PLXS - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to the Plexus Corp. Conference Call regarding its Fiscal Third Quarter 2019 Earnings Announcement. My name is Sylvia, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for questions. scheduled approximately is hour. call conference to one last The recorded. conference Please this being note that is

I the Investor now Senior would turn Director Beresford, Ms. of Plexus’ Heather Communications and Relations. call Heather? over to

Heather Beresford

thank you us Good morning for and today. joining

terms provided believe, Some today our anticipate expect, they not intend, will of historical to similar as call be statements plan, during limited and often forward-looking facts. the statements. made will statements identify information forward-looking be The and words

difficulties in in guarantees results not since statements. inherent and from there are future statements actual predicting are could those Forward-looking results expressed the materially differ or implied forward-looking

in a from Form the for could year those yesterday's that cause Fair XX-K Company's the ended of refer fiscal materially in September statement please and factors press differ the to Harbor to particularly release. our For discussed, filings, list Disclosure periodic Safe filing actual XXXX, factors and XX, SEC results risk the

free provides financial non-GAAP because they information, ROIC, are such additional those and as Plexus return supplemental for into management insight decision-making goals cash provide measures because and flow, performance. used internal and economic

provide period-to-period addition, better performance these and other to net income of non-GAAP understanding In comparison. of and adjusted management for per share, such purposes as core earnings measures, uses adjusted a

full release of refer and For please a press reconciliation non-GAAP our yesterday's filings. to information, supplemental periodic SEC

Investors www.plexus.com, on access webcast and live clicking morning the supporting that the participants Plexus' encourage to We at website the call at this on top materials page. at of

Jermain, President Chief with calls, comments and Officer; the provide Frisch, Todd Todd today before Consistent Executive for details. are Executive Vice prior over Vice me Steve President and Pat Operating and will further Kelsey, to Chief and Steve Officer. call earnings summary President Pat Chief and turning Financial Officer; Joining Executive

the call Kelsey. turn Todd? now Todd to over me Let

Todd Kelsey

and morning, Thank you, Heather, everyone. good

quarter third represents quarter of result of for This results program fiscal revenue with third $XXX delivered We end our the XXXX. the after our of the ramps of record end through and quarterly in three. reported on XXXX. we results at of third Yesterday range markets. begin successful guidance achieved slide our Please from revenue a market, evening, XX% healthy fiscal demand quarter million. our fiscal differentiated close increase the We high

Our at revenue aerospace defense the health life and care expectations and our each sciences, set the sectors of solid while and beginning delivered meeting growth sequential quarter.

and industrial/commercial while down exceeded the Our sequentially, sectors, expectations communications entering quarter.

a was the met of $X.XX of EPS in $X.XX of expectations range. midpoint our stock-based GAAP compensation our penny the expense, guidance included than with higher anticipated and The result entering line quarter.

Our traction operating X.X%, unfavorable our a offset by of product mix. as was margin productivity to initiatives, improved partially which result by an gained

Please advance to slide four.

accomplishments additional within highlight will quarter. the fiscal I Next, third

when $XXX annualized fully the Our level wins performance into the quarter trailing achieving bringing $XXX confidence since manufacturing wins maintained of The million XXXX. our teams ramped growth. future our wins of performance which four highest represents sustained enhances fiscal to production, wins strong million,

and existing new highlighted healthy demanding assisted across with highly Day in revenue our associated differentiated exciting regulatory our consisted of of mix at products of June. Analyst wins The we a that future portfolio and complex and with The included technology environments. wins programs surgery customers robotic

our teams wins will that is magnitude increased opportunities of confidence sufficient us we This and the addition wins In proven strong the into momentum to strong our growth to manufacturing billion. sustain performance, fuel $X.X the qualified gives future. funnel to

second or additional traction seven reduced inventory our within in days by third inventory follows This efforts. three-day an quarter. We're gaining reduction improvement quarter. the fiscal million $XX fiscal We a in the

we fiscal XXXX. quarter and the We proceed expect fiscal as further through fourth in progress

weighted average of We of invested XX.X%. at an return above capital, result we This of economic XXX capital on return cost represents our delivered which shareholder created meaningful X%. basis value estimate and points

Our aerospace quarter fiscal fiscal XXXX. $XXX the quarter growth, strong million and X% an This revenue of of of of defense XXXX, growth. its in the trend growth third third from posting sequential recent result continued sector represents XX%

the fiscal fourth the expects team quarter. another strong result addition, In in

We approaching anticipate the fiscal growth XX% XXXX in revenue sector.

We’re pleased by our zero technology to in supplier our customers recognized aerospace offerings. complex as a and be of premier of as service focus and a leading-edge advanced on the defense markets our our defects, highly result utilization

quarterly in engineering continued fiscal solutions its third the revenue quarter. wins record team record performance again Finally, exceptional our with and once

As organization. a growth to a for the past truly positioned a strong years. the XX% an year, professional in six result, growth fiscal XX% contributing for revenue are recent exceptional CAGR the services The large we result remarkable in service is offering over

Day, Analyst into converting our at highlighted we engineering been we've in highly revenue. meaningful successful long-term As manufacturing programs

are Center solutions Design Design of impact encouraged and Center service our European our Germany of engineering OEMs high engineering by further in the Darmstadt global both performance our are We same and Europe our We Livingston remainder to growth the in with projections. finding in this as of expansions the its growth future our future enabled Scotland. in value offering customers.

for Advancing five. fiscal on fourth to of quarter XXXX slide our the guidance

Looking to the non-traditional sectors. our by ahead the differentiated fourth performance fiscal anticipated excited I'm quarter. of

soften with guiding to stable Therefore, quarter the a range consistent in fourth and the in we we're for within We is of $XXX broad-based our million, markets fiscal end the new third $XXX reduction impact range revenue fiscal quarter these guidance. meaningful to provided which expect the program demand of sector. communications ramps sectors million

end The our defense growth strong fiscal semiconductor XXXX and X% and remains implies and revenue health defense, XX%. quarter the fourth of of is particularly markets within aerospace within range aerospace sciences, the guidance to and sector sequential Demand approach to of expect we fiscal growth sector. care/life robust within range Our exclusive target equipment. XX% in industrial/commercial, of midpoint our X%, our capital

serving demanding customers we to with in and environments. expect success excluding exceed highly communications and XX% capital complex highlighting In revenue growth XXXX, products fiscal semiconductor our fact, in our equipment regulatory

and to X%. continued performance margin X.X% operating expect target operating midpoint X.X%, of quarter, X.X% of would fourth our are in in at improvement to which be range fiscal the guiding the Within we

EPS we in result, $X.XX. as revenue communications the $X.XX expense a of the our of GAAP includes stock-based are of sector. for $X.XX declines a compensation charges in non-recurring This result given business, As any disappointing to addressing and the excludes range outlook guiding revenue

to advance slide Please six.

anticipated The for the Looking future are exceptional stable XXXX, ramp year Further, capital markets. wins remain we growth. fiscal of to growing. forward semiconductor markets and expect despite of growth, and another our catalysts programs communications equipment in our and are performance the remainder new of weakness

XX% products further anticipate fiscal aerospace We combined feature quarter regulatory complex sciences, our continues Our sectors environments. to and industrial/commercial portfolio XXXX to and that demanding differentiate the defense in in portfolio. fourth the revenue markets care/life of exceed and highly health

will similar expect in further fiscal XXXX, markets. we maintain We concentration in solidifying our a leadership these

in expansion end which XXXX In these with the of to efforts of target XXXX our during XXXX. state-of-the-art addition, range the in our EPS in be within well will facilities we I'm fiscal a result fiscal productivity performance invested of fiscal readiness in margin growth meaningful The combination result operating progress X.X% anticipate would as X%. of our as with pleased initiatives. We

our strong of call the sectors over to turn additional Steve? market our continue summary, and I ability In and of analysis Steve aligned deliver We're and will create focused to for to results remain the successful performance value. confident consistent to our teams our strategy. operations. shareholder in now

Steve Frisch

Thank you, Todd. Good morning.

quarter XXXX. slide for Please performance of sector our a advance the the review our as fourth of seven quarter to third for XXXX fiscal during of sectors well market fiscal for the expectations

line Our with care/life X% single-digit health the sciences quarter. revenue increase. expectations was our of lower third sector fiscal result increased in in This

New main contributor program ramps the the growth. are for

quarter, new ramps program Looking at the fiscal fourth the continue.

the customer of a the next-generation program ramps. products the mask However, lower growth of will introduction cost with larger

to follow our working. As for sector a revenue care/life rate in quarter. XXXX the the XX% with its strategy differentiated high-teens in sector rate fiscal health is this a be with fourth that this indication result, market growth sciences we a would for fiscal sector expect growth At level, XXXX, clear fiscal flat

was Revenue of sector than flat industrial/commercial top of quarter, in a sector nearly X single-digit expectations original our mid which better the the within customers XX fiscal forecast. for decline. the outperformed was our third

see They at subsectors. fourth we the and quarter. semiconductor approximately the anticipate With overcome an The successful have would industrial/commercial decreases quarter sector equipment portfolio. capital a the a all we XXXX. that is finish, mid for the the single-digit this low achieve in of revenue result in fiscal rate team very we of mix in net the sector’s been fiscal XX% forecast for in final and across single-digit fiscal increases As growth of our XXXX, subsector look a diversifying decline decline

a of third fiscal was defense our X% result sector expectation high with grew the Our in aerospace single-digit and quarter. line The increase. in

strong with robust of existing another growth. program from ramps enabled Continued demand new combined programs quarter

remain we and healthy fourth ramps toward expect quarter, very new fiscal to we program look to As to continue. base the business

As high is fiscal market another result, rate strategy growth the expecting and approximately we this for in for clear quarter. a our indication that fiscal XXXX are the aerospace a differentiated fourth remarkable increase sector would single-digit for result of working. defense yield with sectors a Achieving our XX% sector,

improvement. fiscal stronger declined ramp sector above third new main of low-teens program the A was result a of our in for that the expectations communications the quarter, anticipated X% Our a than was decline. reason

are to of However, reductions. significant communications our our erode. forecasting continue XX customer forecasts for our calendar top customers XXXX in sector X

a quarter. sector our this decline approximately result, for the to our revenue, At be will year communications fiscal full level fourth down As approximately by in we sector the expect in of fiscal XX% XXXX. communications XX%

sector a visibility horizon. also communications forecast revenue recovery suggests the the on do the fourth for Although bottom, see not that fiscal is our we the meaningful quarter

the such, align organization we necessary actions projections. new the taken revenue to the to have As

million to customers. with into XX to red support wins. record advance trailing of key to quarter. The performance expect wins manufacturing team won our in $XXX continues fiscal indicator and exceptional we the of Please were with gray fully growth. third We million new $XX momentum, the future The the X manufacturing future fiscal quarter, of eight a revenue quarter when to programs production. our represent wins a coming by opportunities. overview originating generated quarter wins an of The represents from The fiscal third bars in in At line wins the of four XX% customers We quarter generate growth million. annualized grew another balanced new ramped that engineering slide existing our wins XX for potential. closing $XXX performance third

backlog, adding fiscal strong has continued the With engineering been XXXX. solutions the team capacity throughout

During the new of grand Germany. Darmstadt larger a office in the third opening at Center we our fiscal Design quarter, celebrated

the further to by wins strong million were $XXX of nine wins in results advance region third for Please insight Americas slide quarter. exceptionally fiscal into region. the

care/life our health included aerospace new and Neenah, Boise, strategic programs. programs, the fiscal Illinois two sciences will each million Chicago, benefit substantial The new Our of facilities $XX health two and gained wins wins quarter region from third meaningful facility sciences while Wisconsin care/life sector. defense our from in Idaho APAC

First, solid execution in and the The recently another of our opened added ahead from financial our is new customer to Penang, driving strong performance Riverside Malaysia. East team expectations. performance facility wins team site

fiscal the China. The Oradea, early program Xiamen, third that in Second, wins our reason wins Romania existing energy from in we meaningful health a build quarter. facility to facility program an new management a customer ramp fiscal expect significant sciences manufacturing team the $XX XXXX. with million continued care/life The the won of robust to EMEA momentum include for in in a

further for wins Please by into sector. XX market advance to the slide insight performance manufacturing

the wins, in care/life $XXX devices. associated Included health revenue robotic team potential third in million health We're wins revenue strong assisted in care. the quarter. this generated with growing totaling surgery fiscal significant expanding about of field is Our exceptionally optimistic sciences the

The quarter. our third industrial/commercial the American of sector for expansion a produced The manufacturing large conglomerate wins. is $XX relationship with the million highlight North of fiscal

EMEA will for teams and join in our manufacturing team APAC this Americas customer. products Our

customers have Our differentiator a desire who integrated manufacturing solutions a key been for solution. global

us gives The sector share next mainly several continued million year. wins rate gain that customers. existing can result of defense were the market the with sectors existing into and $XX wins confidence with of growth the maintain strong fiscal aerospace customers The

our for sector existing an the Finally, the communications Malaysia. team fiscal customer win in in third extended Penang, quarter a sizable with our relationship with

sector to a $X.X advance first to In $X.X sector the XX. quarter. Please billion. million in slide grew health new care/life wins team over fiscal funnel. sciences the customers driving to from strong increased billion funnel upon qualified the funnel their strategy quarter, Their In new customers. new strong from as in performance, has to targeting XXXX, and opportunities $XXX is $XXX focused our diversifying by of working fiscal The sector’s customers. interest opportunities The million spite aerospace manufacturing the sector as and the Increasing balanced the mainly been to finish of robust defense the The $XXX opportunities is industrial/commercial solutions funnel global almost with new healthy third well the grew existing at demand strong. with customers to XX% in continues remains be as million. their from is fiscal funnel it

to to operating like performance slide turn would XX. I Next, on

quarter One our of was fiscal the achieved margin third within $XXX in revenue margin. quarter. in highlighted, demand revenue communications we did fiscal of job the Todd quarterly record the to on lower an impact customers. outstanding of guidance. at At to As increased end quarter our X.X% the Once for million deliver reacting third operating again, operating was the changes team the

we new adjust quarter, reductions in As fourth communications sector. we the forecast fiscal to the need the look to at

are as well As continue drive projected such match to to we demand organization improvement. aligning as productivity the

realize expect during of some quarter. to the We improvements the

in guiding X.X% to quarter. range So, we’re of the operating margin fiscal for the X.X% fourth

In addition margin operating of improvements, we improvements. on realize the starting our benefits to are focus inventory to

sequential fiscal in a days quarter at days, quarter. the X-day fiscal the second finished from third reduction Our inventory of XX

further we're we improvements. with pleased remain driving this While result, on focused

Sometimes during do accomplishments. of the the not financial There achieved was capture results goal quarter. significant a third by nonfinancial fiscal all themselves the

this our team quarter of Officer, impacting business at Gearhart, our a exceptional in To leadership It Information foundation is provide team. Chief that system the for a Our is financial and resource that Steve of of global results XX accomplishments cross-functional success. a to planning manufacturing led locations. revenue with global do upgraded our all enterprise like without leveling testament the record outstanding quarter, the this continued any capabilities solid

few A final comments.

profit. our revenue quarter XXXX, team achieve the in finish an is record has business As results. and the The year changing with to of dynamics adjusting final on to operating us to amazing of to put job the we enter track team fiscal position and done the XXth record a these adapting

significant forecast our continuous drive fiscal to demanded The improvement to made simultaneously and never have me. in facilities. pivot tools XXXX ceases we our team's change addition, investments strength activities our amaze is is ability In in yet people, future, in our when that finish a the It successes the great fiscal fiscal that leverage XXXX, record business had will me confidence manage as with gives team’s have to a the strong start as the the we performance that ensure XXXX. to in they well to of

financial the I our Pat review for call will now to turn an in-depth Pat? performance. of

Pat Jermain

good Thank you, Steve, everyone. and morning,

on fiscal Our are quarter third results summarized slide XX.

Third of costs XX by guidance was of $XX underabsorption EMEA higher the mix. our customer end fixed by margin basis X.X% of million revenue an of was the due Gross million. sequentially $XXX region to top at points, within changing lower in quarter our sequentially primarily and and unfavorable

reduction our partially was EMEA region, expense The SG&A the cost. lower reduced approximately to sequentially administrative $XXX,XXX. fixed and related mitigate guidance Selling of mainly underabsorption spending to was which million our and of by $XX favorable to

As a margin end sequential was X.X% Impacted a improvement of revenue, sequentially almost XX points. margin, by of points. X.X%, guidance lower basis by at was basis percentage higher XX while of operating of low the gross our SG&A

in expense. foreign part this was expected margin basis than $X.X quarter's million in due points approximately of compensation were lower operating of exchange expenses stock-based Non-operating gains. Included XX to

slightly geographic Our distribution earnings. rate above of guidance the effective of was tax XX.X% due to

guidance GAAP with of elevated share outstanding favorable midpoint repurchase number our diluted due activity. the to was slightly EPS the $X.XX diluted of of at shares to guidance,

slide by quarter, back brought the bringing balance cash U.S. last a of billion. the third fiscal of sheet over approximately tax enactment million we Since cash Turning cash. offshore flow have strategy back our the In now repatriation $XX XX. continued reform year, on and to $X.X we

quarter, fiscal $XXX quarter. the to authorized we third shares of have per an million, our during stock average of $XX completed the quarter, shares During million $XX program remaining fourth purchased million price last We the approximately the our we $XXX purchase $XX.XX of of year. for buyback at Through share. intend million XXX,XXX

will our of we month, new potential with Next Directors for authorization. a review Board

unsecured covenants. take improve our we our credit XX, to and of senior May On favorable advantage financial facility refinanced pricing

in In $XXX and it with the commitment of expanded an facility provides growth. the additional $XXX additional from million to the addition, maximum us under anticipation by of with was capacity flexibility $XXX was to The credit May potential The future maturity facility increase million credit million. facility extended to the amended borrowing XXXX.

third cash operations free million. end the For of quarter, on $XX resulting million At of second three was XX of $XXX million fiscal capital spent million. we quarter. Cash the was balance the in $XX in third fiscal the higher in days, third days flow than from end $XX cash generated expenditures, quarter, cash the results the our and cycle fiscal at our quarter

details Please for drive were Sequentially, see turn our reduction to seven to inventory. inventory primarily efforts our due improved We on days a XX around team's pleased sequential cash our to management. slide cycle. to days, million concerted inventory in $XX commitment

reduction were reduced of one the XX and slightly fiscal pulled the under program order days lower the receivables portion seven our to we also lower. by inventory, improve receivables days communications sold factoring sector. Corresponding the fourth back expected procurement downturn increased sequentially day inventory days A the customer of by days. quarter Sequentially, management, related our in was activity. payable on to to In to amount as

utilization X.X% and guidance, basis EPS are Improved summarized is additional higher quarter, to higher contributing XX. for slide to fourth are gross to Todd mix, guidance would the quarter fiscal the third points approximately customer which fourth cost of actions in the has on Fiscal expected margin anticipated As the midpoint the some continued than fiscal gross margin. provided details already revenue cost the At review range quarter. XX better X.X%. be containment fixed margin and gross be of this I’ll

fourth SG&A our sequentially we million to expense $XX.X up would guidance, XX expect million. the At of the be anticipated SG&A For fiscal quarter, points. revenue, in revenue of the midpoint of $XX.X range X.X% basis

Fiscal in communications actions X.X%, revenue within compensation points plan. exclusive range to related the the to margin the of basis fourth At are of timing formulating is operating any guidance stock-based we this which is quarter the includes The of still be XX the and margin address details of operating charges approximately to expected sector. expense. nonrecurring taken to declines X.X% point,

A expected few to to notes. be quarter and range fourth of than third the higher to $X.X the XX% rate quarter. by guidance, XX% $XX estimate Depreciation for other fiscal amortization expected fiscal be the in tax million. be quarter, We for an slightly million to be is to fourth At effective fiscal expense are quarter of would expected $X.X million, the XX% fiscal for Non-operating year while the expenses the approximately expenses is these XX%. $XXX,XXX. this full of midpoint to sequentially higher the fourth

the Continuing be shares. quarter, estimate diluted outstanding average fiscal XX approximately to weighted million we our during repurchase fourth share shares activity

for in the will we fourth the of forecasted sheet capital cycle At working of of improve cycle reduction days is point a result balance lower days cash expectation capital working XX days. cash guidance, Our fiscal revenue, requirements. this for quarter. sequentially three XX would in the to levels Based the days expect on

flow cash free positive fiscal expect XXXX. We for

inventory $XX sector. million the dependent the to revenue communications primarily will continued our ability reduction to efforts the previous be management in our of our million mitigate within impact guidance around from and meeting projected significant $XX However, on

expected million of be $XX Finally, fiscal spending $XX our to for is in million. XXXX range to the estimate capital

for I Sylvia? call that, questions. the With now will open

Operator

from instructions] first our Research. Shawn comes Longbow from Thank you. Harrison [Operator And question

Shawn Harrison

everybody. morning, Good

some is risk with? weaker of right years. into disengagements? the with communications any As We’ve shifts the How customers of over this much delve And there you I’ll dealing can versus business. communications business, demand customers a imagine, seen technology have that your maybe function that this are with is of

look As we is there fiscal downside through side? ‘XX, whether further

Todd Kelsey

But I’d the existing around and Shawn, into we technologies some out But, to strong seeing of service within and the this, over be and our on continuing we customer is then, what such. relationships various broad-based and color subsectors it suppliers. across as basically will view Steve all continuing details start view and me I relationships let healthy, we’re to communications future demand that additional pass now. customer as reduction the Well, general, significant the and in for

different obviously, than our people Now, is potentially in market. other portfolio the

are, all but they may as across not showing similar our or we So, subsectors are them. be seen may scenario of declines that

In percentage Steve down, wise highlighted, double-digit our quarter-over-quarter. down of are X are customers fact, them of XX X top as

a So, it and very within goes goes sector. customer beyond the just deep

ramps we're But, we we semiconductor equipment at a a Now, like space. into we And ability a previous sector some get in that expect likely and about, sectors. wins our to XX% general, our the the drive say I’m lowest market it's a for the our issue the And, margin as of may a with don't. it these fourth quarter U-shaped, fiscal bit, up certainly expect to XXXX. in would the expectations, view the general, pick be to I us, planning major capital a But, but these of the certain as call end in sector for revenue we recovery a when be We sector. saw derisking us reduction. us, we as it for bit look to that demand. we from portfolio. over trough, more communications the talked program given not view this new we on volatile It’s that other portfolio And

in the communications and excluding and cap So, growth the this and growth even XX% to expecting we're that paralleling we're of the sectors, moving despite sciences, industrial/commercial, in other seeing kind over weakness, And aerospace forward. business. defense reasonable health onto still the projected due semi strengths the care/life ‘XX,

reductions these other expect communications we’d to sectors year-over-year So, we're see. going overcome three that to

from ‘XX good margins year the our to EPS going range, we’d be back couple Then, an expect with when fiscal you into standpoint. that a target

you how the play want we the in in and the highlight we have maybe several to perhaps least of at where cable some customers? technology Steve, space So,

Steve Frisch

question, think technology a distributed more from Sure. our the it you architecture in look surprise, the It's is as well a the is perspective, I to space not is. Shawn, at as this cable think, as centralized I you going asked the shift? And being I for only the early years. XXXX, drop industry surprise been was In investment know to there the anybody in the on probably worked a virtualization. anticipated. capital off the I significant has reduction really spending. the calendar by don't is This pretty MSOs.

I think it's what architecture forcing going kind at of a is look be. the to

we So centralized architecture, in we the participate architecture. distributor also the participate for us, do in

take solution, we in lower medium built at and products, for that bit products, look bigger programs us a our for is be manufacturing to And lower The the a The to We our i.e. communication for box, roadmap box more part what to where do more us volume centralized more having see volume a -- distributed place so, happened. us, for us versus going from we our service shift distributed. products interesting customers. the our are going challenge what or revenue you and is being that happening expensive for shift centralized need probably cost were potential to you that a box. the need and put basically see solution for long-term

worked because our investigated them, solutions commercial from technology think the being solutions, the the although believe And distributed quickly be understanding, does I yet. don't and shift happening. it how and will people interesting not it so, to virtualized they're solution -- a they're necessarily is we it are in investing and see shift

solution getting to the it sure customers that will we years our take needs. shifts, architecture we play of few front a as have So, out. this proactively, think make in to manufacturing with the their we're But solves that

doing, in that's script. we're so, talked the about of And what as kind we here

Shawn Harrison

has mouth in semi even have a touched if U-shaped and feeling a fantastic but don't I I recovery I out Todd, description. may you cap. anything I on sense pushed that's of that a some want one maybe semi XXXX. put this, just bit follow-up. to that get further on kind of guess, words recovery the been you're cap? into your So,

Todd Kelsey

guess mean, the to in half, would we seeing you What visibility is visibility too. is about a a probably would probably is have do within not I would about say now, I cap. XXXX great not cap and -- say, people I see don't great our call semi we're not we what we -- for been But year hear our from Yes. what that it’s right it we're recovery, read now. I customers similar it degradation well are back into talking and any forecast. best right semi though over now seeing consistent what

So, we now. the floating truly believe at bottom we’re right

Operator

comes Sheerin Matt from next question Our from Stifel.

Matt Sheerin

to Just and the there. the another question cost efforts relative business cutting communications

improving quarter margins about talked You ‘XX. in and next fiscal

profitable range help overall to segment at least In terms a it's get haven't to of at these cost plan the the the And breakeven perhaps this boost cutting or efforts, and I know within point. Company? process worse you provided imagine is of details, but even that

Pat Jermain

that's plan, Matt be would and That Yes. Pat. our the this is expectation.

than saving to be charges get, I target the and plan pretty as important execute those ‘XX. less be order in working this X initiatives mean, of those laying million operating we’re or be and are together these this taking plan. $X that is two for operating Todd to a fiscal my would the focused achieve back our it probably just is, be involved on would into that. But we’re out I sites expectation. still our We will point our magnitude, be said, would times But, now annual range expectation mean, our savings fiscal business one would margin sense And where actions of at. ‘XX. And concentration on to right and give

Matt Sheerin

of I Okay. other And making segments. imagine the customers where in facilities other terms you have those in you’re cuts,

in other to So, serve to is customers just equipment the other it relatively modify segments? easy

Steve Frisch

see actually Yes. with wining honest those that And sites those going products to be actually the is of the us where actually sectors. because Matt, with sites, long term, the as Yes. and I this this other for are you, for Steve. we growth engines see mix business good we're as thing a

is out freeing the so, revenue help forcing a you, the did us well honest is for Short-term, quickly us long-term the minimize up long-term, lousy it going to going us with there that because to thing. this happening though long-term, honest And this with it’s in space To But be is for it’s as to do it’s really us. investments be work short-term. you, this. in to as other comms reduction really any good

Operator

from comes Jim question following Our from Ricchiuti Company. Needham and

Jim Ricchiuti

around program But, the bounce wins is quarters I just from about wins quarter nicely. Thanks. wanted can yet your in number Good I program your potential revenue to quarter-to-quarter. previous down up morning. for know, and the of

wonder you’re I if that larger could you that. anything just Is deals, larger to pursuing opportunities? So, there speak

Todd Kelsey

Yes. a say, seeing But would happen I larger Jim and to more quite we're that program say, close wins no. quarter. we bunch will them see think of opportunities fluctuate I bit. you I would of number this a

low next had just in because wouldn’t significantly we see front be happened opportunities of of closed It I So, that quarter couple up us. be to surprised big to be this something higher it pop to a we quarter.

Jim Ricchiuti

it the positive outperforming. color of, of forward, there of weakening of some in customers sounds potential side you guess, business. the wonder industrial/commercial people's choppiness you're additional to though alluded be industrial light any just on could the business, different parts even if some concerns like that I market Got part XX about And it. that, X could the I think of about And you provide the the that going in on I and fairly top

Steve Frisch

This is Steve. Yes.

at that draw, my whether increasing transportation gas sector the could of each wasn't direct market customers a or are was there's sector was positive and saw business. an had was see come little of saying bit or any even sub there of We on of or was fairly inclusion uptick decreasing. equipment, that really, that We that in and few I capital down. significantly part a subsectors, the part message oil a others it And semiconductor or

and together really overall fiscal that look to growth I that sector the other blend anything into us. we XXXX, a subsectors trend see points fact that, one the in than for any significant as in of in So, it the happening, we see don't

and positive So, it going on quite we are forward. optimistic

Todd Kelsey

a from market standpoint, add markets even end beyond if seeing, to we're growth and tick Jim, anything modestly. end just up the And bit, an

right So, obvious equipment to we're we're getting the semiconductor to but subsectors not not that other in worse. be now, seeing than capital weak, state that continues weakness servicing the any

Jim Ricchiuti

question Got you. it. Last for the Thank and I'll back queue. in me, jump

to to assisted point that robotic surgery, the at potentially talking just to a I sector? I'm it's be now. accompanied more meaningfully revenues you And going for begin to in that wondering, start think. while also what would respect see about better to with that presume margins, And do you've been contribute Just I by

Todd Kelsey

it our to back in some into get would We’d Yes. ‘XX to meaningful the impact we be as expect impact ‘XX. ‘XX of and to half start see fiscal More though.

Jim Ricchiuti

better Okay. And carrying margins?

Todd Kelsey

probably That's fair.

Jim Ricchiuti

Yes.

Okay. Thank you.

Operator

comes Our next question from Soderstrom Anja Sidoti. from

Anja Soderstrom

I some follow-ups. have just

the for mentioned lower segment, You margin. generally it's communications

into driving piece higher what how going So, more it see should of think smaller you becoming communications help the this a margin is pie? margins overall advanced sort of that you trending Are like with the about margin? is is to we overall or the equipment for that

Todd Kelsey

and Yes. They’re in starting I into the I’d Anja, a improving quarter. meaningful other role about, we portfolio the think, over having have as impact. starting last basically initiatives mix, certainly we talked see productivity the margins ‘XX. that to And areas a go those XX% general say, we plays fiscal the as

see this So, from margins what we year. they would expect to are up

Anja Soderstrom

the contribution the partially lower Okay. And from segment. that's going to be communications helped from

Todd Kelsey

Yes.

Anja Soderstrom

And had I -- just the follow-up the then, customer wins on a become that Okay. also contract larger. had

we to projects, that need don’t their ramp as how also, margins look is at to shift be contracts, And are to often? that’s don’t that it’s you hopefully how as many so about So, that helping to as you think it? going production going how helping, have better forward there should larger

Steve Frisch

wins Yes. and trend. We the number kind see a terms Steve. in not This necessarily is quarter the of this larger smaller size of is

their the terms in our of in size number that all we of As of shifted across portfolio of buckets look of and out of those the I year. opportunities has funnel the terms size the overall sectors, fundamentally over opportunities in at have each broken

just I than It balanced that us, I’d it's And into we between opportunities terms in we’ve that higher. to And read terms fewer, average anything the business. don't of something which ramping quarter really have few ones in of and need so a doing or the been in to the drove at pretty make coming different of not not have this funnel larger grow this at investments growth that we you one in the of past smaller help and have medium the did up does see is the to look ones. projection this, so, business yes, call place them. well we to ones structure ones, ramp that larger as what happened I trend quarter, But bigger the just cost the the

Operator

from next Morgan. Our Paul JP from question comes Coster

Paul Chung

for This my is Paul question. Thanks Coster. Chung taking on for

year, free investing increase. cash this levels on free down side, flow of above $XXX in to when come cycle get CapEx When can So, just in see cash working cap side, you’re improved inventory more facilities level overall million that days and but we continue cash on we year, spend but mark? next the improvement material understand should on the can that your

Todd Kelsey

Yes.

preparing of for we're So, the right year. in our Paul, plan next stage

So, we But, in fiscal XXXX, finalizing will is there improvements look I month. cash be areas next I to cycle. our as that that see we’ll to three believe the

in of that of to one range million year. is which spending, $XX on this million capital touched them, You $XX

facilities, million will fiscal that number we in ‘XX and Our investment probably $XX that reduced did a year. we of level see won't year to expectation lot that in of from $XX spending next be do million next because

one we see So, that's that area will improvement.

touched we’ve operating seeing days. around operations. range, with is deliver from margins, this within free operating start will year getting that working flow area around we're those which reduction capital, the cash lastly, what more target on inventory in efforts margin Second And our then

that We fourth continue see quarter. expect in the fiscal to

the last significantly the that’s inventory over hand and down activity, back reduction through that come in Because the sector. had but communications of times. some working longer are procurement on We given pulled lead couple of we we months,

this is is there. around year. of expectation throughout management ‘XX cash But inventory and continue fiscal that flow fiscal to end our impacting free at the efforts see So, improvement our ‘XX

$XXX of million. three, So, plan see we the will Whether the as finalize those think we that, over combination we get be above the I approaching will next month.

Paul Chung

had the there And payable should days something Is something some quarters that expect dynamic of payments comps then, just the there. follow-up driving we on that is structural? that accounts a higher or to those the that? coming in of What's do kind your

Todd Kelsey

Yes.

couple a So, what we probably forecasted was a a saw this our than accounts little so reduction quarter in had for significant of reasons. more payable days, we

we’re efforts, obviously purchasing inventory on the back materials. With pulling

that's pulled So, with of then we've the days. those But, that purchasing also, on our reduction, components. back reducing -- payable communications,

answer forward, payable that think few get balance to quarter. going question we've over the more normal probably quarters elevate your the I to will this So, our days and next before level we see seen and

Pat Jermain

exceed typically the depressed, be if look as longer we inventory efforts little bit I stabilized. going a that, think, we're as get term, do, should reduction toward payables reduction in in general, XX our they to Paul, but we our as through they efforts, likely moving are days at

Paul Chung

side, you pressure option are on then to redistributing you. on on that? could if continues you possibly exiting kind this this even accelerate, maybe of this kind of guys, discussions maybe expand downward if having to And for comp Is healthcare/aerospace? resources you business the and Got possible a

Steve Frisch

that we we looking We're customers. this utilize internally. we this that. our But you'll the What based and I team And we off have moves -- think then, our with to any customers piece at appropriately, our proactive resources allocate we of our they technologies. companies our communications is certainly have now of at value relatively small And good point manage think are really looking doing continue in and good space. how doing see resources we're be portfolio. at But,

Todd Kelsey

Paul we we logos. mean, added five And I last new I’d quarter, add. reported that

So, there this in are opportunities us sector. for

Paul Chung

But Thank And China lastly, you. your the but move taking Mexico's analyst further your in day? -- tariff It of any Okay. least. kind from the clear accelerating all? on productions now, from to of any now actions update or in then, are customers at font, at those for discussions all any seems at commentary like

Todd Kelsey

Yes.

bit a China So, there's the in resolution tariff of that right a there situation. now, of successful yet hasn't movement been given

$XXX to over our little So, million. over a I revenue mean, XX% remind of everybody, in little bit just China, we're just a so

on than some we it's half doing And builds going have a China. geographies. not significant portion exposure -- with have customers. But, in stays that we significant us. So, in for we're for And multiple a more that, do qualification other discussions of

about XX% ‘XX course of the other geographies revenue being as up so of our end could during China to it right So, fiscal of moves now. or that

certainly we're some So, seeing where impact. new programs. seeing impact source some We're in we

have in did this we quarter. major Although China win a

in maybe be So, it’s growth -- able been China forward, I move the to think there's an past. have ability the within just levels small to not that at to as we

Paul Chung

Thank you much. so

Operator

Kelsey We for at to closing like this Instructions] questions to Todd no time. call over the turn have [Operator remarks. further I'd

Todd Kelsey

our All right. Thank you, today. Sylvia. who on call And thank us you to joined everyone

like to our commitment our success. your efforts It’s teams and we the interest for thank employees their I’d truly our to appreciate in always, customers Plexus. Plexus our differentiates that also your support, Plexus. As globally of customers’

successful further to a close our fiscal in look and progress fiscal forward So, I XXXX XXXX. of

Operator

you. Ladies this and gentlemen, you today's conference. Thank concludes Thank participating. for

disconnect. now may You

Plexus (PLXS) 18 Jul 192019 Q3 Earnings call transcript