8-K
PLEXUS CORP (PLXS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
____________________________________________________________________________________________________________________________________
Date of Report (Date of earliest event reported): July 22, 2020
____________________________________________________________________________________________________________________________________
PLEXUS CORP.
(Exact name of registrant as specified in its charter)
____________________________________________________________________________________________________________________________________
| Wisconsin | 001-14423 | 39-1344447 |
|---|---|---|
| (State or other jurisdiction<br> of incorporation) | (Commission <br>File Number) | (IRS Employer <br>Identification No.) |
One Plexus Way
Neenah, Wisconsin 54957
(Address of principal executive offices) (Zip Code)
Telephone Number (920) 969-6000
(Registrant’s telephone number, including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | PLXS | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On July 22, 2020, Plexus Corp. (“we” or the “Company”) announced results for the fiscal third quarter ended July 4, 2020. A copy of the Company’s related press release is furnished as Exhibit 99.1 to this report. A copy of the investor presentation that Plexus will present during the Company’s earnings call is furnished as Exhibit 99.2 to this report.
Item 9.01 Financial Statements and Exhibits
(d) The following exhibits are filed herewith:
| Exhibit Number | Description |
|---|---|
| 99.1 | Press release issued by Plexus Corp., dated July 22, 2020 |
| 99.2 | Plexus Corp. Investor Presentation, dates July 22, 2020 |
| 104 | Cover Page Interactive Data File (the cover page tags are embedded within the Inline XBRL document) |
* * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: July 22, 2020 | PLEXUS CORP. |
|---|---|
| (Registrant) | |
| By: /s/ Patrick J. Jermain | |
| Patrick J. Jermain | |
| Executive Vice President and Chief Financial Officer |
Document
Plexus Announces Fiscal Third Quarter Financial Results
•Record quarterly revenue of $857 million for the fiscal third quarter of 2020
•GAAP diluted EPS of $1.20
•Initiates fiscal fourth quarter 2020 revenue guidance of $850 to $890 million with GAAP diluted EPS guidance of $1.05 to $1.20, excluding unforeseen impacts relating to COVID-19
NEENAH, WI – July 22, 2020 - Plexus (NASDAQ: PLXS) today announced financial results for its fiscal third quarter ended July 4, 2020, and guidance for its fiscal fourth quarter ending October 3, 2020.
| Jul 4, 2020 | |||||
| Q3F20 Guidance | |||||
| Summary GAAP Items | |||||
| Revenue (in millions) | 857 | 790 to 830 | $850 to $890 | ||
| Operating margin | 5.3 | 3.8% to 4.2% | 4.8% to 5.2% | ||
| Diluted EPS (1) | 1.20 | 0.72 to 0.82 | $1.05 to $1.20 | ||
| Summary Non-GAAP Items (2) | |||||
| Return on invested capital (ROIC) | 12.9 | ||||
| Economic return | 4.1 | ||||
| (1) | Includes stock-based compensation expense of 0.22 for Q3F20 results, 0.21 for Q3F20 guidance, and 0.21 for Q4F20 guidance. | ||||
| (2) | Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures and a reconciliation to GAAP. |
All values are in US Dollars.
Fiscal Third Quarter 2020 Information
•Won 35 manufacturing programs during the quarter representing an expected $252 million in annualized revenue when fully ramped into production
•Trailing four quarter wins total an expected $868 million in annualized revenue when fully ramped into production
Todd Kelsey, President and CEO, commented, “I am incredibly proud of our global Plexus team as they managed through the complexities arising from COVID-19 while delivering record quarterly revenue of $857 million and GAAP diluted earnings per share of $1.20. This strong performance led to GAAP operating margin of 5.3%, our best quarterly margin result in three years. Further, our team overcame the challenges of the pandemic to deliver exceptional manufacturing wins of $252 million annualized when fully ramped into production. In addition to traditionally strong wins from our existing customers, our team’s innovative virtual business development efforts resulted in a meaningful number of new target customer wins. Our global team’s demonstrated ability in providing superior execution continues to position us for future growth."
Patrick Jermain, Executive Vice President and CFO, commented, “During the fiscal third quarter, we delivered a return on invested capital of 12.9%. This equates to an economic return of 410 basis points above our weighted average cost of capital, creating solid shareholder value. A combination of exceptional operating performance and improved working capital generated this return, an improvement of 150 basis points over the previous quarter. The increase in fiscal third quarter revenue and improvements in our inventory management contributed to an eight day sequential improvement in our fiscal third quarter cash cycle days. We generated $37 million of free cash flow during the quarter, exceeding our net income.”
Mr. Jermain continued, “We are well-positioned with a strong balance sheet. Cash of approximately $300 million was sequentially higher by $73 million while our short-term debt increased $38 million. In May, we executed a 364-day term loan with several of our credit facility banks. We secured $138 million through this offering. With the proceeds, we repaid existing borrowing under our revolving credit facility. At the end of the fiscal third quarter, there was no outstanding borrowing under this facility, therefore allowing us the full use of the $350 million facility.”
Mr. Kelsey continued, “While we expect continued end market volatility, our aggregate demand is anticipated to remain strong in our fiscal fourth quarter. As a result, we are guiding revenue in the range of $850 to $890 million. At this anticipated revenue level, coupled with expected sustained solid operating performance, we are guiding GAAP diluted EPS in the range of $1.05 to $1.20. In providing this guidance, we have taken into consideration known constraints with the global supply chain and workforce challenges that could occur due to COVID-19. However, our guidance assumes no large scale closures of our facilities, or those of our suppliers or customers, due to COVID-19, nor does it assume that the COVID-19 outbreak will materially impact end markets beyond what has already occurred.”
Mr. Kelsey concluded, “As we move into the early part of fiscal 2021, we anticipate certain COVID-related demand to moderate in advance of the anticipated benefit of growth from new program ramps later in the year. Despite the known impacts related to COVID-19, we see a path to continued strength in operating performance throughout fiscal 2021.”
| Quarterly Comparison | Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Jul 4, 2020 | Apr 4, 2020 | Jun 29, 2019 | |||||||
| (in thousands, except EPS) | Q3F20 | Q2F20 | Q3F19 | ||||||
| Revenue | $ | 857,394 | $ | 767,364 | $ | 799,644 | |||
| Gross profit | 82,881 | 61,445 | 71,030 | ||||||
| Operating income | 45,853 | 17,209 | 34,403 | ||||||
| Net income | 35,842 | 12,926 | 24,801 | ||||||
| Diluted EPS | 1.20 | 0.43 | 0.81 | ||||||
| Adjusted net income (1) | 35,842 | 18,299 | 24,801 | ||||||
| Adjusted diluted EPS (1) | 1.20 | 0.61 | 0.81 | ||||||
| Gross margin | 9.7 | % | 8.0 | % | 8.9 | % | |||
| Operating margin | 5.3 | % | 2.2 | % | 4.3 | % | |||
| Adjusted operating margin (1) | 5.3 | % | 3.0 | % | 4.3 | % | |||
| ROIC (1) | 12.9 | % | 11.4 | % | 12.9 | % | |||
| Economic return (1) | 4.1 | % | 2.6 | % | 3.9 | % | |||
| (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, and a reconciliation of these measures to GAAP. |
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 56% of revenue during both the fiscal third quarter and fiscal second quarter of 2020.
| Business Segments ($ in millions) | Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jul 4, 2020 | Apr 4, 2020 | Jun 29, 2019 | |||||||||||
| Q3F20 | Q2F20 | Q3F19 | |||||||||||
| Americas | $ | 306 | $ | 334 | $ | 367 | |||||||
| Asia-Pacific | 482 | 388 | 385 | ||||||||||
| Europe, Middle East, and Africa | 92 | 74 | 81 | ||||||||||
| Elimination of inter-segment sales | (23) | (29) | (33) | ||||||||||
| Total Revenue | $ | 857 | $ | 767 | $ | 800 | |||||||
| Market Sectors ($ in millions) | Three Months Ended | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Jul 4, 2020 | Apr 4, 2020 | Jun 29, 2019 | |||||||||||
| Q3F20 | Q2F20 | Q3F19 | |||||||||||
| Healthcare/Life Sciences | $ | 330 | 39 | % | $ | 271 | 35 | % | $ | 309 | 39 | % | |
| Industrial/Commercial | 317 | 37 | % | 287 | 37 | % | 248 | 31 | % | ||||
| Aerospace/Defense | 141 | 16 | % | 157 | 21 | % | 151 | 19 | % | ||||
| Communications | 69 | 8 | % | 52 | 7 | % | 92 | 11 | % | ||||
| Total Revenue | $ | 857 | $ | 767 | $ | 800 |
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 a full reconciliation of non-GAAP measures to comparable GAAP measures, please refer to the attached Non-GAAP Supplemental Information Tables.
ROIC and Economic Return
ROIC for the fiscal third quarter was 12.9%. Plexus defines ROIC as tax-effected annualized adjusted operating income divided by average invested capital over a four-quarter period for the fiscal third quarter. Invested capital is defined as equity plus debt and operating lease liabilities, less cash and cash equivalents. Plexus' weighted average cost of capital for fiscal 2020 is 8.8%. ROIC for the fiscal third quarter less Plexus' weighted average cost of capital resulted in an economic return of 4.1%.
Free Cash Flow
Plexus defines free cash flow as cash flows provided by operations less capital expenditures. For the three months ended July 4, 2020, cash flows provided by operations of $47.1 million, less capital expenditures of $10.5 million, resulted in free cash flow of $36.6 million. For the nine months ended July 4, 2020, cash flows provided by operations of $92.5 million, less capital expenditures of $41.2 million, resulted in free cash flow of $51.3 million.
| Cash Cycle Days | Three Months Ended | ||
|---|---|---|---|
| Jul 4, 2020<br>Q3F20 | Apr 4, 2020<br>Q2F20 | Jun 29, 2019 <br>Q3F19 | |
| Days in Accounts Receivable | 55 | 55 | 52 |
| Days in Contract Assets | 12 | 13 | 12 |
| Days in Inventory | 97 | 99 | 95 |
| Days in Accounts Payable | (65) | (62) | (54) |
| Days in Cash Deposits | (20) | (18) | (16) |
| Annualized Cash Cycle * | 79 | 87 | 89 |
| * 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 2020 Q3 Earnings Conference Call and Webcast |
|---|---|
| When: | Thursday, July 23, 2020 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, https://plexus.gcs-web.com/events-and-presentations/upcoming-events, where a slide presentation reviewing fiscal second quarter 2020 results will also be made available ahead of the conference call.<br><br><br><br>Conference call at +1.866.922.5180 with passcode: 9483228 |
| Replay: | The webcast will be archived on the Plexus website and available via telephone replay at +1.855.859.2056 or +1.404.537.3406 with passcode: 9483228 |
Investor and Media Contact
Heather Beresford
+1.920.751.3612
heather.beresford@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 over 19,000 individuals who are dedicated to providing global Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing, and Aftermarket 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 global companies by providing innovative, comprehensive solutions throughout the 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 evolving effect, which may intensify, of COVID-19 on our employees, customers, suppliers, and logistics providers, including the impact of governmental actions being taken to curtail the spread of the virus. Other risks and uncertainties include, but are not limited to: 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 shortages and delays in obtaining components as a result of economic cycles, natural disasters or otherwise; 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; the effects of U.S. Tax Reform and of 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 (including as a result of the United Kingdom’s pending exit from the European Union); the potential effect of other world or local events or other events outside our control (such as changes in energy prices, terrorism 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 in our fiscal 2019 Form 10-K.
| PLEXUS CORP. AND SUBSIDIARIES | ||||||||
|---|---|---|---|---|---|---|---|---|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | Nine Months Ended | |||||||
| Jul 4, | Jun 29 | Jul 4, | Jun 29 | |||||
| 2020 | 2019 | 2020 | 2019 | |||||
| Net sales | $ | 857,394 | $ | 799,644 | $ | 2,477,167 | $ | 2,354,239 |
| Cost of sales | 774,513 | 728,614 | 2,253,651 | 2,140,190 | ||||
| Gross profit | 82,881 | 71,030 | 223,516 | 214,049 | ||||
| Operating expenses | ||||||||
| Selling and administrative expenses | 37,028 | 36,627 | 114,517 | 109,521 | ||||
| Restructuring and impairment charges | — | — | 6,003 | — | ||||
| Operating income | 45,853 | 34,403 | 102,996 | 104,528 | ||||
| Other income (expense): | ||||||||
| Interest expense | (3,988) | (3,711) | (11,934) | (9,105) | ||||
| Interest income | 368 | 445 | 1,546 | 1,410 | ||||
| Miscellaneous, net | (600) | (1,419) | (2,619) | (4,304) | ||||
| Income before income taxes | 41,633 | 29,718 | 89,989 | 92,529 | ||||
| Income tax expense | 5,791 | 4,917 | 10,215 | 20,744 | ||||
| Net income | $ | 35,842 | $ | 24,801 | $ | 79,774 | $ | 71,785 |
| Earnings per share: | ||||||||
| Basic | $ | 1.23 | $ | 0.83 | $ | 2.73 | $ | 2.34 |
| Diluted | $ | 1.20 | $ | 0.81 | $ | 2.66 | $ | 2.28 |
| Weighted average shares outstanding: | ||||||||
| Basic | 29,199 | 29,912 | 29,210 | 30,637 | ||||
| Diluted | 29,793 | 30,635 | 29,936 | 31,420 | ||||
| PLEXUS CORP. AND SUBSIDIARIES | ||||||||
| --- | --- | --- | --- | |||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Sept 28, | ||||||||
| 2019 | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 296,545 | $ | 223,761 | |||||
| Restricted cash | 2,493 | |||||||
| Accounts receivable | 488,284 | |||||||
| Contract assets | 90,841 | |||||||
| Inventories | 700,938 | |||||||
| Prepaid expenses and other | 31,974 | |||||||
| Total current assets | 1,538,291 | |||||||
| Property, plant and equipment, net | 384,224 | |||||||
| Operating lease right-of-use assets | — | |||||||
| Deferred income taxes | 13,654 | |||||||
| Other | 64,714 | |||||||
| Total non-current assets | 462,592 | |||||||
| Total assets | 2,288,524 | $ | 2,000,883 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt and finance lease obligations | 145,993 | $ | 100,702 | |||||
| Accounts payable | 444,944 | |||||||
| Customer deposits | 139,841 | |||||||
| Accrued salaries and wages | 73,555 | |||||||
| Other accrued liabilities | 106,461 | |||||||
| Total current liabilities | 865,503 | |||||||
| Long-term debt and finance lease obligations, net of current portion | 187,278 | |||||||
| Accrued income taxes payable | 59,572 | |||||||
| Long-term operating lease liabilities | — | |||||||
| Deferred income taxes | 5,305 | |||||||
| Other liabilities | 17,649 | |||||||
| Total non-current liabilities | 269,804 | |||||||
| Total liabilities | 1,135,307 | |||||||
| Shareholders’ equity: | ||||||||
| Common stock, .01 par value, 200,000 shares authorized, | ||||||||
| 53,442 and 52,917 shares issued, respectively, | ||||||||
| and 29,214 and 29,004 shares outstanding, respectively | 529 | |||||||
| Additional paid-in-capital | 597,401 | |||||||
| Common stock held in treasury, at cost, 24,228 and 23,913, respectively | (893,247) | |||||||
| Retained earnings | 1,178,677 | |||||||
| Accumulated other comprehensive loss | (17,784) | |||||||
| Total shareholders’ equity | 865,576 | |||||||
| Total liabilities and shareholders’ equity | 2,288,524 | $ | 2,000,883 |
All values are in US Dollars.
| PLEXUS CORP. AND SUBSIDIARIES | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NON-GAAP SUPPLEMENTAL INFORMATION Table 1 | |||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||
| Nine Months Ended | |||||||||||||||||||||
| Apr 4, | Jun 29, | Jul 4, | Jun 29, | ||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||
| Operating income, as reported | $ | 45,853 | $ | 17,209 | $ | 34,403 | $ | 102,996 | $ | 104,528 | |||||||||||
| Operating margin, as reported | 5.3 | % | 2.2 | % | 4.3 | % | 4.2 | % | 4.4 | % | |||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| Restructuring and impairment charges (1) | — | 6,003 | — | 6,003 | — | ||||||||||||||||
| Adjusted operating income | $ | 45,853 | $ | 23,212 | $ | 34,403 | $ | 108,999 | $ | 104,528 | |||||||||||
| Adjusted operating margin | 5.3 | % | 3.0 | % | 4.3 | % | 4.4 | % | 4.4 | % | |||||||||||
| Net income, as reported | $ | 35,842 | $ | 12,926 | $ | 24,801 | $ | 79,774 | $ | 71,785 | |||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| Special tax impacts (2) | — | — | — | (814) | 7,035 | ||||||||||||||||
| Restructuring and impairment charges, net of tax (1) | — | 5,373 | — | 5,373 | — | ||||||||||||||||
| Adjusted net income | $ | 35,842 | $ | 18,299 | $ | 24,801 | $ | 84,333 | $ | 78,820 | |||||||||||
| Diluted earnings per share, as reported | $ | 1.20 | $ | 0.43 | $ | 0.81 | $ | 2.66 | $ | 2.28 | |||||||||||
| Non-GAAP per share adjustments: | |||||||||||||||||||||
| Special tax impacts (2) | — | — | — | (0.02) | 0.23 | ||||||||||||||||
| Restructuring costs, net of tax (1) | — | 0.18 | — | 0.18 | — | ||||||||||||||||
| Adjusted diluted earnings per share | $ | 1.20 | $ | 0.61 | $ | 0.81 | $ | 2.82 | $ | 2.51 | |||||||||||
| (1) | During the three months ended April 4, 2020, restructuring and impairment charges of 6.0 million, or 5.4 million net of taxes, were incurred due to the previously announced closure of our Boulder Design Center. | ||||||||||||||||||||
| (2) | During the nine months ended July 4, 2020, there was 1.9 million in tax benefits related to US foreign tax credit regulations issued during the quarter, partially offset by 1.1 million of tax expense as a result of special tax items.During the nine months ended June 29, 2019, special tax expense of 7.0 million was recorded in accordance with new regulations issued in November 2018 under U.S. Tax Reform. These regulations impacted the treatment of foreign taxes paid. |
All values are in US Dollars.
| PLEXUS CORP. AND SUBSIDIARIES | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NON-GAAP SUPPLEMENTAL INFORMATION Table 2 | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| ROIC and Economic Return Calculations | Nine Months Ended | Six Months Ended | Nine Months Ended | |||||||||||||||||||
| Jul 4, | Apr 4, | Jun 29, | ||||||||||||||||||||
| 2020 | 2020 | 2019 | ||||||||||||||||||||
| Operating income, as reported | $ | 102,996 | $ | 57,143 | $ | 104,528 | ||||||||||||||||
| Restructuring and impairment charges | + | 6,003 | + | 6,003 | + | — | ||||||||||||||||
| Adjusted operating income | $ | 108,999 | $ | 63,146 | $ | 104,528 | ||||||||||||||||
| ÷ | 3 | ÷ | 3 | |||||||||||||||||||
| $ | 36,333 | $ | 34,843 | |||||||||||||||||||
| x | 4 | x | 2 | x | 4 | |||||||||||||||||
| Adjusted annualized operating income | $ | 145,332 | $ | 126,292 | $ | 139,372 | ||||||||||||||||
| Adjusted effective tax rate | x | 13 | % | x | 13 | % | x | 15 | % | |||||||||||||
| Tax impact | 18,893 | 16,418 | 20,906 | |||||||||||||||||||
| Adjusted operating income (tax effected) | $ | 126,439 | $ | 109,874 | $ | 118,466 | ||||||||||||||||
| Average invested capital | ÷ | $ | 980,929 | ÷ | $ | 964,894 | ÷ | $ | 921,435 | |||||||||||||
| ROIC | 12.9 | % | 11.4 | % | 12.9 | % | ||||||||||||||||
| Weighted average cost of capital | - | 8.8 | % | - | 8.8 | % | - | 9.0 | % | |||||||||||||
| Economic return | 4.1 | % | 2.6 | % | 3.9 | % | Three Months Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| Average Invested Capital | Jul 4, | Apr 4, | Jan 4, | Sept 28, | ||||||||||||||||||
| Calculations | 2020 | 2020 | 2020 | 2019 | ||||||||||||||||||
| Equity | $ | 944,821 | $ | 892,558 | $ | 908,372 | $ | 865,576 | ||||||||||||||
| Plus: | ||||||||||||||||||||||
| Debt and finance lease obligations - current | 145,993 | 107,880 | 67,847 | 100,702 | ||||||||||||||||||
| Operating lease obligations - current (1) (2) | 8,061 | 8,546 | 9,185 | — | ||||||||||||||||||
| Debt and finance lease obligations - long-term | 188,626 | 186,327 | 186,827 | 187,278 | ||||||||||||||||||
| Operating lease obligations - long-term (2) | 38,077 | 39,617 | 36,473 | — | ||||||||||||||||||
| Less: | ||||||||||||||||||||||
| Cash and cash equivalents | (296,545) | (225,830) | (252,914) | (223,761) | ||||||||||||||||||
| $ | 1,029,033 | $ | 1,009,098 | $ | 955,790 | $ | 929,795 | Three Months Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| Average Invested Capital | Jun 29, | Mar 30, | Dec 29, | Sept 29, | ||||||||||||||||||
| Calculations | 2019 | 2019 | 2018 | 2018 | ||||||||||||||||||
| Equity | $ | 860,791 | $ | 875,444 | $ | 905,163 | $ | 921,143 | ||||||||||||||
| Plus: | ||||||||||||||||||||||
| Debt and finance lease obligations - current | 138,976 | 93,197 | 8,633 | 5,532 | ||||||||||||||||||
| Operating lease obligations - current (1) (2) | — | — | — | — | ||||||||||||||||||
| Debt and finance lease obligations - long-term | 187,581 | 187,120 | 187,567 | 183,085 | ||||||||||||||||||
| Operating lease obligations - long-term (2) | — | — | — | — | ||||||||||||||||||
| Less: | ||||||||||||||||||||||
| Cash and cash equivalents | (198,395) | (184,028) | (188,799) | (297,269) | ||||||||||||||||||
| $ | 988,953 | $ | 971,733 | $ | 912,564 | $ | 812,491 | (1) | Included in Other accrued liabilities on the Condensed Consolidated Balance Sheets. | |||||||||||||
| --- | --- | |||||||||||||||||||||
| (2) | In the fiscal first quarter of 2020, Plexus adopted and applied Topic 842 to all leases using the modified retrospective method of adoption. The prior year comparative information has not been restated and continued to be reported under the accounting standards in effect for fiscal 2019 and 2018. |
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plxsq3f20analystslides
Fiscal third quarter 2020 financial results July 23, 2020
PLEXUS CORP. Safe harbor and fair disclosure statement Any statements made during our call today and information included in the supporting material that is not historical in nature, such as statements in the future tense and statements that include "believe," "expect," "intend," "plan," "anticipate," and similar terms and concepts, are forward-looking statements. 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 September 28, 2019, as supplemented by our Form 10-Q filed with the SEC on May 8, 2020, and the Safe Harbor and Fair Disclosure statement in yesterday’s press release. Plexus provides non-GAAP supplemental information, such as ROIC, economic return, and free cash flow, because those measures are used for internal management goals and decision making, and because they provide 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 earnings per share, to provide a better understanding of core performance for purposes of period-to-period comparisons. For a full reconciliation of non-GAAP supplemental information please refer to yesterday’s press release and our periodic SEC filings. 2
PLEXUS CORP. Fiscal third quarter results Q3F20 Results Q3F20 Guidance Q2F20 Results Revenue ($ millions) $857 $790 to $830 $767 GAAP Diluted EPS $1.20(1) $0.72 to $0.82(2) $0.43(3) • Record quarterly revenue representing 12% sequential growth and 7% y-o-y growth • Strong growth from HC/LS, I/C and COMM • GAAP operating margin of 5.3% - best result in three years • Margin benefitted from leverage, reduced US healthcare costs and strong operating performance (1) Includes $0.22 stock-based compensation expense (2) Includes $0.21 stock-based compensation expense (3) Includes $0.19 stock-based compensation expense; non-GAAP EPS was $0.61, which excluded $0.18 of restructuring expense 3
PLEXUS CORP. Fiscal third quarter highlights EXCEPTIONAL WINS PERFORMANCE CASH CYCLE OF 79 DAYS • Manufacturing wins of $252M • 8 day improvement over the fiscal second quarter • Capitalized on innovative virtual business development STRONG FREE CASH FLOW FUNNEL EXPANDED TO $2.5B • Q3F20 free cash flow of $37M, exceeding expectations • Well positioned for future growth ROIC of 12.9% PORTFOLIO DIFFERENTIATION • Economic return of 410bps above WACC of 8.8% • 92% of revenue generated from combined Healthcare/Life Sciences, Industrial/Commercial and Aerospace/Defense market sectors RESPONSE TO COVID-19 • Committed to providing a safe environment for our teams • Enhanced decontamination and contact tracing procedures 39% 37% 16% 8% • Sites remained near full capacity in Q3, enabling Plexus to meet the needs of our customers and communities Healthcare and Industrial and Aerospace and Communications Life Sciences Commercial Defense 4
PLEXUS CORP. 5
PLEXUS CORP. Fiscal 2020 fourth quarter guidance REVENUE GUIDE • End markets are volatile • Strength in HC/LS, semi-cap and defense • Aerospace weak Q4F20 Guidance EPS GUIDE Revenue $850 to $890 million • Leveraging recent productivity gains GAAP Diluted EPS $1.05 to $1.20* • GAAP operating margin of 4.8% to 5.2% FISCAL 2021 OUTLOOK • Early F21 COVID-related demand reduction in critical care, communications and certain industrial programs • New programs drive growth later in the year • A path to strong operating performance throughout the year * Includes $0.21 of stock-based compensation expense and excludes any non-recurring charges. 6
PLEXUS CORP. Striving to make Plexus workplaces the safest place our team can be outside of their own homes WORK FROM HOME PERSONAL SOCIAL TEMPERATURE CONTACT TRACING TESTING PROTECTIVE DISTANCING SCREENING EQUIPMENT 7
PLEXUS CORP. Leading through the COVID-19 pandemic SUPPLY CHAIN • COVID-19 disruptions being managed • Increased demand within lead-time is largest effort OPERATIONS • Performing above expectations • Q3F20: operating at or near capacity at end of quarter • Q4F20: expecting to operate at or near full capacity BUSINESS DEVELOPMENT • Virtual meetings and tours • Increased focus on delivery performance • Expect continued strong wins performance 8
PLEXUS CORP. Performance by sector Q3F20 Q2F20 Q4F20 Expectations Q3F20 vs. Q2F20 Jul 4, 2020 Apr 4, 2020 (percentage points) Healthcare and Life Sciences $330 39% $271 35% + 22% Up low single Industrial and Commercial $317 37% $287 37% + 11% Up low single Aerospace and Defense $141 16% $157 21% - 10% Down low single Communications $69 8% $52 7% + 33% Up high teens Total Revenue $857 100% $767 100% + 12% Revenue in millions 9
PLEXUS CORP. Manufacturing wins Q3F20 wins: $252M New programs: 35 TFQ $868M Trailing Four Quarters (TFQ) Manufacturing Wins $1,000 50% $900 45% $800 40% $700 35% $600 30% Goal $500 25% 25% $400 20% % of TFQ Sales% of New Wins $M $300 15% $200 10% $100 5% $0 0% Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 TFQ Wins TFQ Wins % of TFQ Sales New Wins 10
PLEXUS CORP. AMER 160 100% 140 132 137 118 80% 120 89 85 100 60% Manufacturing wins by region 80 60 40% 40 20% Revenue ($ ($ millions) Revenue 20 - 0% Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Revenue % TFQ of Wins TFQ EMEA Revenue TFQ Wins % of TFQ Revenue (MFG) $23M APAC 160 100% 140 80% 120 APAC AMER 101 92 Q3F20 100 60% $92M $137M 70 80 59 64 60 40% 40 20% Revenue ($ ($ millions) Revenue 20 - 0% Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Revenue % TFQ of Wins TFQ Revenue TFQ Wins % of TFQ Revenue (MFG) EMEA AMER: supporting programs to increase COVID-19 testing capabilities 80 100% 70 62 80% 60 APAC: all three China locations win meaningful new programs 50 39 60% 40 23 40% EMEA: responds to UK government’s request for ventilator support 30 14 20 11 20% Revenue ($ ($ millions) Revenue 10 - 0% Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 TFQ Wins as % of TFQ Revenue % TFQ as of Wins TFQ Revenue TFQ Wins % of TFQ Revenue (MFG) 11
PLEXUS CORP. Manufacturing wins by sector A/D COMM $20M $5M Healthcare and Life Sciences Industrial and Commercial 160 60% 160 60% 147 140 140 50% 50% 120 114 120 85 102 40% 40% I/C 100 100 Q3F20 80 $80M HC/LS 80 30% 80 30% 52 44 60 $147M 60 60 54 20% 33 20% 40 40 10% 10% Revenue ($ millions) Revenue ($ millions) 20 20 - 0% - 0% TFQTFQof Wins Revenue % Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 TFQTFQof Wins Revenue % Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Revenue TFQ Wins % of TFQ Revenue (MFG) Revenue TFQ Wins % of TFQ Revenue (MFG) Aerospace and Defense Communications HC/LS wins supporting COVID-19 fight 160 60% 160 60% 140 140 50% 50% 120 120 100 40% 40% I/C adds new power grid customer 100 100 80 30% 80 30% 60 60 60 20% 35 20% A/D wins significant security device 40 40 24 17 20 17 21 26 10% 10% Revenue ($ millions) Revenue ($ millions) 20 20 5 - 0% - 0% TFQTFQof Wins Revenue % Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 TFQTFQof Wins Revenue % Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Revenue TFQ Wins % of TFQ Revenue (MFG) Revenue TFQ Wins % of TFQ Revenue (MFG) 12
PLEXUS CORP. Manufacturing funnel Funnel of Qualified Manufacturing Opportunities 3,500 3,000 2,557 2,563 A/D 2,456 2,394 2,485 $575M 2,500 2,000 COMM HC/LS 1,500 $127M Q3F20 $1,304M 1,000 Revenue ($ ($ millions) Revenue I/C $479M 500 - Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Qualified manufacturing funnel grows in spite of strong wins performance 13
PLEXUS CORP. Income statement Q3F20 Comments Revenue $857 million Sequentially higher by $90 million or 12% Gross margin 9.7% Sequentially higher 170 basis points Selling & administrative expenses $37.0 million Sequentially lower $1.2 million GAAP operating margin 5.3% Improved 230 basis points from Q2F20 non-GAAP result Non-operating expenses $4.2 million Improved from expectations Benefited from strong operating results, lower non-operating GAAP diluted EPS $1.20 expenses and lower than expected tax expense 14
PLEXUS CORP. Cash flow and balance sheet Q3F20 Comments Cash from operations: $47 million Free cash flow $37 million Capital expenditures: $10 million Share repurchases None Previously suspended due to COVID-19 Cash balance Approximately $300 million Sequentially higher $73 million Total debt $335 million Gross debt to EBITDA ratio of 1.6X Return on invested capital 12.9% 410 basis points above fiscal 2020 WACC of 8.8% Cash cycle days 79 days Sequential improvement of 8 days 15
PLEXUS CORP. Working capital trends 120 100 80 60 Days 40 20 - Q4F18 Q1F19 Q2F19 Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Net Cash Cycle Days Inventory Days Contract Asset Days A/R Days A/P Days Customer Deposit Days Q4F18 Q1F19 Q2F19 Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Inventory Days 104 105 102 95 87 87 99 97 Contract Asset Days 10 10 12 10 12 13 12 A/R Days 47 51 51 52 55 49 55 55 A/P Days 66 68 61 54 55 61 62 65 Customer Deposit Days 12 15 16 16 17 16 18 20 Net Cash Cycle Days 73 83 86 89 80 71 87 79 16
PLEXUS CORP. Fiscal fourth quarter 2020 guidance Guidance Revenue $850 to $890 million GAAP diluted EPS $1.05 to $1.20 Gross margin 9.1% to 9.5% SG&A $37.0 to $38.0 million GAAP operating margin 4.8% to 5.2% Depreciation and amortization Approximately $14 million Non-operating expenses $4.8 to $5.2 million Effective tax rate 13% to 15%* Diluted weighted average shares outstanding Approximately 30 million Cash cycle days 77 to 81 days * Fiscal year 2020 tax rate anticipated to be 12% to 14%. 17
Q&A Thank you. 18