Plexus(US:PLXS)2022-01-27 16:42Financial Data and Key Metrics Changes - The company reported revenue of $817 million for Q1 2022, with GAAP EPS of $0.82, which included $0.06 of restructuring charges and $0.22 of stock-based compensation expense [6][16] - The gross margin was 8.6%, below guidance due to unfavorable customer mix and operational inefficiencies [16] - The company anticipates revenue guidance for Q2 2022 to be between $820 million and $860 million, with GAAP diluted EPS expected to be between $0.76 and $0.92 [7][18] Business Line Data and Key Metrics Changes - The Industrial sector experienced a 7% revenue decline in Q1, but a mid-single-digit increase is expected in Q2 [10] - The Healthcare Life Sciences sector grew over 3% in Q1, with a low single-digit decline anticipated in Q2 due to supply constraints [10] - Aerospace and Defense sector revenue declined by 7% in Q1, but a low double-digit increase is expected in Q2 as demand remains strong [10] Market Data and Key Metrics Changes - The company achieved $271 million in wins for the quarter, with a trailing four-quarter total of $1.1 billion, representing a 7% year-over-year increase [7] - The funnel of qualified opportunities reached a record $3.3 billion, indicating strong future growth potential [13] - Demand remains robust across all market sectors, although supply chain challenges are limiting the ability to meet this demand [8] Company Strategy and Development Direction - The company aims for $5 billion in revenue with a 5.5% GAAP operating margin by fiscal 2025, with a long-term growth target of 9% to 12% [4][8] - The company is focusing on operational efficiency and customer service excellence to drive growth [5][6] - Strategic investments are being made in working capital and new facilities to support anticipated growth [19] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain constraints are expected to continue impacting revenue in the near term, but strong demand positions the company well for future growth [6][8] - The company is optimistic about the second half of the fiscal year, particularly in the Healthcare Life Sciences sector, due to major program ramps [7][8] - Management expressed confidence in the ability to drive sequential revenue and EPS growth despite current challenges [22][54] Other Important Information - The company is constructing a new manufacturing facility in Thailand, expected to be completed on time and on budget [14][15] - Cash flow is expected to be negative in Q2 due to increased working capital investments [19] Q&A Session Summary Question: What needs to happen for the company to realize all the business won? - Management indicated that supply chain improvements are necessary to achieve the anticipated revenue levels, particularly for new program ramps [21][22] Question: What caused the decline in Aerospace and Defense revenue? - The decline was attributed to shortages in electronic components, particularly wiring harness suppliers [23][25] Question: What were the issues faced in Q1? - The company faced significant supply chain challenges, particularly with custom and electronic components, impacting revenue more than competitors [30][31] Question: Are supply chain issues affecting customer relationships? - Management confirmed that relationships remain strong, with an increase in win rates and customer collaboration despite supply challenges [33][35] Question: How is the company navigating the inflationary environment? - The company is able to pass along component costs, with minimal direct impact from inflation on overall profitability [41] Question: When will inventory levels normalize? - Management expects inventory levels to stabilize in Q3 and Q4, with cash cycle days potentially returning to pre-pandemic levels [47][49]