NEENAH, WI – July 19, 2017 – Plexus (NASDAQ: PLXS) today announced financial results for its fiscal third quarter ended July 1, 2017, and guidance for its fiscal fourth quarter ending September 30, 2017.
|
|
Three Months Ended |
|
|
Jul 1, 2017 |
|
Jul 1, 2017 |
|
Sept 30, 2017 |
|
|
Q3F17 Results |
|
Q3F17 Guidance |
|
Q4F17 Guidance |
Summary GAAP Items |
|
|
|
|
|
Revenue (in millions) |
$619 |
|
|
$595 to $625 |
|
$660 to $700 |
Operating margin |
4.8 |
% |
|
4.8% to 5.2% |
|
4.7% to 5.1% |
Diluted EPS (1) |
$0.74 |
|
|
$0.68 to $0.76 |
|
$0.77 to $0.87 |
Summary Non-GAAP Items (2) |
|
|
|
|
|
Return on Invested Capital (ROIC) |
16.1 |
% |
|
|
|
|
Economic Return |
5.6 |
% |
|
|
|
|
(1) |
Includes stock-based compensation expense of $0.13 for Q3F17 results and $0.13 for Q4F17 guidance. |
(2) |
Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed in this release, such as ROIC and Economic Return, and a reconciliation of these measures to GAAP. |
|
Fiscal Third Quarter 2017 Information
• Won 32 Manufacturing Solutions programs during the quarter representing approximately $220 million in annualized revenue when fully ramped into production
• Trailing four quarter Manufacturing Solutions wins total approximately $839 million in annualized revenue when fully ramped into production
• Purchased $10 million of our shares at an average price of $52.40 per share
Todd Kelsey, President and CEO, commented, “I am pleased we delivered fiscal third quarter revenue and GAAP EPS above the midpoint of our guidance range. Our continued strong operating performance enabled us to achieve our fifth consecutive quarter within or above our target operating margin range of 4.7% to 5.0%.”
Patrick Jermain, Senior Vice President and CFO, commented, “Our fiscal third quarter ROIC was 16.1%, a result that is 560 basis points above our weighted average cost of capital and exceeds our 500 basis point Economic Return goal. Consistent with our expectations, fiscal third quarter working capital requirements increased to support new program ramps occurring during the fiscal fourth quarter. Despite the additional working capital requirements, we delivered approximately $7 million of free cash flow during the quarter and expect to improve on this result during the fiscal fourth quarter.”
Mr. Kelsey concluded, “We expect fiscal fourth quarter revenue to increase significantly as a result of ramping previously reported program wins. Consequently, we are guiding fiscal fourth quarter revenue in the range of $660 to $700 million. At this revenue level, in conjunction with continued strong operating performance, we anticipate GAAP EPS in the range of $0.77 to $0.87. Our wins momentum and qualified funnel of opportunities remain robust, giving us confidence that we can achieve meaningful growth in fiscal 2018.”
Quarterly Comparison |
Three Months Ended |
|
Jul 1, 2017 |
|
Apr 1, 2017 |
|
Jul 2, 2016 |
(in thousands, except EPS) |
Q3F17 |
|
Q2F17 |
|
Q3F16 |
Revenue |
$618,832 |
|
|
$604,349 |
|
|
$667,616 |
|
Gross profit |
$61,185 |
|
|
$63,800 |
|
|
$62,498 |
|
Operating income |
$29,469 |
|
|
$32,571 |
|
|
$30,918 |
|
Net income |
$25,579 |
|
|
$29,295 |
|
|
$26,099 |
|
Diluted EPS |
$0.74 |
|
|
$0.84 |
|
|
$0.76 |
|
Adjusted net income* |
$25,579 |
|
|
$29,295 |
|
|
$27,904 |
|
Adjusted diluted EPS* |
$0.74 |
|
|
$0.84 |
|
|
$0.82 |
|
Gross margin |
9.9 |
% |
|
10.6 |
% |
|
9.4 |
% |
Operating margin |
4.8 |
% |
|
5.4 |
% |
|
4.6 |
% |
Adjusted operating margin* |
4.8 |
% |
|
5.4 |
% |
|
4.9 |
% |
ROIC* |
16.1 |
% |
|
16.8 |
% |
|
13.0 |
% |
Economic Return* |
5.6 |
% |
|
6.3 |
% |
|
2.0 |
% |
*Refer to Non-GAAP Supplemental Information Tables 1 and 2 for a reconciliation to GAAP measures. |
Business Segment and Market Sector Revenue
The Company measures operational performance and allocates resources on a geographic segment basis. Plexus also reports revenue based on the market sector breakout set forth in the table below, which reflects the Company’s global market sector focused business development strategy. Top 10 customers comprised 54% of revenue during the quarter, consistent with the fiscal second quarter of 2017.
Business Segments ($ in millions) |
Three Months Ended |
|
Jul 1, 2017
Q3F17 |
|
Apr 1, 2017
Q2F17 |
|
Jul 2, 2016
Q3F16 |
Americas |
$ |
265 |
|
|
$ |
272 |
|
|
$ |
359 |
|
Asia-Pacific |
326 |
|
310 |
|
293 |
Europe, Middle East, and Africa |
53 |
|
44 |
|
41 |
Elimination of inter-segment sales |
(25) |
|
(22) |
|
(25) |
Total Revenue |
$ |
619 |
|
|
$ |
604 |
|
|
$ |
668 |
|
Market Sectors ($ in millions) |
Three Months Ended |
|
Jul 1, 2017
Q3F17 |
|
Apr 1, 2017
Q2F17 |
|
Jul 2, 2016
Q3F16 |
Healthcare/Life Sciences |
210 |
|
34 |
% |
|
205 |
|
34 |
% |
|
207 |
|
31 |
% |
Industrial/Commercial |
201 |
|
32 |
% |
|
192 |
|
32 |
% |
|
202 |
|
30 |
% |
Communications |
99 |
|
16 |
% |
|
108 |
|
18 |
% |
|
156 |
|
23 |
% |
Defense/Security/Aerospace |
109 |
|
18 |
% |
|
99 |
|
16 |
% |
|
103 |
|
16 |
% |
Total Revenue |
$ |
619 |
|
|
|
$ |
604 |
|
|
|
$ |
668 |
|
|
Non-GAAP Supplemental Information
Plexus provides non-GAAP supplemental information, such as ROIC, Economic Return, and free cash flow, because such measures are used for internal management goals and decision making, and because they provide management and investors additional insight into financial performance. In addition, management uses these and other non-GAAP measures, such as adjusted net income and adjusted operating margin, to provide a better understanding of core performance for purposes of period-to-period comparisons. For a full reconciliation of non-GAAP measures to comparable GAAP measures, please refer to the information below and the Non-GAAP Supplemental Information Tables.
ROIC and Economic Return
ROIC for the fiscal third quarter of 2017 was 16.1%. The Company defines ROIC as tax-effected annualized adjusted operating profit divided by average invested capital over a four-quarter period for the third quarter. Invested capital is defined as equity plus debt, less cash and cash equivalents. The Company’s weighted average cost of capital for fiscal 2017 is 10.5%. ROIC for the quarter less the Company’s weighted average cost of capital resulted in an Economic Return of 5.6%.
Free Cash Flow Calculation
The Company defines free cash flow as cash flows provided by operations less capital expenditures. For the three months ended July 1, 2017, cash flows provided by operations was $16.3 million, less capital expenditures of $9.8 million, resulting in free cash flow of $6.5 million. For the nine months ended July 1, 2017, cash flows provided by operations was $121.9 million, less capital expenditures of $24.4 million, resulting in free cash flow of $97.5 million.
Cash Cycle Days |
Three Months Ended |
|
Jul 1, 2017
Q3F17 |
|
Apr 1, 2017
Q2F17 |
|
Jul 2, 2016
Q3F16 |
Days in Accounts Receivable |
47 |
|
48 |
|
51 |
Days in Inventory |
107 |
|
103 |
|
87 |
Days in Accounts Payable |
(65) |
|
(64) |
|
(62) |
Days in Cash Deposits |
(13) |
|
(14) |
|
(13) |
Annualized Cash Cycle Days* |
76 |
|
73 |
|
63 |
*We calculate cash cycle days as the sum of days in accounts receivable and days in inventory, less days in accounts payable and days in cash deposits. |
Conference Call and Webcast Information
What: |
Plexus Fiscal Q3 2017 Earnings Conference Call and Webcast |
When: |
Thursday, July 20, 2017 at 8:30 a.m. Eastern Time |
Where: |
Participants are encouraged to join the live webcast at the investor relations section of the Plexus website, www.plexus.com, or directly at: http://edge.media-server.com/m/p/r43kdvvi
Conference call at +1.800.708.4540 with passcode: 45130654 |
Replay: |
The webcast will be archived on the Plexus website and available via telephone replay at +1.888.843.7419 or +1.630.652.3042 with passcode: 45130654 |