• Plexus Announces Fiscal First Quarter Financial Results

    Source: Nasdaq GlobeNewswire / 25 Jan 2023 16:15:00   America/New_York

    NEENAH, WI, Jan. 25, 2023 (GLOBE NEWSWIRE) -- Plexus Corp. (NASDAQ: PLXS) today announced financial results for our fiscal first quarter ended December 31, 2022, and guidance for our fiscal second quarter ending April 1, 2023.

    • Reports fiscal first quarter 2023 revenue of $1.09 billion, GAAP operating margin of 5.2% and GAAP diluted EPS of $1.49, including $0.21 of stock-based compensation expense
    • Initiates fiscal second quarter 2023 revenue guidance of $1.02 to $1.07 billion with GAAP diluted EPS of $1.06 to $1.24, including $0.21 of stock-based compensation expense
      
     Three Months Ended
     Dec 31, 2022 Dec 31, 2022 Apr 1, 2023
     Q1F23 Results Q1F23 Guidance Q2F23 Guidance
    Summary GAAP Items     
    Revenue (in billions)$1.094  $1.080 to $1.130 $1.020 to $1.070
    Operating margin               5.2% 5.0% to 5.5% 4.5% to 5.0%
    Diluted EPS (1)$1.49  $1.40 to $1.58 $1.06 to $1.24
          
    Summary Non-GAAP Items (2)     
    Return on invested capital (ROIC)             13.8%    
    Economic return               4.8%    

    (1) Includes stock-based compensation expense of $0.21 for Q1F23 results, $0.20 for Q1F23 guidance and $0.21 for Q2F23 guidance.   

    (2) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for additional information regarding non-GAAP financial measures.


    Fiscal First Quarter 2023 Information

    • Won 29 manufacturing programs during the quarter representing $158 million in annualized revenue when fully ramped into production
    • Trailing four-quarter manufacturing wins of $885 million in annualized revenue when fully ramped into production
    • Purchased $11.5 million of our shares at an average price of $99.12 per share under our share repurchase program, leaving $35.0 million available under our current $50.0 million authorization

    Todd Kelsey, Chief Executive Officer, commented, "Our fiscal 2023 started strong as we capitalized on the momentum built during fiscal 2022. Our fiscal first quarter results met our guidance as revenue expanded 34% year over year to $1.09 billion. We delivered a healthy 5.2% GAAP operating margin and GAAP earnings per share that nearly doubled year over year to $1.49. We achieved these robust results while managing through unexpected near-term demand volatility due to greater than anticipated semiconductor capital equipment market weakness, near-term new program ramp schedule changes and continuing supply chain challenges.”

    Mr. Kelsey continued, "Leveraging our geographically diverse industry-leading capabilities, we won 29 new manufacturing programs worth $158 million, including several programs associated with secular growth markets. In addition, our funnel of qualified manufacturing opportunities expanded nearly $250 million sequentially to a new record of $3.6 billion. We anticipate an increasing value of manufacturing wins for the fiscal second quarter, as well as stronger wins performance for the remainder of fiscal 2023, as our significantly expanded funnel and current business development conditions support a greater level of harvesting.”

    Patrick Jermain, Executive Vice President and Chief Financial Officer, commented, “For our fiscal first quarter, we delivered return on invested capital of 13.8%, which was 480 basis points above our weighted average cost of capital. Strong operating performance led to a 380 basis point improvement in ROIC compared to the prior year fiscal first quarter. Our fiscal first quarter cash cycle of 106 days included strategic investments to support new program ramps and the impact of demand volatility on inventory within the quarter. We are guiding higher cash cycle days for our fiscal second quarter related to additional working capital investments in support of customer demand and new programs ramps. We expect improvement to our cash cycle as we progress through the second half of fiscal 2023.”

    Mr. Kelsey further commented, "We are guiding fiscal second quarter revenue of $1.02 billion to $1.07 billion, GAAP operating margin of 4.5% to 5.0% and GAAP EPS of $1.06 to $1.24. Our guidance reflects a continuation of the near-term demand dynamics that affected our fiscal first quarter, our typical seasonal payroll cost increases as well as a sequential increase in interest and income tax expense.”

    Mr. Kelsey concluded, “We continue to see the potential for strong performance in fiscal 2023, including industry-leading profitability and revenue growth rates in excess of the markets we serve. While recognizing ongoing macroeconomic and geopolitical uncertainties, we anticipate a return to sequential revenue growth for our second half of fiscal 2023 and are focused on achieving our 5.5% GAAP operating margin goal exiting the fiscal year. This expectation reflects robust Healthcare/Life Sciences and Aerospace/Defense market sector demand, normalizing existing program ramp schedules, additional new program ramps and conversion of backlog as we continue to resolve supply chain challenges.”  

      
    Quarterly ComparisonThree Months Ended
    (in thousands, except EPS)Dec 31, 2022 Oct 1, 2022 Jan 1, 2022
    Revenue$        1,093,925  $        1,123,848  $        817,456 
    Gross profit         101,199           107,105           69,996 
    Operating income         57,341           62,314           30,473 
    Net income         42,190           50,457           23,423 
    Diluted EPS$        1.49  $        1.78  $        0.82 
          
    Gross margin         9.3%          9.5%          8.6%
    Operating margin         5.2%          5.5%          3.7%
          
    ROIC (1)         13.8%          13.0%          10.0%
    Economic return (1)         4.8%          3.7%          0.7%

    (1) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed and/or disclosed in this release, such as adjusted operating margin, adjusted net income, adjusted diluted EPS, ROIC and economic return.


    Business Segment and Market Sector Revenue

    Plexus measures operational performance and allocates resources on a geographic segment basis. Plexus also reports revenue based on the market sector breakout set forth in the table below, which reflects Plexus’ market sector focused strategy. Top 10 customers comprised 53% of revenue during the first quarter of fiscal 2023. This is down five percentage points from the fourth quarter of fiscal 2022 and three percentage points from the first quarter of fiscal 2022.

      
    Business Segments ($ in millions)Three Months Ended
     Dec 31, 2022 Oct, 1, 2022 Jan 1, 2022
    Americas$        390  $        380  $        277 
    Asia-Pacific         642           689           491 
    Europe, Middle East and Africa         89           85           73 
    Elimination of inter-segment sales         (27)          (30)          (24)
    Total Revenue$        1,094  $        1,124  $        817 


    Market Sectors ($ in millions)Three Months Ended
     Dec 31, 2022 Oct 1, 2022 Jan 1, 2022
    Industrial$        472        43% $        520        46% $        364        45%
    Healthcare/Life Sciences         488        45%          467        42%          344        42%
    Aerospace/Defense         134        12%          137        12%          109        13%
    Total Revenue$        1,094  $        1,124  $        817 
                


    Non-GAAP Supplemental Information

    Plexus provides non-GAAP supplemental information, such as ROIC, economic return and free cash flow because such measures are used for internal management goals and decision-making, and because they provide management and investors with additional insight into financial performance. In addition, management uses these and other non-GAAP measures, such as adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted EPS, to provide a better understanding of core performance for purposes of period-to-period comparisons. Plexus believes that these measures are also useful to investors because they provide further insight by eliminating the effect of non-recurring items that are not reflective of continuing operations. For additional information on non-GAAP measures, please refer to the attached Non-GAAP Supplemental Information tables.

    ROIC and Economic Return

    ROIC for the first quarter of fiscal 2023 was 13.8%. Plexus defines ROIC as tax-effected annualized adjusted operating income divided by average invested capital over a two-quarter period for the first fiscal quarter. Invested capital is defined as equity plus debt and operating lease obligations, less cash and cash equivalents. Plexus' weighted average cost of capital for fiscal 2023 is 9.0%. ROIC for the first quarter of fiscal 2023 less Plexus’ weighted average cost of capital resulted in an economic return of 4.8%.

    Free Cash Flow

    Plexus defines free cash flow as cash flows provided by operations less capital expenditures. For the three months ended December 31, 2022, cash flows used in operations of $48.8 million, less capital expenditures of $23.1 million, resulted in negative free cash flow of $71.9 million.

      
    Cash Cycle DaysThree Months Ended
     Dec 31, 2022 Oct 1, 2022 Jan 1, 2022
    Days in Accounts Receivable61 60 66
    Days in Contract Assets10 11 12
    Days in Inventory151 144 145
    Days in Accounts Payable(69) (72) (87)
    Days in Cash Deposits(47) (43) (33)
    Annualized Cash Cycle *106 100 103
    * We calculate cash cycle as the sum of days in accounts receivable, days in contract assets and days in inventory, less days in accounts payable and days in cash deposits.
     

    Conference Call and Webcast Information

    What:   Plexus Fiscal 2023 Q1 Earnings Conference Call and Webcast
    When:   Thursday, January 26, 2023 at 8:30 a.m. Eastern Time
    Where:Participants are encouraged to join the live webcast at the investor relations section of the Plexus website, plexus.com. Participants can also join utilizing the links below:
      
       Audio conferencing link:
    https://register.vevent.com/register/BI35170303983c48ce82b9381eb40ce6bd
      
     Webcast link:
    https://edge.media-server.com/mmc/p/4rx58iuu
    Replay:   The webcast will be archived on the Plexus website and will be available as on-demand for 12 months


    Investor and Media Contact
    Shawn Harrison
    +1.920.969.6325
    shawn.harrison@plexus.com

    About Plexus
    Since 1979, Plexus has been partnering with companies to create the products that build a better world. We are a team of nearly 25,000 individuals who are dedicated to providing Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing and Sustaining Services. Plexus is a global leader that specializes in serving customers in industries with highly complex products and demanding regulatory environments. Plexus delivers customer service excellence to leading companies by providing innovative, comprehensive solutions throughout a product’s lifecycle. For more information about Plexus, visit our website at www.plexus.com.

    Safe Harbor and Fair Disclosure Statement
    The statements contained in this press release that are guidance or which are not historical facts (such as statements in the future tense and statements including believe, expect, intend, plan, anticipate, goal, target and similar terms and concepts), including all discussions of periods which are not yet completed, are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include the effect of inflationary pressures on our costs of production, profitability, and on the economic outlook of our markets; the effects of shortages and delays in obtaining components as a result of economic cycles, natural disasters or otherwise; the risk of customer delays, changes, cancellations or forecast inaccuracies in both ongoing and new programs; the lack of visibility of future orders, particularly in view of changing economic conditions; the economic performance of the industries, sectors and customers we serve; the effects of tariffs, trade disputes, trade agreements and other trade protection measures; the effects of the volume of revenue from certain sectors or programs on our margins in particular periods; our ability to secure new customers, maintain our current customer base and deliver product on a timely basis; the risks of concentration of work for certain customers; the particular risks relative to new or recent customers, programs or services, which risks include customer and other delays, start-up costs, potential inability to execute, the establishment of appropriate terms of agreements, and the lack of a track record of order volume and timing; the effects of start-up costs of new programs and facilities or the costs associated with the closure or consolidation of facilities; possible unexpected costs and operating disruption in transitioning programs, including transitions between Company facilities; the risk that new program wins and/or customer demand may not result in the expected revenue or profitability; the fact that customer orders may not lead to long-term relationships; our ability to manage successfully and execute a complex business model characterized by high product mix and demanding quality, regulatory, and other requirements; the risks associated with excess and obsolete inventory, including the risk that inventory purchased on behalf of our customers may not be consumed or otherwise paid for by the customer, resulting in an inventory write-off; risks related to information technology systems and data security; the ability to realize anticipated savings from restructuring or similar actions, as well as the adequacy of related charges as compared to actual expenses; increasing regulatory and compliance requirements; any tax law changes and related foreign jurisdiction tax developments; current or potential future barriers to the repatriation of funds that are currently held outside of the United States as a result of actions taken by other countries or otherwise; the potential effects of jurisdictional results on our taxes, tax rates, and our ability to use deferred tax assets and net operating losses; the weakness of areas of the global economy; the effect of changes in the pricing and margins of products; raw materials and component cost fluctuations; the potential effect of fluctuations in the value of the currencies in which we transact business; the effects of changes in economic conditions, political conditions and tax matters in the United States and in the other countries in which we do business; the potential effect of other world or local events or other events outside our control (such as the conflict between Russia and Ukraine, escalating tensions between China and Taiwan or China and the United States, changes in energy prices, terrorism, global health epidemics and weather events); the impact of increased competition; an inability to successfully manage human capital; changes in financial accounting standards; and other risks detailed herein and in our other Securities and Exchange Commission filings, particularly in Risk Factors contained in our fiscal 2022 Form 10-K.

     
    PLEXUS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (in thousands, except per share data)
    (unaudited)
      
     Three Months Ended
     Dec 31, Jan 1,
      2022  2022
    Net sales$        1,093,925  $        817,456 
    Cost of sales         992,726           747,460 
    Gross profit         101,199           69,996 
    Operating expenses:   
    Selling and administrative expenses         43,858           37,502 
    Restructuring and impairment charges         —           2,021 
    Operating income         57,341           30,473 
    Other income (expense):   
    Interest expense         (6,894)          (3,046)
    Interest income         934           271 
    Miscellaneous, net         (1,944)          (923)
    Income before income taxes         49,437           26,775 
    Income tax expense         7,247           3,352 
    Net income$        42,190  $        23,423 
    Earnings per share:   
    Basic$        1.53  $        0.84 
    Diluted$        1.49  $        0.82 
    Weighted average shares outstanding:   
    Basic         27,639           28,018 
    Diluted         28,305           28,709 


     
    PLEXUS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (in thousands, except per share data)
    (unaudited)
        
     Dec 31, Oct 1,
      2022  2022
    ASSETS   
    Current assets:   
    Cash and cash equivalents$        247,880  $        274,805 
    Restricted cash         31           665 
    Accounts receivable         733,962           737,696 
    Contract assets         119,016           138,540 
    Inventories         1,645,011           1,602,783 
    Prepaid expenses and other         68,401           61,633 
    Total current assets         2,814,301           2,816,122 
    Property, plant and equipment, net         448,325           444,705 
    Operating lease right-of-use assets         64,069           65,134 
    Deferred income taxes         39,337           39,075 
    Other assets         29,260           28,189 
    Total non-current assets         580,991           577,103 
    Total assets$        3,395,292  $        3,393,225 
        
    LIABILITIES AND SHAREHOLDERS’ EQUITY   
    Current liabilities:   
    Current portion of long-term debt and finance lease obligations$        329,076  $        273,971 
    Accounts payable         753,755           805,583 
    Customer deposits         511,037           480,486 
    Accrued salaries and wages         64,126           88,876 
    Other accrued liabilities         296,466           357,273 
    Total current liabilities         1,954,460           2,006,189 
    Long-term debt and finance lease obligations, net of current portion         187,272           187,776 
    Accrued income taxes payable         42,019           42,019 
    Long-term operating lease liabilities         32,149           33,628 
    Deferred income taxes         5,616           6,327 
    Other liabilities         23,517           21,555 
    Total non-current liabilities         290,573           291,305 
    Total liabilities         2,245,033           2,297,494 
    Shareholders’ equity:   
    Common stock, $.01 par value, 200,000 shares authorized,   
    54,133 and 54,084 shares issued, respectively,   
    and 27,612 and 27,679 shares outstanding, respectively         541           541 
    Additional paid-in-capital         654,059           652,467 
    Common stock held in treasury, at cost, 26,521 and 26,405, respectively         (1,104,953)          (1,093,483)
    Retained earnings         1,614,424           1,572,234 
    Accumulated other comprehensive loss         (13,812)          (36,028)
    Total shareholders’ equity         1,150,259           1,095,731 
    Total liabilities and shareholders’ equity$        3,395,292  $        3,393,225 


     
    PLEXUS CORP. AND SUBSIDIARIES
    NON-GAAP SUPPLEMENTAL INFORMATION Table 1
    (in thousands, except per share data)
    (unaudited)
          
     Three Months Ended
     Dec 31, Oct 1, Jan 1,
      2022  2022  2022
    Operating income, as reported$        57,341  $        62,314  $        30,473 
    Operating margin, as reported         5.2%          5.5%          3.7%
          
    Non-GAAP adjustments:     
    Restructuring and impairment charges (1)         —           —           2,021 
    Adjusted operating income$        57,341  $        62,314  $        32,494 
    Adjusted operating margin         5.2%          5.5%          4.0%
          
    Net income, as reported$        42,190  $        50,457  $        23,423 
          
    Non-GAAP adjustments:     
    Restructuring and impairment charges, net of tax (1)         —           —           1,809 
    Adjusted net income$        42,190  $        50,457  $        25,232 
          
    Diluted earnings per share, as reported$        1.49  $        1.78  $        0.82 
          
    Non-GAAP per share adjustments:     
    Restructuring and impairment charges, net of tax (1)         —           —           0.06 
    Adjusted diluted earnings per share$        1.49  $        1.78  $        0.88 

    (1) During the three months ended January 1, 2022, restructuring and impairment charges of $2.0 million, or $1.8 million net of taxes, were incurred primarily for employee severance costs associated with a facility transition in the Company's APAC region.

     
    PLEXUS CORP. AND SUBSIDIARIES
    NON-GAAP SUPPLEMENTAL INFORMATION Table 2
    (in thousands)
    (unaudited)
          
    ROIC and Economic Return Calculations Three Months Ended Twelve Months Ended Three Months Ended
     Dec 31, Oct 1, Jan 1,
     2022 2022 2022
    Operating income, as reported $        57,341   $        178,185   $        30,473 
    Restructuring and impairment charges+         —  +         2,021  +         2,021 
    Adjusted operating income $        57,341   $        180,206   $        32,494 
     x         4     x         4 
             
             
    Adjusted annualized operating income $        229,364   $        180,206   $        129,976 
    Adjusted effective tax ratex         16% x         13% x         13%
    Tax impact          36,698            23,427            16,897 
    Adjusted operating income (tax-effected) $        192,666   $        156,779   $        113,079 
             
    Average invested capital÷$        1,392,002  ÷$        1,207,357  ÷$        1,135,312 
    ROIC          13.8%           13.0%           10.0%
    Weighted average cost of capital-         9.0% -         9.3% -         9.3%
    Economic return          4.8%           3.7%           0.7%


                
    Average Invested Capital CalculationsDec 31, Oct 1, Jul 2, Apr 2, Jan 1, Oct 2,
      2022   2022   2022   2022   2022   2021 
    Equity$        1,150,259  $        1,095,731  $        1,058,190  $        1,040,591  $        1,044,095  $        1,028,232 
    Plus:           
    Debt and finance lease obligations – current         329,076           273,971           250,012           222,393           151,417           66,313 
    Operating lease obligations - current (1)         8,878           7,948           8,640           9,266           9,507           9,877 
    Debt and finance lease obligations - long-term         187,272           187,776           184,707           186,069           187,075           187,033 
    Operating lease obligations - long-term         32,149           33,628           32,270           34,347           36,343           37,970 
    Less:           
    Cash and cash equivalents         (247,880)          (274,805)          (276,608)          (307,964)          (217,067)          (270,172)
     $        1,459,754  $        1,324,249  $        1,257,211  $        1,184,702  $        1,211,370  $        1,059,253 

    (1) Included in other accrued liabilities on the Condensed Consolidated Balance Sheets.



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