PLXS - Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Plexus Corp. conference call regarding its Fiscal Third Quarter 2022 Earnings Announcement. My name is Latania, and I will be your 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 Shawn?

Shawn Harrison

us you Good thank joining today. morning, and for

Some results of without impact and made expense, cash will company’s revenue, the cycle, statements the margin, of operating be of call during gross and future and business forward-looking COVID-XX today margin, our capital other on statements, expense, and allocation, the including selling limitation, operations. income regarding and those the administrative information taxes, provided outlook business

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

this factors of release. list the live our Plexus’ yesterday’s www.plexus.com, for filings filings, that participants fiscal refer a differ the Form on XX-Q statement materially disclosure year on cause website Form those in the X, XXXX, call to the page. ended factors our For risk fair of actual by and to results We at filings, to materials as in Investors at encourage that could and SEC supplemented company’s clicking and XX-K supporting please discussed, periodic Harbor October morning access press top from at Safe the particularly the webcast the

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

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

Todd Kelsey

X. Please everyone. Thank you, morning, Shawn. advance to Good Slide

to is billion guidance, that Plexus fourth deliver which a quarterly first establish I’m revenue, company. we in our fiscal our be would quarter $X for As in pleased position

is growth the supply that and outlook in GAAP understanding anticipate revenue EPS and macroeconomic further chain fiscal remain, XXXX. conditions that we challenging expansion uncertain While

backlogs covering many calendar products the produce XXXX. bullish remain customers we Our report and for

robotic In our new stems strength optimism strong space, markets in demand, factory substantial from continued ramps, in commercial including automation early-stage constraints. the leading historical program to a growth the strong supply and Please position for operational multiple of secular and success warehouse addition Slide and to fiscal our increasing our wins growth review of our commitment resolving the excellence X, third advance to our surgery, assisted quarter results. of for performance

the second range operations result the returned a was success fiscal guidance our the of were For of that the the previous to through leverage, was achieved and above in quarter, of quarter revenue to result represented This quarter, range COVID-XX sciences related of $XXX up result the X.X% achieved sectors volume of we to and normalized following million in share exceeded XX% million our in million, stock-based per our compensation market that sequentially healthcare, industrial three $XXX All growth. record X.X%. COVID-XX a result and Malaysia life $XXX challenges exceeded of year-over-year our diluted increased GAAP high-end and guidance processes of $X.XX improved range quarter. of team’s mitigating customer expectations We $X.XX, margin result our lead EPS disruptions mitigating of and constrained of $X.XX. largely team’s impact of success increasing entering X.X%, the of $X.XX China. operating margin to increase operating a XXX included GAAP delivered the of of impact of and components a basis and revenue point expense. This partnerships. earnings the in our supplies benefit was combination the strong from strong exceeding through related to The guidance

programs. clearing result. strong delayed In second some supply new decisions on they million, from quarter down aftermarket fiscal issues exceptionally Our customers as services sourcing legacy with chain focused manufacturing $XXX and of wins light totaled our constraints, supply

With in of our funnel the win a strength in these goal. are team wins billion in our for funnel, going opportunities we $X.X share fair of X% support is annual continue sustained well-positioned growth forward. future $X in will manufacturing four-quarter of at to to revenue programs and record confident billion held trailing we our XX% holding Our excess of

Please engineering Finally, the fiscal third in healthy remained wins to quarter. Slide X. advance

We remains this remains support unfilled scrutinize but for significant customer $XXX of demand at in our forecast program continue to excess projections and backlog we deterioration, signs for strong of time the million.

which supply. we a million customer recently support Excellence X.X% $XXX In of chain supply and the our fiscal program revenue quarter support to provided GAAP modestly ongoing to compensation of substantially fourth and that of our fiscal pressures projections, robust margin, customer expense performance. outstanding during for and growth billion, one of in-process to resulting the Award are recognition Service outpace burdening a incentive of success reflects received forecast Incremental to fourth inflationary operating increased guiding in quarter other investments X.X%. ramps We’re $X.XX demand new ramps, continues program

$X.XX through We as customers term are levels, At operating stock-based impacts the XXXX. revenue guided we inflationary believe and expect focused per near compensation margin achieving industry-leading diluted nature. remain of to expense. to $X.XX, GAAP mentioned margin our $X.XX fiscal are we operating GAAP of previously share of addressing target earnings items including deliver progress our all on and the We with in X.X%

compared the customer also support our new by our impacted our expense tax according completed Bangkok, the of funnel third is to strong the to in progress plan. to Thailand potential fiscal quarter. by quarter. the greater builds of Our as represented in facility at interest site for opportunities, third and first We fiscal growth continues guidance In qualification EPS

first the quarter fiscal We quarter. begin late fourth in or product production early shipping will fiscal

multiple our also Penang that into have business programs campus to from launch existing transition well new site. the planned as as We directly will

growth to future in experience support campus interest region. as to our multiple strategy first a customer APAC platform further the We we expect and Thailand building strong of create in continue the be to our and

relatively forecasts, we of and customer conservative taking revenue our GAAP anticipate Next, EPS. thoughts longer-term growth in a Even will enable continued that fiscal regarding XXXX few operating view into outlook. when a margin expansion

semi demand sector strong, industrial cap our led by markets, end is communications. our at and Looking

supply continue we the as effort stable impact processes issues multi-quarter make to that program on improved strong in major a in will partnerships. quarter Within several demand component third by While focused through leveraging customer results progress Sciences, aggregate have and availability quarters. fiscal challenged, alleviating reflected ramps next underway several our and we positively Healthcare/Life is

and with defense, the markets desirable commercial supply place solutions team in end significant demand highly a our innovative programs. aerospace are with constraints opportunity space right growth, we well well-positioned are muting customers’ of chain within and as program needs Finally, and aerospace we serve In In operating as strengthening revenue XX% see while in in we summary, complex capital. industry-leading on analysis operations. ability over remain performance partnerships. enduring X.X% margin now our financial further for return the a X% the representing CAGR, of long-term, optimistic our invested I cultivate to market and and sectors of revenue in results, GAAP to call additional the turn Steve? deliver will Steve XX% to to

Steve Frisch

the the of for by fourth review morning. as X The as sectors performance quarter Good performance with I XXXX. fiscal a of Todd. was you, the start third fiscal expectations on quarter fiscal well market market the third quarter. across for sector our will market strong Slide for in all sectors Thank

third sector, our in by processes especially materials constraints, quarter. with exceeded fiscal enhance to to customers start of see increase. Reviewing XX industrial supply mainly significantly still revenue the sector the in material I efforts chain are edge continued forecast in customers above exceptional the node pipeline. higher The to we result early to was lagging details obtain impact The forecast XXXX better-than-anticipated our from due of and sector having the flat a expectations low grew Although longer-range positive single-digit the supply. results. our by a semiconductors, our for with XX top will fiscal Shipments XX%

start fourth the uncertainties. we quarter, are fiscal mindful broader we macroeconomic of the As

However, remains subsectors. across customer industrial of most demand robust our

a sector revenue range for At fourth As the fiscal growth in sector XX%. the industrial achieve level, solid XXXX increase low the we expect of a would in the fiscal single-digit quarter. this result,

Our pipeline program in of mid-single-digit enabled programs our customers. significantly the for Healthcare/Life result of exceptional new achieved a as shipments exceeded ramps Sciences growth as existing well materials increase stronger-than-forecasted of in our Healthcare/Life top quarter. XX% The XX for fiscal Sciences improved for third sector expectations XX

ramps expect drive growth we sector. ahead, to program the further Looking in

four As quarters and would outstanding a in the fiscal this a all expect of XXXX, for Sciences sector year mid-single-digit range the result, we increase our an sector for fiscal Achieving fiscal finish quarter. growth grew with revenue sequentially in XX%. the the would they mean Healthcare/Life fourth result

outlook demand in line Defense sector in quarter. grew strong. The third is mid-single-digit X% and aerospace expectations in increase. Aerospace the of our The a with was Our commercial fiscal result

pipelines the However, material range mature not are customer as sectors. the other result forecasting improvements as mid-to-longer in and of

in anticipate fiscal quarter. term, near As such, for and decline and single-digit muting the supply growth constraints the we sector a the fourth in defense aerospace low are

overview result in we with to we during to for revenue wins near our new million realize Slide customers. an wins quarter to was ramped the material expect fiscal aerospace We XX with the into of second As fiscal when our demand driving performance. expect to manufacturing fiscal commercial are $XXX annualized look record to further improvements be third million to Please XXXX, the compared from capture as fully for programs, we able existing wins in The $XXX the generate customers we of mostly X we won that advance down planning quarter. production.

quarter healthy. $X However, wins trailing-four of remains billion than our more

of Our XX% supports revenue wins quarters rate our the wins X% trailing-four remains XX%. momentum, of above the compounded by which and of goal XX% growth target annual to defined trailing-four divided our as is quarters at

wins, the few Industrial targeted yielded The a and broad $XX Americas. each in demand for the Sciences our two-thirds EMEA Sciences capabilities Defense added more sector the as sector of about with third in million wins than existing EMEA half service had of sector to of all customers. wins. benefited result of deliver share of customers high-power Healthcare/Life for inverter can to from Approximately region’s sector a Slide a customer quarter of result one excellence Slide of include region, million, in and This we strong in and complex facility. to wins the used wins $XXX The as sectors. well Defense be of Americas million manufacturing our heavy excellence Appleton, regional fiscal wins wins million of opportunity fiscal solid in built Healthcare/Life on are direct third for for are our and Aerospace Please wins, the $XX commitment the The X. total a in advance wins customers ability and the The and the Healthcare/Life Starting strategic our to of quarter. that and third fiscal a X with these XX% operational wins from Aerospace being the Next, electrification came market and for portfolio quarterly quarter team’s respectively. industrial highlights highlights the product which Industrial Sciences is Industrial Wisconsin $XX the assemblies sector. equipment. the review will in gains the on sector

a In with semiconductor engagement addition, industrial the customer. team continued cap expand our to large

into Although Malaysia. the further to now globe States, in into the ability started relationship high-quality years few products Mexico complex around expansion produce a ago the our United enable and

of award three countries. subsystems for are we With assemblies, in all this the customer building XX new

team Our won two Healthcare/Life products. Sciences next-generation

in Life a monitoring Sciences The the that product first used blood point-of-care gases. is is of manufacturing

The existing and ultrasound future expands we platform an and the customers. in Malaysia. The both with the expect Defense for our Included WiFi are wins an market in These commercial program Aerospace that to aircraft of will them product as second with of wins for strategic is leverage be a is aerospace communications is the health. opportunities platform these in that targeted a women’s share new customer. production manufactured used

funnel to EMEA. by Finally, can platform opportunities. XX in production We our for and qualified the test This produced our the of Slide program XG a be Aerospace to highlights proceed team secure systems. of of Defense won manufacturing team will used communication

first at of level billion. the record funnel their As the expansion we Healthcare/Life The time. third exited continued funnel fiscal for a held exceeded the and quarter, $X Sciences $X.X team billion

New funnel. Healthcare/Life imaging and opportunities care care, the all diabetes the of to cardiac products in Sciences growth contributed

support GAAP generated for GAAP quarter, turn to are on X.X% third performance XXXX, our in half also we potential organization Slide we $X that In billion an margin also operating pleased guide revenue fiscal first with I was of greater midpoint operating $X this at of fiscal of the guiding revenue as strong quarterly at teams to I’d that billion our the highlighted the to Next, a first had to we built least revenue captured revenue the that am of XX. than performance and GAAP operating pleased X% with margins like that operating margin. time, I’m X.X%. X.X%. we in strong

As of revenue committed will XXXX, remain our margin realizing of GAAP and Pat CAGR to to Pat? XX% turn of And enduring performance. for to call the X% I we teams financial fiscal look our to review goals X.X%. our an of operating in-depth now

Pat Jermain

you, Steve, and good morning, Thank everyone.

Our results above Gross XX our XX. the of fiscal Slide basis guidance end of points. are sequentially was and third higher quarter summarized on top X.X% margin by

of manufacturing Productivity quarter. XX%, our across we fixed fixed For better manufacturing for to quarter. fiscal while compensation primarily revenue and million incentive consistent linked higher expenses three regions experienced third also the to quarter, all to the the administrative Selling above revenue as was of performance leverage operating and second increased remain additional guidance contributed expense with significant improvements $XX results. due fiscal the cost

GAAP due Inclusive As approximately of percentage with end was GAAP we as consistent stock-based which XX our foreign to exchange factoring and operating of X.X%, losses basis above and operational revenue higher expenses of SG&A basis by the a compensation diluted points. of the top of of X.X%, above guidance. performance. expenses. were delivered Non-operating a margin guidance and revenue, our sequentially $X.XX expense, of strong EPS expectations result expectations exceeded which was lower XX points was

cash sheet on our XX. balance flow Slide and to Turning

quarter. support a operations expenditures cash As anticipated totaled in to as both we fiscal $XX customers’ working third of million, demand continued made $XX and for and the investments capital the our the chain supply of million quarter, usage strong capital creating Cash for in result investments a constraints.

million for XXX,XXX repurchase During the our authorization of quarter, $XX shares approximately we our share million. purchasing completed by $XX stock

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

Our goal of facility advantage favorable we covenants. cash X, remains financial and shareholders. credit refinanced our unsecured our June to to On take return our senior all pricing excess to improve

maximum addition, was maturity and to million credit extended facility of the expanded June was the $XXX commitment In million the facility $XXX under from to the XXXX.

sheet XXX of with reflects over sequentially four while million We million. during balance sheet amended to approximately $XX million was debt to was end period debt our the demand. borrow Total $XXX $XXX quarter credit cycle turn Please of cash facility. was supply at days, of increased Slide The by details by consistent quarter sequentially several of to and steady days quarters Our included in for X%. Cash working part our due cash, million, challenges million the in lower capital inventory net Sequentially, investments. days. $XXX by a the available higher our increase days cycle. chain robust $XXX under end balance fiscal XX had third customer expectations the continuation on past

new higher supported the in ramps, and quarter. quarter revenue upside are deliver third fiscal fiscal anticipated have we for program fourth revenue to addition, In the which drove

XX% primarily covered with continue by two have improved over due and of shipments inventory the to Days customer timing of deposits. in receivables We payments. to our sequentially days,

incentive to Slide be is portion be Todd already the approximately are to than variable this fourth fiscal on X.X%. some the guidance to is revenue the has which additional margin quarter. margin midpoint, XX expense. range reduction in summarized lower review due quarter third At and expected As the I’ll gross compensation of X% fourth of provided gross points would basis higher A fiscal Fiscal for EPS XX. the quarter, details,

our expect investments in support on our new to near-term facility to costs, Thailand fixed outlook. including order margins due growth strong also in impact We a

expected administrative interest the We rates. expenses expect range higher to the million, the third are quarter. million to Non-operating selling million, and of to be $X of fiscal to rising in range due lower than million sequentially in $XX.X $XX.X $X.X primarily slightly expenses

cash days, breakeven days balance net the a for investments capital the XXX We for that our will forecast, compared to four primarily inventory Our the days. fiscal improved we the working due cycle to quarter. this XX will of fiscal quarter. Based positive free result expect of working expectation revenue to level in on third fourth cycle to will anticipate sheet sequential days increase of capital in a flow cash generate reduction improvement cash days is

Finally, we Thailand that, new million for expect end to to of capital which approximately now open includes With $XXX facility. $XXX let’s Latania, spending XXXX questions. the for million, $XX fiscal in call range for our the million

Operator

Soderstrom question [Operator Instructions] our Sidoti. first of from Anja And comes

line open. Your is

Anja Soderstrom

here. questions. you it, what to XXXX? confidence the and you Yes, fourth on I your performance for great missed touched just your my in the a but for you margins hi. lower Congratulations Thank quarter gives might commentary taking have curious, fiscal and have projection I’m might about for

Todd Kelsey

Yes.

So this, midpoint, is and likely add not But again, a XX commentary. in want Pat we’re think where investments. fourth at of mean, it’s quarter if Anja, seeing some this But is at bit and is start growth we’re the we going only Todd. guiding I’ll little look to points, pressure areas to then continued down I the so I basis the much.

spot substantially success labor what inflationary and of is. the labor we’re good remains the pressure some on have particular And our issue when in guidance we’re in place working with then seeing our customers, customer us. both So, buys our materials and level with that And it’s that. range on with we having demand above around

it incentive about during the pass the fiscal that increased will performance area financial materials – to we’ve obviously, the stabilizes. will final maybe So And along compensation costs of had I’ll talk to a And chain longer Pat XXXX. supply there then a when we issue. the improving And will time near-term that the is view because that term. come as

Pat Jermain

And on Yes. other QX. one just comment

are leverage. So, of mentioned I expense Anja, about gross basis down had is margin points. basis XX points gaining we operating XX

point, XX additional approaching down term, as basis we our leverage, and target about move fiscal through we’ll at I fixed cost So Todd’s we’re X.X%. be points revenue with to XXXX midpoint. Longer our think of

So, in XXXX. we see do fiscal margins to expect improvements in

Anja Soderstrom

strategic was elaborate strategic Okay, customers. included you EMEA press the I release that that you in from think some just opportunities? Can noted on And helpful. your opportunities

Steve Frisch

terms XXXX Yes. challenges comment had here the that’s of exceptional customers The XXXX this pretty and on an team. And existing been some job spite team I’ll in that and one. in This has dividends. for wins is quarter driving through customer Steve. of COVID driven paying performance from EMEA with doing for relationships. significant some of in all the it’s They

these deliver these ability I XXXX, in definitely all So in recognized. is to new of XXXX about, talked customers are exciting and our part us customers beginning in going for for each are being where them products. their future wins The of either the the with of platforms that we’re for

opportunity we’re us excited leverage to how of build customers that the fact as so and team kind the we’re about new a pretty And the point winning the we the is for platforms forward. done relationship of these with has move

So in expecting team of continued customers those things EMEA. good the out and

Anja Soderstrom

what sort you. how we just of your with then see among all? see changed economy customer or a potential recession, the Thank weaker as do And Okay. or sentiment at if the has discussions general, you in

Todd Kelsey

very mean, typical I – I customers XXXX. impact in in several going continue of backlog that there’s that some to would downs but or and are remarks, customers. a as mentioned demand. typical have they demand normal we’re say And prepared product there’s there a that’s that a reporting In up calendar report that of here I through customer mean haven’t seeing their with just from, changed much. Yes. number the environment strong and a general, to And them see you’re I we

we So that serve, still right now, in demand quite remains the markets the strong.

Anja Soderstrom

is exposure severe be Okay. how if and there? that more And just you your the remind us again affected to cost China might

Todd Kelsey

of little XX% a revenue China. about of our Yes, comes over just out

China. to we’ve So any small from impact COVID And it’s no the a of lockdowns. had relatively impact

Anja Soderstrom

you. all great. me. Okay, That’s you. for Thank Thank

Operator

our question from And Instructions] of next Fox comes Steven Fox [Operator Advisors.

open. is line Your

Steven Fox

everyone. morning Good Thanks.

I a cash little question, talk to wanted bit First back and get and working capital just flows. about

capital progress hole inventory you a sounded cash it during target? the whether still So you reasonable then about of a on any the XX-months can little momentum talk inventory like quarter, a some of but made had start there’s generating just sort that’s a supply out the days. And next chain this Pat, out on maybe bit this quarter the drag, of positive worse sort over of And is working coming to follow-up. again? path I if flows front

Pat Jermain

do in that see and quarter coming of that days. improvement is I flow, an QX, we free Yes, see inventory in positive this out do from cash

we’ve pretty go that as I through think flow improvement. and see move been But strong in offset continued with through as exposure. expect I deposits do to XXXX, securing free we see mentioned, mean XXXX. inventory as cash XXXX, customer I generation we’ll improvements successful I I Steve, we do

Oliver Mihm

This just I’ll add. Yes. add Oliver. there. is I’ll something

I good what’s that inventory. to it’s on think driving reflect

dynamics. of number a have You

be chain time could driven customer forecast certainly to program used of it’s extremely lead support that then be by ramps. You to long could also new time risk. offset over varies in lead and components used It our and if being supply –

the change that lead in those could back some pull potentially future, in dynamic. as times see so you’ll And

As with quarter-over-quarter. us $XX deposits as Pat mentioned, customer our back customers are up million to quite reciprocating

internal success noting revenue us that lower performance. some supply, going We are to with having inventory we we as QX give you with And initiatives strong days that lastly, optimism be close the have then able that forward. more saw will by unlocking I’ll drive

Steven Fox

cetera, macro have to et still healthcare not, economically I’m life And could growth new and reset care? – step pressure terms see the is share Great. sort little the of That’s maybe et a the given the bit and we could some we behind sciences. others can cyclical. drivers, thinking that maybe are given sense? helpful. be that of if or market But CapEx just impacted the What back health be saying segments. cetera, in we least that business all And makes of cetera, maybe wins, your gains, where that not necessarily major And equipment on versus what what et about personal are diagnostics, then

Steve Frisch

Yes.

this Steve. of program parts those to One ramps. new in Two talked Todd as program and some I wins, that is well We new is are ramps happening. So nice have did about that. terms to do

And so spite – is in macroeconomic of of kind the revenue the growing. that questions, some of

And what’s optimism. us of one so that’s giving the part

The care goods is lot and second part we talk still larger is depleted. customers, life to a sciences their our talk customers they to places health finished the inventory in for of

if bit, end it’s in from And like demand going all so they’ve even and a a of think the the little of terms hearing standpoint, they little CapEx this been spending there’s needed had slowdown bit at an to those spending, market level that we’ve seems be I of equipment a over backfill basically some time. robust still challenges getting to the CapEx

and seeing in And as Todd needs of we’re talking forecast of lot in XXXX. a way going demand highlighted, the customers the quite the terms optimistic so again, about all we’re are into,

And secular robotics all especially markets, so well. the still are quite that and doing like stuff in

Todd Kelsey

XX% the thing timeframe were was I’d back heavily surgery, life the of most some so call by our healthcare economically more care it, if think there’s at sensitive recession, equipment XXXX, or Yes. as neurology. significant sciences business, now, if look within investment pieces the somewhere I such the things sector. of of One of there. That’s which business, piece is a imaging too, add went you health that’s of probably a because within the you our around And portfolio, last lower significantly robotic-assisted in dominated to, our XXXX Steve,

in recession-resistant, time say, it think, then. the much badly I So than I too even frame, which the is didn’t XXXX perform portfolio, it more XXXX, was would

Steven Fox

super helpful. that’s Right, Thank you.

Operator

And Raymond Fairbanks question our of from James. will come next Melissa

line open. is Your

Melissa Fairbanks

quarter, it on Hi, function see cleared? I’m be guys. that. unfulfilled something this just the just had supply will question could Thailand that still a constraints? or when that really are around and your million. to help thrilled expectations really backlog Is of What execution, ease I quick a the $XXX on Great is impressive to of facility

Todd Kelsey

function Melissa. Yes. a really It’s supply constraints, of

it to we I mean, So expect roll out. to continue

success more had in issues, upside, were we supply clear. revenue clearing though able even less the in still or resulted fiscal we good which saw the to demand So quarter that we third backfilled what of

more at So times this we’re Steve it going level, roll particularly continues had to point. components normalized legacy until to those a that And talked lead for a to get backlog. see about,

Melissa Fairbanks

great. standpoint, expect Okay, you’re Then last to we expense to the after expense is inventory that how eventually that from sheet, cleared? then interest And as question modeling now that. depreciation one we more get trend with maybe balance capital extent is funding to would on? then And a that coming Thailand should working investments normalized a the

Pat Jermain

is Yes. Melissa, this Pat.

So starting up. with depreciation. We do see that coming

I the think around So depreciation going of XXXX, be in in low it XXXX, I be $XX think, will we’ll let me back up, into think in XXXX million XXs. I

up. point then a rates. we see And that seeing expense, around we’ll your pretty interest So significant interest to impact from ticking rising are

as be and we that increase. revolving component inventory, we’ll expense. benefit liquidating So interest the through of down borrowing our free point, that’s But up large cash a our bringing to will your

a maybe you So the something to use QX – think standpoint, similar from on I fiscal modeling quarter. if end to QX – million want of that per $X guide, lower

would think point. reasonable at I be this that

Melissa Fairbanks

Thanks me. very great. for much. all Okay, That’s

Operator

comes from JPMorgan. next Chung question Instructions] And Paul our of [Operator

line Your is open.

Paul Chung

taking Hi, thanks my for question.

mentioned think year move contribution talk in as quarter? well kind in if couple facility. from XXXX? be But we And What’s also the do into September facility. the level Thailand of you then fiscal expanding I of about guess think in kind of I CapEx quarters you XXXX new the Thailand the how the about revenue rate you new And may contribution next the as facility OpEx could the and boost we run the ramps. that So

CapEx for be year guide XXXX initial fiscal helpful. on So any would

Steve Frisch

start some Steve. is Yes. it Pat follow-on. for turn and I’ll to over then This

shipments In here customer, for for with qualifications highlighted, first passed in in first terms customers of through QX, QX. Todd late kind of revenue successfully beginning with facility, we a begin and our the our product we’ll it’s Thailand as

standpoint, So at from revenue a minimal point. this it’s

said, programs have However, our Thailand. into we from are looking customers we to with several facilities and transition that that Penang

the we the by of standpoint, the that going of were XXXX, XXXX, a end expenses absorbing And facility. that all in go corporate the it’s half level facility as getting back a we so revenue to through that we where basically have expect is XXXX, from that,

will the us giving growth what but would in than and fill which some quicker quite XXXX and what’s are for normal be prospects year beyond happens the facility, the look. that have us, visibility quick for could here, kind frankly again, where what the to So view be the us. is We pretty a of XXXX actually

And of XXXX to in do with a able looking job do, employees execution. and us. growth see for team with attract. has excellent the We’ve Thailand its the XXXX happy to need of we planning very being been what location strategy so into we’ve The doing been an terms we initial beyond as and been

grow. And perfect well us so turn we to to you it Southeast it mitigation may to for a as see then. continue for Pat, kind of a Asia, place over strategy

Pat Jermain

on fiscal overall a a basis From P&L Yes. impact XXXX, about investments. margins perspective, point from Thailand Paul, with there’s starting XX

fiscal systems. on half drag profitability then of a for margins. first And we turn about have As half facility. into still will been want may And as the X.X%. into we move revenue is guided into into think we’ll second people expense. you investing be move still around I the But And I we’re X.X%, asking that XXXX, be XXXX, that use in to of as OpEx to number think and good a we had to going because move in XXXX, X.X% our overall our QX I

I additional revenue But see percentage increase. will the keep around the X.X%. we’ll dollars think that So

Paul Chung

above Very great. on level manufacturing And still you’re a Okay, into that wins, comfortably just helpful. pretty XXXX billion the four-quarters. sounds trailing then good. It on your quite $X like is visibility

there momentum So the record of comments on second win after any in quarter? fiscal kind levels

Todd Kelsey

Yes.

think – But And dropped was at in we in quarter to as out funnel. tend it the to well thought we mean further at to above to really to wins as funnel think, QX, we and important wins. of fiscal want $X tend we about in size the continue We we believe then I momentum general, least address billion wins quarterly look the I XXXX. we not four-quarters. positioned feel with trailing large the stay good drive it. into So because we’re the from the to we look of And

Steve Frisch

really is Yes, quarters is to quarterly we this Steve. an to opportunity, a we that business of reality not into it is, it teams revenue. incentivize important a that win that One the when because takes is couple wins ramp the thing to number development understand for do

drove behavior. we quarterly we achieving to drive if so bad teams or that pricing believe would number, the wins And

so why number and really what And annual on of we that’s stay kind with looks four-quarter and an on teams like. working a trailing focused the

so significant And do we again, that. that’s a why design reason buy

Paul Chung

you kind mentioned And expansion on expand of growth manufacturing if that of think that helpful. customer existing you outlook, we of are you. of helpful. wins? be would how wins could Thank versus about Are Very customers your these longer-term in-house lastly, new Understood. customer’s here. and mostly or kind from the trend funnel as more you very driving between dynamic And most displacing competitive existing kind

Steve Frisch

first. Sure, maybe part the second

If XXXX very initiative effort that with And you new the go and back XXXX, believe, and to pleased we’re fiscal we to logos adding, add to we talked pretty about the I number did. we what portfolio, conscious in had a XXXX and XXXX. like

purposeful extreme are bit. looking executed. very with is maybe the add way little until but strategy again, We the and still new being down logos, a not come they’ve to to pleased same But the

good we you As execution winning their really the chance had has program significantly. in really the We EMEA helped beginning ramps, the execution call talked about where it execute new we a up has the really when we our and look you to well, because a customers, of dividend Their especially by that’s and execution the programs really wins mix of helped quarter. of that with is them winning what XXXX operation are XXXX next like here through this teens, drive performance.

market customers. gains taking with are We share

lastly, lower in I it’s us say bit look there existing manufacturing. currently, historical than helping and that maybe a continue And been think little – us. COVID that’s our through are execution what I’d exiting are customers talk then past. about is to their to

a opportunity down be with bit, little turn uncertainties, the another up, However, to macroeconomic have back conversations start which as for things pick us. could to those especially tendency a

between driving in And with kind say And one, a pleased but pretty so there’s active teams now the the of sector today. we’re right our wouldn’t it’s market are really three. either been manage. to a it an mix I And is trend it we’re we – thing way continue that

highlighted, our Todd in like XXXX. what look So we kind as terms optimistic going into funnel of with of pretty

Paul Chung

so Great. Thank much. you

Operator

our Sheerin of come Stifel. next [Operator question will Instructions] from And Matt

Your line is open.

Matt Sheerin

in were significant morning. the operations, constraints. built drill you you where a that to revenue is your two Hi, to of strategies. changes change Yes. your upside but One really provide bit terms fact of into commentary in missing quarters in compared talked about a three, the just I little of previous in lot last the supply basically in good numbers the inventory, difference, you’ve the more dramatic changes wanted ability the to in obviously, supply because processes, chain a also

talk could strategy the little and quarters? that bit you how been about, a changes more next into put and few over what place So plays have

Todd Kelsey

Sure.

want say in I’d around the to I we particularly of historically it supply some versus what look significant And were because demand Malaysia, anymore. good the what pretty chunk demand challenges, we’ve is, success bring what we’ve to the is at issue there around more of us being footprint. is of kind on which regardless environment focused our that the some we’re had things impacts projections some our we addressed taking when There occur one But was with are big of just of demand. also twofold. supply COVID that just that So but is had the challenges, that’s of quarters approach doesn’t current at a meeting an were much supply they back really what that

with focused more forecasting. a taking we’re our much approach supply So

earlier. lead taking, able we’re And escalating be it purchase that as so think, then on X. get has step focused So excellent drive that’s focused the impact. some put can approach too long to in processes number longer-term I for activities in the we’re – components the a that on processes our probably that market. instance, in to Step that we’re the forecast, place with us of that well place, most on drive number orders the driving X We’ve got in using automation, the open is right things such to customers we’re around to supply lot find parts just as

sight So we our the this mean why quarter, exceeded things. focused I of quarter that the some we are components case began that’s drive in of a we right on we’re far because line we guidance. as to have to able the didn’t

Matt Sheerin

mentioned you’re on that types you about you where easing. some still And are great. Could Okay, supply? seeing what issues, constraints call better components bit of also little you’re a talk areas this seeing and where

Oliver Mihm

not Yes. Matt. commodity could I’ll take our that segments This is trend that. across Candidly, really to. are I easing put Oliver, any base, we’re that seeing a

quarters. would upside the of made glimmer that And create the internally for a QX. in revenue the news in the was we’ve then to coupled whole helped consistent dynamic, And I there say been what here of that success, couple not getting good made that’s with Todd past worse. if the point in pivots about think it’s I that fact it’s ensure

Todd Kelsey

team. earlier efforts hard. team I We’ve incredibly thing got that’s of have The well. We’ve Yes. probably great is it should just some the one as talent I’d added to add the an working excellent too that

good So we talent have chain feels about in the supply that the really organization.

Matt Sheerin

for margin. wanted to talk thanks And Pat ask Okay, that. I or gross about the also

materials component materials an companies Pat? about which and higher that’s drives inflation, margin that see a some a as still a pass-through, just up One due other talked there’s percentage fact EMS the pass-through the as to last all COGS. starting cost gross at are of the that you And pressure night one-for-one to of because of issue,

Pat Jermain

price earn we on points, point. with mean productivity that able saw margin costs, XX, because Matt. us, some inflated fixed we’ve improvements last this additional of I achieving revenue not fortunate us Yes. probably we’re impact XX with And is to for it too, profit been that and at that basis the quarter to through

Todd Kelsey

But to impact our what I’d is us say further any and I factored what it’s moving see don’t basically, we is negative it is, mean, It’s it – projections. having forward. into that

Pat Jermain

Yes. earlier X.X%. of towards moving that said target of And I us

We continue even believe to that in environment. this

Matt Sheerin

it. Got

a nice financing of lot a the at yourself. that, on seen inventory cash inventory you’re then inventory, improvement what certainly of And from deposits still you’re that working Okay. historically, getting and the we’ve XX% it’s that capital but

line bottom You’re through seeing expense. your interest that higher impact

or these discussions go to where manner forward other discussions customers should particularly if there maybe number carry is more where they in inventory, of conservative sort behave So to customers, will you going be want more number. with have want maybe should up, you XX% higher a a that

Steve Frisch

Most Steve. in inflationary definitely, some of as inventory is both costs. this Matt, as well the

that had We’re as frankly facing before definitely conversations customers we’re in quite dynamics. these industry I’ve with never our they having

want they some carrying associated there if So – level? a this. yes, to inventory what a conversation, about a level, If they there’s also with is deposit, cost continuing right is that of it’s conversations a there’s gets the but have regulatory higher

conversations. But So discussions. we by it varies are customer having and yes, different those

Matt Sheerin

so Okay, very Thanks helpful. much.

Operator

the further closing turn questions. no to I Todd showing am remarks. like now I would for to back And conference

Todd Kelsey

All your your you, to Latania. appreciate We right. everybody support who would also today. in like Thank Plexus. I joined thank interest and call our

Operator

This concludes today’s participating. for conference. Thank you

now disconnect. may You

Plexus (PLXS) 29 Jul 222022 Q3 Earnings call transcript