Slide 1: 2017 Second Quarter Earnings Conference Call
Jeffrey T. Gill 2017 Second Quarter President & CEO Earnings Conference Call Anthony C. Allen Vice President & CFO August 15, 2017
Slide 2: Safe Harbor Disclosure
Safe Harbor Disclosure Non-GAAP Financial Measures Any non-GAAP measures, and their related reconciliation to GAAP measures, are provided and available on the company ’ s website: www.sypris.com Each forward-looking statement herein is subject to risks and uncertainties, as detailed in our most rece
Slide 3: Table of Contents
Table of Contents • Overview • Transition Plan Update • New Program Awards • Results • Financial Review • Cost Reduction Goals • Key Takeaways • Q&A Session 3
Slide 4: Overview: 2Q17 Highlights
Overview 2Q17 Highlights • Revenue increased 16.8% sequentially – 32.5% increase at Sypris Electronics – 10.2% increase at Sypris Technologies • Gross margin expanded to 7.5% for Q2 – 18.1% gross margin for Sypris Electronics – 2.1% gross margin for Sypris Technologies • 31.8% reduction in SG&A expe
Slide 5: Overview: 2Q17 Highlights (Guidance and Cost Target)
Overview 2Q17 Highlights • $26.3 million two-year cost improvement target – All major initiatives are now complete – Expect further positive impact on margins in 2018 as full year results are realized from these actions • Raising revenue guidance; Confirming margin outlook for the second half of 201
Slide 6: Transition Plan Update: Objectives
Transition Plan Update Objectives • Significantly improve our cost-competitiveness on a sustained basis • Establish and maintain a highly-liquid balance sheet • Achieve a balanced diversification of customers and markets served • Complete the Broadway relocation utilizing internally generated funds
Slide 7: Transition Plan Update: Actions Taken in 2016
Transition Plan Update Actions Taken in 2016 • Entered into sale-leaseback for underutilized real estate generating $12.0 million • Divested CSS business, generating $42.0 million • Eliminated high-cost commercial debt: savings of $5.5 million annually • Relocated Sypris Electronics to a modern 50,0
Slide 8: Transition Plan Update: Initiatives to be Completed
Transition Plan Update Initiatives to be Completed – On Plan • The timely approval and launch of programs in Toluca – Daimler completed and launched – Volvo/Mack underway; expect to complete Q4 • The successful implementation of a single ERP platform • Transition of operations from the Broadway Plan
Slide 9: New Program Awards
New Program Awards • During the past 15 months, the award of new, multi-year programs has been very positive – $15.8 million for 2018 – $12.9 million for 2019 – Average term of 4+ years • In addition, follow-on business from new government contracts is expected to be material – $4.9 million for 2018
Slide 10: New Program Awards: Sypris Technologies
New Program Awards: Sypris Technologies • New program awards Revenue Market Date Term SOP 2017 2018 2019 balanced across Automotive customers, markets and Awarded 4Q16 7 Yr 4Q18 $ - $ 0.7 $ 4.0 products Light Truck Awarded 1Q17 2 Yr 1Q17 0.7 1.0 - • Providing solid multi-year Awarded 1Q17 3 Yr 1Q17
Slide 11: New Program Awards: Sypris Electronics
New Program Awards: Sypris Electronics Revenue Market Date SOP 2017 2018 2019 • New program awards to Communication & Navigation Awarded 1Q17 1Q18 $ - $ 0.9 $ - drive double digit growth Awarded 2H16 1Q17 1.9 2.3 - in 2017 Follow-on 2H18 1Q19 - - 2.3 Infrared Countermeasures • Complex, high-cost-of-
Slide 12: Results: Sypris Technologies
Results Sypris Technologies • Globally competitive platform – Lower variable cost – Elimination of redundant fixed overhead – Elimination of redundant capital requirements – Increased capacity utilization • Reduced breakeven point and increased margins • Talent redistributed between locations – Acce
Slide 13: Results: Sypris Electronics and Consolidated
Results Sypris Electronics • Clear, singular strategic vision • Material improvement in competitive profile – Reduction in fixed overhead – Substantially lower SG&A – Improved operational visibility and cycle times – Additional absorption will further reduce rates and increase competitiveness Consol
Slide 14: Financial Review Second Quarter 2017
Financial Review Anthony C. Allen Vice President & CFO Second Quarter 2017 August 15, 2017
Slide 15: Q2 Financial Results
Q2 Financial Results $ millions 2Q 2017 1Q 2017 Consolidated ST SE Consolidated Change Net Revenue $ 21.2 $ 14.1 $ 7.2 $ 18.2 $ 3.0 Gross Margin 7.5% 2.1% 18.1% (3.8)% 1130 bps Adjusted Operating Income $ (2.0) $ (1.2) $ 0.6 $ (4.1) $ 2.1 • Sequential quarterly revenue growth of 16.8% • Consolidated
Slide 16: Sypris Electronics Q2 Highlights
Sypris Electronics Q2 Highlights • 33% revenue growth • 1,630 bps gross margin improvement • YTD operating profit • New program ramp-ups underway • Cost savings from facility relocation being realized • Strong backlog to support 2H shipments • Energized team 16
Slide 17: Sypris Technologies Q2 Highlights
Sypris Technologies Q2 Highlights • 10% revenue growth • 830 bps gross margin improvement • Transition of Broadway operations nearing completion • Employee retention rate exceeded expectations during transition • Accelerated rebuild of equipment to support customer deliveries • Customer approvals fo
Slide 18: Cost Reduction Goals
Cost Reduction Goals • Cost of sales impacted in 2017 by extended production in Broadway and investments in labor and equipment rebuilds to support customer demand – completed as of 8/4/17 • Achieving year-over-year SG&A reductions as planned • Severance expense fully recognized in 1H 2017 and reloc
Slide 19: Outlook Update
Outlook Update 1H 2017 2H 2017 Outlook Actual Prior Outlook Current Outlook Revenue $38m to $40m $39.4m $40m to $42m $42m to $44m Gross Margin 5% to 7% 2.3% 15% to 17% 15% to 17% SG&A 17% to 19% 17.8% 16% to 18% 15% to 16% • Raising revenue outlook for 2H reflecting solid backlog; new business furth
Slide 20: Customer Concentration
Customer Concentration Top 2 Customers as a Percent of Revenue • No single customer expected to account for > 15% of revenue in 2017 • Balanced customer base in both segments • Adding new customers to further diversify portfolio 20
Slide 21: Revenue Mix by Market
Revenue Mix by Market Top Markets as a Percent of Revenue • Significant shift in markets served provides balanced revenue mix • Expect reduced volatility with less dependence on heavy truck market • Exploring new markets to provide growth opportunities for both segments 21
Slide 22: Mix + Cost Reductions Drive Margin in 2H
Mix + Cost Reductions Drive Margin in 2H • Expect expansion of gross margin in 2H 2017 to 15-17% of revenue • Nearly 50% increase in GM% as compared to 2014 • Lower cost profile and more balanced revenue mix drive increased margin performance • Cost reductions, new business awards and follow-on busi
Slide 23: Key Takeaways
Key Takeaways • Revenue increased 16.8% sequentially during Q2 and gross margins improved to 7.5% • All major actions have now been completed as of August with regard to our two-year, $26.3 million cost improvement target • Raised revenue guidance and confirmed gross margin outlook for 2H 2017 − 2H1
Slide 24: Question and Answer Session
Jeffrey T. Gill Question and Answer Session President & CEO 2Q Earnings Conference Call Anthony C. Allen Vice President & CFO August 15, 2017