties no reports of as uncertainties results information, The Form otherwise, events Annual be update to and Company issued immediately a to whether except Report on dependent statements undertakes a new by and this statements filed the Company's or Exchange forward-looking of XX-K, risks and this include, as other Securities expressed required Form Company's Quarterly limited recent correct number call, than during different law. before but the Company's Reports the and not Commission. our in future set these and made accuracy of most with is Specific or by earnings ultimate that obligation The statements. the the these XX-Q cause to are may upon actual in performance release implied or

a measures. call, certain are management’s release comparable such today’s of financial GAAP of today. discussion supplemental statements non-GAAP part issued Additionally, Company as of earnings on the included include the information to measures the Reconciliations

turn the ahead, Schlarbaum. I Jeff Please will go over Jeff. call to now

Jeffrey Schlarbaum

Thank good everyone. you, Audra, and morning,

are $XX.X fiscal a XXXX million, have of to We pleased revenue strong our year closed of XX.X%. year-over-year fiscal represents an quarter out which with with fourth outstanding growth

XXX compared which last year operating We same had gross share. million is to basis $X.XX higher at per income the and margins an of of is same compared XX% year quarter the XX.X% or million $X.X $X.X of quarter to net which last increase points income and

leverage sequential fourth to fifth to represent deliver our margins revenue million. our quarter our that quarter of we ability and more revenues backlog, growth allows efficiently while $XX of resources quarter are The converting our the in marks best our industry. levels some revenue of fiscal consecutive These second which over our believe us

resulted growth of to because in the business number of extended is value investments new, the momentum particularly longer we it are is commitments we’ve duration awards. believe significant made result which a This a scale customer and including gratifying higher direct

more believe in new we both customer win is which customers. strategic consistently, our existing ability growth has improved and to our Our relationships, new programs rooted among

that our and of mission-critical are trust perform life-saving their to to result products. ability customers the relationships These consistently manufacture us for our

the time to and they number partners offerings the portfolio cost, advantage lead the manufacturing as remain to of of control quality our which of for allows Additionally, our vertically-integrated at the IEC, customers components, time need critical to us same manage. competitive it allows the a minimize

seeing to marketplace are excited opportunities also we our about we new with the In many recognition steadily growing, are addition, customers. of capabilities onboard

have we over quarters, customers. past come seen of the these three revenue XX% fiscal new from Over

to XX% a our $X.X our report million, results. compared fiscal full revenue XXXX to compared prior pleased to of year XXX% a increase year $XXX to of am operating increase million, income Turning prior the year I results, results and

XXXX. moment, to million Tom greater results before also our million turn which XX% which orders over than to backlog of would of fiscal a booking $XXX $XXX do, since of of new like highlight the in the will discuss year, I represents the the call financial in growth to more net backlog result In represents in close our I I but during the fiscal detail,

book-to-bill X I our more our Clearly, am our and XX% ratio to bookings than sales fiscal year pleased X.X annual year-over-year. up the exceptionally knowing were with of for strong were

contracts. composition backlog longer-term is a greater of number includes also Our changing now and

than less our ability For for of this ultimately represented one start comparison at of which periods to of order to year than XXXX backlog time greater backlog approximately XX% greater enhances commitments fiscal which are deliverable the starting example, year in future. orders in XX% better year, the than one in our plan XXXX, the our

manufacture programs competitive our advance life-saving, advantage that in a ramp program of is IEC trained key mission-critical the A ready requires we to we well up. which support efficiently have for ability staff to

are We adding manufacturing to and improve resources introduce quality. continually into for processes on reduce automation incremental to our opportunities looking our to dependency

required assembly the priority that our product. high-complexity skills said, and and However, processes our manufacture workforce of a developing our it’s essential customers’ remains are to test for final with that

XXXX, we XXX new fiscal employees. During onboarded

the of convert our to production availability from related Also to ability materials. backlog projects raw to is

industry has component the As to shortages global with our for grapple now. years you approximately two know, continued

to the see in markets. use on engineered components but source we Components these in used regulated tightness highly sole highly chain behalf customers in operating consumer of our more available, for products are some supply the continue becoming readily we

released we are to management they has situation meet right need commitments to time efficient have focused shortage ensuring some production. The into we for us a go reality the parts for been on balancing customer on an the inventory for with now are our hand as and

relationships our exceptionally of indicative strategic year is the we future and Fiscal due what reputation IEC in customer strong this holds. is performance was we enhanced have our growth believe an the XXXX to year We believe and for marketplace. our delivered

XXXX, we into positioned this position. As continue build we and and from well our to believe momentum have to a leadership move platform we expand strong are fiscal

to provide financial call will Now around quarter more the I ending Tom our Tom? detail over year performance. to turn fiscal fourth and

Thomas Barbato

and was to quarter everyone. as quarter increase to fiscal morning, Revenue Good sequential of quarter increase X% compared of for a of the the the of XXXX fiscal XX.X% fourth million, third $XX.X XXXX of compared XXXX. an fourth

million of XXXX. XX.X% Gross - quarter fourth XXXX to to XXX increased fourth in fourth the quarter fiscal margin XXXX. compared $X.X Gross was of the of basis XXXX profit gross of of the in fiscal for of gross fourth million, XX.X% fiscal quarter quarter of the compared fiscal $X.X margins profit fiscal points in

in compared Selling sales and or higher sales and increased $X.X administrative of increase X.X% $X.X fourth expenses fiscal $XXX,XXX, as of to or The to related XXXX. expenses. X.X% due million quarter primarily to wage of the million was

net of million diluted share $X.X of per share basic million recorded fourth in fourth fiscal $X.X quarter quarter to fiscal per of and share income $X.XX income Company in and of $X.XX basic XXXX net compared or per the The diluted the XXXX. or $X.XX

allowance, benefit utilized $X.X deferred a fourth tax that one-time Net which related adjusting believe included will tax be to periods. in income million the the confidence for quarter we of assets fiscal tax company its the future XXXX reflects asset deferred

the to to income I non-GAAP release included this include non-GAAP encourage $X.XX our you excluding for GAAP was and quarter call. a performance benefit, evaluate these to are important which per the On provided at or believe tax look measures measures us basis, the closest income fourth XXXX income basic common of share. non-GAAP share $X.X fiscal to We associated reconciliation measures, one-time net period-to-period. net million the earnings is with from per the in net it

XX.X% the at XXXX, fiscal million $XXX compared the results Looking $XXX.X year. to increased fiscal for in the prior million, to year full revenue

at XXXX. a and market of net increases medical sales defense for XXXX, XX%, saw Looking and aerospace aerospace of distribution industrial fiscal in compared $XX.X decreases XXXX, at XX% million for sectors XX%. for to defense fiscal at customers and increase at and fiscal Various resulted in our we revenue

programs. frequently due net ups. saw demand an sales from to in production by increase demand We Programs million. are $XX.X in sales increases ramp $XX.X in and new customer was fluctuate fiscal were or XXXX replaced in million increase in end Aggregate of

XXXX. in increase However The $X.X were other reaching in of and in by to of relationships, changes increases million contracts was customer delays customer fiscal result decrease due in the changes million, these primarily of offset a their partially of $X.X ending during the sales the customer the medical remaining million term were caused programs sales of which end net demand. up ramping $X.X sector

new The the amounted decreases from in sector production resulted partially sales customers. due customers with programs the in which whose three demand was remaining up increase The ramp in customers net increase $X.X offset million. $X.X from million by grown market end-markets several have of to of other primarily industrial to

XX.X% a profit XXXX. by from decreased XX.X% and and in of improved points Selling percentage XXX sales million basis XXXX $X.X sales fiscal increased Gross $X.X million of increased and administrative in as to fiscal expenses. compared in X% administrative of sales to was higher prior year. primarily related increase due or fiscal expenses in fiscal and X.X% to the to XXXX $XX.X and in sales million selling of The wage expenses

diluted or million share basic diluted fiscal share compared XXXX in to of fiscal million prior net the $X.XX for income $X.XX share $XX.X as per Net or and per $X.X income per basic and $X.XX was year.

well December first mentioned XXXX alternative Tax quarter included $X.X income the valuation the deferred previously of of to as XXXX net the credits of benefit tax tax XXXX of as our the on allowance allowance million as U.S. a and fiscal result Act. Cuts tax a minimum asset Fiscal Jobs release adjustment, related

provided encourage excluding net $X.X it’s period-to-period in $X.XX us to per evaluate of believe include a you with tax included to reconciliation We basis, look the our release income at the from the closest net GAAP non-GAAP to important non-GAAP call. performance income common the benefits, again, and I net non-GAAP fiscal which for per earnings this XXXX million associated On to measures and share are income was the measures, share. these one-time or measures

Now looking XXXX. at our balance sheet fiscal for

Our balance $XX.X equity. with in working stockholders' in sheet and million strong million remains capital $XX.X

inventories see million $XX.X XX, XX, that million, up XXXX. September XXXX will You to compared $XX.X September at were at

our calls, levels our prior associated inventory backlog. convert discussed As with are to on directly ability we've our

see in willingness the to help shortages to component the $XX.X continue the to our comparison $X.X exited customers year on customer fiscal growing deposits with in risks XXXX XXXX. fiscal ongoing resulting we a associated of at of the end to million mitigate as part We million

the at of at adjusted in comparison reduction of million look QX a you when the saw we inventories QX, as at customer fact, adjusted in inventories of inventories, net $X end end deposit, In as the of fiscal XXXX. to

We provided you ratio. our earnings call. light look in measure believe to that of important for and our is inventories GAAP capital I of management of an associated reconciliation to the is and closest at our encourage the in working this us which deposits book-to-bill with considering the the included measures release of non-GAAP measures customer this backlog

– With turn it that, I Jeff. call back to the will back

Jeffrey Schlarbaum

Thanks, sheet Tom. balance our strategic our we fiscal three strengthen driving began identified XXXX, we initiatives profitability. and When improving sustained growth,

we show excellent team our strategies that made As here these sit executing year. today, progress results during has the our

our for life-saving products growing. exciting our with performing an mission-critical as It’s manufacturing reputation partner and for and top a established company firmly complex, highly time

to favorable base. fiscal market we on on and this our As existing to expand we into customer our add move continue customer are XXXX, recognition relationships, to focused to capitalizing

also during are completed being the the made progress facility XXXX. new of being very we construction which about We state-of-the-art on anticipate excited our

and well would dynamic hard It’s attract new to work I their for in that thank positioned our to new continued because their awards busy company partners. like is efforts, win of our our employees and environment.

leadership are growth We position profitability. and to drive continued our expand energized and

Now I over call the operator questions. turn any will the that, with to back for

Operator

question. from of Our Instructions] Please first Chokshi with question line [Operator proceed Nehal comes your the with Maxim Group.

Nehal Chokshi

Great quarter guys. Yes. Thank you.

fiscal is backlog of beginning I it. but You didn’t shipments say the within XXXX? the of catch year much that $XXX this How for at million did call,

Jeffrey Schlarbaum

in Roughly, you in XXXX? Oh, So, XX% it’s a outside are for XX%. saying and the year. it XXXX no, XX% of

Nehal Chokshi

Got it.

Okay.

orders your backlog this revenue. that below number Q-over-Q, implies your So, is down then which was

from little so, I around knockout had million $XX that contracts – the a guess from had $XX you quarter won. below million, prior a you is So or which guys big bookings bit those no,

$XX you sorry, runrate. But the this bit $XX below a Was million am I below that – your million characterize or expectations how is that? prior would

Jeffrey Schlarbaum

Yes.

we it’s we you So, what the Nehal, exceeded what bookings I are and anticipated and look always QX aggregating those I and really at at took is QX than predict timing. two mean, you you what if how that far the $XX aggregated look QX the those and say, – QX right, it’s But at bookings. in and would average, achieve to better and QX. when And would you in look I hard million

than am I But, it’s that. issue I pleased a of just more whatsoever. not so It’s actually higher mean, I – anything. am than timing

Nehal Chokshi

about XX XX% not I And Q-over-Q the you has whether understand help us again that small of case? this why been that over years, a Can decline. be the case you Okay. should decline upcoming And a Q-over-Q us quarter? to to accounted that remind a XX% or for the quarter would the thinking upcoming we from then, here, about past All the right. very think times had anywhere to up December expect

Jeffrey Schlarbaum

Yes.

and of we that So, calendar and we obviously, amount do. a follows business same have aerospace fiscal the defense government significant the

an September it’s through Xst October XXth. So

So, obviously, that the fiscal end historically I that to of our the pick demand created continues throughout lower the calendar of end up the is first and quarter the has year in year. think a government

didn’t bookings the our and to then we and to the bookings saw in as softness QX. experienced continuing increase this last continue you may of broader, be seasonal now, the diversity Obviously, year,

trend think, of backlog continue at a we with that the strong amount may greater I diversity. So, look as

it. So, I why guess, they that’s characterize

Nehal Chokshi

good in book you within I that to $XXX XXXX would drive XX% a fair obviously business in that that need still you million say. be of – backlog, growth, Would Then order year statement? case, at would fiscal to more

Jeffrey Schlarbaum

add if of and of the bookings, for the fiscal short we book significant you in Yes. at during we a amount And not four and need last those double-digit amount is ship that base even the that look to bookings the think we I our trend to quarters that year drive XXXX, fell to level growth. have to if

book very that during and in large the with to of we amount am So, comfortable fall year. I anticipate shipped business the

Nehal Chokshi

am expansion Okay, if talk on a the I sure didn’t you I Q-over-Q? sure drivers gross of not then basis? okay. am the on And – And it. did a What did but I were we catch year-over-year about, margin

Jeffrey Schlarbaum

at the these we earlier, say, I think, you QX, when investing at and converting look newer margins, when lot programs. are we you QX, were look let’s a

stranded more Some of which were manufacturing. in

levels to QX, more When those we workforce lot levels that right absorb we absorbed. that place a solid investments absorption with investments before, I I – in like felt above what confident and completely I was And QX we the profit had We that’s that and were margins. saw making nice you look said think revenue overhead revenue get the at create when million, represented. gross were the effectively to $XX

Nehal Chokshi

the XXXX revenue at year risk tapering fiscal off there probably not question final think but is will fiscal a – of throughout Okay. being it Great. away to will, necessarily fair potentially beginning that be high could that that year the My about happen. year-over-year that, way is – a that the as straight growth at likely and

Jeffrey Schlarbaum

I understand I am sure your question. not

Nehal Chokshi

But just year-over-year will some see year-over-year I in quarters XXXX phase growth through XX% out XX% decelerates and growth? of of say December growth theoretical as XXXX, here. fiscal year-over-year we you year like quarter that throw a let’s go numbers that, might the

Jeffrey Schlarbaum

out play if that it’s way. I going to don’t know

right. Our of the business nature fluctuates we quarter-over-quarter. the that I do, work guess,

precisely electronic to manufacturing to So of revenues there next. the dynamics customer manufacturing from me it that make one as outsource difficult an quarter for companies that the and more flow controls for us, are to service provider predict

I it’s we clean and for as you but best the can what again. growth described, year up I at going be I look can just say, think think with it the way see to and as don’t double-digit year-over-year now. I are confidence aggregate I state that’s

Nehal Chokshi

Okay, much. great. the very you Congratulations Thank way. by

Jeffrey Schlarbaum

Thank very much. Appreciated. you

Operator

question. proceed Our from [Operator comes with Instructions] Chris line your of Research. next Please Singular with question Sakai the

Chris Sakai

morning. on Chinese Good everyone. headwinds tariff. wanted Hi, if see are the facing there? any you to question I My was

Jeffrey Schlarbaum

nice Chris. so, talking Yes, to you,

the companies of through passed of our on that that end-products, to that manufacturing the for to So, the to to along tariffs, are we’re supposed experienced supplier their customers their is print when we that a through pass specify build the in OEM expense, reimbursement. issue behalf sort manufacturers and terms tariff for acquire those we because tariff components are

we But covered may there next Now one that quarter those our on expense expenses that as are get be their a in seeing customers timing tariffs are the get issue largely aggregate, reimbursing. the relief. a the we relationship by to we quarter and the

Chris Sakai

see point of from the because there Okay. cost end? you’d – increasing lower a demand your But where will be demand tariff a the ever

Jeffrey Schlarbaum

it And No, we over look no. devices the they that, manufacture and the the thing XX% we when about industrial – obviously I Tom and obviously, aerospace are products look at is are here. you the as we manufacturing life-saving products, we that mentioned, mean, when are build, unique you defense. at medical

acquiring from we on procure. Most tariffs. discrete the are some we those actually China subject of dependence the very materials percentage and per the of small there components materials to they very But we’re raw of for buy, U.S. and little raw is the se overall produced that the are a China in

Chris Sakai

and then, workforce Great. cost having large add? will it that And cost the amount? much amount in for – the to additional noticeable how that to be you Will a I specialize or Okay. a backlog workforce. mentioned train be guess, increase Will

Jeffrey Schlarbaum

the versus in in some two saw in gross when that first you fiscal second and and nice the you in profit guess, development margins to aggregated what were regard because I the would quarters investments quarters, initiatives workforce XXXX. I levels improved, margin our draw really – absorb able And saw those margins. say the that revenue quarters our you we profit you is, two two saw fluctuations that the second in

so, could quarter-to-quarter. modest in ladder, gross average margin fluctuation we But able from as to And some I be XXXX to should be the forward rates we climb continued at in we going produced the as those XXXX, there expect think, well. on

Chris Sakai

Okay. Thanks answers. Great. for and questions that

Jeffrey Schlarbaum

Great. care. Chris. to Thanks you, talking Take

Operator

this to further floor now over I turn management. would We the no to like questions have at back time.

Jeffrey Schlarbaum

for your next look great. Well, and appreciate you, everybody in. Thank quarter. We IEC we calling talking continued in interest forward to everyone, to

Operator

teleconference. today's this Ladies does and conclude gentlemen,

Thank disconnect may time. day. lines a You and this at wonderful your have participation for you your

Iec Electronics (IEC) 22 Nov 192019 Q4 Earnings call transcript