IEC - Earnings call transcript Q3 2020

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Operator

Greetings, and welcome to the IEC Electronics Third Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Ms. Jennifer Belodeau. Please begin.

Jennifer Belodeau

you in. thank and morning for calling Good

On President Tom and this morning, Barbato, Jeff Schlarbaum, we have Chief Financial the Officer. call Chief Executive Officer; and

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

Jeff Schlarbaum

Well, of XX% revenue solid Jen, hope thank I you're good It's and speak everyone was second of fiscal strong everyone. healthy. and another pleasure this and This by you, safe our million. of to and for morning, X%, IEC. compared was of all increase it quarter an to led morning, was sequential quarter XXXX. a It year-over-year, It to increase $XX.X was a

We milestone $XX company that the target. million more industry-leading of what XX%. surpassed also target margin be internal then an at time, consider this Our believe an revenue a than it to same ago we while notable is that through while gross $XX particularly quarterly substantially year delivering internal set our which revenue, in quarter, million, we breaking on growth we our of sights quarterly quarterly $XX million achieved when was all organically, to one just revenue you generated

solutions done the Our growing of who the the and IEC reputation ability have a to job and continued high growth in products organic midst achieved as dedication levels the a electronic generate highly current And pandemic. to is also get testament resilience to our has reliable volumes and industries. of about highly-regulated speaks it employees such of manufacturing the for capable highly-complex provider

cash in It flow in basic quarter cash gratifying fiscal diluted of or support top $X.XX to the continued and period change line our purchase delivered significant In with primarily the substantially were same inventory. quarter, for share. to consuming associated a million from was income growth, net with improved backlog we our the during operating to success, XXXX $X.X million we profitability, $X when growth to XX% per also addition of generate the

of start We've a U.S.-based Finally, a year, book-to-bill at the discussed the competitive the ratio believe the fiscal it in XXXX our we light period to of what backlog the ago, a our growing third revenue, as was year advantage solid near and which as year-to-date, quarter for same our X.X:X. our fiscal level increased XXX% remains was nine-month often is same manufacturer. XX% at compared

to specifically, U.S.-based severe production manufacturing situation with China, continuity expertise. of COVID-XX this the So, U.S. and presence East has associated the and as the think the further due reinforced of benefits we more largely pandemic, the supply has outsourcing grappled issues to with firmly-established Far our

on we pandemic. for encountering solutions, the demand also the to flip chain previously challenges supplier our logistical with steady shutdowns lingering While continue side, complications and COVID-XX we're to supply reported manufacturing associated vertically-integrated related see

a well end in take proactive to with more constraints. are in quarter's working $XX million. need, to to resulted these of at-risk partners at deposits effective stance secure parts on continue our of advance strategies, We mitigate has And than furthermore, customer supply customer manage which we and chain

quarter, We base from our different coming to on diversifying see strong and eight bearing multimillion-dollar activity also continue booking customers, saw we is focus were to revenue that in with the third pleased bookings fruit.

success, as existing COVID-XX in attracting winning and complications both remains and our continue projects strong business from to of customers. order new customers new despite the pipeline sales have new Our we backlog from

as value be on our sales complex for Our who that execution believe products. engineered manufacturing value customer-centric recognize highly remains vertically-integrated and nimble U.S.-based operational markets the we focused service highly customers also and as model, platform extremely our best-in-class strategy unique, exclusive to end of on well what focus,

quality, us and the times Our customers' us strategically capable and more compelling risks, but foremost, and the manage to superior on responsive allow costs the manufacturing with transition and premium enable a property very U.S. reliable long that electronic have the align control the with customer better exceptionally Today's way exclusive delivery, customized they manufacturing importantly, and to run of offshore an associated – support is life customer our critical long-standing place the even base, us components giving a required diverse to lead many low-cost provider, extraordinarily offshore the companies, service, to just-in-time cases, many considering a our complexities, entrust as large is initiatives manufacturing we the in-house processes. our associated customers highest protections, increasingly a for option. manufacturing with as IEC manufacturing. to and that who onshore for they headlines product a we with of to capabilities, recognize locations the of to and U.S. refer levels in cost, believe often out stands fabrication solutions quality the first associated the IEC. opportunity fully manufacturing Nonetheless, and lead more times, intellectual maybe outsourcing recognized

trade we With at the harder believe will like more export overseas risk-reward challenging COVID-XX the look environment, pandemic a companies take trade-offs complicating already and what manufacturing. was further a with associated

to ours. resulting to be strategies of yet we these a U.S.-controlled company the production such to future it's as adapt how more in to to long-term, recent outsourced supply, domestic sources will upside in impact expect shift a manufacturing events, seen While see sourcing platforms bias to

now construction now delays, we're our unanticipated we Turning an to for a manufacturing new initial early few fall targeting so facility, move-in. had

near exceed remain As to a to we The stages will as which especially pursue operational to what in well the that career attractiveness a to believe considering quarter, We're improving in innovations planning third facility new series it minimize the produce meet our our ability environment, as relates and and energized performance awards new to a enhanced for our I've industry-leading be we with of manufacture building our highly quarterly of designed our further operational to incorporates we better mentioned diversify the believe manufacturing candidates progressive remain state-of-the-art we to us continuing we on put complex, Likewise, state-of-the-art future create enhance an from more move base. designed, business OEMs, in building million move believe disruptions, improved revenue a new to customer the will even We threshold deliver earlier calls, team. and goal future layout to facility $XX increasing employee the serve new our custom talented products, new recognition join as top engineered highly by our industry's expectations. pierce marketplace customer feature and in but an bullish our position any we're margins the as to grow of and leading focused selling of as of on partner strategic to the this efficiencies. gross profitability. flow will a

performance. fiscal Tom? to over Now, turn more Tom I quarter the provide call third will financial detail around our to

Tom Barbato

third to of XXXX. income fiscal as the in recorded increase $X.X third margin quarter consistent quarter an fiscal and quarter of fiscal company third Good XXXX. third the and quarter of by the XXXX million of XXXX sales sales of as of million a $X.XX third decrease of morning, XXXX XXXX compared XXXX. XXXX, in in XXXX. the to share of of third compared gross quarter X% of per and XX.X% in quarter quarter X.X the of slightly higher in per fiscal fiscal the of the or net of profit or administrative quarter XX% the as of quarter fiscal million XXXX, in $X.X compared million margin million, of quarter improved $X.XX diluted than basic was Gross X.X% of X.X% Gross $X.X Selling million, the per quarter third $X.X the to percentage was of for fiscal diluted to compared third a basic of share, fiscal with of was fiscal XX% net compared everyone. the third for expenses $X.XX income third the fiscal second gross profit and sequentially fiscal were The $XX.X XXXX. as to Revenue to

$X noted, growing from cash inventory as backlog. As compared third in million, generated we quarter of in last quarter, $XXX,XXX used strong flow operating we we year's to fiscal during our support Jeff invested flow when operations to the cash and

by we in by of sectors XX%, sector third customers disengaging to $X.X increase with defense demand increases million $X.X and programs QX well XXXX, market customers, at as primarily which as The in resulted quarter comparison of in for demand an customer, by to ending delays. medical Sales existing well the industrial increase in production with decreased XXXX, ramping other variety hold customers, sales ramping our on million, XX%. fiscal with certain to in with partially at These increased $X.X aerospace aerospace related increases demand new and $X.X medical of of revenue, related other with primarily net reductions as revenue to sector program were in due from a million, revenue another in defense increased certain saw million and distribution saw customers. a offset at XX%, at a the certain primarily program programs as customers. and Industrial for of driven Looking customer. of fluctuations by offset the and sector

further aerospace or nine of $XX.X the defense fiscal fiscal been morning would per was and XXXX. nine $XX.X fiscal non-GAAP the for months first as million million the of gross $X.XX the income $X.X $XX.X the income in months looking to in net nine or nine XXXX, fiscal diluted in and of XXXX $XXX.X the or diluted million. for nine per sales for year of in nine Gross of of inventory of the the margin of million, for to months or increase fiscal primarily XX% to compared period. and million reserve, the $X.X or to $X.XX Please sector Adjusted was the information reorganization related in Now XX.X% related was to $XXX.X of and million year million impact first quarter The reconciliation of $XX.X medical XX.X% sales, share first at sales medical in lower the compared first driven or expenses first increased Gross share. to release increase this in million million fiscal in adversely months net to X.X% comparable in sales the to compared Growth fiscal an of an activities the income tables the $X.XX customer prior was as of X.X% period. profit Net per fiscal period. Selling compared of million an inventory in decreased sector the a $XX.X months administrative the months million write-down same at in of per basic the the per $X.X million administrative fiscal and XXXX in $X by one-time first onetime prior results revenue $X primarily expenses was decrease $X.XX $XXX,XXX expenses. share decreased impacted quarter by and and sector. in of due end basic profit XXXX, press $X.XX have these and sales sales regarding basic measures. diluted percentage selling included see in adjusted payroll to in fiscal the of first and prior XXXX first

the For of operations $X.X last we in XXXX, months operating used first compared generated cash flow activities in from year million to fiscal nine cash million. $X.X of flow

in $XX.X equity. working our remains strong, Now looking stockholders' and million sheet sheet, at with our balance $XX.X balance in million capital

end up modestly the to of XXXX. that inventory end see $XX.X at at quarter of fiscal million, You'll the $XX.X million compared the third was the

the willingness component as at with shortages. our deposits $XX.X customers part We quarter XX, continue $XX.X see customer mitigate third risks to ongoing a of the of And grew million in XXXX. at September to the a help end associated to million on comparison to result, the

of June amounts our facility request credit to I'll associated credit which the $XX to turnaround provisions of the with restated strategic of is $XX agreement a the testament further entered minimum Bank, certain million back and X, to requirements revolving pandemic up partnership new allow M&T Jeff. condition Bank. million. credit in $X IEC improved with it to increased sixth is added post to a alignment XXXX, the and and facility increases million reflection that, effective turn The into financial that Additionally, subject amended the company and between notwithstanding the we agreement all With worldwide to uncertainty IEC the overall M&T

Jeff Schlarbaum

growing last XXXX remained public Great. challenges the has Thank products intently leadership the immensely months, capable leveraging during IEC an as you, our the and We're XXX% on position world industries. economic and Tom. highly-regulated reliable has for will continue to add our Fiscal unique and as Despite experienced with existing with U.S.-based health in additional program and any our to and the hand electronic customers. fiscal customers positioned expect several manufacturing solutions margin life-saving for industry-leading has year. provider we the manufacturing wins awards close and year we of back for provider improved uniquely focused products, growth, new highly-complex With organic driving that, a company, performance continued capabilities new we and I our call profitability on as over out for been questions. facilitate mission-critical to a now remain operator strong focused

Operator

[Operator Thank question. Research. you. Please with Instructions] question Sakai from comes Singular with proceed Our your Chris first

Chris Sakai

sectors, most Hi, I the least is you you guess, I business good just on, was can where from Question, And the the and found three morning. guess, favorable? where environment comment favorable? the

Jeff Schlarbaum

talking to Yes, absolutely. Nice Good morning, Chris. you.

increased XX% sequentially, So, QX I at sector. in of we the just we about you quarter, the saw the defense �� come from sector, terms look saw medical versus XX% this come sales at another look if of if QX, from

do under it's And the little XX% math, from the we sector. so industrial a probably coming when

the really industry answer, is that's to solid defense So, and sector. the increased good amount and I seeking had the was pretty what medical and least sequential were you're steady guess, quarters. revenue, industrial the that led Both

Chris Sakai

as light what not so to other it going the – well as But there? as you was Why on was far sectors? why can us shed goes, some as as on industrial Okay. – performing,

Jeff Schlarbaum

Yes.

– We the obviously, customers medical essential of as for security supporting non-essential defense company essential couple get products. products and classifications sector, businesses largely a saw the were national and it obviously the with but had again, were procurement non-essential essential because suffered medical were all with that some essential didn't mixed but industries, COVID-XX affected, of of there essential certainly, all that most most medical the of And initiatives the were I the the some considered think with product essential this a There So, support sport economic essential that we of didn't certainly, a have with more initiatives. companies products, have considered manufacturers, And they a the I our that pandemic. number at ones products much was we underway minority. I industrial was sector think was classifications bag. think The industrial classifications that defense weren't. uncertainties, associated versus the classified but companies number conservative them during sector

to the well on two. why So, as that's compared didn't other fare read my sector the industrial

Chris Sakai

All Okay. Thanks that. question. great. right, And just for other one

customers? grown disclose as far sequentially? your you has that how And do amount of over As –

Jeff Schlarbaum

number question. interesting report support. – actually total We customers we don't of So that

talked past, our the to that national around well, existing revolved has the different primarily into strategy And these much alignment has I've locations. on customer strategy. advocacy been have gaining focus new strategy with we our have customer global customer As we growth get strategic our with multiple multiple as divisions, our new in of as attention locations, but do about it us a partner doesn't the performing OEMs program, and introduce market-leading acquisition to product divisions,

we dozen So, a year. add customers half a new a

So, It's on the to to complicated all customer aligned we've grow overhead with. dynamics been minimize with the additional that strategic much with bringing more really OEMs we partners. new efficient and try

don't – year-over-year. we report but customers don't So, of we the total the handful punch every is, but customers add a served, a of handful number sort year, add we line we small of

Chris Sakai

Well, that. thanks great. for Okay,

Jeff Schlarbaum

you for talking Chris. Thanks Nice to the questions.

Operator

Shawn Our your question. Boyd Please [Operator Capital. with with comes proceed from next Instructions] question Mark Next

Shawn Boyd

hear gentlemen. morning, me? Can you Good

Jeff Schlarbaum

morning. Yes, can hear great. you we Good

Shawn Boyd

Great.

on Medical, segments. Can very you strong us Going more looking as that on year-over-year of at strong and what's going give growth this we just in bit revenue kind little the just sustainability of there saw color particular, go QX. and also again, a the basis, quarter, we back a down on in in forward?

Jeff Schlarbaum

Yes.

us know hard to always it's that predict future. You for the

of not our we're what saw As are. the medical demand customers and in see you sort as a lines reaction back of in strong to quarter creation front markets, end visibility, our end that customers what number the in in we we're demand. of on so know, seeing their they're they're that forecasting but the is the We're demands second-tier mainstay

some I testament I the non-essential that high to the the essential a fairly brought for they've were products before made think about nature these market. to comment their And uncertainties conserving products on that's capital demand. despite acquisitions, of and the companies

it. that's to QX, but on some amount that So, see I I move QX think building as over accretive I additional as of in a and revenue piece of we year. those see into starting also It next We're a customers, bring significant new wasn't being and time. into

switch So medical time for you customers to overcome is sector remains work. lengthy to an new the revenue The all to regulatory and acquiring us. because hurdles very important of got

So, one bit us a it's because blessing onboard it's new a challenging in for but sticky, it's to respect fairly programs.

as that model seek of that capabilities see continued medical OEMs represent. our we manufacturing focus exploit I the a for for to So, us kind

Shawn Boyd

it. Got it. Got

to at of fair backlog, mix we forward is continued should too, – out So your level say going looking mix of in similar it a a medical? expect of similar kind growth or the this

Jeff Schlarbaum

we really, medical and But visibility just sector – front representation as lines. I defense, I between what split as increased it's was strength. the our sales. that like can versus their the QX I customers as good the were Best when one are didn't looked And show tell, have industrial on I QX, much equally, at on the said, seeing isn't that right? mean the

and were medical defense equally So, strong.

that say hard think of some continue? variation will I it, to So, specifically.

Shawn Boyd

brand-new And to now maybe looking a Great deposits. you covering the I of as thinking that way wonderful that a is there it's I'm this were of right, would ask called see. a if Is Switching we a of looking ratio you flow, a in at discuss coming level is at or taking program be sort benefit be – minimum this cash another might to course, to level a be at of were I'm into starting it be of to better expected you way customer have going Okay. out. to targeting? If – customer certain your if is, about And there XX% could that to I'd to inventory. that deposits guys you're gears certain ready I is this IEC, for IEC? inventory,

Jeff Schlarbaum

want and question, down the to a you're great they and to customers, each say answer not on-boarding to in these going our is gets invest to It customize us materials not the fact you strategies formula. to the convert a And each risk a up probably inventory. manufacture give to it to program. we're it's invest, and of need and we with It's our and on it work, want strategies have their minimizing it a material We they into looking products. isn't wherever it. distribute really So, that risk-reward We much how we, lock formula. business customer the I trade-offs recognize for, And raw and based canned don't how unique acquisition we we them dynamics and continued to a I'm but take distributor. really much finished product canned

Our future business for on parts sit not acquire distribution. go and is to them

we and the customized risks, in that, invest strategies. this value those it's our a and byproduct see is of approach, customized and them, with have thankfully, total minimizing So really a that having and customers said we risks their

Shawn Boyd

Got it.

actually anything see flat here? Was deposits continue can should that decrease increasing? Okay. in – to should them the of kind from there we to of we expect extraordinary about Or quarter we kind

Jeff Schlarbaum

you I Yes, know think...

Shawn Boyd

revenue your In growth.

Jeff Schlarbaum

fluctuating Yes, major either see any significantly. trends direction in I don't

converted and so That longer. longer-term because products deposits sit where have securing it we're be the up little – down we're materials haven't a yet the could some of think newer some overall our where have into bookings, quarter programs It's on raw shipping. could a we trends for I we we We draw might pretty probably lumpy. to be going kind converting steady. like stay are as material we it's horizons, finished and

of think kind but the in a lumpy, So, will strategy bookings, I similar it's little like a the overall, kind of bit remain band. it's

Shawn Boyd

Got it.

the you. quarter. Thank on Congrats Okay.

Jeff Schlarbaum

talking Nice Thanks. to you.

Operator

Our from with Please Allan next proceed Lyons, Investor. question. question Private a comes your

Unidentified Analyst

Thank Okay. to results Hey, Tom quarter on congratulations good nine Jeff date. great month you. and and morning and a

with So, performance. really the pleased

can defense to of you've So give do assisting I existing have questions. detail as that manufacture a In Could date the a little meeting traction of you as who the on �� the Albuquerque conform bit for, grade couple little bonus standards a in you seen those more particular, bit well to what military received these customers, mandates don't for for defense agency? logistics operation?

Jeff Schlarbaum

Yes.

specific growth seen that So operation, to we've business. Albuquerque the continued with

XXXX, mentioned to job to As execution and really they've visibility And And and a years, customers, I've the for good your ramping point, chalk contributed they're before, servicing this our are growth up defense it program in operation programs And slow in are at attractive of on, steady, growth. to a the that prior a those nature bit done those fair the business have rewarded overall with which customers programs I past was year some us. pretty it that up. additional of have newer they awards.

in Albuquerque, for very year, that looking growth I the been continued a year coming And that frankly, growth see has site. So into year. out growth good a overall, XXXX

Unidentified Analyst

Great.

Okay. Thanks.

during vendor opening quarter? the to do your manufacturers, any list working far with As up approved and multiple source in further been you've from IEC as that they success allowing customers – have

Jeff Schlarbaum

Yes.

we an not battle. of both yes, constraints result better with don't So ongoing confronted the raw talking battle, success. that's capacity, full You're a as right? that materials with, that's a know manufacturers that are and at COVID-XX always having I we're being continued always about pandemic

potential customers with a alternate highly been gives re-qualify these know, flexibility, but frame us we in. and that aggressively the collaborate work greater easy to manufacturers/ markets, regulated to in have design in them not is better challenges back more go inspires what and design that think us I a you future done our locked as already the allow it's to So, to risks has it in and

number battle the what constant and stuck a make of and best our it's where we regularly got that customers. we still kind there's it. So, it, make of one And with of just with we're strides work a areas but on we we

Unidentified Analyst

Right. lease One building? the other question. starting payments When on new are actually your

Jeff Schlarbaum

in. move we Yes. When

for we construction prior was had delays. calls, – We've on So mid-to-late hoping I had summer. hoped some

more lease assuming start we a in. those And to any I is fade move fall. guess But payments opening, the we best looks the grand wouldn't sometime delays practical. my until start we that to So, in think fall and closer move now

Unidentified Analyst

Right.

Well and Okay. answers the in balance year the you. the Thank of for thanks well. as the fiscal luck on and move good

Jeff Schlarbaum

the to Nice talking Great. Al, you. thanks. for Thanks questions.

Operator

At like the Schlarbaum this Thank you. comments. time, closing would Jeffrey over I to for Mr. to turn call back

Jeff Schlarbaum

I associated the COVID-XX you, everyone continue We Well, as for pandemic. challenges just want in. wish for with thank say everyone and continued to again, the health safety calling through we all to work

speaking thanks in. again And to next again forward for we everyone calling as So, quarter. with always, look

Operator

today's does Thank conclude you. This teleconference.

your and at You time, may have day. this lines disconnect great a

Iec Electronics (IEC) 8 Aug 202020 Q3 Earnings call transcript