Slide 1: 2017 Third Quarter Earnings Conference Call
Jeffrey T. Gill 2017 Third Quarter President & CEO Earnings Conference Call Anthony C. Allen Vice President & CFO November 14, 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 recen
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: 3Q17 Highlights
Overview 3Q17 Highlights • Revenue of $21.4 million consistent with prior year – 18.8% increase at Sypris Electronics • Gross margin expanded to 3.1% for Q3 – 16.8% for Sypris Electronics • Margin was less than plan due to launch, transfer, mix and freight issues at Sypris Technologies – $2.6 millio
Slide 5: Overview: 3Q17 Highlights and Guidance
Overview 3Q17 Highlights • Announced the award of 4 new contracts for mission-critical Space and Military applications with Harris Corporation • Volvo/Mack contract extended through 2021 • $26.3 million two-year cost improvement target – All major initiatives now complete – Closure of Broadway Plant
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: Actions Taken in 2017
Transition Plan Update Actions Taken in 2017 – On Plan • The timely approval and launch of programs in Toluca – Daimler completed and launched – Volvo/Mack contract signed; launch underway • The successful implementation of a single ERP platform • Transition of operations from the Broadway Plant • T
Slide 9: 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 10: 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 11: Financial Review Third Quarter 2017
Financial Review Anthony C. Allen Vice President & CFO Third Quarter 2017 November 14, 2017
Slide 12: Q3 Financial Results
Q3 Financial Results $ millions 3Q 2017 3Q 2016 Consolidated ST SE Consolidated Change Net Revenue $ 21.4 $ 13.5 $ 7.8 $ 21.4 $ - Gross Margin 3.1% (4.9)% 16.8% (2.6)% 570 bps Adjusted Operating Income $ (2.5) $ (1.9) $ 0.5 $ (6.0) $ 3.5 Severance & Relo $ 0.4 $ 0.4 $ - $ - $ 0.4 • Revenue consisten
Slide 13: Sypris Electronics Q3 Highlights
Sypris Electronics Q3 Highlights • 18.8% revenue growth • 1,980 bps gross margin improvement • YTD operating profit • New program ramp-ups underway • Cost savings from facility relocation being realized • Strong backlog to support Q4 and 2018 shipments • Energized team 13
Slide 14: Sypris Technologies Q3 Highlights
Sypris Technologies Q3 Highlights • Gross margin impacted by production issues, product mix and excess freight • Transition of Broadway operations to end in November • Production issues substantially resolved and mix issues addressed • Accelerated rebuild of equipment to support customer deliveries
Slide 15: 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 Q3 2017 and relocation costs wil
Slide 16: Outlook Update
Outlook Update Q4 2017 2018 Outlook Outlook Revenue $20m to $22m $86m to $92m Gross Margin 10% to 12% 15% to 17% • Q4 revenue outlook unchanged reflecting solid backlog • Investments to support customer shipments during transition phase now complete • 2018 to benefit from the full-year impact of the
Slide 17: 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 17
Slide 18: 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 18
Slide 19: Mix + Cost Reductions Drive Margin in 2018
Mix + Cost Reductions Drive Margin in 2018 • Expect expansion of gross margin in 4Q 2017 to 10-12% of revenue • Further margin improvement to 15-17% in 2018 • 2018 will benefit from the full-year impact of the 2017 cost saving initiatives • Cost reductions, new business awards and follow-on business
Slide 20: Key Takeaways
Key Takeaways • Revenue consistent with the prior year, while gross margins improved to 3.1% from a loss of 2.6% from the prior year comparable period • 3Q and YTD 2017 SG&A expense down 41% YOY • Production and mix issues at Sypris Technologies impacting Q3 expected to be substantially resolved in
Slide 21: Question and Answer Session
Jeffrey T. Gill Question and Answer Session President & CEO 3Q Earnings Conference Call Anthony C. Allen Vice President & CFO November 14, 2017