PLXS - Earnings call transcript Q1 2021

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Operator

Good morning, and welcome to the Plexus Corp. Conference Call regarding its First Quarter 2021 Earnings Announcement. My name is Sarah, and I’ll be the operator for today’s call. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the call over to Mr. President and Vice Relations. Plexus’ Harrison, of Investor Communications Shawn Please go ahead.

Shawn Harrison

Good Sarah. you morning for you, joining thank and Thank us today.

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

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

harbor a press list those as and that filings, such for SEC information into filing cash in management insight and factors used ROIC, statement fair by supplemented the and please of financial to factors differ could provides performance. XX-Q goals XX-K Plexus XXXX, periodic results and non-GAAP For refer flow the disclosure our Form the cause fiscal materially filings, are company’s free release. additional discussed, and risk Form supplemental they in actual provide safe particularly year the internal because from economic return ended those as for our measures because X, to yesterday’s decision-making October

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

social In quarter’s the release and Plexus’ order access www.plexus.com, call again SEC conducting reconciliation virtually. full top page. this the that Investors the distancing, refer periodic non-GAAP yesterday’s supplemental at on our are a at webcast at materials supporting of press We please live website we and For to to participants encourage information, filings. maintain appropriate call of morning this clicking on all to

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

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

Todd Kelsey

and Shawn will X. you, team. introduction start our Relations Please on Slide Thank begin of morning recent with Investor I good impacting an everyone.

and year noticed to I’m call. have welcome as the a tremendous Shawn to may our his President and Plexus’ a Shawn well-respected familiar previously as Plexus self-side our Loop name very experience history Plexus Investor He you Investor Plexus furthering Capital voice analyst knows well. excited and brings expertise program. Harrison Longbow introducing First XX to and has Relations leverage and to Shawn with Research. pleased of Communications Relations. Vice I’m us a covering team for

a to for years have Beresford Next, level. Relations, our job done President first our many operational quarter of Relations her to over I service work a to Please and Investor know team. you great Investor Heather of the respect I has leadership branding taking am gotten in that Heather as Communications Corporate last new and our a inform within you and X.X to to discussion our Heather further this look differentiated leadership her Aftermarket and X Heather her leveraging been forward of for a offering. performance Vice exceptional promoted to result fiscal of results. Services. to Slide has in growing capabilities, advance pleased

with on of and management guidance of expense was and This margin stock-based We our our midpoint the compensation of the our GAAP in $XXX which achieved our focus expanded productivity operations at XXXX. and improvements along to represents Our margin expectations with performance of solid third points consecutive X%. line operating expense We quarter basis revenue includes in range. our Engineering of first of XX excess quarterly through million, results the leading result achieved in X.X% strong quarter Solutions operating industry from fiscal team. GAAP

Our Industrial upside quarter, our capital semiconductor customers. expectations a of sector the primarily as from exceeded equipment result entering

improvement equipment saw sector expectations, we as demand in exceeded for Healthcare/Life used also for Our Sciences modest elective procedures.

from stock-based on Finally, Through due of Defense outstanding commercial operating and this aerospace expense, team proud COVID-XX Aerospace to guidance share Slide earnings the of underperformed line per $X.XX, to above performance including advance navigating we X. results combination was of program global of I’m COVID-XX. continued while compensation well Plexus and end GAAP which the the complexity impact ramp delays. deliver of they strong to extremely revenue, and our the forecast in diluted range. $X.XX as our top delivered stemming Please of

Next starting fiscal successes of of I our team. go-to-market recent the additional accomplishments will first XXXX quarter within discuss with the

leader the regulatory navigating the pandemic, leveraged our consecutive as to demanding quarters products strong complex in wins reputation successfully and our results. While go-to-market environments of produce highly has several team

result significant team business highlights virtual innovative production. Our into underscores the quarterly the our new ramped delivered of manufacturing provide market during of opportunity our million wins This The number. success pandemic first strong for future development logos growth. the high recognition included fiscal $XXX fully when and uncommonly quarter and of efforts wins six performance

exceed four for trailing in $X Our quarter first time history. manufacturing billion the wins now

were expended addition, its wins nearly leads opportunities. our into with The the to engineering quite future funnel opportunities. end successful manufacturing a and record as increased previous funnel opportunities well qualified is strategy. quarter, a we nearly The million funnel our billion In Plexus by indicator of for aligns qualified in $X.X $XXX is leading Further, expansion that good margin manufacturing from result teams our level in highest years. engineering funnel opportunities additional moving of two

over the new qualified us well of should opportunities to position and and goal of engineering the longer-term. X% to rate achieve XX% revenue the our CAGR in wins healthy manufacturing Our considerable funnel program expansion

turning some Next to highlights. operational

revolutionary product considerably as team product Our engineering utilization development efforts several strengthened solutions and new in quarter the engaged launches. in the

we create the offering, service the differentiated customers products we better our provide recognize a build Our through world. where that value help

contributor strong profitability remains Plexus’ and to manufacturing team solutions a engineering growth. Our

excellence zero continued achieving while customer perfect delivery, GAAP of goal and and Our the productivity margin. sustained their expansion service industry their and driving been defects operations end a result improvements The cost team management. operating manufacturing leading delivery march effective of aspirational toward our of has

X. services delivering offering during Finally, order services sustainable create team further for expand guidance fiscal customers, our Sciences fiscal based improvements quarter. our second for critical the the quarter forecast view with in as the fiscal our XX exceeded Advancing operating well strengthening as first quarter second opportunity a cycle broad expectations, demand quarter The and robust fiscal provide on XXXX increases and medical Industrial aftermarket increasing sector. one ago. our margins. second are of an XX Healthcare/Life customers value in income what near-term to we anticipate and strong anticipated to We of equipment We in life Slide expected aftermarket due to revenue to product top throughout a from quarter solutions their our as

equipment $XXX sub-sector consideration, a top million semiconductor fiscal of the capital strength during industrial is the $XXX of second XX sector we’re increasing While, quarter of these is XX to portion forecast their our expansion, million. guiding the additional customers this significant into circumstances revenue Taking with showing cycle.

productivity With to range strong this per GAAP of XX anticipate gains, of to the X% we result team stock-based driving As of operating of in we’re $X.XX performance, delivering share efforts GAAP X.X%, operations compensation including and the $X.XX, points including diluted basis our of effective sustainable a control in earnings expense. margin compensation expense. of expense $X.XX getting stock-based

fiscal several thoughts assumes end close regarding I occurred. resulting provides continue that fiscal with will end near-term, impact upside have operations remains capture arise. the guidance few Long-term will of our our opportunity to improved COVID-XX materially of what a markets to second any an limited, in Our execution across not potential we outlook seen the for XXXX. strengthening our beyond markets or markets that revenue yet end strong has demand already history the demand visibility In may quarter. into

the of margin second the anticipate XXXX. range. operating moderate fiscal second Based quarter half off forecast, quarterly to quarter guidance consistent the And we first result. to current relatively fiscal customer fiscal with revenue from Looking

improvements fiscal ongoing I call to manage market the Our Steve? of sectors now on drive analysis our operations. focus and and has growth to productivity our Steve XXXX. Plexus turn ability robust the of in our positioned over strong performance EPS half additional first for for to changes outlook will demand,

Steve Frisch

result for improvement. fiscal Stronger the Industrial Revenue The of quarter. expectations better the Thank morning. I Good of quarter first you, our of start almost first fiscal teens semiconductor sectors the the within drove Todd. capital expectations decline. a as XXXX. performance equipment second than market will for as our review was our all customers of fiscal low demand on well X quarter of with for XXXX our decreased a from sector the XX% Slide of our

several we fiscal customers. quarter, double-digit increases As forecast semiconductor look equipment the are at we capital second seeing from

In but the our are in is The fiscal subsectors, demand second growing energy recent a and subsiding. result pockets sector equipment anticipate quarter. mid-single-digit subsector strength that addition, increase net our is there of we Industrial for in communication the within industrial management

in slightly a better expectations Sciences quarter. was Healthcare/Life of X% than revenue declined result Our first fiscal the our high-single-digit The decrease.

viruses, production two Looking are testers reaching at rates. including quarter, the that COVID-XX can second recently full detect fiscal ramped

In forecast products. treatment elective care addition, used critical there increases COVID-XX modest device some a been for with patients the demand a and has and in for resurgence procedure

our sector Aerospace in our the expect Defense and sector quarter. a X% we the was As in fiscal Healthcare/Life some second in a result, fiscal of Production lower for challenges Revenue result as well The high-single-digit first revenue. down in degradation ramping quarter. meaningfully Science were for space our commercial as cause mid-single-digit the a expectations short the further aerospace programs of program, increase. a was with increase

at quarter. second fiscal Looking the

the meet as within changing to significantly markets. push they end demand and customers from Forecasting varies pull sector

across for region that strong XX% growth quarter goal strategy. wins trailing advance overall above customers. and the was $XX wins divisions performance X region coming with and maintain our quarter. were of fiscal review anticipating and maintains which our Wins wins We that new first healthy the three of each XX%, trailing XX low-single-digit robust quarter At manufacturing addition their quarter. wins won X% drove excess second result as sector the revenue regions, continued current them in are allowed wins four However, is quarter of of of and new volatility our from when increase to We The wins wins an fiscal our momentum four result diversification which region very The million by The customers generate wins trailing new Defense new $XXX million. trailing a the performance we to in the the $X quarter the our ramped are Slide can well-balanced billion. a long-term a quarter. into increased well-balanced production. the the X for six Slide fiscal manufacturing close fully eight and region’s we magnitude, million of at at all APAC the to of expect Aerospace to million their logos programs relationships to mix to advance manufacturing increase new stands into wins or the wins the our first XX Included $XXX and Please XX between overview $XXX for by net our level with annualized within quarter at $XX The expansion in of XX in our wins for at four a existing supports a relationships. for wins new dampens is, the of customers record four Americas performance. to million.

with growth per at While was to balance by wins quarter wins million. fiscal another wins insight customers four the relationships. each performance in and relationships. quarter. new market wins reach XX $XXX over of into between $XX long-term. eight manufacturing supports quarter in first a wins mix generated the $XXX The XX winds for customers from the region from million had performance and Please from by of million sector matched The wins distributed number goals trailing from the The coming their The of healthy robust the securing Industrial each sector five opportunities advance their performance Slide to and new well were manufacturing XX% sector. grew previous EMEA by wins the further sector

sector from million fiscal healthy Healthcare/Life $XX team teams of produced captured Sciences from five The wins, the $XX XX in wins The wins result mix nine Aerospace quarter. Our where the relationships. new manufacturing split the in Defense million a of relationships. equally first between and and wins, first customers eight customers The quarter. fiscal and new were wins totalling

the The and first team team in Slide our of to quarter, challenges wins the continued that being designed will center device Included Penang, Malaysia heart in to development be the support our Healthcare/Life current to customer. medical will business Mexico. from the will won believe III on program second is further Sciences have and overcome device we some in is that a insight treatment produced our fiscal adjustments Sciences a wins by of creates be The engineering in a the at healthy disease. of anesthesia solutions of Looking into device wins. the coronary move Malaysia, The we fiscal our process made Healthcare/Life Class facility. COVID-XX XX healthcare transferred will the and facilities for is existing to manufacturing from Guadalajara, Penang, Please production competitor performance. used also quarter continue the

a Sciences was will in facility for detection new on healthcare Our focused Healthcare/Life and allergy products management. be who producing customer also Guadalajara

ramping in produces facility. manufacturing the product wins, a Included products who this instrumentation expect advanced of our year. is We family fiscal The in to customer, will used process in control. this Xiamen, be China industrial manufactured new start

industrial the another production system. also won Our air team purification of

this is product. team customer commercialization the assisting with new Our EMEA in of

ramping will Center facility Scotland in These two expect be of Defense this our an year. later products customer. Kelso, in We and Excellence our drone start produced Aerospace included from in the Aerospace existing to Penang, new device wins facility. Malaysia programs the are

portion Finally, who our Services their to business. Healthcare/Life closed team services Sciences the a decided opportunities two the of first customer, outsource Aftermarket has from

Americas in there’s into the can are We proceed EMEA, as relationship the potential engagements highlights of but for qualified manufacturing Slide the and well. two XX expand funnel first to The a APAC or opportunities.

from $XXX an quarter. the fiscal production sector our during to are quarter XX% funnel almost to increase, funnels the manufacturing two Our within shifting model. Contributing outsource growth teams to impressive first the who billion. funnel strategy an by customers, $X.X opportunities the increased expanded million internal their the from The

investments or Our The $XXX significantly first to Industrial $XXX growth. almost quarter. for the Sciences second opportunities are qualified their straight million the resource funnel funnel team $XXX their fiscal and driving The quarter by close the in fiscal XXXX focused in it $X.X the advancing Healthcare/Life sector fiscal expanded into at quarter million increased to sector in the XX% grew teams on first funnel billion. The close the leads million.

of rewarded to by continue ability team’s Our spite providing us COVID-XX customers, that has to additional being created deliver is our in volatility opportunities.

$XXX their Defense first Our finish the Aerospace fiscal and sector in has increased has at the funnel by $XX to years. in four now into million Their been it funnel million. grown quarter largest

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

first GAAP fiscal our of Todd margin strong operating highlighted, quarter. team in As produced the X.X%

the of robust Our the manufacturing deliver outstanding result. first the the teams operational to on In fiscal teams provided focused quarter, foundation efficiency, for two on built top solid performance. foundation that

Solutions the activities holiday team to Our these to our Engineering contributed Aftermarket operating meet did our customer of revenue expectations. with aligning outperforming margin tirelessly of worked season exceptional and team growth Both job demand. Services us investments original an through

proud quarter team each for path to excellence. to commitments. in fiscal operating on but the seasonal delivering to we customer team always our regularly comments. first margin we expect to X%. for margin would pushing quarter the this straight enabled I that for of produced As deliver in our the of final the will relentless like is these second I each for and focus strong overcome I talked strong of the service results improvement. performance and excellence fiscal being range X% second few GAAP to guidance. about healthy quarter typical quarter, a mark Plexus of fulfil their headwinds other opportunities to the Plexus passion fiscal excess It operational to employees fourth A improvement. the continuous thank of on operating their result and am excellence to GAAP X.X%. The There look strong would be dedication operational success, themselves

now addition call better the better in-depth Pat a you. a our company, Pat? financial making performance. turn I’ll for place. are to In truly world Thank making Plexus review you to the of an

Pat Jermain

good and morning, Steve everyone. you, Thank

quarter Our on fiscal are summarized first results Slide XX.

and our engineering the guidance, of services, the X.X% also at related which primarily to guidance aftermarket million include our fourth performance fiscal quarter. travel favorable end lower in margin million $XXX of and was our quarter our to were expected First of million of the expense. The and Selling sequential hit and top margin, our in to gross reduction administrative anticipated related spending Gross of guidance higher margin healthcare better improved We the to than midpoint compensation expense incentive gross an improvement revenue lower expenses expenses. a and due services. of while $XX.X costs to mix than from better decline focus on majority value-added business delivered management. $X.X than related

In guidance. a had we recovered million receivable. in recovery been addition, our previously This quarter contemplated reserved first customer $X.X of

performance. GAAP due was SG&A to margin Non-operating is margin X%. diluted expectations $X.X expenses operating X.X% lower above primarily third million above a of due $X.XX a of This top and of margin range, spending. our the gross losses. the end foreign a of quarter consecutive to were exchange Our was our with slightly of EPS above guidance GAAP the above guidance improved of result strong combination as operating operational

$X line anticipated, in to capital. million, investments cash fiscal which expectations. $XX resulting made spend $X and on in capital in operations and quarter, working now flow negative in million cash the from flow free million with expenditures we our sheet for of balance on XX. as Turning cash slide first was delivered We

price $XX $XXX program the completed totals $XX.X shares stock first we new We $XX.XX per quarter, share. XXX,XXX for purchasing at an last program approximately million and has of million our commenced million the under authorized remaining approximately it. authorized year. our average This fiscal and shares program in million XXXX of During under purchased $XX

We capital capacity allowing delivered return cash due while last we with more XXX Total weighted in totaled we $XXX share delivered of our into expenditures return a shareholder three our highest on with $XXX our expect details facility, XXXX facility. slide points of the to points result from At debt than At conditions generated the This quarter. our with on investments ratio at and repurchase sequentially million lower economic we with basis sheet invested our taking last sequentially performance, execute committed XX part substantial times and market capital, balance capital to our working by the XX cost cycle our cash consistent XX.X% operating repurchases years. quarter-end, with capital of of throughout fiscal in the expanded improved our Please days. of quarter-end, quarter by low creating in to consideration. value. above program. XXX at return the pleased was the came exceptional quarter. which million basis average our of cash gross for basis us sequentially quarter-end, result on days. higher end turn full XX were cycle, by ended outstanding cycle. conservative was guidance in a cash borrowings therefore debt-to-EBITDA $XXX revolving the no million million under improved We of consistent credit had slightly of X.X $XX

eight. days inventory While fiscal the inventory revenue. increase primarily quarter days in to compared last by reduce dollars rose related were to essentially first flat quarter,

days The fiscal sequentially addition, quarter. in prepared customer second due by in customer receivables for XX higher were our receivable days. toward receivables days, program, in modest as In days. payable a payments revenue in in was to inventory a reduction delays deposit both procured five anticipated days increase primarily partially customer the higher factoring sold offset higher we under our few and and in we were quarter-end, a inventory improvement and days

be are XX%. provided and the the XX fiscal of would the compensation At employees gross midpoint EPS revenue is XX cost fiscal some second quarter, to for negatively As range slide margin summarized for payroll first margin of be reset second margin this Todd quarter impact points than guidance of expected the gross which higher approximately the XX. additional taxes in the details, by already I’ll as guidance, quarter. has U.S. seasonal basis points. to gross X.X% on well approximately fiscal increases basis as will review

for million. to million more by the range anticipated continued the productivity approximately SG&A this a sequentially quarter, second of million. our expect $XX the midpoint SG&A expect $X expense in of operational offset to anticipated with at the than we leverage and through revenue. guidance, expenses $XX However, revenue of better higher impact be we fiscal would higher

the factors is $XXX,XXX a expected the of would primarily we higher contributing X.X%, this expected quarter. X.X%, compensation this of SG&A the from As second amortization to million, range debt about XX including headwinds, first Non-operating $X.X performance, than in to points be due compensation is to $X.X of is the expense in totaled reduced which be and stock-based in last for midpoint X% expectation expenses be improving notes foreign expense of incentive which SG&A, GAAP sequential expenses the quarter, operational to be points fiscal few $XX percentage fiscal exchange million expected million quarter. lower earlier, with million. to guidance, the mentioned quarter, the seasonal $X losses. than which margin are is these $X fiscal anticipate At are approximately approximately revenue, compensation increase of the quarter the expense. A which to operating range would depreciation million. be XX fiscal higher quarter basis other of basis includes consistent Several with the benefited I SG&A second quarter’s to recovery. last as customer and first bad

of to shares rate shares. of an diluted estimating XX.X XX% approximately effective million are and outstanding XX% We tax

the with the of four quarter. the of in cycle sheet resolve XX forecast, this is compared for days. expectation days fiscal days working at working remain on capital we our the would level will revenue relatively fiscal to first days cash this Based first balance capital XX cash Our expect that cycle guidance, improve midpoint investments of consistent quarter. will to

Finally, spending capital million, $XX $XX for expansion which our range in the to in to our related fiscal million to is be XXXX includes expected approximately estimate of $XX Thailand. million

we cash expect to of approximately $XXX free million. questions. For flow call continue that, open let’s generation year, with the full the Sarah, now for

Operator

you. Thank from comes of Needham first Ricchiuti Our & Instructions] [Operator the question Jim line with company.

line now is Your open.

Jim Ricchiuti

was couple Hi, thank morning. you of Good can verticals you. of logos might program. wondering if on provide, new you six able customer or be questions, color A you I there’s to expand any the on if type either added, or

Todd Kelsey

Yes.

sectors you So the find I right people it’s program Jim, of and Steve customers about new existing business Steve approach, grow I take highlight I’ll six and really away from about significant. this the is then the Todd. I one XX customers to and provide have details grow the with wins this is, us is that the started to new And thing about But new talked some the look I talked think hope customers that around development if relationships. wanted and with opportunities. at those get logos our I’ll in to

logos eight new existing So divisions plus that includes of logo. six the

expanded and So, that relationship the with add in, we get a it, other division this, as original new the with division. we divisions those, when each additional we of you we or look the logo, as have grow potentially at transition well we logo

more over to Steve point it and to to to into I want wanted a that then detail. out turn I get bit So,

Steve Frisch

Sure, across were split in color, terms of Jim. equally the sector. they

two So, there two two industrials, in Sciences Healthcare/Life in was in and aerospace.

mix control and bit the good was – into little of purification them. And in the that went as that one gives was as process talked device advanced for about a the program the system. them; insight some I some one more manufacturing anesthesia was you all of that details across so it and wins sectors. of of of the used highlighted well a into three healthcare them air that’s the I pretty

Jim Ricchiuti

the color. you’re wanted that to impacted yes, confidence for color but And growth. this got it’s And talking you unquestionedly Thanks of you’ve to get the yes, go the COVID X% clearly, gave but wins way, thinking last year. was be year for that year? Thanks. we revenue that giving to it’s second by about XX% some think – you about when by coming target that going I this It to the of obviously on do I about half and growth. should how X% that revenue are as conversion? some of moving to a parts happen year that see sounds XX% like, sense, the well. not I question trying to, think, that It’s a what’s you I’m in, potentially good

Todd Kelsey

Yes.

if in kind year if the So, the right way in and here characterized that of about script this do I’ve XX% on I XX%. up you that. first assessment and goal. XX%, XX% year give the could with is wouldn’t confidence math, to at over look to things the us that backward be number it XX%, is but the to of think, there’s we period to Jim, release were of the you’re your is all, achievable looking of and X% a X% realistic to XX% very would add And a difficult X% we the this that it in

go serve we a process of Then, look in sectors four catalyst through I into that number go planning and of growth. results can our as think as factors for in planning shown again, have I a know that into their through our go we our – level the as bottoms-up that – pandemic us last support year XXXX. do support our markets revenue if and includes there’s really bit teams So, as with fiscal we XXXX we growth well, that fiscal that our but and they goals,

have which job that margin think I expansion, the doing we of we’re achievable. expansion all, margin a nice the sustainable of First and showing that’s very

but got sign of of wouldn’t recovery I see right to a we’re procedures, of the a starting recovery used now. for medical elective we’ve a of that equipment any Second, it’s by hint elective say means. and that

there’s increase COVID expect as we upticks move great in post rollout. as opportunity also there’s vaccine with see the And travel commercial from the we we demand forward. So, aerospace that see that to

FXXXX-ish that about So some quarter Healthcare/Life have the ramps then that may funnel that win over we sector. had exciting we’ve programs you new four These in new to come $X long-term within trailing talked we the the expecting. success XXXX been that we’re billion And ramps type event be an fruition Sciences is the saw type early what and all program timeframe have. have We’ve our of here.

a So, get fiscal we for through looking really into get fiscal beyond catalysts go – us as we’ve get are and got or number that XXXX of XXXX. good

Jim Ricchiuti

Got it.

air, what right back maybe, you. was the or representing could and just historically, it I’ll commercial us, in on jump now then just Just – A&D of Thank what remind that’s the you queue.

Todd Kelsey

above me the – it’s let number. get Yes,

I verify a think the bit XX% is right probably, in And it’s that. at but now, it’s low-XXs, had little point. where even at XX% kind I’m to to now. right over going mid-XXs it it’s of one about been,

Steve Frisch

a Yes. a sector, the of Plexus third. And that’s it’s roughly about

Jim Ricchiuti

you. much Got and quarter. congrats Thank on it. very Thanks the

Operator

you. Thank

from with comes question of the next Raymond Adam Our Tindle James. line

open. now is line Your

Adam Tindle

end QX, sounds saw it quarter on of up basis. second coming on. effectively Todd, It morning would customers good up like I half and to Heather. got drivers sequentially to and industrial we consistent of the QX you’ve XQ each Thanks, relatively the maybe, revenue where fiscal why just quarter, see medical expect and with flat and wanted Shawn trends guide. with Okay. because recent the normally we around see start a some biggest a congrats questions just seasonal or sequential in the the comments, to build is new strength, towards

So, below effectively to QX I’m offsets missing QX seasonality? what that and would make be the normal

Todd Kelsey

Yes.

I think the that that is limited is the issue just fairly now. visibility Adam right

So of if to more call, it – our We a to we not quarter of it’s know. sure. mean, QX I I – we’re say, would not flat $XX a it’s don’t just situation you QX. obviously, the when back ago, we about substantially be just think on had it’s order up is to And million. expected

of the demand industrial and lot particularly come upside a saw So, healthcare in, in we the sector. around

brought we customers out. brought near-term just – forecasts, not necessarily in as the our up further up and they as them So,

it. flat to won’t. feel uncertainty the little can bit year like in a I’d of of So, we’ll an through rest something they whether the time. lot I are have looks right because we more off there the execution but at now, going we’re see this we of whether to based of think say execute a success some drop or from as we’re in similar a our comfortable visibility as we move of us it customers victim sense, on demand and standpoint, that But there’s

Adam Tindle

stick understandable. QX? that Right, that’s to mean just to to And X% margin guided X.X% does also that of that kind in that would operating clarify, range was

Todd Kelsey

bit uncertain a I we it’s a X% uncertain, obviously, it’s the get. revenue bit be on that the think a little, to mean, Yes. leverage I we’re the above based range, it’s targeting and but

call early too to one. So, it’s that a little

Adam Tindle

over record about the committed about talked the talked you question, to growth. X% funnel, longer-term long-term a you maybe XX% $X billion just revenue to And Okay.

Just trying XXXX, in potentially range. average X% in the does XXXX of supersized be understand, such fiscal the growth imply and XXXX that here XX% that a can to to

So what maybe magnitude of big on a with the and expectations help growth pretty seems upcoming. timing uptick just like

Steve Frisch

Obviously, We’ve that be down. This we at the in see which that is, around is we’re to But the some XXXX we’ve a share. look dynamics bounce try and commercial Steve. we’re there, I’ll where us talked for the this bottom looking market challenging. bit fact to Sure. aerospace of gives would we optimism at, market strong give handle and at one. trying gain about we’ve guidance been

market couple recover. accelerate what take logos. is XXXX share, a that see catalyst short-term of calls to And of start a the as elective are things happen to terms as in winning our in continuing – we Healthcare/Life believe talked comments into start and there the capital signals in forecast to of think catalyst we some to last Todd’s equipment see growth the the and I we’ve for so with then forecast could real we the for increase industrial to growth to as devices we’re time. then, we see semi-cap post-COVID. – and demand talking there’s that We’ve things looking think there. forecast And this drop-ins. talked We turn semiconductor for And Sciences. flattish in kind And is, potential about new we as at help for kind The of point some demand. are over we’re recover only procedures team semiconductor going equipment, And at about out

decent of the And the XX% X% continue of the so, types combined factors by driven business. with that fact we win to of amounts to new those is optimism

I – if a I a there’s growth, demand it. with to continues pretty these things it about why recover that the off customers at could our chance optimistic I all to from start think clip and the so And we’re real post-COVID, economy think outperform, good increase takes think,

Adam Tindle

much. That’s very helpful. Thank you

Operator

Thank you.

David Our next the comes of Loop Williams from Capital. question with line

Your line now open. is

David Williams

Shawn first, letting the Great. for for And the Thanks me congrats ask to question. transition.

you seeing ask we’re the First, do demand in short term about demand? this of the demand just XQ in drop the I think Or mainly maybe or wanted any the demand? to command pull early half maybe that the some is second from and

Todd Kelsey

Go Steve. ahead,

Steve Frisch

not future robbing specifically mean, consistent is come upside. the actually quarters from forward-looking bit. it so up I and QX Yes. our upside, stayed quarters, with a have have That’s

upside kind looking QX, and quarters. trend through things And is, watching. one at a this demand. we it of as Todd as stealing And going we’re highlighted, so QX from see we’re the It’s as is to It’s just we’re go QX. something future of not

David Williams

the think non-sticky. I COVID year the kind thinking COVID potential year Healthcare, I after? phase or term then much And shorter-term next could tailwinds, How the that shorter are tailwinds the just of about great. guess, the your into related business, Okay, in of

Todd Kelsey

Yes.

So right a call COVID of now, that true result where there’s not of as a a would lot demand the tailwind, up is testing COVID. care in beyond testing I point

least going COVID talking it they are even to demand about And continuing our customers can that thing call point COVID. testers used a see they’re lot, them one that we XXXX. and at too what out but calendar And testers is, or are for be XXXX. through we is Now progressing beyond that enter and

in things product. But that the our a that’s true too. only the So other of right small talked as that’s well than other many say, they I upside critical thing as can COVID one forecast Steve care would the now amount test increase about on

David Williams

Great. political transition I it, landscape, And Thanks terms deposit you’re in watching color. anything last [Audio of the of about for can real quick, thinking have or just might the – you kind thoughts from that if any on for Dip] one

Todd Kelsey

Yes.

come opportunities stimulus So on I I demand thing there. mean there’s result that’s the could a a few we’re one different the side. proposed the up is looking at as that would out of say,

have business. We equipment heavy some

of bodes could as a standpoint. some increase demand I for well too. well Certainly, think the semi-cap products from think further even COVID I it

other The other thing what at of have landscape that the the happens looking tax equation with the we’re on impact. side does and is, any

David Williams

much. thanks Great, so Thanks a lot.

Operator

you. Thank

question comes line Stifel. Matt next Our Sheerin of with the from

Your now is line open.

Matt Sheerin

Yes, thanks. Good morning, everyone.

now, or inventory supply on product the days regarding chain environment right component I a Pat. you talked Just about the the question up, mean,

customers seeing to Are are inventory? board of in components. yet? you And asking We’re certain in semiconductors, supply constraints some you your hearing across that build the passive

Steve Frisch

Yes.

I’ll So Matt, take is that one. this Steve.

lot semiconductor having everybody there’s down shuts automotive. – and of all, due we shortages, there to don’t do shutdowns a want out the market, news just of First automotive remind about to

there’s of nothing there. terms end So our impact, in market

automotive don’t tightening We semiconductor here Now is the some second specifically, any in of what’s components. are causing those in foresee seeing that. a quarter. And fiscal issues we challenges in

at. and extend We’re and comfortable see a pretty little times pressure where inventory pricing we from to an start lead we’re do start standpoint that to feel We here there.

we’re feel real at. I like our you’re perspective. definitely it’s from So where pretty comfortable

is have at through but definitely times teams work these have harder periods, outperformed. when our teams these to Our

optimistic we And do. so dropping will those ability and go our in one bigger our teams what at big terms year. into demand the If a in as The the bring on back that part forecasts kind little be customers react to get I’m nervous I pretty of challenge. things of in looking able start is our is, the really half of to

we’re what levels so inventory about we And customers been have in storing. to comfortable our talking

mind, in responsible keep the inventory our Now Plexus customers doesn’t are speculate. for levels.

it’s working upside raw inventories of our respond standpoint, our some have – with back where we be to to do in year. some the increased able be. from customers And do really just demand So that customers have we need they component have to to half through the

point, well. a each with handling but it mix we’re the a a coming we do appropriately. at bit but – is it’s really responding teams it I are customer, more, think this it again, so And And see

Pat Jermain

is this Matt, Pat.

a $XX On quarter. the we quarter, of the our dollars compared guided down inventory want I to first just to But about midpoint the sheet, expect in million. to cash balance second the slight I tune the do comment build had fiscal cycle for of being

in second And some of in of the expect that’s driven by inventory quarter. revenue we because days, the just increase

Matt Sheerin

Got it.

think comps half XX% but back and change the that. growth I questions at costs big margin be setup thinking saw sounds should the you a than you some ramp you’re looking to I had then had ups you’ve for that the year? and for headwinds. when don’t of regarding just a on follow-up consensus when to for is bit last quarter tougher Okay. going my you is numbers XXXX, really, to did some want like then as obviously, revenue at revenue I we margins, really indicated September next fiscal is that And for start really when going strong guess it Adam I much. quarter. return there’s the and quarter I for But the different quarter-to-quarter, guidance your And been previous the ago, a in good. about X% in question to Thanks target, terms in past, know a some As XXXX add said, little to

about So the how think we mix of business? the growth margin versus should in the

Todd Kelsey

that or it I you couple with to as I’ll a I kind and too of to mean, still sets I would be Yes, I XX%, well, hit mean, I the XXXX, And leverage, I growth quite good. mean, about But start a not – give the I to any backing a be there’s year. good maybe in look at X% think up start think the then sort it’s the I earlier, up XXXX that on or other say, want pretty catalyst color, doesn’t up good mean that’s certainly, math talked XXXX looks and it I to When but good. a to talk but year early to factors about do setting topics guide think of you I revenue a it’s pretty from really EPS to year standpoint. well

So that’s story fiscal XXXX. compelling I a for think

Pat Jermain

on. transitions, those transitions And headwinds with have always we going Matt, mentioned you margin

we’re item expect and the other don’t been obviously at levels very depressed So we pre-COVID. expenses. that’s say quarters And margins. we get then and it We watching some to I facility the corporate Thailand reaches averages. ramping few typically that’s site point, were the think going have at some travel is but to back impacting be They’ve up a return a do we’ll I necessarily wouldn’t before takes new

could a that monitoring headwind be slight So for us.

Matt Sheerin

of just embedded out or model great. And just in a Okay, COVID there? now, you didn’t that Is last related cost. do any just changes regarding your cost. question, call Pat, see you quick sort

Pat Jermain

for first around was quarter, it million. the $X So

to On we think million. $X.X elective million, had internal down. So it’s our million. quarters, do expenses healthcare area we year-over-year, with were the in so tune expect there. million to another depressed $X lower This down. about the million look starting year, When taper fiscal to about $XX $X XXXX, being about last We last latter costs, you that’s $X year, of would with of procedures year costs probably

much and reduction. We seeing pretty up expense from a we’re COVID to benefit that be the expect those offsets

costs year. about up $X be this We million expect to Healthcare

flat. pretty are those net-net, So

Matt Sheerin

That’s helpful. Okay.

Okay. a Thanks lot.

Operator

Thank you.

Steven line Fox of next comes the from Fox Advisors. with Our question

line Your now is open.

Steven Fox

morning. Good Thanks.

from I questions could. if me two Just

move expand in that drove what due on some if a First then Could one to there thinking outsourcing. on expansion, was had follow-up? the customers to to circumstances, and you that you works in Whether I change something by it already funnel the decision? mentioned maybe was was some to or decisions

Steve Frisch

do some of question supply their is I chain customers This Steve. these times, think Yes. In more. challenging strategies

them the COVID think is And think considering, right conversations things are little but I now the so that customers to quicker. having move situation we’re were bit pushing a I

big timing I I just the helping on a COVID expedite but of a strategic think their shift is part, – not mean, things. big strategic shift So on

Steven Fox

And would those their be is your facilities, their would outsourcing like shifts around be – existing by their facilities the customer, strategy utilized like plant equipment current with be into done what? you’d own and

Steve Frisch

two of or And places they months, months, would alignment, exit we’d moment in if facilities. that and Yes, it do then very One decision. circumstance, XX a XX do at exited one transfer it. the a a under we strategic facility ways. we for their strategic Yes. they be the would would that move that manage where a is rare Under to there’s consider facility? But entirely what would either we this call manage

Steven Fox

then environment smaller, new six seeing of where can the from sort just guys much of it this do talk around providers? wins? was, And competitive just Thank competition play How the versus just large logo those you. about maybe on you wins, EMS you

Steve Frisch

guys the there’s and well. big players’ as smaller Yes. the same. the mean, we time is always all I The competitive involved environment run into about

I fundamental these there’s been don’t situations And COVID, so the think a competitive big with landscape. shift or in with

refreshing that’s seeing are little more, discipline, say a in to a little I’d Although, bit so bit we pricing and diligence see.

Steven Fox

you. Thank

Operator

you. Thank

the from comes Paul line JPMorgan. with of question next Our Coster

Your is now line open.

Paul Coster

as – dev get ones. bus we a changing I are T&E you’ve team; quick a couple to think the well team going or that without that do you expense? the And back a the virtual see sales out of of are you business new developing found the is follow-up. into have quick mode you pandemic way the working backend Do pretty the Yes, come world. like in It sounds of

Todd Kelsey

and mean, to to I certainly, are in road, of think, get out Paul, looking I our front looking people, customers. on get development out the business

more out I’m of front to be me customers candid, looking to Let get myself. in

in also travel there’s see to I going up, it’s So, going don’t I I been than it think the up the to but that level a think had go – you’re quite think do same to past. go

things virtually, or it I are effective are that think get can there understanding be feeling that virtually. people done can

great team like excellent just job having unique, firsthand. still site it did us. that’s communications and that I to in development really But branding business is creating of think virtual a Our customer helping see a an your nothing there’s environment

better So, the certain that such, there’ll I’m it and maybe... with be once becomes rollout more movement environment but a vaccine

Paul Coster

change anything yes, in for Washington the good. Is in there then that you? administration – anything the D.C. changes any And is in there

Todd Kelsey

our talk maybe, to I’ll potentially could and feel, campus it bit about markets, comes where benefit the But heavy business equipment factors. and I I a sector our When in only that could our think, our Yes. energy and think can then there’s spent? test more about are dollars Industrial Pat benefit benefit, markets where’s going and sector a about Industrial happens around there’s of stronger. I back stimulus kind get a think little and business talk could from the around COVID what focus we’ve to So, particularly of market standpoint semi other – talked is

So to, maybe, to comments. I’ll off some for Pat pass

Pat Jermain

understand the potential Paul, closely. and earnings offshore from mean, there’s there’s some tax watching credits also, could that Obviously, Sure. us, rate if of but discussion any perspective, that want it would the a around to which been mitigate increase. corporate rate, we’re impact we’d increasing tax I

it. monitoring closely is team tax Our

So, that the to it have we’ll in just with see priority administration. falls where new

Paul Coster

much. Got it. Thank you very

Operator

you. Thank

Anja Our & Company. Soderstrom with from Sidoti next the comes question of line

is line Your open. now

Anja Soderstrom

but Hi, on a second congrats, wanted Heather. half. thank just guidance questions of lot great more you good asked and to quarter get and Congrats revenue my Shawn the I of taking A your for question. a for already, sense

sort that going in the electives half surprise of that to it’s in fiscal comes forcefully be You assume expectations could stay that back still a be of suppressed. [ph]? line sort That say upside second more quarter with second

Todd Kelsey

in at less because that mean, today, it environment drop impact the what perhaps a little impacted necessarily the lot than QX basically, as what fiscal it the is being and seeing it quarter upside doesn’t call a saw second at QX looks quarter, I for that second even, does. demand point. it of this we Yes, more or softer maybe, we’re

flat So, there’s says potential, it’s think opportunities right less. the second visibility our of QX a lot now, for I it’s just, or more within to half,

Anja Soderstrom

about to and high. and you’re guiding remain good margin a be little Okay. you Thank that, performance for there’s ramping you. pressing quarter And bit might I a the guiding the this new relatively just, gross you because – quite you’re had projects quarter think elaborate to to second

think how about that we going So, should forward?

Todd Kelsey

Yes. Go ahead, Pat.

Pat Jermain

with Yes. I I Todd was really we’re well, last going operating margin quarters. to as the say, been from said, standpoint; pleased an mean, we’ve three –

be X% hitting Anja, trying monitoring, are we’re travel would or that target. things be of would to healthcare would that target. above be headwinds be or potential costs, Expenses, for kind achieve our our above but and could those expenses So, X% us,

Todd Kelsey

get other can – mean, new the can we the we programs new offset don’t And or ramps ramping always ramps. inefficiencies new future. we think Yes. leverage from see significant program drag a from the really in program the business I the we’re somewhat and costs of

Anja Soderstrom

in Can Okay. in defense ramping you then alluded there. how Thank programs lastly, talk to that And elaborate just coming quarters? keep about on shortfall and and the new you quarter, going army issues you. with the causing to some that’s this the

Steve Frisch

requirements going from program, on into Sure. as a in requirements with of and we’ve those some standpoint, production. what stringent down the manufacturing and some it believe, there’s space, lot the outer ramp, of worked have and we’re can had The that a the I those a delays requirements alignment We imagine, and slowed strengthening with are. working customer programs are on you process space through mentioned, customer

to impact going And so I to it want expect that forward.

Anja Soderstrom

That all you. you. Thank for Thank was me. Okay.

Operator

this you. back now are for to call would Mr. I time. the further There no turn questions remarks. Thank to at closing CEO like Kelsey, Todd

Todd Kelsey

giving and shout joined Thank who members well continue just to right. Plexus. perform hard around all a us everybody, today. And in you, them team our your their work. All interest thank certainly that circumstances out like are We Plexus thank Sarah. again, and to by to call I’d They despite exceptionally our for globally to your today. support appreciate you start challenging

Operator

conference call. your you this Thank gentlemen, and concludes Ladies for today’s participation.

disconnect. may have a You now great Everyone, day.

Plexus (PLXS) 21 Jan 212021 Q1 Earnings call transcript