Financial Performance - Net sales for fiscal year 2023 were $4.21 billion, compared to $3.81 billion in 2022 and $3.37 billion in 2021[264] - Gross profit for fiscal year 2023 was $394.55 million, up from $347.23 million in 2022 and $323.30 million in 2021[264] - Net income for fiscal year 2023 was $139.09 million, slightly higher than $138.24 million in 2022 and $138.91 million in 2021[264] - Earnings per share (diluted) for fiscal year 2023 were $4.95, compared to $4.86 in 2022 and $4.76 in 2021[264] - Net income for 2023 was $139.1 million, slightly higher than $138.2 million in 2022[270] - Net sales for fiscal 2023 were $4,210.3 million, a 10.5% increase from $3,811.4 million in 2022[354] - Operating income for fiscal 2023 was $195.8 million, up 9.9% from $178.2 million in 2022[354] - Net income for fiscal 2023 was $139.1 million, with basic earnings per share of $5.04 and diluted earnings per share of $4.95[332] Currency and Foreign Exchange - 8% of net sales in 2023 were denominated in currencies other than the U.S. dollar, down from 9% in 2022[242] - 16% of total costs in both 2023 and 2022 were denominated in currencies other than the U.S. dollar[242] - A 10% change in the value of the U.S. dollar relative to other transactional currencies would not have a material effect on the company's financial position as of September 30, 2023[242] - Exchange losses on foreign currency transactions were $1.8 million in 2023, compared to $0.7 million in 2022 and $1.1 million in 2021[291] - The fair value of foreign currency forward contracts increased from $5.7 million in 2022 to $6.3 million in 2023[315] Interest Rates and Borrowing - The borrowing rate under the Credit Facility as of September 30, 2023 was SOFR plus 1.10%[244] - A 10% change in interest rates would not have a material effect on the company's financial position as of September 30, 2023[244] - The Company borrowed $748.5 million and repaid $778.5 million under its Credit Facility during fiscal 2023, with the highest daily borrowing at $412.0 million and average daily balance at $338.1 million[307] Internal Controls and Reporting - The company's internal control over financial reporting was effective as of September 30, 2023, based on COSO criteria[252] Assets and Liabilities - Total assets decreased from $3,393.2 million in 2022 to $3,321.2 million in 2023, a decline of 2.1%[267] - Cash and cash equivalents decreased from $274.8 million in 2022 to $256.2 million in 2023, a decline of 6.8%[267] - Total current liabilities decreased from $2,006.2 million in 2022 to $1,812.7 million in 2023, a decline of 9.6%[267] - Retained earnings increased from $1,572.2 million in 2022 to $1,711.3 million in 2023, a growth of 8.8%[268] - Total stockholders' equity increased from $1,095.7 million in 2022 to $1,214.4 million in 2023, a growth of 10.8%[268] - Accounts receivable decreased from $737.7 million in 2022 to $661.5 million in 2023, a decline of 10.3%[267] - Inventories decreased from $1,602.8 million in 2022 to $1,562.0 million in 2023, a decline of 2.5%[267] - Total property, plant and equipment, net increased by 10.6% to $492,036 thousand as of September 30, 2023 from $444,705 thousand as of October 1, 2022[304] - The Company's total debt and finance lease obligations decreased by 6.6% to $431,058 thousand as of September 30, 2023 from $461,747 thousand as of October 1, 2022[306] - Long-lived assets as of September 30, 2023 were $561.4 million, up 10.1% from $509.8 million in 2022[355] - Total assets as of September 30, 2023 were $3,321.2 million, a 2.1% decrease from $3,393.2 million in 2022[354] Cash Flow and Capital Expenditures - Cash flows from operating activities improved significantly from a negative $26.2 million in 2022 to a positive $165.8 million in 2023[270] - Payments for property, plant and equipment increased from $101.6 million in 2022 to $104.0 million in 2023, a growth of 2.4%[270] - Capital expenditures in fiscal 2023 totaled $104.0 million, with APAC region accounting for $45.9 million[354] - The company sold $834.5 million of trade accounts receivable in fiscal 2023, a 6.0% increase from 2022[367] Revenue Recognition and Contracts - Revenue is recognized over time for arrangements where the company has an enforceable right to payment, including a reasonable profit margin, based on costs incurred to date[281] - The company uses a cost-based input method to measure progress toward completion for contracts requiring over-time revenue recognition, reflecting costs incurred during the manufacturing process[286] - Revenue recognized over time is estimated based on costs incurred to date plus a reasonable profit margin, with 82% of revenue recognized over time in fiscal 2023[380] - Contract assets increased to $142.3 million at the end of fiscal 2023, up from $138.5 million at the beginning of the period[382] - Deferred revenue decreased to $158.7 million as of September 30, 2023, compared to $298.8 million as of October 1, 2022[382] Taxes and Tax Benefits - The effective income tax rate for fiscal 2023 was 13.6%, up from 12.7% in 2022, primarily due to GILTI impact and geographic earnings distribution[318] - The company recorded a $5.7 million increase in valuation allowance in 2023 due to continuing losses in various jurisdictions[319] - Net deferred income tax assets increased from $32.7 million in 2022 to $58.2 million in 2023, with a $6.4 million increase in valuation allowance[323] - The company has $184.2 million in pre-tax state net operating loss carryforwards expiring between 2024 and 2044, and $61.9 million in foreign net operating loss carryforwards[324] - A tax holiday for a foreign subsidiary in the APAC segment resulted in tax reductions of $25.9 million in 2023, $35.3 million in 2022, and $34.4 million in 2021[325] - The company has $14.0 million of uncertain tax benefits as of September 30, 2023, with $13.6 million classified as non-current liabilities[327] - The company recognized a tax benefit of $1.9 million related to restructuring and other charges in fiscal 2023[386] Leases and Lease Obligations - The company's lease portfolio includes real estate and non-real estate leases with terms ranging from less than 1 year to 37 years[333] - Total lease expense for fiscal years 2023, 2022, and 2021 was $31.1 million, $28.9 million, and $27.0 million respectively, with finance lease amortization, interest, operating lease expense, and other lease expense contributing to the total[335] - Total lease assets as of 2023 and 2022 were $106.8 million and $105.2 million respectively, with finance lease assets at $37.4 million and operating lease assets at $69.4 million in 2023[336] - Total lease liabilities as of 2023 and 2022 were $90.2 million and $85.9 million respectively, with current finance lease liabilities at $4.0 million and long-term finance lease liabilities at $39.3 million in 2023[336] - Weighted-average remaining lease terms for finance and operating leases in 2023 were 10.6 years and 16.0 years respectively, with weighted-average discount rates of 16.7% for finance leases and 3.7% for operating leases[336] - Future minimum lease payments as of September 30, 2023, totaled $54.5 million for operating leases and $114.7 million for finance leases, with present values of $47.1 million and $43.3 million respectively[337] Share-Based Compensation and Retirement Plans - The company recognized $21.3 million, $23.3 million, and $24.8 million in share-based compensation expense for fiscal years 2023, 2022, and 2021 respectively[341] - As of September 30, 2023, the company had $21.1 million of unrecognized compensation expense related to RSUs, expected to be recognized over a weighted average period of 1.4 years[342] - The company's 401(k) Retirement Plan contributions for fiscal 2023, 2022, and 2021 totaled $9.8 million, $9.3 million, and $9.3 million respectively[344] - As of September 30, 2023, the company's SERP assets held in trust totaled $12.4 million, with a related liability to participants of approximately $12.4 million[347] Restructuring and Other Charges - The company made a one-time, non-recurring payment of $15.8 million in fiscal 2023 related to an arbitration decision in Norway, resulting in a $14.2 million charge net of insurance recoveries[350] - Restructuring and other charges for fiscal 2023 totaled $23.1 million, including $14.2 million related to an arbitration decision in Norway[384][387] - The company incurred $8.9 million in restructuring charges in fiscal 2023, primarily due to workforce reduction and lease termination[384] Segment Performance - APAC region contributed the highest net sales at $2,358.4 million in 2023, a 2.5% increase from 2022[354] - GE Healthcare Technologies, Inc. (GEHC) accounted for 10.3% of consolidated net sales in fiscal 2023[356] - Revenue from the AMER segment increased to $1,558.2 million in fiscal 2023, up from $1,310.7 million in fiscal 2022[377] - The APAC segment generated $2,358.4 million in revenue for fiscal 2023, compared to $2,300.6 million in fiscal 2022[377] - Inter-segment sales for fiscal 2023 were $109.4 million, with APAC contributing the majority at $88.9 million[377] Derivatives and Hedging - The Company had cash flow hedges outstanding with a notional value of $215.4 million as of September 30, 2023, an increase of 50.4% from $143.2 million as of October 1, 2022[311] - The total fair value of forward currency exchange contracts was a $5.0 million liability as of September 30, 2023, compared to a $6.0 million liability as of October 1, 2022[311] - The Company had additional forward currency exchange contracts outstanding with a notional value of $145.5 million as of September 30, 2023, an increase of 142.1% from $60.1 million as of October 1, 2022[312] - The total fair value of non-designated derivatives was a $1.3 million liability as of September 30, 2023, compared to a $0.3 million asset as of October 1, 2022[312] - The Company estimates that $5.0 million of unrealized losses, net of tax, related to cash flow hedges will be reclassified from other comprehensive income into earnings in the next twelve months[310] Warranty and Share Repurchase - Limited warranty liability decreased to $5.8 million in fiscal 2023 from $6.9 million in 2022[361] - The company repurchased 425,746 shares for $40.9 million under the 2023 share repurchase program[363] Comprehensive Income and Loss - Accumulated other comprehensive loss improved to $(24,330) thousand in 2023 from $(36,028) thousand in 2022, driven by foreign currency translation adjustments and derivative instrument fair value adjustments[295] Software and Internal Use Costs - The company capitalizes significant costs related to the acquisition or development of software for internal use, including software costs, consulting services, and employee compensation[279] Depreciation and Useful Lives - Property, plant, and equipment are depreciated over estimated useful lives, with buildings and improvements at 5-39 years, machinery and equipment at 3-7 years, and computer hardware and software at 3-10 years[278] Customer Deposits and Advanced Payments - Customer deposits increased to $601,644 thousand in 2023 from $480,486 thousand in 2022, while deferred revenue decreased to $158,707 thousand from $298,800 thousand, resulting in a combined "Advanced payments from customers" of $760,351 thousand in 2023 compared to $779,286 thousand in 2022[275] - Customer deposits related to inventory increased by 27.4% to $590.2 million as of September 30, 2023 from $463.2 million as of October 1, 2022[303] Cash Equivalents and Short-Term Deposits - Cash equivalents decreased to $33.5 million in 2023 from $88.7 million in 2022, primarily consisting of short-term time deposits with maturities of less than three months[275] Fair Value of Debt - The fair value of the company's debt was $374.3 million in 2023, compared to $401.6 million in 2022, with carrying values of $383.0 million and $413.0 million, respectively[296] U.S. Income Before Tax - The company's U.S. income before tax was a loss of $84.6 million in 2023, compared to a loss of $64.3 million in 2022[316] External Revenue by Segment - Total external revenue for fiscal 2023 was $4,210.3 million, with Healthcare/Life Sciences contributing $1,874.8 million, Industrial $1,756.5 million, and Aerospace/Defense $579.0 million[377] Net Sales from Engineering Design - Net sales from engineering design and development services were less than 5.0% of consolidated net sales for fiscal years 2023, 2022, and 2021[289] Inventories - Inventories as of September 30, 2023 totaled $1,562,037 thousand, a decrease of 2.5% compared to $1,602,783 thousand as of October 1, 2022[303]

Plexus Corp. (NASDAQ:PLXS) Q4 2023 Earnings Conference Call October 26, 2023 8:30 AM ET Company Participants Shawn Harrison – Vice President-Communications and Investor Relations Todd Kelsey – Chief Executive Officer Steve Frisch – President and Chief Strategy Officer Pat Jermain – Executive Vice President and Chief Financial Officer Oliver Mihm – Executive Vice President and Chief Operating Officer Conference Call Participants David Williams – The Benchmark Company Melissa Fairbanks – Raymond James & Assoc ...

| --- | --- | --- | --- | |-------|-------|---------------------------------------------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | Fiscal fourth quarter 2023 highlights October 25, 2023 | | | | | | | Safe harbor and fair disclosure statement 2 PLEXUS CORP. Revenue ($ millions) ROIC 4,500 4 16% 12% Revenue ROIC Consistently strong performance! PLEXUS CORP. 1,124 1,094 1,071 1,022 1,024 600 700 800 900 1,000 1,100 1,200 Q4 F22 Q1 F23 Q2 F23 Q3 F23 Q4 F23 $1.78 $1.49 $1.45 $1.32 $1.44 ...

Fiscal 2023 fourth quarter guidance | --- | --- | --- | --- | |-------|----------------------------------------------------|------------------|--------------------------------| | | | | | | | REVENUE GUIDE • Robust commercial aerospace demand | | Q4F23 Guidance | | | • Ongoing new program ramps | Revenue | $1.00 billion to $1.04 billion | | | • Incremental weakness in semicap | | | | | • Modest softening of some industrial markets | GAAP Diluted EPS | $1.18 to $1.36* | • Ongoing supply chain challenges EPS G ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________________________________________________________________________________ FORM 10-Q ____________________________________________________________________________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 1, 2023 O ...

Financial Data and Key Metrics Changes - The company reported fiscal third quarter revenue of $1.02 billion, meeting guidance amidst mixed market conditions [57] - GAAP operating margin was 2.8% with GAAP EPS of $0.56 per share, including $0.14 per share of stock-based compensation expense [36] - Non-GAAP operating margin was 5%, at the high end of guidance, benefiting from improved gross margin and lower SG&A expenses [50] - Non-GAAP EPS was $1.32, exceeding guidance due to operational excellence and lower-than-forecasted taxes [98] Business Line Data and Key Metrics Changes - Revenue in the industrial sector declined 3% in the fiscal third quarter, better than expected due to improvements in supply chain [42] - The healthcare and life sciences sector is on track for a 20% increase for the full year of fiscal 2023, despite being flat for the fiscal fourth quarter [43] - Aerospace and defense sector decreased 1% in the fiscal third quarter, beating expectations due to improved deliveries [43] Market Data and Key Metrics Changes - The Americas region saw exceptional wins of almost $200 million, with significant contributions from the Guadalajara facility [67] - The EMEA region had impressive wins of $64 million, with trailing four-quarter wins surpassing $300 million [67] - The APAC region benefited from strong wins primarily from the industrial sector, contributing to overall growth [67] Company Strategy and Development Direction - The company aims to achieve $5 billion in revenue with a 5.5% GAAP operating margin by fiscal 2025, focusing on operational excellence and lifecycle solutions [62] - The strategy includes expanding sustainability-oriented product lifecycle solutions to enhance customer engagement and reduce emissions [38] - The company is optimistic about future growth opportunities, particularly in commercial aerospace and healthcare sectors [61] Management's Comments on Operating Environment and Future Outlook - Management noted that the current demand and supply chain dynamics are holding steady, with expectations for accelerating revenue and profitability growth [40] - There is cautious optimism regarding the semiconductor capital equipment market, which is expected to find a bottom [61] - The macro environment poses risks, but management remains confident in the company's ability to deliver industry-leading growth [62] Other Important Information - The company purchased approximately 150,000 shares for $13.5 million during the quarter, with plans for further purchases [51] - The cash cycle at the end of the third quarter was 111 days, slightly above expectations, with an anticipated improvement in the fourth quarter [99] - The company released its inaugural Sustainability Report, highlighting responsible business practices and ongoing sustainability initiatives [59] Q&A Session Summary Question: What is the outlook for the December quarter and the $5 billion target for fiscal '25? - Management indicated that achieving the $5 billion target will require mid- to high single-digit growth, with expectations for flat to down performance in the first half of fiscal '24 [12] Question: What are the challenges in the semiconductor capital equipment market? - Management acknowledged ongoing softness in the semiconductor capital equipment market but expressed excitement about potential recovery and growth opportunities [80] Question: How is the company addressing supply chain challenges? - The company is actively engaging with customers to help solve supply chain issues and is implementing machine learning and predictive analytics to optimize material positioning [111]

Safe harbor and fair disclosure statement PLEXUS CORP. | --- | --- | --- | --- | |------------------|-----------------|------------------------|-----------------| | | Q2F23 Results | Q2F23 Guidance | Q1F23 Results | | Revenue | $1.07 billion | $1.02 to $1.07 billion | $1.09 billion | | GAAP Diluted EPS | $1.45(1) | $1.06 to $1.24(1) | $1.49(1) | • Stronger than anticipated performance by Engineering and Sustaining Services (1) Our Q1F23 results and Q2F23 guidance and results included $0.21 of stock-based co ...

Plexus Corp. (NASDAQ:PLXS) Q2 2023 Earnings Conference Call April 27, 2023 9:00 AM ET Company Participants Shawn Harrison - VP, Communications & IR Todd Kelsey - CEO Steve Frisch - President & CSO Patrick Jermain - EVP & CFO Conference Call Participants David Williams - The Benchmark Company James Ricchiuti - Needham & Company Matthew Sheerinerin - Stifel Nicolaus Paul Chung - JPMorgan Anja Soderstrom - Sidoti & Company Operator Good morning, and welcome to the Plexus Corp. Conference Call regarding its Fis ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's financial statements, management's analysis, market risk disclosures, and internal control information [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The financial statements present the company's performance for the three and six months ended April 1, 2023, showing significant growth in net sales and income, stable assets, and positive operating cash flow [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Net sales increased 20.5% to $1.07 billion for Q2 FY2023, with net income rising 52.0% to $40.8 million, reflecting strong year-over-year growth Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended April 1, 2023 | Three Months Ended April 2, 2022 | YoY Change | Six Months Ended April 1, 2023 | Six Months Ended April 2, 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $1,070,823 | $888,723 | +20.5% | $2,164,748 | $1,706,179 | +26.9% | | **Gross profit** | $102,993 | $76,510 | +34.6% | $204,192 | $146,506 | +39.4% | | **Operating income** | $56,942 | $35,837 | +58.9% | $114,283 | $66,310 | +72.3% | | **Net income** | $40,844 | $26,869 | +52.0% | $83,034 | $50,292 | +65.1% | | **Diluted EPS** | $1.45 | $0.95 | +52.6% | $2.94 | $1.76 | +67.0% | [Condensed Consolidated Balance Sheet](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) Total assets slightly decreased to $3.38 billion, while inventories increased to $1.65 billion, and total liabilities decreased to $2.20 billion as of April 1, 2023 Key Balance Sheet Items (in thousands) | Account | April 1, 2023 | October 1, 2022 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $269,664 | $274,805 | | Inventories, net | $1,649,719 | $1,602,783 | | **Total Assets** | **$3,382,020** | **$3,393,225** | | **Current Liabilities** | | | | Accounts payable | $729,225 | $805,583 | | Customer deposits | $531,683 | $480,486 | | **Total Liabilities** | **$2,199,638** | **$2,297,494** | | **Total Shareholders' Equity** | **$1,182,382** | **$1,095,731** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow turned positive to $57.2 million for the six months ended April 1, 2023, driven by higher net income and managed inventory investments Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended April 1, 2023 | Six Months Ended April 2, 2022 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $57,156 | $(4,653) | | **Net cash used in investing activities** | $(47,615) | $(64,258) | | **Net cash (used in) provided by financing activities** | $(18,424) | $107,801 | | **Net (decrease) increase in cash** | $(5,106) | $38,363 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes reveal inventories of $1.65 billion, total debt of $482.7 million, active use of derivative instruments, and a Q3 2023 restructuring plan - Total inventories reached **$1.65 billion**, partially offset by customer deposits of **$516.7 million**[25](index=25&type=chunk) - Total debt and finance lease obligations were **$482.7 million** as of April 1, 2023[26](index=26&type=chunk) - The company uses foreign currency forward contracts to hedge cash flows, with a notional value of **$192.9 million** for designated hedges as of April 1, 2023[31](index=31&type=chunk) - For the six months ended April 1, 2023, approximately **81% of revenue** was recognized over time[78](index=78&type=chunk) - The company repurchased **$23.9 million** of its common stock under the 2023 Program in the first six months of fiscal 2023[60](index=60&type=chunk) - In April 2023, the company committed to a restructuring plan and expects to incur approximately **$9.0 million** in costs during the third quarter of fiscal 2023[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the 20.5% year-over-year revenue growth, improved operating margin, positive free cash flow, and ongoing capital management amidst market pressures [Overview](index=23&type=section&id=Overview) Plexus navigates global supply chain constraints, inflation, and geopolitical trade restrictions, maintaining a strong balance sheet with $270 million in cash and available credit - The company is experiencing global supply chain constraints, impacting its ability to meet customer demand and requiring additional inventory investments[92](index=92&type=chunk) - Inflationary pressures on components, labor, and operating costs are ongoing, largely mitigated through contractual pricing rights with customers[93](index=93&type=chunk) - As of Q2 2023, the company had **$270 million** in cash and cash equivalents and **$216 million** available under its revolving credit facility[96](index=96&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q2 2023 net sales grew 20.5% to $1.07 billion, driven by strong performance in Healthcare/Life Sciences, leading to expanded gross and operating margins and increased diluted EPS Net Sales by Market Sector (in millions) | Market Sector | Q2 2023 | Q2 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Industrial | $439.3 | $414.7 | +5.9% | | Healthcare/Life Sciences | $487.3 | $353.2 | +38.0% | | Aerospace/Defense | $144.2 | $120.8 | +19.4% | | **Total Net Sales** | **$1,070.8** | **$888.7** | **+20.5%** | Net Sales by Reportable Segment (in millions) | Segment | Q2 2023 | Q2 2022 | YoY Change | | :--- | :--- | :--- | :--- | | AMER | $407.8 | $311.2 | +31.0% | | APAC | $587.3 | $533.9 | +10.0% | | EMEA | $101.8 | $73.7 | +38.1% | - Gross margin for Q2 2023 increased to **9.6%** from 8.6% YoY, and operating margin increased to **5.3%** from 4.0% YoY[97](index=97&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk) - Return on Invested Capital (ROIC) for the six months ended April 1, 2023 was **13.8%**, generating a positive economic return of **4.8%** above the company's **9.0%** WACC[134](index=134&type=chunk)[135](index=135&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20of%20Capital%20Resources) The company's liquidity remains strong with $270.4 million in cash, achieving positive free cash flow of $7.7 million for the first six months of fiscal 2023, a significant improvement year-over-year Free Cash Flow (FCF) Reconciliation (in millions) | Metric | Six Months Ended April 1, 2023 | Six Months Ended April 2, 2022 | | :--- | :--- | :--- | | Cash flows provided by (used in) operating activities | $57.2 | $(4.7) | | Payments for property, plant and equipment | $(49.5) | $(64.1) | | **Free cash flow** | **$7.7** | **$(68.8)** | Annualized Cash Cycle (in days) | Period | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Days in accounts receivable | 56 | 59 | | Days in contract assets | 11 | 12 | | Days in inventory | 156 | 154 | | Days in accounts payable | (69) | (86) | | Days in cash deposits | (50) | (41) | | **Annualized cash cycle** | **104** | **98** | - The company sold **$411.3 million** of trade accounts receivable in the first six months of fiscal 2023, receiving cash proceeds of **$406.5 million**[154](index=154&type=chunk) - Capital expenditures for fiscal 2023 are estimated to be between **$110.0 million** and **$130.0 million**[148](index=148&type=chunk) [Disclosure About Critical Accounting Policies](index=33&type=section&id=Disclosure%20About%20Critical%20Accounting%20Policies) No material changes were made to the company's critical accounting policies during the second quarter of fiscal 2023 - No material changes were made to critical accounting estimates in the second quarter of fiscal 2023[159](index=159&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Market risk exposure remains consistent with prior disclosures, primarily involving foreign currency and interest rate fluctuations, with management assessing no material financial impact from a 10% change - There were no material changes in exposure to market risk from foreign exchange and interest rates[161](index=161&type=chunk) - For the three months ended April 1, 2023, **9% of Net Sales** and **21% of Total Costs** were denominated in currencies other than the U.S. dollar[163](index=163&type=chunk) - Interest rate risk is primarily associated with the variable-rate Credit Facility, which had a borrowing rate of SOFR plus **1.10%** as of April 1, 2023[165](index=165&type=chunk) [Controls and Procedures](index=34&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The CEO and CFO concluded that disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[166](index=166&type=chunk) - No material changes to internal control over financial reporting occurred during the second quarter of fiscal 2023[167](index=167&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers updates on risk factors, equity security sales, and a list of exhibits filed with the report [Risk Factors](index=34&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes have occurred in the risk factors previously disclosed in the company's fiscal 2022 Annual Report on Form 10-K - No material changes have occurred in the risk factors set forth in the fiscal 2022 Form 10-K[168](index=168&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceed) During Q2 FY2023, the company repurchased 125,639 shares for $12.4 million under the 2023 Program, with $22.6 million remaining available Share Repurchases in Q2 2023 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2023 | 21,085 | $108.70 | | Feb 2023 | 46,332 | $97.78 | | Mar 2023 | 58,222 | $95.92 | | **Total** | **125,639** | **$98.75** | - As of April 1, 2023, **$22.6 million** remained available for repurchase under the 2023 Program[169](index=169&type=chunk) [Exhibits](index=35&type=section&id=ITEM%206.%20Exhibits) The report includes required CEO and CFO certifications, a reconciliation of non-GAAP measures, and financial data in Inline XBRL format as exhibits - The report includes required CEO/CFO certifications, a reconciliation of ROIC to GAAP, and XBRL data files as exhibits[171](index=171&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for the quarter ended December 31, 2022, detailing financial position and performance through key statements and notes [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Net sales increased 33.8% to $1.09 billion and net income grew 80.1% to $42.2 million for the three months ended December 31, 2022 Three Months Ended (in thousands, except per share data) | Financial Metric | Dec 31, 2022 | Jan 1, 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $1,093,925 | $817,456 | +33.8% | | Gross profit | $101,199 | $69,996 | +44.6% | | Operating income | $57,341 | $30,473 | +88.2% | | Net income | $42,190 | $23,423 | +80.1% | | Diluted EPS | $1.49 | $0.82 | +81.7% | [Condensed Consolidated Balance Sheet](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) As of December 31, 2022, total assets were $3.40 billion, with inventories at $1.65 billion and total liabilities at $2.25 billion, strengthening shareholders' equity to $1.15 billion Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | Oct 1, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $247,880 | $274,805 | | Inventories, net | $1,645,011 | $1,602,783 | | Total assets | $3,395,292 | $3,393,225 | | Total liabilities | $2,245,033 | $2,297,494 | | Total shareholders' equity | $1,150,259 | $1,095,731 | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Total shareholders' equity increased from $1.10 billion to $1.15 billion for the three months ended December 31, 2022, driven by net income and partially offset by treasury stock purchases - Net income of **$42.2 million** was the primary driver of the increase in retained earnings and total equity[14](index=14&type=chunk) - The company purchased **$11.5 million** in treasury stock during the quarter, reducing shares outstanding[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended December 31, 2022, cash decreased by $27.6 million, with $48.8 million used in operating activities and $39.4 million provided by financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Dec 31, 2022 | Three Months Ended Jan 1, 2022 | | :--- | :--- | :--- | | Cash flows used in operating activities | $(48,794) | $(88,979) | | Cash flows used in investing activities | $(21,582) | $(33,370) | | Cash flows provided by financing activities | $39,438 | $70,043 | | Net decrease in cash | $(27,559) | $(52,122) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail inventories at $1.65 billion, debt at $516.3 million, APAC as the largest revenue contributor, and 81% of revenue recognized over time - Inventories increased to **$1.65 billion** as of Dec 31, 2022, up from **$1.603 billion** as of Oct 1, 2022[24](index=24&type=chunk) - Total debt and finance lease obligations were **$516.3 million** as of Dec 31, 2022[26](index=26&type=chunk) - During the quarter, the company repurchased **115,723 shares** for **$11.5 million** under its 2023 share repurchase program[56](index=56&type=chunk) - Approximately **81%** of the company's revenue for the three months ended Dec 31, 2022 was recognized over time[71](index=71&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=18&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial performance, highlighting a **33.8% year-over-year revenue increase** driven by strong demand, while addressing market pressures and liquidity [Overview](index=21&type=section&id=Overview) Plexus operates in the EMS industry, specializing in complex products, while navigating global supply chain constraints, component and labor cost inflation, and U.S. export controls on China - The company is experiencing global supply chain constraints, leading to an inability to procure certain components on a timely basis and requiring additional investments in inventory[83](index=83&type=chunk) - Inflationary pressures on components, labor, and operating costs are expected to continue, though the company has been largely able to mitigate impacts through contractual pricing rights with customers[84](index=84&type=chunk) - As of Q1 fiscal 2023, the company had **$248 million** in cash and **$180 million** available under its revolving credit facility to support potential future challenges[87](index=87&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Net sales for Q1 fiscal 2023 increased 33.8% year-over-year to $1.09 billion across all segments and sectors, with operating margin improving to 5.2% and operating income rising 87.9% Net Sales by Reportable Segment (in millions) | Segment | Q1 FY23 | Q1 FY22 | Change (%) | | :--- | :--- | :--- | :--- | | AMER | $389.7 | $277.3 | +40.5% | | APAC | $641.9 | $491.7 | +30.5% | | EMEA | $89.4 | $72.9 | +22.6% | | **Total** | **$1,093.9** | **$817.5** | **+33.8%** | Net Sales by Market Sector (in millions) | Market Sector | Q1 FY23 | Q1 FY22 | Change (%) | | :--- | :--- | :--- | :--- | | Industrial | $472.1 | $363.8 | +29.8% | | Healthcare/Life Sciences | $487.9 | $344.5 | +41.6% | | Aerospace/Defense | $133.9 | $109.2 | +22.6% | | **Total** | **$1,093.9** | **$817.5** | **+33.8%** | - Operating margin increased to **5.2%** from **3.7%** year-over-year, and operating income rose **87.9%** to **$57.3 million**[98](index=98&type=chunk) - Return on Invested Capital (ROIC) improved to **13.8%** from **10.0%** in the prior-year quarter, generating a positive economic return of **4.8%**[111](index=111&type=chunk)[112](index=112&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended the quarter with $247.9 million in cash, with cash used in operating activities at $48.8 million, an annualized cash cycle of 106 days, and negative free cash flow of $71.9 million - Cash and cash equivalents were **$247.9 million** as of December 31, 2022, with **87%** held outside the U.S[113](index=113&type=chunk)[114](index=114&type=chunk) - The annualized cash cycle increased to **106 days** from **103 days** year-over-year, primarily due to a **six-day** increase in inventory days and an **eighteen-day** decrease in accounts payable days[116](index=116&type=chunk)[117](index=117&type=chunk) - Free Cash Flow (a non-GAAP measure) was **$(71.9) million**, an improvement from **$(122.2) million** in the prior-year quarter, mainly due to a smaller working capital investment in inventory[122](index=122&type=chunk)[124](index=124&type=chunk) - The company sold **$185.6 million** of trade accounts receivable during the quarter, receiving cash proceeds of **$183.6 million**[131](index=131&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=27&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes in market risk exposure were reported, with foreign currency and interest rate risks deemed not to have a material effect from a hypothetical 10% change - There were no material changes in market risk exposure from the 2022 Annual Report on Form 10-K[137](index=137&type=chunk) - A hypothetical **10.0%** change in the value of the U.S. dollar or in interest rates would not have a material effect on the company's financial position, results, or cash flows as of December 31, 2022[139](index=139&type=chunk)[141](index=141&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the first quarter of fiscal 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures are effective at a reasonable assurance level[142](index=142&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[143](index=143&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1A. Risk Factors](index=28&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes have occurred in the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended October 1, 2022 - No material changes have occurred in the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended October 1, 2022[144](index=144&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceed) During the quarter, the company repurchased **115,723 shares** for approximately **$11.5 million** under the 2023 Program, with **$35.0 million** remaining in authorization Share Repurchases for Q1 FY2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2 - Oct 29, 2022 | 47,769 | $91.16 | | Oct 30 - Nov 26, 2022 | 30,306 | $102.60 | | Nov 27 - Dec 31, 2022 | 37,648 | $106.41 | | **Total** | **115,723** | **$99.12** | - As of December 31, 2022, approximately **$35.0 million** remained available for repurchase under the 2023 Program[145](index=145&type=chunk) [ITEM 6. EXHIBITS](index=29&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications, non-GAAP financial measure reconciliations, and Inline XBRL formatted statements - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32.1, 32.2) and a reconciliation of ROIC to GAAP (99.1)[147](index=147&type=chunk) [SIGNATURES](index=30&type=section&id=SIGNATURES) [Signatures](index=30&type=section&id=Signatures) The report was duly signed on February 3, 2023, by Todd P. Kelsey, Chief Executive Officer, and Patrick J. Jermain, Executive Vice President and Chief Financial Officer, on behalf of Plexus Corp - The report is signed by CEO Todd P. Kelsey and CFO Patrick J. Jermain[149](index=149&type=chunk)