Plexus Corp.

morning and welcome to the Plexus Corp conference call regarding its physical second quarter 2021 earnings announcement. My name is Tiffany and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for 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, Plexus' Vice President of Communication and Investor Relations. Sean?

Thank you, Tiffany. 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 change. 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 3rd is supplemented by our Form 10Q 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 net 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 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. 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 advance to slide three for a discussion of our fiscal second quarter results. Our robust fiscal second quarter results highlight the advantages of our unique value proposition and consistent focus on operational excellence. We expanded our industry-leading gap operating margin to 5.8 percent, improving on last quarter's performance by 11 basis points. This was achieved through our focus on productivity improvements and expense management, along with continued solid performance from our engineering solutions and aftermarket services teams. The result includes 23 basis points of restructuring expense and 73 basis points of stock-based compensation expense. It is our best performance in over a decade, since 2008, and represents the fourth consecutive quarter of GAAP operating margin in excess of 5%. We achieved quarterly revenue of $881 million, which was in line with our expectations and at the midpoint of our guidance range. Our industrial sector exceeded our high expectations entering the quarter, led by upside from semiconductor capital equipment customers. Our healthcare life sciences sector had an exceptional quarter. We are seeing signs of improving demand for equipment used for elective procedures. Finally, aerospace and defense underperformed a forecast, primarily due to labor availability late in the quarter as a result of the COVID-19 pandemic. Through this combination of strong operating performance and inline revenue, we delivered gap-diluted earnings per share of $1.42, including $0.07 associated with a modest restructuring of our operations in Scotland and Idaho, and $0.22 of stock-based compensation expense. This result 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 challenges stemming from COVID-19. Please advance to slide four. I will now highlight fiscal second quarter accomplishments that we expect will enable accelerated future revenue growth. Our team produced another exceptional quarter of wins, delivering $284 million of manufacturing revenue when fully ramped into production. With this result, our trailing four-quarter wins was again over $1 billion and hit a new record. The quarterly wins included six new logos, another very strong result that enables further growth as these relationships expand. The wins also consist of a notable aftermarket services engagement. We continue to make great progress in expanding our capabilities and growing revenue with this higher margin differentiated offering. In addition to the manufacturing wins, our team delivered its highest level of quarterly engineering wins since fiscal 2019. Strong engineering wins are generally a leading indicator of accelerating manufacturing growth. The strong wins result highlights the success of our innovative virtual business development efforts and underscores the market recognition of our strong execution. Our go-to-market team continues to be successful in leveraging our reputation as the leader in highly complex products and demanding regulatory environments to produce several consecutive quarters of exceptional results. In addition, we announced the commencement of construction of our new manufacturing facility in Bangkok, Thailand. This 400,000-square-foot facility will be complete in the fiscal third quarter of 2022. Bangkok is known for its highly skilled workforce and established supply chain. It provides us an additional growth engine in the APAC region to support customers across all three of our market sectors. Existing customers have already expressed significant interest in the facility, and we look forward to welcoming approximately 1,800 NuPlexus team members upon its completion. Please advance to slide five. We anticipate our robust performance will continue for the fiscal third quarter based upon incrementally stronger demand, particularly in our healthcare life sciences sector, and our confidence in our ability to consistently execute. We are seeing broad-based strengthening of healthcare life sciences demand over the next several quarters, led by the start of a recovery for devices related to elective procedures. These increases more than offset a slowdown in point-of-care diagnostics orders. Likewise, as we look beyond the fiscal third quarter, our industrial sector is showing significant broad-based demand increases. Semiconductor capital equipment and communications forecasts are robust. We believe our aerospace and defense sector revenues troughed and forecasts should begin to inflect higher. Taking these factors into consideration, we are guiding fiscal third quarter revenue of $875 to $915 million. Overall, our customer demand exceeds our guidance, but we are limited in our ability to meet upside due to supply chain constraints. As a result of effective expense control and the efforts of our operations team in driving sustainable productivity gains, We are guiding GAAP operating margin in the range of 5.1 to 5.6 percent, including 72 basis points of stock-based compensation expense. With the strong operating performance, we anticipate delivering GAAP-diluted earnings per share of $1.23 to $1.38, including 22 cents of stock-based compensation expense. Our guidance assumes that neither supply chain constraints nor COVID-19 will materially impact end markets or our operations beyond what is already anticipated. Next, a few thoughts regarding our longer-term outlook. Fiscal 2021 is shaping up to be a solid year with mid-single-digit revenue growth, operating margin well above 5%, and EPS growth potentially above 30%. Leveraging this foundation, we believe we have a platform to sustain strong revenue growth moving forward through the strengthening in the overall demand environment, including equipment used in elective medical procedures, and eventual commercial aerospace recovery, our ability to support secular growth markets, and the acceleration in new program wins. We're particularly excited about new program ramps related to robotic surgery, blood processing, and warehouse automation. Looking beyond fiscal 2021, we are confident these demand catalysts support our goal of achieving 9% to 12% annual revenue growth while continuing to deliver industry-leading operating performance, with operating margins consistently above 5%. Please advance to slide 6. Prior to concluding my comments, I'd like to touch on a longstanding cornerstone of our Plexus culture and a critical component to achieving our vision of creating the products that build a better world. This cornerstone is our environmental, social, and governance efforts. It represents our responsibility as a company to our many stakeholders, and we reflect it through five pillars. We recognize we must be a responsible employer, community partner, global citizen, and industry steward. and that we're accountable to our stakeholders in the way we govern our company. We recognize that this responsibility wholly aligns with our commitment to create long-term shareholder value. A key part of our ESG efforts is ensuring that leaders across Plexus fully understand these commitments and are accountable and engaged in our ESG initiatives. Our leaders ensure an ESG focus is integrated into our strategy and the way we operate our business. It is also important that we effectively capture and communicate the positive impacts we pursue just as we communicate our financial results. Addressing ESG matters is not only the right thing to do, but can also result in increased operational efficiencies, innovation, and expanded team member engagement and retention, all of which are critical to realizing our goal of delivering $5 billion in revenue at greater than 5% operating margin by fiscal 2025. Specific areas of immediate focus are expanding our diversity and inclusion efforts, which is a non-negotiable aspect of our culture at Plexus and an enabler of our ability to engage and retain top talent. We're also making capital investments to measure and reduce energy consumption and seeking opportunities to reduce waste to landfill. When we build new factories, they will leverage green technologies, which is occurring with our new facility in Thailand. It's not lost on us that in order to fulfill our vision to create the products that build a better world, we must go beyond that and also take action to build a better world. These actions include treating our people exceptionally well, improving the communities that we touch, minimizing our impact on the planet, and influencing our business partners to do the same. As our ESG strategy continues to develop, investments occur, and milestones are realized, we are committed to providing updates on the benefits and value to our team members, customers, partners, and shareholders. In closing, I would like to thank our approximately 19,000 Plexus team members for not only helping to create the products that build a better world, but for your efforts in building a better world. I'm proud of your commitments and accomplishments. I will now turn the call over to Steve for additional analysis of the performance of our market sectors and operations. Steve.