Plexus Corp.

Good morning and welcome to the Plexus Corp conference call regarding its fiscal second quarter 2022 earnings announcement. My name is Abigail 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. Shawn Harrison, Plexus Vice President of Communications and Investor Relations. Shawn?

Thank you, Abigail. Good morning, and thank you everyone for joining us today. Some of the statements made and information provided during our call today will be forward-looking statements, including without limitation those regarding revenue, gross margin, selling at administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation, future business outlook, and the impact of COVID-19 on the company's business and the results of operations. Forward-looking statements are not guaranteed 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 2nd, 2021 is supplemented by reform 10Q filings and the safe harbor and fair disclosure statement in yesterday's press release. 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. Joining me today are Todd Kelsey, Chief Executive Officer, Steve Frisch, President and Chief Strategy 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. Good morning, everyone. Please advance to slide three. We achieved fiscal second quarter revenue of $889 million, a result that exceeded our guidance range of $820 to $860 million. Our industrial and healthcare life sciences sectors exceeded our expectations entering the quarter as our supply chain team was successful in resolving more constrained materials than anticipated. Our aerospace and defense sector met expectations of strong growth as we benefited from the early recovery of commercial aerospace demand. We delivered gap operating margin of 4%, finishing at the high end of our guidance range. This result was achieved despite higher than anticipated labor inefficiency due to the impact of COVID-19 Omicron variant in Malaysia, increased variable incentive compensation costs due to the strong revenue result, and the impact from procuring certain components at above market prices. The combination of strong revenue and operating margin led to gap diluted earnings per share of 95 cents, exceeding our guidance range of 76 to 92 cents. The EPS result included 21 cents of stock-based compensation expense. Our strong execution in markets that feature highly complex products and demanding regulatory environments directly led to another exceptional quarter of new business wins. Our manufacturing and aftermarket services wins totaled $313 million, which was nearly an all-time record and our best quarterly result in a decade. The wins result included a significant new program representing market share gain with an existing semi-cap customer and expansion of an aftermarket services engagement with a major healthcare company. This exceptional performance propelled our trailing four-quarter wins to another record high of more than $1.1 billion. In addition to the strong wins, our funnel of qualified manufacturing opportunities expanded to a record level of $3.4 billion. Lastly, new engineering engagements were robust for the second consecutive quarter, which combined with the momentum in manufacturing wins and qualified opportunities supports our nine to 12% revenue CAGR goal. Our customers continue to value our differentiated offering in engineering and aftermarket services, supporting the circular economy and their sustainability needs. The end result is exceptional wins and an expanding funnel. Please advance to slide four. As we look to the third quarter of fiscal 2022, customer demand remains strong across all market sectors. While the supply chain appears to have stabilized, it remains constrained and is limiting our ability to meet broad customer demand upside. Yet we are benefiting from the impact of a small number of significant and rapid new program ramps with pipeline supply. As a result, we are expecting further sequential revenue growth at the midpoint and are establishing a revenue guidance range of $885 to $925 million. This guidance includes our estimate of supply chain impacts due to COVID-19 lockdowns in Shanghai, China. With the increased revenue, we anticipate further positive leverage of our operating infrastructure that can currently support over $1 billion in quarterly demand, and are anticipating gap operating margin in the range of 4.4 to 4.9%, including approximately 65 basis points of stock-based compensation expense. At these revenue and operating margin levels, we expect to deliver GAAP diluted earnings per share of $1.02 to $1.18, including 21 cents of stock-based compensation expense. Our guidance assumes supply chain constraints and COVID-19 do not materially impact end markets or our operations beyond current expectations. In support of the strong growth potential represented by our funnel of opportunities, our latest site in Bangkok, Thailand continues to progress according to plan. The first assembly line was recently installed. We complete qualification builds in the fiscal third quarter and production will commence in the fiscal fourth quarter. We have multiple existing programs planned to transition into the site from our Penang campus, as well as a substantial new piece of business that will launch directly into the site. We expect the site to be the first of multiple in Thailand as we further our campus strategy and create a platform to support future growth in our APAC region. Next, a few thoughts regarding our longer term outlook. I'm encouraged by the accelerating momentum demonstrated by our fiscal second quarter results. We now see the potential to deliver quarterly sequential revenue growth through fiscal 2022 and into fiscal 2023, while expanding GAAP operating margin and EPS. Looking at our end markets, we continue to see strong demand over the next several quarters. Within healthcare life sciences, we have several major program ramps underway. With pipeline component supply, these programs should continue to favorably impact the remainder of fiscal 2022 and into 2023. Our industrial sector demand is very strong, led by semi-cap and communications. While supply is challenged, we continue to make progress as reflected in our fiscal second quarter results through a multi-quarter effort focused on attacking component availability issues, enhanced by leveraging customer partnerships to secure supply. Finally, within aerospace and defense, we see a strengthening of demand in commercial aerospace led by single aisle jets, business jets, and aftermarket needs. These positive market factors, when combined with robust new program wins in manufacturing, aftermarket services, and engineering, as well as a record funnel of qualified opportunities, supports our optimism and our ability to make progress toward our $5 billion revenue target. In addition, we remain committed to delivering upon our goals of 9% to 12% revenue CAGR with 5.5% gap operating margin and 15% return on invested capital over the long term. I will now turn the call over to Steve for additional analysis of the performance of our market sectors and operations.