PLXS - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to the Plexus Group Conference Call regarding its Fiscal Second Quarter 2020 Earnings Announcement. My name is Sidney, 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. The conference call is scheduled to last approximately one hour. conference recorded. this that note is being Please

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

Heather Beresford

for Good thank joining us morning you today. and

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

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

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

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

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

release and www.plexus.com, the at materials this SEC supporting full non-GAAP call on live website refer periodic For yesterday's supplemental that our top of Plexus' of at and reconciliation press We please at webcast a access page. the on Investors encourage information, filings. to morning the clicking participants the

Chief Officer; Executive Chief President Kelsey, Financial President Executive Todd and Pat Jermain, Vice are today and Officer; Vice and Officer. Steve Chief Executive Operating Frisch, President me Joining and

Pat calls, Todd comments further to call the over earnings before Steve prior summary provide turning for will and details. with Consistent

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

Todd Kelsey

quarter second our X. everyone. results and Please good fiscal you, begin morning, Heather, on Thank with Slide

XXXX. quarterly evening, our of of achieved million. We $XXX reported the close quarter results yesterday the for market revenue After we of fiscal second

While the mandated ability impact facilities to expectations entering reductions our chain and Malaysia. in government I at teams revenue the result was Penang, of our commend below Covid-XX-related and constraints, our workforce our supply their mitigate quarter,

Our XX% sites in Malaysia of typical operated weeks for final quarter. three of workforce with the the

of remainder With operated of the sites near quarter. the month capacity the February, exception for our the our of facilities China full in

the the and While each at of all from our customers team needs communities. and essential talented meeting our dedicated face locations Covid-XX our locations members resulting challenges of to committed pandemic, remain

the $X.XX to delivered closure EPS due related expense, announced of included the $X.XX of We Center. Design of cost previously of Both our GAAP $X.XX of Boulder including GAAP and $X.XX and EPS non-GAAP non-GAAP our to directly Covid-XX. $X.XX of stock-based excluding compensation EPS impact

X. to advance Slide Please

While our for that by create overcome impacted Covid-XX. to outbreak, the teams delivering customers complexities to the to ability world. results build resolve They challenges the our better remain were committed Covid-XX and helping a demonstrated products and and of our their

workers healthcare monitors, such systems. bed around globe test portable pumps, infusion the medical the electronics, as that Covid-XX. in Our products the medical are against Healthcare/Life portable and products of diagnostic mobile includes our delivering supported battle customers electronics, This ultrasounds, by and patient radiography efforts Sciences critical frontline ventilators,

and continues addition needs produce of Communications to essential Industrial/Commercial, fight for and support the to customers as the In Plexus our Defense these Aerospace products supporting our infrastructure communities. products against Covid-XX,

Slide to advance X. Please

highlight in impacts Covid-XX of our the meeting communities. of Next and the and I further our our team, needs our will response customers

a could very early in of content potential that sizable footprint as occur our China, Given chain result realized disruption and Covid-XX. supply we

global established In January. late beginning in regular, calls executive we response,

of day. executive with these teams Internally, have priorities, line that We calls steering in that to policies actions our each and policies a committee business inform locally. of teams and team each with drive protocols are an regional as and continue these executive impacts we day sets committee organized steering

through to of our challenges remain the ensuring presented work our we they and customers. needs to by well-being safety committed As Covid-XX, the as strive essential of the team we support members

their for Our the in away members has to internal protocols as be policies thoroughly stated place goal can is resulted virus be become our the more when evolving safest facilities our and team This understood. from has homes.

bans international ahead place getting in of put recommendations. we and travel government well examples, As domestic

temperature and implemented our all We our We screening facilities sites at procedural provide coverings order at support all social of have in mandatory distancing. changes reconfigured multiple face globally. facilities manufacturing globally. to We

require who do to all so. work employees that home can We from

resources communications and relevant to had We a discussing globally three detailed communicate I Covid-XX. on regular also at Unfortunately to employees our issues for Covid-XX. least basis. all to team positive members employees provide to-date, have weekly we test personally

as well-defined customers, of management crisis an multi-day as to prior This resuming In employees a shutdown site by hours. We response by decontamination followed the positive within a thorough test, and third-party shutdown a implemented orderly a in notified protocol. we provider to site well was operations. of the performed each immediately service

Please advance to X. Slide

of sector, healthy produced late quarter, wins our teams of While This wins the these supporting quarter. market $XXX within Covid-XX Healthcare/Life to our posted has of needs second has leveraged which a expertise million result in we Despite secured was manufacturing opportunities. as fiscal also Sciences the it in markets. in challenges, uncertainty dominated customers million lack by $XXX our go presented travel many and the the manufacturing in

our programs are Europe are Covid-XX testing. we ventilators and programs or with call, time in associated As that The these have of of majority fiscal be will States reflected and the five of United secured quarter wins. across the ramping third this

medical seeing addition, programs for upside are emergency In customers applications. we from existing that support multiple

ability adapt our focus. teams’ strength to persevere highlights Our talent, quickly and organization’s and

that We products team that to better build is truly have world. a committed the creating a

XXXX of third on the quarter fiscal Slide to our X. Advancing guidance for

the million to third $XXX look quarter, As to $XXX to revenue the in of million. deliver we forward fiscal range expect we

While is volatile, demand strong. critical our are aggregate highly markets demand robust. particular care Sciences very in Healthcare/Life in remains and products

is defense and remain also our of to down and business and balance Aerospace full allowed the aggregate healthy. the demand our equipment Penang sites on of are all Communications with at operate capital Semiconductor Currently, capacity. is exception Industrial mixed. of considerably

At non-production our near output Penang on now facilities, home, by changing focusing our week shift on work patterns, day operating per having seven from capacity. is improvements full schedule, and a productivity employees

quarter third margin continue in from by fiscal and impacted to operating inefficiencies Covid-XX. Our the challenges negatively be resulting will

anticipate to lead We such, including $X.XX As non-recurring we guiding EPS the not We X.X%. revenue operating margins at range of $X.XX GAAP are of in currently do stock-based the in levels compensation charges. X.X% will $X.XX to and margins any to operating these anticipate expense.

have we constraints chain, challenges, consideration global as In taken into due workforce providing to on as potential well Covid-XX. occur supply could this the that operational guidance, inefficiencies

no end-markets those or will closures already COVID-XX nor facilities, or our what beyond assume occurred. our However, large-scale that due our of customers materially the Covid-XX, to guidance of assumes outbreak has impact suppliers does it

revenue We to within material and quarter. negative commit EPS our timely providing the transparent and should changes occur expectations updates to

priority. members move our we team As remain our top forward,

flexible, I protocols We to want we continue team adapted the in to as our operate safety possible. our in of patient to manner to implement quickly safest and and teams, members have policies who sites be meet as change. needs to continue our as who invest thank our well the

products the essential am organization, devices It our and medical I those is support are entire to lifesaving of customers our proud our through in deliver courage efforts other that and manufacturing and particularly of communities. to we but their sites. unwavering able our

additional of operations. to will I call the Steve? analysis sectors now for our turn the market of performance Steve over and

Steven Frisch

Thank I provide will of context you, second quarter our start fiscal the facilities Slide situation, The morning. our Todd. impacted with COVID-XX the Good metrics. of global on operational To X. better pandemic status

are by of All requirements upon located. them placed governments facilities respective have the they Plexus’ where

permission However, our conduct business. been all facilities of granted have to

third quarter fiscal Covid-XX. guidance the due to currently Our anticipated operational inefficiencies includes

work home Our when global under and design are office most centers, to from mandates possible. headquarters personnel

to time adjusted In if facilities, our manner new extended varies have this to we necessary. this an can regards we the paradigm period teams region. and for of function Our by in status believe manufacturing

experienced their Starting by of our of to restrictions spread the the in COVID-XX. production to sites due response a China in imposed period limited government APAC, very

team overcame our supply of and orders most to overtime quarter. significant customers' the fulfill constraints second worked within However, the fiscal

anticipate levels an staffing third supply full China. improved and the For in quarter, we chain local fiscal

employees we our were who our The As can impact announced control our of as at subject in restricts to Malaysia more severe are on sites March of movement to work XXrd, XX%. completely number suppliers current some local the is they The closed. at sites order national the order.

attributed fiscal Our second revenue quarter Malaysia. the to in the be situation softness largely for can

April expiration in effect, remains past quarter, we it XX. start the be current we fiscal As of could the extended the order third and believe date

health However, employees our we have result in have of Malaysian mitigations the put restrictions. officials as eased a of some to place protect

We have employees continue production full allowed reduction number but patterns a create been shift of the achieve to in nearly new enable the of rates. they us that facility,

able all of Malaysian resume production. addition, suppliers In some our critical to of been have level

situation We in throughout improve the fiscal expect quarter. third the to Malaysia continue to

majority for late in last Boise were we during Americas had quarter. of the quarter largely Covid-XX through COVID-XX the employee our the test by Our That in in of fiscal sites positive second the unaffected one the changed quarter. as site the week

the of were policies and issue. management minutes learning of initiated crisis Our procedures within

by EH&S, exceptional, Communications site well days. leadership which Corporate our the the enabled a within execution Boise team few as preparation The our was reopen as teams, of operations and to

in Our procedures and EMEA as well. employee sites and early policies health second to adjusted their quarter the safety, ensure

Fortunately, managing. associated global chain they that with are do beyond all supply any Covid-XX incidents not have issues the regions

to safest and the homes. make our their outside want we some employees of Employees importantly, are actions taking. the illustrate can Plexus steps of the the we to made have one to I Finally, home from to required on some of this commitment in are to Todd order highlighted expand most social of them, deliver commitment. upon to do that work so. are taking distancing, we

have buildings, compliance. access to ensure We to restricted

our facilities situations. entrances close modified patterns shift have in rent We reconfigured employee manufacturing and contact for

to reconfigured we physically spaces the areas proper have break rooms proper separation social distancing. common changed and workspaces lunch have to and layout of like We ensure support

reviewing employee safety and to leadership each start approach day to global best business share a As our we practices. team,

making rhythm. the operating implementing are transition We new to reacting crisis to a from

to continue our will been Our well transparent to this and customers as new environment. be as shareholders we philosophy and adjust communications our employees, as has with

review market the for Please our our to advance to the impact Covid-XX of quarter, largely Slide market due negative sector. that Three by in our a operations. of sectors expectations second missed performance X had on fiscal

impacted expectations for the our on for will quarter Since the the just fiscal focus fiscal second events each of the review we third of regions in XXXX. quarter, sectors I that the

the in XX% Our Healthcare/Life expect over Sciences third is revenue quarter. fiscal decline to

XX% We the testing, a treating have January. of third seen in for and is COVID-XX since with driving demand quarter net that growth. the provide end of products customers forecast Significant fiscal the our increase increases used diagnosing,

Given we robust. Covid-XX, the urgent need for produce Healthcare/Life we expect Sciences fight our demand to remain products that

quarter. a third equipment and by retail Our transportation the semiconductor is fiscal subsectors. decline Industrial/Commercial gas, in Strong and the sector anticipating demand weaknesses from automated high-single-digit offset is for being capital oil customers

is Some subsector to share chain equipment of the supply teams’ strengths constraints. ability our due of in gains deliver to the capital the semiconductor market

from of demand quarter. Defense growth; customers is changed aerospace the sector In commercial forecast that from We however decline defense while outlook. demand is stable, high-single-digit regards third several for fiscal rest have Aerospace customers and relatively sequential in had remains sector, expecting forecasting been mixed. and declines programs space to security the Our our the a

sector XG ramping for demand the Strong connectivity of third Communications is the infrastructure Internet and in new growth. Our wireless fiscal expecting XX% almost grow program driving the are quarter. a to products

Some by of working to the requirements at strength bandwidth the home, from increased home. is people staying due and created

of into overview Please million performance of new fiscal won production. We quarter. in XX second the annualized Slide expect generate manufacturing when an programs for to fully advance to XX we wins ramped $XXX that revenue the

as adjusting in sales is good momentum opportunities variable process. early the the with The travel close of diligence become restrictions combined strong to new a they virtually. a The was quarter to result team in wins

Finally, quarters four our of wins our maintains goal our wins momentum $XXX at trailing of million above XX%.

further region’s The total insight a of results $XX for robust Please All region. to Americas million. was of benefited XX Slide from the million wins by regions the portion the wins. $XXX into wins advance

to result Covid-XX Included have the the used within fiscal fight third in a against the we is expect in product quarter. that ramped

anticipate two new Covid-XX. related addition, In fiscal in third wins program we to the quarter

as are We for ramp – ramp aggressively to on plans those working programs well.

a over quarter. million were wins APAC been The outstanding year. job through have The second the they conditions our of the the adverse fiscal $XXX manufacturing strongest of leading team regions’ in an did customers

As a as increases the customers key the from customer a market semiconductor equipment share as sectors. they large in with significant two were from result, industry, in well rewarded capital Communication

The center has million Oradea, Included strong. will the EMEA customer. region of design a in our $XX with facilities. product exceptionally large in Darmstadt be the produced were program Romania This sciences life wins been wins is our that co-developing

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

Sciences an Our results Healthcare/Life in of quarter. the team wins fiscal strong had $XXX second exceptionally million

battle Obviously wins energized Covid-XX. we program for that in are are against by the the products the used

new for we the the life the the sustain wins customer added by meaningful are encouraged future a China program in also EMEA, team growth addition programs for to will operations. However, quarters our the that two from in imaging large sciences

healthy second over a manufacturing the of wins straight sector’s the and is XX% $XX of a second This in year. produced sector the Industrial/Commercial quarter. million wins growing quarter strongest fiscal in quarter The

customers the the Market highlight Aerospace sector for the momentum. second with and a quarter, of new the quarter. generated million gains fiscal program share Defense key wins is creating is wins in space large $XX The

products to growth enabling demanding demonstrated is for environment high in this ability produce Our subsector. quality this

a Finally, into our new is expands within customer. knowledge from our existing million, communication of communications how example program customers’ value wins sector transportation products is industry includes our customers. of Plexus $XX providing a new industry, meaningful opportunity The diverse our to an the an market

form strong manufacturing totaling qualified opportunities second Slide to advance quarter a We the with $X.X billion. of Please fiscal closed XX.

are sector job significant new funnel opportunities wins. outstanding while an the simultaneously with Our teams filling doing harvesting of

continues funnel $X.X Sciences Healthcare/Life billion. healthy The to a be

the opportunities In normal within new addition the business, to pandemic the creating Covid-XX sector. is

virus working are as their for aggressively customers Our Covid-XX the to top priority quantify Plexus. is battles customers qualify the world Healthcare/Life a teams with needs, Sciences our and supporting

million. by Industrial/Commercial exceptional win their of and at robust our sector second performance is delivery In the the spite The increased fiscal opportunities. $XX quarter creating of to $XXX performance, the million funnel new over close teams operation high-quality

funnel $XXX sectors Defense million and Aerospace at strong. The almost remains

In the mix significant addition the space of defense size opportunities to programs. and diverse include

earnings few quarter a since the fiscal final There first comments. call changes lot January been of A in have XX.

that managing will crisis morning, challenges, this opportunities. them. I brought Plexus the surprised the to is each the team that of significant. As pandemic a it review challenges to creating not proud, am is has but are but through be more able The also say create

commitment the have and the employees Plexus difference tremendous. solving problems The brings. demonstrated make it is that with to are working the of traits They opportunities that a Covid-XX

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

Patrick Jermain

and Steve, morning, you, everyone. good Thank

Our Slide fiscal second on summarized are results XX. quarter

Covid-XX-related under primarily million all XXX XX%, and fixed down million the of margin increases, Revenue cost gross gross down while $X of to more due basis was expenses. X% The points. the seasonal than $XXX sequentially compensation was margin was of across in expenses incurrence absorption lower manufacturing of regions,

consistent was million $XX.X of with expense administrative our and Selling expectations.

revenue, the X%, seasonal revenue XX increases. to lower sequentially higher As a was and basis points SG&A by due percentage cost of

the fiscal activities million. activities completed in of restructuring related quarter, the previously closure Center. our second all Boulder announced of charges During to These resulted $X approximately Design we

primarily Non-operating million consideration adjusted than due expectations stock-based operating was expense. the basis $X.X exchange Included was margin approximately of points of foreign compensation quarter’s Before XX charges, operating of X%. in better restructuring gains. expenses margin was this to

charge to GAAP the restructuring of of $X.XX $X.XX related diluted activities. after-tax a EPS included per share

was non-GAAP this $X.XX. Excluding item, diluted EPS

the Turning and flow Slide XX. on to sheet cash now balance

million of under second at stock had XXX,XXX we shares During the the $XX.X price per authorization. quarter, our $XX.XX the million we remaining an fiscal share. approximately the average approximately end purchased of quarter, $XX for At of

we current program in given repurchase the indefinitely, suspended However March, environment. the

million fiscal we million of cash months second $XX million. For free first flow $XX cash used the we expenditures on $XX free cash fiscal in of the operations XXXX, resulting capital six $XX quarter, million for and of flow generated negative spent in Through

the delivered creating an value. as challenges capital capital of with points economic XXX Covid-XX. by presented positioned return fiscal the quarter second is of strong face XX.X%. average shareholder the Despite This a balance cost on solid Covid-XX, a impact weighted believe well of Plexus our sheet future invested We above generated return of for we basis we

$XXX $XXX As debt totaled while X, cash of totaled XXXX, million, April million.

of ratio a times debt-to-EBITDA of times. limit Our gross leverage covenant X.X X.X to compare

addition In balance to revolving our we significant strong have through credit sheet, future funding facility our should available arise. needs

days, XX. in at to $XX million, XX a days. sequential to of was XX Cash increase of cycle turn while The was higher Please XX by second related the quarter. for revenue the second Sequentially, quarter days the the reduced cash fiscal details for on days Slide by increased end cycle. our inventory primarily increase

end In longer certain third quarter. as Also procured components. addition, starting we for we of revenue the we lead the inventory in in prepared towards this for environment, quarter anticipated fiscal the are experience higher times to

order demand inventory and products are In be greater customer certain and components will to maintain procuring a high that of we dollars service, higher. accepting meet earlier level for

were Days in the to increase and a under receivables sold sequentially was six by due days, program. primarily XX days, our reduction customer receivables higher factoring

In weighted contributed to of the days. in last timing quarter, the more shipments towards quarter addition, to compared the of the which the increase last was month

has provided, are EPS quarter, third guidance review summarized XX. fiscal for and the which already the some I’ll revenue on As additional Todd Slide details

X.X% margin points fiscal Fiscal At in would X.X%. margin be the midpoint gross the than third approximately this be higher to the XX quarter of to basis range gross quarter. is of guidance, expected second

better revenue, increase these anticipated to consistent expect to are leverage as expenses, we X% of manufacturing fixed expenses our quarter-over-quarter. in experience With an remain sequential forecasted

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

quarter expense. in margin expected of third operating of XX includes of to X.X% points Covid-XX, by fiscal to is the Impacted compensation inefficiencies basis This range X.X%. be stock-based guidance

A amortization fiscal million for $X.X few expense third are be depreciation is quarter; to the of approximately and in Non-operating million to expected $XX consistent with fiscal other million. expenses notes to quarter. second be range the $X.X expected

of would which exchange fiscal to sequentially quarter. due the were At foreign the during recorded be absence higher, gains expenses second midpoint this the guidance, these of primarily

for third to tax XX%, the expect we we effective of effective quarter, full XX% the estimate year. while to an rate XX% For rate a non-GAAP fiscal tax of XX%

diluted estimated shares are we addition, quarter. XX In outstanding third the million fiscal approximately for shares of

is working dollars relatively capital balance remain for Our expectation for the to sheet consistent.

higher We payable increase balances, we procurement demand. higher meet expect inventory accounts anticipated as and the activity to

on to Based days cash expect we forecast, days this our revenue capital in XX of cycle level will days. working XX of result

For new inventory third program breakeven support build flow expect free we the quarter, around to fiscal cash we as ramps.

full $XX year, in free cash of flow we the expect excess million. For

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

With that Sidney, for questions. call let’s now open the

Operator

first comes Raymond Our Adam with Instructions] from Tindle question [Operator James.

Your line is open.

Adam Tindle

morning. good beyond assume occurred. to not that and I guidance does has mentioned what end-markets just you Thanks material Todd, the wanted start, Okay. to impact

what to on maybe occurred you order thus can So start, has just standpoint? a touch far from product

like in thus is a is not understandable, material which operational-related, demand reduction Because far. it March in seems largely the shortfall but

in on demand so what So you’ve just maybe far touch reduction. seen

Todd Kelsey

Sure.

Adam, biggest impact So, probably demand from a in been has our aerospace subsector. the standpoint,

weak as weak. we strong. seeing sector But much are aerospace it of capital defense is we and equipment that define itself also and semiconductor Industrial/Commercial Now are within as beyond space entire

going now market that’s capital situation. demand whether in is up semiconductor the right strong. right now. I that’s there well think is Now mean, long-term there equipment it’s out whether rather to I a or question to be But holding as near-term some the

Adam Tindle

couple sharp further normal sharp guidance? we downturn, order Okay. or typically - it of cuts in those of Are if takes order orders another order downticks in And quarters contemplated cuts. follow of cuts, your kind

Todd Kelsey

related It’s bifurcated talk QX, are in course a healthcare, to well yes, strength new of about number thing as directly too. Covid-XX. we in we other For strong One that’s and of noting very worth yes. a care won products programs critical that and little Adam, too, is that’s bit the

more when the you type or surgery that we bit. consider like applications weaken elective say, are used products a in, make quite But that, type, demands things that

So there is as healthcare a too. within bit of mixture well, a

Adam Tindle

for just maybe one one Okay. final Pat. And

return you’ve factor but You economic created benefit pandemic. despite positive restructuring, I it’s we had some the still from that know if positive navigating in.

the to are to margins up, first that cash team move moving forward, just achieve down. adjusted Maybe how touch on expected cycle and

would expect improvement. I further So

to If cycle you key could drive touch expecting improvement the drivers of Thanks. the on cash they this? are

Patrick Jermain

Yes.

second these to quarter. flow accounts of I we factor end not able that programs. think we So, the in some in at receivable by Inventory driven into lot new we’ll we progress was our of see quarter, ramp negative the being that third of will had more and be cash free quarter a levels elevated the and as some improvement third area the as of the

So but And that’s to inventory customer I inventory that, also where that payable we to the increase in some of additional ensure have think offset we markets customer some these on hand. because demand see are the will where our in securing upside deposits, is expect I days. days, wants improvement and

are deposits to offset capital investment. We customer that working help requesting

job think So, fantastic the regions. a our are I all inventory management in around of teams doing

some the of this improvements increases in term, the are probably we will inventory. But cycle. so, seeing there. main And see cash we in for Those us near are components

Adam Tindle

you. Thank sense. Makes

Operator

next you. line the question And Loop from of Shawn Harrison our Thank Capital. with comes

is line Your open.

Shawn Harrison

It’s into, everybody. topics. to your morning guess good to Hi, I hear delve two wanted good voices. I

outsourcing outsourcing of a how and market is permanence here we’ve corrections? for versus incremental the that maybe just, a being while in first a maybe prior The it incremental pull-forward seen much of

Steven Frisch

Yes.

look the a question with starting are continuity now, supply right from one. with is what that to bit, is I'm long-term? is of interesting I’ll a I and going of customers to say, So, the is expand because for strategy, at a take COVID going what do would conversations little lot the This Steve. to conversations your customers, customers

of market will teams’ change this ability, incremental us the helping for our through more is it’s ability and several that lots do to Today, Covid-XX is gain that at strategy customers I into definitely the share is, it quarters. manufacturing And goes we crisis of but future as the customers. with deliver the look expect reactionary, part

We customers to if opportunities. comes, the increase the that there if would for a slowdown, would expect number or expect outsourcing we is downturn opportunity the of

see of a going our the it’s to it, Covid-XX guess question of impacts to pattern? your expectation on to early are be. a probably so, I will. little follow what But that focused is kind this think And it is similar I going is

Shawn Harrison

the Okay. of see And then, all and we because home I guess, providers there is environment – at incremental of in a from follow-up, broadband of here the you Or of kind this strength the big other June in the providers is quarter? communications work Internet business, is signal that need spend is kind that quarters home? off level the multiple something that it by

Steven Frisch

beginning the some QX, did forecast At for of our Yes. show QX strengthening.

this So, does question level. has what a it we did stabilize probably substantial like anticipate a some look is to XXXX, increased be We get do at The one. expect and early call bit to it will strengthening. Covid-XX that it’s way. in into obviously that

Shawn Harrison

you. Thank Steve. great, That’s Okay.

Operator

with line Thank next Company. you. & question comes from the Jim And our of Ricchiuti Needham

open. Your line is

James Ricchiuti

Thank expense Covid-XX-related that it. you could But in you. your provide for margin gross guidance I missed have embedded QX? fiscal morning. any may maybe Good

Todd Kelsey

Pat pass as think and I a off So, I’ll with to I’ll bit as we this – specifics then about more it start Covid-XX.

is guidance. than demand higher the our with our guidance, of One things to our regards

staffed higher So demand. are for we

that right in it’s our are we – and a the the – significant knowing than But volatile in But now we there need be normal the are challenges time so need. that we be realistic impacting to more parts are to ability would environment. supply that certainly more able mean, get I margins. chain we that’s and the within

So we account. into taking are that

an an that, or because self-quarantine a employees. result, as a we taken beyond choose need employee to period we But a of we’ve approach to for if time, of compensate Covid-XX that site our close we if have

there some PP&Es. that So as well around cost is as direct

can more numbers. Pat give to you I’ll off he specifics So, pass the it around and and

Patrick Jermain

Sure. Yes.

be cost. million So, direct Jim, QX, labor of and that Todd’s million. in we are combination and had the we to some $X equipment point, QX, $X.X expecting to In around

of And so, X.X%. guiding from margin a operating margin to X.X% are we standpoint,

So direct in the midpoint we costs is about are X%. expect basis points. XX that QX Those

be you’d at those, X.X%. without So about

below in coming really we and that sites that we labor our that’s target that are of managing as need other some down to in labor while situation. through see still inefficiencies range I increasing are this headcount managing significantly is force, where and think So are additional and are sites programs X.X% the we’ll X% difference and programs

So that quarters. in our to – bridges back we how where get kind think range I of future target

James Ricchiuti

a doesn’t It’s helpful. If back can think we it represents the what only look Is that, fair Defense about like sound aerospace size it? the – at to there way you that Aerospace that business for way and segment, because of is commercial is coming anytime soon.

Patrick Jermain

while down business and within that’s be half for the about sector. of a will certainly, it Yes, our

James Ricchiuti

it I Healthcare/Life of clearly relates there it’s Okay. the And care. increased Do the on – interesting then, have you from are all seeing the think Science, benefit you as way any critical that the to alluded to you coming that that given start piece elective tougher little to things in we are or back still a is that the thick when of to as still more might tell here? sense demand

Steven Frisch

Yes.

So, try can. best this answer that is I the to Steve. I’ll

net If and a a life was I sciences you to at that increase and XX% portion the talked actually our XX% QX our we was look for about healthcare had flat. for forecast the if increase QX, healthcare, you forecast April relatively breakdown from Healthcare/Life fact Sciences January

from had If April. customers at XX top you all just look to January double-digit the within XX movement the subsector, healthcare

were products, that associated of down six six However, up were nine were elective down. those non-critical procedures. and The were healthcare with

we And the double-digit increase? continue expect so, do to with –

elective the That that will expect turned pent-up demand? to be as asking and on economies bit there question but on get is a across procedures pandemic, globe start will going those The procedures to we depend elective do are return a happen. the back we is,

come to to to elective slower as Is people the would economies be a world back expect come of but to basically we and ramp, those to back on demand move. it that are turn allowed programs as going soon and

James Ricchiuti

for to of Or just Steve. but this just helpful, Industrial/Commercial me be the maybe limited may question too call, maybe the last side bottom? That’s The is tough the June do the just business the on get this visibility that sense here? and is you

Steven Frisch

I mean, again, demands that January to seen some the about cycle, at in coming think down, forecast in it changes the that those the the I forecast the, come of April talked we’ve from subsectors we substantially. the looking down cycle

fair pretty believe of And be for customers to good forecasts at that fiscal where taken have our look a the their going amount QX. so, do we are a

pretty adjusted to of that’s going early the tell I little global to well. more? bit going it think what’s they’ve so, situation. terms to in a us happen Is given come And down for

James Ricchiuti

Thank fair That’s you. enough.

Operator

Thank – you. Coster line question next the our from of comes JPMorgan. And Paul

line Your is open.

Paul Coster

Yes. Thanks for taking my questions.

healthcare pass-through that of this the first on logos, of are the have all. devised are Are they business any any customers they from existing that the is quick new products a kind on fly programs ramping new the of of – or front Just it new brand is up?

of and initially over margins – time? the pressure do do then up, are ramp the they of you kind under they course improve As

Todd Kelsey

the new that I in process five are Yes, wins about general, new talked in are ramping. programs our that the of Paul,

think be those should margins the I are those. with – fine

though. be level I will at margins, able to think corporate those ramp kind we of

ramp be I expect So, during dilutive it to period. the wouldn’t

Paul Coster

time? this new logos at No

Todd Kelsey

are new logos. there Yes,

Paul Coster

in that five? Included

Todd Kelsey

are, There yes, correct.

Paul Coster

Interesting.

just then, your a Are seeing question on risk. issues that any customers you you are quick amongst carefully? credit monitoring And Okay.

Todd Kelsey

is, our at credit or percent carefully. monitoring are companies. our we so at revenue, XX make customers we up any The concerns this have really benefit our international look when of point. list, all seen not But you top-XX customer Well,

So closely to is going but this it we we point, are feel something comfortable at monitor.

Paul Coster

team the guess the and be calendar moment year? pickup but I is that anyone, Your assumption? will this their to Is expect to in sales impaired now the to modest at just virtually working should expect Should then remotely – ability and business the of next fairly lose back-end and they’ll deals we XQ somewhat quarter. be – manufacturing the we reasonable that a maybe close in wins rates probably got have more in to win fiscal it’s fair that

Steven Frisch

yet. assume wouldn’t I that just

opportunities think, close. new bit little harder I may logos a be with to

with are with they going our to the with teams to business that, deliver increased and existing seeing so, continue we that. customers opportunities are expectation is However, development

team Our with doing services. to need corporate to our continue virtual fair give able work they to tools that things be a videos and communications sell of amount and is our to sales force allow the

again, a little challenged. so, logos maybe more new think, And bit I

They their may more see we potentially existing opportunities. customers But our slowdown decision-making. providing

the shift a So bit. split little might

Paul Coster

question. last then And it. Got

question to back defense and the Jim around segment. Aerospace Going Ricchiuti’s

a on confirm assume I for basis the be was a least mentioned to all smaller percentage going of a you XX% that was while backward-looking to So, at forward first commercial looking it’s that.

product? are commercial can of us, kind new also, related what business air actual and sort it Aerospace clarify to consumable But you of you miles Is doing is a for it in just i.e. the newbuilds, aircraft? segment? therefore, Or traveled

Todd Kelsey

is a a by right the I taken newbuilds. hit There split combination have near-term obviously now, a aftermarket business. But that XX:XX of it’s that’s of and a that business the an Paul. pre-COVID is – it’s both, certainly split. aftermarket And Yes, we there the amount dominated call

Paul Coster

Right.

miles to consumable recovery aftermarket see picky, we at there air is guess the aftermarket if variable, is therefore if what can of business versus percentage at a pickup. businesses the I or commercial that? newbuild Aerospace So, should you of be least travels, hate but

Steven Frisch

what’s me. our guess in shipping going completely aircrafts customers, versus we field new be aftermarket units visibility always we purely Yes, It unfortunately with the don’t for would services. a that are get

Paul Coster

All right.

thank much. you Okay, so

Operator

question of Anja our Thank Sidoti. And with from comes line Soderstrom the you. next

Your open. is line

Anja Soderstrom

Hi question. my Thank taking for everyone. you

Todd Kelsey

Anja. Hi,

Anja Soderstrom

questions good already. asked of lot A

ask am the SG&A. to going about So, I just

due sort and - we of for coming is that guiding are how should Is the quarters? quarter. that third the about to down or compensation going to are the there parts that? there for other we moving You think How seasonal down sustainable

Patrick Jermain

Yes.

seasonal into the those merit increases. coming effect down, not January it’s So, those cost because are go Xst

through. carrying are those So

is that productivity. were driving better it inefficiencies better of Some

expenses We in smaller flow QX. seeing are through of in some QX, COVID the that be

a hires from really is what of our spending pulled headcount back. as non-existent imagine And you done we’ve and discretionary that essentially delayed. is standpoint some we’ve can Travel,

to and closer QX, expect much QX that lower go and to $XX into smaller and we going is probably in I a So, QX. be as rebound bit to be million

Some But in we of that third is higher that’s the expect quarter. in well, variable incentive compensation quarter. fourth down expense expense the as

think million something probably reasonable. the is $XX in I So, quarter going forward, per range

Anja Soderstrom

then, Thank there? parts it And you. up ticking moving Okay. seems non-operating like expenses are the your too. a bit What’s

Patrick Jermain

of mainly exchange for devaluation Mexico were and Probably Anja. gain had driven peso the foreign is, QX, by $X two generated those us. we main in some gains in One there, things million about

was that in that So million recurring we $X anticipate wouldn’t about QX.

capital towards the started increase the the we of half we that quarter, to in working second continue third back into with quarter. that the expect to Also experience

higher going is what quarter the borrowing interest had the is and than be in our higher than So the quarter. second to we expense

– million. previously again, that So midpoint That what guidance they to is pretty and of guided similar for think I going third are prior kind was we for the forward had the quarter $X of the quarters.

I million a So $X assuming or million is gains a $X $X.X removing million, quarter losses. the pretty FX reasonable FX activity, think no to number

Anja Soderstrom

be Okay. a Thank going chain, going supply expect see next that’s a seeing the of are And challenging Or that what and How does terms there? to do to I you in it of supply – you in What Or into challenging do improve? inventory bit just now. then year? understand it chain? you – color is you. bit a

Steven Frisch

COVID-XX. the to constraints supply Steve. with supply is are we facility this are associated – now closures seeing The more constraints chain Yes, due

as in so, with that suppliers come particularly expectation happen will and is, our supply all of up some seen back Malaysia the And our chain facilities we’ve and constraints China. free online,

chain the they’ve early to shutdown had online supply They back disappear. and constraints starting and are come

so, well pandemic Now, as periods on different widespread custom for companies, times. the is engineering their obviously as shutdown of both of components seen the and get business portions different many have electronics

to it’s the manages so, online again, And return but these world pandemic. normal expect more back and facilities meaningful. get the sporadic, that we’d to as it’s things And

Anja Soderstrom

And you. Thank Okay. deemed the shutdown being essential is or? due not to businesses them

Steven Frisch

shutdowns Malaysia. yes, to similar we’ve the in what No, facility – are faced

in essential the Although we different in businesses, early us are case governments quarter. making – the are for

have of in workforce XX% allowed the our We are facility. to only

so, for production And limited. was us

were including completely. Now, essential not ours were they of shut and deemed forced down some suppliers to some

to basically chain help and get been we’ve so, critical back to understand we’ve able that is And some supply been with working them of respective the governments those suppliers on. turn

trend think normal up it and the here, are levels this suppliers fiscal reaching free these and these which of basically see coming will of we’ll through more constraints. production online continues, continuing And we I some third if back quarter seeing

Anja Soderstrom

Okay. Thank you. me. That was all for

Todd Kelsey

you. Thank

Operator

you. Thank

next Our Stifel. Sheerin with from question comes Matt

Your line is open.

Matthew Sheerin

Thanks the appreciate and far. all good I color so morning.

you idea Just of the those the or ramps only in of question terms sustainability programs there? any of programs. seeing of or for business in me out just one-off Could you us an regarding equipment two programs healthcare in that terms lifecycles or are give quarters the getting the are in three Covid-XX-related more

Todd Kelsey

that a out be or drop four that I say, that them that, would call duration I of somewhere would that we to would quarter sustainable, three remainder volumes Yes, would but anticipate one two two their bit. would a probably to Matt and to quarters, these, I one one-off programs have the from get once

Matthew Sheerin

that of point, equipment, in And offset guess, that. at see I you to the will ramp type elective surgery programs Okay. theory,

Todd Kelsey

yes. believe We so,

Matthew Sheerin

Okay.

That’s Thanks Okay. much. it for me. so

Todd Kelsey

Matt. Thanks, right. All

Operator

call CEO, Todd any any time. I Kelsey remarks. for now at showing would not I like to questions to you. Thank am this further back turn the further

Todd Kelsey

to your interesting you, And call all times today. everyone you. We are joined Plexus. of certainly am support it’s sure Thank Sidney. These and interest who thank appreciate I right. our I and All in again, certainly want impacted

location Some are of typically you are listening this you than are to call. probably you a different at as

and to to you closer But normal when I to know, stay I healthy we’ll soon. things certainly look and are forward day talk safe the and stay

Operator

and Thank This ladies you conference. you, participating. concludes for Thank today's gentlemen.

disconnect. You now may

Plexus (PLXS) 23 Apr 202020 Q2 Earnings call transcript