Q4 2024 Plexus Corp Earnings Call

Okay.

Operator: Thank you for standing by.

Operator: Thank you for standing by.

Bailey: Thank you for standing by my name is Bailey and I will be your conference operator today.

Bailey: My name is Bailey, and I will be your conference operator today.

Bailey: My name is Bailey, and I will be your conference operator today.

Bailey: At this time, I would like to welcome everyone to the Plexus Fiscal Fourth Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Bailey: At this time, I would like to welcome everyone to the Plexus Festival 4th quarter, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Bailey: At this time I would like to welcome everyone to the Plexus Festival fourth quarter 'twenty 'twenty four earnings conference call.

Bailey: All lines have been placed on mute to prevent any background noise.

Bailey: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star.

Bailey: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and 1.

Bailey: After the Speakers' remarks, there will be a question and answer session.

Bailey: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Bailey: I would like to withdraw your question again press star and one.

Shawn Harrison: I would now like to turn the call over to Shawn Harrison, Vice President of Investor Relations. You may begin.

Shawn Harrison: I would now like to turn the call over to Shawn Harrison, Vice President of Investor Relations.

Speaker Change: I would now like to turn the call over to Shawn Harrison Vice President of Investor Relations you may begin.

Shawn Harrison: You may begin.

Shawn Harrison: Good morning, and thank you for joining us today. Some of the statements made in information provided during our call today will be forward-looking statements, including, without limitation, those regarding revenue, gross margin, selling administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation, and future business outlook. For looking statements are not guarantees since your inherent difficulties predicting future results, and actual results could differ materially from those expressed or implied in the four-looking statements.

Todd Kelsey: Good morning, and thank you for joining us today. Some of the statements made and information provided during our call today will be forward-looking statements, including without limitation, those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation and future business. Forward-looking statements are not guaranteed, since they're inherent to future results, and actual results could differ materially from those expressed or implied. a list of factors that could cause actual results to differ materially from those... 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 30th, 2021.

Shawn Harrison: Good morning, and thank you for joining us today some of the statements made and information provided during our call today will be forward looking statements, including without limitation those regarding revenue gross margin selling and administrative expense operating margin other income and expense taxes cash cycle capital allocation and future business outlook.

Shawn Harrison: Forward looking statements are not guarantees since you are inherent difficulties in predicting future results and actual results could differ materially from those expressed or implied in the forward looking statements.

Shawn Harrison: 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 30, 2023. It is supplemented by our Form 10-K filings from the State Department of Fair Disclosure Statements and our press release.

Shawn Harrison: 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 32023, supplemented by our Form 10-Q filings and the Safe Harbor Fair disclosure statements in our press release.

Todd Kelsey: is supplemented by our Form 10-Q filings and the Safe Harbor Fair Disclosure Statement.

Shawn Harrison: We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus' website, www.plexus.com, clicking on Investors at the top of that page.

Todd Kelsey: We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus. www.plexus.com.

Shawn Harrison: For a minute there, Todd Kelsey, President and Chief Executive Officer; Oliver Mim, Executive Vice President, Chief Operating Officer; and Patrick May, Executive Vice President and Chief Financial Officer. With today's earnings call, Todd will provide summary comments before turning the call over to Oliver and Pat for further details.

Shawn Harrison: Joining me today are Todd Kelsey, president... Oliver Mihm, Executive Vice President and Chief Operating Officer. Pat Jermain, Executive Vice President and Chief Financial In today's earnings call, Todd will provide summary comments. for returning the call over to Oliver and Pat.

Shawn Harrison: Before I turn the call over to Todd, please note that during our fiscal first quarter, Plexus will participate in Stefels Midwest 101 Conference in Chicago on November 7.

Shawn Harrison: Before I turn the call over to Todd, please note that during our fiscal first quarter, Plexus will participate in Stiefel's Midwest One-on-One Conference in Chicago. and Raymond James, 2024 TMT Consumer Conference in New York.

Shawn Harrison: In Raymond James, 2024, TNT and Consumer Conference in New York City on December 10.

Shawn Harrison: With that, let me now turn the call over to Todd Kelsey.

Shawn Harrison: With that, let me now turn the call over to Todd Kelsey. Todd.

Todd Kelsey: Todd? Thank you, Shawn.

Todd Kelsey: Thank you, Sean.

Todd Kelsey: Good morning, everyone. Please advance to slide three. Plexus exited fiscal 2024 with exceptional performance, a testament to the dedication and focus of our more than 20,000 team members globally. Our team's commitment to delivering customer service excellence resulted in Plexus gaining market share throughout fiscal 2024, positioning us for a solid fiscal 2025, and capturing pull-in data late in the fiscal fourth quarter, leading to the exceptional quarterly results. In addition, our team's ongoing focus on driving efficiency and increasing operating margin resulted in Plexus achieving our 6 plus percent non-gap operating margin goal one year earlier than anticipated, producing robust quarterly EPS.

Todd Kelsey: Good morning, everyone. Please advance to slide three. Plexus exited fiscal 2024 with exceptional performance, a testament to the dedication and focus of our more than 20,000 team members globally. Our team's commitment to delivering customer service excellence resulted in Plexus gaining market share throughout fiscal 2024, positioning us for a solid fiscal 2025, and capturing pull-in data, laid in the fiscal fourth quarter, leading to the exceptional quarterly results. In addition, our team's ongoing focus on driving efficiency and increasing operating margin resulted in Plexus achieving our 6 plus percent non-GAAP operating margin goal one year earlier than anticipated, producing robust quarterly EPS.

Speaker Change: <unk> ongoing focus on driving efficiency and increasing operating margin resulted in <unk>, achieving our 6% non-GAAP operating margin goal one year earlier than anticipated producing robust quarterly EPS.

Todd Kelsey: We also generated record free cash flow of $194 million in the quarter. The stellar free cash flow performance pushed our fiscal 2024 free cash flow generation to $341 million, representing more than two times our previous record annual free cash flow. We continue to anticipate revenue growth for fiscal 2025 while loading trends within our market sectors remain mixed. We anticipate another strong year for our aerospace and defense market sector, aided by ongoing share gains and new program ramps. While we expect modest growth from health care, life sciences, and industrial market sectors supported by demand recovering in certain subsectors, new program ramps and share gains.

Todd Kelsey: We also generated record free cash flow of $194 million in the quarter. This stellar free cash flow performance pushed our fiscal 2024 free cash flow generation to $341 million, representing more than two times our previous record annual free cash flow. We continue to anticipate revenue growth for fiscal 2025 while noting trends within our market sectors remain mixed. We anticipate another strong year for our aerospace and defense market sector aided by ongoing share gains and new program rank. While we expect modest growth from healthcare life sciences and industrial market sectors supported by demand recovering in certain subsectors, new program ramps, and share gains.

Speaker Change: We also generated record free cash flow of $194 million in the quarter.

Speaker Change: This stellar free cash flow performance pushed our fiscal 2020 for free cash flow generation to $341 million.

Speaker Change: Representing more than two times, our previous record annual free cash flow.

Speaker Change: We continue to anticipate revenue growth for fiscal 2025, while loading trends within our market sectors remained mixed.

Speaker Change: We anticipate another strong year for our aerospace and defense market sector aided by ongoing share gains and new program ramps.

Speaker Change: While we expect modest growth from healthcare life Sciences, and industrial market sectors supported by demand recovering in certain sub sectors, new program ramps and share gains.

Todd Kelsey: We remain focused on maintaining our strong operating margin performance of recent quarters, producing meaningful growth in EPS and generating free cash flow that will continue to be deployed toward creating additional shareholder value. Please advance to slide four.

Todd Kelsey: We remain focused on maintaining our strong operating margin performance of recent quarters, producing meaningful growth in EPS, and generating free cash flow that will continue to be deployed toward creating additional shareholder value.

Speaker Change: We remain focused on maintaining our strong operating margin performance of recent quarters, producing meaningful growth in EPS and generating free cash flow that will continue to be deployed toward creating additional shareholder value.

Todd Kelsey: Please advance to slide four. We delivered tremendous fiscal fourth quarter financial results. Revenue of $1.05 billion exceeded our guidance range. As the quarter progressed, we experienced stronger demand and a pull-in of activity with customers across multiple market sectors that more than offset ongoing demand weakness in the industrial market sector and the EMEA region. Non-GAAP operating margin of 6.2% met our long-term goal, expanding 40 basis points sequentially and exceeding our 5.6% to 6.0% guidance range. Our focus on driving operational efficiency led to healthy margin leverage on the late quarter demand surge. Non-GAAP EPS of $1.85 also exceeded our guidance range, benefiting from revenue upside, robust operating margin performance, further reduction in interest expense, and a favorable tax rate.

Speaker Change: Please advance to slide four.

Todd Kelsey: We delivered tremendous fiscal fourth quarter financial results. Revenue of $1.05 billion exceeded our guidance range. As the quarter progressed, we experienced stronger demand and a pulling of activity with customers across multiple market sectors that more than offset ongoing demand weakness in the industrial market sector and the AMA region. Non-GAAP operating margin of 6.2% met our long-term goal, expanding 40 basis points sequentially and exceeding our 5.6 to 6.0% guidance range. Our focus on driving operational efficiency led to healthy margin leverage on the late quarter demand surge. Non-GAAP EPS of $1.85 also exceeded our guidance range, benefiting from revenue upside, robust operating margin performance, further reduction in interest expense, and a favorable tax rate.

Speaker Change: We delivered tremendous fiscal fourth quarter financial results.

Speaker Change: Revenue of 1.05 billion exceeded our guidance range.

Speaker Change: As the quarter progressed, we experienced stronger demand and a pull in of activity with customers across multiple market sectors.

Speaker Change: That more than offset ongoing demand weakness in the industrial market sector and the EMEA region.

Speaker Change: non-GAAP operating margin of six 2% met our long term goal, expanding 40 basis points sequentially and exceeding our five 6% to 6.0% guidance range or.

Speaker Change: Our focus on driving operational efficiency led to healthy margin leverage on the late quarter demand surge.

Speaker Change: non-GAAP EPS of $1 85 also exceeded our guidance range benefiting from revenue upside robust operating margin performance further reduction in interest expense and a favorable tax rate.

Todd Kelsey: Please advance to slide five.

Todd Kelsey: Please advance to slide five. For the fiscal fourth quarter, we won 26 manufacturing programs worth $230 million in annual revenue when fully ramped into production. Included in this result is another strong quarterly contribution from the healthcare life sciences market sector of 148 million dollars.

Speaker Change: Please advance to slide five.

Todd Kelsey: For the fiscal fourth quarter, we won 26 manufacturing programs, worth $230 million in annual revenue when fully ramped into production. Included in this result is another strong quarterly contribution from the healthcare life sciences market sector of $148 million. For fiscal 2024, our go-to-market team generated more than $1 billion in manufacturing program wins, including a record $568 million of program wins in the healthcare life sciences market sector, supporting our anticipation of exceptional revenue growth for this market sector over the long term. Please advance to slide six.

Todd Kelsey: For fiscal 2024, our go to market team generated more than $1 billion in manufacturing program wins, including a record $568 billion of program wins in the healthcare life sciences market sector, supporting our anticipation of exceptional revenue growth for this market sector over the long Please advance to slide six.

Todd Kelsey: We continue to create value for our shareholders, our team members, our customers, and communities through our sustainable and responsible business practices. The following are highlights from Fiscal 2024. We reduced our waste to landfill by over 10% globally, double our 5% goal, through increased recycling and reuse, strategic vendor selection, and reduced waste generation. We reduced our scope one and two emissions by over 5% across Plexus' global manufacturing sites, as we continue to improve operational efficiencies, optimize technology, and transition to cleaner sources of energy. In support of our social impact efforts, we donated more than $1 million globally through the Plexus Community Foundation.

Todd Kelsey: We continue to create value for our shareholders, our team members, our customers, and communities through our sustainable and responsible business practices. The following are highlights from Fiscal 2024. We reduced our waste to landfill by over 10% globally, double our 5% goal, through increased recycling and reuse, strategic vendor selection, and reduced waste generation. We reduced our scope 1 and 2 emissions by over 5% across Plexus' global manufacturing sites as we continue to improve operational efficiencies, optimize technology, and transition to cleaner sources of energy. In support of our social impact efforts, we donated more than $1 million globally through the Plexus Community Foundation.

Todd Kelsey: Our team members contributed over 20,000 paid volunteer hours to their local communities, surpassing our fiscal 2023 engagement. engagement. And we continue to drive sustainable and responsible business practices across our value chain. We assessed over 50% of our global supply chain spend on environmental and social factors as we help our customers deliver more sustainable products to the market.

Todd Kelsey: Our team members contributed over $20,000 paid volunteer hours to their local communities, surpassing our fiscal 2023 engagement. And we continue to drive sustainable and responsible business practices across our value chain. We assessed over 50% of our global supply chain spend on environmental and social factors as we help our customers deliver more sustainable products to the market.

Speaker Change: Okay.

Todd Kelsey: Finally, this past quarter, we were thrilled to be named one of the top 100 US internship programs for 2024 by Yellow, recognizing the investment in our people who are at the heart of who we are and what we do. We also received the Business Friend of the Environment Award for Sustainability in the Large Company category presented by Wisconsin Manufacturers and Commerce. This is in recognition of our dedication to environmental stewardship, sustainable business practices in our vision to help create the products that build a better world. Thanks to all of our team members who supported these achievements that will continue to build upon throughout fiscal 2025.

Todd Kelsey: Finally, this past quarter, we were thrilled to be named one of the top 100 US internship programs for 2024 by Yellow, recognizing the investment in our people who are at the heart of who we are and what we do. We also received the Business Friend of the Environment Award for Sustainability in the Large Company category presented by Wisconsin Manufacturers and Commerce. This is in recognition of our dedication to environmental stewardship, sustainable business practices, and our vision to help create the products that build a better world.

Speaker Change: Finally, this past quarter, we were thrilled to be named one of the top 100 U S. Internship programs for 2024 by yellow recognizing the investment in our people who are at the heart of who we are and what we do.

Speaker Change: We also received the business friend of the Environment Award for sustainability in the large company category presented by Wisconsin manufacturers and Commerce.

Speaker Change: This is in recognition of our dedication to environmental stewardship sustainable business practices and our vision to help create the products that build a better world.

Todd Kelsey: Thanks to all of our team members who supported these achievements that we'll continue to build upon throughout fiscal 2025.

Speaker Change: Thanks to all of our team members, who supported these achievements that we will continue to build upon throughout fiscal 2025.

Todd Kelsey: Please advance to slide seven. We begin fiscal 2025 in a strong position given healthier improved conditions for many of our market sectors and sub sectors. Solid fiscal 2024 new program wins performance, inclusive of market share games enabled by our focus on delivering customer service excellence. The expansion and profitability witnessed throughout fiscal 2024 associated with our focus on driving efficiency and increasing operational performance. And the EPS leverage created from deploying our outstanding free cash flow toward reducing our borrowing and completing our share repurchase program. We are guiding fiscal first quarter revenue in the range of $960 million to $1.0 billion.

Todd Kelsey: Please advance to slide seven. We begin fiscal 2025 in a strong position, given healthier, improved conditions for many of our market sectors and subsectors. Solid Fiscal 2024 new program wins performance inclusive of market share games enabled by our focus on delivering customer service. The expansion and profitability witnessed throughout fiscal 2024 associated with our focus on driving efficiency and increasing operational performance. and the EPS leverage created from deploying our outstanding free cash flow toward reducing our borrowing and completing our share repurchase program.

Speaker Change: Please advance to slide seven.

Speaker Change: We begin fiscal 2025 in a strong position given healthier improve conditions for many of our market sectors and subsectors.

Speaker Change: Solid fiscal 2024, new program wins performance inclusive of market share gains enabled by our focus on delivering customer service excellence.

Speaker Change: The expansion in profitability witnessed throughout fiscal 2024 associated with our focus on driving efficiency and increasing operational performance.

Speaker Change: And the EPS leverage created from deploying our outstanding free cash flow toward reducing our borrowing and completing our share repurchase program.

Todd Kelsey: We are guiding fiscal first quarter revenue in the range of $960 million to $1.0 billion, non-GAAP operating margin of 5.7% to 6.1%, and non-GAAP EPS of $1.52 to $1.67. After the stronger-than-anticipated finish to fiscal 2024, along with an ongoing challenge demand environment in EMEA, we expect sequential revenue growth to pause with our fiscal first quarter before resuming as the fiscal year continues. For fiscal 2025, we expect robust revenue growth within aerospace and defense, reflecting a continuation of end market strength, new program ramps, and market share gains. Moderate growth in healthcare life sciences as we navigate through any remaining inventory corrections while benefiting from new program ramps, share gains, and a modest rebound in healthcare market demand.

Speaker Change: We are guiding fiscal first quarter revenue in the range of $960 million to 1.0 billion.

Todd Kelsey: Non-GAAP operating margin of 5.7 to 6.1% and non-GAAP EPS of $1.52 to $1.67. After the stronger than anticipated finish to fiscal 2024, along with an ongoing challenge demand environment in Omea, we expect sequential revenue growth to pause with our fiscal first quarter before resuming as the fiscal year continues. For fiscal 2025, we expect robust revenue growth, with aerospace and defense reflecting a continuation of end market strength, new program ramps, and market share gains. Moderate growth and healthcare life sciences as we navigate through any remaining inventory corrections while benefiting from new program ramps, share gains, and a modest rebound in healthcare market demand.

Speaker Change: non-GAAP operating margin of five 7% to six 1% and non-GAAP EPS of $1 52.

Speaker Change: To $1 67.

After the stronger than anticipated finish to fiscal 2024, along with an ongoing challenged demand environment in EMEA, we expect sequential revenue growth to pause with our fiscal first quarter before resuming as the fiscal year continues.

Todd Kelsey: And moderate growth and industrial reflecting robust growth and semi cap exceeding third party market recovery forecast, but a broader industrial market that remains challenged by inventory corrections and weak demand. We anticipate our efforts to continue to increase operational efficiency will result in maintaining the strong operating margin performance of recent quarters, while EPS should witness meaningful expansion, leveraging revenue growth, strong profitability, and the ongoing benefits from deploying our substantial free cash flow generation toward creating shareholder value.

Todd Kelsey: and Moderate Growth in Industrial, reflecting robust growth in Semi-Cap, exceeding third-party market recovery forecasts, but a broader industrial market that remains challenged by inventory corrections and weak demand. We anticipate our efforts to continue to increase operational efficiency will result in maintaining the strong operating margin performance of recent quarters, while EPS should witness meaningful expansion, leveraging revenue growth, strong profitability, and the ongoing benefits from deploying our substantial free cash flow generation toward creating shareholder value.

Oliver Mihm: I will now turn the call over to Oliver for additional analysis of the performance of our market sectors. Thank you, Todd.

Oliver Mihm: I will now turn the call over to Oliver for additional analysis of the performance of our market sectors.

Oliver Mihm: Oliver. Thank you, Todd.

Oliver Mihm: Good morning. I will begin with a review of the fiscal fourth quarter performance of each of our market sectors. our expectations for each sector for the fiscal first quarter, and some directional sector commentary for fiscal 2025. I will also review the annualized revenue contribution of our wind performance for each market sector and region, and then provide an overview of our funnel of qualified manufacturing Starting with our aerospace and defense sector on slide 8, revenue increased 3% sequentially in the fiscal fourth quarter, above our expectation for flat revenue. Multiple customers drove the revenue upside, reflecting increased demand inside the quarter and stronger than anticipated demand for our engineering solution.

Oliver Mihm: Good morning. I will begin with a review of the fiscal fourth quarter performance of each of our market sectors, our expectations for each sector for the fiscal first quarter, and some directional sector commentary for fiscal 2025. I will also review the annualized revenue contribution of our wins performance for each market sector and region, and then provide an overview of our funnel of qualified manufacturing opportunities. Starting with our aerospace and defense sector on slide 8, revenue increased 3% sequentially in the fiscal fourth quarter, above our expectation for flat revenue. Multiple customers drove the revenue upside, reflecting increased demand inside the quarter and stronger than anticipated demand for our engineering solutions, which more than offset cautiousness stemming from uncertainty in the commercial aerospace sub-sector.

Oliver Mihm: which more than offset cautiousness stemming from uncertainty in the commercial aerospace subset. Consistent with prior guidance, Fiscal 2024 represented a very strong growth year for the Aerospace and Defense... with revenue up 21%. exceeding the robots growth we saw in fiscal 2023 of 17%. We expect revenue for the aerospace and defense sector to decline high single digits in the fiscal first quarter, with the pulling of activity into Q4 and customer conservatism in the commercial aerospace subsector more than offsetting strength in our space subsector. Our wings for the fiscal fourth quarter for the aerospace and defense sector were strong at $45 million and included a complex product assembly for our Boise, Idaho facility.

Oliver Mihm: Consistent with prior guidance, fiscal 2024 represented a very strong growth year for the aerospace and defense sector. With revenue up 21%, exceeding the robust growth we saw in fiscal 2023 of 17%.

Oliver Mihm: We expect revenue for the aerospace and defense sector to decline high single digits in the fiscal first quarter, with a pooling of activity into Q4 and customer conservatism in the commercial aerospace sub-sector, more than offsetting strength in our space sub-sector. Our wins for the fiscal fourth quarter for the aerospace and defense sector were strong at $25 million, and included a complex product assembly for our Boise, Idaho facility. This program wins further solidifies our relationship with one of the largest defense prime contractors. We also want our first manufacturing award from a defense customer where we have maintained a long-standing engineering solutions engagement.

Speaker Change: First quarter with a point of activity into Q4 and customer conservatism in the commercial aerospace sub sector more than offsetting strength in our space sub sector.

Speaker Change: Our wins for the fiscal fourth quarter for the aerospace and defense sector were strong at $45 million and included a complex product assembly for our Boise, Idaho facility.

Oliver Mihm: This program, when further solidifies our relationship with one of the largest defense prime contractors in the United States, We also won our first manufacturing award from a defense customer where we have maintained a longstanding engineering solution. This program will be built in our Neenah, Wisconsin. Finally, engineering solutions wins for the aerospace and defense sector hit a record high in fiscal 2024, reflecting continued progress and diversifying our opportunities to generate growth.

Speaker Change: This program win further solidifies our relationship with one of the largest defense prime contractors.

Speaker Change: We also won our first manufacturing award from a defense customer, where we have maintained a long standing engineering solutions engagements.

Oliver Mihm: This program will be built in our Nina-Wis Constant facility. Finally, engineering solutions wins for the aerospace and defense sector hit a record high in fiscal 2024, reflecting continued progress and diversifying our opportunities to generate growth.

Speaker Change: This program will be built in our Neenah, Wisconsin facility.

Speaker Change: Finally engineering solutions wins for the aerospace and defense sector hit a record high in fiscal 2024, reflecting continued progress in diversifying our opportunities to generate growth.

Oliver Mihm: Our fiscal 2025 aerospace and defense market sector outlook continues to be bullish, supported by new program ramp strength in our defense sub-sector, and our expectation that uncertainty in the commercial aerospace sub-sector will resolve as the year progresses. Please advance the slide nine.

Oliver Mihm: Our fiscal 2025 aerospace and defense market sector outlook continues to be bullish, supported by new program ramp strength in our defense subsector and our expectation that uncertainty in the commercial aerospace subsector will resolve as the year progresses. Please advance to slide 9. Revenue in our healthcare life sciences sector was up 9% sequentially for the fiscal third quarter on the strength of inside-the-quarter demand increases and a pooling of demand for a new product. This beat our expectations of a mid-single-digit increase. Fiscal 2024 for our healthcare life sciences sector saw a 17% revenue decline as a result of inventory corrections and demand softening.

Speaker Change: Our fiscal 2025 aerospace and defense market sector outlook continues to be bullish supported by new program ramps strengthened and our defense sub sector and our expectation that uncertainty in the commercial aerospace sub sector will resolve as the year progresses.

Speaker Change: Please advance to slide nine.

Oliver Mihm: Revenue in our health care life sciences sector was up 9% sequentially for the fiscal third quarter on the strength that inside the quarter demand increases and a poolment demand for a new product launch. This beat our expectations of a mid-single digit increase.

Speaker Change: Revenue in our healthcare life Sciences sector was up 9% sequentially for the fiscal third quarter on the strength of inside the quarter demand increases and are pulling that demand for our new product launch.

Speaker Change: This beat our expectations of a mid single digit increase.

Oliver Mihm: Fiscal 2024 for our health care life sciences sector saw a 17% revenue decline as a result of inventory corrections and demand softness, as well as a disgust headwind from the normalization of previously procuring components at above market prices. For the fiscal first quarter, we expect the health care life sciences sector to decline high single digits, reflecting some continued inventory corrections and the pooling of activity into the fiscal fourth quarter. This dynamic is more than offsetting continued momentum from our engineering solutions.

Speaker Change: Fiscal 2024 for our health care life Sciences sector saw a 17% revenue decline as a result of inventory corrections and demand softness.

Oliver Mihm: as well as a discussed headwind from the normalization of previously procuring components at above-market prices. For the fiscal first quarter, we expect the healthcare life sciences sector to decline high single digits, reflecting some continued inventory corrections and the pooling of activity into the fiscal fourth quarter. This dynamic is more than offsetting continued momentum from our engineering solutions. Healthcare Life Sciences Sector wins for the fiscal fourth quarter, marked a second consecutive quarter of strong performance at $148 million. WINS included two significant awards from an existing customer for our Nena, Wisconsin manufacturing facility. One of these awards represents new outsourcing work and reflects on the depth of our experience in this subsector, the strength of our historical execution from our ongoing sustaining services and and our ability to contribute world-class engineering, commercialization and development resources in support of customer success.

Speaker Change: As well as the disgust headwinds from the normalization of previously procuring components at above market prices.

Speaker Change: For the fiscal for the fiscal first quarter, we expect the health care life science sector to decline high single digits.

<unk> some continued inventory corrections in the pooling of activity into the fiscal fourth quarter.

Speaker Change: This dynamic is more than offsetting continued momentum from our engineering solutions.

Oliver Mihm: Health care life sciences sector wins for the fiscal fourth quarter marked a second consecutive quarter of strong performance at $148 million. Wins included two significant awards from an existing customer for our Nina, Wisconsin manufacturing facility.

Speaker Change: Health care life Sciences sector wins for the fiscal fourth quarter marked our second consecutive quarter of strong performance at $148 million.

Speaker Change: Wins included two significant awards from an existing customer for our Neenah, Wisconsin manufacturing facility.

Oliver Mihm: University. One of these awards represents new outsourcing work and reflects on the depth of our experience in the sub-sector, the strength of our historical execution from our ongoing sustaining services engagement, and our ability to contribute world-class engineering commercialization and development resources and supportive customer success. We also want the production of a therapeutic device for an existing customer based on a historical execution and support of their new product launches. This product will be produced in our Chicago, Illinois facility.

Oliver Mihm: We also want the production of a therapeutic device for an existing customer based on a historical execution and support of their new product launch. This product will be produced in our Chicago, Illinois facility. The aggregate wins for the health care life sciences sector for fiscal 2024 reflect a record high and a remarkable 69% year-over-year increase.

Oliver Mihm: The aggregate wins for the health care life sciences sector for fiscal 2024 reflect a record high and a remarkable 69 percent year-over-year increase.

Oliver Mihm: As we look to our fiscal 2025, we remain optimistic for a return to growth for the health care life sciences sector, benefiting from the ongoing strength and program ramps, modest and market improvements, and normalization of inventories.

Oliver Mihm: As we look to our fiscal 2025, we remain optimistic for a return to growth for the healthcare life sciences sector, benefiting from the ongoing strength and program ramps, modest end market improvements, and normalization of inventory.

Oliver Mihm: Advancing to the industrial sector on slide 10, revenue increased 12 percent sequentially in the fiscal fourth quarter. The result was above our expectation of a high-send gold-digit increase and primarily driven by inside the quarter-domain increases from customers in our semi-cats and energy sub-sectors. Fiscal 2024 saw 3 percent revenue decline for the industrial sector as strength in new program ramps and the beginnings of a semi-cats sub-sector recovery were more than offset by generally soft demand and various sub-sectors working through an inventory correction.

Oliver Mihm: Advancing to the industrial sector on slide 10. Revenue increased 12% sequentially in the fiscal fourth quarter. The result was above our expectation of a high single-digit increase and primarily driven by inside-the-quarter demand increases from customers in our semi-cap and energy subsectors. Fiscal 2024 saw a 3% revenue decline for the industrial sector, a strength in new program ramps, and the beginnings of a semi-capped subsector recovery were more than offset by generally soft demand in various subsectors working through an inventory crisis. Looking ahead to the fiscal first quarter, continued demand improvement and semi-cap is being more than offset by Some industrial subsectors continue to work through demand instability, the revenue upside experienced in the fiscal fourth quarter, and near-term program volatility with two customers.

Oliver Mihm: Looking ahead to the fiscal first quarter, continued demand improvement in semi-cats is being more than offset by some industrial sub-sectors continuing to work through demand instability, the revenue upside experience in the fiscal fourth quarter, and near-term program volatility with two customers. As a result, we expect revenue to decline mid-single digits in the industrial sector for the fiscal first quarter.

Oliver Mihm: As a result, we expect revenue to decline mid-single digits in the industrial sector for the fiscal first quarter. The industrial market sector wins for the fiscal fourth quarter of $37 million, including a next-generation product win with an existing test and measure. Our wins also included share gains on two platforms for an existing semi-cap. These products will be built in our Penang, Malaysia... We are also pleased to note that an existing customer with a leadership position in the energy subsector has audited our Boise, Idaho facility and confirmed the Plexus quality system as compliant to NQA-1. This is ASME's Nuclear Quality Assurance Standard for firms providing services in support of nuclear energy.

Oliver Mihm: The industrial market sector wins for the fiscal fourth quarter of $37 million included a next-generation product win with an existing testing measurement customer. Our wins also included share gains on two platforms for an existing semi-cats customer. These products will be built in our Penang Malaysia campus.

Oliver Mihm: We are also pleased to note that an existing customer with a leadership position in the energy sub-sector has audited our Boise, Idaho facility and confirmed the Plexus quality system as compliance to NQA-1. This is A.S.M.E.'s nuclear quality assurance standard performs providing services and support of nuclear energy. Compliance to this standard expands our differentiation, enabling continued revenue growth.

Speaker Change: Yeah.

Oliver Mihm: Compliance to this standard expands our differentiation, enabling continued revenue. Our expectation for the industrial sector of a return to growth in fiscal 2025 remains unchanged.

Speaker Change: Compliance to the standard expands our differentiation, enabling continued revenue growth.

Oliver Mihm: Our expectation for the industrial sector of a return to growth in fiscal 2025 remains unchanged. Our view as a general sub-sector instability will resolve as a year progresses with market outgrowth and semi-cap offsetting industrial sub-sector market weakness.

Speaker Change: Our expectation for the industrial sector of our return to growth in fiscal 2025 remains unchanged.

Oliver Mihm: Our view is that general subsector instability will resolve as the year progresses, with market outgrowth and semi-cap offsetting industrial subsector market.

Speaker Change: Our view is the general sub sector instability will resolve as the year progresses with market outgrowth in semi cap offsetting industrial sub sector market weakness.

Oliver Mihm: Advancing to slide 11, we can review the regional highlights of the manufacturing wins for the fiscal fourth quarter. The America's wins were exceptionally strong at $195 million. This marks the second consecutive quarter of a strong regional wins performance. Wins included a share gain award for our Neon Wisconsin facility from an existing customer in our space sub-sector that is seeing increasing product market acceptance. This wind reflects the strength of our collaborative relationship and support of helping launch the product into the market. The A-PAC region's fiscal fourth quarter wins of $30 million included new programs with two of our existing semi-cap customers.

Oliver Mihm: Advancing to slide 11, we can review the regional highlights of the manufacturing wins for the fiscal fourth quarter. The Americas' wins were exceptionally strong at $195 million. This marks the second consecutive quarter of strong regional winds. WINS included a share gain award for our Neenah, Wisconsin facility from an existing customer in our space subsector that is seeing increasing product market acceptance. This win reflects the strength of our collaborative relationship and support of helping launch the product into the market. The APAC region's fiscal fourth quarter wins of $30 million included new programs with two of our existing semi-cap...

Speaker Change: Advancing to slide 11, we can review the regional highlights of the manufacturing wins for the fiscal fourth quarter.

Speaker Change: The Americas wins were exceptionally strong at $195 million.

Speaker Change: This marks the second consecutive quarter of strong regional wins performance.

Speaker Change: Wins included a share gain award for our Neenah, Wisconsin facility from an existing customer in our space sub sector that is seeing increasing product market acceptance.

Speaker Change: This win reflects the strength of our collaborative relationship in support of helping launch their product into the market.

Speaker Change: The APAC region fiscal fourth quarter wins of $30 million included new programs with two of our existing semi cap customers. These.

Oliver Mihm: These assemblies will be built in our Penang, Malaysia campus. The mayor region's fiscal fourth quarter wins of $5 million included a new program award from an existing semi-cap customer. This award for our team in Scotland reflects continued share game for Plexus as our customer executes to the strategic supplier roadmap.

Oliver Mihm: These assemblies will be built in our Penang, Malaysia campus. The awards are a result of our continued strong execution. The aggregate fiscal 2024 wins for the AIPAC region increased 46% over the prior period.

Speaker Change: These assemblies will be built in our Penang Malaysia campus.

Speaker Change: The awards are a result of our continued strong execution.

Speaker Change: The aggregate fiscal 2024 wins for the APAC region increased 46% over the prior fiscal year.

Oliver Mihm: The Mayor-Regent's fiscal fourth quarter wins of $5 million included a new program award from an existing semi-capitalist. This award for our team in Scotland. reflects continued share gain for Plexus as our customer executes to the strategic supplier roadmap.

Speaker Change: EMEA region fiscal fourth quarter wins of $5 million included a new program award from an existing semi cap customers.

Speaker Change: This award for our team in Scotland.

Speaker Change: <unk> continued share gains for <unk> as our customer executes to their strategic supplier roadmap.

Oliver Mihm: Please advance the slide 12 for a review of our funnel of qualified manufacturing opportunities. The funnel of qualified manufacturing opportunities remains robust at $3.5 billion, with a sequential decline reflected by the robust harvesting activity by our team and typical funnel management.

Oliver Mihm: Please advance to slide 12 for a review of our funnel of qualified manufacturers. The funnel of qualified manufacturing opportunities remains robust at $3.5 billion, with a sequential decline reflective of the robust harvesting activity by our team and typical funnel management.

Speaker Change: Please advance to slide 12 for a review of our funnel of qualified manufacturing opportunities.

Speaker Change: The funnel of qualified manufacturing opportunities remains robust and $3 5 billion.

With a sequential decline reflective of the robust harvesting activity by our team and typical funnel management.

Oliver Mihm: In summary, the strength of wins in fiscal 2024 that continued progress with new program ramps and the normalization of sub sectors currently experiencing either uncertainty or inventory corrections gives us optimism for growth in fiscal 2025.

Oliver Mihm: In summary, the strength of wins in fiscal 2024, the continued progress of new program ramps, and the normalization of subsectors currently experiencing either uncertainty or inventory corrections gives us optimism for growth in fiscal 2025.

Patrick Jermain: I will now turn the call over to Pat for an in-depth review of our financial performance. Pat.

Pat Jermain: I will now turn the call over to Pat for an in-depth review of our financial performance.

Patrick Jermain: Thank you, Oliver, and good morning, everyone. Our fiscal fourth quarter results are summarized on Slide 13. Gross margin at 10.3% exceeded our guidance and was sequentially higher by 50 basis points. We recognize significant fixed cost leverage as revenues sequentially increased 9% while fixed manufacturing expenses decrease slightly from last quarter. Efficiency gains and productivity improvements across all three of our manufacturing regions led to the better-than-anticipated results.

Pat Jermain: Thank you, Oliver.

Pat Jermain: And good morning, everyone. Our fiscal fourth quarter results are summarized on slide 13. Gross margin of 10.3% exceeded our guidance and was sequentially higher by 50 basis points. We recognize significant fixed-cost leverage as revenue sequentially increased 9%, while fixed manufacturing expenses decreased slightly from last quarter. Efficiency gains and productivity improvements across all three of our manufacturing regions led to the better than anticipated results. Selling an administrative expense of $54 million was above our guidance, primarily due to additional incentive compensation expense linked to improved operating and cash flow performance. Non-GAAP operating margin of 6.2% exceeded our guidance due to the strong gross margin performance and delivered on our target margin one year earlier than expected.

Patrick Jermain: Selling in the administrative expense of $54 million was above our guidance primarily due to additional incentive compensation expense linked to improved operating and cash flow performance. Non-GAAP operating margin at 6.2% exceeded our guidance due to the strong gross margin performance and delivered on our target margin one year earlier than expected. Non operating expense of $8.4 million met expectations, while we experienced a substantial reduction in interest expense due to our robust cash flow performance. We did see higher levels of foreign exchange losses with quarter. Non-GAAP deluded EPS of $1.85 exceeded the top end of our guidance due to the factors mentioned, along with a benefit from the favorable tax rate.

Pat Jermain: Non-operating expense of $8.4 million met expectations. While we experienced a substantial reduction in interest expense due to our robust cash flow performance, we did see higher levels of foreign exchange losses this quarter. Non-gap diluted EPS of $1.85 exceeded the top end of our guidance due to the factors mentioned, along with the benefit from a favorable Turning to our task flow and balance sheet on slide 14. We were extremely pleased with our free cash flow performance as we wrapped up the fiscal year. We delivered $220 million in cash from operations and spent $26 million on capital expenditures, resulting in free cash flow of $194 million.

Patrick Jermain: Turning to our cash flow and balance sheet on 514.

Patrick Jermain: We were extremely pleased with our free cash flow performance as we wrapped up the fiscal year. We delivered $220 million in cash from operations and spent $26 million on capital expenditures, resulting in free cash flow of $194 million. This result was well above our expectations.

Pat Jermain: This result was well above our expectations. As Todd mentioned, this was the highest performance in company history. For Fiscal 2024, we generated record-free cash flow of $341 million, an outcome representing more than double our previous record and three times our Fiscal 2024 With the strong performance, we reduced our total debt during the quarter by $102 million while continuing to support our share repurchase program. For fiscal 2024, we reduced our total debt by $184 million. During the quarter, we purchased approximately 166,000 shares of our stock for $19.5 million, which completed the previously authorized $50 million share repurchase program.

Patrick Jermain: As Todd mentioned, this was the highest performance in company history. For fiscal 2024, we generated record free cash flow of $341 million in outcome, representing more than double our previous record and three times our fiscal 2024.

Patrick Jermain: and Ed income. With the strong performance, we reduced our total debt during the quarter by $102 million while continuing to support our share-repurchase program. For fiscal 2024, we reduced our total debt by $184 million. During the quarter, we purchased approximately $166,000 shares of our stock for $19.5 million, which completed the previously authorized $50 million share-repurchase program. For fiscal 2024, we purchased $55.7 million of our stock at an average price slightly below $104 per share. We have now begun purchasing shares under the new $50 million program authorized during the fiscal fourth quarter. We ended the year in a net cash position; cash of approximately $347 million was sequentially higher by $78 million.

Pat Jermain: For fiscal 2024, we purchased $55.7 million of our stock at an average price slightly below $104 per share. We have now begun purchasing shares under the new $50 million program authorized during the fiscal fourth quarter. We ended the year in a net cash position, cash of approximately $347 million, was sequentially higher by $78 million. At the end of the fiscal year, we had $50 million outstanding under our revolving credit facility with $450 million available to borrow under the facility. Our gross debt-to-EBITDA ratio was at a conservative level of less than one. For the fiscal year, we delivered a return on invested capital of 11.8%, which was 360 basis points above our weighted average cost of capital.

Speaker Change: Approximately $347 million was sequentially higher by $78 million.

Patrick Jermain: At the end of the fiscal year, we had $50 million outstanding under our revolving credit facility, with $450 million available to borrow under the facility. Our gross debt-to-Epadal ratio was at a conservative level of less than one. For the fiscal year, we delivered a return on invested capital of 11.8%, which was 360 basis points above our wedded average cost of capital. Cash cycle at the end of the fiscal year was 64 days, 16 days favorable to expectations, and sequentially improved by 19 days.

Speaker Change: At the end of the fiscal year, we had $50 million outstanding under our revolving credit facility with $450 million available to borrow under the facility.

Speaker Change: Our gross debt to EBITDA ratio was at a conservative level of less than one.

Speaker Change: For the fiscal year, we delivered return on invested capital of 11, 8%, which was 360 basis points above our weighted average cost of capital.

Pat Jermain: Cash cycle at the end of the fiscal year was 64 days, 16 days favorable to expectations, and sequentially improved by 19 days. This level of cash cycle was the best result delivered in the past four years.

Speaker Change: Cash cycle at the end of the fiscal year was 64 days 16 days favorable to expectations and sequentially improved by 19 days.

Patrick Jermain: This level of cash cycle was the best result delivered in the past four years.

Speaker Change: This level of cash cycle was the best result delivered in the past four years.

Patrick Jermain: Please turn to slide 15 for details on this exceptional performance. Our cash cycle improvement primarily came from a combination of lower accounts receivable and inventory days.

Pat Jermain: Please turn to slide 15 for details on this exceptional performance. Our cash cycle improvement primarily came from a combination of lower accounts receivable and inventory data. sequentially days and receivables, improved by seven days, led by fiscal year-end collection effort. Increased revenue and continued progress on our working capital initiatives contributed to a sizable inventory reduction of 24 days. Our teams delivered a sequential reduction in gross inventory of $123 million and a reduction of over $250 million when compared to the fiscal 2023 year-end balance.

Speaker Change: Please turn to slide 15 for details on this exceptional performance.

Speaker Change: Our cash cycle improvement, primarily came from a combination of lower accounts receivable and inventory days sequentially.

Patrick Jermain: Sequentially, days and receivables improved by seven days, led by fiscal year-uncollection efforts. Increased revenue and continued progress on our working capital initiatives contributed to a sizeable inventory reduction of 24 days. Our teams delivered a sequential reduction in gross inventory of $123 million and a reduction of over $250 million when compared to the fiscal 2023 year-unbalance.

Speaker Change: Sequentially days and receivables improved by seven days led by fiscal year end collection efforts.

Speaker Change: Increased revenue and continued progress on our working capital initiatives contributed to a sizable inventory reduction of 24 days.

Speaker Change: Our teams delivered a sequential reduction in gross inventory of $123 million and a reduction of over $250 million when compared to the fiscal 2023 year end balance.

Patrick Jermain: As Todd has already provided the revenue and EPS guidance for the fiscal first quarter.

Pat Jermain: As Todd has already provided the revenue and EPS guidance for the fiscal first quarter, I'll review some additional details which are summarized on slide 16. Fiscal first quarter gross margin is expected to be in the range of 10.1 to 10.4%. At the midpoint, gross margin would be similar to the fiscal fourth quarter. We expect selling and administrative expense in the range of $46.6 to $47.6 million, which is inclusive of approximately $4.6 million. and Stock Based Compensation Expense. Disco First Quarter non-GAAP operating margin is expected to be in the range of 5.7 to 6.1% exclusive to stock-based compensation expense and any restructuring activity.

Speaker Change: As Todd has already provided the revenue and EPS guidance for the fiscal first quarter I'll review some additional details which are summarized on slide 16.

Patrick Jermain: I'll review some additional details which are summarized on 516. Fiscal first quarter gross margin is expected to be in the range at 10.1% to 10.4%. At the midpoint, gross margin would be similar to the fiscal fourth quarter. We expect selling and administrative expense in the range of 46.6 to 47.6 million dollars, which is inclusive of approximately 4.6 million dollars, the stock-based compensation expense. Fiscal first quarter non-GAAP operating margin is expected to be in the range of 5.7 to 6.1 percent, exclusive of the stock-based compensation expense and any restructuring activity. Non-operating expenses anticipated to be approximately $6 million.

Speaker Change: Fiscal first quarter gross margin is expected to be in the range of 10, 1% to 10, 4%.

Speaker Change: At the midpoint gross margin would be similar to the fiscal fourth quarter.

Speaker Change: We expect selling and administrative.

Speaker Change: <unk> expense in the range of 46, 6% to $47 $6 million, which is inclusive of approximately $4 6 million of stock based compensation expense.

Pat Jermain: Non-operating expenses anticipated to be approximately $6 million. This would represent a sequential improvement as we continue to deploy excess cash to reduce our borrowing and related interest expense. For the fiscal first quarter, we are estimating an effective tax rate between 14 and 16% and diluted shares outstanding of approximately $27.7 million. Our expectation for the balance sheet is that working capital investments will increase compared to the fiscal fourth quarter. Based on our revenue forecast, we expect this level of working capital will result in cash cycle days in the range of 71 to 75. This would be sequentially higher by nine days, primarily due to the return of advance payments linked to our continuing With higher investments to support anticipated revenue growth for fiscal 2025, we expect the usage of cash for the fiscal first quarter, a trend we have experienced the last several quarters.

Patrick Jermain: This would represent a sequential improvement as we continue to deploy excess cash to reduce our borrowing and related interest expense. For the fiscal first quarter, we are estimating an effective tax rate between 14 and 16% and diluted shares outstanding of approximately 27.7 million.

Patrick Jermain: Our expectation for the balance sheet is that working capital investments will increase compared to the fiscal fourth quarter. Based on our revenue forecast, we expect this level of working capital will result in cash cycle days in the range of 71 to 75 days. This would be sequentially higher by nine days, primarily due to the return of advance payments linked to our continuing inventory reduction efforts. With higher investments to support anticipated revenue growth for fiscal 2025, we expect a usage of cash for the fiscal first quarter, a trend we have experienced the last several quarters. Despite this usage, we expect to follow up the fiscal 2024 result with robust free cash flow in the range of $50 to $100 million for fiscal 2025.

Pat Jermain: Despite this usage, we expect to follow up the fiscal 2024 result with robust free cash flow in the range of $50 to $100 million for fiscal 2025. We plan to continue to deploy any excess cash to create additional shareholder value.

Patrick Jermain: We plan to continue to deploy any excess cash to create additional shareholder value.

Patrick Jermain: One additional comment on the full year: we expect capital spending in the range of 120 to 150 million dollars, which is inclusive of approximately $60 million related to footprint expansion on the mainland of Penang, Malaysia. We continue to see significant growth opportunities in this region and are investing to ensure we support broad-based customer interest in our services within the region.

Pat Jermain: One additional comment on the full year, we expect capital spending in the range of $120 to $150 million, which is inclusive of approximately $60 million related to footprint expansion on the mainland of Penang, Malaysia. We continue to see significant growth opportunities in this region and are investing to ensure we support broad-based customer interest in our services within the region.

Bailey: With that, Bailey, let's now open the call for questions. At this time, I would like to remind everyone that in order to ask the question, press star and then the number one on your telephone keypad. Please limit your question to one initial and one follow-up.

Bailey: With that, Bailey, let's now open the call for questions. At this time, I would like to remind everyone, in order to ask a question, press star and then the number one on your telephone keypad. Please limit your question to one initial and one follow-up.

David Williams: Your first question comes from the line of David Williams with the Benchmark Company. Your line is open.

David Williams: Your first question comes from the line of David Williams with the Benchmark Company. Your line is open.

David Williams: Hey, good morning, everyone, and congrats on the really solid results here. Thanks, David. Good morning.

Bailey: Hey, good morning, everyone, and congrats on the really... Thanks, David. Good morning.

Todd Kelsey: So I guess the first question for me is really around the narrow space in the fence, and you talked a bit about this in your script, but just kind of curious how you're thinking about that for the year. Obviously, Boeing without the contract being renewed or resolved, as we had hoped. And maybe some of the conversation yesterday from their print just about the timing of that production coming back. How are you thinking about that? And maybe how do you avoid the risk that could be associated with that is we think about the four-year in aerospace in the fence?

Todd Kelsey: So, I guess the first question for me is really around the aerospace and defense, and you talked a bit about this in your script, but just kind of curious how you were thinking about that for the year. Boeing without the contract Resolved, as we had hoped, and maybe some of the conversation... Timing of that. How are you thinking about that and maybe?

Todd Kelsey: Yeah, I'll start, and maybe Oliver will want to add as we go through the discussion here. But certainly disappointing that the Boeing strike wasn't resolved yesterday, as I think a lot of people were anticipating. But one of the things in our projections are, as we went through our preparation for the call, we have been conservative in the way we've looked at Boeing. So when we talk about strong growth anticipated in aerospace in the fence, that takes a relatively conservative look at how the Boeing situation plays out. So I think if we get some resolution in that, that could provide some potential upside opportunity for us.

Todd Kelsey: Yeah, I'll start start and maybe Oliver will want to add as we go through the discussion here. But it's certainly disappointing that that the Boeing strike wasn't resolved yesterday has, I think a lot of people were anticipating. But one of the things in our projections are, as we went through our preparation for the call, we have been conservative in the way we've looked at Boeing. So when we talk about strong growth anticipated in aerospace and defense, that that takes a relatively conservative look at how the Boeing situation plays out. So I think, you know, if we get some resolution in that, that could provide some potential upside opportunity for us.

Todd Kelsey: We think at this point, we're reasonably de-risked for what the situation is today. So, with that said, when we think about the aerospace in defense sector for fiscal 25, it looks like another strong growth year. You know, not at the 21 percent level of 24, but certainly has the potential to be into the double digits. And a lot of that is driven through strength in new program ramps within our defense, and we're going to have to make sure that we're going to be able to make sure that we're going Victor.

Todd Kelsey: We think at this point, we're, we're reasonably de-risked for what the situation is today. So with that said, when we think about the aerospace and defense sector, for fiscal 25, looks like another strong growth year, you know, not at the 21% level of 24. But certainly has the potential to be into the double digits. And a lot of that is driven through strength in new program ramps within our defense subsector. The great color there. I certainly appreciate it.

David Williams: Okay, very good. The great color there; I certainly appreciate it.

Todd Kelsey: And then maybe secondly, here, it's just on the semi-cap equipment space. There's been a lot of, I think, variable discussion around the demand trends there, some up, some down. It sounds like you've got several new program wins this quarter, and it's been an area of opportunity for you. So maybe just as you think about the semi-cap equipment space, is there anything that you're concerned with? And how do you view that generally? Have you de-risked that, do you think, for the trends? And just, I guess maybe anything that goes into that estimation of demand for the year on semi-cap, thank you.

Todd Kelsey: And then maybe secondly here, just on the semi-cap equipment space, there's been a lot of, I think, variable discussion around the demand trends there, some up, some down. several new program wins this quarter, and it's been an area of opportunity for you. So maybe just as you think about the semi-cap equipment space, is there anything that you're concerned with and how do you view that generally? Have you de-risked that? I guess maybe anything in the future. Yeah, I think in general, we're at a relatively conservative look at Semicap as well, too. Now, we would expect to, and as I mentioned in the prepared remarks, we'd expect to outgrow the market and outgrow market forecast because of share gains.

Speaker Change: The trends in and just I guess, maybe anything that goes into that that estimation of demand for the year on semi cap. Thank you.

Todd Kelsey: Yeah, I think in general we're at a relatively conservative look at semi-cap as well, too. Now, we would expect to, and as I mentioned in the prepared remarks, we'd expect to outgrow the market. And I'll grow market forecast because of share gain. So I think you can take any projections that you see out there for WFE or semi-cap in general and expect that we're going to outperform that as we have for the past decade or so. So I think that's the way to think about semi-cap. So we would expect it to be, you know, well into the double digits from a growth year this year, even taking a conservative view.

Speaker Change: Yeah, I think in general we're at a relatively conservative look at semi cap as well to know we would expect to and as I mentioned in the prepared remarks, we would expect to outgrow the market and outgrow market forecast because of share gains. So I think you can take any projections that you see out there for wf E or semi cap in general and expect that work.

Todd Kelsey: So I think you can take any projections that you see out there for WFE or Semicap in general and expect that we're going to outperform that as we have for the past decade or so. So I think that's the way to think about Semicap. So we would expect it to be well into the double digits from growth here this year, even taking a conservative...

Speaker Change: Outperform that as we have for the past decade or so so.

Speaker Change: I think that's the way to think about semi cap. So we would expect it to be well into the double digits from a growth year this year and even taken a conservative view.

David Williams: Fantastic, but thank you for the time, and congrats again. Thanks, David.

David Williams: Thanks again for the time and congrats. Thanks, David.

Speaker Change: Fantastic. Thanks, again for the time and congrats again.

Thanks, David.

Melissa Fairbanks: Your next question comes from the line of Melissa Fairbanks with Raymond James and Associates. The line is open.

Melissa Fairbanks: Your next question comes from the line of Melissa Fairbanks with Raymond James & Associates. Your line is open.

Speaker Change: Your next question comes from the line of Melissa Fairbanks with Raymond James and Associates. Your line is open.

Melissa Fairbanks: Hey guys, thanks very much. I'll echo the congrats on a great quarter.

Melissa Fairbanks: Hey, guys. Thanks very much. I'll echo the congrats on the great quarter. I've got one for Oliver.

Melissa Fairbanks: Hey, guys, thanks, very much I'll.

Melissa Fairbanks: Echo the congrats on the great quarter.

Oliver Mihm: I've got one for Oliver. I wonder if we could dig into the non-semi-cap business in industrial. On the last call, you had guided to some recovery in the broadband communications sector. It had been pretty weak for quite some time. Just wondering if you could give us an update on that business and what the expectations are going forward.

Melissa Fairbanks: One for Oliver.

Oliver Mihm: Wondering if we could dig into the non-SemiCap business in industrial. On the last call, you had guided to some recovery in the broadband communications sector. It had been pretty weak for quite some time. Just wondering if you could give us an update on that business and what the expectations are going forward.

Melissa Fairbanks: I'm wondering if we could dig into the non semi cap business and industrial on the last call you had guided to some recovery in the broadband communications sector had been pretty weak for quite some time just wondering if you could give us an update on that business and what the expectations are going forward.

Oliver Mihm: Yeah, thanks, Melissa. Sure, happy to answer that. Yeah, I'll look for communications, and what we build in here is a much more flat look. Certainly recognize the macro tailwind that exists, and we talked about that in prior quarter. Certainly, our growth is tied to certain projects coming from fruition, but we also recognize that those projects and the passive fruition is not always one here. No kidding. A lot of experience with that over the years.

Oliver Mihm: Yeah, thanks Melissa, sure, happy to answer that. Yeah, our outlook for communications and what we build in here is a much more flat look. Certainly recognize the macro tailwinds that exist and we talked about that in prior quarter. Certainly our growth is tied to certain projects coming to fruition, but we also recognize that those projects in the path to fruition is not always there. No kidding. A lot of experience with that over the years.

Speaker Change: Yeah. Thanks, Melissa sure happy to answer that yeah outlook for communications and won't be built in here.

Speaker Change: Much more flat look.

Certainly recognize the macro tailwind that exist and we talked about that in prior quarter certainly our growth is tied to certain projects coming to fruition, but we also recognize that those projects.

Speaker Change: And the path to fruition is not always linear.

Speaker Change: [laughter] no kidding [laughter], a lot of experience with that over the years.

Pat Jermain: So for my follow-up, maybe for Pat, on the cash cycle outlook, obviously really great reduction in 4Q. I know it's been a focus of the whole team. You've guided to the bump higher in 1Q. Can you remind us what the longer term target is? How should we view peak to trough levels of investment? What the cash cycle days look like, especially with that $50 to $100 million free cash flow target for the year?

Patrick Jermain: So for my follow up, maybe for Pat, on the cash cycle outlook.

Patrick Jermain: Obviously, really great reduction in 4Q. I know it's been a focus of the whole team. You've guided to the bump higher in 1Q.

Patrick Jermain: Can you remind us what the longer-term target is? How should we view peak-to-trop levels of investment? What the cash cycle days look like, especially with that $50-$100 million free cash load target for the year? Yeah, sure can. I mean, going back to the first quarter of fiscal 24, we're at 95 days. So to have a midpoint now for Q1 to 25 is 73 days, 22-day improvement. Really pleased with. And to go to your question of, you know, a year ago, what would we have been pleased with? We were kind of signaling mid-70s for cash cycle as a target.

Pat Jermain: Yeah, sure can. I mean, going back to the first quarter of fiscal 24, we were at 95 days. So to have a midpoint now for Q1 to 25 is 73 days, a 22-day improvement. Really pleased with. And to go to your question of, you know, a year ago, what would we have been pleased with? We will see some return of advanced payments along with that inventory reduction. So my expectation is 73 will be a high point for Q1 for 25. And then we'll start to steadily bring that down. Expectation would be to get back into the 60s, whether we get back to the 64 level we'll see, but it has kind of reset my expectations that I'd like to see us more in the high 60s.

Patrick Jermain: And obviously hitting 64 at the end of this year kind of resets our expectations. So as I look to 25, Melissa, yeah, 73 days in Q1. We'll see an investment of cash in Q1.

Patrick Jermain: And just to correct maybe something I said in the script, that's something we have typically seen every first quarter the last several years, not several quarters. Last several years, we've seen an investment of cash in the fiscal first quarter. I expect us to continue our inventory improvement efforts going through fiscal 25. We will see some return of advance payments, along with that inventory reduction. So my expectation is 73 will be a high point for Q1 for 25, and then we'll start to steadily bring that down. Expectation to get back into the 60s; whether we get back to the 64 level we'll see, but it has kind of reset my expectations that I'd like to see us more in the high 60s.

Pat Jermain: Wow, that's fantastic. That's great.

Patrick Jermain: Wow, that's fantastic. That's great. Maybe if I could just squeak in one quick follow-up on you did mention the return of advance payments. Are your customers, now that we're in kind of like a more normalized supply environment, still. Eager to give you some of those advance payments, so like if we see inventory going up, do you expect that to still be a balance of some customer commitments along with your own working capital investment. Yeah, I think we see those typically is when inventory starts to age and get to a point of access and obsolete is where we're pursuing those type of advance payments.

Pat Jermain: Maybe if I could just squeak in one quick follow up on you did mention the return of advanced payments. Are your customers now that we're in kind of like a more normalized supply environment, are your customers still eager to, you know, give you some of those advanced payments? So like, if we see inventory going up, do you expect that to still be a balance of some customer commitments along with your own working capital investment? Yeah, I think where we see those typically is when inventory starts to age and get to a point of excess and obsolete is where we're pursuing those type of advanced payments.

Pat Jermain: So I think that can still happen. But obviously, with supply chain improving, we're seeing less of that excess inventory.

Patrick Jermain: So I think that can still happen, but obviously, with supply chain improving, we're seeing less of that excess inventory. Okay, great. Thanks very much.

Melissa Fairbanks: Okay, great. Thanks very much. That's all for me.

Melissa Fairbanks: That's all for me.

Jim Ricchiuti: Your next question comes from the line of Jim Ricchiuti with Needham and Company. Your line is open.

Jim Ricchiuti: Your next question comes from the line of Jim Ricchiuti with Needham and Company. Your line is open.

Chris Gringon: Hi, good morning.

Chris Grenga: Hi, good morning. This is Chris Grenga on for Jim. Congrats on the results. Thanks, Chris. Is there any one thing that you could point to or that you could describe the pull-in during the quarter? You mentioned there was a broad, I guess, a broad pull-in that drove the stronger-than-expected results. Is there anything in particular that you would call out as a driver of that? Yeah, the interesting thing was it impacted every sector. So we saw, and there were different reasons for the pull-ins that we saw. Some were success of new program ramps, others were just demand uptick that people saw with their end customers where they were looking for this.

Chris Gringon: This is Chris, Chris Gringon, for Jim.

Chris Gringon: Congrats on the result. Thanks, Chris.

Todd Kelsey: Is there any one thing that you could point to or that you could describe the pull in during the quarter you mentioned that there's a broad, I guess, broad pull in and that drove the stronger than expected results. Is there anything in particular that you would call out as a driver of that?

Todd Kelsey: Yeah, the interesting thing was it impacted every sector. So we saw, and there were different reasons for the pull in that we saw somewhere success of new program ramps. Others were demand, just demand uptick that people saw what their end customers where they were looking for this. So we saw what we saw was quite broad based on to the tune of close to $40 million. So one of the things, I mean, we're certainly cognizant that our revenues sequentially down in Q1, but I think that that $40 million impact or near $40 million impact is really what's causing that fact.

Todd Kelsey: So what we saw was quite broad-based to the tune of close to $40 million. So one of the things, I mean, we're certainly cognizant that our revenue is sequentially down in Q1, but I think that that $40 million impact or near $40 million impact is really what's causing that factor. Got it. And, um...

Todd Kelsey: Got it.

Oliver Mihm: And do you have a sense for how much longer the inventory imbalance or correction is expected to persist in health care?

Oliver Mihm: Do you have a sense for how much longer the inventory imbalance or correction is expected to persist in healthcare, in conversations with customers, or do you have any visibility into how much longer you expect that dynamic to persist? Yeah, I'll take that. This is Oliver. Certainly difficult to predict exactly when that's going to come out. I think last time, last quarter, we already talked about the fact that as we look at our portfolio as a whole, we thought that the inventory correction dynamic, we had worked through 85 to 90 percent of that. I'll also note that we talked about engineering solutions revenue momentum here in this last quarter, and we view that as generally a good leading indicator of decision making and outlook for that sector.

Oliver Mihm: Do you in conversations with customers, or do you have any visibility into how much longer you expect that dynamic to persist? Yeah, I'll say that this is all of our certainly difficult to predict exactly one that's going to come out. I think last time last quarter we already talked about the fact that as we look at our portfolio as a whole, we thought that the inventory correction dynamic we had worked through 85 to 90% of that. I also note that we talked about engineering solutions revenue momentum here in this last quarter, and we view that as generally a good leading indicator of decision making and outlook for that sector.

Oliver Mihm: And so I think that gives us optimism here as we look to fiscal 25 for continued revenue growth. A little additional color that I'd add here, Chris, is we're seeing the corrections flow through faster in health care than in life sciences overall. And there are a couple, but within health care, there's a couple of one-off situations where the corrections are still fairly significant. Got it. Thank you very much.

Oliver Mihm: And so I think that gives us optimism here as we look to fiscal 25 for continued revenue growth. A little additional color that I'd add here, Chris, is as we're seeing the corrections flow through faster in health care than in life sciences. Overall, and there are a couple, but within health care, there's a couple of one-off situations where the corrections are still fairly significant.

Chris Gringon: Thank you very much.

Steven Fox: Your next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox: Your next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox: Hi, good morning. Just following up on the on the pull-ins that you mentioned, can you draw any conclusions? I know you said it was broad-based, but is there any conclusions to draw from a macro standpoint, or you just think it was all, you know, customers program specific and along those lines does it I know I understand why the pull-ins would sort of you know reduce your growth in FQ1 but what does it preclude you from growing say 10% for fiscal 25 for fiscal 25.

Steven Fox: Hi, good morning. Just following up on the pollens that you mentioned. Can you draw any conclusions? I know you said it was a broad base, but is there any conclusions to draw from a macro standpoint, or do you just think it was all, you know, customers, or programs specific? And along those lines, does it? I understand why the pollens would sort of, you know, reduce your growth in FQ one, but what does it preclude you from growing, say 10% for fiscal 25 for fiscal 25?

Todd Kelsey: Yeah, so maybe you've all started by answering the 25 questions, and I'm going to pass it over to Oliver to provide some additional detail on the pollens. When we look at fiscal 25, I think with the call it slower start from a revenue standpoint with the pollens impacting the comparable of 24 as well as the revenue in 25. I think double digits looks difficult; I would say we're projecting mid singles, maybe a little higher as we look to fiscal 25. So, so we think we can make good progress, and we expect some pretty strong sequential revenue growth on a quarterly basis once we hit Q2 and move through the balance of the fiscal year.

Todd Kelsey: Yeah, so maybe, Steve, I'll start by answering the 25 question and then I'm going to pass it over to Oliver to provide some additional detail on the pull-ins. When we look at fiscal 25, I think with the, call it slower start from a revenue standpoint, with the pull-ins impacting the comparable of 24 as well as the revenue in 25, I think double digits look difficult, I would say. We're projecting mid-singles maybe a little higher as we look to fiscal 25, so we think we can make good progress and we expect some pretty strong sequential revenue growth on a quarterly basis once we hit Q2 and move through the balance of the fiscal year.

Speaker Change: Yeah.

Oliver Mihm: And then adding on to that, I think as we reflect on the pollens, there were certainly a number of just customer-specific situations Todd mentioned earlier, a specific program once that had pulled in more aggressively from the customer. Taking a step back and looking for some macro themes, we mentioned earlier in our remarks, space sub sector showed strength showing strength in Q1. We also talked about the semi cap sub sector, so that grew sequentially in Q4 and continues to show underlying demand pickups. That would be, I think, our other macro reflections on the overall trend. And we look at all of that and we think we're again, I say well position would be the term that comes to mind as we contemplate the macro F25 outlook.

Oliver Mihm: And then adding on to that, I think as we reflect on the pull-ins, there were certainly a number of just customer-specific situations. Todd mentioned earlier a specific program launch that had pulled in more aggressively from the customer. Taking a step back and looking for some macro themes, we mentioned earlier in our remarks space subsector showed strength, showing strength in Q1. We also talked about the semi-cap subsector. So that grew sequentially in Q4 and continues to show underlying demand pickups. That would be, I think, our other macro reflections on the overall. And we look at all of that, and we think we're, again, I say, well-positioned would be the term that comes to mind as we contemplate the macroeconomic and Steven Schein.

Speaker Change: And then adding onto that I think as we as we reflect on the Poland. There were certainly a number of just customer specific situations. Todd mentioned earlier, our specific program launch that had pulled in more aggressively from the customer.

Speaker Change: Taking a step back and looking for some macro themes, we mentioned earlier in our remarks space sub sector showed strength showing strength in Q1, we also talked about the semi cap sub sector. So that grew sequentially in Q4 and continues to show underlying demand pick up so that would be I think our other macro reflections on the overall.

Speaker Change: Trends and we look at all of that and we think again I would say well positioned would be the term that comes to mind as we contemplate the macro F 'twenty five outlook.

Steven Fox: Great.

Todd Kelsey: It's Sean.

Alright Thats helpful.

Shawn Harrison: It's Shawn. One more thing. I want to go back to the statement, you know, made about aerospace in the film to just, you know, we added some conservatism in there as well. And so, you know, trying to adjust for, you know, the unknown, related to the Boeing supply chain. Got it.

Todd Kelsey: One more thing. I want to go back to the statement made about aerospace and the film; just we added some conservatism in there as well. And so trying to adjust for the unknown and it related to the following supply chain. Got it. That's helpful.

Speaker Change: It's Sean one more thing.

Shawn Harrison: I want to go back to the statement.

Speaker Change: About aerospace and defense.

Shawn Harrison: We added some conservatism in there as well so.

Shawn Harrison: Trying to adjust for the unknown.

Shawn Harrison: Related to the Boeing supply chain.

Speaker Change: Got it that's helpful. And then just curious on that program volatility you called out with two customers can you give us any further details on what that was about and whether that's an ongoing issue beyond that last quarter. Thanks.

Todd Kelsey: That's helpful. And then just curious on the program volatility, you called out with two customers. Can you give us any further details on what that was about and whether that's an ongoing issue beyond the last quarter? Thanks. Yeah, I'll just note that for both of those, they're one-off situations. We are working with our customer to help them resolve that dynamic. And I also note that from from my perspective, the demand for both of those programs is not perishable. Understood. Thank you.

Todd Kelsey: And then just curious on the program volatility you called out with two customers. Can you give us any further details on what that was about and whether that's an ongoing issue beyond the last quarter. Thanks. Yeah, I'll just note that for both of those that are one-off situations, we are working with our customer to help them resolve that dynamic.

Speaker Change: Yes, I will just note that for both of those sort of one off situations. We are working with our customer to help them resolve that dynamic and I also note that from my perspective, the demand for both of those programs is not perishable.

Todd Kelsey: And I'll also note that from my perspective, the demand for both of those programs is not perishable. Understood. Thank you.

Speaker Change: Understood. Thank you.

Speaker Change: Okay.

Steve Badger: The next question comes from the line of Steve Badger, with keeping capital markets in line is open. Hi, good morning.

Steve Badger: Your next question comes from the line of Steve Badger with KeyBank Capital Markets. Your line is...

Speaker Change: Your next question comes from the line of Steve Barger with Keybanc capital markets. Your line is open.

Speaker Change: Okay.

Jacob Moore: Hi, good morning. This is Jacob Moore. I'm for Steve Barger. Thanks for taking the question. Absolutely.

Jacob Moore: This is Jacob Moore. I'm for Steve Badger. Thanks for taking the question. questions. Absolutely.

Jacob more: Hi, Good morning. This is Jacob more on for Steve Barger, Thanks for taking my questions.

Todd Kelsey: My first question here is on operating margin, really accelerating achieving about 6% target by a full year. I'm sure that there was some benefit from the pull forward in the quarter. But my question here is, what are the structural actions? Do you think that margin performance reflects the most?

Patrick Jermain: My first question here is on Operating Margin. I'm really accelerating achievement of that 6% target by a full year.

Speaker Change: Totally.

Speaker Change: My first question here is on our operating margin really accelerating achievement of about 6% target by a full year I am sure that there was some benefit from the pull forward in the quarter, but my question here is what are the structural actions do you think that margin performance reflects the most and really how much more work is there to be done on those or other actions.

Oliver Mihm: I'm sure there was some benefit from the pull forward in the quarter, but my question here is, what are the structural actions do you think that margin performance reflects the most and really how much more work is there to be done on those or other actions? Yeah, I'll start and open up to my colleagues if they have any additional comments they want to add. This is Oliver. Certainly, we have a continued focus on manufacturing efficiency. I'll note that we hit that from two different angles, both in terms of profitability and capital equipment intensity. I'll also note that generally focusing on continued investments and automation would continue to help us there.

Oliver Mihm: And really, how much more work is there to be done on those or other Yeah, I'll start and open up to my colleagues if they have any additional comments they want to add. This is Oliver. Certainly, we have a continued focus on manufacturing efficiency. I'll note that we hit that from two different angles, both in terms of profitability and capital equipment intensity. I'll also note that generally focusing on continued investments in automation would continue to help us there. By way of example, we deployed a significant warehouse automation project in our Penang campus in fiscal 24 and expect that to propagate more broadly through the organization.

Speaker Change: Yes, I'll start and I'll.

Speaker Change: Open up to my colleagues if they have any additional comments they want to add this is Oliver.

Speaker Change: Certainly we have a continued focus on manufacturing efficiency.

Speaker Change: I'll note that we hit that from two different angles, both in terms of profitability and capital equipment intensity.

Speaker Change: I'll also note that generally focusing on investment continued investments in automation with what it continue to help US there by way of example, we deployed a significant warehouse automation per project and our Penang campus in fiscal 'twenty, four and expect that to propagate more broadly through the organization and we see both.

Patrick Jermain: By way of example, we deployed a significant warehouse automation project in our organization, and we see both pick rate efficiency improvements as well as space utilization improvements as a result of that. And then last, let us say organizationally, we've aligned around a technology and innovation organization, as well as driving both pieces of the innovation and the optimization and continuous improvement. And we think all of those things will continue to bear fruit as we drive margin enhancement or margin performance through the fiscal year. And Jacob, as I look at kind of the quarterly performance, we expect in fiscal 25.

Oliver Mihm: And we see both pick rate efficiency improvements as well as space utilization improvements as a result of that. And then lastly, I would say organizationally, we've aligned around a technology and innovation organization as well as driving both pieces of the innovation and the optimization and continuous improvement.

Pat Jermain: And we think all of those things will continue to bear fruit as we drive margin enhancement or margin performance through the fiscal year. And Jacob, as I look at kind of the quarterly performance we expect in fiscal 25, you're right, for Q1, I'm guiding a midpoint of 5.9. So we are losing some fixed cost leverage on the lower revenue. The March quarter is burdened by merit increases. So we will see margins coming down at that point before we start improving margins on the back half of this year with productivity improvements, Oliver pointed to.

Patrick Jermain: You're right. For Q1, I'm guiding a midpoint of 5.9. So we are losing some six cost leverage on the lower revenue. The March quarter is burdened by merit increases. So we will see margins coming down at that point before we start improving margins on the back half of this year with productivity improvements, Oliver pointed to. But I think what this tells us is we can achieve the target of 5.2. I'm sorry, 6.2; just may not be hitting that every quarter. Thanks. That's helpful.

Pat Jermain: But I think what this tells us is we can achieve the target of 5.2, may, I'm sorry, 6.2, just may not be hitting that every quarter. Thanks, that's helpful.

Pat Jermain: So maybe just to follow on to clarify there, do you think you can hit 6% non-GAP for the full year? And is there a threshold level of sales growth you need to get there? Um, I think the sequential revenue growth that we're going to see starting the second quarter is going to benefit us, whether we get to 6% for the full year, what we'll see could be slightly below that, but exiting the Fiscal 25 is what we want to be hitting that 6-2. Got it. Okay, I got it there.

Patrick Jermain: So maybe just to follow and clarify there, do you think you can hit 6% non-GAAP for the full year and is there a threshold level of sales growth you need to get there? I think that sequential revenue growth that we're going to see starting the second quarter is going to benefit us. Whether we get to 6% for the full year, what we'll see could be slightly below that. But exiting the fiscal 25 is what we want to be hitting that 6.2. Got it. Okay.

Patrick Jermain: I got it, and maybe the last one for me. This was actually my first question, which was on the sustainability of the past two months or three cash flow quarters, which you mostly addressed. I think it's going to come down some. But maybe to expand a bit here, could you touch on your term capital allocation priorities and what do you see as your highest return opportunities to use that cash going forward? Yeah, I think well, I think we've done a great job bringing down debt. So we've only got $50 million outstanding under the evolving credit facility.

Pat Jermain: And maybe the last one for me, this is actually my first question was on the sustainability of the past two monster free cash flow quarters, which you mostly addressed, I think that's going to come down some, but maybe to expand a bit here, could you touch on near term capital allocation priorities? And like, what do you see as your highest return opportunities to use that cash going forward? Yeah, I think, well, I think we've done a great job bringing down debt. So we've only got $50 million outstanding under the revolving credit facility. So we do have the new share repurchase authorization of $50 million that we're executing upon.

Todd Kelsey: So we do have the new share repurchase authorization of $50 million that we're executing upon. And next month, we're going to be visiting with our board about other opportunities to deploy the significant free cash flow we've generated over the last two quarters. So, from a priority standpoint, I'd say share repurchase program, maybe some further debt reduction. But again, as we get later in the year with growth, we will see some investment. and in working capital. And as I mentioned, we do have the footprint expansion in Malaysia. Yeah, I just add to that too. I mean, when we think about capital allocation, obviously, one of the first things that comes to mind is supporting growth, and we're expecting a good growth year this year.

Pat Jermain: And next month, we're going to be visiting with our board about other opportunities to deploy the significant free cash flow we've generated over the last two quarters. So from a priority standpoint, I'd say share repurchase program, maybe some further debt reduction. But again, as we get later in the year with with growth, we will see some investment. in working capital, and as I mentioned, we do have the footprint expansion in Malaysia.

Todd Kelsey: Yeah, I'd just add to that, too. I mean, when we think about capital allocation, obviously one of the first things that comes to mind is supporting growth, and we're expecting a good growth year this year, so that's going to have an impact, certainly, on our free cash flow as compared to fiscal 24.

Todd Kelsey: So that's going to have any impact, certainly on our free cash flow as compared to fiscal 24.

Jacob Moore: Okay, that's it for me. Helpful answers, and thanks for giving the questions. Absolutely. Thank you.

Jacob Moore: Okay, got it. That's it for me. Helpful answers and thanks for taking the question.

Matt Sheerin: Absolutely. Your next question comes from the line of Matt Sheerin with Stiefel, your line is open.

Matt Schrin: Your next question comes from the line of Matt Schrin with People. It's really open.

Todd Kelsey: Yes, thanks.

Matt Schrin: Yes, thanks.

Pat Jermain: Good morning, everyone. Just to follow up on the last question regarding margins and particularly the strength you're seeing in gross margin, you're guiding gross margin down just a little bit on what is six or seven percent sequential drop. And I'm just wondering if, in addition to the things you talked about, factory automation, more efficient processes, are you also benefiting from mix? You talked about a higher percentage of engineering services. The defense aerospace sector has been a higher percentage of revenue.

Matt Schrin: Good morning, everyone. Just to follow up on the last question regarding margins and particularly the strength you're seeing in gross margin, you're guiding voice margin down just a little bit on what a six or seven percent sequential drop. And I'm just wondering if, in addition to the thing you talked about, faculty automation, more efficient processes, are you also benefiting from mix? You talked about a higher percentage of engineering services. The defense aerospace sector has been a higher percentage of revenue.

Patrick Jermain: So could you talk about maybe margin profile within the different segments and what's going to drive that as you go forward. Yeah, I can start, Matt. You're right. I mean, we're probably losing about 50 basis points of six cost leverage in the first quarter. We're covering that with higher contribution margin. Some of that's coming from a mix of services and customer mix, along with, again, as Oliver touched on, further automation and productivity improvement. From a sector perspective, it's not much of a difference between the sectors. So I wouldn't say any additional waiting to a certain sector is necessarily driving better profitability.

Pat Jermain: So could you talk about maybe margin profile within the different segments and what's going to drive that as we go forward? Yeah, I can start, Matt. You're right. I mean, we're probably losing about 50 basis points of fixed cost leverage in the first quarter. We're covering that with higher contribution margin. Some of that's coming from mix of services and customer mix, along with, again, as Oliver touched on, further automation and productivity improvements. From a sector perspective, it's not much of a difference between the sectors. So I wouldn't say any additional weighting to a certain sector is necessarily driving better profitability.

Pat Jermain: It almost comes to within customer And then I'll add on to that. in terms of mix rather than hitting that from a sector's perspective.

Patrick Jermain: It almost comes to within customers. In and on to that, in terms of mix rather than hitting that from a sector's perspective, we expect our engineering solutions revenue to pick up as the fiscal year progresses, and that certainly hits a higher margin number than the rest of our operations.

Oliver Mihm: We expect our engineering solutions revenue to pick up as the fiscal year progresses, and that certainly hits a higher margin number than the rest of our options. Could you remind us how big that business is? It's greater than a hundred million dollars is kind of the way we framed it. We don't go into a lot of specifics. But with very high margins relative to your business. Yeah, yeah. Okay. All right. That's it for me. Thanks so much. Sure, sure. Thanks, Matt.

Patrick Jermain: Could you remind us how big that business is? It's greater than $100 million is kind of the way we framed it. We don't do a lot with very high margins relative to your business, right? Yeah, yeah. Okay. All right.

Matt Schrin: That's it from me. Thanks so much. Sure.

Anja Söderström: Thanks, Matt. Your next question comes from the line of on just solder storm. What's the doubt? Your line is open. Oh, yeah. Just you really think. No. Yes, much better. You there. Hello, can you hear me better now? We can. Yes. Okay, I'm sorry.

Anja Söderström: Your next question comes from the line of Anja Soderstrom with Sudoti. Your line is open.

Anja Söderström: Anja? Uh, just that you're really faint. Hello? Yes, much better. You there? Hello, can you hear me better now? We can, yes. Okay, I'm sorry.

Todd Kelsey: I think that's also the Malaysia expansion. To what magnitude the expected are expanding it and what kind of products do you support there, and what do you expect the expansion to be completed? Yeah, so we support all of our market sectors in Malaysia. We have a quite large campus there that currently consists of five different facilities. So this would be our sixth in the Malaysia area. When we think about the new facility, some of the growth growth we're targeting is around semi-cap and around health care life sciences in particular, but that's not again within Malaysia, and our Panayan campus we support all of our sectors.

Oliver Mihm: In terms of the Malaysia expansion, to what magnitude are you expanding it and what kind of products do you support there and when do you expect the expansion to be completed? Yeah, so we support all of our market sectors in Malaysia. We have a quite large campus there that currently consists of five different facilities. So this would be our sixth in the Malaysia area. When we think about the new facility, some of the growth we're targeting is around SemiCap and around Healthcare Life Sciences in particular. But that's not, again, within Malaysia, in our Penang campus, we support all of our sectors.

Todd Kelsey: So regarding completion, we expect to be able to hit some first customer shipments late in the fiscal year. Okay, thank you.

Oliver Mihm: So regarding completion, we expect to be able to hit some first customer shipments later.

Oliver Mihm: Okay, thank you.

Todd Kelsey: And it comes with a nuclear energy compliance. What led you to get there to attain that and what's involved in getting that and what can we expect from you having that? Yeah, so that was driven by our customer. So we had an award that involved some products, this part of the nuclear energy supply chain. And so the customer came out and audited us to that standard. Okay, thank you. It's a fairly regular standard that supports the, again, the nuclear energy subsector, and we've already had additional customers that have an interest in the fact that we have this, this ability.

Oliver Mihm: And in terms of the nuclear energy compliance, what led you to attain that, and what's involved in getting that? What can we expect from you having that? Yeah, so that was driven by our customer. So we had an award that involved some products that's part of the nuclear energy supply chain. And so the customer came out and audited us to that standard. Okay, thank you. It's a fairly rigorous standard that supports, again, the nuclear energy subsector, and we've already had additional customers that have an interest. in the fact that we have this ability. Okay, that's helpful.

Speaker Change: What can we expect from you having that.

Speaker Change: Yeah, So that was driven by our customer so we had an award.

Speaker Change: That involves some products that's part of the nuclear energy supply chain and so the customer came out and audited us to that standard.

Speaker Change: Okay. Thank you.

Speaker Change: It's a fairly rigorous standards that supports the.

Speaker Change: Again, the nuclear energy sub sector, and we've already had additional customers that have an interest in.

Speaker Change: And the fact that we have this this.

Speaker Change: Ability.

Todd Kelsey: Okay, that's helpful. Thank you. That was welcome me.

Anja Söderström: Thank you. That was all for me.

Speaker Change: Okay. That's helpful. Thank you that was all for me.

Bailey: Thank you, Annie.

Bailey: Thank you, Anja. There are no further questions at this time.

Speaker Change: Thank you Ronnie.

Bailey: There are no further questions at this time.

Speaker Change: There are no further questions at this time I will turn the call back over to Todd Kelsey plexus, as President and Chief Executive Officer for closing remarks.

Todd Kelsey: I will turn the call back over to Todd Kelsey, Plexus' President and Chief Executive Officer, for closing remarks. Yeah, thank you, Bailey. I'd just like to summarize a bit of our call and the key themes of our call. So first of all, I want to thank our shareholders, investors, analysts and our Plexus team members who joined the call this morning. We appreciate your support as always.

Todd Kelsey: I will turn the call back over to Todd Kelsey, Plexus's president and chief executive officer for closing remarks.

Todd Kelsey: Yeah, thank you, Bailey. Just like to summarize a bit of our call and the key themes of our call. So first of all, I want to thank our shareholders, investors, analysts, and our Plexus team members who joined the call this morning. We appreciate your support, as always, reiterating the key themes of today's call.

Todd Kelsey: Thank you Billy just like to summarize a bit of our call in the key themes of our call. So first of all I want to thank our shareholders investors analysts and our plexus team members, who joined the call. This morning, we appreciate your support as always.

Reiterating the key themes of today's call, we're positioned for a solid fiscal 2025, creating additional shareholder value through delivering revenue growth, robust operating margin and sustained free cash flow generation. As we look to fiscal 2025, we anticipate strong aerospace and defense revenue growth, given robust end markets and new program ramps, as well as moderate healthcare life sciences and industrial revenue growth, aided by share gains and new programs. We've displayed our ability to leverage our focus on increased operational efficiency by achieving our target non-gap operating margin goal of greater than six percent one year earlier than projected.

Todd Kelsey: Reiterating the key themes of today's call.

Todd Kelsey: We're positioned for a solid fiscal 2025, creating additional shareholder value through delivering revenue growth, robust operating margin, and sustained free cash flow generation. As we looked at fiscal 2025, we anticipate strong aerospace and defense revenue growth given robust end markets and new program ramps, as well as moderate healthcare, life sciences, and industrial revenue growth aided by share gains and new programs. We've displayed our ability to leverage our focus on increased operational efficiency by achieving our target non-GAAP operating margin goal of greater than 6% one year earlier than projected. This positions us to continue the strong operational performance of recent quarters in fiscal 2025.

Todd Kelsey: We're positioned for a solid fiscal 2025, creating additional shareholder value through delivering revenue growth robust operating margin and sustained free cash flow generation.

Todd Kelsey: As we look to fiscal 2025, we anticipate strong aerospace and defense revenue growth given robust end markets and new program ramps as well as moderate healthcare life Sciences, and industrial revenue growth aided by share gains and new programs.

Todd Kelsey: We've displayed our ability to leverage our focus on increased operational efficiency by achieving our target non-GAAP operating margin goal of greater than 6% one year earlier than projected this positions us to continue the strong operational performance of recent quarters in fiscal 2025.

This positions us to continue the strong operational performance of recent quarters in fiscal 2025. Finally, we delivered record-free cash flow in fiscal 2024, allowing us to reduce debt and generate additional shareholder value. The combination of these factors positioned Plexus to deliver strong EPS growth in fiscal 2025.

Todd Kelsey: Finally, we delivered record free cash flow in fiscal 2024, allowing us to reduce debt and generate additional shareholder value. The combination of these factors positions Plexus to deliver strong EPS growth in fiscal 2025.

Todd Kelsey: Finally, we delivered record free cash flow in fiscal 2024, allowing us to reduce debt and generate additional shareholder value. The combination of these factors position plexus to deliver strong EPS growth in fiscal 2025.

Todd Kelsey: Thank you again, and have a nice day.

Thank you again, and have a nice day. This concludes today's conference call. You may now disconnect.

Todd Kelsey: Thank you again and have a nice day.

Bailey: This concludes today's conference call. You may now be-

Speaker Change: This concludes today's conference call you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Sure.