Good morning and welcome to the Plexus Corporate Conference Call regarding its Fiscal Fourth Quarter 2023 Earnings Announcement. My name is Felicia and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for questions. The conference call is scheduled to last approximately one hour. Please note, this conference is being recorded. I would now like to turn the call over to Shawn Harrison, Plexus Vice President of Communications and Investor Relations. Shawn?

Thank you, Felicia. Good morning and thank you for joining us today. Some of the statements made and information provided during our call today will be forward-looking statements, including without limitation, those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation and future business outlook. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of factors that could cause actual results to differ materially from those discussed, please refer to the company's periodic SEC filings, particularly the risk factors in our Form 10-K filing for the fiscal year ended October 1, 2022, is supplemented by our Form 10-Q filings and the safe harbor and fair disclosure statement in our press release. We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus' website. Joining me today are Todd Kelsey, Chief Executive Officer; Steve Frisch, President and Chief Strategy Officer; Pat Jermain, Executive Vice President and Chief Financial Officer; and Oliver Mihm, Executive Vice President and Chief Operating Officer. Consistent with prior earnings calls, Todd will provide summary comments before turning the call over to Steve and Pat for further details. Let me now turn the call over to Todd Kelsey. Todd?

Thank you, Shawn. Good morning everyone. Please advance to Slide 3. Fiscal 2023 was an exceptional year for Plexus. Our team's focus on delivering operational excellence and customer service excellence resulted in outstanding financial performance. In addition, we advanced our sustainable and responsible business practices aligning to our vision to help create the products that build a better world. As we'll discuss in more detail, the accelerating momentum built in fiscal 2023 supports our confidence in achieving $5 billion in revenue with a 5.5% GAAP operating margin by our fiscal 2025. Please advance to Slide 4. For fiscal 2023, we delivered revenue growth in excess of 10%, a 5.2% non-GAAP operating margin, 16% non-GAAP EPS growth and free cash flow of $62 million. While we have consistently delivered industry-leading revenue growth and profitability, this result represents the first time in 15 years we have delivered double-digit revenue growth with greater than 5% operating margin. With momentum building in many of our markets, increasing new program ramps and the opportunity to capture the ongoing unfulfilled demand as supply chain challenges lessen, we continue to forecast accelerating revenue growth as fiscal 2024 progresses. Please advance to Slide 5 for a review of our fiscal fourth quarter results. Our fiscal fourth quarter represented our fifth consecutive quarter with revenue in excess of $1 billion and our sixth consecutive quarter, with GAAP operating margin exceeding five – non-GAAP operating margin exceeding 5%. We delivered quarterly revenue of $1.02 billion, slightly exceeding the midpoint of our guidance. The continued progress by our team in its ability to clear supply mitigated ramp delays and inventory correction activity with some healthcare life sciences customers. In addition, we again undershift demand this quarter by at least $100 million, primarily as a result of component shortages. For the quarter, we delivered GAAP operating margin of 5.2%, including 57 basis points of stock-based compensation expense. Meeting the high end of guidance, GAAP EPS exceeded guidance at $1.44 per share, including $0.21 of stock-based compensation expense. Please advance to Slide 6. In the fiscal fourth quarter, we won 30 new manufacturing programs worth $192 million when fully ramped into production. After delivering record performance in our fiscal third quarter, we witnessed some delay in closing new program win opportunities late in the fiscal fourth quarter. Nonetheless, customer interest remains high in our geographically diverse and industry-leading capabilities. In addition, our funnel of qualified manufacturing opportunities, although down sequentially due to harvesting and normal turnover activity expanded nearly $300 million year-over-year, exiting fiscal 2023 at $3.7 billion. This funnel continues to include a greater than typical number of large opportunities in each of our market sectors, positioning Plexus to maintain strong manufacturing wins momentum and robust revenue growth over the long-term. Please advance to Slide 7. We're guiding fiscal first quarter revenue of $990 million to $1.03 billion, GAAP operating margin of 4.8% to 5.3%, inclusive of approximately 52 basis points of stock-based compensation expense and GAAP EPS of $1.15 to $1.33. Our GAAP EPS guidance includes approximately $0.19 of stock-based compensation expense. We expect to benefit from sustained robust commercial aerospace demand and improving semiconductor capital equipment demand, while also facing headwinds as a result of short-term inventory corrections with certain healthcare life sciences customers and a reduction of components procured at above market prices to more normal levels. Looking further ahead, we continue to forecast accelerating revenue growth as fiscal 2024 progresses, leveraging strong demand in our aerospace and defense and industrial market sectors, accelerating new program ramp momentum and lessening supply chain challenges, which creates the opportunity to capture our ongoing backlog of customer demand. As revenue growth accelerates, we also anticipate operating margin expansion. Consequently, we remain confident in achieving our goal of $5 billion in revenue with a 5.5% GAAP operating margin by our fiscal 2025. Please advance to Slide 8. Finally, I'd like to provide an update on our advances in furthering our sustainable and responsible business practices, as well as share some exciting recent recognition. I'm extremely proud of how our team members supported our vision of helping to build a better world in fiscal 2023. First, we contributed over 19,000 volunteer hours to our local communities, an increase of 300% year-over-year. Next, we made a significant expansion of the reach and impact of our employee resource groups where we added two new groups and 15 chapters globally. Additionally, we donated over $1 million through our Plexus Charitable Foundation. Further, we delivered sustainable solutions within our operations as we expect to substantially exceed our 5% energy intensity reduction goal for fiscal 2023. This is following a 12% reduction in fiscal 2022. Finally, we realized a shared benefit from collaborating with companies to help design and produce more sustainable products. During our fiscal second quarter 2023 earnings call, we highlighted our partnership with Bevi, where we manufacture their smart water dispenser at our Appleton, Wisconsin facility. This product highlights how we engage with our customers to combine innovation and sustainability to help build a better world. The Bevi smart water dispenser is capable of delivering 40,000 different varieties of delicious water while Bevi installations have saved the equivalent of over 400 million single-use water bottles to date, including more than 120,000 at our Plexus U.S. sites. Last week, the Bevi smart water dispenser was voted the coolest thing made in Wisconsin for 2023 in a competition held by Wisconsin Manufacturers & Commerce, the most influential business association in Wisconsin. A wonderful recognition for Bevi and our Plexus team. I will now turn the call over to Steve for additional analysis of the performance of our market sectors. Steve?

Thank you, Todd. Good morning. I will step through a review of the fiscal fourth quarter and the full fiscal year performance of each of the market sectors for 2023, as well as our expectations for each sector for the fiscal first quarter of 2024. Starting with the industrial sector on Slide 9, revenue declined 2% in the fiscal fourth quarter. The result was better than our expectations of a mid single-digit decline, improvements in component supply enabled the stronger result. For the full year of fiscal 2023, new program ramps helped overcome the headwinds of the semicap sub-sector to hold revenue flat as compared to fiscal 2022. As we start the fiscal first quarter, we expect new program ramps and strengthening demand with some customers in our semicap and test and measurement sub-sectors to produce a high single-digit increase. Looking at the wins performance for the industrial sector, the team closed $52 million of qualified manufacturing wins in the fiscal fourth quarter to finish fiscal 2023 with strong wins of $461 million. The new programs include another charging system for electrified heavy equipment that we will produce in our Appleton, Wisconsin facility. In addition, we also won a family of products used to improve the efficiency of power grids through automated control. These devices will be manufactured in our Oradea, Romania facility. We can proceed to healthcare life sciences sector on Slide 10; the sector was down 1% for the fiscal fourth quarter, which was in line with our expectations. For the full year of fiscal 2023, the healthcare life sciences sector grew 20%, which is an exceptional result from a fiscal year view. As we move into fiscal 2024, we see some customers adjusting inventory levels down for end of the calendar year, and we see inflated material pricing returning to normal levels. In addition, the growth trajectory of two new program ramps was reduced to align with broader supply chain constraints as well as near-term lower demand, and that result is we expect revenue in our healthcare life sciences sector to decline low double-digits in the fiscal first quarter. Looking at the wins performance for the healthcare life sciences sector, the wins were robust at $104 million for the fiscal fourth quarter. The strong finish contributed to the team’s healthy wins performance of $336 million for fiscal 2023. Included in the fiscal fourth quarter wins are a neurostimulator bladder control system. We will produce this finished medical device in our Oradea, Romania facility. In addition, we added a new logo that is an industry leader in the diagnostic laboratory equipment area. We will start the relationship by manufacturing subassemblies for them in Guadalajara, Mexico. Advancing to Slide 11. Our aerospace and defense sector grew 11% in the fiscal fourth quarter. The strong result was in line with our expectations of an approximately 10% increase. Meaningful expansion with nine of the top 10 customers in the sector enabled a solid outcome. For the fiscal fourth quarter and for the full year of fiscal 2023, we saw robust demand, especially in commercial aerospace. In spite of the supply chain challenges throughout the year, the team was able to grow the aerospace and defense sector 17% in fiscal 2023. As we look to the fiscal first quarter, commercial aerospace demand remains robust and some of the supply chain constraints are easing. As a result, we anticipate a mid-single-digit increase for the aerospace and defense sector for the fiscal first quarter. Reviewing the wins performance for the aerospace and defense sector. The team won $36 million of qualified manufacturing opportunities in the fiscal fourth quarter, which brought their fiscal 2023 total to a robust $149 million. Included in the wins is a large power converter for a defense application from a new division of an existing customer that will be produced in our Boise, Idaho facility. Advancing to Slide 12, we can review a few regional highlights of the manufacturing wins for the fiscal fourth quarter. Americas wins of $97 million in the fiscal fourth quarter drove the region’s fiscal 2023 total to $482 million. The healthy wins total for the year, along with a robust regional funnel is confirmation of the strong value proposition of the region. The APAC region’s total wins of $183 million in fiscal 2023 benefited from steady wins from the industrial sector throughout the year. With over one-half of the region’s fiscal fourth quarter wins of $43 million coming from the industrial sector, the fiscal fourth quarter was no exception. The region is poised for meaningful growth from this sector, especially as the semi-cap subsector strengthens. Finally, the EMEA region had its 6th consecutive quarter of wins over $50 million. With $52 million of new wins in the fiscal fourth quarter, the region recorded an impressive $280 million of wins in fiscal 2023. With a fiscal 2023 revenue growth rate of over 30%, the regional operations team did an outstanding job converting the wins to revenue. We expect the momentum to continue, resulting in another exceptional growth year for the region in fiscal 2024. I will finish with a review of our funnel of qualified manufacturing opportunities on Slide 13. The combined funnel remains strong at $3.7 billion. For the fiscal fourth quarter, the industrial sector funnel closed at $938 million. New qualified opportunities, especially from semi-cap customers, backfilled the quarterly wins to maintain the industrial funnel at a very healthy level. The healthcare life sciences sector funnel dipped given the strong wins performance and turnover activity. At $1.9 billion at the end of the fiscal fourth quarter, the funnel remains at a very resilient level. The aerospace and defense sector team grew its funnel by $110 million to close at an exceptionally strong level of $840 million for the fiscal fourth quarter. New security and commercial space opportunities contributed to the strong growth. Fiscal 2023 was a solid year for our global market development team. They capitalized upon the strong value proposition that our operations and supply chain teams have created by securing $946 million in manufacturing wins in fiscal 2023. On top of this almost $1 billion of wins, the global market development team expanded the funnel of qualified manufacturing opportunities by $283 million during fiscal 2023, an exceptional result. We started fiscal 2024 in a great position for continued strong wins performance. I will now turn the call to Pat for an in depth review of our financial performance. Pat?

Thank you, Steve, and good morning everyone. Our fiscal fourth quarter results are summarized on Slide 14. While revenue slightly exceeded our guidance midpoint, gross margin of 9.4% exceeded the top end of our guidance. Robust growth in our aerospace and defense market sector and strong fixed-cost management, especially in our APAC region drove the healthier than expected performance. Selling and administrative expense of $43.4 million was slightly above guidance, primarily due to higher incentive and stock-based compensation expense associated with stronger profitability performance. As a percentage of revenue, SG&A was 4.2%, which was consistent with expectations. GAAP operating margin of 5.2% was at the high end of our guidance due to the improved gross margin. This result included 57 basis points of stock-based compensation expense. Non-operating expenses were favorable to expectations as a result of foreign exchange gains and lower than expected interest expense. GAAP diluted EPS of $1.44 exceeded our guidance for the factors previously mentioned, along with a benefit from a slightly favorable tax rate. Turning to our cash flow and balance sheet on Slide 15. We were very pleased with the better than forecasted free cash flow performance as we wrapped up the fiscal year. We delivered $90 million in cash from operations and spent $24 million on capital expenditures, resulting in a robust fiscal fourth quarter free cash flow of $66 million. For the fiscal year, we spent $104 million on capital expenditures, which equated to approximately 2.5% of revenue. We ended the year in a strong balance sheet position. Cash totaled $257 million, while total debt was $431 million. We had $267 million available to borrow under our credit facility and a conservative gross debt-to-EBITDA ratio of 1.6x. For the fiscal year, we delivered a return on invested capital of 13.4%, which was 440 basis points above our weighted average cost of capital. Exceptional operating performance relative to slightly higher working capital investments led to a 40 basis point improvement over fiscal 2022. Each year we recalculate our weighted average cost of capital by using a consistent methodology. With less relative volatility in our stock price over the past few years and a more attractive capital structure, our cost of capital for fiscal 2024 will reduce to 8.2% from 9% in fiscal 2023. The cash cycle ended the fiscal year at 87 days, favorable to expectations and sequentially lower by three days. Please turn to Slide 16 for the details on our cash cycle. We were encouraged to see our supply chain and regional teams continue to drive reductions in gross inventory dollars. This quarter saw a sequential reduction of $80 million, which contributed to the seven-day reduction in inventory days. Partially offsetting this was a four-day reduction in payable days related to earlier procurement and timing of payments. Days in receivables sequentially improved by four days, primarily due to fiscal year-end collection efforts and increased activity under our receivables factoring program. When looking at our advanced payment days, you may have noticed an increase in days for all the previously reported periods. I want to mention a change we made during the fiscal fourth quarter and how we present these days. Previously, our balance sheet included certain advanced payments within other accrued liabilities. As these payments increased over the last several quarters and are similar in nature to previously reported customer deposits, we are combining advanced payments with customer deposits. On our balance sheet, you will now see a total for these types of payments, referred to as advanced payments from customers. From a day’s perspective, this reclassification has lowered our reported cash cycle between 16 and 27 days over the period shown on Slide 16. As Todd has already provided the revenue and EPS guidance for the fiscal first quarter, I’ll review some additional details which are summarized on Slide 17. Fiscal first quarter gross margin is expected to be in the range of 9.1% to 9.5%. At the midpoint gross margin would be slightly lower than the fiscal fourth quarter. We expect some near-term impact on margins due to investments in fixed costs to support forecasted sequential revenue growth as we move through fiscal 2024. We expect selling and administrative expenses in the range of $42.5 million to $43.5 million, essentially flat with the fiscal fourth quarter. Keep in mind that we would expect to see an increase in SG&A expense when we get to our fiscal second quarter with merit increases being effective January 1. Non-operating expenses are anticipated to be in the range of $10 million to $10.5 million, sequentially higher due to the absence of certain insurance benefits and foreign exchange gains recognized in the fiscal fourth quarter. Our effective tax rate for both the fiscal first quarter and fiscal year is expected to be in the range of 14% to 16%. Our expectation for the balance sheet is that working capital investments will modestly increase compared to the fiscal fourth quarter. Based on our revenue forecast, we expect this level of working capital will result in cash cycle days in the range of 90 to 94 days. This would be sequentially higher by five days, primarily due to inventory requirements in support of program ramps. With modest working capital investments coupled with higher capital expenditures to support anticipated future revenue growth, we expect a usage of cash for the fiscal first quarter, a trend we have experienced the last few years during the fiscal first quarter. A few comments on the full year; we expect capital spending in the range of $110 million to $130 million, which does not include any site additions. We are projecting slightly higher working capital investments compared to the prior year to fund growth expectations in the second half of fiscal 2024. Last, we expect to deliver improved free cash flow as we move through fiscal 2024, ending the year with more than $50 million. Over the next couple of months, we will be reviewing with our Board of Directors an appropriate capital allocation plan. We will discuss our anticipated revenue growth and desire to continue capital returns through our share repurchase program, while we take into consideration market conditions, timing of free cash flow and the current elevated interest rate environment. With that, Felicia, let’s now open the call for questions.

Hey, good morning. Thanks for letting me ask a question and congrats on the solid execution here, gentlemen.

Thanks, David.

So maybe first, just thinking about the – you mentioned a couple of the delays in closing in the Healthcare segment. Is there anything there that you can elaborate on or maybe help us with? Is this something we should expect to continue or was this a one-off? Just any color would be helpful I think.

This is Steve. I’ll start with that one. I’d view it more as a one-off. I mean, transitions of new program ramps, especially the complexity of finished medical devices, they’re not uniform at all times. And so as we look at what’s happening with the couple that I mentioned, one is more related to supply chain challenges with the disposable, which we don’t do, that’s causing a little bit of slowness in the capital equipment that we’re trying to deliver. And then the other part was more of a technical issue associated with what that customer is working through with their end markets. That’s been resolved for the most part. So they’re working with their end customers, figuring out a ramp schedule. So from our standpoint, there’s nothing really kind of an anomaly associated with what we would see in a typical ramp schedule for a complex healthcare product.

Okay, great. Thanks so much for that. And then maybe secondly, just you talked about the industrial and the improvement in the semi-cap equipment. Is this more of an in-demand improvement that you’re seeing or maybe more related to component procurement? And does this continue or is this maybe just a one-off here? We should expect that to be slower as you kind of move through the first quarter.

Yes. So, David, we’re seeing a couple of different factors in semi-cap. One is we’re seeing what I would call a modest improvement in end markets. And I would say it’s the first time in probably five or six quarters that we saw forecasts come up just a bit. We’re also taking advantage of share gains within that market space. So again, if you look back to 2023 – to fiscal 2023, we were down in the low-double-digits on a market that was down 20% to 25% so far outperformed the market. And as we think about 2024, and if we start to see some reasonable improvement, which right now we’re just predicting a modest improvement or projecting a modest improvement. If we see a substantial improvement, we’d expect to well outgrow the market and again, keeping in mind that our CAGR in that space was 30% from fiscal 2015 to fiscal 2022. So in taking it back, you asked about components freeing up. That wasn’t necessarily a factor in the semi-cap space? It is a little bit more of a factor with aerospace and defense.

Okay, great. Thanks so much for that. And then just you talked about maybe being able to fulfill some of the $100 million of unfulfilled or under shipped this quarter. Do you think you can – when do you think you can get to that, maybe where you can completely fulfill that demand? Is that next quarter or are we still several quarters out before you think you start shipping that?

Yes, we think it really continues throughout 2024. So we expect to have an impact from Q2 to Q4 of 2024. So not so much in Q1. But we are starting to see some modest improvements in lagging edge semiconductors as well.

Thanks so much for the time, guys. Appreciate it.

Thank you, David.

Hey, guys, thanks very much and great quarter. Pat for a change, I have one for you.

All right.

Yes. Total debt came down really nicely on a sequential basis. I’m wondering what we should assume for interest expense going forward, assuming the new working capital investments that you talked about. And then longer-term, maybe if you could explain how you’re thinking about balancing deploying cash between the buyback and paying down debt?

Sure, yes. And let me start with Q1. We do expect a usage of cash, so we would probably be a little higher in the revolver by the end of December. As we move through fiscal 2024, though, I think we’ve got real opportunity to bring down inventory dollars, continuing that trend from 2023. There will be some return of advanced payments that we’ll be doing as we dispose of that inventory, especially around excess and obsolete inventory. So net-net from a day’s perspective, Melissa, I think we can improve our cash cycle probably five to ten days from where we ended fiscal 2023. So under this new reclassification basis, we’re probably in the low 80s or high 70s. And every day we free up is about $10 million of free cash flow. So that then can equate to bringing debt down through 2024. We’ve got about $6 million left under our current authorization for the share repurchase program. So we’ll definitely execute on that amount. And over the next month or two, we’ll meet with our Board just to look at where interest rate levels are. We want to commit excess cash to returning that to shareholders. But there could be an element of trying to delever a bit as well with the amount of free cash flow we’ll be generating in fiscal 2024.

Okay, great. Maybe extending the interest expense conversation out to your customers. Outside of what you mentioned in healthcare, are you seeing any impact to deal closures or program ramps due to customer concerns about interest rates? And then I think Todd touched on this in his comments. Is there any change to the way your customers are thinking about building or holding inventory?

Yes. So, it’s Steve, maybe I’ll start. In terms of impact on deals, really no impact yet as it relates to where interest rates are at that we see flow through. I think from an inventory standpoint, yes, inventories are a big topic of conversation with virtually all customers. Everybody’s trying to figure out how to drive them down. I think some of the easing – if we can continue to see easing in the component markets that will help. That’s the biggest impact for us is the lead times are still extended. So if those free up, that’ll definitely make the conversations and the ability to drive inventory down with our customers much easier.

I would say there’s a lot of mutual commitment to driving down inventory right now.

That sounds about right. Sounds good. All right. Thanks very much. That’s all for me. Thanks.

Okay. Thanks Melissa.

Hi, good morning. This is Chris Grenga on for Jim. Congrats on the solid results. And thank you for taking the questions. You mentioned that within the funnel, you’re seeing a greater number of larger opportunities. Just curious if you could elaborate. Is that a strategic or is that just a function of the market? And then is that across end markets? Are you seeing that concentrated in any particular end market in particular? Thank you.

Yes. It’s across the markets, Chris, and they’re up kind of across the board, these larger opportunities. And I would say it’s a little bit of both. It’s a bit of a sign of the market and the views of OEMs in that market. But it also has to do with our go-to-market strategy and the way our teams are approaching the markets and opportunities that are out there. So I suspect we’ll continue to increase those numbers of larger opportunities. And we typically think of something greater than $20 million as a larger opportunity. But I think we'll continue to see that increase over time.

Great, thank you very much. And then just could you help me understand or reconcile, I guess, the cadence of sequential increases in healthcare life science wins versus the expectation that that end market might be a little bit softer in the near term? And are there any particular applications within life science that you're seeing more challenged than the average in the near term? Thank you.

Yes. So there's a number of factors that are going on with healthcare life sciences as we look into fiscal 2024. And I'd start with the fact that we're coming off of two outstanding growth years of 18% and 20% in 2022 and 2023. So there is a strong or I would call it a difficult comparison that the sector is going up against. But then there's a number of factors that are turning 2024 into a little bit of a challenging year from a growth standpoint. One is, I talked about the reduction of procurement of parts at above-market prices to more normalized levels. That was most pronounced in the Healthcare/Life Sciences marketplace in the tune of north of $100 million. So you think about that as impacting the revenue comparison right off the top. There's also factors going on with inventory corrections with certain customers who maybe got a bit ahead of what their demand was. And that's a near-term issue that's happening right now. There's a bit of softening that's going on with certain end markets like imaging, for instance, we're seeing a bit of softening. And then finally, the program ramps that Steve referred to. So when you combine all those together, there's a bit of a headwind within that sector. Now one thing I want to do, though, is highlight the strong opportunities within the other sector. So within aerospace and defense and industrial market, which includes semi-cap, we're expecting very strong double-digit growth in both of those in fiscal 2024.

Great, thank you very much.

Hey, Chris. It’s Shawn Harrison here. Just wanted to get back to the part of your earlier question as well about wins versus near-term revenues because of the complexity of the markets we play in healthcare and life sciences, a program win in that incubation period from time of win to revenue could be two years, could be three years, it could be a little bit longer depending upon the regulatory approvals required to ramp that. As Steve said earlier, these programs are extremely complex. So winning something today and the strong win rate doesn't really mean anything to revenue in the near term. But it is a great indicator over the long-term.

Great, thank you very much. Appreciate the color.

Hi, thank you for taking my questions. And congratulations on a great quarter. I'm just curious for the aerospace and defense, how much of that growth is driven by the demand versus sort of backlog build as component has become more available?

Yes. This is Steve. I'll take that one. The demand through fiscal 2023 for commercial aerospace was there. It's always been there. We've had a pretty significant backlog of activity. And so as we talked about a little bit in fiscal 2023, that sector was a little bit slower pipelining than materials. We now have much higher confidence with our customers in terms of the pipeline and materials. We're starting to see some ease constraints on some of the lagging and semiconductor components. So we're able to flow that through into shipment products for our customers, which we expect to continue at a better rate here in 2024 than we did in 2023, given the environment. So strong demand continues, easing of components sets us up for a pretty good fiscal 2024 as it relates to commercial aerospace we believe.

Okay, thank you. And in terms of inventory I think Pat you noted you expect that to improve throughout fiscal 2024. Do you think you're going to get back to historical levels ever in terms of inventory or is there sort of a new normal we should expect there longer term?

Yes, there's – I think it's going to be tough to get back to the pre-pandemic levels. But I just think with some of the new processes we put in place and as we see lead times coming down, I mean we can make some really significant efforts and improvements. Keep in mind Anja too, with the company growing at the rate it's growing, we're just going to see more working capital investments required. So from a dollars perspective, I don't think we'll get back to those levels. From a day's perspective, I think we'll see improvement whether it's to the pre-pandemic level, we'll wait and see. That could be a little further out to see that type of level.

Specifically this is Oliver, Anja, talking to what we're seeing in our commodities, weighted average lead times are coming down. So if you look at it across our entire commodity base, we're just under 15% lead time coming back reducing quarter-over-quarter. Specific to semiconductors, which has historically been a stickier spot for us. We saw lead times come down just over – sorry, just under 20% quarter-over-quarter, moving from about nine months to move in the out seven months. But the point here, getting back to your question is at seven months, that's still 2.5x what we would have historically considered a normal lead time for semiconductor commodity. So as Pat noted, as that comes down, we expect to see inventory reduced, but we're still quite a bit of ways from what we would consider normal lead times.

Thank you. And I think you and your peers have in the past said that due to the uncertainty in terms of the supply chain challenges and whatnot, some potential customers had been reluctant to ship some outsourcing model. What do you see there now given the current economic conditions?

Yes. I think the concept there, what we talked about historically is if you go back to, say, COVID period, there is a general hesitancy maybe to make some decisions? Do we want to outsource – there is reduced travel. We want to be able to go and see the facility that we will be moving our product to. And certainly, I think over the past few quarters, we've seen that reverse. And so I think that the tendency to make decisions has come back. I think the larger deals that Todd talked to earlier also is representative of that dynamic in that shift.

Okay, that was all from me.

All right. Thank you, Felicia. Well, I thought in closing, I would spend just a bit of time talking about our fiscal 2024 outlook and how we see that playing out. And I guess, I would start by saying it looks much the same as we thought 90 days ago. So we expected we'd be in a bit of a revenue trough over Q3 and Q4 of fiscal 2023 into Q1 of 2024, playing out as we expected, but then driving into strong growth in Q2, Q3 and Q4 of fiscal 2024 as we saw stabilization in markets, acceleration of new program ramps, some lessening of supply chain constraints. So that's still playing out. And I'd also note that in spite of the strong margin performance of 2023, we believe we can continue to expand margins as revenue increases and we gain better leverage with maybe the only caveat being our fiscal Q2, where we have the seasonal headwinds due to compensation adjustments and such, which come into play. So everything is looking on track for us for fiscal 2024 based on what we thought a quarter ago. And we continue to progress the way we expect, and that's what gives us confidence we can exit the year around the 5.5% operating margin range and drive towards this $5 billion in revenue at 5.5% in our 25%. So lots of confidence as we look forward. Then in closing, I just want to thank everybody again for joining our call. We appreciate the interest in Plexus and all of your support. Have a nice day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.