Q3 2023 Plexus Corp Earnings Call
Good morning, and welcome to the Plexus Clark Conference call regarding its fiscal third quarter 2023 already sent out to.
My name is Benny and I will be your operator for today's call.
At this time all participants are in a listen only mode.
After a brief discussion by management, we will open the conference call for our questions.
Conference call is scheduled to last approximately an hour.
Please note that this conference is being recorded.
I would now like to turn the call over to Mister Shawn Harrison.
Vice President of Communications and Investor Relations Sean.
Thanks Betty.
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 cast cycle capital allocation of future business outlook.
Forward looking statements are not guarantees since there are difficulties are predicting future results.
The 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 periodically SEC filings, particularly the risk factors and I've gone 10-K filing for the fiscal year at at October 1st 2022, it's supplemented by your form. Thank you filings the safe Harbor imperious closer statements from yesterday's press release.
We encourage participants on the call. This morning to access the live webcast supporting material materials. It flexes his website www dot flexes dotcom clicking at investors with the top of that page.
Joining me today are tied Kelsey Chief Executive Officer, Steve <unk>, President and Chief Strategy Officer, Petromin Executive Vice President and Chief Financial Officer, and all of them <unk> Executive Vice President and Chief operating Officer.
She's got with prior earnings calls titled provide comment provide summary summary comments before turning the call over to Steve Patrick further details let.
Let me now turn the call <unk> calcium.
Thank you Sean good morning, everyone.
Please advanced to slide three.
I'm pleased with the performance of our global plexus team in the fiscal third quarter, including the ability to support future growth opportunities and deliver strong resolve will navigating a volatile demand and supply chain environment.
Fiscal third quarter revenue of $1.02 billion med guidance.
The number of cross currents within the period.
Markets were mixed with certain subsector seeing demand strengthened.
Some seeing demand seemingly bottom and others beginning to show in your term weakness due to a variety of factors.
Simultaneously, what we're seeing further modest improvement and component availability certain lagging at semiconductor lead times remained quite elevated and we under ship demand by more than $100 million once again this quarter.
For the quarter, we delivered GAAP operating margin of 2.8% with gap EPS of 56 cents per share, including 14 cents per share of stock based compensation expense and 76 cents per share related to an arbitration decision and non-recurring restructuring charges.
Adjusted operating margin of 5.0%, which included 337 basis points of stock based compensation expense, let the high end of our guidance range.
The team's ability to mitigate supply chain challenges along with improvements in manufacturing efficiency and better than anticipated performance from our engineering team contributed to this wrong resolved.
The fiscal third quarter represented our fifth consecutive quarter with operating margin exceeding 5%.
non-GAAP EPS of one dollar and 32 cents per share inclusive of 14th sense of stock based compensation expense exceeded guidance benefiting from the team's focus on operational excellence and lower than forecast in taxes.
I go to market team once again did an outstanding job in the fiscal third quarter, winning 30, new manufacturing programs with a record $321 million when fully ramped into production.
Several of the program ripped wins represented competitive sure takeaways.
We've exceeded $300 million in quarterly new program wins twice during the last six quarters, demonstrating the strength of our strategy in customer confidence in our value proposition.
At the same time, we maintained a robust funnel a qualified manufacturing opportunities at $4 billion.
This phone will again includes a greater than typical number of large opportunities in each of our market sectors.
Which we believe continues to position as well to maintain strong manufacturing Will's momentum.
Finally, new engineering program wins, and the final of qualified engineering opportunities expanded versus the prior quarter, both positive leading indicators of future manufacturing whales.
Please advanced applied for.
Leighton our fiscal third quarter, we released our inaugural sustainability report, which highlighted the responsible and sustainable business practices that have long been ingrained in our culture and our corridor vision to help create the products that build a better world.
I encourage everyone joining today's call to review the report found on our sustainability webpage.
A few of our teams fiscal 2022 accomplishments highlighted in the report include achieve.
Cheating and 11.9% energy intensity reduction across flexes manufacturing sites.
Launching a third employee resource group.
Donating in excess of $1 million globally through the plexus charitable foundation.
Completing a third party materiality assessment to understand stakeholder needs.
And enhancing our cyber incident response preparedness.
We have many more efforts underway during fiscal 2000, twenty-three, including delivering more than 40 environmentally focused projects.
Adding two additional employee resource groups and enhancing our volunteer time off and charitable matching programs.
During fiscal 2022, we also formally deployed are differentiated suite of sustainability oriented product lifecycle solutions, which is driving expanded customer engagement.
A core component of the solutions is our life cycle assessment capabilities.
Through a consult with a partnership with our customers, we develop a strategic roadmap of emissions reduction opportunities and in some cases cost reduction opportunities throughout the lifecycle of a product, including the design manufacture use servicing an end of life.
We add substantial value to the process through our teams deep understanding of our customers markets supply chains and products.
There are teams expertise in product development product commercialization supply chain solutions and sustaining services are unique in helping flex a partner with our customers to act upon the opportunities identified through the life cycle assessment.
Ultimately, creating products with improve sustainability.
As we strive to build a better world, we realize the significant opportunity that exists to help our customers deliver more responsible sustainable products to the market.
We have completed assessments with five customers to date and are actively pursuing are engaged in 20 additional opportunities across our product lifecycle solutions.
Please advanced to slide five.
We are guiding fiscal fourth quarter revenue of 1 billion to $1.04 billion.
GAAP operating margin of 4.7% to 5.2% inclusive of approximately 53 basis points of stock based compensation expense.
And can I P. P. S. A one dollar and 18 cents to one dollar and 36 cents.
P. P. S guidance includes approximately 19 cents a stock based compensation expense.
I am proud that given this guidance, we expect a finished fiscal 2000 twenty-three with revenue growth exceeding 10% for the second consecutive year and adjusted operating margin exceeding 5% a meaningful increase from fiscal 2022.
Within the fiscal fourth quarter, we expect to continue to benefit from increasingly robust commercial aerospace demand an ongoing new program Rams. These positives are being offset by incremental weakness in semiconductor capital equipment.
Market, which seems to be finding a bottom.
Modest softening in some of our industrial markets and ongoing supply chain challenges, including those of our customers.
The flatter demand NAMIC is negatively affecting cost absorption at some of our sites.
Finally, I'd like to provide a look into early fiscal 2024.
Receive the current demand and supply chain dynamics holding steady as we entered fiscal 2024.
We expect to follow this with accelerating revenue and profitability growth as a result of stabilizing demand in certain markets, increasing new program ramp momentum and lessening supply chain sandwiches.
The latter includes continued technology enhancements, our team is bringing to supply chain management and further gradual improvements and lagging edge semiconductor availability, creating the opportunity to reduce the ongoing unfulfilled backlog of customer demand.
As a result, we remain confident in achieving our goal of $5 billion in revenue with 5.5 per cent gap operating margin by our fiscal 2025.
I also have continued confidence that flexes as well positioned to deliver industry, leading revenue growth and profitability over the longterm.
Our best in class capabilities focus on operational excellence and unique solutions to address the lifecycle of our customers products are resonating loudly as evidenced by our program wins momentum competitive share games and ongoing robust funnel of opportunities.
I will now turn the call over to Steve for additional analysis of the performance of our market sectors and operations Steve.
Thank you Todd Good morning, I will start on slide six for the review of the fiscal third quarter performance of our market sectors as well as our expectations for the sectors for the fiscal fourth quarter of 2023.
Starting with the industrial sector revenue decline three per cent in the fiscal third quarter there.
A result was better than our expectation of a mid single digit decline.
Improvements and supply chain, especially for our test and measurement Subsector contributed to the stronger result.
As we start this quarter, we are experiencing short term forecast whiteness with some test and measurement and communication customers bleeding.
Leading to a forecast for a mid single digit decline for the industrial sector for the fiscal fourth quarter.
Even with the slight decline this quarter ongoing program ran from mitigate the double digit decline we are seeing in her stomach kept business to keep the industrial sector flat for fiscal 2023.
As we anticipated revenue in our health care I find sector was down 7% for the fiscal third quarter.
Continuous supply chain challenges and modest and market softness where the main reasons for the decline.
In the near term the forecast fluctuations are relatively balanced.
And that resulted we anticipate our health care my final sector to be flat for the fiscal fourth quarter.
For the full year of fiscal 2023, the health care life Sciences sector is on track for an increase in the range of 20 per cent.
Our aerospace and defense sector decreased one per cent in the fiscal third quarter. The result meet our expectations of a mid single digits decrease.
Our supply chain team's ability to improve deliveries with constrained components drove the stronger result.
As I look to the fiscal fourth quarter commercial aerospace demand remains robust and the actions that are teams I've taken to improve materials are creating positive impacts.
As a result, we expect meaningful expansion of shipments with our top six aerospace and defense customers.
The combined grocery deal in approximately 10% increase for the aerospace and defense sector for the fiscal fourth quarter.
A strong finish to the year would put the fiscal 2000 twenty-three grow with it for aerospace and defense sector in the high teens.
We've advanced the five seven for an overview of exceptional wins performance of our market sector teams.
We won 30, new manufacturing programs during the fiscal third quarter that we expect to generate a record $321 million an annualized revenue when ramp into production.
Or when's benefited from an increase in strategic sourcing citizens by our customers we.
We were pleased to be selected by several customers or their partner choice as they made decisions to either outsource their internal manufacturing or to consolidate their supply base.
As a result of the strong winds the trajectory of our wins momentum, which is defined as a trailing forequarter wins divided by the trailing four quarters of revenue is turning back towards is historically strong level.
We have advanced the slide eight.
We can review a few sector and regional highlights of the manufacturing wins for the fiscal third quarter.
Our industrial team whether sectors of 18, new program wins with $193 million when fully ramped into production.
The health care life Sciences team, one seven new programs valued at $90 million, while the aerospace and defense team had a very good quarter with five new program winds were $38 million.
The America's wins were exceptional I'd, almost $200 million or facility in Guadalajara, where recipients of several of the strategic sourcing decisions as we anticipate $160 million of these America wins can be fulfilled by our team in Mexico.
The APEC region benefited from strong winds from the industrial team as most of the $58 million a regional wins came from this sector.
Finally, the EMEA region had another impressive when the result of $64 million.
With the region's trailing forequarter wins now surpassing $300 million, we have high expectations for meaningful growth in fiscal 2024.
We we may have to slide nine for highlights of the fiscal third quarter wins.
I will start with three wins from our industrial sector. All three are examples of existing customers who are rewarding our team is for delivering customer service excellence and operational iphones on current programs.
The first one is it from a long term communications customer.
I have decided to consolidate a meaningful portion of their products from their internal manufacturing into Guadalajara, Mexico facilities.
We will start ramping some of these programs this quarter.
The second example from US I'm, a caf customer who recognize our team's performance in Penang, Malaysia by are expanding our relationship to include high level Assembly production.
Third example is very similar Ah customer focused on electrical vehicle rapid charging that reproduced printed circuit Board Assembly for <unk>, Romania has awarded US the production of the finished product.
The health care life Sciences team on a meaningful portfolio of programs from a new logo who produces defibrillators.
The new customer selected are Guadalajara, Mexico location and wish to consolidate their production.
We will start ramping some of these programs this quarter.
Finally, our aerospace and defense sector grew our market share with an existing aerospace customer.
Giving our performance with our current programs they have decided to transfer duplexes a meaningful portion of the business from one of our competitors.
We expect to start the qualification process for these new assemblies in our Neenah, Wisconsin manufacturing site and early fiscal 2024.
As shown on slide 10, or Formula qualified manufacturing opportunities finished at a robust $4 billion in the fiscal third quarter.
Further evidence that our customers are considering larger more strategic sourcing decisions is supported by the new opportunities that were added to the formal in the fiscal third quarter.
The new potential programs include the outsourcing of internal manufacturing as well as supply base supply base consolidation efforts.
We are confident that our focus on customer service excellence and operational excellence have as well positioned to be our customers partner choice of.
A strong funnel and satisfied customers are key ingredients, we're maintaining a robust wounds performance.
Next I'd like to turn to operating performance on slide 11.
During our fiscal third quarter, our supply chain team and operations teams once again demonstrated their commitment to finding solutions by adjusting to changes in customer forecast.
We also drove supply of constrain materials and converted those materials in the finished goods within the quarter.
In addition, our engineering team all performed expert patients.
The extra effort by the entire organization resulted in non-GAAP operating margin performance of 5%. A result that was at the high end of our expectations and represents the fifth quarter in a row of operating margins above 5%.
I will now turn the call the patent for an end up review of our financial performance Pat. Thank you Steven Good morning, everyone. Our fiscal third quarter results are summarized on slide 12.
Revenue came in at our mid point gross margin nine 2% was towards the top end of our guidance.
Performance from our higher value added services, along with improved contribution margin and our APAC and the mayor regions drove the Hell's here, then expect a gross margin.
Selling and administrative expense of $42.3 million was favorable to guidance, primarily due to lower stock based compensation expense.
As a percentage of revenue SG&A was 4.1%, which is favorable to expectations and sequentially lower by 20 basis points.
non-GAAP operating margin of 5%, which excludes 220 basis points of restructuring and other charges was at the high end of our guidance due to the improved gross margin and lower SG&A expense.
As a result also included 37 basis points of stock based compensation expense.
Non operating expenses were slightly unfavorable to expectations as a result of greater than anticipated foreign exchange losses.
non-GAAP diluted EPS of $1.32, which excludes 76 cents of restructuring and other charges exceeded our guidance due to the factors previously mentioned <unk>.
Also contributing to the EPS improvement was lower than expected tax expense due to discrete tax items recorded during the quarter.
Turning to our cash flow and balance sheet on slide 13.
Relative to our initial expectations were pleased with our free cash flow performance. This quarter, we delivered $18 $8 million in cash from operations and spend $33 million on capital expenditures, resulting in fiscal third quarter cash outflow of $11.5 million. This.
Results included $23 million in payments related to one time non recurring charges.
During the quarter, we purchased approximately 150000 shares of our stock for $13.5 million.
We have approximately $9 million remaining under the current authorization and expect to purchase this amount.
Our fiscal fourth quarter.
Next month will be reviewing with our board of directors are plans for a new program. Once the current authorization is completed.
We believe plexus as well positioned with a strong balance sheet at quarter end cash totaled $254 million, while total that was $492 million.
We also had over $200 million available to borrow under a credit facility and a conservative gross debt to EBITDA ratio of 1.8 times.
For the fiscal third quarter, we delivered return on invested capital of 13.5%, which was 450 basis points above are weighted average cost of capital.
Cash cycle at the end of the third quarter was 111 days slightly above expectations and sequentially higher by seven days.
He just turned to slide 14 for details on our cash cycle.
We were encouraged to see our supply chain and regional teams drive a sequential reduction and growth inventory dollars.
Despite the dollar improvement inventory data sequentially increased by five primarily due to lower revenue.
More than offsetting the increase in inventory days was a seven day increase in customer deposit days.
With over $580 million in customer deposits, we now have over 35% of our gross inventory covered at the end of the quarter.
A as in receivables sequentially increased by seven days, primarily due to reduced activity under our receivables factoring program and changes in customer payment terms.
As Todd is already provided the revenue in EPS guidance for the fiscal fourth quarter I'll review, some additional details which are summarized on 515.
Fiscal fourth quarter gross margin is expected to be in the range of 8.9 to nine 3% at the midpoint gross margin would be slightly lower than the fiscal third quarter.
While they're Bangkok facility is still impacting margins, we're seeing a steady improvement in earnings as we ramp new business in the site and expect continued improvement as we move to positive returns in fiscal 2024.
We expect selling and administrative expenses and the range of 42% to $43 million essentially flat with the fiscal third quarter.
Non operating expenses are anticipated to be in the range of $9 million to $9.5 million sequentially improve due to certain insurance benefits and the expected reduction in foreign exchange losses.
Are effective tax rate for the fiscal fourth quarter is expected to be in the range of 13% to 15%.
Our expectation for the balance sheet is that working capital investments will modestly improved compared to the fiscal third quarter based on our revenue forecast. We expect this level of working capital will will result in cash cycled days in the range of 106, two 110 days a.
Sequential improvement at three days at the midpoint.
We anticipate the improved cash cycle will generate free cash flow in the range of $10 million to $30 million for the fiscal fourth quarter delivering positive free cash levels for fiscal 2023.
Last we expect capital spending for the fiscal year to be in the range of $115 million to $125 million slightly lower than previous guidance.
With that Benny, let's now open the call for questions.
Thank you.
To ask a question. Please press star one one on your telephone Angelica your name can be announced to withdraw your question. Please press one one again.
Stand by while we compiled thank you any faster.
Our first question comes from the line up David Williams off the bench My company. Your line is now open.
Hey, good afternoon, or good morning, and thanks for letting me get a follow up question.
Alright, David.
Good morning, Yeah, I guess first on the <unk>.
Funnel.
Understanding their thoughts put in takes there, but it looks like this is the first time over the last 27 quarters that we've seen that kind of come down, but it was a pretty big last quarter as it relates to function of some of that being pulled through or anything else that we should be thinking about in terms of the tunnel.
Yeah, I think Dave is you can certainly look at the program wins and say that there was it had an impact on the final, but that's still say at $4 billion. It's a second largest funnel we've ever had in the history of the company. So we're feeling really good and view it is very much a robust arnall.
Yeah, and if you look at the beginning of fiscal twenty-three became and I would like a $3.4 billion final start in a year or so the prospect of finishing the year or something.
And the $4 billion range to <unk> comment makes us feel pretty good about where we're at one of the things I would add to his what were what we report to you as our qualified funnel. We also have an early stage farnell and that's actually at a record level right now we're not going to say what that is but there's quite a bit that's percolating in the background as well.
Okay, great. Thanks for the color of their.
And then maybe some incremental weakness that you talked about in this gimme cap equipment I think you've previously mentioned some of your customers were requesting more inventory held maybe for some upside demand that comes in.
Seeing a strength change in that strategy or just maybe any color around the semi cap equipment weakness that you're seeing.
Yeah, as we talked about throughout the year here, we've definitely seen it come down <unk>.
<unk> comment.
See some signs of it being bound center on the bottom so from our perspective, we are managing the inventories.
Tightly with our with our customers. They all basically we're talking about when when it when it comes back they wanted to make sure. They have the right inventory levels and mix of products available and ready. So we are working with them to optimize that a little early to predict exactly when the strengthening will happen, but I think the focus.
Now is people talking about when it returned versus managing the downside of the talking about more being ready for the upside.
A little bit of additional color that I'd add on semi gap as well David is we're really excited about when semi cap recovers and if you look at our past history from 15 to 22, we had a 30% <unk> within semi cab during this downturn period, we've outperformed the market.
Share gains and we're really excited that wonder market does recover we think we're going to have some some substantial growth within that semi cap sub sector.
Great. Thanks, Thanks for that color and just one more if I might hear you've just been upbeat about healthcare opportunity and that's been that's been training very nicely.
A bit lower I think we had anticipated.
Painted anything noteworthy here that there are any updates maybe on the the pause and the ramp discuss a couple of quarters ago.
I wouldn't read too much into it I think we did talk about one customer in a in a few program ramps a couple of programs that were a little bit slower than what we anticipated part of that was driven by the customers and markets supply chains in other words.
Disposables are single use devices that they need for the product that they were having difficulty getting so that's definitely muted a little bit of our growth.
But I want to read too much into it a little bit of volatility and I think it was people adjust their inventories in beaver predicting what may need as we go into fiscal 2024, but again, we are very very optimistic yet in terms of warehouse care life Sciences are for us.
Thank you for his color and congrats on the progress.
Thanks.
Thank you.
One moment please for the next question.
The next question constant line up Melissa Fairbanks off payment changed and Associates line is now opening.
Hey, guys. Thanks, very much good morning, just kind of digging in the morning, [laughter], just kind of digging in a little bit more on the industrial it'd be helpful. If you could give us a little more detail. What you are seeing the weakness outside of semi cap and is it safe to assume that these are just push ups or delays by your customers and then maybe if you could give us.
Updated revenue split between semi cap and the rest of the industrial.
Yeah. So Melissa the two subsectors that we're seeing the softness on with an industrial spaces test and measurement as well as communications I think certainly in the ladder. What we're seeing is a technology switch over there. So it would be that more as a pause tested.
Test and measurement is slightly softer right now, but we do view that is recovering later as.
As we look at at semi cab it's about.
About a little over a third maybe 40% of our industrial sector. So it puts us kind of in the the higher teams or mid to upper teens range from overall plexus revenue.
Okay, great. Thanks, and then just an inventory you know that's one of my my favorite topics.
Drifting to see the days of inventory covered by customer deposits increased again I was wondering if you could give us an update what you're seeing in component hot spots. If it's still the same usual suspects pricing of some of those components and if we can expect to see overall inventories continue to decline.
<unk> is Oliver good morning.
From an overall supply chain perspective, I would really break it down to three three lines. Three stories first is Brian re across our commodity base, we're seeing normalization of lead times.
Pricing tends to follow that we.
We see some suppliers trying to build inventory and so just in general the trend there continues to make incremental progress and.
In terms of our challenge spots, we still see constraints and bones custom engineered components and electrical mechanical commodity.
And then.
As Todd earlier mentioned within lagging edge semiconductors to get into the lower volumes specialized components really just from a handful of key suppliers, we're still seeing quite complaint and lead times.
Unexpected <unk> essentially zero inventory on the open market to enable polenta recovery. So that's one of the areas that we we are working on and we are working within the suppliers to improve that dynamic and then the third piece I talk to you and this is also alluded to a little bit earlier is when our customers sometimes have supply chain challenges.
And in a certain instances, we actually will engage with them to help them solve that as a partner.
And I can think of one specific example, and that's going on right now.
And then Melissa from inventory dollars perspective, we think we can get to.
Q for I was guiding cash cycled the midpoint of 108, which would be a three day reduction from Q3, a lot of that's related to inventory now there is some return of deposits that were anticipating in the fourth quarter.
But we do expect dollars to reduce and the fiscal fourth quarter, and then going into physical 24, I think there is a lot of opportunity based on some of the comments Oliver made to see further reductions in both dollars an inventory days, maybe just a note on that.
We do continue to make investments in both tools and processes relative to how our materials operations performance.
And one piece of innovation that we've now deployed across all of our <unk> our manufacturing sites as.
It is building machine learning and predictive analytics into our planning algorithms and so this is gonna switch back to your question is essentially enabled us to optimize material positioning so I think working capital relative to our customer demand and it creates a more feasible production plan for our customers.
Really if you if you take a step back and predictive analytics creates for us a more accurate feed our capture of true supply and availability.
As I opened with we now have that in place across all of our <unk>, our manufacturing sites and are now the plan that globally.
That's fantastic. Thanks for all the details very very helpful. I'll get back in the queue. Thank you.
Sure.
Thank you one moment please for the next question.
The next question comes trying to line up Stephen Fox Fox advisers LLC. Your line is now okay.
Hey, good morning, guys Uhm I have two questions if I could first of all.
If I'm if I'm understanding what you said about beyond this quarter for the early part of next fiscal year. It sounds like it's going to start off kind of flattish with September quarter levels, and I would assume that usually you would have seen a little bit more growth into the end of the year is it my reading those comments try it and if you could.
Just sort of maybe put a little more color around.
What you're seeing generally after this quarter.
Yeah, I think your your interpretation there is accurate Stephen what I'd say is when we look at Q1, we view it as it looks pretty similar to queue for right now I think as we get into Q2, we could begin to see some growth now, but remember again that that's that quarter is typically a bit challenged from a margin standpoint.
As we have seasonal cost increases and then we see some strong acceleration as we get into the second half of the fiscal year has received a bit more stabilization and markets.
We make continued progress on new program ramps, we have a couple of very large ones that are in the queue right now a couple of them that Steve alluded to and then the supply chain continues to see incremental improvements. So we would expect that to continue over the second half of the year.
And the reason Q1 is flat with Q4, it's basically and markets I guess or is there any kind of pattern within your business.
It's basically the demand dynamics that we referenced in the call. So the uhm continued softness in semiconductor capital equipment.
The near term softness in the industrial markets and then continuing to work through the supply chain. So those are the the near term dynamics that are offsetting some of the positives that we have within the market's now if we saw the supply chain and improved more rapidly than we expect or semi cap if that gets a more rapid.
Recovery is maybe some are starting to suggested could we would see upside from what what we're projecting here.
Got it and then just as a follow up you mentioned some competitive takeaways in the new wind category I was wondering I'm, assuming it's across different types of products, but is there any sort of common thread to why maybe you're taking business from.
Competitors more recently.
Just trying to get product and now that those are starting to soften and.
Basically people are getting a little bit less worried about can I get my product now they're starting to focus on who has the best provider of it. So we kind of saw those building through the tail end of Covid here and as a funnel of opportunities started to increase we are having more strategic conversation with our customers about what their long term supply plan is going to be post COVID-19.
And I'm really proud of our team's ability both from a supply chain of operational standpoint, how they are able to deliver through COVID-19 and I think we're getting rewarded for it. So I do expect a mix a couple of quarters to continue to see these kinds of opportunities come into the funnel and be part of the winds. The one thing I would add to to Steve's comment there is broad based on.
Cross our market sectors, we saw takeaways in each of our market sectors.
Great. That's very helpful. Thank you very much.
Thank you one moment please for the next question.
The next question comes from the line up match streaming from sniper. Your line is now opening.
Yes. Thanks, Good morning, I wanted to follow up on Steve's question regarding your outlook for for the December quarter, and beyond and how that plays into your $5 billion target for physical twenty-five because it looks like based on what you said for Q1 and.
Q to you you're gonna be flat to down year on year and it looks like you're going to have to grow at least mid to high single digits.
In order to do that unless unless twenty-five is double digit growth year. So trying to figure out how we how we bridge to that 5 billion dollar number given that you're gonna be slapped it down in the first half like physical 24.
Yeah, So what I would say that is when we look at overall fiscal 24. The nine to 12 goal that we have will be difficult may expect growth in an unreasonable growth, but to get to that range might be a big challenge, but you should see the revenue accelerated uhm.
To levels that that made the 5 billion achievable is we're in the 25.
So that's the way we look at it.
Oh, Okay. Okay. Thank you and then this is back to the future. Yeah go ahead.
Yeah again, Matt is based off of the programs that are ramping in already won.
Okay and is that skewed more towards towards the defense and healthcare spaces.
No across all three sectors.
Okay.
Okay, and then and then on the supply issues you talked about that hundred million dollar number aware, you're unable to ship and is that is that sort of a the number that we're looking out for the next couple of quarters or will you work that down that backlog as Oliver talked about some of the supply constraints easing.
Yeah, it's it's coming down and it's come down from what it was three or four quarters ago, and we would expect to see continue to see it reduce.
As we move through fiscal 24 in particular.
Okay. Okay. Thank you.
Alright. Thank you one moment please for the next question.
The next question constant line up.
Okay <unk> your line is now open.
Hi, and thank you for taking my question, Sir I'm, just curious if a commercial aerospace it seems like that's picking up free again, asking being able to challenge how.
How much <unk> is due to <unk>.
Alright.
E as well.
Yeah. This is Stephen and I'll start here the demand from the commercial aerospace customers has been quite strong for a period of time here. The challenge was is coming through Covid pipelining of materials wasn't as sophisticated as some of the other sectors and so few.
Few quarters ago, we talked about the fact that we were really working with our customers hard to come up with a better plan for forecasting and getting a pipeline of materials slowing.
The teams have been able to do that and so what you are seeing here is our ability to basically continued.
Continue to meet kind of have a backlog of demand.
With that said our team just returned from the Paris Air show and if you read through some of the press orders being up and demand being up it looks like in addition to the the backlog that we have it looks like going forward. There could also be additional strengthening and demand. So.
I'm, a pretty optimistic about where commercial aerospace is going to be for us in 2024.
Okay. Thank you and also you seem pretty confident in your 5 billion target and what's the biggest risk to reaching that.
I would say the biggest risk would be the macro environment and if things go go south from a macro standpoint from where they are today.
Mmk. Thank you that was all for me.
Thank you.
Alright, one moment please for our next question.
Actually the last question last question comes from <unk> <unk> Company. Your line is now open.
Hi, good morning.
Region has been demonstrating strength in particular Windsor just wondering if you could expand on on what you are seeing their.
What's <unk>, what's <unk>, what's been contributing to that strength.
I think.
It's a market that we've continued to invest in or over the years I would say you know a few years ago, we kind of got to critical mass and our manufacturing facilities as well as investing in the team.
And they're just having a really good success with a value proposition so our value proposition as well based of both of everything from the engineering standpoint, with our design centers there all the way through manufacturing and we added services there about 18 months ago and so from that standpoint is a great value proposition, we do believe and we are seeing.
Suppliers or customers I should say in that market that are looking to bring things back from Asia to to Europe , a little bit more regionalization and localization. We're benefiting from that so I think a combination of those couple of things is again, it's going really well you see the the wins number.
Is exceeding really kind of our annual revenue number so our expectations for growth for that region are quite large as we look to 2000 2004.
Great and with the new program wins 30 wins.
How many or to what extent did those wins begin as engineering wins, and I guess, what I'm trying to get to is how.
How how is the engineering.
U as you a ramp up the engine number of engineering wins.
How is that being flow through into the new program land.
Yeah, I don't know that we have a breakdown for this quarter I mean typically on the order of about a third of our manufacturing Lindsey tend to be heavily engineering centric.
Previously.
Yeah, I'm just going to have the date here again.
So we don't have the numbers here in front of us.
The the wins this quarter were dominated a bit by the strategic sourcing decisions, where it's more of a consolidation of supply base.
Or competitive takeaways. So there's probably a few list this quarter that were driven by engineering, but again I don't have that data in front of me either so.
Thank you.
You're welcome.
Thank you.
At this point I would now like to turn the conference back to I see uhm mistake tied Kelsey for closing remarks.
Alright, Thank you Benny.
I would like to thank everybody the shareholders investors analysts and Ah flexes team members, who joined US today on the call as always we appreciate your interest in flex us and I wish you all a very great day.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Mmm.
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Okay.
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