Slide 1: 2017 Fourth Quarter and Full Year Earnings Conference Call
Jeffrey T. Gill 2017 Fourth Quarter and Full Year President & CEO Earnings Conference Call Anthony C. Allen Vice President & CFO March 20, 2018
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 • Results • Financial Review • Cost Reduction Goals • Key Takeaways • Q&A Session 3
Slide 4: Overview: 4Q17 Highlights
Overview 4Q17 Highlights • Revenue increased 7.6% year-over-year to $21.5 million – 72.4% year-over-year increase at Sypris Electronics – 7.2% sequential increase for Sypris Technologies • Gross margin expanded to 6.6% for Q4 – 10.7% for Sypris Technologies – Sypris Electronics gross margin affected
Slide 5: Overview: 4Q17 Highlights
Overview 4Q17 Highlights • $26.3 million two-year cost improvement target – All major initiatives now complete – Closure of Broadway Plant in November – Q3 Sypris Technologies production issues resolved • Announced the award of several new contracts for mission- critical electronic assemblies for us
Slide 6: Outlook
Outlook • Energy markets are expanding – Crude oil above $60 a barrel – Rise in natural gas demand expected to continue • Aerospace & Defense manufacturing is on the rise – U.S. defense budget expanding significantly – High demand creating electronic component shortages and extended lead times • Mar
Slide 7: 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 8: 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 9: Transition Plan Update: Actions Taken in 2017
Transition Plan Update Actions Taken in 2017 • The timely approval and launch of programs in Toluca – Daimler completed and launched – Volvo/Mack contract signed; launch underway • Successful implementations of a new ERP platform • Transition of operations from the Broadway Plant • Liquidations of i
Slide 10: 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 11: Results: Sypris Electronics
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 12: Financial Review Fourth Quarter 2017
Financial Review Anthony C. Allen Vice President & CFO Fourth Quarter 2017 March 20, 2018
Slide 13: 4Q Financial Results
4Q Financial Results $ millions 4Q 2017 4Q 2016 Consolidated ST SE Consolidated Change Net Revenue $ 21.5 $ 14.5 $ 7.0 $ 20.0 $ 1.5 Gross Margin 6.6% 10.7% (1.8)% (0.8)% 740 bps Adjusted Operating Income $ (1.5) $ 0.3 $ (0.5) $ (5.0) $ 3.5 Severance & Relo $ 0.1 $ 0.1 $ - $ 0.6 $ (0.5) • ST revenue
Slide 14: FY Financial Results
FY Financial Results $ millions FY 2017 FY 2016 Consolidated ST SE Consolidated Change Net Revenue $ 82.3 $ 54.9 $ 27.4 $ 91.8 $ (9.5) Gross Margin 3.6% 0.7% 9.4% 0.8% 280 bps Adjusted Operating Income $ (10.2) $ (5.1) $ 0.1 $ (21.6) $ 11.4 Severance & Relo $ 2.4 $ 2.4 $ - $ 1.2 $ 1.2 • ST revenue d
Slide 15: Sypris Electronics Highlights
Sypris Electronics Highlights • Revenue decline reflects CSS sale in August 2016 • 590 bps gross margin improvement • Electronic component shortages impacted Q4 performance • New program ramp-ups underway • Cost savings from facility relocation contribute to margin improvement • Strong backlog to su
Slide 16: Sypris Technologies Highlights
Sypris Technologies Highlights • Revenue decline reflects nonrenewal of 2 contracts, partly offset by market growth • 2017 revenue mix includes growth in energy-related product sales • Lower fixed overhead contributes to margin improvement • Transition of Broadway operations complete as of the end o
Slide 17: 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 • Achieving year-over-year SG&A reductions as planned • Severance expense fully recognized as of end of 2017 with minimal relocation cos
Slide 18: Customer Concentration
Customer Concentration Top 2 Customers as a Percent of Revenue • No single customer accounts for > 15% of revenue in 2017 • Balanced customer base in both segments • Adding new customers to further diversify portfolio 18
Slide 19: 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 19
Slide 20: Outlook Update
Outlook Update FY 2017 FY 2018 Results Outlook Revenue $82.3 million $90 to $96 million Gross Margin 3.6% 15% to 17% SG&A 16.0% 13% to 14.5% Adjusted Operating Income (12.4)% 1% to 4% • Revenue outlook reflects solid backlog and strong market conditions • Expect 1H revenue outlook between $43 to $45
Slide 21: Mix + Cost Reductions Drive Margin in 2018
Mix + Cost Reductions Drive Margin in 2018 • 260 bps margin expansion from 1H 2017 to 2H 2017 on 8.7% sequential revenue growth • Cost reductions from closure of ST Broadway Plant expected to provide uplift in gross margin for 1H 2018 • Electronic component shortages expected to continue in 1H 2018
Slide 22: Key Takeaways
Key Takeaways • 4Q revenue increased $1.5 million or 7.6% over prior year • Gross margin improved to 6.6% in 4Q from negative 0.8% in prior year • FY SG&A expense reduction of $8.9 million or 40% from 2016 • ST generates positive operating income for 4Q • Production complete at Broadway Plant as of
Slide 23: Question and Answer Session
Jeffrey T. Gill Question and Answer Session President & CEO 4Q Earnings Conference Call Anthony C. Allen Vice President & CFO March 20, 2018