Hello, everyone. Thank you for joining us and welcome to the Q2 2026 Plexus earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Sean Harrison, IRO. Sean, please go ahead.

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 guaranteed 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 filing for the fiscal year ended September 27, 2025, 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 at www.plexus.com, clicking on investors at the top of that page. Joining me today are Todd Kelsey, President and Chief Executive Officer, Oliver Min, Executive Vice President and Chief Operating Officer, Pat Germain, Executive Vice President and Chief Financial Officer, and David Abel, Senior Vice President of Finance. With today's earnings call, Todd will provide summary comments before turning the call over to Oliver, Pat, and David for further details.

But before I turn the call over to Todd, I would first like to express my gratitude to Pat for his partnership mentorship and friendship and offer my best wishes for an amazing retirement second i'm excited to announce that todd will be appearing on cnbc's fast money this evening to discuss plexus and our fantastic results in outlook with that let me now turn the call over to todd kelsey tom thank you sean good morning everyone please advance to slide three before i begin my prepared remarks regarding the business i want to celebrate pat's incredible 12-year tenure as plexus's cfo and wish him all the best during retirement he's been an extraordinary business partner to me over the years i also want to express my deep gratitude for pat's leadership and integrity establishing a strong tone from the top that has been instrumental in our growth journey fostering and cultivating a high-performing finance team that has played a significant role in Plexus' tremendous financial results over the years. I'm also excited to welcome David Abel as our next CFO. Since joining Plexus last fall, David's impact on the organization has already been meaningful. I'm confident that as we continue our growth journey, David's extensive financial expertise, global perspective, and strategic mindset will position him to be an exceptional CFO. Let's advance to slide four. Plexus' momentum is accelerating broadly. We now expect to deliver mid-teens or greater fiscal 2026 revenue growth from the contribution of numerous program ramps, ongoing market share gains, and improving end market demand. Our team generated a record $355 million in new manufacturing program wins with broad-based contributions across our market sectors. Against this tremendous result, we also expanded our funnel of qualified manufacturing opportunities. We're delivering non-GAAP operating margin expansion while increasing our already significant investments focused on expanding operational efficiency and capitalizing on continuing revenue growth momentum. Finally, we are sustaining strong financial discipline, delivering better than expected working capital performance amidst substantial acceleration in revenue growth and tightening supply chain conditions. Please advance to slide five. Fiscal second quarter revenue of $1.164 billion exceeded our guidance range, representing our fifth consecutive quarter of sequential revenue growth and a robust 19% year-over-year increase. While growth was strong throughout all of our market sectors, we experienced specific strength in aerospace and defense as a result of increasing demand for our industry-leading solutions and support of disruptive technologies, and in semi-cap, where our ongoing share gains are amplifying surging market demand. Non-GAAP EPS of $2.05 exceeded guidance. We delivered a robust 6% non-GAAP operating margin while continuing to heavily invest in program ramps, operational efficiency initiatives, and technologies. Please advance to slide 6. For the fiscal second quarter, we secured 30 new manufacturing programs with a record $355 million in annualized revenue when fully ramped into production. All market sectors contributed to this tremendous performance, which included broad-based opportunities in aerospace and defense, expanded relationships and share gains in surgical and imaging platforms, a new engagement in data center power solutions, and continued share gains in semiconductor capital equipment. Through expanded business development efforts, synergies with our engineering solutions and sustaining services, and our focus on providing unmatched quality and delivery, we're also seeing an increasing breadth of customer interest for our industry-leading solutions. As a result, for the second fiscal quarter our funnel of qualified manufacturing opportunities expanded sequentially and year over year. We produced particularly notable growth in our industrial market sector where we are generating significant interest in automation and robotics, data center and energy solutions in our aerospace and defense market sector. Please advance to slide 7. At Plexus, we are committed to advancing sustainability through our value of innovating responsibly, as we boldly drive positive change and promote a sustainable future for and through our people, our solutions and our operations, all of which is built on a foundation of trust and transparency. Critical to our success is our people who are at the heart of who we are and what we Our second fiscal quarter was particularly memorable as we celebrated two major organizational milestones. First, I was honored to join members of our Plexus leadership team at NASDAQ's Market Site and Times Square to ring the closing bell in celebration of our 40th anniversary as a publicly listed NASDAQ company. The significant accomplishment was a celebration of the trust we've created with our customers and the unwavering dedication of our people. Additionally, our Kelso Scotland site celebrated its 25th anniversary. Since opening in 2001, the Kelso team has evolved from printed circuit board assembly to manufacturing complex life-impacting products, an evolution made possible by our team members, many of whom have been with us since day one. Our commitment to delivering excellence and innovating responsibly also continues to earn external recognition. We are proud to be named a finalist for the 2026 Manufacturing Leadership Awards in two categories, AI Vision and Strategy and Sustainability in the Circular Economy. The awards will be presented in June by the Manufacturing Leadership Council, which is part of the National Association of Manufacturers. These awards highlight our emphasis on innovation and delivering a positive environmental impact as we help create the products that build a better world. Finally, we are excited to announce the upcoming release of our annual sustainability report during our fiscal third quarter. The fiscal 2025 report highlights our continued commitment to innovating responsibly, as we've always been driven to do something more for our customers, our team members, and the world. Please advance to slide eight. For our fiscal third quarter, we are guiding revenue of $1.2 to $1.25 billion, representing 5% sequential and 20% year-over-year growth at the midpoint. We are guiding non-GAAP operating margin of 5.9 to 6.3% and non-GAAP EPS of $2.02 to $2.18. We believe we are outgrowing our end markets, many of which are seeing improving demand, by leveraging new program ramps, market share gains, and our support of disruptive technologies. As a result, we anticipate double-digit revenue growth in each of our market sectors in fiscal 2026 with particularly strong performance in aerospace and defense and industrial, led by significant growth in our semi-cap subsector. Accordingly, for fiscal 2026, we now expect to deliver mid-teens or greater revenue growth overall, a substantially increased forecast from our initial expectations last October. We anticipate delivering this revenue growth performance with robust profitability, anticipating a 6% or greater non-GAAP operating margin for fiscal 2026 and continued strong working capital efficiency. In closing, our consistent focus on redefining excellence through our unmatched quality and delivery is shaping our decision making and sustaining our tremendous momentum we are expanding and accelerating investments in technology capabilities and our people to enable customer success drive greater long-term operational efficiency and increase our revenue growth potential these efforts will position us to sustain our momentum well beyond fiscal 2026 we'll now turn the call over to oliver for additional analysis of the performance of our market sectors, Oliver.

Thank you Todd. Good morning. I will begin with the review of the fiscal second quarter performance of each of our market sectors, our expectations for each sector for the fiscal third quarter, and directional sector commentary for fiscal 2026. I will also review the annualized revenue contribution of our WINS performance for each market sector and then provide an overview of our funnel of qualified manufacturing opportunities. Starting with our aerospace and defense sector on slide nine, revenue increased 19% sequentially in the fiscal second quarter, significantly outperforming our expectation of a mid-single-digit increase. Improved end market demand across all subsectors and our team's efforts to expand component availability drove the result. For the fiscal third quarter, we expect revenue for the aerospace and defense sector to be up mid-single digits as we see programs scaling up in our space and defense subsectors. Fiscal second quarter wins for the aerospace and defense sector were 44 million dollars. Our Kelso Scotland site won a follow-on share gain award from an existing customer in the defense subsector. The customer noted the strength of our partnership and our operational excellence as factors in their decision. Relationship strength and operational excellence were also factors in a significant follow-on award from an existing unmanned defense customer this product is built in our boise idaho facility we anticipate fiscal 2026 revenue growth for the aerospace and defense sector to exceed our 9 to 12 percent goal with growth expected to be well into the double digits the sector's growth continues to gain momentum supported by new and existing customers with strong demand growth in the commercial aerospace and space subsectors and exceptional growth in the defense subsector please advance to slide ten. Fiscal second quarter revenue in our healthcare life sciences market sector was up one percent sequentially, aligned to our expectation of flat to up low single digit performance. For the fiscal third quarter, we expect the healthcare life sciences market sector to be flat ahead of an anticipated return to sequential revenue growth in our fiscal fourth quarter. Our fiscal second quarter wins were strong at 116 million dollars. Our team in Xiamen, China, won a next-generation point-of-care ultrasound system due to the strength of our new product launch capabilities. Our seamless engineering to production transition capabilities also contributed to a significant award for our Neenah Wisconsin facility. The products support a robotic surgical platform. We continue to have a robust fiscal 2026 outlook for the healthcare life sciences sector, anticipating revenue growth to exceed our 9 to 12 percent goal, supported by contributions from ongoing and new program ramps, share gains, and strong end market demand across our therapeutics and monitoring subsectors. Advancing to the industrial sector on slide 11, fiscal second quarter revenue was up 12 percent sequentially, in line with our forecast. Our industrial sector fiscal third quarter outlook of a low double-digit increase is supported by substantial growth within the semi-cap subsector and strength in the industrial equipment subsector from new program ramps and strengthening demand. The industrial market sector had record high wins of $195 million for the fiscal second quarter. Wins included a substantial award from an existing customer that is launching a new product line for data center power solutions. Our long-term strategic partnership and strength of value proposition contributed to the win. The product will be built in our Bangkok, Thailand facility. We also won a substantial follow-on award from an existing robotics customer. Our strength of execution and ability to quickly ramp to fulfill their demand supported the win. This product is assembled in our Guadalajara Mexico campus. Our Guadalajara Mexico campus is also welcoming a new customer to Plexus, as we are selected to support production of an energy storage system for electric commercial vehicles. Our outlook for the industrial sector for fiscal 2026 continues to gain momentum. We are now anticipating growth well in excess of our 9-12% growth goal. Our growth outlook is supported by new program ramps and robust growth that's in excess of market for our semi-cap subsector, and demand improvement and program ramps offsetting pockets of demand softness within other subsectors. Please advance to slide 12 for a review of our funnel of qualified manufacturing opportunities. In recognition of Plexus' industry-leading capabilities and focus on building partnerships, our customers are providing increasing opportunities to capture share and new program wins. As evidence, our funnel of qualified manufacturing opportunities expanded 11 percent sequentially in the fiscal second quarter and is now $4 billion. This expansion is due in part to record high funnels in our aerospace and defense sector and our industrial sector. The funnel in those two sectors has expanded in excess of 45% as compared to the fiscal second quarter of 2025. In summary, the revenue growth we are experiencing from ongoing and new program ramps, inclusive of share gains, and improving end market demand support our revised outlook for Plexus to now deliver mid-teens or greater fiscal 2026 revenue growth. Before I turn the call over to Pat, I'd also like to wish Pat well in his retirement. You've been an incredible partner and done a lot in support of the success of Plexus and the incredible journey that we are on. Congratulations. Now over to you, Pat.

Thank you Oliver and good morning everyone. Our fiscal second quarter results are summarized on slide 13. Gross margin at 10.2% was at the top end of our guidance due to a favorable mix of service offerings and fixed cost leverage. In addition, productivity improvements associated with ongoing operational efficiency initiatives help to offset the impact from our typical seasonal compensation cost increases. Selling an administrative expense of $57.3 million was slightly above our guidance due to additional incentive compensation expense driven by our robust revenue growth and strong ROIC performance. In addition, we expanded our technology and automation investments in support of future efficiencies and sustaining revenue growth momentum. The result was a non-GAAP operating margin of 6%, which was at the top end of our guidance. Non-operating expense of $4 million was favorable to expectations due to foreign exchange gains and lower than unanticipated interest expense. Non-GAAP diluted EPS of $2.05 exceeded the top end of our guidance due to the items mentioned and the favorable tax rate. Turning to our cash flow and balance sheet on slide 14. For the fiscal second quarter, we delivered $28.5 million in cash from operations and spent $12.5 million on capital expenditures, generating $16 million of free cash flow, which exceeded our forecast of breakeven to a slight usage of cash. For the fiscal second quarter, we acquired approximately 109,000 shares of our stock for $20.6 million. At the end of the quarter, we had approximately $42 million remaining on the current repurchase authorization. Similar to last quarter, we ended the fiscal second quarter in a net cash position. We had $137 million outstanding under our revolving credit facility with over $350 million available to borrow. For the fiscal second quarter, we delivered a return on invested capital of 13.8%, which was 480 basis points above our weighted average cost of capital. Despite an increase in invested capital to support robust revenue growth, we continue to generate healthy ROIC given strong operational performance. Cash cycle at the end of the fiscal second quarter was 64 days, which was favorable to expectations and five days lower than last quarter. Please turn to slide 15 for additional details regarding this positive result. Sequentially, days in receivables improved three days due to exceptional collection efforts by our team. Days in inventory sequentially improved four days from continued progress on working capital initiatives and increased revenue. Accounts payable days increased three days due to the timing of supplier payments and procuring inventory in anticipation of significant revenue growth. Last, our days in advance payments experienced a six-day reduction with a net $15 million being returned to customers during the quarter. Before I hand the call to David, I'd like to make a few closing comments. It has been an absolute pleasure and honor to serve as CFO for Plexus under Todd's leadership and guided by our outstanding board of directors. I want to thank Todd, our board, and everyone at Plexus for your support and trust over the last 12 years. I especially want to thank our finance organization for maintaining the highest standards and integrity, something I'm confident will endure. The company is in great hands with David moving into the CFO role, and I know the transition will be seamless over the coming months it has been a true privilege to be part of this fantastic organization i will now turn the call over to david to discuss additional details regarding our fiscal third quarter expectations as well as some commentary regarding fiscal 2026. david thank you pat and good morning everyone let me begin by offering my congratulations to pat and wishing him all the best in this next chapter.

I'm excited to step in and lead a tremendous team and carry on the legacy of a really strong finance organization. I'm also optimistic about Plexus' growth journey and confident that our consistent strategy will sustain our momentum as we help create the products that build a better world. Now let me turn to our guidance for the fiscal third quarter, summarized on slide 16. As Todd has already provided the revenue and EPS guidance, I will review some additional details. Fiscal third quarter gross margin is expected to be in the range of 9.9% to 10.2%. At the midpoint, gross margin would be slightly below last quarter, impacted by the timing of program ramps, capability investments, and ongoing higher incentive compensation, given our robust revenue growth and strong financial returns. We anticipate ongoing productivity improvements and additional fixed cost leverage will serve as offsets. The risk for selling and administrative expense for the fiscal third quarter is in the range of $69 to $70 million, including our typical stock-based compensation expense and additional stock-based compensation expense as a result of executive retirement. Excluding these expenses, we expect to gain leverage sequentially on higher revenue. The fiscal third quarter non-GAAP operating margin is expected to be in the range of 5.9% to 6.3%, exclusive of stock-based compensation expense. At the midpoint, this would demonstrate sequential improvement and good progress toward our goal of consistently delivering at or above a 6% non-GAAP operating margin. Non-operating expense is anticipated to be approximately 5.4 million dollars in the fiscal third quarter, up sequentially primarily due to higher interest expense and foreign exchange comparisons. We are estimating a non-GAAP effective tax rate of between 16% and 18% for the fiscal third quarter, and the same range for fiscal 2026, unchanged from our previous outlook for the year. Turning to the balance sheet. For the fiscal third quarter, we are expecting higher investments in working capital to support the accelerating revenue growth outlook. We anticipate cash cycle days will be in the range of 67 to 71 days. days. As a result, we expect a usage of cash, a free cash flow for the fiscal third quarter. In support of our accelerating revenue momentum, we are strategically increasing our working capital investments in fiscal 2026. Yet through our focus on working capital efficiency, we continue to expect to end the fiscal year with cash cycle days in the low 60s. We also continue to expect fiscal 2026 capital expenditures in a range of 100 to 120 million dollars. Our focus on operational efficiency is creating tangible benefits by generating higher throughput on existing production lines, which is deferring new equipment purchases while also increasing site revenue capacity. We are now forecasting fiscal 2026 free cash flow of 50 to 75 million dollars over the longer term we remain confident that by leveraging our focus on working capital efficiency and our significant investments in operational efficiency we will capitalize upon our substantial revenue growth opportunities and generate robust free cash flow with that ben let's now open the call for questions we will now begin the question and answer session please limit yourself to one question and one follow-up if asking more than one follow-up we kindly ask you to re-cue if you would like to ask a question please press star one to raise your

hand to withdraw your question press star one again we ask that you pick up your headset when asking a question to allow for optimum sound quality if you are muted locally please remember to unmute your device please stand by while we compile the q and a roster your first question comes from the line of Melissa Fairbanks with Raymond James. Melissa, your line is open. Please go ahead.

Hey, guys. Thanks so much. Congratulations on the quarter, and of course, congratulations to Pat. We're going to miss you, but Dave, I look forward to working with you more in the future. I would be remiss if I didn't ask Pat about cash cycle days one more time. I know I'm a little bit focused on it and Dave thanks for you know additional color looking into cash cycle days exiting the year but we're obviously seeing a really strong acceleration in growth in the near term so I know they're going to trend higher next quarter sounds like they're going to trend slightly lower exiting the year but just wondering how to think about working capital investment longer term to support this level of growth whether it's through capex through new site investments or uh you know just working capital investments yeah i can start and

then maybe david can add on to it i'd say two things melissa i think from a day's perspective i think we're in a really good spot in this low to mid 60s going forward and i think that would carry into fiscal 27. I think the other thing to look at is with revenue growth we're probably around you know 10 to 15 percent additional working capital dollars associated with any growth in revenue. So I think that's a good barometer if you're looking at from a dollars perspective but from a day's perspective I think low to mid 60s is a good range for us.

Yeah Melissa maybe Bill, the other part of your question was about investing in even capital in the long term. We just reaffirmed our 100 to 120 million dollars of capital investment. Recently in the last six months our teams have actually improved the throughput of some of our assets by 10 percent, which is avoided in the neighborhood of 20 million dollars of capital investment. So we're able to grow revenue on a very similar capital base.

So those types of efficiencies are not only happening in capex but also there's the same type of type of efficiencies in our working capital environment as well so hence that gives us confidence in the long term okay amazing um thanks uh just one more question this may be for oliver because he kind of touched on some of this in his commentary wanted to ask about some trends in industrial um you know we focus on semi-cap and test equipment so much, but it sounds as though one of your customers, I think you do some energy storage solutions for them, they raised their full-year outlook for this year, almost doubling the growth rate. So in part, because of strength in power supply. So I know you kind of touched on you've got some new wins in industrial for these types of applications. You've been winning in there for a long time. Just wondering how you're looking at some more near-term demand, you know, assuming that some of these new wins are going to be longer term in scope. Thanks, Melissa.

Happy to talk about that. Yeah, and we are excited.

Sorry to put you on the spot, Oliver.

Oh, that's fine. Happy to talk about it. We are excited about our customers in the energy infrastructure space. We've talked about some wins there over the past few quarters. We also, referencing back a few quarters ago, we talked about a specific regulatory compliance standard that we have for our Boise facility that enables us to do control systems for nuclear power. So we think that gives us a bit of competitive differentiation, which enables some of this growth that we're seeing in this subsector. Yeah, and I would bleed that through to saying our excitement there also extends into the adjacencies that we're seeing here relative to data centers. So we talked about a win here this quarter, specific to a power platform solution, but just the funnel that we have related to items in the data center, whether that's power management and storage, thermocooling, thermal density, fluidics, really well aligned to our value proposition and capabilities, but then again, that energy distribution and infrastructure, we just talked about, storage control systems. We're also seeing companies push AI out to what has been referred to as at the edge. So on equipment, on devices, these are often ruggedized applications, and so the redesign to put those solutions in place, the manufacturing, and then the need to sustain those and service those we view as being really well aligned to our capabilities and strengths, and we have a very strong and active funnel in that space.

Okay, great.

That's great. thank you so much for the detail um that's it for me i'll uh get back in the queue if i need something else thanks so much guys and congratulations pat thanks thank you your next question comes from the line of ruben roy with stifle ruben your line is open please go ahead yes thank you uh congratulations to all but uh especially pat um thanks for all the help pat and And David, obviously, congratulations, too. But, Pat, before you go, maybe we'll start with you. Todd, in his prepared remarks, mentioned sustained momentum well beyond fiscal 26. And I'm wondering if we could just maybe think a little bit about the operating margin structure of the company as you sort of line up a funnel of new wins, et cetera. And it's probably premature, and you're probably not going to give us a longer-term target. above what above six means but just in terms of you know some of the wins that are coming into the funnel etc you know maybe you can walk us through the puts and takes across the different segments on you know how we should think about um you know that operating margin and i have a follow-up which is sort of similar for oliver after uh we talk about this a bit thank you sure um yeah and i'll start if others want to join in um ruben the the margin differential between market sectors is not that different nowadays with the markets we're serving with the additional

wins there is some ramping costs that's involved so that that's a little bit of a drag on our margins but the the fixed cost leverage we're gaining both on our fixed costs and SG&A definitely overrides that and provides that target of 6% or above. And as we look to F-27, yeah, we're not going to make any new commitments at this point, but seeing a consistency in that margin performance, going back a few years ago when we saw that consistency is when we started to think about what is that next target. get. And I think we'll be in that position, but obviously not wanting to commit to anything at this point. But I think there's definite opportunity with the fixed cost leverage. Some of the services we're providing around sustaining services and engineering that carry higher margins. And then probably around the automation efforts. David talked about some of that with capital spending. The impact that has on margin is pretty pronounced.

So I think you'll see benefits there as well and one of the things that I would add is you know with the what we would expect is in improving or increasing margins as we continue to move out and that's because of the leverage that will be gaining as well as the operational efficiency initiatives we're probably not too far from establishing a new target Pat's been working on it with David and the finance team and we'll let David get comfortable in the chair for a couple of quarters perhaps before uh i'm coming out with a new target here yeah makes sense thank you todd if i pull that you know sort of discussion and maybe pull in working capital near sarah oliver

you called out some tightening supply chain conditions and that's been a consistent you know sort of theme across a lot of uh calls so far in earnings season wondering if you could maybe give us a little more detail on on what you're seeing around supply and whether or not you know that's acting as a little bit of a gating factor as you think about uh some of the program ramps embedded in your q3 or you know fiscal year guidance here obviously the raise is great to see but you know what are the puts it takes against supply and you know sort of the demand improvement you're seeing across the end markets thank you yeah maybe i'll start with this ruben and oliver can jump in and provide additional color um i think as we we set our forecast we

certainly have taken into account the realities of the supply chain. So I think I don't feel like we have undue risk as a result of supply chain within our forecast right now. Now there's certainly more upside that exists should things go in the right direction for us. But the other thing that we're doing is we're working very proactively with our customers around, call it the golden screws to make sure that we get supply for those tough-to-obtain parts.

Yeah, so more specifically there, the specific commodities that we are seeing allocation or tightening, Ruben, portions of semiconductor, portions of passives, memory, no surprise for anybody, raw PCB fabs. Behind that, lead times extending, but not allocation yet, around extended lead times around high-performance passes, magnetics, and some portions of microcontrollers. And so, as Todd met, a lot of proactive work here, asking our sourcing teams to identify risk early. That enables a consultative engagement with our customers, asking them to extend forecast visibility, expand alternates, enable some advanced materials planning from our side, for instance, early PO placement, extended PO horizon. Weisman. And then I would just generally say that the interconnection between those teams and the processes around that were well honed during the constrained market post-COVID. And so we're seeing that ring to bear today, including some AI tools that we had developed to help interrogate the open market and find supply for us.

Understood. Very helpful. Thanks, Jeff.

Your next question comes from the line of David Williams with Needham. David, your line is open. Please go ahead.

Hey, good morning, everyone. Thanks for letting me ask a question. And, Pat, let me say congratulations, and we will certainly miss you very much. So I hate to see you go, but, David, welcome and look forward to working with you. Thanks, David. You know, maybe first, on the capacity side, you've talked about that $100 million to $120 million this year. And just kind of curious, do you think that you can keep up, you know, some of the automation efforts and some of these efficiencies? Can you keep up with the type of demand that you're seeing in front of you? Or should we think maybe next year you'll need some additional greenfield capacity?

Yeah, thanks, Dave. That's a good question. You know, we're really pleased with the results our teams are delivering with those efficiencies and throughput we talked about. You know, and so at this point, if we think about our capacity around the world, it's really well balanced. We think we can service, you know, well in excess of $5 billion in annualized revenue. You know, but then as the growth continues, we're just going to continue to reassess how our sites are doing, where we might need to invest in capacity. But at the moment, we're feeling pretty good about what we have. With the growth, it depends on the type of product and the location. But at the moment, we're sticking to that guidance and we're going to continue to drive efficiency with our current footprint. And we have a lot of initiatives that are increasing the utilization within our current sites, so that progress is going to continue. So far, so good, David, but we're constantly assessing the situation for sure.

Yeah, one of the things I'd also note is with, David, with our newer building deployments that we do, the way we put those into play enable us to add incremental capacity without substantial capex, and so that enables us to add some additional bricks-and-mortar footprint when we need to um yes but that was an important point to add um and then maybe secondly just uh i guess in this environment as we think about this demand how much of this do you think is is demand driven from the effort you've put in previously versus just the the so i guess i'm trying to ask how

much is share gains uh because of your operational excellence versus what do you think just the market overall is being pushed toward yeah there's there's large components from both david we've We've got significant share gain in semiconductor capital equipment that's going on right now and continues even through this quarter. We also are gaining share within aerospace and defense on several subsectors with defense being a significant one. But those markets are good, too. So we're getting a double benefit, I would say, in that we're taking share in a really strong market. So we expect some excellent growth within those markets that far exceeds market growth.

Thanks so much.

A friendly reminder, to ask a question, please press star 1 to enter the queue. Your next question comes from the line of Stephen Fox with Fox Advisors, LLC. Stephen, your line is open. Please go ahead.

Thanks very much, and good morning, everyone. First of all, Pat, thanks very much for all your help over the years. Always a pleasure to work with you. I guess, first of all, just maybe following up on that operating margin question, can you give us a sense for how operating leverage is developing numerically? Obviously not an exact number, but qualitatively from the sense you have some puts and takes in there. You're seeing margin expansion. How do we think about sort of the drop-through in this type of environment? Is it similar to what you've seen in prior up cycles, or is there more investment going on that we should maybe consider a little less margin expansion? I was curious if you can provide more perspective there, and then I had a follow-up.

Yes, Stephen. This is David. As we think through the leverage and drop-through, typically we can see maybe a 10% to 12% drop-through on revenue growth. And obviously, as we're driving our efficiency initiatives, we can see not only that leverage, but also some drop-through of other improvements. But we're also investing in capability. So, for example, we've got the next generation of cybersecurity maturity models we're investing in to help us win new revenue and so we need to balance what we're doing with the efficiency whether it's dropping through the bottom line but or enabling you know the next level of revenue growth and so we're confident that we're going to we're going to see that leverage come through and fairly typical to what we've seen before uh and but and we're in a great period of driving efficiency and balancing that with investment so yeah that 10 to 12 percent drop through is probably which you should keep in mind.

Great. That's very helpful, actually. And then in terms of the aerospace markets, you guys threw a lot at us just now. I know last quarter you also had a huge amount of wins in that space. Can you give us a little more sense on sort of ranking the drivers here? How much is just some of these new markets like space really accelerating?

How much is you know your own market share gains or new wins or new capabilities it's just there's a lot to unpack there i was wondering if you could just sort of give us a sense of what's most important yeah steven this is all over i'll take that um if i break that sector down within and this is going to build a little bit on what todd just talked about a second ago or a minute ago within defense and space, we see both the benefit of new program wins as well as end market demand driving the growth there. Within commercial aerospace, that's largely just organic growth. And then within commercial aerospace, I'll also note that similar to prior quarters, our message that we really haven't seen a significant pull through of additional end market demand due to recovery at the primes and how they're doing the production, right, or the OEMs and how they're doing the production, so we still have upside to bring to bear there as their production rates increase. Does that give you the insight you're looking for?

Pretty much. I mean, just to follow up real quick, like the new programs that you won last quarter, I guess, can you talk about how that influences maybe the growth in coming quarters?

When we we start to see it and what whether it's you know fits within all those buckets like you described or there's something different going on that we should you know think about as an inflection yeah certainly fits within those buckets and i recognize the answer it depends isn't going to be super helpful steven but um let me add some more words there um as we look at new program ramps based on sectors based on customers that we can get quite a bit of variation in terms of how long that rev we can hit that revenue rate if we're starting from scratch say it's a new customer win and we've got a ramp up the supply chain potentially the customers they have some end market regulatory work if they got to do a bit since a health care life sciences that can be a six to eight quarter ramp for us to get into production and start hitting some volumes if I and we try to note in our comments this morning if it's an existing customer an add-on product or even with an existing customer if it's a new product you've got some supply chain work already there, and our ability to ramp into production is faster. Hey, Steve, it's Sean.

Just to get a bit more acute for you, some of the wins we had in aerospace and defense in our first fiscal quarter will contribute to the latter part of this fiscal year. Capacity is already coming online, and so that is a little bit of a help this year, but it's actually a greater contributor to fiscal 2027 and beyond. So a lot of the growth we're seeing right now is based either upon your programs or market share gains that we had over the course of the past couple of years. And so this sustains the momentum as Todd talked about into 27 and beyond.

Great. No, that is very helpful. Thank you very much.

Your next question comes from the line of Anya Soderstrom with Sadati. Anya, your line is open. Please go ahead.

Hi, and thank you for taking my question and congratulations on the great quarter and guidance and on the retirement path and the appointment, David. Looking forward to be working with you. And so a lot of my questions have been addressed already, but in terms of, just want to check with the Malaysia facility. You mentioned last quarter that you expected that to break even in terms of the margins in the second quarter how's that tracking yeah it was a little bit behind uh break even this past quarter and the reason being that the revenue is actually ramping faster there so we're making additional investments early on but we're still on track to exit the fiscal year with it having strong profitability okay thank you and then just with the targets that you set for the health care and life sciences for the full year in the third quarter uh how should we think about the growth there um going forward seems like that's

going to be slowing down a bit or coming down yeah i would say that uh we see uh when i talked about the sequential growth we're looking at in q4 and so i think from uh and we also talked about the winds here this this uh this quarter um historical winds from f25 quite strong which will help to create some sustained growth as we look to F27 um so I'm sorry does that cover the Anya for you yes it is it did and just one last question on the competitive environment have you seen any sort of changes there at all in the yeah I'm just I'm reflecting on you I don't think we've seen any significant changes from a competitive environment um and in fact you know we have noted that in this past quarter the number of large opportunities that we've won up was had a slight uptick which we view as positive both for how we're how we're conveying ourselves in the marketplace and our ability to differentiate okay thank you that was all for me there are no further questions at this time i will now turn the call back to todd kelsey for closing remarks

todd all right go ahead yeah thank you ben um i'd like to thank our shareholders investors analysts, and our Plexus team members to join the call this morning. In closing, we're generating significant momentum, and I anticipate that fiscal 2026 will be a great year for Plexus and set us up for a strong fiscal 2027. So thank you again to our team members, our customers, and our shareholders. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.