Plexus Corp.

Good morning, and welcome to the Plexus Corp conference call regarding its first quarter 2021 earnings announcement. My name is Sarah, and I will be the operator for today's call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for your questions. The conference call is scheduled to last approximately one hour. Please note that this conference is being recorded. I would now like to turn the call over to Mr. Sean Harrison, Texas Vice President Communications and Investor Relations. Please go ahead.

Thank you, Sarah. Good morning and thank you for joining us today. Some of the statements made and information provided during our call today will be forward-looking statements as they will not be limited to historical facts. The words believe, expect, intend, plan, anticipate, and similar terms often identify forward-looking statements. Forward-looking statements are not guarantees. since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of factors that could cause actual results to differ materially from those discussed, please refer to the company's periodic SEC filings, particularly the risk factors in our Form 10-K filing for the fiscal year ended October 3, 2020, as supplemented by our Form 10-Q filings and the Safe Harbor and Fair Disclosure Statement in yesterday's press release. Plexus provides non-GAAP supplemental information, such as ROIC, economic return and free cash flow, because those measures are used for internal management goals and decision-making, and because they provide additional insight into financial performance. In addition, management uses these and other non-GAAP measures, such as adjusted operating income, adjusted operating margin, adjusted net income, and adjusted earnings per share, to provide a better understanding of core performance For purposes of period-to-period comparisons, for a full reconciliation of non-GAAP supplemental information, please refer to yesterday's press release in our periodic SEC filings. We encourage all participants on the call this morning to access the live webcast and supporting materials at Plexus's website at www.plexus.com, clicking on Investors at the top of that page. In order to maintain appropriate social distancing, we are again conducting this quarter's call virtually. Joining me today are Todd Kelsey, President and Chief Executive Officer, Steve Frisch, Executive Vice President and Chief Operating Officer, and Pat Germain, Executive Vice President and Chief Financial Officer. Consistent with prior earnings calls, Todd will provide summary comments before turning the call over to Steve and Pat for further details. Let me now turn the call over to Todd Kelsey. Todd?

Thank you, Sean, and good morning, everyone. Please begin on slide three. I will start with an introduction of recent changes impacting our investor relations team. First, you may have noticed a familiar name and voice introducing our call. I'm pleased to welcome Sean Harrison to the Plexus team as our Vice President of Communications and Investor Relations. Sean brings tremendous experience to Plexus as a well-respected sell-side analyst, previously with Loop Capital and Longbow Research. He has a 20-year history covering Plexus and knows us well. I'm very excited for Sean to leverage his expertise in furthering Plexus's investor relations program. Next, many of you have gotten to know and respect Heather Beresford over the last two and a half years for her leadership within our investor relations team. Heather has done a great job in taking our investor relations, corporate communications, and branding to a new level. I am pleased to inform you that as a result of her exceptional work and capabilities, Heather has been promoted to Vice President of Aftermarket Services. I look forward to Heather leveraging her leadership to further our operational performance in this growing and differentiated service offering. Please advance to slide four for a discussion of our fiscal first quarter results. Our operations achieved strong results in the fiscal first quarter of 2021. We expanded our industry-leading gap operating margin to 5.6 percent through our focus on productivity improvements and expense management, along with solid performance from our engineering solutions team. This result includes 64 basis points of stock-based compensation expense and represents the third consecutive quarter of GAAP operating margin in excess of 5%. We achieved quarterly revenue of $830 million, which was in line with our expectations and at the midpoint of our guidance range. Our industrial sector exceeded our expectations entering the quarter, primarily as a result of upside from semiconductor capital equipment customers. Our healthcare life sciences sector also exceeded expectations as we saw modest improvement in demand for equipment used for elective procedures. Finally, aerospace and defense underperformed to forecast due to the impact of COVID-19 on commercial aerospace and program ramp delays. Through this combination of strong operating performance and inline revenue, we delivered GAAP-diluted earnings per share of $1.23, including 18 cents of stock-based compensation expense, which was well above the top end of our guidance range. I'm extremely proud of our GlobalPlexus team as they continue to deliver outstanding results while navigating the complexity stemming from COVID-19. Please advance to slide five. Next, I will discuss additional accomplishments within the fiscal first quarter of 2021, starting with the recent successes of our go-to-market team. While navigating the pandemic, our go-to-market team has successfully leveraged our reputation as the leader in highly complex products and demanding regulatory environments to produce several consecutive quarters of strong wins results. Our team delivered fiscal first quarter manufacturing wins of $223 million when fully ramped into production. The quarterly wins included six new logos, an uncommonly high number. This result highlights the success of our innovative virtual business development efforts, underscores the market recognition of our strong performance during the pandemic, and provides significant opportunity for future growth. Our trailing four-quarter manufacturing wins now exceed $1 billion for the first time in history. In addition, we expanded Plexus' funnel of qualified manufacturing opportunities by nearly $600 million from the previous quarter, as our teams are quite successful in moving leads into qualified opportunities. The end result is a record $3.3 billion funnel of opportunities that aligns well with our strategy. Further, our engineering funnel increased to its highest level in nearly two years. The engineering funnel is a good leading indicator for future manufacturing wins and additional margin expansion opportunities. Our healthy rate of new program wins and the considerable expansion in the funnel of qualified manufacturing and engineering opportunities should position us well to achieve our 9 to 12 percent revenue CAGR goal over the longer term. Next, turning to some operational highlights. Our engineering solutions utilization strengthened considerably in the quarter as the team engaged in several revolutionary new product development efforts and product launches. Our customers recognize the value we provide through our differentiated service offering where we help create the products that build a better world. Our engineering solutions team remains a strong contributor to Plexus's profitability and manufacturing growth. Our manufacturing operations team continued their march toward their aspirational goal of zero defects and perfect delivery while achieving productivity improvements and driving effective cost management. The end result has been the delivery of customer service excellence and a sustained expansion of our industry-leading GAAP operating margin. Finally, our aftermarket services team exceeded expectations, delivering strong revenue and operating income during the fiscal first quarter. We view aftermarket services as a critical offering in order to provide value throughout the product lifecycle and create sustainable solutions for our customers, as well as an opportunity to further expand margins. Advancing to our guidance for the fiscal second quarter of 2021 on slide six. We anticipate a robust fiscal second quarter due to expected increases in medical equipment demand and near-term strengthening in our industrial sector. The healthcare life sciences improvements are broad-based, with 17 of our top 20 customers increasing their fiscal second quarter forecast from what we anticipated one quarter ago. While the semiconductor capital equipment subsector is a significant portion of the industrial expansion, the sector is showing additional strength, with 14 of our top 20 customers increasing their fiscal second quarter forecast during this cycle. Taking these circumstances into consideration, we're getting revenue of $860 to $900 million. As a result of effective expense control and the efforts of our operations team in driving sustainable productivity gains, we're getting gap operating margin in the range of 5 to 5.5 percent, including 73 basis points of stock-based compensation expense. With this strong performance, we anticipate delivering gap-diluted earnings per share of $1.17 to $1.32, including $0.22 of stock-based compensation expense. Our guidance assumes that COVID-19 will not materially impact end markets or our operations beyond what has already occurred. I will close with a few thoughts regarding fiscal 2021. In the near term, we have seen demand strengthening across several of our end markets, resulting in an improved revenue outlook for the fiscal second quarter. Long-term visibility into end markets remains limited, yet our history of strong execution provides the opportunity to continue to capture any potential upside demand that may arise. Looking to the second half of fiscal 2021, Based off current customer forecasts, we anticipate quarterly revenue relatively consistent with the fiscal second quarter guidance range and operating margin to moderate from the fiscal first quarter result. Our ability to manage changes in demand, our ongoing focus on productivity improvements, and our robust first half outlook has positioned Plexus to drive strong EPS growth for fiscal 2021. I will now turn the call over to Steve for additional analysis of the performance of our market sectors and operations. Steve.