Q2 2025 Plexus Corp Earnings Call

Yeah.

Thank you for watching!

Operator: Thank you for standing by.

Speaker Change: Thanks for listening. I'm your host, Shawn Harrison. I'll see you next time.

Angela: My name is Angela, and I'll be your conference operator today.

Angela: Thank you for standing by. My name is Angela and I'll be your conference operator today. At this time I would like to welcome everyone to the Q2 2025 Plexus earnings conference call. All lines have been placed on mute to prevent any background noise.

Angela: At this time, I would like to welcome everyone to the Q2 2025 Plexus Earnings Conference Call. All lines have been placed on mute to prevent any background noise. 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 in your telephone keypad.

Angela: After the stickers marks, 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 in your telephone keypad. Thank you. I would now like to turn the call over to Mr. Shawn Harrison, vice president of investor relations. You may begin.

Angela: Thank you.

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

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. 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.

David, David, David, David, David, David,

Angela: Good morning and thank you for joining us today. Some of the statements made and information provided during our call today will be for looking statements.

Angela: including without limitation, those regarding revenue, gross margin, selling an administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation of future business outlook. [inaudible]

Shawn Harrison: Forward-looking statements are not guaranteed since their inherent difficulties in predicting future results and actual results could differ materially from those expressed or implied in the forward-looking statement. or a list of factors that could cause actual results that differ materially from those. please refer to the company's periodic SEC.

Angela: Four-looking statements are not guarantees since their inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the four-looking statements.

Angela: for list of factors that could cause actual results to differ materially from those discussed.

Angela: Please refer to the company's periodic SEC filings, particularly the risk factors in our form 10K filing for the fiscal year and its September 28th, 2024, is supplemented by our form 10K filings from the C. Harvard and Fair Disclosure Statement and a press release.

Shawn Harrison: in particular, the risk factors in our Form 10-K filing for the fiscal year ended September 28, 2024 is supplemented by our Form 10-Q filings in the Safe Harbor and Fair Disclosure Statement and our Press We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus' website at www.plexus.com, clicking on Investors at the top of that page.

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

Shawn Harrison: Joining me today are Todd Kelsey, President and Chief Executive. Oliver Mihm, Executive Vice President and Chief Operating Officer. and Pat Jermain, Executive Vice President and Chief Financial Officer.

Speaker Change: Joining me today are Todd Kelsey, President and Chief Executive Officer, Oliver Mihm, Executive Vice President and Chief Operating Officer, and Patrick Main, Executive Vice President and Chief Financial Officer.

Shawn Harrison: With today's earnings call, I will provide summary comments before turning the call over to Oliver and Patrick.

Angela: With today's earnings call, we'll provide summary comments before turning the call over to Oliver and Patrick for their details.

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

Speaker Change: With that, let me now turn the call to Richard Todd Kelsey, Todd.

Todd Kelsey: Thank you, Shawn.

Todd Kelsey: Good morning, everyone. Please advance to slide three. Our commitment to our customers' success during dynamic market environments is enabling a growing breadth of new program wins across Plexus' solutions. During our fiscal second quarter, we achieved our largest ever win for our sustaining services and our best quarterly engineering solutions wins performance in more than five years. In addition, our continued progress with initiatives to increase our operational and working capital efficiency resulted in robust fiscal second quarter financial performance. We see this momentum sustaining as we drive actions to navigate the current environment. In order to proactively help customers navigate current market complexities, we are strategically investing in talent such as our Trade Compliance and Logistics organization.

[inaudible]

Todd Kelsey: Thank you, Shawn. Good morning, everyone. Please advance to slide three.

Todd Kelsey: Our commitment to our customer success during dynamic market environments is enabling a growing breath of new program wins across Plexus solutions.

Todd Kelsey: During our fiscal second quarter, we achieved their largest ever win for our sustaining services and our best quarterly engineering solutions wins performance in more than five years.

Todd Kelsey: In addition, our continued progress with initiatives to increase our operational and working capital efficiency resulted in robust fiscal second quarter financial performance.

Thanks for watching!

Todd Kelsey: In order to proactively help customers navigate current market complexities, we are strategically investing in talent such as our trade compliance and logistics organization.

Todd Kelsey: We also continue to invest in technology, including our growing internal use of AI. facilities, including our new site in Malaysia that will open this summer. and advanced capabilities, including numerous tools focused on process automation, efficiency and achieving zero defects. As we look ahead, we continue to anticipate up to $100 million of free cash flow for fiscal 2025. Our substantial liquidity and robust free cash flow generation provides the opportunity to create additional shareholder value. Finally, while conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate achieving meaningful EPS growth in fiscal 2025, capitalizing upon revenue growth in each of our market sectors, sequential revenue growth for the remainder of the fiscal year, robust operating margin performance, and ongoing free cash flow deployment.

Todd Kelsey: We also continue to invest in technologies including our growing internal use of AI.

Facilities, including our new site in Malaysia that will open this summer

Todd Kelsey: and advanced capabilities, including numerous tools focused on process automation, efficiency, and achieving zero defects.

Todd Kelsey: As we look ahead, we continue to anticipate up to $100 million of free cash flow for fiscal 2025.

Todd Kelsey: Our substantial liquidity and robust recast flow generation provides the opportunity to create additional shareholder value.

Todd Kelsey: Finally, while conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate achieving meaningful EPS growth in fiscal 2025, capitalizing upon revenue growth in each of our market sectors.

Todd Kelsey: sequential revenue growth for the remainder of the fiscal year, robust operating margin performance and ongoing pre-cash flow deployment.

Todd Kelsey: Please advance to slide four. Revenue of $980 million met our guide. As the fiscal second quarter progressed, we saw signs of incremental strengthening and outlooks from health care customers, which offset modest reductions in other markets. Non-GAAP operating margin of 5.7% met the high end of our guidance range. Our operational efficiency efforts and stronger performance from our engineering solutions and sustaining services help to offset a portion of the typical seasonal cost headwind. Non-GAAP EPS of $1.66 exceeded our guidance, benefiting from strong operating margin performance as well as slightly favorable tax rate and lower than anticipated non-operating expenses.

Please advance to slide four.

Revenue of $980 million Met Arguides [inaudible]

Todd Kelsey: As the fiscal second quarter progressed, we saw signs of incremental strengthening and outlooks from healthcare customers which offset modest reductions in other markets.

Thanks for watching!

Todd Kelsey: non-GAAP Operating Margin of 5.7% met the high end of our guidance range.

Todd Kelsey: Our operational efficiency efforts and stronger performance from our engineering solutions and sustaining services help to offset a portion of the typical seasonal cost headwinds.

David, David, David, David,

Todd Kelsey: non-GAAP EPS of $1.66 exceeded our guidance, benefiting from strong operating margin performance, as well as slightly favorable tax rate and lower than anticipated non-operating expenses.

Todd Kelsey: Finally, we delivered $16.5 million of free cash flow, significantly better than our expectations.

Thanks for watching!

Todd Kelsey: Finally, we delivered $16.5 million of free cash flow significantly better than our expectations.

Todd Kelsey: Please advance to slide five. For the fiscal second quarter, we won 42 manufacturing programs worth $205 million in revenue annually when fully ramped into production. During the quarter, we closed our largest ever Sustaining Services win in support of creating success for an industry-leading health care customer. Also included in the quarterly wins are exciting manufacturing share gains and opportunities to support growth technologies in all of our market sectors. Furthermore, we generated the highest quarterly winds performance for our engineering solutions since the fiscal fourth quarter of 2019. The engineering wins performance reflected strong engagement across all of our market sectors, highlighting the extensiveness of our capabilities and effectiveness of the team's diversification effort.

Please advance to slide five.

Todd Kelsey: For the fiscal second quarter, we won 42 manufacturing programs worth $205 million in revenue annually when fully ramped into production.

Todd Kelsey: During the quarter we closed our largest ever sustaining services win and support of creating success for an industry leading healthcare customer. [inaudible]

Todd Kelsey: Also included in the quarterly wins are exciting manufacturing share games and opportunities to support growth technologies in all of our market sectors.

Todd Kelsey: Furthermore, we generated the highest quarterly wins performance for our engineering solutions since the fiscal fourth quarter of 2019.

Todd Kelsey: The engineering wins performance reflected strong engagement across all of our market sectors, highlighting the extensiveness of our capabilities and effectiveness of the team's diversification efforts.

Todd Kelsey: The breadth of this quarter's wins performance across our solutions, market sectors, and technologies is a strong leading indicator of future Plexus revenue growth.

Todd Kelsey: The breath of this quarter's wins performance across our solutions, market sectors and technologies is a strong leading indicator of future Plexus revenue growth.

Todd Kelsey: Please advance to slide six. Our commitment to sustainability is integrated with our core value of innovating responsibly as we boldly drive positive change and promote a sustainable future. Our people are the heart of who we are and what we do.

Thank you.

Please advance to slide six.

Todd Kelsey: Our commitment to sustainability is integrated with our core value of innovating responsibly as we boldly drive positive change and promote a sustainable future.

Todd Kelsey: Our people are the heart of who we are and what we do.

Todd Kelsey: I'm therefore incredibly proud to share that Wisconsin Manufacturers and Commerce selected Plexus as Manufacturer of the Year Mega Category in recognition of our innovation, philanthropy, technological advancements, commitment to customer satisfaction, financial performance, and creation of quality jobs. Thank you to our incredible team members, partners, and local communities whose contributions support fulfilling our vision of helping to create the products that build a better world. We also continue to deliver innovative solutions to create customer success.

Todd Kelsey: and therefore incredibly proud to share that Wisconsin manufacturers and commerce selected

Todd Kelsey: as manufacturer of the year mega category. In recognition of our innovation, philanthropy.

technological advancements. [inaudible]

Commitment to customer satisfaction

Financial Performance and Creation of Quality Jobs

Todd Kelsey: Thank you to our incredible team members, partners and local communities whose contributions support fulfilling our vision of helping to create the products that build a better world.

Todd Kelsey: We also continue to deliver innovative solutions to create customer success.

Todd Kelsey: During our fiscal second quarter, our Plexus Xiamen team celebrated a new partnership with GE Health Care China to advance the green supply chain ecosphere initiative by focusing on maximizing the recycling and reuse of valuable medical equipment and promoting sustainability. We also recently partnered with our customer Bevy to celebrate Earth Day. Bevy's mission is to unbottle the future through their smart, bottless water dispenser. Throughout our partnership, Bevy's Smart Water Dispenser, which is manufactured at our Appleton, Wisconsin facility, has saved the equivalent of over 218 million plastic water bottles from landfills.

Todd Kelsey: During our fiscal second quarter, our Plexus Shawn Men team celebrated a new partnership with GE Healthcare China to advance the Green Supply Chain Ecosphere initiative by focusing on maximizing the recycling and reuse of valuable medical equipment and promoting sustainability.

Todd Kelsey: We also recently partnered with our customer Bevy to celebrate Earth Day. Bevy's mission is to unbottle the future through their smart, bottle-less water dispensers.

Todd Kelsey: Throughout our partnership, Bevy Smart Water Dispenser, which is manufactured at our Appleton Wisconsin facility, has saved the equivalent of over 218 million plastic water bottles from

Todd Kelsey: Our commitment to delivering excellence includes reducing our environmental impact.

Thanks for watching!

Todd Kelsey: Our commitment to delivering excellence includes reducing our environmental impact. Our team members in Herodia Romania joined the Planning Hope initiative, working with over 100 volunteers to plant 1000 trees.

Todd Kelsey: Our team members in Oradea, Romania, joined the Planting Hope Initiative, working with over 100 volunteers to plant 1,000 trees.

Todd Kelsey: And finally, we are excited to announce the release of our annual sustainability report later in the fiscal third quarter. The 2024 report highlights our continued commitment to innovating responsibly, as we've always been driven to do more for our customers, our team members in the world.

Todd Kelsey: And finally, we are excited to announce the release of our annual sustainability report later in the fiscal third quarter. The 2024 report highlights our continued commitment to innovating responsibly as we've always been driven to do more for our customers, our team members in the world.

Todd Kelsey: Please advance to slide seven. We're getting fiscal third-quarter revenue of $1.00 to $1.04 billion, non-GAAP operating margin of 5.7% to 6.1%, and non-GAAP EPS of $1.65 to $1.80. While conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate sequential revenue growth for our fiscal fourth quarter combined with another quarter of strong operating margin performance. This outlook supports a continued view that Plexus will achieve meaningful EPS growth in Fiscal 2025 with revenue growth in each of our market sectors, robust operating margin performance, and ongoing free cash flow deployment.

Please advance to slide seven.

Todd Kelsey: We're getting fiscal third quarter revenue of $1.00 to $1.04 billion, non-GAAP operating margin of 5.7 to 6.1% and non-GAAP EPS of $1.65 to $1.80.

Speaker Change: Thank you for watching. Please like, comment, and subscribe. See you next time.

Todd Kelsey: While conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate sequential revenue growth for our fiscal fourth quarter, combined with another quarter of strong operating margin performance. [inaudible]

Todd Kelsey: This outlook supports a continued view that Plexus will achieve meaningful EPS growth in fiscal 2025 with revenue growth in each of our market sectors, robust operating margin performance and ongoing free cash flow deployments.

Todd Kelsey: We continue to expect year-over-year growth for our aerospace and defense market sector, supported by robust demand for our solutions supporting defense and commercial space products. Growth forecasts improved slightly in our healthcare life sciences market sector. We continue to benefit from new program ramps and share gains, while healthcare customer demand is improving after a prolonged period of inventory correction. We continue to expect growth in our industrial market sector. This expectation reflects robust growth in semi-cap associated with contributions from new program wins and share gains amidst an outlook of modest semi-cap market growth. In addition, we see some early signs that inventory corrections may have peaked in the broader industrial market.

Todd Kelsey: We continue to expect a year-over-year growth for our aerospace and defense market sector supported by robust demand for our solutions supporting defense and commercial space products.

Todd Kelsey: Growth forecast improves slightly in our health care life sciences market sector.

Todd Kelsey: We continue to benefit from new program ramps and share games, while healthcare customer demand is improving after a prolonged period of inventory correction.

Thank you.

Todd Kelsey: We continue to expect growth in our industrial market sector. This expectation reflects robust growth in semi-cap associated with contributions from new program wins and share gains amidst an outlook of modest semi-cap market growth.

Todd Kelsey: In addition, we see some early signs that inventory corrections may have peaked in the broader industrial market.

Todd Kelsey: Finally, Plexus uniquely supports customer success, leveraging our comprehensive product lifecycle solutions and passion for operational excellence delivered through our globally united team. Our ongoing strategic investments in talent, technology, facilities, and advanced capabilities position Plexus to proactively navigate evolving landscapes and dynamic market environments to enable our customers' success.

[inaudible]

Todd Kelsey: Finally, Plexus uniquely supports customer success, leveraging our comprehensive product life cycle solutions and passion for operational excellence delivered through our globally united team.

Todd Kelsey: Our ongoing strategic investments in talent, technology, facilities, and advanced capabilities position Plexus to proactively navigate evolving landscapes and dynamic market environments to enable our customers success.

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

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

Oliver Mihm: Thank you, Todd.

Oliver Mihm: Good morning. I will begin with a review of the fiscal second quarter performance of each of our market sectors. for expectations for each sector for the fiscal third quarter and some directional sector commentary for fiscal 2025. I will also review the annualized revenue contribution of our WINGS performance for each market sector and then provide an overview of our funnel of qualified manufacturing opportunities. Starting with our aerospace and defense sector on slide eight, revenue increased 8% sequentially in the fiscal second quarter, meeting our expectation of a high single digit increase. Continued softness in the commercial aerospace subsector was offset by demand increases in both the defense and space subsectors.

[inaudible]

Thank you, Todd. Good morning.

Oliver: I will begin with the review of the fiscal second quarter performance of each of our market sectors.

Oliver: for expectations for each sector for the fiscal third quarter, and some directional sector commentary for fiscal 2025.

Oliver: I will also review the annualized revenue contribution of our Wings performance for each market sector and then provide an overview of a funnel of qualified manufacturing opportunities.

Oliver: Starting with our aerospace and defense sector on slide eight, revenue increased eight percent sequentially in the fiscal second quarter, meeting our expectation of a high single digit

Oliver: Continued softness in the commercial aerospace sub-sector was offset by demand increases in both the defense and space sub-sectors [inaudible]

Oliver Mihm: We expect revenue for the aerospace and defense sector to be up mid-single digits in the fiscal third quarter. reflective of broad-based increases in customer demand and an increase in volume for a new product ramp. Our wins for the fiscal second quarter for the aerospace and defense sector were healthy at $27 million. Reflective of our continued strength of execution, we received awards for products currently manufactured in-house at two of our customers in the defense subset. We also received an award for further new product launch builds for a customer that continues to invest in their SPRACE product portfolio.

Oliver: We expect revenue for the aerospace and defense sector to be up mid-single digits in the fiscal third quarter.

Oliver: Reflective of broad-based increases in customer demand and an increase in volume for a new product ramp.

Oliver: Our limbs for the fiscal second quarter for the aerospace and defense sector were healthy at $27 million.

Oliver: Reflective of our continued strength of execution, we received awards for products currently manufactured in-house at two of our customers in the defense sub-sector.

Thanks for watching!

Oliver: We also received an award for further new product launch builds for a customer that continues to invest in their space product portfolio.

Oliver Mihm: Plexus is the sole provider for these new product launch builds. And our focus to expand our engineering design services with aerospace and defense customers continues to build momentum with the award of our largest ever Aerospace and Defense Secretary. Consistent with our outlook last quarter, we expect continued sequential growth as we finish the fiscal year, resulting in modest growth for our aerospace and defense market sector in fiscal 2025. Strength and the defense and space subsectors is being substantially offset by reduced near-term demand in the aerospace sector. muting the impact of robust underlying long-term commercial aerospace market demand and the anticipated growth contribution from our ongoing wins and sharing.

Oliver: Plexus is the sole provider for these new product launch builds.

Oliver: and our focus to expand our engineering design services with aerospace and defense customers continues to build momentum with the award of our largest ever aerospace and defense

[inaudible]

I don't know what you're talking about. I don't know what you're talking about.

Speaker Change: Consistent with our Outlook last quarter, we expect to continue sequential growth as we finish the fiscal year, resulting in modest growth for our aerospace and defense market sector in fiscal 2025.

Oliver: Strength and the defense and space sub-sectors is being substantially offset by reduced near-term demand in the aerospace sub-sector.

Oliver: muting the impact of robust underlying long-term commercial aerospace market demand and the anticipated growth contribution from our ongoing wins and sharegames

Oliver Mihm: Please advance to slide nine. Revenue in our healthcare life sciences market sector was up 10% sequentially for the fiscal second quarter, beating our expectation of a high single-digit increase. Inside the quarter, demand increases across a number of customers contributed to the strong results. For the fiscal third quarter, we expect the health care life sciences sector to grow revenue mid-single digits, driven primarily by increased end-market demand and supported by strength from new programs. Fiscal second quarter healthcare life sciences sector wins of 118 million dollars included our largest ever award for sustaining services. This substantial award from an existing customer marks a shift in their strategy from in-house to outsourced services.

[inaudible]

Please advance the flight 9.

Thanks for watching!

Oliver: Revenue in our Health Care Life Sciences Market Sector was up 10 percent sequentially for the fiscal second quarter, beating our expectation of a high single-digit increase.

Oliver: Inside the quarter demand increases across a number of customers contributed to the strong results.

Oliver: For the fiscal third quarter, we expect the health care life science sector to grow revenue mid-single digits driven primarily by increased end market demand and supported by strength from new program ramps.

and Patrick Jermain.

Oliver: fiscal second quarter health care life sciences sector wins of $118 million included our largest ever award for sustaining services.

Oliver: This substantial award from an existing customer marks a shift in the strategy from in-house to outsourced services.

Oliver Mihm: Our strong history of execution with this customer and the strength of our executive relationships contributed to the award. This product will be serviced in our Guadalajara, Mexico. Our wins also included subassemblies for a customer's next generation MRI support equipment. Again, our historical strength of execution and executive partnerships contributed to the award. In this instance, our customer engaged exclusively with Plexus on this opportunity. These assemblies will be built in our Penang, Malaysia campus. Our Penang Malaysia campus also received an award to build sub-assemblies in support of an orthopedic robotic assisted surgical As we look to the full year, our outlook for fiscal 2025 for the healthcare life sciences sector has slightly improved on the strength of new program ramps and multiple customers increasing demand.

Oliver: Our strong history of execution with this customer and the strength of our executive relationships contributed to the award.

Oliver: Our Wins also included sub-assemblies for a customer's next generation MRI support equipment.

Oliver: Again, our historical strength of execution and executive partnerships contributed to the award, and this instance our customer engaged exclusively with Plexus on this opportunity.

These assemblies will be built on our Penaing Malaysia campus.

David, David, David, David, David,

Oliver: Our Penaing Malaysia campus also received an award to build sub-assemblies in support of an orthopedic, robotic assisted surgical system.

Thanks for watching!

Oliver: As we look to the full year, our outlook for fiscal 2025 for the health care life sciences sector has slightly improved on the strength of new program ramps and multiple customers increasing demand.

Oliver Mihm: Advancing to the industrial sector on slide 10. Revenue decreased 10% sequentially in the fiscal second quarter. The result was in line with our expectation of a high single-digit to low double-digit revenue decline. Near-term demand increases across a number of customers for both existing and new product production offset other forecast changes in the portfolio. Our first-goal third-quarter outlook for the industrial sector of a low single-digit increase reflects demand strength in our semi-cap subsector and new program ramp strength in our energy management sector.

Oliver: Advancing to the industrial sector on fly 10, revenue decreased 10% sequentially in the fiscal second quarter.

Oliver: The result was in line with her expectation of a high single digit to low double digit revenue decline.

Oliver: Near-term demand increases across a number of customers, for both existing and new product production, offset other forecast changes in the portfolio.

David, David, David, David, David, David,

Oliver: Our first school third quarter outlook for the industrial sector of a low single digit increase reflects demand strength in our semi cap sub sector and new program ramp strength in our energy management sub sector. [inaudible]

Oliver Mihm: The industrial market sector wins for the second quarter with $60 million. As a result of the continued nonlinearity of the new technology transition within the broadband communications subsector, our customer has awarded us further production of legacy products, as some end customers invest to optimize their installed infrastructure. We also expanded our engagement with a leading construction and mining equipment customer as they awarded us production for a safety system that was part of a recent acquisition. Plexus' ability to support the resulting transition reflects a high value-add offering and the strength of our partnership. Finally, our wins performance continue to show strength across the portfolio of our semi-cap customers with both new program wins and shared Our expectation of growth for the industrial sector in fiscal 2025 remains unchanged.

and Patrick Jermain.

Oliver: The Industrial Market Sector wins for the second quarter were $60 million.

Oliver: As a result of the continued non-linearly of the new technology transition within the broadband communication sub-sector, our customer has awarded us further production of legacy products as some end customers invest to optimize their installed infrastructure. [inaudible]

Oliver: We also expanded our engagement with the leading construction and mining equipment customer, as they awarded us production for a safety system that was part of a recent acquisition.

Oliver: Plexus's abilities and support the resulting transition reflects a high value out offering and the strength of our partnership.

David, David, David, David, David, David,

Oliver: Finally, our Wins performance continued to show strength across the portfolio of our summer cap customers, with both new program wins and share games.

[inaudible]

Oliver: Our expectation of growth for the industrial sector in fiscal 2025 remains unchanged.

Oliver Mihm: Share gains and new program ramps are driving robust growth for our semi-cap subsector, while, despite some early green shoots, trends remain generally uneven across the majority of our industrial sub-market.

Oliver: Shergaines, a new program ramps are driving robust growth for our semi-cap sub-sector, while, despite through early green shoots, trends remain generally uneven across the majority of our industrial

Oliver Mihm: Please advance to slide 11 for a review of our funnel of qualified manufacturing. The funnel of qualified manufacturing opportunities remains robust at $3.5 billion. Our positive outlook for funnel health is in part supported by the strength of early-stage opportunities in our industrial and aerospace and defense sectors.

David, David, David, David, David, David,

Oliver: Please advance the slide 11 for a review of a funnel of qualified manufacturing opportunities.

David, David, David, David, David,

Oliver: The fun will have qualified manufacturing opportunities, remains robust at $3.5 billion dollars.

Oliver: Our positive outlook for funnel health is in part supported by the strength of early-stage opportunities in our industrial and aerospace and defense sectors.

Oliver Mihm: In summary, after considering Current dynamic market conditions, our share gains, program ramps, continued strength in certain subsectors, and increased demand in recently challenged subsectors, we continue to forecast sequential revenue growth during the second half of fiscal 2025.

Thanks for watching!

and Summary after considering. [inaudible]

Oliver: Current dynamic market conditions, our share gains, program ramps, continued strength in certain sub-sectors, and increased demand in recently challenged sub-sectors, we continue to forecast sequential revenue growth during the second half of fiscal 2025.

Oliver Mihm: Before turning the call over to Pat, reflecting on the recent tariff volatility, I'd like to take a moment to recognize and appreciate the efforts of our trade compliance team and our global Plexus team, as we continue to provide agile, proactive, and complicated analysis and responses in support of our customers' success. Our customers have noted their appreciation, and we'd like to add our appreciation to theirs.

[inaudible]

Before turning the call over to Pat [inaudible]

Oliver: Reflecting on the recent terror volatility, I'd like to take a moment to recognize and appreciate the efforts of our trade compliance team and our global Plexus team as we continue to provide agile, proactive, and complicated analysis and responses and support of our customer success.

Oliver: Our customers have noted their appreciation, and we'd like to add our appreciation to theirs. Thank you

Patrick Jermain: Thank you. I will now turn the call over to Pat.

Oliver: I will now turn the call over to Pat. Pat? Thank you, Oliver, and good morning, everyone. Our fiscal second-corder results are summarized on slide 12.

Patrick Jermain: Thank you, Oliver, and good morning, everyone. Our fiscal second quarter results are summarized on slide 12. Gross margin of 10% was at the top end of our guidance due to a favorable mix of service offerings and better fixed cost leverage. Productivity improvements associated with operational efficiency initiatives help to reduce the impact from our typical seasonal compensation cost increase. Selling an administrative expense of $49 million was at the midpoint of our guidance. non-GAAP operating margin of 5.7% was at the top end of our guidance due to the strength and gross margin. Non-operating expense of $3.8 million is favorable to expectations due to improved foreign exchange performance and lower than anticipated interest expense.

Pat: Gross margin of 10% was at the top end of her guidance due to a favorable mix of service offerings and better fixed cost leverage.

Pat: Productivity improvements associated with operational efficiency initiatives helped to reduce the impact from our typical seasonal compensation cost increases. [inaudible]

Pat: Selling an administrative expense of $49 million was at the midpoint of our guidance. non-GAAP operating margin of 5.7% was at the top end of our guidance due to the strength and gross margin.

Pat: Non-operating expense of $3.8 million is favorable to expectations due to improved foreign exchange performance and lower than anticipated interest expense.

Patrick Jermain: Non-GAAP diluted EPS of $1.66 exceeded our guidance due to the items mentioned and a slightly favorable tax .

Pat: non-GAAP diluted EPS of an hour 66, exceeded our guidance due to the items mentioned in a slightly favorable tax rate.

Patrick Jermain: Turning to your cash flow and balance sheet on slide 13. As shown across these financial metrics, our performance was strong and consistent with the fiscal first quarter. As a result, we delivered $36.7 million in cash from operations and spent $20.2 million on capital expenditures. generating free cash flow of $16.5 million. This performance exceeded expectations and positions us well to meet our fiscal 2025 free cash flow projection of up to $100 million. During the quarter, we continued to return cash to shareholders through our share repurchase program by acquiring approximately 86,000 shares of our stock for $12.2 million.

Pat: Turning to your cashflow and balance sheet on flight 13.

Pat: As shown across these financial metrics, our performance was strong and consistent with the fiscal first quarter.

Pat: As a result, we delivered $36.7 million in cash from operations and spend $20.2 million on capital expenditures, generating free cash below $16.5 million.

Pat: This performance exceeded expectations and positions us well to meet our fiscal 2025 free cashflow projection of up to $100 million.

Pat: During the quarter, we continued to return cash to shareholders through our share repurchase program by acquiring approximately 86,000 shares of our stock for $12.2 million.

Patrick Jermain: We have approximately $25 million available under the current $50 million authorization.

Pat: We have approximately $25 million available under the current $50 million authorization.

Patrick Jermain: We are taking advantage of our strong financial performance and robust balance sheet to hold an earlier review with our Board of Directors to discuss an additional buyback authorization once a current program is This review is planned for next month. Similar to the prior quarter, we ended the fiscal second quarter in a net cash position. We have $15 million outstanding under our revolving credit facility with $485 million available to borrow. Given our available capacity, we anticipate borrowing under this facility when our $100 million private placement notes mature this June. We will take market conditions into consideration if and when we would refinance any amount longer term.

Pat: We are taking advantage of our strong financial performance and robust balance sheet to hold in earlier review with our Board of Directors to discuss an additional buyback authorization once a current program is completed.

This review is planned for next month.

Pat: Similar to the prior quarter, we ended the fiscal second quarter in a net cash position.

Pat: We have $15 million outstanding under our Revolving Credit Facility with $485 million available to borrow.

Pat: Given our available capacity, we anticipate borrowing under this facility when our $100 million of private placement notes mature this June .

Pat: We will take market conditions into consideration if and when we would refinance any amount longer term.

Patrick Jermain: For the fiscal second quarter, we delivered a return on invested capital of 13.7%, which was 480 basis points above our weighted average cost of capital. Our invested capital base is significantly lower than the prior year due to our efforts to drive sustained improvement in working capital. This combined with improved operating performance drove the expansion in ROIC over the prior year. cash cycle at the end of the fiscal second quarter with 68 days, three days favorable to expectations and consistent with the fiscal first quarter. This result represents a 25% improvement in our cash cycle days from one year ago.

Pat: For the fiscal second quarter, we delivered Return on Invested Capital 13.7%, which was 480 basis points above our way to the average cost of capital.

I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.

Pat: Our invested capital base is significantly lower than the prior year due to our efforts to drive sustained improvement in working capital.

Thanks for watching!

Pat: This combined with improved operating performance drove the expansion in ROIC over the prior year.

Pat: and Cass Cycle at the end of the Fiscal Second Quarter with 68 days, 3 days favorable to expectations, and consistent with the Fiscal First Quarter. This result represents a 25% improvement in our Cass Cycle days from one year ago.

Patrick Jermain: Please turn to slide 14 for details on our cash cycle. With a continued sequential reduction in gross inventory dollars, this quarter by $10 million, we experienced a two-day improvement in inventory data. We have now reduced the dollar value of inventory for five consecutive quarters with gross inventory $370 million lower than the fiscal 2023 high point. For days in advance payments, we experienced a two-day reduction with $14 million being returned to customers during the quarter.

Pat: Please turn to slide 14 for details on our cash cycle.

Thanks for watching!

Pat: With a continued sequential reduction in gross inventory dollars, this quarter by ten million dollars, we experience the two-day improvement in inventory days.

Pat: We have now reduced the dollar value of inventory for five consecutive quarters with gross inventory $370 million lower than the fiscal 2023 high point.

Pat: For days in advance payments, we experience a two day reduction with $14 million being returned to customers during the quarter.

Patrick Jermain: As Todd has already provided the revenue and EPS guidance for the fiscal third quarter, I'll review some additional details, which are summarized on slide 15. Fiscal third quarter gross margin is expected to be in the range of 9.9 to 10.2 percent. At the midpoint, gross margin would be slightly improved from last quarter. We expect selling and administrative expense in the range of $50 to $51 million, which is fairly consistent with the prior quarter. Note that this estimate is inclusive of approximately $6.4 million of stock-based compensation expense. Fiscal third quarter non-GAAP operating margin is expected to be in the range of 5.7% to 6.1%, exclusive of stock-based compensation.

Pat: As Todd has already provided the revenue and EPS guidance for the fiscal third quarter, I'll review some additional details which are summarized on 515.

[inaudible]

Patrick Jermain: This go third quarter growth margin is expected to be in the range of 9.9 to 10.2% at the midpoint line growth margin would be slightly improved from last quarter.

Patrick Jermain: We expect selling an administrative expense in the range of 50 to 51 million dollars, which is fairly consistent with the prior recorder. Note that this estimate is inclusive of approximately $6.4 million. Let's do our base compensation expense.

Patrick Jermain: Non-operating expense is anticipated to be approximately $4.5 million. We continue to anticipate lower interest expense consistent with our reduced borrowing. For the fiscal third quarter, we are estimating an effective tax rate between 14 and 16 percent and diluted shares outstanding of approximately $27.6 million. In support of anticipated program ramps, our expectation for the balance sheet is that working capital investments will increase compared to the fiscal second quarter. However, based on our anticipated sequential revenue growth, we expect our cash cycle days to remain consistent with the fiscal second quarter. Hence, we are guiding a cash cycle range of 66 to 70 days.

Patrick Jermain: Nine operating expense is anticipated to be approximately $4.5 million. We continue to anticipate lower interest expense consistent with our reduced borrowing.

Patrick Jermain: or the fiscal third quarter, we are estimating an effective tax rate between 14% and 16% and diluted shares outstanding of approximately 27.6 million.

Thanks for watching!

Patrick Jermain: In support of anticipated program ramps, our expectation for the balance sheet is that working capital investments will increase compared to the fiscal second quarter. However, based on our anticipated financial revenue growth,

Patrick Jermain: We expect our cash cycle days to remain consistent with a fiscal second quarter. Hence we are guiding a cash cycle range of 66 to 70 days.

Patrick Jermain: With investments to support anticipated program ramps and higher levels of capital spending associated with completing the build-out of our new facility in Penang, Malaysia, We expect break-even to a slight generation of free cash flow for the fiscal third quarter. Fiscal 2025 capital spending is expected to be in the range of $110 to $130 million, slightly lower than our previous guidance. Once again, given our improved performance through the first half of the fiscal year, we anticipate generating up to $100 million of free cash flow for fiscal 2020.

Patrick Jermain: with investments to support anticipated program ramps and a higher level and higher levels of capital spending associated with completing the build-out of our new facility in Penang, Malaysia.

Patrick Jermain: We expect break even to a slight generation of free cash flow for the fiscal third quarter.

Patrick Jermain: Disco 2025 capital spending is expected to be in the range of $110 to $130 million, slightly lower than our previous guidance.

Patrick Jermain: Once again, given our improved performance through the first half of the fiscal year, we anticipate generating up to a hundred million dollars of free cash flow for fiscal 2025.

Angela: With that, Angela, let's now open the call for questions. Thank you. We will now begin the question and answer session.

With that, Angela, let's now open the call for questions.

and Patrick Jermain. Thank you. Thank you.

Thank you. Thank you. Thank you.

Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one in your telephone key, ask to raise your hand and join the queue.

Angela: If you have dialed in and would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Also, for this meeting, we request everyone to please limit your question to one question and one follow-up only. Thank you.

Patrick Jermain: If you would like to withdraw your question, simply press star one again.

Patrick Jermain: If you are called upon to ask your question and are listening well on speaker and your device, please pick up your handset and ensure that your phone is not on you been asking your question.

Patrick Jermain: Also, for this meeting, we request everyone to please limit your question to one question and one follow up only. Thank you. Your first question comes from the line of David Williams from the benchmark company. Your line is now open.

David Williams: Your first question comes from the line of David Williams from the Benchmark Company. Your line is now open. Hey, good morning, everyone. Thanks for taking the question and congratulations on just navigating this environment as well as you are. Thank you, David.

Thanks for watching!

David Williams: Good morning everyone, thanks for the question and congratulations on just navigating this environment as well as you are here.

David Williams: Yeah, so lots of, I think there's lots of things that we could talk about here, but I guess first, it's really around the tariffs, and this has been obviously a big topic of discussion. But, you know, in the past, you've talked about your in-country, for-country kind of strategy that has helped there, and you talked about hiring some logistics and some support staff. But just, can you talk maybe a little more about how the tariffs are impacting you, and are you hearing anything from your customers? Are you seeing their forecast shift? And maybe, what are those discussions that you're having today with them?

Thank you, David.

Speaker Change: Yeah, so lots, I think there's lots of things that we can talk about here, but I guess first it's really around the terrace and this has been obviously a big topic of discussion but

Speaker Change: You know, in the past, you talked about your in-country, four-country strategy that has helped there, and you talked about hiring some logistics and some support staff, but...

Speaker Change: Can you talk a little more about how the tariffs are impacting you and are you hearing anything from your customers? Are you seeing their forecast shift? What are those discussions that you're having today with them? What are those discussions that you're having today with them? What are those discussions that you're having today with them?

Todd Kelsey: Sure. So, I mean, first of all, what I would say is we would all like to get to a steady state, because I think that will help us plan for the future and move forward with our customers. Because right now, our customers are largely taking a wait and see type approach. We're doing a bit of modeling for some customers on potentially moving regions, although those aren't necessarily to the US. They could just be to lower tariff jurisdictions or things such as that. But in general, we believe we're positioned really well as we move forward through this.

Speaker Change: Sure, so I mean, first of all, what I would say is we would all like to get to a steady state because I think that will help us plan for the future. Thank you.

Speaker Change: and move forward with our customers. Because right now our customers are largely taking a weight and seat type approach. We're doing a bit of modeling for some customers and potentially moving regions, although those aren't necessarily to the US. They could just be to...

Speaker Change: lower tariff jurisdictions or things such as that but in general we believe we're positioned really well as we move forward through this one is the investments in trade compliance from a standpoint of people tools and process. Thank you very much.

Todd Kelsey: One is the investments in trade compliance from a standpoint of people, tools, and process. Again, to remind everybody on the call, we pass the tariffs on to our customers so we don't absorb those costs ourselves. And that's moving forward fine, as we would anticipate it to right now. And we think we're positioned well from a footprint standpoint and a services and tools standpoint, that we'll be able to adjust and help our customers achieve a successful solution, regardless of what that final state is. We have available capacity in each of our regions, including within the US, so we're well positioned to be able to do that.

Speaker Change: Again, to remind everybody on the call, we pass the tariffs on to our customers so we don't absorb those costs ourselves.

Speaker Change: and that's moving forward fine as we would anticipate it to right now.

Speaker Change: and we think we're positioned well from a footprint standpoint and a services and tools standpoint that will be able to adjust and help our customers achieve a successful solution.

Speaker Change: regardless of what that final state is. We have available capacity in each of our regions, including within the U.S., so we're well positioned to be able to do that. We still think an in-region for region is the likely end state as this continues to migrate. We think that's the typical solution that we get towards, but we, again, believe we're well positioned to continue to adjust as our customers see the final end state.

Todd Kelsey: We still think an in-region, for-region is the likely end state as this continues to migrate. We think that's the typical solution that we'd get towards. But we, again, believe we're well positioned to continue to adjust as our customers see the final end state.

David Williams: One of the things from a standpoint of demand, too, David, at this point we're seeing no impact to demand and that includes no demand degradation or no pull forward into the current and into earlier time periods right now. Okay, very good. Certainly appreciate your color there.

Speaker Change: One of the things from a standpoint of demand to David, at this point we're seeing no impact to demand and that includes no demand degradation or no pull forward into the current and to the earlier time periods right now.

David, David, David, David, David,

David Williams: And then maybe you talked a little bit about having excess capacity. But if you think about new facilities, if you were to build that, can you talk a little bit about that CapEx investment and then the timing in order to bring up a new facility? How quickly can that happen if a customer came to you and said, Hey, we want to move to the US, but you didn't have capacity?

Okay.

Speaker Change: Very good. Certainly appreciate the color there. And then maybe you talked a little bit about having excess capacity, but if you think about new facilities, if you were to build that, can you talk a little bit about that CapEx investment and then the timing in order to bring up a new facility? How quickly can that happen if a customer came to you and said, hey, we want to move to the U.S. but you didn't have capacity?

Patrick Jermain: Yeah, well, the good news, David, this is Pat. We've got really good capacity in all three of our regions. As we mentioned, we've got the Penang, Malaysia site coming on board this summer. We've got available capacity in Europe and then in Mexico and the U.S. So all three of those regions can handle any additional volume that's put into it.

Speaker Change: Yeah, well, the good news, David, this is Pat. We've got really good capacity in all three of our regions. As we mentioned, we've got the Penang, Malaysia site coming on board this summer.

Speaker Change: We've got available capacity in Europe and then in Mexico and the US so all three of those.

Regions, Conhandle, any additional... [inaudible]

Patrick Jermain: How quickly, if the need would arise in the future, you know, it's probably a four to six quarter period to do that build. But with some of the improvements we're making within our facilities, and Oliver could talk more about this, but we're trying to expand capacity within our existing facilities through automation efforts and a number of other initiatives that can delay the need for a new site after we put the one in in Malaysia.

a volume that's put into it.

How quickly if the need would arise in the future?

You know, it's probably a four to six quarter period.

Speaker Change: to do that bill. But with some of the improvements we're making within our facilities, and Oliver could talk more about this, but we're trying to expand capacity within our existing facilities.

Speaker Change: Through automation efforts and a number of other initiatives that can delay the need for a new site after we put the one-in in Malaysia.

Oliver Mihm: Yeah, I can just expanding on that. As we drive operational improvements into our manufacturing facilities, not only are we So, Pat mentioned automation, that could be process automation, material handling automation. As a specific example there, we've automated our warehouse in Penang last fiscal year, and through doing that, we saw a 60% reduction in space utilization as we automated that warehouse, 300% increase in pick rate, and also better labor efficiency. So we're now rippling that through another three facilities this fiscal year, and that's a way that we... and create additional capacity with the existing bricks and mortar.

Speaker Change: Yeah, I can just expanding on that as we drive operational improvements into our many factory facilities, not only are we working on improvements.

and Patrick Jermain.

Speaker Change: Pat mentioned automation. That could be process automation, material handling automation as a specific example there. We've automated our warehouse and penang last fiscal year and through doing that we saw a 60% reduction in space utilization as we automated that warehouse. 300% increase in pick rate and also better labor efficiency.

Speaker Change: And so we're now replaying that through another three facilities this fiscal year and that's a way that we can continue to make

Speaker Change: Blake, and create additional capacity with the existing bricks and mortar that we have.

Melissa Fairbanks: Your next question comes from the line of Melissa Fairbanks with Raymond James. Your line is now open. Hey guys, thanks so much!

Go to Beadaholique.com for all of your beading supply needs!

Speaker Change: Here next question comes from the line of Melissa Fairbanks with Raymond James, your line is now open

Hey guys. Thanks so much.

Melissa Fairbanks: Pat, I just wanted to touch on the cash cycle days since this is the last topic that you spoke about before we went into Q&A. We have seen it leveling out around 68 days, obviously a significant improvement from where we were a year ago. Just wondering, understanding that there is going to be some fluctuation on a quarterly basis, but wondering what your longer term target is for those cash cycles. Yeah, thanks, Melissa. I mean, it's changed a bit, because as you recall, last year, I was probably in the kind of low 70s, mid 70s. And then we've, frankly, we're a bit surprised ending the fiscal year in 24 at 64 days.

Speaker Change: Pat, I just wanted to touch on the cash cycle days.

Speaker Change: Since this is the last topic that you spoke about before we went into Q&A, we have seen it leveling out around 68 days.

Speaker Change: Obviously, a significant improvement from where we were a year ago.

Speaker Change: Just wondering, understanding that there is going to be some fluctuation on a quarterly basis, but wondering what your longer-term target is for those cash cycle days.

Speaker Change: Yeah, thanks, Melissa. I mean, it's changed a bit because as you recall last year, I was probably in kind of low 70s to mid-70s and then...

Speaker Change: We frankly were a bit surprised ending the fiscal year in 24 at 64 days.

Patrick Jermain: And we've kind of continued in the 60s. And that's where I'm guiding the fiscal third quarter. I think we have opportunity, though, to get back into kind of the mid to low 60s. I think that's a good target for us. I think there is opportunity around gross inventory to bring that down. But we do have to recognize we have sizable customer deposits, also offsetting that gross inventory, that some of that's going to be returned to customers in 25 and 26. But keep in mind that every one of those days that we're able to reduce frees up $10 million of cash flow for us.

Speaker Change: and we've kind of continued in the 60s and that's where I'm guiding the fiscal third quarter. I think we have opportunity though to get back into kind of the mid to low 60s. I think that's a good target for us.

Speaker Change: I think there is opportunity around gross inventory to bring that down, but we do have to recognize we have sizable customer deposits.

Speaker Change: Also offsetting that gross inventory, that's some of that's going to be returned to customers in 25 and 26.

Speaker Change: But keep in mind that every one of those days that we're able to reduce frees up $10 million of cash for us and it's been a huge improvement to our balance sheet from a borrowing standpoint and ability to support our buyback and other growth initiatives.

Melissa Fairbanks: And it's been a huge improvement to our balance sheet from a borrowing standpoint and ability to support our buyback and other growth initiatives. Yeah, absolutely. Absolutely.

Oliver Mihm: Oliver, I had a follow-up for you. One thing that you said was kind of interesting, in the aerospace and defense segment, you noted that you won some new product launches, two of which had previously been done in-house by the customer. Correct me if I'm misunderstanding what you said. But I'm curious what some of the dynamics are. This is kind of something that we've talked about, a lot of outsourcing of manufacturing. If it's in aerospace and defense, that's always an area that tends to move very, very slowly. And so I'm curious what some of the dynamics behind two of those wins or some of your newer product launch wins was.

Speaker Change: Yeah, absolutely. Absolutely. Oliver, I had a follow up for you. One thing that you said was kind of interesting in the aerospace and defense segment, you noted that

You want some new product launches? [inaudible]

Two of which had previously been done in-house

Speaker Change: by the customer. Correct me if I'm misunderstanding what you said. But I'm curious what some of the dynamics are. You know, this is kind of something that we've talked about a lot of outsourcing of manufacturing.

Speaker Change: If it's in aerosolation defense, that's always an area that tends to move very, very slowly and so I'm curious what some of the dynamics behind two of those wins or some of the your newer product launch wins was.

Oliver Mihm: Yeah, I think just, Melissa, in general, so you did hear correctly. And just in general, I think as customers are experiencing different external market conditions, as well as if they have significant changes in capacity. so relative to demand, sorry, I should say significant changes in demand relative to their capacity. Those are the types of instances that we've historically seen them cause the question, hey, should we take this outside instead of doing this inside? I think the other piece here that we also talked about with the aerospace and defense sector largest ever engineering design win. And as we've talked about historically, as we do that engineering product development, we're often then doing basically all the time doing the production on the tail end of that.

[inaudible]

Speaker Change: Yeah, I think just Melissa in general, so you did hear correctly.

and just in general, I think, as customers are… [inaudible]

Speaker Change: experiencing different external market conditions, as well as if they have significant changes in capacity.

Speaker Change: So, relative to demand, so I should say significant changes in demand relative to their capacity.

Speaker Change: Those are the types of instances that we've historically seen them cause the question, hey, should we take this outside instead of doing this inside?

Speaker Change: I think the other piece here that we also talked about with the aerospace and defense sector largest ever engineering design win

Speaker Change: And as we talked about historically, as we do that engineering product development, we're often then doing basically all the time, doing the production on the tail end of that. And so that would be another circumstance that would cause that production to come to Plexus.

Oliver Mihm: And so that would be another circumstance that would cause that production to come to Plexus. I think one of the things from a broader trend standpoint that we're seeing is more of an openness to outsource. I mean, these are long term historical industrial companies that are becoming that have manufacturing assets that are becoming much more open to outsourcing and see the benefits of it. So I think it's a good long term trend for us.

Speaker Change: I think one of the things from a broader trend standpoint that we're seeing is a more of an openness to outsource. I mean, these are long-term historical and industrial companies that have manufacturing assets that are becoming much more open outsourcing and see the benefits of it.

I think it's a good long-term trend for us [inaudible]

Matthew Sheerin, Ed Sheeran, Ed Sheeran, Steven Fox

Steven Fox: Your next question comes from the line of Steven Fox with Fox Advisors LLC. Your line is now open. Hi, good morning, guys. I had two questions also.

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

Steven Fox: First of all, I was wondering if you could provide a little bit more color on the health care sustainable services program that you highlighted. I think you said you're doing it in Guadalajara, but can you give us a sense for just sort of what exactly you're doing, how it ramps, and what it could mean for other ones in the future? Then I have a follow-up. Yeah, so we can't get into a lot of details around the product itself, Steve. I mean, other than to say it involves a single use aspect of a piece of capital equipment is what I would say.

Stephen FOX: Hi. Good morning guys. I had two questions also. First of all, I was wondering if you could provide a little bit more color on the healthcare sustainable services program that you highlighted. I think you said you're doing in Guadalajara, but can you give us a sense for.

Stephen FOX: Just sort of what exactly you're doing, how it ramps and what it could mean for other wins in the future than I follow up.

[inaudible]

Stephen FOX: Yes, so we can't get into a lot of details around the product itself, Steve. I mean, other than to say it involves...

Speaker Change: a single use aspect of a piece of capital equipment is what I would say. The potential, the program has potential to ramp over a two to three quarter time period and the volumes could be fairly large.

Steven Fox: The potential, the program has potential to ramp though over a two to three quarter time period and the volumes could be fairly large. And does it open up for any other opportunities if you prove yourself capable of ramping up? Well, it's definitely follow on with the similar program. So the volumes that we're considering right now could go up from there and could result in future. and the relationship with the customer itself is a very strong and very long-term partnership with one of our top healthcare customers.

Speaker Change: And does it open up for any other opportunities if you prove yourself a capable of ramping it?

Speaker Change: Well, it's definitely follow on with the similar programs, so the volumes that we're considering right now could go up from there, and could result in future wins.

Speaker Change: And the relationship with the customer itself is a very strong and very long-term partnership with one of our top healthcare customers.

Steven Fox: Understood. Thank you.

Steven Fox: And then just as a follow up, I couldn't help but notice that like your June quarter guidance for operating margins at the high end has a six handle. And I thought after the September quarter, we were sort of assuming you want to get back to like 6% margins to the fourth quarter of this fiscal year. Is there any reason for thinking that can happen sooner than previously assumed or anything else we should think about with the high end of the I think it's on two fronts, Steven, it has to do a lot with what we saw in the results for Q2.

Speaker Change: Understood, thank you. And then just as a follow up, I couldn't help but notice that like your June quarter guidance for

Speaker Change: offering margins at the high end, has a six handle, and I thought [inaudible]

Speaker Change: After the September quarter, we were sort of assuming you want to get back to like 6% margins to the fourth quarter of this fiscal year. Is there any reason for thinking that can happen sooner than previously assumed or anything else we should think about with the high end of the guidance. Thanks. Thanks.

Speaker Change: Yeah, I think it's on two front, Steven. It has to do a lot with what we saw in the results for Q2, but I think we're seeing the benefits of our operational efficiencies fall through quicker than we had anticipated. We're also seeing a nice mix of services with

Steven Fox: But I think we're seeing the benefits of our operational efficiencies flow through quicker than we had anticipated. We're also seeing a nice mix of services with engineering and sustaining services being quite strong. So I think the two of those are leading to us accelerating margin growth a little bit faster than we had anticipated.

Speaker Change: Engineering and sustaining services being quite strong. So I think the two of those are leading to us accelerating margin growth a little bit faster than we had anticipated. So we think Q3 is certainly a potential that it could start with a 6 as is Q4.

Ruben Roy: So we think Q3 is certainly a potential that it Your next question comes from the line of Ruben Roy with Stifle.

[inaudible]

David

Speaker Change: Your next question comes from the line of Ruben Roy with Typho. Your line is now open.

Ruben Roy: Your line is now open. Thank you. Hi, guys.

Todd Kelsey: Todd, I wanted to have a quick follow up on your tariff. answers to David's questions. And, you know, obviously a lot of uncertainty out there at this point, a lot of moving pieces. But in terms of, it sounds like you've had some discussions with customers. Have you gotten any feedback on movement of products, you know, based on tariffs at this point, or is that still on the Yeah, it's still pretty early, Ruben. What we're seeing is there's a handful of customers that I would say we're doing some modeling on about potential movement of product. There's a small amount of product that we're we're locating, we're moving out of China into different geographies right now.

Ruben Roy: Thank you. Hi guys, Todd. I wanted to have a quick follow up on your tariff.

Ruben Roy: answers to David's questions. And obviously a lot of uncertainty out there at this point, a lot of moving pieces. But in terms of it sounds like you've had some discussions with customers.

Ruben Roy: How the cost would look like in pastures, etc. Have you gotten any feedback on movement of products based on tariffs at this point or is that still on the come?

[inaudible]

Speaker Change: Yeah, it's still pretty early, Rubin. What we're seeing is there's a handful of customers that I would say we're doing some modeling on about potential movement of product. There's a small amount of product that we're locating. We're moving out of China into different geographies right now.

Todd Kelsey: But it's relatively limited, I would say at this point. And I think in general, our customers are waiting to see what the end state looks like before they they make any decisions or really push too far in that area. Got it. Thank you, Todd.

Speaker Change: But it's relatively limited, I would say at this point, and I think in general our customers are waiting to see what the end state looks like before they make any decisions or really push too far in that area.

Oliver Mihm: And then a quick follow up as well for Oliver. On the industrial commentary, Oliver, and the green shoots, it sounded to me like, you know, that was sort of a statement that it had to do more with inventory than demand, or, you know, sort of new programs, etc. Is that the way to think about it? Or are you actually, you know, starting to see some movement in terms of demand on some of your industrial, from some of your industrial . Yeah, I guess I conflate those two, right. And so I think what we had been seeing over prior quarters was customers had a lot of extra inventory in the channel, and that was muting It seems like we've maybe bottomed out in aspects of our broader industrial portfolio, and then that manifests to us as a stronger demand signal.

Speaker Change: Yeah, thank you, Todd. And then a quick follow up as well for Oliver on the industrial commentary and the green shoots. It sounded to me like, you know, that was sort of a...

Speaker Change: Statement that had to do more with inventory than demand or sort of new programs, etc. Is that the way to think about it? Or are you actually starting to see some movement in terms of demand on some of your industrial customers?

Thanks for watching!

Speaker Change: Yeah, I guess I can flate those two, right? And so I think what we had been seeing over prior quarters was customers had a lot of extra inventory in the channel and that was muting their demand to us.

And so now that that inventory

Speaker Change: It seems like we've maybe bottomed out in aspects of our industrial portfolio, and then that manifests to us as a stronger demand signal. So does that answer the question?

Oliver Mihm: So does that answer the question?

Matthew Sheerin, David Williams, Steven Fox, David Williams, Steven Fox, David

Shawn Harrison: Hey Robin, it's Shawn. I would say there are some pockets where we believe the end demand strengthening above some of the moderation. Small Pockets Right Now. Spring in the Midwest, so green shoots is an appropriate term.

Speaker Change: Eroven at Shot, I would say there are some pockets where we believe the end-demand is strengthening above some of the moderation in inventory.

Speaker Change: Edwin, but it's small pockets right now. It's spring in the Midwest, so green shoots as an appropriate term.

Thank you.

[inaudible]

I'm sorry, I'm sorry, I'm sorry. [inaudible]

Chris Grenga: Again, if you would like to ask a question, please press star 1 on your telephone keypad and your next question comes from the line of Chris Grenga with Needham. Your line is now open. Hi, good morning. This is Chris on for Jim. Thank you for taking the questions. As you are approaching the opening of the new Canang site this summer, it sounds like the capacity is filling up, and particularly with the MRI assembly wind and others. Do you see any gross margin headwind as that facility ramps over the course of the next few quarters?

Thank you.

Speaker Change: Again, if you would like to ask a question, please press number one on your telephone keypad and your next question comes from the line of Chris Grenga with Needham. Your line is now open.

Chris: Hi, good morning. This is Chris on on for Jim. Thank you for taking the questions.

Chris Granga: As you are approaching the opening of the new Penang site this summer, it sounds like the capacity is filling up in particular with the MRI assembly win and others. Do you see any any gross margin headwind as that facility ramps over the course of the next few quarters?

Patrick Jermain: Yeah, Chris, this is Pat. We'll see a little, but it's going to be very minimal. And Asia, especially Malaysia, has a great track record of getting up to profitability within a three to four quarter period, and then getting to corporate averages soon after that. So I'm pretty confident in that. And I mean, occasionally we have this, we had that with Thailand. And so it's something we factor into our margin targets that we will be expanding periodically.

Chris Granga: Yeah, Chris, this is Pat. We'll see a little, but it's going to be very minimal and...

Chris Granga: Asia, especially Malaysia, has a great track record of getting up to profitability within three to four quarter period.

and then getting to corporate averages soon after that, so. So.

Chris Granga: I'm pretty confident in that and I mean occasionally we have this we had that with Thailand and so it's something we factor into our margin targets that we will be expanding periodically but I think in this case it will come pretty quick. [inaudible]

Oliver Mihm: But I think in this case, it'll come pretty quick. Got it. Thank you. And just looking at the funnel chart, you know, health care, it bumps around, but it looks like it ticked down a bit sequentially in Q2. And just wondering how I should think about that relative to the improvements that you're seeing in underlying demand. and New Program Ramp. Yeah, so I think just talking about the funnel, a couple of things, we've mentioned this in prior calls, but haven't maybe talked about it in a while. We don't manage funnel and winds to quarterly boundaries like we would say operational results.

Thank you. Thank you. Thank you.

Got it. Thank you. And-

Speaker Change: Just looking at the funnel chart, health care, it bumps around, but it looks like it ticked down a bit sequentially in Q2 and just wondering how I should think about that relative to the improvements that you're seeing in underlying demand.

and new program ramps.

Speaker Change: Yeah, so I think just talking about the funnel a couple things, we've mentioned this in prior calls but haven't maybe talked about it in a while. We don't manage

Speaker Change: Funnel and wins to quarterly boundaries, likely would say operational results, and so you'll see some ebb and flow from one quarter to the next. I'd also highlight for health care versus prior year the funnel is up.

Oliver Mihm: And so you'll see some ebb and flow from one quarter to the next. I'd also highlight for health care versus prior year, the funnel is up. Sorry, our winds are up eight percent versus prior year. And so just generally, I think we continue to be optimistic about our ability to grow there. We've also mentioned what the extra demand increases we're seeing from customers. We expect that to flow through to additional decision making, which would then flow through to additional. Thank you very much.

Speaker Change: Sorry, our winds are up 8% versus prior year and it's a just generally I think we continue to be optimistic about ability to grow there. We've also mentioned with the extra demand increases we're seeing from customers, we expect that to flow through to additional decision making, which was then flow.

Through to additional wins.

[inaudible]

Great. Thank you very much.

Steve Barger: Your next question comes from the line of Steve Barger with KeyBank Capital Markets. Your line is now open. Thanks, good morning. I wanted to go back to industrial. If you exclude semi cap equipment, is the net effect of the other industrial sub markets showing growth? Or is that still flat or down? And any specifics you can give around heavy equipment, power management, automation?

[inaudible]

Speaker Change: Your next question comes from the line of T. Barger with Keybank Capital Markets, your line is now open.

Thanks for watching!

Steve Barger: Thanks, good morning. I wanted to go back to industrial. If you exclude semi-cap equipment, is the net effect of the other industrial said markets showing growth, or is that still flat or down? And any specific you can give around heavy equipment, power management, automation would be great.

Todd Kelsey: Yeah, Steve, good morning. This is Todd. So just to give you a little bit of insight, the balance of industrial except excluding semi-cap is down. And it's down fairly reasonably, because our semi-cap business is up, I would call it in the high teens for the fiscal year. So the sectors that are seeing some pressure are test and measurement, heavy equipment, energy, electrification. So it's pretty broad based. of seeing. headwinds right now, excluding semi-cap, with maybe the exception being communications, which is a bit volatile, though, as well. Yeah, that's great. I appreciate it. And I understand the comments about maybe seeing inventory stabilization.

[inaudible]

Steve Barger: Yeah, Steve, good morning. This is Todd. So just to give you a little bit of insight, the balance of industrial except excluding semi-cap is down.

Speaker Change: and it's down fairly reasonably because there are some ICAP businesses up. I would call it in the high teens for the fiscal year.

Speaker Change: So the sectors that are seeing some pressure, our test and measurement, have the equipment, energy electrification, so it's pretty broad-based.

Speaker Change: headwinds right now, excluding semi-cab, with maybe the exception being communications, which is a bit volatile though as well.

Speaker Change: Yeah, that's great. I appreciate it. And I understand the comments about maybe seeing inventory stabilization. You said there hasn't been demand degradation or pull forward. I guess

Shawn Harrison: You said there hasn't been demand degradation or pull forward. I guess To the extent that you know, are you seeing any uptick in aftermarket service business for industrial products, meaning end-users may be slowing CapEx decisions and that's driving an uptick in MRO? And if that did happen, what's the margin benefit for you, or the margin benefit?

Speaker Change: To the extent that you know, are you seeing any uptick in aftermarket service business for industrial products meaning end users may be slowing capex decisions and that's driving an uptick in MRO and if that did happen what's the margin benefit for you?

for the Martian Impact .

Shawn Harrison: Yeah, Steve, it's Shawn. So just to put a fine point on Todd's comments, that was on a year-over-year basis, quarter-over-quarter, you know, the non-semi-cap industrial is looking up. We aren't seeing any kind of sustaining services uptick for that market sector, or incremental demand of someone trying to sweat the assets. In a time of uncertainty, this is either, you know, less inventory headwinds or better pure Your next question comes from the line of Anja Soderstrom with CIDHOTI.

David, David, David, David,

Yes, David Shawn. So, just the—

Put a fine point on Todd's comments.

Speaker Change: That was on a year-over-year basis. Corover quarter, you know, the non-Semi-cap industrial is looking up. We aren't seeing any kind of

Speaker Change: sustaining services up thick for that market sector or incremental demand of someone trying to sweat the assets. In the time of uncertainty this is either less inventory headwinds or better pure demand.

Thank you.

Anja Sutterthorne: Your next question comes from the line of Anja Soderstrom with Sidoti, your line is now open.

Anja Söderström: Your line is now open. And thank you for taking my question. I'm curious, within the engineering winds, you mentioned that was very strong helped by diversification efforts. Can you elaborate on what those are? Yeah, so historically, our engineering wins were dominated by the healthcare market sector. And we saw some, over recent quarters, some substantial diversification within those markets where it's really hitting all of our sectors. Oliver had mentioned the very large aerospace and defense win that we had, which was our largest ever. We had a large life sciences win this and we performed very well in both industrial and semi-cap as well.

Anja Sutterthorne: Thank you for taking my question. I'm curious within the engineering wins. You mentioned that was very strong, helped by diversification efforts here, elaborate on what those are.

Speaker Change: Yes, so historically our engineering winds were dominated by the healthcare market sector and we saw some over recent quarters some substantial diversification within those markets where it's

Speaker Change: It's really hitting all of our sectors. Oliver mentioned the very large aerospace and defense win that we had, which was our largest ever. We had a large life sciences win this quarter and we performed very well in both industrial and semi-cap as well. [inaudible]

Anja Söderström: So it's been pretty broad based and it's, like I say, it's a good sign for the future in that we see that diversification because engineering wins lead to manufacturing wins.

Speaker Change: So it's been pretty broad-based and it's, like I say, it's a good sign for the future in that we see that diversification because engineering wins, lead to manufacturing wins.

Anja Söderström: Thank you.

Matthew Sheerin, David Williams, Steven Fox, David Williams

Shawn Harrison: And also, you mentioned shared guests. Who are you taking share? On you, Shawn. It's broad based. And so based upon end market, based upon sub market, we are seeing share gains based upon, as Oliver highlighted, you know, the strength of our executive relationships, the strength of our execution, our focus on our customers success. In some cases with the one all the one example Oliver highlighted, we were the sole EMS company, our customer engaged. Not going to put a fine point and make it that easy for you on where we're winning share gains, but I would say it's broad based across our markets.

Speaker Change: Thank you. And also, you mentioned shared games. Who are you taking shares from?

Thank you.

[inaudible]

On you, Shawn.

Speaker Change: It's broad-based and so, based upon and market, based upon, sub-market, we are seeing share gains based upon.

Speaker Change: Oliver highlighted the strength of our executive relationships, the strength of our execution, our focus on our customers.

and Patrick Jermain.

Speaker Change: In some cases, with the one example, Oliver highlighted, we were the sole EMS company, our customer engaged with just because of the strength of the relation.

Speaker Change: Ships. I'm not going to put a fine point and make it that easy for you on where we're winning share games but I would say it's broad-based across our market sectors and sub-sectors.

Shawn Harrison: Okay, thank you.

Anja Söderström: I'm also curious in terms of the weakening dollar, are you hedging for that? How are you thinking about the current volatility there? Yeah, we are hedging. We do a portion of our non-US currencies hedging. So we do have some exposure. And with the volatility, especially that we saw the last month, we could see some impact on our P&L but we are hedging for it and we'll watch for it.

I'm sorry. I'm sorry. I'm sorry. I'm sorry.

Speaker Change: Okay, thank you. I'm also curious in terms of the weakening dollar. Are you hedging for that or?

How are you thinking about the current volatility there?

Speaker Change: Yeah, we are hedging. We do a portion of our non-US currencies.

Speaker Change: Hedging, so we do have some exposure and with the volatility, especially that we saw the last month, we could see some impact on our PNL. Um, um,

Speaker Change: But we are hedging for it and we'll watch for it.

Anja Söderström: Okay, thank you. That was all for me.

David, David, David, David, David,

Okay, thank you, that was awesome for me.

Thanks.

Steve Barger: Your next question comes from the line of Steve Barger with KeyBank Capital Markets. Your line is now open. Great. Thanks for taking the follow up. Really good to hear SummitCap is running.

Thanks for watching!

Operator: Here next question comes from the line of Steve Barger with Keybank Capital Markets, your line is now open

Thank you.

Steve Barger: Great, thanks for taking the follow up. Really good to hear some of the cap is running up mid teens. Can you talk through what you're seeing for leading edge, metrology versus memory versus trailing edge?

Todd Kelsey: Can you talk through what you're seeing for leading edge metrology versus memory versus trailing edge? Yeah, it's better than mid-teens, Steve, so not going to dilute the strength we're seeing. But where we're seeing is, you know, it's Oliver highlighted, growth across semi-cap in terms of wins with customers. We play front-end to back-end. We're seeing, you know, growth across the customers in all areas. And some customers, maybe they were a little... there as well. But I wouldn't put it into a single bucket of technology or front under back and where we're seeing strength. It's pretty broad based, and I would We'll just go back to the fact that we've won a lot of market share over the past couple years from competitors as well as new programs coming to market.

Steve Barger: Yeah, it's better than mid-teens, Steve Sowe, not that dilute, the strength we're seeing, but where we're seeing is, you know, is Oliver Highlight growth across?

Steve Barger: Sammy Kaffin, terms of wins with customers. We play front end to back end. We're seeing growth across the customers in all areas and some customers. Maybe they were a little over inventory the past two years and so demand is.

coming back.

Steve Barger: There as well, but I wouldn't put it into a single bucket of technology or front, under, back, and where we're seeing strength. It's pretty broad based and I would

Steve Barger: I'll just go back to the fact that we've won a lot of market share over the past couple years from competitors as well as new new programs coming to market and we had

Todd Kelsey: We had an effort, it's highlighted in engineering, but also in manufacturing to diversify, and that's bearing fruit as well, and so it's really broad-based strength for us. I'd hesitate to characterize it was one area of SEMICAP versus another because it's broad. Got it. Okay.

Steve Barger: An effort is highlighted in engineering but also manufacturing to diversify and that's bearing fruit as well and so it's really broad based strength for us I wouldn't. [inaudible]

Steve Barger: I'd hesitate to characterize it was one area of semicap versus another because it's

Todd Kelsey: And then one last one. Some of the Semicab names have been talking about a memory tool upgrade cycle rather than new tool builds. If that happens, get that business if it was your original build? Perfect, thanks.

Speaker Change: Got it. Okay. And then one last one. Some of the, some of the cap names have been talking about a memory tool upgrade cycle rather than new tool builds. If that happens, do you get that business if it was your original build? Yeah.

Yes.

[inaudible]

Perfect, thanks

Shawn Harrison: That concludes our question and answer session.

Todd Kelsey: I will now turn the conference back over to Mr. Todd Kelsey, President and CEO, for closing remarks. All right, thank you, Angela. I'd like to thank shareholders, investors, analysts and our Plexus team members who joined the call this morning.

Speaker Change: That concludes our question and answer session. I will now turn the conference back over to Mr. Todd Kelsey, President and CEO for closing remarks.

Todd Kelsey: Alright, thank you, Angela. I'd like to thank shareholders, investors, analysts, and our Plexus team members who joined the call this morning.

Todd Kelsey: Concluding with a few summary comments. With our investment in talent, technology, facilities and tools, we believe Plexus is well positioned to enable our customer success in this dynamic environment in support of our vision to help create the products that build a better world. Evidence of this view is the breadth of our new program wins across our solutions, markets, and technologies. Further, while we are acknowledging the macroeconomic uncertainty, we continue to anticipate meaningful EPS growth in fiscal 2025, driven by revenue growth in each of our market sectors, strong operating margin performance, and continued free cash flow generation used to create additional shareholder value.

Todd Kelsey: Concluding with a few summary comments, with our investment in talent, technology, facilities and tools, we believe Plexus is well positioned to enable our customer success in this dynamic environment and support of our vision to help create the products that build a better

Todd Kelsey: Evidence of this view is the breadth of our new program wins across our solutions, markets, and technologies.

Todd Kelsey: Further, while we are acknowledging the macroeconomic uncertainty, we continue to anticipate meaningful EPS growth in fiscal 2025.

Todd Kelsey: driven by revenue growth in each of our market sectors, strong operating margin performance, and continued free cash flow generation used to create additional shareholder value.

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

Thank you again and have a nice day.

Operator: Ladies and gentlemen, that concludes today's conference. Thank you all for joining.

Todd Kelsey: Ladies and gentlemen, that concludes today's conference. Thank you all for joining you may now disconnect.

Operator: You may now disconnect.