GlobeNewswire Inc | Jul 22, 2020 04:15PM EDT

July 22, 2020

-- 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, Wis., July 22, 2020 (GLOBE NEWSWIRE) -- 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.

Three Months Ended Jul 4, 2020 Jul 4, 2020 Oct 3, 2020 Q3F20 Results Q3F20 Guidance Q4F20 GuidanceSummary GAAP Items Revenue (in millions) $857 $790 to $830 $850 to $890Operating 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 12.9% (ROIC)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-GAAPfinancial measures and a reconciliation to GAAP.

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 teams innovative virtual business development efforts resulted in a meaningful number of new target customer wins. Our global teams 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 Q3F19Revenue $ 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-GAAPfinancial measures discussed and/or disclosed in this release, such as adjustedoperating margin, adjusted net income, adjusted diluted EPS, ROIC and economicreturn, 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 Q3F19Americas $ 306 $ 334 $ 367Asia-Pacific 482 388 385Europe, Middle East, and Africa 92 74 81Elimination of inter-segment sales (23) (29) (33)Total Revenue $ 857 $ 767 $ 800

Market Sectors ($ in Three Months Endedmillions) Jul 4, 2020 Apr 4, 2020 Jun 29, 2019 Q3F20 Q2F20 Q3F19Healthcare/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 InformationPlexus 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 ReturnROIC 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 FlowPlexus 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 Apr 4, 2020 Jun 29, 2019 Q3F20 Q2F20 Q3F19Days in Accounts Receivable 55 55 52Days in Contract Assets 12 13 12Days in Inventory 97 99 95Days 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 incontract assets and days in inventory, less days in accounts payable and daysin 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

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 presentationWhere: reviewing fiscal second quarter 2020 results will also be made available ahead of the conference call.

Conference call at +1.866.922.5180 with passcode: 9483228

The webcast will be archived on the Plexus website and available viaReplay: telephone replay at +1.855.859.2056 or +1.404.537.3406 with passcode: 9483228

Investor and Media ContactHeather Beresford+1.920.751.3612heather.beresford@plexus.com

About PlexusSince 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 products 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 Kingdoms 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 SUBSIDIARIESCONDENSED 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 2019Net 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 expensesSelling andadministrative 37,028 36,627 114,517 109,521 expensesRestructuringand impairment ? ? 6,003 ? chargesOperating 45,853 34,403 102,996 104,528 incomeOther income (expense):Interest (3,988 ) (3,711 ) (11,934 ) (9,105 ) expenseInterest 368 445 1,546 1,410 incomeMiscellaneous, (600 ) (1,419 ) (2,619 ) (4,304 ) netIncome before 41,633 29,718 89,989 92,529 income taxesIncome tax 5,791 4,917 10,215 20,744 expenseNet 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 Weightedaverage shares outstanding:Basic 29,199 29,912 29,210 30,637 Diluted 29,793 30,635 29,936 31,420

PLEXUS CORP. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except per share data)(unaudited) Jul 4, Sept 28, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 296,545 $ 223,761 Restricted cash 3,098 2,493 Accounts receivable 519,323 488,284 Contract assets 116,442 90,841 Inventories 819,543 700,938 Prepaid expenses and other 32,836 31,974 Total current assets 1,787,787 1,538,291 Property, plant and equipment, net 380,056 384,224 Operating lease right-of-use assets 71,885 ? Deferred income taxes 14,089 13,654 Other 34,707 64,714 Total non-current assets 500,737 462,592 Total assets $ 2,288,524 $ 2,000,883 LIABILITIES AND SHAREHOLDERS? EQUITY Current liabilities: Current portion of long-term debt and finance $ 145,993 $ 100,702 lease obligationsAccounts payable 553,254 444,944 Customer deposits 173,027 139,841 Accrued salaries and wages 60,056 73,555 Other accrued liabilities 105,290 106,461 Total current liabilities 1,037,620 865,503 Long-term debt and finance lease obligations, 188,626 187,278 net of current portionAccrued income taxes payable 53,899 59,572 Long-term operating lease liabilities 38,077 ? Deferred income taxes 6,394 5,305 Other liabilities 19,087 17,649 Total non-current liabilities 306,083 269,804 Total liabilities 1,343,703 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, 534 529 respectivelyAdditional paid-in-capital 615,103 597,401 Common stock held in treasury, at cost, (912,731 ) (893,247 ) 24,228 and 23,913, respectivelyRetained earnings 1,257,374 1,178,677 Accumulated other comprehensive loss (15,459 ) (17,784 ) Total shareholders? equity 944,821 865,576 Total liabilities and shareholders? $ 2,288,524 $ 2,000,883 equity

PLEXUS CORP. AND SUBSIDIARIESNON-GAAP SUPPLEMENTAL INFORMATION Table 1(in thousands, except per share data)(unaudited) Three Months Ended Nine Months Ended Jul 4, Apr 4, Jun 29, Jul 4, Jun 29, 2020 2020 2019 2020 2019Operating income, as $ 45,853 $ 17,209 $ 34,403 $ 102,996 $ 104,528 reportedOperatingmargin, as 5.3 % 2.2 % 4.3 % 4.2 % 4.4 % reported Non-GAAP adjustments:Restructuringand ? 6,003 ? 6,003 ? impairmentcharges (1)Adjustedoperating $ 45,853 $ 23,212 $ 34,403 $ 108,999 $ 104,528 incomeAdjustedoperating 5.3 % 3.0 % 4.3 % 4.4 % 4.4 % margin Net income, $ 35,842 $ 12,926 $ 24,801 $ 79,774 $ 71,785 as reported Non-GAAP adjustments:Special tax ? ? ? (814 ) 7,035 impacts (2)Restructuringandimpairment ? 5,373 ? 5,373 ? charges, netof tax (1)Adjusted net $ 35,842 $ 18,299 $ 24,801 $ 84,333 $ 78,820 income Dilutedearnings per $ 1.20 $ 0.43 $ 0.81 $ 2.66 $ 2.28 share, asreported Non-GAAP pershare adjustments:Special tax ? ? ? (0.02 ) 0.23 impacts (2)Restructuringcosts, net of ? 0.18 ? 0.18 ? tax (1)Adjusteddiluted $ 1.20 $ 0.61 $ 0.81 $ 2.82 $ 2.51 earnings pershare (1)During the three months ended April 4, 2020, restructuring and impairmentcharges of $6.0 million, or $5.4 million net of taxes, were incurred due to thepreviously announced closure of our Boulder Design Center.(2)During the nine months ended July 4, 2020, there was $1.9 million in taxbenefits related to US foreign tax credit regulations issued during thequarter, partially offset by $1.1 million of tax expense as a result of specialtax 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 November2018 under U.S. Tax Reform. These regulations impacted the treatment of foreigntaxes paid.

PLEXUS CORP. AND SUBSIDIARIESNON-GAAP SUPPLEMENTAL INFORMATION Table 2(in thousands)(unaudited) ROIC andEconomic Nine Months Ended Six Months Ended Nine Months EndedReturnCalculations Jul 4, Apr 4, Jun 29, 2020 2020 2019Operatingincome, as $ 102,996 $ 57,143 $ 104,528reportedRestructuringand impairment + 6,003 + 6,003 + ?chargesAdjustedoperating $ 108,999 $ 63,146 $ 104,528income 3 3 $ 36,333 $ 34,843 x 4 x 2 x 4 Adjustedannualized $ 145,332 $ 126,292 $ 139,372operatingincomeAdjustedeffective tax x 13% x 13% x 15%rateTax impact 18,893 16,418 20,906Adjustedoperating $ 126,439 $ 109,874 $ 118,466income (taxeffected) Averageinvested $ 980,929 $ 964,894 $ 921,435capital ROIC 12.9% 11.4% 12.9%Weightedaverage cost - 8.8% - 8.8% - 9.0%of capitalEconomic 4.1% 2.6% 3.9%return Three Months EndedAverage Invested Jul 4, Apr 4, Jan 4, Sept 28,CapitalCalculations 2020 2020 2020 2019Equity $ 944,821 $ 892,558 $ 908,372 $ 865,576Plus: Debt and finance lease 145,993 107,880 67,847 100,702obligations - currentOperating leaseobligations - current 8,061 8,546 9,185 ?(1) (2)Debt and finance leaseobligations - 188,626 186,327 186,827 187,278long-termOperating leaseobligations - 38,077 39,617 36,473 ?long-term (2)Less: Cash and cash (296,545) (225,830) (252,914) (223,761)equivalents $ 1,029,033 $ 1,009,098 $ 955,790 $ 929,795 Three Months EndedAverage Invested Jun 29, Mar 30, Dec 29, Sept 29,CapitalCalculations 2019 2019 2018 2018Equity $ 860,791 $ 875,444 $ 905,163 $ 921,143Plus: Debt and financelease obligations - 138,976 93,197 8,633 5,532currentOperating leaseobligations - ? ? ? ?current (1) (2)Debt and financelease obligations - 187,581 187,120 187,567 183,085long-termOperating leaseobligations - ? ? ? ?long-term (2)Less: Cash and cash (198,395) (184,028) (188,799) (297,269)equivalents $ 988,953 $ 971,733 $ 912,564 $ 812,491(1)Included in Other accrued liabilities on the Condensed Consolidated BalanceSheets.(2)In the fiscal first quarter of 2020, Plexus adopted and applied Topic 842to all leases using the modified retrospective method of adoption. The prioryear comparative information has not been restated and continued to be reportedunder the accounting standards in effect for fiscal 2019 and 2018.