PLXS - Earnings call transcript Q3 2021

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Operator

Good morning, and welcome to the Plexus Corp. Conference Call regarding its Fiscal Third Quarter 2021 Earnings Announcement. My name is (Rence), and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for questions. scheduled approximately is hour. call conference to one last The recorded. conference Please this being note that is I to now would like Mr. over to turn the call Vice and Shawn of Relations. Plexus’ Harrison, President Investor Communication Shawn?

Shawn Harrison

for us you thank and morning, today. Good joining

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

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

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

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

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

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

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

Todd Kelsey

morning, discussion GAAP of our advance Thank and quarter Slide of of margin met fiscal the X.X%, of Shawn. results. Revenue Please operating third X $X.XX. Good revenue to GAAP revised you, EPS government-mandated everyone. our at Stifel the in expectation $XXX fiscal Conference. of our quarter delivered result and million, high COVID-XX We challenging third X efforts to provided primarily end workforce for This the response of in due Penang, June the reductions, to the created pandemic. Malaysia, outstanding by members conditions team amidst was a resilience

customers, updated anticipated the worked our team from tirelessly as workforce while to anticipated team, Our the revenue our of than margin contribution of operations, US of healthcare needs performance better and required than restrictions. result outstanding Penang outlook, exceeded Solutions EPS and and significantly our meet our lower operating a Engineering navigating GAAP the costs.

proud a workload the expectations. results region, and stock-based in strong, $X.XX Solutions margin Plexus they deliver that extremely delivered very quarter of GAAP to restructuring the team Engineering and fiscal very is Our our included result our to compensation expense. quarter. as operating The due third modest exceeded global challenging team Americas of EPS $X.XX I'm navigated a record in

enable highlight development that quarter will accomplishments we revenue will third I Next, fiscal growth. business expect future accelerated

further that four-quarter $X.X record ramped $XXX produced wins, strong trailing revenue, million wins another a to new result five relationships expand. billion. these of included approximately delivering as very fully quarter enables our into production, logos, of another quarterly wins The bringing growth team Our manufacturing exceptional when

markets Our and highly featuring increasing demanding year, teams added our have requirements. products fiscal regulatory new XX highlighting logos in this complex differentiation

several including relationship new notable last highlighted expansion were wins, an services opportunities, the the Within quarter. aftermarket of

contribute AMS to very quarter ramps opportunities these should and rapidly, XXXX of One results. fiscal first

investments. near-term sizable making be we'll ramp, the of pace the Given

positioning wins leading leveraging for outstanding service Our our our quarter’s Slide in wins strategy. customer magnitude, business our results. to advance accelerating our go-to-market operating reputation generally team for of but is across strong quarter, our Strong the performance. not efforts of growth its Engineering accretive excellence, team is X. noteworthy offerings. a service of growth. performance only also Engineering of engineering last of to alignment are all had wins the is Solutions Plexus another delivering to indicator because not Please excellent due only manufacturing The to new exceeding The

our operations, infections through a strict Our COVID-XX government demonstrated on in the social members capacity, the situation, numerous resilience customers focused extraordinary rise We our were while also began restrictions the essential quarter. the tenacity, ensuring our at APAC to Penang members support found protocols manufacturer, to team Despite leadership limited through managing Malaysian final opportunities challenging third sharp distancing our sites. six of an for team were we anticipated, efficiently we fiscal by combat operating as driving of of more June upon high midway revenue initially the given announcement of able our our and during as weeks update. for end XX% our workforce team X status and the to to quarter, provided our that expectations the the approximately workforce toward in reductions, continue than implemented actions but

on local administering vaccination an daily. and June a doses July onsite their government, suppliers, late center with Malaysian our received Penang, members, engaged with clinic. supplied X,XXX along vaccination Malaysian provider with team approval vaccination the and goal for during In Our conjunction manufacturers team local other create creating the proactively a Ministry which the approximately in COVID-XX government manufacturers vaccines, to Health, customers, XXth, and began two our Of the Plexus, other healthcare of clinic also team

Malaysian Of doses Our outstanding positive received is provide scheduled Sunday. nearly feedback the from to Ministry which by clinic, Health, first this upcoming XX,XXX

will Malaysian be members anticipated vaccinated. team We late the vaccination anticipate by of of our are of goal end aligning doses by the August, Second XX% availability broad with government's Penang summer. over

in elevated in Malaysia. local remain infections in Penang, near-term important team supporting the vaccination is in our While an and COVID-XX step members our community

As a and fiscal manufacturers we on throughout the expect fourth our to result, restrictions community sustain quarter.

to of fourth XX% mid-July, workforce operate operational fiscal of will and Plexus, applicable better government weeks at efforts near-normal support XX% the reductions limit to to two This of X. eventual the of anticipate at efficiencies, fourth return workforce function first allow Slide throughout allowing restrictions, an the the our to the levels, In continued approximately workforce the easing outlooks reductions quarter, customers. allowing ongoing prior should advance our Please team when operations strong support We to fiscal Plexus output to our within with subsequently inclusive capacity. quarter. capacity the workforce our country, clinic, capacity. eased capacity of to vaccination to the of our combined Plexus level, typical During growth

we As very When improved coupled remains Penang $XXX with our to a operations, of million range are to million. sectors. sequential $XXX fiscal the within quarter, the robust, particularly Healthcare our are fourth Market and sizable Industrial of establishing guiding revenue, look output Life in a we and demand Sciences, improvement

delivering guiding chain, overcome practical current our revenue GAAP and are operations, we upside to range. While We're workforce constrained we in XX stock-based these this ongoing to of supports expense. the the $X.XX, Penang our of the compensation GAAP demand operating to earnings basis margin the $X.XX environment including the X.X%, of supply stock-based guidance, dynamics, at compensation range $X.XX operating share At limitations given and in should diluted X.X% including revenue we margin points expense. of per anticipate levels,

supply Our chain what operations our COVID-XX, that already guidance anticipated. end assumes constraints, is not impact materially do beyond and or markets

outlook. term longer our regarding thoughts few a Next,

beginning anticipating our meaningful ramps, to led program end our Defense optimistic we believe we're in capital is showing customers. contributions we at and several related communications driven sector quarters, strengthening are Aerospace Healthcare markets, and robust, to over Looking demand Life equipment defense demand In increases. of in improvement commercial equipment forecasts, see customers. by recovery outlook. revenue significant with commercial both demand Likewise, elective industrial from industrial inflect procedures. aerospace, warehouse by Sciences remain healthy higher, our for the broad-based our and summary, space from while next broad-based and Semiconductor automation and We sector is

In addition warehouse robotic-assisted commercial in space. and demand, to as participants automation, strong surgery, are factory end we markets, such market secular growth major and

amounts execution. and aftermarket engineering by and exceptional customers capabilities, We through and our commitment our by expertise, significant Furthermore, of aided we superior benefit continue our new provided business, win services. from quality to to differentiation the

call like into Looking dedication. to catalysts continue are confident we incredible to these It’s industry-leading unwavering drive GAAP again efforts support operating demand and fiscal with as growth, for above market stakeholders. over XXXX, support our talents Plexus better our of the for all their thank I'd creating double-digit X%. we performance, world, the margin their through consistently operating I sectors team revenue our now we’re Steve turn and will of the products delivering operations. our of additional further able of for and performance Steve. to vision that analysis a to build that while

Steven Frisch

Thank you, morning. to Slide Please review X sectors. of performance market Todd. our by a Good for advance

highlighted, Malaysian the the workforce quarter. government our during third Todd Malaysia, by Penang, operations significantly As enacted were impacted curtailments in by fiscal

a In delay due to program supplier within issue addition, quality the ramp we experienced a quarter.

for quarter, we are of the quality Therefore, in all the the solved the on will issue. and the fiscal fourth negative these sectors operations due Penang, actions focus As a more the in to for taking fiscal we resume the sectors the Todd missed impacts third have expectations factors. result, expectations reviewed normal to supplier quarter. I

is industrial Our sub-sector. capital demand in semiconductor strong continued seeing sector the equipment

cable ramps to in the driving strength programs, meaningful warehouse sector. the and access automation with growth In are addition, product,

low double-digit shift procedure our In fiscal quarter. Life products, we As elective the are the in fourth to sector sector, expecting COVID-related a our Healthcare accelerated. from for industrial has result, devices, a and increase demand Sciences

events, Life momentum. fiscal increase of In Healthcare fourth in quarter. sector expectation of our single The Sciences digit are yields combination ramps new program And these addition, an a for high gaining the

continued programs our our when advance establishing market while new to The quarter. generate for improving sector existing commercial wins record in performance new expect to won new our see the ramped of Defense the Our into and that relationships, drive lifted fully ones. of we high Aerospace continues billion. to to manufacturing revenue to X XX in in wins a million another aerospace. The annualized wins digit Slide quarter. single strengthening third for to level overview the fourth strong an trailing anticipate four-quarter Defense sector five Aerospace We We expand addition fiscal the teams performance demand Included logos. in Please the $X.X sector $XXX wins of is for continued increase production. fiscal and forecast our

the delivering Slide to momentum, trailing strong XX% manufacturing facilities approximately and the our above growth revenue, the goal, not million, impressive to region that a $XX lost the to wins XXXX. EMEA wins offering two with wins, above above the continue further $XXX quarter aftermarket a server’s of had of to which distractions $XXX to logos. fiscal US their XXXX Included opportunities industrial wins the the trailing Americas by The four is by X four to performance margin supports fiscal wins wins addition result for region’s Romania by quarter States, insight were market the were quarter. third Our locations in the with wins service service million. for and expect region expectations. quarter. $XX the that divided in the of the four-quarter of its In can The fiscal by our increased this of in an quarters million, Slide the wins $XXX Oradea, fiscal our wins spite fiscal our in robust has excess is drove several The Please manufacturing result region The maintains trailing their of including finish million. $XXX healthy If $XX region we facility. advance quarter. the being sector on The meaningful wins fiscal million growth quarters advance associated fiscal quarter With wins in review APAC the significantly of into program the million. manufacturing sector. expands new million $X.X is X trailing The meaningful pandemic, created we wins third in excellence. at third new third XX%. our keep third billion in four-quarter wins They're for focus United of trailing rewarded expansion new in XX% team customer of in

expect we a quarter typical, than lower was more to result wins the level. fourth Although wins return fiscal historical the to

trailing third record wins had million third Our and in further the insight wins at the Healthcare defense fiscal of is logo a XXXX. trailing fiscal wins of delivering sub-sector. almost beat fiscal $XXX totaling result for the advance resulting Life to the strong quarter. in aftermarket wins, $XXX a products Life expands the quarter quarter the to second in Please million the was record XX repair Healthcare million. team for million, for Sciences we're wins. third expecting our robust meaningful Included Included their new of and our sector $XXX wins, quarter, sector current fiscal our in fiscal by in global Aerospace addition meaningful into Sciences $XX additional in that wins growth With program four-quarter wins in customer. Defense services a Slide some service The four-quarter of the another

repair the are solutions we in we and not Romania, and to Oradea, Mexico, Guadalajara, original Although service devices. the developing are manufacturer,

care the production Sciences team an relationship of next an for customer. existing our generation manufacturing also the ultrasound cardiac The expanded opportunity, diabetes to Healthcare current won a using addition of In the machine and also facility for Life monitor from customer. Oradea the this

to we our addition the the the will In healthcare level by a wins Appleton, we new produced a high won markets. demand Penang, be facility. quarter, production facility. North for the Included industrial is customer. Asian complex a Pacific device the American Wisconsin for kiosk our Asia for announced The The will of last in volume be produced manufacturing turnkey in Malaysia assembly self-service production new

new complex ability prototypes on by also counter-electronic Plexus’ site's within States. a our selected is customer, artificial a Penang. will volume with of industrial Malaysia. program The Aerospace technology. wins, the product Wisconsin, to facility and team Defense manufactured the applications. and a industrial controller is secured defense in in be is of who focused Our United The in manufacturing company production team Neenah, next the that generation used support because Included intelligence the

and of add family to new the also These expanded that products Aerospace Slide can assemblies Idaho, funnel highlights Defense a quantity of space. customer. current space in our of We launched with team Finally, build Boise, are the increasing commercial that relationship into our proceed assemblies manufacturing Plexus that of produces new programs will be The opportunities. added we to the to qualified XX our customer this for for facility. complex

a Our million the funnel by billion. $X.X $XX to at grew robust in fiscal quarter, third finish

meaningful The manufacturing a funnel monitor, healthy a insulin to Four robotic including the of the billion. an funnel with our engineering their $XXX added is an at $X.X million a strong to the who Our these were an performance their expertise close manufacturing fiscal outsourcing surgical machine, kept sector instrument, their manufacturing existing developed. the third and illustrates funnel's quarter Life from to quarter, opportunity industrial strategy, larger sector internal the ultrasound reevaluating customer increased $XX by the very in in third funnel, pump, variety the million. Healthcare fiscal teams A Sciences diabetes at contributed quarter. Even growth. product wins opportunities, the have and broad additions

$XXX the sector quarter funnel with fiscal Our Aerospace of a million. third Defense and finished

design multiple domestic facilities and the manufacturing in continue and to who commercial defense Our space attract States, centers require customers capabilities. United

need the will for the expect part US a to We sector's be manufacturing meaningful continue funnel. of

of the Next, of like the during generated to GAAP than X.X%. I performance XX. stronger operational operating efforts adverse experienced to the margin result. the exceptional would impacts Slide quarter, revenue third to team turn spite contributed In fiscal on anticipated operating Two

workforce third XX% back them output in the quarter. Penang of achieve the only manufacturing factories of of our XX%, during level allowed in the scheduling an First, half fiscal that adjustments team made approximately enabled being the with to

to engineering third revenue during achieve profitability team exceptional capitalized backlog and our quarter. the strengthening strong fiscal and the Second, execution, on global

to quarter, we the As we fourth are making strategic to look fiscal investments growth. support

mitigate teams, site, resources, Our constraints and to regional, operational supply to and we're have component customer meet inefficiencies added corporate chain demand. working and tirelessly

the Even in highlight We I their with operating we Malaysia, some for to investments the to are A efforts fiscal that X.X% addition, exceptional results, in fiscal the delivering few some comments. our margin committed in during quarter. In investments, fiscal final ramps new is solid XXXX. operating third program to meaningful commence fourth expect X.X% we execution range the continuing the making of in that these team with of additional fiscal the are that Penang, highlighted fourth quarter. delivered team to of great quarter. want in

days Although vaccine X,XXX the output of our operation, manufacturers. other full the operating under first Plexus In workforce that over dose employees is and suppliers, producing eight at they're customers, the to employees, COVID-XX still vaccination Malaysia's first curtailment XX%, a to and has center nearly team workforce limits Plexus’ over our of from X,XXX levels. delivered

the be is to Sunday, will many be all spite in follow Plexus would center's vaccinated, of their is and projections, receive by first construction our in allocation pandemic of Assuming challenges all the creating In employees new facility of vaccinated Thailand, this and fully end doses Malaysia the the who the Bangkok that manufacturing progressing. by dose desire August. of

the complete review We call on develop now fiscal team's keeping turn XXXX expect our Pat? to ability vaccination an industry-leading in workforce, as initiatives quarter is pandemic, strategic third and The Pat facility will a production I with reduced planned. the financial of output in the of remarkable. of middle center, a for track performance. in-depth to while an to the optimizing

Patrick Jermain

to resulting spent everyone. and our of and the Good results $XX summarized Thank morning, result free our our our $XX focus I cash and results, with expectations three sheet fiscal income trends, morning, capital flow fiscal million cash We on on sheet our and balance fourth working a XX. on Slide flow Starting for balance operations, third of cash you, for quarter guidance. excess quarter, want million, fiscal areas, million are the net $XX This Steven. and quarter quarter. flow expenditures, in capital third which in in from cash delivered our

quarter, shareholders, is quarter, our remaining cash quarter. fiscal fiscal we million the the for commitment an of strong million. program, authorization sequentially average We cash new all plans with shares Board soon fourth $XXX $XX During purchase approximately be under stock our of had quarter-end, authorization. $XX a quarter-end, remaining our revolving well to end sheet. At balance by XXX,XXX our million price to completed. third current at credit share. a purchased Also one, totaled the with of the will debt we approximately Directors, at positioned million, facility. an $XX And ratio At at our $XXX our approximately third is fiscal had the EBITDA of Plexus to of With to our We for $XX.XX excess outstanding attractive level. we $XX.X million our returning believe higher intend during was reviewing, once amount leverage million, per under we gross

third our our capital were fiscal quarter, return on result of solid the we average cash weighted value. of invested This cycle, above of generated return For our quarter-end, was cost delivered pleased with XX.X%. At basis economic with XXX capital, points consistent we shareholder a guidance. creating an which

capital Sequentially reduced details third primarily revenue With days cycle was cash our the days cycle. fiscal XX turn the by inventory XX Slide working in cash and for related for the by Please higher eight increase of on days. to to The increased days, XX. quarter. our result sequentially

as the in our revenue higher inventory. customer secure days. toward procuring products in order will high anticipated level inventory customers components. earlier, revenue accepting current elevated offsetting customer greater days to of deposit the deposit payable as certain of quarter. chain Partially sequentially XX lead for experiencing with higher. procured increases and to In related Also, were a days prepare we inventory increase dollars both activity inventory we payable maintain environment, days. worked With times in offset to an service, purchasing demand the by end increased that are days fiscal longer the with days, we meet addition, the be demand, two increased days, by Customer we’re support and components fourth for certain supply for In we quarter,

At Todd guidance are be higher of review for summarized margin expected the fourth guidance, additional already Fiscal sequentially EPS quarter X.X% basis provided range the As gross the be points. I'll revenue is and to XX. fourth by has this quarter, to the midpoint gross details, which X.X%. XX some on fiscal of margin Slide in would

We leverage anticipated better the fixed our in expect on to with sequential gain revenue. costs increase

$XX of range more above target, track X% next consistent operating we share committed the we'll With details margin our margin of GAAP our fourth million revisiting a Directors notes approximately we the fiscal increased for At $X.X midpoint revenue, of to expected expense to fiscal million, X.X% is quarters. midpoint to the and X.X%, of we last and of At be amortization to slightly Board or added would to in meeting the X% future which third of XX expense margin to operating operating the anticipated to revenue A of during remain be quarter margin improved to of be SG&A the guidance, this Again, from fourth of be range For $XX X.X% result million. XX revenue At excess other the would quarter. be expect our be SG&A quarter, for lead in will this compensation higher Fiscal third six sequentially million month, X%. guidance, GAAP basis basis delivering few call. Non-operating the operating record, five quarter. includes be our October quarter. million. GAAP earnings is in the $X.X in fiscal fiscal and would of at points. consistent Depreciation points would the should are provide with leverage. fourth which stock-based by This expense. $XX expected margin range expected operating expenses

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

third that is expectation balance sheet the the Our capital fiscal for compared quarter. investments working to will increase,

this quarter, increase level fiscal would range the expect midpoint anticipated quarter’s days estimate. Capital $XX forecast, cycle working due inventory our the procurement of expected fiscal cycle cash for revenue capital, cash move to to into Based We increase million, activity $XX the we XX of XXXX. primarily XXXX result expect this requirements. of in in to additional At we meet as compared days. last XX to as will on guidance, the the fiscal demand spending slightly to million of is third four inventory be below to days we

For quarter, the expect cash negative. to The fourth free supply additional flow inventory have and chain fiscal extended required times, investments we in be lead demand. environment, tightening to satisfy customer

working working closely our customers secure to are We investments. capital with to deposits minimize

In already capital we capital to working as order take the have in investments. With move support open if demand, the We anticipate, into strong necessary investing fiscal to we added addition, measures (Rence), call want for questions. now customers the results started fulfill now to that that, in demand even working let's in our we XXXX.

Operator

you, Thank sir. [Operator Instructions].

Our from from & Jim Company. first question the Needham comes Ricchiuti line of

now is line Your open.

James Ricchiuti

you. morning. Thank Good Hi.

questions. of couple a Just

a chain in quantifying in issues of industrial the having fact the chain. the about, quarter down way do if you supply on QX. broader of or the highlighted you any is we've different component if a based other be that seeing just what the follow-up wins guess what Thank And wondering And in impacting because availability recovery supply also across of terms there's from so hearing was been potentially question, just wondering or wins suggesting anticipating what have there. any any areas we're in in this QX. to, sense And that it's is, beginning I’m potentially I you. business, might been you're market seeing type headwind all of broadly that the or verticals, sequentially, You fiscal are you're the and question I'm I'm

Steven Frisch

Sure. supply Maybe is funnel hit the wins impacting the focused that anything the supply second on first, rate. there. believe couldn't on Really the don't now correlate chain or happening which wins. right is I'll the part impact chain I

think I at normal So, levels. we're

We not into by as relates number. much wouldn't quarterly wins Specifically, either. in that QX, measure read do industrial teams too the it the I a to

day For of it matter we of whether us, quarter. or at really of win last quarter end the doesn't next beginning the the the the

meet incentivize the we quarterly try so, heavily to we focus quite metric. And trailing number. something four-quarter the don't close a teams That's on and why wins to

like So, quarter, I I it a healthy to was softer come but back QX a level. said, expect to

much So, again, too I wouldn't into that either. read anything

of we chains. there in terms or us we’re you that the in to QX, in forecast front have component as frankly, unable that In is headwinds, of revenue achieve due sizeable - for supply a customer we terms of Quite QX that - forecast to to numbers, procure we the said, that the we'd an it With have capacity able $XXX will of the million. excess million start be talking to if roll up and be can even about do of $XXX that. to worth manufacturing components, then labor

standpoint, to the there. And don't - opportunity an aggressively working close teams from from So, of are again, out overall standpoint, there’s an demand I a lot it.

James Ricchiuti

follow the there. that that is really fairly just I'm and I'm may you're like other highlighted, traction up. And with extent this gaining the some what what AMS this - of the is you. driving side, you're new of areas that, relationship and The be want pleased to medical healthcare what in to business. traction see of the the you it. your you're wondering you're business. Got on side, It really with in seems assuming seeing to expansion Thank beginning

Todd Kelsey

Yes.

couple quarters correct, the Jim. but quite it that AMS about is, I or healthcare we of a within is both a and you're So has the space. and have our mean, quarters potential, the this we're it talked capabilities what had it of now meaningful three we've I And about across relationship of programs Healthcare it with substantial. sectors, we side And in all would customer. The Life Sciences regulatory row, business business. I our right will lot be healthcare on say our for to has new traction business that do we're most within have a clearly launching gaining the think

And it business. growth job for and excellent getting be in all some up, we're F’XX mean, you AMS a that I great there, very could doing out business. when the it like So, year team's a of substantial looks traction roll it building our

James Ricchiuti

you. Got Thank it.

Operator

you. Thank Please Soderstrom question ahead. Sidoti. of line next the is from Anja The go from

Anja Soderstrom

Hi, everyone. the and Thank couple I strong questions. you for difficult my had environment. taking despite the of congratulations question, quarter, a just on

of you've going to play capacity, to been benefit be to Penang, driving are And XXX% we the there, able those? back going efficiencies how get still out? efficiencies terms from are you as those In to

Steven Frisch

Yes.

being quite done I efficiencies, mean, - are is probably the the about frankly, pace team working efficiencies exceptionally not are hard a that's the at Specifically sustainable. long-term because achieved and or being

So, of our And I work few probably realistic basically some facilities things of more will or above a But used had improve I going. things we where be But learning like learning run about are into question? in that can how going are, how be XX% terms you not to we’re to levels, as the the future we're those forward. is thinking we we think, we things follow-up at thing - and said, efficient. go a another a

Anja Soderstrom

Yes. cycle It days. in was cash regards the to

I cash cycle improved this guiding try back of to environment. we in about could think And your be new to once or are the with in before how should you the that chain Is still or get systems, you've XXs understand that But - that? low and supply systems, a to improve achievable, think days. elevated we been normal environment, they the you so, have I now because

Patrick Jermain

Pat. Yes. right. Anja, I you're it's think Yes,

the low to through a at that we low And cash cycle are ‘XX an fiscal and would see getting XX to the point to as in into overall quarters, look right back high now. to inventory I XXs. mid want and equate move days, the We

And for fiscal of of, part reasonable be to so, for most or think that's latter spot the operating I a within ‘XX.

Anja Soderstrom

you. for That Okay. Thank me. was all

Operator

Thank one Sheerin line The Stifel. you. from next the is go of Please ahead. Matt from

Matthew Sheerin

Yes, thanks. everyone. Good morning,

about But leverage the Just margins, and from or relatively you're that talking nicely and margin, operating a XX% revenue. still relative margin, - up so you're the the question still sequentially of gross regarding peak upswing. revenue it's guiding down to X.X% on and levels

fact Steve, you talked at labor Malaysia, COVID fact full able in labor about at you're be despite So, are things costs production that overtime? at the levels, the related XX% lower you're some there to or to that costs still levels. basically like still

point some go there there some back get and away costs you'll peak margins? to are at that those So,

Todd Kelsey

Yes.

and into in doing the ramping business. of typically And But and Steve lot just a this of well time are about that of program it’s may some incredibly in rapidly. about jump impacting there's ramp. too. a lot ramps few particular to margins. around impacting But different what want spend we're at don't one fast, margin, talking start unique because the to AMS very build program or in bit it’s adding we is resources So, program a part as on Matt, we I'll point this, we and a Pat factors that talked ramps, And QX

are ongoing supply a bit efforts chain There that that there's secure Penang components. impacting So, our some of now QX, also operations of occurring there. is in are an that right the intense inefficiencies and the just to impact yet are

achieved So, with be on long But an talked with we'll cost to we past, Pat plan those do north we've out, the board range in month, we'll come be And about precursor when are having I'll impact discussing believe further in a plan operating in X%, are what look how the new and achievable that. margins we the is and annual the future. a all margin target. next say as our our somewhere out our It of structure.

Patrick Jermain

costs. about COVID thing asked add one Matt, I'd Hey, you had is,

QX, some In in COVID-related we Just to give had X.X million costs. you perspective. about

X.X We we're as employees are more our vaccinated. doing fourth there as of that go testing expect be Seeing the will that employees, some reduction in quarter. million to down, around

quarter come a the So, in fiscal fourth bit costs those down we see

Steven Frisch

about And kind point one it well, of Penang of because I'll as asked add Anja terms efficiencies. in

if I they're higher at have reality of work. XX% or not thing think - keep site outperforming XXX% that the and the even generating the are we paying in the is, one mind XX% of still generating workforce employees, is, on to although efficiencies, we're

cost hasn't our labor So, relates force the structure it to changed there. as really

Patrick Jermain

thing margin on target. one Yes. the And had just then I last operating

with peers. talk GAAP of we're in compensation, said, stock-based that with keep we'd a to operating really add basis we up you apples-to-apples But that's And mind mid-X%, back our goal Todd important our that a going board come on with if north a to As X% be month. margin. through would when next say of

Matthew Sheerin

Understood.

of then in had inventory. a Malaysia you you primarily able lower as you're of fact Okay. did supply guess Thanks issue. production fact that. guess for much And the levels that question on function build constraints, that given because I although the I another as the to the the quarter, somewhat that's is surprising,

areas to So components been going guess where you question are you're is tied are able is, and so, I to you're you of lot building inventory, a or just you to of that's opening backlog bringing were the just where run that some through? think things seeing up build do this kind in.

Steven Frisch

it's ‘XX, latter. into off We even. constraint starting until or don't Yes, us we you get component of the more the give fiscal probably calendar necessarily issues

we in expect So, to constrained a continued market, it we a reason bringing are be hence more do the inventory. bit little

lead even have are bit - may we leery bit afraid the still on not because a inventory also about time bring are hand, some little a having in, might disappear that customers it and a they're little times little bit to there, losing have standpoint, are that more of for the about customers forecast reason. We more it be that leery there's though there a from

time help with potentially to now, some working to And though us, offset where could it even it we're customers bring that. with they’re lead on we them that's in asking and so have get deposits we

there to the few things So relates as are different, management. a inventory non-normal happening say I'd business it

Matthew Sheerin

we to you ASPs the side, the up components. Are a through? mean, along battle related to just able of going or I are suppliers and to that on board, is just are sort that, across And that pass customers, know pricing semis Yes. the going that

Steven Frisch

we going able to on Yes, for at the are customers. I way pass part is, our and we and those the there's prices our things most variances contracts up, we’re to look priced things are. in mean,

Matthew Sheerin

Okay. Thanks very much.

Operator

Thank you. The next one is from Adam Tindle from Raymond James.

Adam Tindle

Okay, thanks. Good morning.

for Steve what sounds trying for percent quality said either question quick I'm using you customers are get this a that issue. on the of just or resolved, a sense Todd to It is but supplier Just of this for broader really sense customer? one that to get part from part, is contagion this, a across custom more base of customer a this or a this Just risk really is just of the or trying the one-off? like

Todd Kelsey

for a part and it's Yes, electronic part. It's a an not one-off. that custom supplier it's

back So, full this for one-off production that we're system and and is that resolved it's customer. a for in

Adam Tindle

it. Got Okay.

Todd. about wanted ask really ‘XX I fiscal to comments, the So,

correct about as about me think talking you growth, and I talked basis. I'm You in and on if wrong, double-digit had double-digit we past, think growth been the a go-forward

logic? missing add that demand So, of I'm and mid-teens double-digit something wondering, top or non-perishable these this that growth, is more like on if growth with we there

Todd Kelsey

Yes, I would we're alone in adjustments. F’XX. takes well, the was into So, what mean, would growth intentionally number, is, I to when it's thinking over really ‘XX account the But F’XX, I end of say it can the double-digit, say of I let Adam. vague of long our is, we even what what ways start the and we're it early with ’XX? think a cycle be of

is I than mean, a revenue, were dislocated think the ended, it. And had unless would our that because change. going we dislocated, we we growth with But $XX here's call bit the supported I what million when could say. - had wouldn't we way things to. would comfortably double-digit forecast better you level, performed about the QX at I would we be about we about I thought look So, way talking that

that, of maybe perished, rolling a can is million you first QX. the amount in a small of that's recovered or and so Some small about $XX into think of There's amount half F-XX.

Adam Tindle

helpful. That's it. Got

on for Just the near-term clarify last to me one margin commentary.

AMS business the So, you ramp. have

talked that? QX spill into of I'm prepared cost it some much to trying It a like ramp build sounds or lower guide utilization? that QX. with about more off way well. Thanks. for impact. we know, QX, at think that X% you headwinds this the or being how is, related to understand more may as as related we building comments, be Should that. in to think tailwinds you Are so maybe there off think about to AMS associated to about or Malaysia how of is higher I QX a just And the midpoint the

Patrick Jermain

Yes. take I Adam, that. can

the doing start into and quarter revenue the end ‘XX. we're investment the So fiscal of then the quarter, fiscal will and towards the fourth in

we investment. going So than on that the quarter, revenue generating that point fourth be start investment to is in about XX-basis the fiscal to - before drag margin a the offset more

Okay.

recovered year. points - course basis next be XX QX should throughout that I'm thinking for So just of the

Patrick Jermain

Yes.

Adam Tindle

QX It sounds tailwinds sequentially. versus like more there's

Patrick Jermain

Yes

Adam Tindle

Okay, got Thank you. it.

Steven Frisch

we help about understand look typically there's at a - that's circuit more service ramping, you services, looking staff and have maybe you're To the more the And it’s procuring lot involved of level just if ramp, Yes. repair. labor you're assemblies. and When you card components. the a aftermarket circuit not to typically it's build at

and to training the about do more it's repair. people service So,

them that cost we're technicians the before and to and operators have the of train doing on can actually we amount is and about doing significant start talking add So, we how repair, a to work. service

that's be the more are why bit on normal that's a than front-loaded so, AMS, - costs what what would And little ramps.

Adam Tindle

Helpful Steve. color. Thanks,

Operator

one next The is Steven Advisors. from Fox you. Fox Thank from

now is line Your open.

Steven Fox

ability new had about size the or sort up the of and versus in a after describe to I whether on about happened, wins to that average like wins been of sort it's over bigger of machine investing years, been of drive think I'm on front-end big sort you're would go circumstance everyone. that's morning, years. there's looks it. X more sort how you why X cetera? just an And to like target or had million wins per follow-up. the wins win in higher question curious you Good up I and then picture future. et last the step in size bit prior you And the higher how can think going how the Do scale two of It Do a per couple X you of window, of just that and Thanks. wins more? a a X average you

Steven Frisch

Yes.

I is certain that bit size a So I focus that will part thresholds into competitors to wins uptick your say is bit exclude a We've average have know over bigger little it magnitude. of that anything on an would opportunity. a some effort conscious And size on we chase they of of don't our the bet they math the a say but from of only correct. years standpoint. a where opportunities, necessarily seen

the about And customer. more continued it's our us, are opportunities with have partnership relationships as bigger think across For I the the get we stronger, seeing board. to

size pick the So average surprise years, I doesn't they me increases up. will expect in in the but don't that significant it coming

Todd Kelsey

Yes.

something a to Just in. bit add too pretty to make continue we our in that That’s customer-facing investments Steve. around investing significant team,

is customer as we as course, development of business team. team, And existing with well of new additional customer the that. existing the scales about. new but we we - revenue, that the and that have bid on, that's there. our team, And way get out that's our think new have We The logos business one development of things the invest we've being in still is been team, progress just reflected leverage been talking in I'd to continue the that in to point made

fiscal XX logos. So, be we've had to new XX year. A this might typical XX year already

new within business leveraging that some existing right talent our paying effort a within development new processes customers, done some now. it's of we've organization, bringing - of talent, the and targeting great job the new out building So, off in

Steven Fox

bit talk one, that a much as was, helped don't that? And follow-up, want Like Great. talked you engineering a benefit you've don't about Pat, you you services of just but margins. quarter-over-quarter, That's to year-over-year, put it? little Can I can think then this a know, you - of it around however really how about interesting. said math I

Patrick Jermain

third, productivity, a I we healthcare lower costs, engineering, it's we had If Yes. maybe at third. break Steve. really around and that out, to third, a different better mean, components don't a I the look had

really those the math improvement. it, of equally haven't me among that but was behind probably We They're done really dominating three. one the right feels spread that any the to three of pretty not kind

Steven Fox

I helpful. Thank you. that. That's Okay. appreciate

Operator

Thank Paul you. The from Chung from next one is JPMorgan.

Paul Chung

taking for question. Thanks Hi. my

XX as this months we you through relatively have have wins next the and the we momentum into should nice next overall easier Defense? couple. Defense, about think Aerospace How on wins. nice strength comps expand growth On in and as there? quarter. you a And in I in and Aerospace we months, surge the navigate Can So, segment that head XX and the

Steven Frisch

things healthy that a quarter, defense abnormally this one size. was very large obviously, I a in opportunity we wins the It customer. talked yes, a And script an for defense bit large won about of that the The Sure. was side.

to that And gain then as we've so, share the continuing talked space number about, higher. definitely helped the we push are And in part. commercial

fiscal we we've so, able been through relationships. that meaningful with see look to as And growth what ‘XX we those capture in and expanding

rebound, starting to going So, what with aerospace outlook of of sector we commercial pretty in for is look to believe, the terms optimistic the like ‘XX.

Todd Kelsey

bit of A&D for be all we comp, they're And next now. what little but growth year good going to gets I'd strong feel fiscal three say about Obviously, think sectors all ‘XX. our a us in sectors is, we for easier

Paul Chung

little XQ, great. a expected but catch XQ, of then And on in a seem ramp than big Okay, lighter in up. to kind CapEx,

but facility, expect mentioned margins, and scale there how think more mentioned Thailand about we on of facility? then How are on I any generates is kind Thailand shake I I So kind the relatively there kind of do delays even you of size given you. you've higher think out? of assume, of year. that facility you've on Malaysian track the itself, it's facility the facility the Thank automation? the think in And to margins next emphasis for margin that kind facility? contribution of do

Steven Frisch

the second. part, and will I'll maybe the jump into Pat Sure. answer first

the impressed to project track. on the of the team's keep terms building, generally In ability actually with I'm

We’re up. planned is a confident And two behind can striking about right year week or back what we catch ago. a now, it they the it was team

the expect third So, facility from fiscal in an expectation standpoint, we the online XXXX. quarter do of to be

moved our of have mitigation - customers existing help of and for handful interest now, from from We to standpoint basically those a are robust supply there’s a some business more build talking chain there Penang to risk some a right in to people.

the building a person. the actually We that, internal GM site. he's It's and We've have for an hired announced team.

really are well. our So plans going

Patrick Jermain

going lot typically, business help see I we'll up in it'll in Thailand. We’ll have we've new four to the Paul, margin, And of similar Yes. campus ramping drag be What in on Penang. a utilizing with structure quarters is for because three, business be just a got overhead there. the we've mean, us the got we of putting to margin, where environment the support and Penang

fairly to is similar think to four quarter we three in when like up our quick, operating ramp period. the our we corporate facility saw to So, Penang, again was target, put what margin a fifth I that

think see point don't results, an much impact have do to you're we or at typically I facilities to So, one of overall because another. ramping going the

we're because a So, of with depress Thailand. going necessarily period through overall I wouldn't margins ramping our just

Paul Chung

Got you. question. And last

kind in for Thank that of APAC diversification and now, we improved do or post footprint kind to the Are you expectations you. done of in Your facility. Thailand grow have beyond? ‘XX further even

Todd Kelsey

Yes.

when about I think with I have, the mean, on down somewhere the but dots too be expanding not the necessarily map, add it dots we the the new isn't question on consider, map, second call it you We And road. far of thinking to the to we're locations Thailand that out a projections out. be at. where we're looking within facility need gross won't

Paul Chung

Thanks.

Operator

no time. I’m this questions Presenters, further showing at continue. please Thank you.

Todd Kelsey

(Rence). you, Thank right. All

the to the end growth markets optimistic we improved seeing, about year, strong XXXX. participation in a markets. and we're exceptional wins shaping So, that like are fiscal up reiterate to closing, in I'd secular our be It’s growth given performance,

margin higher growth well operating new also EPS our for strong all which the within establishing for We’re performance, us baseline year. and position fiscal

So, like support appreciate in We call all thank your on us the closing, you I'd to today. joining in and interest Plexus. for

Operator

participation, Thank today's day. this for and concludes you gentlemen, conference. Thank have you. a wonderful Ladies and your

disconnect. You all may

Plexus (PLXS) 22 Jul 212021 Q3 Earnings call transcript