Key Tronic Corporation · NASDAQ:KTCC
Key Tronic — Investor Presentation (May 2016)
32 slides from Key Tronic's investor presentation, May 23, 2016
Slide 1: Management Presentation
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary EXHIBIT 99.1
Slide 2: Leading provider of Electronic Manufacturing Services
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Leading provider of Electronic Manufacturing Services (EMS) with unique combination of global capabilities and customer responsiveness
Slide 3: Safe Harbor Statement
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Safe Harbor Statement This presentation may contain forward-looking statements within the meaning of the federal securities laws and are subject to the safe harbor under those laws. These forward-looking statements can be identified
Slide 4: Key Investment Highlights
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Key Investment Highlights ► EMS market expected to continue to grow ► Strong competitive position: • Unique combination of global capabilities and customer responsiveness • Combined incremental growth from Ayrshire acquisition • Inc
Slide 5: Electronic Manufacturing Services Market
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Electronic Manufacturing Services Market $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 2016 2017 2018 2019 2020 2021 In Billions Source: BCC Research 2015
Slide 6: EMS Provider Tiers
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary EMS Provider Tiers ► Tier I: Over $2 billion in annual revenue ► Tier II: $400 million to $2 billion in annual revenue ► Tier III: $100 million to $400 million in annual revenue ► Key Tronic currently 9th largest U.S. contract manuf
Slide 7: Integrated Global Operations: US
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Integrated Global Operations: US ► Spokane, Washington • Corporate headquarters • Command and control • Centralized program management, production control, quality control, material management • Tooling and prototyping ► KTC East (A
Slide 8: Integrated Global Operations: Mexico
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Integrated Global Operations: Mexico ► Juarez, Mexico • Volume PCA, box build and plastic molding • Sheet metal fabrication • Repair operations • 900,000 square feet • 4,000+ employees • Contiguous campus of eight facilities • Long
Slide 9: Integrated Global Operations: China
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Integrated Global Operations: China ► Shanghai, China • International material sourcing organization • High-volume PCA and box build • 160,000 square feet • Contiguous campus of four buildings • 450 employees • Presence since 1999
Slide 10: Worldwide Production Mix
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Juarez Mexico 61% Shanghai China 11% USA 28% Worldwide Production Mix
Slide 11: Leveraging Global Capacities
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary USA-based Management Operations Materials Production Control Quality Control Engineering USA-Based Production Prototyping Low to high volume Mexico-based Production Low to high volume China-based Production High volume USA-Based Pur
Slide 12: Virtual Tier I Capabilities
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Virtual Tier I Capabilities ► International sourcing yields close to Tier I material pricing ► Chinese, Mexican and US production yields Tier I conversion costs ► One Stop Shopping: • Strong production and process design capabilitie
Slide 13: Tier III Responsiveness
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Tier III Responsiveness ► USA-based centralized operations management ► Customer interface in English ► Experienced program management for low/mid/high volume programs ► Experienced management of offshore facilities
Slide 14: Target Programs Scale to Tier Size
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Target Programs Scale to Tier Size TIER 1 MICRO TIER 3 TIER 2 $200 million $100 million $10 million $1 million Target Customer Program Size
Slide 15: Capabilities by EMS Tiers
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Capabilities by EMS Tiers $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 PCBA PCBA AND BOX PCBA, BOX, OFFSHORE PCBA, BOX, OFFSHORE, MOLDING, METALS, DESIGN EMS SIZE TO CAPABILITIES CONTINUUM
Slide 16: Cost/Service Comparison
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Tier I COST Tier II Tier III RESPONSIVENESS Rapid Slow Low High Cost/Service Comparison For $5 to $80 Million Program
Slide 17: Target Accounts
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Target Accounts ► Programs with $5 million to $80 million in annual revenue ► Involves at least two production technologies: • Plastic injection molding • Electrical assembly • Full box build • Sheet metal fabrication ► Challenging/
Slide 18: Profitable and Diverse Customer Programs
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Profitable and Diverse Customer Programs
Slide 19: From Wide-Ranging Industries
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary …From Wide-Ranging Industries Consumer plastic products Consumer electronics Medical devices Specialty printers Gaming Telecommunications Automotive Educational equipment Electric transportation Computer accessories
Slide 20: Annual Revenue
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Annual Revenue $254 $347 $361 $305 $434 $485 FY2011 FY2012 FY2013 FY2014 FY2015 *FY2016 In M ill io n s *Annualized from Q3 2016 YTD revenue
Slide 21: Growth Strategy
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Growth Strategy Continue to emphasize unique combination of Tier I capabilities and Tier III responsiveness ► Continue to invest in volume driven capacity ► Continue to leverage materials and parts procurement ► Continue to diversif
Slide 22: Financials
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Financials
Slide 23: Core Operating Objectives
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Core Operating Objectives ► Grow faster than EMS industry ► Maintain strong operating margins and profitability ► Maintain strong balance sheet ► ROIC that exceeds cost of capital
Slide 24: Exponential Growth in Number of Customers
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary EXPONENTIAL GROWTH IN NUMBER OF CUSTOMERS Revenue - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Q3 FY11 Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15
Slide 25: Investment in Growth
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Investment in Growth…. 2700 2584 3343 4866 5650 FY12 FY13 FY14 FY15 FY16 Wordwide Headcount 500 1000 1500 2000 FY12 FY13 FY14 FY15 FY16 Sq Footage of Facilities 9 11 12 38 42 0 5 10 15 20 25 30 35 40 45 FY12 FY13 FY14 FY15 FY16 SMT
Slide 26: Change in Customer Concentration
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Change in Concentration – Top 5 29% 17% 16% 7% 4% All Others 27% FY2012 7% 7% 18% 4% 6% All Others 58% Q3 FY2016
Slide 27: Q3-FY16 Financial Model
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary 8.4% 6.1% 2.3% Q3-FY16 Financial Model Gross Margin Operating Expenses Operating Margin 9% - 11% 4% - 5% 4% - 7% Target Expecting gradual improvement with long term growth
Slide 28: Annual Earnings
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Annual Earnings $0.55 $1.07 $1.12 $0.67 $0.38 $0.58 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 *FY 2016 D ilu te d E P S *Most recent reported quarter – YTD Q3 FY16 and mid pt guidance
Slide 29: Key Balance Sheet Ratios
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Key Balance Sheet Ratios -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 FY11 FY12 FY13 FY14 FY15 FY16 Current Ratio Debt to Equity Ratio
Slide 30: Return on Invested Capital
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Return on Invested Capital 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% FY2011 FY2012 FY2013 FY2014 FY2015 Q2 FY2016 YTD KTC ROIC Industry Average ROIC
Slide 31: Key Investment Highlights
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary Key Investment Highlights ► EMS market expected to continue to grow ► Strong competitive position: • Unique combination of global capabilities and customer responsiveness • Combined incremental growth from Ayrshire acquisition • Inc
Slide 32: Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary NASDAQ: KTCC
Trust. Commitment. Results. KeyTronicEMS Confidential & Proprietary NASDAQ: KTCC