Plexus(PLXS) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported fiscal first quarter revenue of $1.09 billion, reflecting a 34% year-over-year growth [80] - GAAP operating margin was 5.2%, including stock-based compensation expense [84] - GAAP EPS was$ 1.49, which included $0.21 of stock-based compensation expense [84] - The company anticipates fiscal second quarter revenue guidance of$ 1.02 billion to $1.07 billion, with GAAP operating margin expected to be between 4.5% and 5% [24] Business Line Data and Key Metrics Changes - The Industrial sector revenue declined by 9% in the fiscal first quarter, with expectations of a 10% decline in the fiscal second quarter due to reduced demand from SemiCap customers [25] - The Healthcare/Life Sciences sector grew by 4% in the fiscal first quarter, with expectations for flat revenue in the fiscal second quarter before returning to growth [82] - The Aerospace and Defense sector declined by 2% in the fiscal first quarter, but is expected to see low single-digit growth in the fiscal second quarter [82] Market Data and Key Metrics Changes - The company’s funnel of qualified manufacturing opportunities increased by nearly$ 250 million to a record $3.6 billion [62] - The EMEA region saw exceptionally strong wins, contributing$ 93 million in the fiscal first quarter [26] - Demand in the Semiconductor Capital Equipment (SemiCap) sector is projected to be down by 10%, impacting overall revenue expectations by approximately 2% [14][15] Company Strategy and Development Direction - The company aims to achieve a GAAP operating margin of 5.5% by the end of fiscal 2023, focusing on resolving supply chain challenges and capitalizing on new program ramps [81] - The company is committed to environmental, social, and governance (ESG) initiatives, joining the Semiconductor Climate Consortium to reduce greenhouse gas emissions [60] - The company expects to return to sequential revenue growth in the fiscal second half, driven by strong demand in Healthcare/Life Sciences and Aerospace and Defense sectors [81] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing supply chain challenges, particularly with lagging edge semiconductors, but anticipates a reversal of trends in decision-making processes for customers [3][5] - The company remains optimistic about fiscal 2023, despite macroeconomic uncertainties, and expects to outperform market growth rates [81] - Management highlighted that the Aerospace and Defense sector is recovering, with supply constraints being the main gating factor [81][93] Other Important Information - The company made cash investments in operations totaling $49 million and capital expenditures of$ 23 million during the fiscal first quarter [7] - The balance sheet at quarter-end included cash of $248 million and debt of$ 516 million, with $180 million available to borrow under the credit facility [7] - The company is targeting to end fiscal 2023 with close to$ 50 million of free cash flow [85] Q&A Session Summary Question: What are the expectations for SemiCap demand? - Management expects SemiCap demand to be down by 10%, impacting overall revenue by about 2% [14][15] Question: How is the inventory and working capital situation? - Management indicated that inventory days are expected to increase, but they aim to reduce cash cycle days by 5 to 10 days by the end of fiscal 2023 [39][40] Question: What is the outlook for the Aerospace and Defense sector? - Management noted that demand is recovering, and they expect low single-digit growth in the sector for the fiscal second quarter [82][93] Question: How does the company plan to address supply chain challenges? - Management is focused on working with customers to improve the supply pipeline and resolve existing challenges [93] Question: What are the expectations for free cash flow? - Management anticipates free cash flow generation in the second half of the year, targeting close to $50 million by the end of fiscal 2023 [85]