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Corporate Presentation NASDAQ:SMTX Corporate Overview AUGUST 20, 2018

Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

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Page 1: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

Corporate PresentationNASDAQ:SMTX

Corporate Overview

AUGUST 20, 2018

Page 2: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

This presentation contains forward-looking statements within the meaning of U.S. federal securities laws. These forward-looking statements include, but are not limited to, statements regarding our expectations, hopes, beliefs, intentions, plans, prospects or strategies regarding the future. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The forward-looking statements contained in this presentation are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

FORWARD-LOOKING STATEMENT

2

Page 3: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

Global mid-size provider of end-to-end EMS

PCBA production

Systems integration

Comprehensive testing services

Product design

Vertical integration

Enclosure fabrication

Sustaining engineering

Supply chain management services

Servicing product lifecycle

Industry qualityrecognition

Global EMS Award for Product Quality1

North American EMS Growth Leadership Award2

Customer Value Leadership Award3

OVERVIEW

31 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016

Support and maintenance from product development to end-of-life transitioning

New leadership team making an impact

YTD 2018 up 23% over YTD 2017

Targeting 28%-plus revenue growth in 2018 (Aug 8, 2018 Form 10Q, 8K)

Page 4: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

4

Achieving Top-Quartile Operating Metrics Among Peer EMS Companies

Targeting $200+M Revenues in 2 Years from $139M in 2017

One Vision, One Mission, One SMTC.

Increase Business with Existing Customers Through World Class Service

Achieve Double Digit Growth With Existing Through New Programs

Become Provider of Choice And Win New Customers to Accelerate Growth

Drive Value via M&A, Expand Mix of Lines of Business and Increase TAM with Supply Chain Synergies to Gain Scale

SMTC PILLARS OF SUCCESS

Relentless Pursuit of Profitable Growth through Customer and Employee Excellence

Above Market Returns for our Investors

Page 5: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

PROGRESSION TO BE BEST-IN-CLASS PEER METRICS

5

7.7% 8.2%9.1% 9.6%

11.5% 11.9%

19.7%

K E Y T R O N I C S Y P R I S

S O L U T I O N S

S M T C S I G M A T R O N N O R T E C H

S Y S T E M S

I E C S P A R T O N

GROSS PROFIT (%) TTM

$85,773$108,868 $110,328

$154,657

$278,132

$378,906

$447,838

S Y P R I S

S O L U T I O N S

N O R T E C H

S Y S T E M S

I E C S M T C S I G M A T R O N S P A R T O N K E Y T R O N I C

REVENUE ($) TTM

-1.33 %

0.88%1.46%

3.14%

4.33%4.61%

5.78%

S I G M A T R O N N O R T E C H

S Y S T E M S

S M T C I E C K E Y T R O N I C S P A R T O N

ADJ EBITDA (%) TTM

S Y P R I SS O L U T I O N S

-6.24%

-2.53%-2.22%

-1.17% -1.00 %

0.49%

1.85%

K E Y T R O N I C I E C

NET INCOME (%) TTM

S P A R T O NS Y P R I SS O L U T I O N S

N O R T E C H S Y S T E M S

S I G M A T R O N S M T C

Q2189.6%

Q2183.50%

Q218-0.00%

Page 6: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

DIFFERENTIATING LEADERSHIP TEAM

6

Rich FitzgeraldCOO

18+ years: electronics industry experience

Ed SmithPresident & CEO

25+ years EMS, electronic components distribution industry experience

SMTEK increased from $0.35 to $15.23 at takeout under his stewardship

At AVNET led Americas component operations growing from $ 1.2 to $4.0B Started a global embedded business and grew to $2.2B in 7 years

Steve Waszak CFO & SVP M&A

20+ years finance, strategic M&A development experience

Page 7: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

NEW LEADERSHIP TEAM MAKING AN IMPACT

Source: Yahoo! Finance 7

SVP GSC

MAY 1 2018

CFO

MAR 13 2018

VP Customer Acquisition

DEC 18 2017

CEO and COO appointments

MAY 16 2017

Q2 2017 – Initiated a restructuring plan to address customer needs, financial sustainability and operational excellence

Stabilized long-term customer-base

Expanded addressable market

Strengthened the organization with key executives to focus on growth

Q2 2018 – Improving results and 28%-32% top line growth outlook for 2018

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

6/1/20183/1/201812/15/201710/5/20177/26/20175/15/2017

IMPROVING STOCK PERFORMANCE

Page 8: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

GLOBAL FOOTPRINTCommon Copy Exact Solutions

Toronto, CanadaDesign & Engineering CenterTechnical Services Group (TSG)

Dongguan, ChinaManufacturing & Repair Facilities150,000 square foot 4 story facility, providing world class engineering, printed circuit board assembly and integration for finished devices globally.

8

Approx. 500,000 square feet of manufacturing capabilities globally for best-in-class cost opportunities. More than 40 manufacturing and assembly lines

Frost & Sullivan Award WinnersProduct Quality, Growth Leadership & Customer Value Leadership Awards

GENERAL CERTIFICATIONS/STANDARDS

ISO 9001:2015ISO 13485:2003ISO 14001:2004

IPC-A 610 Class I, II, IIIFDA RegisteredAS9100 (August 2018)

Fremont, USA HQNPI Tech Centerconnected to global production sites for quick-turn prototyping and new production launches

334,000 square foot facility, 17.5 acre campus offers customers, in-house metal fabrication, cable & harness assembly for high quality services in an efficient, cost effective site

Chihuahua, MexicoManufacturing & Repair Facilities

Hong KongGlobal Procurement

Logistics CenterEl Paso, USA

Page 9: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

FOCUSED ON ATTRACTIVE END MARKETS

INDUSTRIAL

MEDICAL

TEST & MEASUREMENT

(IoT)

PAYMENT SYSTEMS

OTHER

SEMICONDUCTOR

9

LARGE, GROWING, MEANINGFUL

Page 10: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

FAVORABLE INDUSTRY TRENDS

Source: SEMI (www.semi.org), November 201710

• North American PMI, SEMI, PCB Indices all show growth through 2018

• Manufacturing and PCB showing projected growth of 5.8% in 2018

• SEMI Book to Bill Ratio currently at 1.06

• PCB Book to Bill Ratio currently at 1.14

1.031.08

-0.99-0.96-0.99

1.04 1.07 1.09 1.05 1.08 1.091.15 1.14

2 0 1 6

S E P

2 0 1 6

O C T

2 0 1 6

N O V

2 0 1 6

D E C

2 0 1 7

J A N

2 0 1 7

F E B

2 0 1 7

M A R

2 0 1 7

A P R

2 0 1 7

M A Y

2 0 1 7

J U N E

2 0 1 7

J U L Y

2 0 1 7

A U G

2 0 1 7

S E P

TREND IN NORTH AMERICAN

PCB BOOK-TO-BILL RATIOMARKET TRENDS IN NORTH AMERICA ELECTRONIC PRODUCTS

3/1

2 G

RO

WT

H R

AT

ES

PU

RC

HA

SIN

G M

AN

AG

ER

S I

ND

EX

U.S New Orders for Computers and Electronics

PCB Sales

EMS Sales

Semiconductor Sales

U.S Purchasing Managers’ Index

2014SEP

2014DEC

2015MAR

2015JUNE

2015SEP

2015DEC

2016MAR

2016JUNE

2016SEP

2016DEC

2017JUNE

2017SEP

80

75

70

65

60

55

50

45

40

35-20%

-10%

0%

10%

20%

30%

40%

Page 11: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

FINANCIAL SUMMARY

*50%+ of incremental Manufacturing Value Add dollars contributes to Gross Profit 11

KEY STATISTICS

Stock Price (8/7/18) $2.65 / share

Market Cap (8/7/18) $45.6 M

Total Ent. Value (8/7/18) $65.3 M

Ticker / Exchange SMTX / Nasdaq

Basic Shares (6/30/18) 17.2 M

Diluted Shares (6/30/18) 17.7 M

NET Debt (6/30/18) $ 19.7 M

CAPITALIZATION

In $1,000, except EPS

Long Term TargetModel

Q2 2018 Q2 2017 FY 2017 FY 2016 FY 2015

Revenues 20% growth* 44.5 33.0 139.2 167.9 220.6

Gross Margin 12%-14% 9.6% 4.3% 7.8% 10.6% 8.0%

Adj EBITDA 1.6 (3.6) (1.5) (4.7) 5.7

Adj EBITDA Margin 6%-10% 3.6% NM NM 2.8% 2.6%

EPS (0.01) Nil (0.47) (0.01) (0.00)

Page 12: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

INCOME STATEMENT

12

(Unaudited) THREE MONTHS ENDED

Expressed in thousands of USD, except number of shares and per share (amounts) JULY 1, 2018 JULY 1, 2017

Revenue $ 44,479 $ 32,995

Cost of Sales 40,196 31,575

Gross Profit 4,283 1,420

Selling, general and administrative expenses 3,647 4,110

Operating income (loss) 540 (5,642)

Interest expense 403 217

Income (loss) before income taxes 137 (5,859)

Income tax expense (recovery)

Current 196 168

Deferred 38 (14)

234 154

Net income (loss) and comprehensive income (loss) $ (97) $ (6.013)

Basic earnings (loss) per share (0.01) (0.36)

Diluted earnings (loss) per share (0.01) (0.36)

Weighted average number of shares outstanding

Basic 17,222,439 16,807,333

Diluted 17,222,439 16,807,333

Page 13: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

BALANCE SHEET HIGHLIGHTS

13

(in thousands)JULY 1,

2018DECEMBER 31,

2017

Current Assets $69,679 $59,188

Property Plant & Equipment 11,732 10,269

Other Long Term 472 399

Total Assets $81,883 $69,856

Current Liabilities $55,267 $44,693

Long term Debt 5,500 6,000

Other Long term liabilities 450 89

Stockholders’ equity 19,869 19,074

Liabilities and stockholders’ equity $81,883 $69,856

KEY STATISTICS: JULY 1, 2018

Cash-to-Cash Cycle 61 days

DSO 61 days

DPO 74 days

Inv Turns 5.0x

Net Debt $19.7M

Page 14: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

INVESTMENT HIGHLIGHTS

14

What is Changing?

New Leadership Team with Demonstrated Track Record

Pursuing operational excellence and focused at SMTC on achieving top-quartile operating metrics among peer EMS companies

Expanding Customer Base and Top-Line Growth

Working Together as a Team to Deliver Premium Shareholder Value

Diversified Customer Base with No Significant Concentration

Strategically Placed Global Footprint Offers Best-of-Class Options to Customers

Focusing on the Most Attractive End Markets

Favorable Industry Trends Provide Backdrop for Strong Performance

Free Cash Flow Generation with Attractive Deleveraging Profile

Accelerating Year-over-Year Revenue Growth

Targeting $200+M in Revenues in 2 Years from $139M in 2017 with Double Digit Gross Margins

Page 15: Corporate Overview - Darrow Associates · OVERVIEW 1 Frost & Sullivan 2012 2 Frost & Sullivan 2013 3 Frost & Sullivan 2016 3 Support and maintenance from product development to end-of-life

THANK YOUContact

Peter SeltzbergManaging Director, Darrow Associates, Inc.516-419-9915 | [email protected]

AUGUST 2018