Annual Meeting
March 7, 2017
IEC ELECTRONICS 2017©
2
Cautionary Note Regarding Forward-Looking Statements
References in this report to “IEC,” the “Company,” “we,” “our,” or “us” mean IEC Electronics Corp. and its subsidiaries except where the context otherwise
requires. This presentation contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or
“continue” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements
regarding future sales and operating results, future prospects, the capabilities and capacities of business operations, any financial or other guidance and all
statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. The ultimate correctness of
these forward-looking statements is dependent upon a number of known and unknown risks and events and is subject to various uncertainties and other
factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements.
The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those views
expressed or implied in our forward-looking statements: litigation; business conditions and growth or contraction in our customers’ industries, the electronic
manufacturing services industry and the general economy; variability of our operating results; our ability to control our material, labor and other costs; our
dependence on a limited number of major customers; the potential consolidation of our customer base; availability of component supplies; dependence on
certain industries; variability and timing of customer requirements; technological, engineering and other start-up issues related to new programs and
products, uncertainties as to availability and timing of governmental funding for our customers; the impact of government regulations, including FDA
regulations; the types and mix of sales to our customers; intellectual property litigation; our ability to maintain effective internal controls over financial
reporting; unforeseen product failures and the potential product liability claims that may be associated with such failures; the availability of capital and other
economic, business and competitive factors affecting our customers, our industry and business generally; failure or breach of our information technology
systems; and natural disasters. Any one or more of such risks and uncertainties could have a material adverse effect on us or the value of our common stock.
For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those
expressed or implied in our forward-looking statements, see our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and other filings with the
Securities and Exchange Commission (the “SEC”).
All forward-looking statements included in this presentation are made only as of the date indicated or as of the date of this presentation. We do not
undertake any obligation to, and may not, publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently
occur or which we hereafter become aware of, except as required by law. New risks and uncertainties arise from time to time and we cannot predict these
events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore,
you should not rely on our forward-looking statements as predictions of future events.
IEC ELECTRONICS 2017©
3
Agenda
‣ Introduction
‣ 2016 Year In Review
‣ Looking Forward
‣ Q&A
IEC ELECTRONICS 2017©
Senior Leadership Team
Jeffrey T. Schlarbaum
President & Chief Executive
Officer
• IEC Senior Leader from
2005 to 2013
• Executive Management
roles at Plexus Corp. and
Seagate Technologies
Jens Hauvn
Sr. Vice President of Operations
• Prior role IEC VP of Quality
and Operational Excellence
• Vice President, Corporate
Quality at Ducommun
Incorporated
Michael T. Williams
Chief Financial Officer
• Eighteen years of various
leadership roles at Bausch & Lomb
• Vice President, Finance &
Controller at Bausch & Lomb
Jennifer M. Brown
Vice President of Human Resources
• Executive Vice President, Chief
Administrative Officer and
Corporate Secretary at Alteva, Inc.
• Senior Vice President – Admin. and
Human Resources at Access
Group, Inc.
Cindy Donovan
Chief Information Officer
• Provided IT leadership for
companies such as Paychex,
Carestream, and Kodak
• Expertise in ERP development and
implementation
4
IEC ELECTRONICS 2017©
Electronic Manufacturing Solutions
5
• Develop Customized Stress Testing
Platforms to Simulate a Product’s End
Application
• Laboratories to Perform Counterfeit
Component Detection & Complex
Failure Analysis
• Vertical Manufacturing of Critical Key
Components
• Control Cost, Time, and Quality
• Custom Configuration, Full System
Assembly & After Market Services
• Direct Fulfillment to End Customer
For Life-Saving and Mission Critical Products
IEC ELECTRONICS 2017©
Our Focus
6
• Focus on growing market sectors*
- Medical +7.4% CAGR
- Industrial +6.9% CAGR
- Military +6.2% CAGR
• Providing full life-cycle, advanced
manufacturing support
• Long term relationships and
proven performance with Blue
Chip customers
Life Saving and Mission
Critical Products
*Projected CAGR 2014-2019
Source: New Venture Research Corp.
Medical
$6.5B TAM
Industrial
$9.4B TAM
Military
$5.9B TAM
Representative Key Customers
Market Opportunity
IEC ELECTRONICS 2017©
High-Margin in Highly Regulated Markets
7
G
ro
ss
Ma
rgi
n
(
T
TM
)*
20%
6%
14%
Consumer, Computing, Communications, Auto Medical, Industrial, Aerospace & Defense
Portfolio Mix
High Concentration High Concentration Mixed Portfolio
*Source: Yahoo Finance as of January 2017
IEC ELECTRONICS 2017©
2016
Year in Review
8
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9
Turnaround Progressing With Strategic Priorities
‣ Strengthened
Balance Sheet
• Reduced net debt
by $11.8 million
• Improved
inventory position
by $10.4M
‣ Positioned Company to
Re-establish Organic Growth
• Initiatives in place to
rebuild sales pipeline
• Addressing backlog
softness and anticipating
strengthened performance
in second half of fiscal
2017
2016 Demonstrated Solid Progress Executing Against Operational Goals
‣ Improved Margins
and Profitability
• Gross Margin
improved to 16%
• Net income of
$4.8 million or
$0.47 per share
IEC ELECTRONICS 2017© | CANNOT BE PRESENTED, REDISTRIBUTED, OR SHOWN TO ANYONE WITHOUT EXPRESS WRITTEN PERMISSION
Substantial Progress To Date
Gross Margin Improvement
5%
10%
15%
2014 2015 2016
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11
Substantial Progress To Date
Revenue per Employee*
Net Income Improvement
‣ Redesigned Manufacturing Floor and
Improved Flow Design to Increase
Efficiency of Labor
• Revenue per employee increased 8% YoY
‣ Proactively Managed Workforce in
Response to Customer Demand
Fluctuations
‣ Generated Non-GAAP $9.4M EBITDA or
7.4% EBITDA Margin**
($
M
)
$135
$145
$155
$165
2014 2015 2016
($15)
($10)
($5)
$0
$5
2014 2015 2016
* Average weekly headcount per weekly HR Headcount Report, Revenue per Form 10-K
($K
)
**EBITDA and EBITDA Margin are Non-GAAP measures. Reconciliation of GAAP to Non-GAAP
measures can be found at end of this presentation.
IEC ELECTRONICS 2017© | CANNOT BE PRESENTED, REDISTRIBUTED, OR SHOWN TO ANYONE WITHOUT EXPRESS WRITTEN PERMISSION
$15
$20
$25
$30
$35
2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
12
Strengthened Balance Sheet
($M)
Net Debt Reduction*
($16.7)
Reduced Debt/EBITDAS To 2X**
* Debt, less cash ** Calculated in accordance with our credit agreement, as disclosed in Form 10-K. EBITDAS is a Non-GAAP measure.
Reconciliation of GAAP to Non-GAAP measures can be found at end of this presentation.
IEC ELECTRONICS 2017© | CANNOT BE PRESENTED, REDISTRIBUTED, OR SHOWN TO ANYONE WITHOUT EXPRESS WRITTEN PERMISSION
13
Substantial Progress To Date
Cash Conversion Cycle**
Inventory* ‣ Improved Material Management Process
• Inventory reduction of $10.4M
‣ Improved Manufacturing Execution and
Lead Time Reduction for Active Orders
• WIP decreased by 30% YoY
‣ Significantly Reduced Accounts Receivable
Aging
• $1.7M reduction in aging greater than 30
days
($M)
# Days
70
75
80
85
90
2014 2015 2016
** Source: Lincoln International Fourth Quarter EMS Report
* Net inventories
0
10
20
2014 2015 2016
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14
Driving Long Term Growth
‣ Reinvigorated Existing Customer
Relationships to Restore Confidence
‣ Driving Cross-Selling Opportunities Amongst
In-house Verticals
‣ Reformulating New Customer Acquisition
Structure to Drive Organic Growth
IEC ANNOUNCES
$3.7 MILLION
CONTRACT
IEC RECEIVES $10.2
MILLION CONTRACT
FROM TOP GLOBAL
DEFENSE COMPANY
Top 5 Medical
Device Company
IEC ELECTRONICS 2017©
Rebuilding the Funnel
15
Year End Backlog
‣ Onboarding of new customers is typically 12-18
month process
• New customer funnel has deteriorated since
2013/2014, negatively impacting 2016 backlog
‣ Existing customer base is solid
• Two key customers experiencing expected short
term volume reductions
‣ Executing several new customer acquisition
initiatives
• Restructured entire sales team and go to
market strategy
($M)
$0
$25
$50
$75
$100
2014 2015 2016
IEC ELECTRONICS 2017©
16
• Effectively managing through volume
reduction from certain key customers
• Deliberately retained skilled labor and
support for anticipated second half
ramp
• Maintaining gross margins consistent
with industry average
• No lost customers; longstanding and
committed
1st Half of Fiscal 2017 2nd Half of Fiscal 2017
• Expect stronger second half of fiscal
2017
• Expect volume returns from existing
customers
• Strengthen new customers funnel
Fiscal 2017 Expectations
Proactive Measures Have Minimized Impact of Short Term Revenue Decline
• Restructuring activities, debt reduction and improved inventory management over past
18 months have strengthened the balance sheet
• In Q1 17
• Net debt reduction of $7.2M
• EBITDA breakeven with margin performance consistent with industry
IEC ELECTRONICS 2017© | CANNOT BE PRESENTED, REDISTRIBUTED, OR SHOWN TO ANYONE WITHOUT EXPRESS WRITTEN PERMISSION
17
Investor Outreach
‣ Noble Con13 Investor Conference
• January 31, 2017
‣ MicroCap Conference
• April 4, 2017
‣ B. Riley & Co. Annual Investor Conference
• May 24 – 25, 2017
IEC ELECTRONICS 2017© | CANNOT BE PRESENTED, REDISTRIBUTED, OR SHOWN TO ANYONE WITHOUT EXPRESS WRITTEN PERMISSION
18
Looking Forward
Rebuild & Strengthen
Bridge
Growth
Retraction
• Underperformance
with previous
management
• Loss of $34.7M
through 2015
• Profit erosion
• Turnaround
commenced
• Return to profitability
• Strengthened balance
sheet
• Solidified operational
excellence
• Rebuild new customer
sales funnel
• Proactively address
expected $20-25M
volume decline for two
existing customers
• Reinstate proven
practices to drive
sustained growth
2015 – 2016 2017 2018 2013 - 2014
• Drive Organic
Growth
• Return IEC brand
to leadership
position as
demonstrated in
2012
Success
2012
• Revenue
$130.4M
• Gross Margin
18.9%
• Operating
Margin
10.1%
Thank you
IEC ELECTRONICS 2017© | CANNOT BE PRESENTED, REDISTRIBUTED, OR SHOWN TO ANYONE WITHOUT EXPRESS WRITTEN PERMISSION
20
‣ Reconciliation of U.S. GAAP to Non-GAAP Measures
Appendix A
In thousands. Individual line
items per Form 10-K
Twelve Months Ended
September 30, 2016
Net Income $ 4,786
Interest 1,392
Taxes 70
Depreciation &
Amortization
3,106
EBITDA (Non-GAAP) $ 9,402
In thousands. Individual line items
per Form 10-K
Three Months Ended
September 30, 2016
Net Income $ 176
Provision for (benefit from)
income taxes
76
Depreciation & Amortization 697
Interest expense 201
Non-cash stock compensation 119
EBITDAS (Non-GAAP) $ 1,269
In thousands. Individual line
items per Form 10-K
Twelve Months Ended
September 30, 2016
Net Sales $ 127,010
EBITDA (Non-GAAP) 9,402
EBITDA Margin (Non-GAAP) 7.4%