NASDAQ:PLXS Plexus Q2 2025 Earnings Report $122.43 -3.38 (-2.69%) As of 04/30/2025 04:00 PM Eastern Earnings HistoryForecast Plexus EPS ResultsActual EPS$1.66Consensus EPS $1.54Beat/MissBeat by +$0.12One Year Ago EPS$0.94Plexus Revenue ResultsActual Revenue$980.17 millionExpected Revenue$980.07 millionBeat/MissBeat by +$103.00 thousandYoY Revenue Growth+1.40%Plexus Announcement DetailsQuarterQ2 2025Date4/23/2025TimeAfter Market ClosesConference Call DateThursday, April 24, 2025Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Plexus Q2 2025 Earnings Call TranscriptProvided by QuartrApril 24, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Thank you for standing by. My name is Angela, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q2 twenty twenty five Plexus Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:26Thank you. I would now like to turn the call over to Mr. Shawn Harrison, Vice President of Investor Relations. You may begin. Shawn HarrisonVice President - IR at Plexus00:00:35Good 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, including without limitation those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation and future business outlook. Forward looking statements are not guarantees since there 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 ks filing for the fiscal year ended 09/28/2024, supplemented by our Form 10 Q filings and the Safe Harbor and fair disclosure statement in our 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. Shawn HarrisonVice President - IR at Plexus00:01:36Joining me today are Todd Kelsey, President and Chief Executive Officer Oliver Minn, Executive Vice President and Chief Operating Officer and Pat Germain, Executive Vice President and Chief Financial Officer. With today's earnings call, Todd will provide summary comments before turning the call over to Oliver and Pat for further details. With that, let me now turn the call over to Todd Kelsey. Todd? Todd KelseyPresident & CEO at Plexus00:01:58Thank you, Sean. Good morning, everyone. Please advance to slide three. Our commitment to our customer success during dynamic market environments is enabling a growing breadth of new program wins across Plexus' solutions. During our fiscal second quarter, we achieved our largest ever win for our sustaining services and our best quarterly engineering solutions wins performance in more than five years. Todd KelseyPresident & CEO at Plexus00:02:24In addition, our continued progress with initiatives to increase our operational and working capital efficiency resulted in robust fiscal second quarter financial performance. We see this momentum sustaining as we drive actions to navigate the current environment. In order to proactively help customers navigate current market complexities, we are strategically investing in talent such as our trade compliance and logistics organization. We also continue to invest in technology, including our growing internal use of AI facilities, including our new site in Malaysia that will open this summer and advanced capabilities, including numerous tools focused on process automation, efficiency and achieving zero defects. As we look ahead, we continue to anticipate up to $100,000,000 of free cash flow for fiscal twenty twenty five. Todd KelseyPresident & CEO at Plexus00:03:19Our substantial liquidity and robust free cash flow generation provides the opportunity to create additional shareholder value. Finally, while conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate achieving meaningful EPS growth in fiscal twenty twenty five, capitalizing upon revenue growth in each of our market sectors, sequential revenue growth for the remainder of the fiscal year, robust operating margin performance and ongoing free cash flow deployment. Please advance to slide four. Revenue of nine eighty million dollars met our guidance. As the fiscal second quarter progressed, we saw signs of incremental strengthening and outlooks from healthcare customers, which offset modest reductions in other markets. Todd KelseyPresident & CEO at Plexus00:04:12Non GAAP operating margin of 5.7% met the high end of our guidance range. Our operational efficiency efforts and stronger performance from our Engineering Solutions and Sustaining Services helped to offset a portion of the typical seasonal cost headwinds. Non GAAP EPS of $1.66 exceeded our guidance, benefiting from strong operating margin performance as well as slightly favorable tax rate and lower than anticipated non operating expenses. Finally, we delivered $16,500,000 of free cash flow, significantly better than our expectations. Please advance to slide five. Todd KelseyPresident & CEO at Plexus00:04:57For the fiscal second quarter, we won 42 manufacturing programs worth $2.00 $5,000,000 in revenue annually when fully ramped into production. During the quarter, we closed our largest ever sustaining services win in support of creating success for an industry leading health care customer. Also included in the quarterly wins are exciting manufacturing share gains and opportunities to support growth technologies in all of our market sectors. Furthermore, we generated the highest quarterly wins performance for our Engineering Solutions since the fiscal fourth quarter of twenty nineteen. The Engineering wins performance reflected strong engagement across all of our market sectors, highlighting the extensiveness of our capabilities and effectiveness of the team's diversification efforts. Todd KelseyPresident & CEO at Plexus00:05:45The breadth of this quarter's wins performance across our solutions, market sectors and technologies is a strong leading indicator of Future Plexus revenue growth. Please advance to Slide six. Our commitment to sustainability is integrated with our core value of innovating responsibly as we boldly drive positive change and promote a sustainable future. Our people are the heart of who we are and what we do. I'm therefore incredibly proud to share that Wisconsin Manufacturers and Commerce selected Plexus as Manufacturer of the Year mega category in recognition of our innovation, philanthropy, technological advancements, commitment to customer satisfaction, financial performance and creation of quality jobs. Todd KelseyPresident & CEO at Plexus00:06:33Thank you to our incredible team members, partners and local communities whose contributions support fulfilling our vision of helping to create the products that build a better world. We also continue to deliver innovative solutions to create customer success. During our fiscal second quarter, our Plexus Xiamen team celebrated a new partnership with GE Healthcare China to advance the green supply chain ecosphere initiative by focusing on maximizing the recycling and reuse of valuable medical equipment and promoting sustainability. We also recently partnered with our customer Bevy to celebrate Earth Day. Bevy's mission is to unbottle the future through their smart, bottleless water dispensers. Todd KelseyPresident & CEO at Plexus00:07:19Throughout our partnership, Bevy's smart water dispenser, which is manufactured at our Appleton, Wisconsin facility, has saved the equivalent of over two eighteen million plastic water bottles from landfills. Todd KelseyPresident & CEO at Plexus00:07:32Our commitment to delivering excellence includes reducing our environmental impact. Our team members in Oradio, Romania joined the Planning Hope initiative, working with over 100 volunteers to plant 1,000 trees. Todd KelseyPresident & CEO at Plexus00:07:45And finally, we are excited to announce the release of our annual sustainability report later in the fiscal third quarter. The 2024 report highlights our continued commitment to innovating responsibly as we've always been driven to do more for our customers, our team members and the world. Please advance to slide seven. We're guiding fiscal third quarter revenue of 1,000,000,000 to $1,040,000,000 non GAAP operating margin of 5.7% to 6.1% and non GAAP EPS of $1.65 to $1.8 While conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate sequential revenue growth for our fiscal fourth quarter combined with another quarter of strong operating margin performance. This outlook supports a continued view that Plexus will achieve meaningful EPS growth in fiscal twenty twenty five with revenue growth in each of our market sectors, robust operating margin performance and ongoing free cash flow deployment. Todd KelseyPresident & CEO at Plexus00:08:54We continue to expect year over year growth for our Aerospace and Defense market sector supported by robust demand for our solutions supporting defense and commercial space products. Growth forecasts improved slightly in our HealthcareLife Sciences market sector. We continue to benefit from new program ramps and share gains, while Healthcare customer demand is improving after a prolonged period of inventory correction. We continue to expect growth in our Industrial market sector. This expectation reflects robust growth in semi cap associated with contributions from new program wins and share gains amidst an outlook of modest semi cap market growth. Todd KelseyPresident & CEO at Plexus00:09:34In addition, we see some early signs that inventory corrections may have peaked in the broader industrial market. Finally, Plexus uniquely supports customer success, leveraging our comprehensive product lifecycle solutions and passion for operational excellence delivered through our globally united team. Our ongoing strategic investments in talent, technology, facilities and advanced capabilities position Plexus to proactively navigate evolving landscapes and dynamic market environments to enable our customers' success. I will now turn the call over to Oliver for additional analysis of the performance of our market sectors. Oliver? Oliver MihmExecutive VP & COO at Plexus00:10:17Thank you, Todd. Good morning. I will begin with a review of the fiscal second quarter performance of each of our market sectors, our expectations for each sector for the fiscal third quarter and some directional sector commentary for fiscal twenty twenty five. I will also review the annualized revenue contribution of our wins performance for each market sector and then provide an overview of our funnel of qualified manufacturing opportunities. Starting with our aerospace and defense sector on slide eight, Revenue increased 8% sequentially in the fiscal second quarter meeting our expectation of a high single digit increase. Oliver MihmExecutive VP & COO at Plexus00:10:53Continued softness in the commercial aerospace sub sector was offset by demand increases in both the defense and space sub sectors. We expect revenue for the aerospace and defense sector to be up mid single digits in the fiscal third quarter reflective of broad based increases in customer demand and an increase in volume for a new product ramp. Our wins for the fiscal second quarter for the aerospace and defense sector were healthy at $27,000,000 Reflective of our continued strength of execution, we received awards for products currently manufactured in house at two of our customers in the defense sub sector. We also received an award for further new product launch builds for a customer that continues to invest in their space product portfolio. Plexus is the sole provider for these new product launch builds. Oliver MihmExecutive VP & COO at Plexus00:11:41And our focus to expand our engineering design services with aerospace and defense customers continues to build momentum with the award of our largest ever aerospace and defense sector design project. Consistent with our outlook last quarter, we expect continued sequential growth as we finish the fiscal year, resulting in modest growth for our aerospace and defense market sector in fiscal twenty twenty five. Strength in the defense and space subsectors is being substantially offset by reduced near term demand in the aerospace subsector, muting the impact of robust underlying long term commercial aerospace market demand and the anticipated growth contribution from our ongoing wins and share gains. Please advance to slide nine. Revenue in our HealthcareLife Sciences market sector was up 10% sequentially for the fiscal second quarter beating our expectation of a high single digit increase. Oliver MihmExecutive VP & COO at Plexus00:12:37Inside the quarter demand increases across a number of customers contributed to the strong result. For the fiscal third quarter, we expect the HealthcareLife Sciences sector to grow revenue mid single digits driven primarily by increased end market demand and supported by strength from new program ramps. Fiscal second quarter HealthcareLife Sciences sector wins of $118,000,000 included our largest ever award for sustaining services. This substantial award from an existing customer marks a shift in the strategy from in house to outsourced services. Our strong history of execution with this customer and the strength of our executive relationships contributed to the award. Oliver MihmExecutive VP & COO at Plexus00:13:18This product will be serviced in our Guadalajara, Mexico campus. Our wins also included subassemblies for a customer's next generation MRI support equipment. Again, our historical strength of execution and executive partnerships contributed to the award. In this instance, our customer engaged exclusively with Plexus on this opportunity. These assemblies will be built in our Penang, Malaysia campus. Oliver MihmExecutive VP & COO at Plexus00:13:45Our Penang, Malaysia campus also received an award to build subassemblies in support of an orthopedic robotic assisted surgical system. As we look to the full year, our outlook for fiscal twenty twenty five for the healthcare life sciences sector has slightly improved on the strength of new program ramps and multiple customers increasing demand. Advancing to the industrial sector on slide 10, revenue decreased 10% sequentially in the fiscal second quarter. The result was in line with our expectation of a high single digit to low double digit revenue decline. Near term demand increases across a number of customers for both existing and new product production offset other forecast changes in the portfolio. Oliver MihmExecutive VP & COO at Plexus00:14:31Our fiscal third quarter outlook for the industrial sector of a low single digit increase reflects demand strength in our semi cap sub sector and new program ramp strength in our energy management sub sector. The industrial market sector wins for the second quarter were $60,000,000 As a result of the continued non linearity of the new technology transition within the broadband communication sub sector, our customer has awarded us further production of legacy products as some end customers invest to optimize their installed infrastructure. We also expanded our engagement with a leading construction and mining equipment customer as they awarded us production for a safety system that was part of a recent acquisition. Flexus' ability to support the resulting transition reflects a high value add offering and the strength of our partnership. Finally, our wins performance continued to show strength across the portfolio of our semi cap customers with both new program wins and share gains. Oliver MihmExecutive VP & COO at Plexus00:15:32Our expectation of growth for the industrial sector in fiscal twenty twenty five remains unchanged. Share gains and new program ramps are driving robust growth for our semi cap sub sector, while despite some early green shoots trends remain generally uneven across the majority of our industrial submarkets. Please advance to slide 11 for a review of our funnel of qualified manufacturing opportunities. The funnel of qualified manufacturing opportunities remains robust at $3,500,000,000 Our positive outlook for Funnel Health is in part supported by the strength of early stage opportunities in our industrial and aerospace and defense sectors. In summary, after considering current dynamic market conditions, our share gains, program ramps, continued strength in certain subsectors and increased demand in recently challenged subsectors, we continue to forecast sequential revenue growth during the second half of fiscal twenty twenty five. Oliver MihmExecutive VP & COO at Plexus00:16:34Before turning the call over to Pat, reflecting on the recent tariff volatility, I'd like to take a moment to recognize and appreciate the efforts of our trade compliance team and our Global Plexus team as we continue to provide agile, proactive and complicated analysis and responses in support of our customers' success. Our customers have noted their appreciation and we'd like to add our appreciation to theirs. Thank you. I will now turn the call over to Pat. Pat? Patrick JermainEVP & CFO at Plexus00:17:03Thank Patrick JermainEVP & CFO at Plexus00:17:03you, Oliver, and good morning, everyone. Our fiscal second quarter results are summarized on slide 12. Gross margin of 10% was at the top end of our guidance due to a favorable mix of service offerings and better fixed cost leverage. Productivity improvements associated with operational efficiency initiatives helped to reduce the impact from our typical seasonal compensation cost increases. Selling and administrative expense of $49,000,000 was at the midpoint of our guidance. Patrick JermainEVP & CFO at Plexus00:17:35Non GAAP operating margin of 5.7% was at the top end of our guidance due to the strength in gross margin. Non operating expense of $3,800,000 is favorable to expectations due to improved foreign exchange performance and lower than anticipated interest expense. Non GAAP diluted EPS of 1.66 exceeded our guidance due to the items mentioned and a slightly favorable tax rate. Turning to our cash flow and balance sheet on slide 13. As shown across these financial metrics, our performance was strong and consistent with the fiscal first quarter. Patrick JermainEVP & CFO at Plexus00:18:15As a result, we delivered $36,700,000 in cash from operations and spent $20,200,000 on capital expenditures, generating free cash flow of $16,500,000 This performance exceeded expectations and positions us well to meet our fiscal twenty twenty five free cash flow projection of up to $100,000,000 During the quarter, we continued to return cash to shareholders through our share repurchase program by acquiring approximately 86,000 shares of our stock for $12,200,000 We have approximately $25,000,000 available under the current $50,000,000 authorization. We are taking advantage of our strong financial performance and robust balance sheet to hold an earlier review with our Board of Directors to discuss an additional buyback authorization once the current program is completed. This review is planned for next month. Similar to the prior quarter, we ended the fiscal second quarter in a net cash position. We had $15,000,000 outstanding under our revolving credit facility with $485,000,000 available to borrow. Patrick JermainEVP & CFO at Plexus00:19:30Given our available capacity, we anticipate borrowing under this facility when our $100,000,000 placement notes mature this June. We will take market conditions into consideration if and when we would refinance any amount longer term. For the fiscal second quarter, we delivered invested capital of 13.7%, which was four eighty basis points above our weighted average cost of capital. Our invested capital base is significantly lower than the prior year due to our efforts to drive sustained improvement in working capital. This combined with improved operating performance drove the expansion in ROIC over the prior year. Patrick JermainEVP & CFO at Plexus00:20:14Cash cycle at the end of the fiscal second quarter was sixty eight days, three days favorable to expectations and consistent with the fiscal first quarter. This result represents a 25% improvement in our cash cycle days from one year ago. Please turn to Slide 14 for details on our cash cycle. With a continued sequential reduction in gross inventory dollars this quarter by 10,000,000 we experienced a two day improvement in inventory days. We have now reduced the dollar value of inventory for five consecutive quarters with gross inventory $370,000,000 lower than the fiscal twenty twenty three high point. Patrick JermainEVP & CFO at Plexus00:20:57For days in advance payments, we experienced a two day reduction with $14,000,000 being returned to customers during the quarter. As Todd has already provided the revenue and EPS guidance for the fiscal third quarter, I'll review some additional details which are summarized on slide 15. Fiscal third quarter gross margin is expected to be in the range of 9.9% to 10.2%. At the midpoint, gross margin would be slightly improved from last quarter. We expect selling and administrative expense in the range of 50,000,000 to $51,000,000 which is fairly consistent with the prior quarter. Patrick JermainEVP & CFO at Plexus00:21:34Note that this estimate is inclusive of approximately $6,400,000 of stock based compensation expense. Fiscal third quarter non GAAP operating margin is Fiscal expected to be in the range of 5.7% to 6.1% exclusive of stock based compensation expense. Non operating expense is anticipated to be approximately $4,500,000 We continue to anticipate lower interest expense consistent with our reduced borrowing. For the fiscal third quarter, we are estimating an effective tax rate between 1416% and diluted shares outstanding of approximately $27,600,000 In support of anticipated program ramps, our expectation for the balance sheet is that working capital investments will increase compared to the fiscal second quarter. However, based on our anticipated sequential revenue growth, we expect our cash cycle days to remain consistent with the fiscal second quarter. Patrick JermainEVP & CFO at Plexus00:22:34Hence, are guiding a cash cycle range of sixty six to seventy days. With investments to support anticipated program ramps and higher levels of capital spending associated with completing the build out of our new facility in Penang, Malaysia, we expect breakeven to a slight generation of free cash flow for the fiscal third quarter. Fiscal '20 '20 '5 capital spending is expected to be in the range of 110,000,000 to $130,000,000 slightly lower than our previous guidance. Once again, given our improved performance through the first half of the fiscal year, we anticipate generating up to $100,000,000 of free cash flow for fiscal twenty twenty five. With that, Angela, let's now open the call for questions. Operator00:23:26Thank you. We will now begin the question and answer simply press star one again. If you are called upon to ask your question and are listening by loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Also, Your first question comes from the line of David Williams from The Benchmark Company. Your line is now open. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:07Hey, good morning everyone. Thanks for taking the question and congratulations on just navigating this environment as well as you are here. Patrick JermainEVP & CFO at Plexus00:24:14Thank you, David. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:16Yes. So lots I think there's lots of things that we David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:19could talk about here. But I guess first is really around the tariffs and this has been obviously a big topic of discussion. But in the past, you've talked about your in country, four country kind of strategy that has helped there and you talked about hiring some logistics and some support staff. But just can you talk maybe a little more about how the tariffs are impacting you? And are you hearing anything from your customers? David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:42Are you seeing their forecast shift? And maybe what are those discussions that you're having today with them? Todd KelseyPresident & CEO at Plexus00:24:49Sure. So I mean, first of all, what I would say is we would all like to get to a steady state because I think that will help us plan for the future and move forward with our customers. Because right now our customers are largely taking a wait and see type approach. We're doing a bit of modeling for some customers on potentially moving regions, although those aren't necessarily to The U. S. Todd KelseyPresident & CEO at Plexus00:25:14They could just be to lower tariff jurisdictions or things such as that. But in general, we believe we're positioned really well as we move forward through this. One is the investments in trade compliance from a standpoint of people, tools and process. Again, to remind everybody on the call, we pass the tariffs on to our customers, so we don't absorb those costs ourselves. And that's moving forward fine as we would anticipate it to right now. Todd KelseyPresident & CEO at Plexus00:25:43And we think we're positioned well from a footprint standpoint and a services and tools standpoint that we'll be able to adjust and help our customers achieve a successful solution regardless of what that final state is. We have available capacity in each of our regions, including within The U. S, so we're well positioned to be able to do that. We still think an in region, four region is the likely end state as this continues to migrate. We think that's the typical solution that we'd get towards. Todd KelseyPresident & CEO at Plexus00:26:14But we again believe we're well positioned to continue to adjust as our customers see the final end state. One of the things from a standpoint of demand too, David, at this point we're seeing no impact to demand, and that includes no demand degradation or no pull forward into the current into earlier time periods right now. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:26:40Okay. Very good. Certainly appreciate the color there. And then maybe you talked a little bit about having excess capacity. But if you think about new facilities, if you were to build that, can you talk a little bit about that CapEx investment and then the timing in order to bring up a new facility? David WilliamsEquity Research Analyst at The Benchmark Company LLC00:26:58How quickly can that happen if a customer came to you and said, Hey, we want to move to The U. S. If you David WilliamsEquity Research Analyst at The Benchmark Company LLC00:27:02didn't have capacity? Patrick JermainEVP & CFO at Plexus00:27:04Yes. Well, the good news, David, this is Pat. We've got really good capacity in all three of our regions. As we mentioned, we've got the Penang Malaysia site coming on board this summer. Patrick JermainEVP & CFO at Plexus00:27:15We've got available capacity in Europe and then in Mexico and The U. S. So all three of those regions can handle any additional volume that's put into it. How quickly if the need would arise in the future, it's probably a four to six quarter period to do that build. But with some of the improvements we're making within our facilities and Oliver could talk more about this, but we're trying to expand capacity within our existing facilities through automation efforts and a number of other initiatives that can delay the need for a new site after we put the one in Malaysia. Oliver MihmExecutive VP & COO at Plexus00:27:59Yeah, I can just expanding on that. As we drive operational improvements into our manufacturing facilities not only are we working on improvements that reduce our cost basis, but also on our asset utilization. And so Pat mentioned automation that could be process automation, material handling automation as a specific example there. We've automated our warehouse in Penang last fiscal year. And through doing that, we saw a 60% reduction in space utilization as we automated that warehouse, 300% increase in pick rate, and also better labor efficiency. Oliver MihmExecutive VP & COO at Plexus00:28:35And so we're now rippling that through another three facilities this fiscal year, and that's a way that we can continue to make and create additional capacity with the existing bricks and mortar that we have. Operator00:28:53Your next question comes from the line of Melissa Fairbanks with Raymond James. Your line is now open. Melissa FairbanksVice President at Raymond James Financial00:29:02Hey guys, thanks so much. Pat, I just wanted to touch on the cash cycle days since this is the last topic that you spoke about before we went into Q and A. We have seen it leveling out around sixty eight days. Obviously, a significant improvement from where we were a year ago. Just wondering understanding that there is going to be some fluctuation on a quarterly basis, but wondering what your longer term target is for those cash cycle days? Patrick JermainEVP & CFO at Plexus00:29:33Yes. Thanks, Melissa. I mean, it's changed a bit because as you recall last year, I was probably in the kind of low 70s to mid-70s. And then we frankly were a bit surprised ending the fiscal year in 'twenty four at sixty four days. And we've kind of continued in the 60s and that's where I'm guiding the fiscal third quarter. Patrick JermainEVP & CFO at Plexus00:29:54I think we have opportunity though to get back into kind of the mid to low 60s. I think that's a good target for us. I think there is opportunity around gross inventory to bring that down. But we do have to recognize we have sizable customer deposits also offsetting that gross inventory that some of that's going to be returned to customers in 2025 and 2026. But keep in mind that every one of those days that we're able to reduce frees up $10,000,000 of cash flow for us. Patrick JermainEVP & CFO at Plexus00:30:28And it's been a huge improvement to our balance sheet from a borrowing standpoint and ability to support our buyback and other growth initiatives. Melissa FairbanksVice President at Raymond James Financial00:30:40Yes, absolutely. Absolutely. Oliver, I had a follow-up for you. One thing that you said was kind of interesting. In the aerospace and defense segment, you noted that you won some new product launches, two of which had previously been done in house by the customer. Melissa FairbanksVice President at Raymond James Financial00:31:01Correct me if I'm misunderstanding what you said. But I'm curious what some of the dynamics are. You know, this is kind of something that we've talked about a lot of outsourcing of manufacturing. If it's in aerospace and defense, that's always an area that tends to move very, very slowly. And so I'm curious what some of the dynamics behind two of those wins or or some of the your newer product launch wins, was. Oliver MihmExecutive VP & COO at Plexus00:31:30Yeah. I think just, Melissa, in general so you did hear correctly. And just in general, I think as customers are experiencing different external market conditions as well as if they have significant changes Oliver MihmExecutive VP & COO at Plexus00:31:44in Oliver MihmExecutive VP & COO at Plexus00:31:44capacity, so or relative to demand sorry. Should say significant changes in demand relative to their capacity. Those are the types of instances that we've historically seen them cause the question, hey, should we take this outside instead of doing this inside? I think the other piece here that we also talked about with the aerospace and defense sector, largest ever engineering design win. And as we've talked about historically, as we do that engineering product development, we're often then doing basically all the time doing the production on the tail end of that. Oliver MihmExecutive VP & COO at Plexus00:32:18And so that would be another circumstance that would cause that production to come to Plexus. Todd KelseyPresident & CEO at Plexus00:32:22I think one of the things from a broader trend standpoint that we're seeing is more of an openness to outsource. I mean, are long term historical industrial companies that are becoming that have manufacturing assets that are becoming much more open to outsourcing and see the benefits of it. I think it's a good long term trend for us. Operator00:32:48Your next question comes from the line of Steven Fox with Fox Advisors LLC. Your line is now open. Steven FoxFounder & CEO at Fox Advisors, LLC00:32:57Hi, good morning guys. I had two questions also. First of all, I was wondering if you could provide a little bit more color on the healthcare sustainable services program that you highlighted. I think you said you're doing in Guadalajara, but, can you give us a sense for, just sort of what exactly you're doing, how it ramps and, what it could mean for other wins in the future? Then I have a follow-up. Todd KelseyPresident & CEO at Plexus00:33:22Yes. So we can't get into a lot of details around the product itself, Steve. I mean other than to say it involves a single use aspect of a piece of capital equipment is what I would say. The potential the program has potential to ramp though over a two to three quarter time period and the volumes could be fairly large. Steven FoxFounder & CEO at Fox Advisors, LLC00:33:49And does it open up for any other opportunities if you prove yourself capable of ramping it? Todd KelseyPresident & CEO at Plexus00:33:55Well, it's definitely follow on with the similar program. So the volumes that we're considering right now could go up from there and could result in future wins. The relationship with the customer itself is a very strong and very long term partnership with one of our top healthcare customers. Steven FoxFounder & CEO at Fox Advisors, LLC00:34:16Understood. Thank you. And then just as a follow-up, I couldn't help but notice that like your June guidance for operating margins at the high end has a six handle. And I thought after the September, we were sort of assuming you wouldn't get back to like 6% margins to the fourth quarter of this fiscal year. Is there any reason for thinking that can happen sooner than previously assumed? Steven FoxFounder & CEO at Fox Advisors, LLC00:34:41Or anything else we should think about with the high end of the guidance? Thanks. Todd KelseyPresident & CEO at Plexus00:34:46Yes. I think it's on two fronts, Stephen. It has to do a lot with what we saw in the results for Q2. But I think we're seeing the benefits of our operational efficiencies flow through quicker than we had anticipated. We're also seeing a nice mix of services with engineering and sustaining services being quite strong. Todd KelseyPresident & CEO at Plexus00:35:04So I think the two of those are leading to us accelerating margin growth a little bit faster than we had anticipated. So we think Q3 is certainly a potential that it could start with a six as is Q4. Operator00:35:24Your next question comes from the line of Ruben Roy with Stifel. Line is now open. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:35:32Thank you. Hi, guys. Todd, I wanted to have a quick follow-up on your tariff answers to David's questions. And obviously, lot of uncertainty out there at this point, a lot of moving pieces. But in terms of it sounds like you've had some discussions with and how the costs would look like in pass throughs, etcetera. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:35:55Have you gotten any feedback on movement of products based on tariffs at this point? Or is that still on the come? Todd KelseyPresident & CEO at Plexus00:36:04Yes. It's still pretty early, Ruben. What we're seeing is there's a handful of customers that I would say we're doing some modeling on about potential movement of product. There's a small amount of product that we're we're locating. We're moving out of China into different geographies right now. Todd KelseyPresident & CEO at Plexus00:36:22But it's relatively limited, I would say, this point. And I think in general, our customers are waiting to see what the end state looks like before they make any decisions or really push too far in that area. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:36:35Got it. Thank you, Todd. And then a quick follow-up as well for Oliver. On the industrial commentary, Oliver, in the green shoots, it sounded to me like that was sort of a statement that it had to do more with inventory than demand or sort of new programs, etcetera. Is that the way to think about it? Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:36:54Or are you actually starting to see some movement in terms of demand on some of your industrial from some of your industrial customers? Oliver MihmExecutive VP & COO at Plexus00:37:03Yes. I guess I can slate those two, right? And so I think what we had been seeing over prior quarters was customers had a lot of extra inventory in the channel and that was muting their demand to us. And so now that that inventory it seems like we've maybe bottomed out in aspects of our broader industrial portfolio and then that manifests to us as a stronger demand signal. So does that answer the question? Shawn HarrisonVice President - IR at Plexus00:37:32Ruben, it's Sean. I would say there are some pockets where we believe the end demand is strengthening above some of the moderation in inventory headwinds. But it's small pockets right now. It's spring in the Midwest, so green shoots is an appropriate term. Operator00:38:02And your next question comes from the line of Chris Grego with Needham. Chris GrengaEquity Research Associate at Needham & Company00:38:11Hi, good morning. This is Chris on for Jim. Thank you for taking the questions. As you are approaching the opening of the new Penang site this summer, it sounds like the capacity is filling up and particularly with the MRI assembly win and others. Do you see any gross margin headwind as that facility ramps over the course of the next few quarters? Patrick JermainEVP & CFO at Plexus00:38:42Yes. Chris, this is Pat. We'll see a little, but it's going to be very minimal. And Asia, especially Malaysia has a great track record of getting up to profitability within a three to four quarter period, and then getting to corporate averages soon after that. So I'm pretty confident in that. Patrick JermainEVP & CFO at Plexus00:39:04And I mean occasionally we have this. We had that with Thailand. And so it's something we factor into our margin targets that we will be expanding periodically. But I think in this case it will come pretty quick. Chris GrengaEquity Research Associate at Needham & Company00:39:22Got it. Thank you. And just looking at the funnel chart, healthcare it bumps around, but it looks like it ticked down a bit sequentially in Q2. And just wondering how I should think about that relative to the improvements that you're seeing in underlying demand and new program ramps? Oliver MihmExecutive VP & COO at Plexus00:39:50Yeah. So I think just talking about the funnel couple of things. We've mentioned this in prior calls but haven't maybe talked about in a while. We don't manage funnel and wins to quarterly boundaries like we would say operational results. And so you'll see some ebb and flow from one quarter to the next. Oliver MihmExecutive VP & COO at Plexus00:40:08I'd also highlight for healthcare versus prior year, the funnel is up. Sorry, our wins are up 8% versus prior year. So just generally I think we continue to be optimistic about our ability to grow there. We've also mentioned with the extra demand increases we're seeing from customers we expect that to flow through to additional decision making which would then Oliver MihmExecutive VP & COO at Plexus00:40:30flow through to additional wins. Chris GrengaEquity Research Associate at Needham & Company00:40:35Great. Thank you very much. Operator00:40:41Your next question comes from the line of Tee Barger with KeyBanc Capital Markets. Your line is now open. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:40:50Thanks. Good morning. I wanted to go back to Industrial. If you exclude semi cap equipment, is the net effect of the other industrial submarkets showing growth? Or is that still flat or down? Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:41:03And any specifics you can give around heavy equipment, power management, automation would be great. Todd KelseyPresident & CEO at Plexus00:41:09Yes, Steve. Good morning. This is Todd. So just to give you a little bit of insight, the balance of industrial except excluding semi cap is down. And it's down fairly reasonably because our semi cap business is up, I would call it in the high teens for the fiscal year. Todd KelseyPresident & CEO at Plexus00:41:28So the sectors that are seeing some pressure are test and measurement, heavy equipment, energy and electrification. So it's pretty broad based of seeing headwinds right now excluding semi cap with maybe the exception being communications, which is a bit volatile though as well. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:41:51Yeah. That's great. I appreciate it. And I understand the comments about maybe seeing inventory stabilization. You said there hasn't been demand degradation or pull forward. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:42:02I guess, to the extent that you know, are you seeing any uptick in aftermarket service business for Industrial Products, meaning end users maybe slowing CapEx decisions and that's driving an uptick in MRO? And if that did happen, what's the margin benefit for you or the margin impact? Shawn HarrisonVice President - IR at Plexus00:42:24Steve, it's Sean. So just to put a fine point on Todd's comments, that was on a year over year basis. Quarter over quarter, the non semi cap industrial is looking up. We aren't seeing any kind of sustaining services uptick for that market sector or incremental demand of someone trying to sweat the assets in the time of uncertainty. This is either less inventory headwinds or better pure demand. Operator00:42:59Your next question comes from the line of Anja Sotherstorm with Sidoti. Your line is now open. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:43:09Hi, thank you for taking my question. I'm curious within the engineering wins that you mentioned that was very strong, helped by diversification efforts. Can you elaborate on what those are? Todd KelseyPresident & CEO at Plexus00:43:22Yes. So historically, our engineering wins were dominated by the health care market sector. And we saw some, over recent quarters, some substantial diversification within those markets where it's really hitting all of our sectors. Oliver had mentioned the very large aerospace and defense win that we had, which was our largest ever. We had a large life sciences win this quarter and we performed very well in both industrial and semi cap as well. Todd KelseyPresident & CEO at Plexus00:43:52So it's been pretty broad based, it's like I say, it's a good sign for the future in that we see that diversification because engineering wins lead to manufacturing wins. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:44:07Thank you. And also you mentioned share gains. Who are you taking shares from? Shawn HarrisonVice President - IR at Plexus00:44:16Anya, it's Sean. Shawn HarrisonVice President - IR at Plexus00:44:17It's broad based. And so based upon end market, based upon submarket, we are seeing share gains based upon as Oliver highlighted, the strength of our executive relationships, the strength of our execution, our focus on our customers' success. In some cases with the one example Oliver highlighted, we were the sole EMS company our customer engaged with just because of the strength of the relationship. Not going to put a fine point and make it that easy for you on where we're winning share gains, but I would say it's broad based across our market sectors and sub sectors. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:44:53Okay. Thank you. And I'm also curious in terms of, the weakening dollar. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:44:57Are you hedging for that? Or how are you thinking about Patrick JermainEVP & CFO at Plexus00:45:04We are hedging. We do a portion of our non U. S. Currencies hedging. So we do have some exposure. Patrick JermainEVP & CFO at Plexus00:45:15And with the volatility especially, that we saw the last month, we could see some impact on our P and L. But we are hedging for it and we'll watch for Operator00:45:37next question comes from the line of Tee Barger with KeyBanc Capital Markets. Your line is now open. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:45:44Great. Thanks for taking the follow-up. Really good to hear semi cap is running at mid teens. Can you talk through what you're seeing for leading edge metrology versus memory versus trailing edge? Shawn HarrisonVice President - IR at Plexus00:45:57Yes. It's better than mid teens, Steve. So not going to dilute the strength we're seeing. But what we're seeing is, as Oliver highlighted, growth across semi cap in terms of wins with customers. We play front end to back end. Shawn HarrisonVice President - IR at Plexus00:46:14We're seeing growth across the customers in all areas and some customers maybe they were a little over inventory the past two years and so demand is coming back there as well. But I wouldn't put it into a single bucket of technology or front end or back end where we're seeing strength. It's pretty broad based and I would just go back to the fact that we've won a lot of market share over the past couple of years from competitors as well as new programs coming to market. We had an effort as highlighted in engineering but also in manufacturing to diversify and that's bearing fruit as well. And so it's really broad based strength for us. Shawn HarrisonVice President - IR at Plexus00:46:52I wouldn't I hesitate to characterize it was one area of semi cap versus another because it's broad based. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:47:00Got it. Okay. And then one last one. Some of the semi cap names have been talking about a memory tool upgrade cycle rather than new tool builds. If that happens, do you get that business if if it was your original build? Oliver MihmExecutive VP & COO at Plexus00:47:17Yes. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:47:20Perfect. Thanks. Operator00:47:26That concludes our question and answer session. I will now turn the conference back over to Mr. Todd Kelsey, President and CEO for closing remarks. Todd KelseyPresident & CEO at Plexus00:47:36All right. Thank you, Angela. I'd like to thank shareholders, investors, analysts and our Plexus team members who joined the call this morning. Concluding with a few summary comments, with our investment in talent, technology, facilities and tools, we believe Plexus is well positioned to enable our customers' success in this dynamic environment in support of our vision to help create the products that build a better world. Evidence of this view is the breadth of our new program wins across our solutions, markets and technologies. Todd KelseyPresident & CEO at Plexus00:48:10Further, while we are acknowledging the macroeconomic uncertainty, we continue to anticipate meaningful EPS growth in fiscal twenty twenty five, driven by revenue growth in each of our market sectors, strong operating margin performance and continued free cash flow generation used to create additional shareholder value. Thank you again and have a nice day.Read moreParticipantsExecutivesShawn HarrisonVice President - IRTodd KelseyPresident & CEOOliver MihmExecutive VP & COOAnalystsPatrick JermainEVP & CFO at PlexusDavid WilliamsEquity Research Analyst at The Benchmark Company LLCMelissa FairbanksVice President at Raymond James FinancialSteven FoxFounder & CEO at Fox Advisors, LLCRuben RoyManaging Director - Equity Research at Stifel Financial CorpChris GrengaEquity Research Associate at Needham & CompanySteve BargerManaging Director - Equity Research at KeyBanc Capital MarketsAnja SoderstromSenior Equity Research Analyst at Sidoti & CompanyPowered by Conference Call Audio Live Call not available Earnings Conference CallPlexus Q2 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K) Plexus Earnings HeadlinesAnalysts Offer Insights on Technology Companies: Plexus (PLXS) and Intel (INTC)April 26, 2025 | markets.businessinsider.comPlexus (NASDAQ:PLXS) Trading Down 3.7% Following Weak EarningsApril 26, 2025 | americanbankingnews.comVirtually Limitless Energy?A radical energy breakthrough could change everything. Scientists at MIT and a stealth startup may have discovered a new form of power—what some are calling “Helios” technology. It’s not solar, wind, or even nuclear fission. In fact, it could yield more energy than oil, gas, and coal combined—without harmful byproducts. This obscure company could be at the center of the next trillion-dollar energy revolution.May 1, 2025 | Stansberry Research (Ad)Plexus sees Q3 adjusted EPS $1.65-$1.80, consensus $1.72April 25, 2025 | markets.businessinsider.comPlexus price target lowered to $145 from $152 at StifelApril 25, 2025 | markets.businessinsider.comPlexus anticipates $100M free cash flow for fiscal 2025 with EPS growth outlookApril 25, 2025 | msn.comSee More Plexus Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Plexus? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Plexus and other key companies, straight to your email. Email Address About PlexusPlexus (NASDAQ:PLXS) provides electronic manufacturing services in the United States and internationally. It offers design, develop, supply chain, new product introduction, and manufacturing solutions, as well as sustaining services to companies in the healthcare/life sciences, industrial/commercial, aerospace/defense, and communications market sectors. 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PresentationSkip to Participants Operator00:00:00Thank you for standing by. My name is Angela, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q2 twenty twenty five Plexus Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:26Thank you. I would now like to turn the call over to Mr. Shawn Harrison, Vice President of Investor Relations. You may begin. Shawn HarrisonVice President - IR at Plexus00:00:35Good 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, including without limitation those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation and future business outlook. Forward looking statements are not guarantees since there 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 ks filing for the fiscal year ended 09/28/2024, supplemented by our Form 10 Q filings and the Safe Harbor and fair disclosure statement in our 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. Shawn HarrisonVice President - IR at Plexus00:01:36Joining me today are Todd Kelsey, President and Chief Executive Officer Oliver Minn, Executive Vice President and Chief Operating Officer and Pat Germain, Executive Vice President and Chief Financial Officer. With today's earnings call, Todd will provide summary comments before turning the call over to Oliver and Pat for further details. With that, let me now turn the call over to Todd Kelsey. Todd? Todd KelseyPresident & CEO at Plexus00:01:58Thank you, Sean. Good morning, everyone. Please advance to slide three. Our commitment to our customer success during dynamic market environments is enabling a growing breadth of new program wins across Plexus' solutions. During our fiscal second quarter, we achieved our largest ever win for our sustaining services and our best quarterly engineering solutions wins performance in more than five years. Todd KelseyPresident & CEO at Plexus00:02:24In addition, our continued progress with initiatives to increase our operational and working capital efficiency resulted in robust fiscal second quarter financial performance. We see this momentum sustaining as we drive actions to navigate the current environment. In order to proactively help customers navigate current market complexities, we are strategically investing in talent such as our trade compliance and logistics organization. We also continue to invest in technology, including our growing internal use of AI facilities, including our new site in Malaysia that will open this summer and advanced capabilities, including numerous tools focused on process automation, efficiency and achieving zero defects. As we look ahead, we continue to anticipate up to $100,000,000 of free cash flow for fiscal twenty twenty five. Todd KelseyPresident & CEO at Plexus00:03:19Our substantial liquidity and robust free cash flow generation provides the opportunity to create additional shareholder value. Finally, while conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate achieving meaningful EPS growth in fiscal twenty twenty five, capitalizing upon revenue growth in each of our market sectors, sequential revenue growth for the remainder of the fiscal year, robust operating margin performance and ongoing free cash flow deployment. Please advance to slide four. Revenue of nine eighty million dollars met our guidance. As the fiscal second quarter progressed, we saw signs of incremental strengthening and outlooks from healthcare customers, which offset modest reductions in other markets. Todd KelseyPresident & CEO at Plexus00:04:12Non GAAP operating margin of 5.7% met the high end of our guidance range. Our operational efficiency efforts and stronger performance from our Engineering Solutions and Sustaining Services helped to offset a portion of the typical seasonal cost headwinds. Non GAAP EPS of $1.66 exceeded our guidance, benefiting from strong operating margin performance as well as slightly favorable tax rate and lower than anticipated non operating expenses. Finally, we delivered $16,500,000 of free cash flow, significantly better than our expectations. Please advance to slide five. Todd KelseyPresident & CEO at Plexus00:04:57For the fiscal second quarter, we won 42 manufacturing programs worth $2.00 $5,000,000 in revenue annually when fully ramped into production. During the quarter, we closed our largest ever sustaining services win in support of creating success for an industry leading health care customer. Also included in the quarterly wins are exciting manufacturing share gains and opportunities to support growth technologies in all of our market sectors. Furthermore, we generated the highest quarterly wins performance for our Engineering Solutions since the fiscal fourth quarter of twenty nineteen. The Engineering wins performance reflected strong engagement across all of our market sectors, highlighting the extensiveness of our capabilities and effectiveness of the team's diversification efforts. Todd KelseyPresident & CEO at Plexus00:05:45The breadth of this quarter's wins performance across our solutions, market sectors and technologies is a strong leading indicator of Future Plexus revenue growth. Please advance to Slide six. Our commitment to sustainability is integrated with our core value of innovating responsibly as we boldly drive positive change and promote a sustainable future. Our people are the heart of who we are and what we do. I'm therefore incredibly proud to share that Wisconsin Manufacturers and Commerce selected Plexus as Manufacturer of the Year mega category in recognition of our innovation, philanthropy, technological advancements, commitment to customer satisfaction, financial performance and creation of quality jobs. Todd KelseyPresident & CEO at Plexus00:06:33Thank you to our incredible team members, partners and local communities whose contributions support fulfilling our vision of helping to create the products that build a better world. We also continue to deliver innovative solutions to create customer success. During our fiscal second quarter, our Plexus Xiamen team celebrated a new partnership with GE Healthcare China to advance the green supply chain ecosphere initiative by focusing on maximizing the recycling and reuse of valuable medical equipment and promoting sustainability. We also recently partnered with our customer Bevy to celebrate Earth Day. Bevy's mission is to unbottle the future through their smart, bottleless water dispensers. Todd KelseyPresident & CEO at Plexus00:07:19Throughout our partnership, Bevy's smart water dispenser, which is manufactured at our Appleton, Wisconsin facility, has saved the equivalent of over two eighteen million plastic water bottles from landfills. Todd KelseyPresident & CEO at Plexus00:07:32Our commitment to delivering excellence includes reducing our environmental impact. Our team members in Oradio, Romania joined the Planning Hope initiative, working with over 100 volunteers to plant 1,000 trees. Todd KelseyPresident & CEO at Plexus00:07:45And finally, we are excited to announce the release of our annual sustainability report later in the fiscal third quarter. The 2024 report highlights our continued commitment to innovating responsibly as we've always been driven to do more for our customers, our team members and the world. Please advance to slide seven. We're guiding fiscal third quarter revenue of 1,000,000,000 to $1,040,000,000 non GAAP operating margin of 5.7% to 6.1% and non GAAP EPS of $1.65 to $1.8 While conservatively assessing the remainder of the fiscal year and acknowledging the uncertainty associated with tariffs, we continue to anticipate sequential revenue growth for our fiscal fourth quarter combined with another quarter of strong operating margin performance. This outlook supports a continued view that Plexus will achieve meaningful EPS growth in fiscal twenty twenty five with revenue growth in each of our market sectors, robust operating margin performance and ongoing free cash flow deployment. Todd KelseyPresident & CEO at Plexus00:08:54We continue to expect year over year growth for our Aerospace and Defense market sector supported by robust demand for our solutions supporting defense and commercial space products. Growth forecasts improved slightly in our HealthcareLife Sciences market sector. We continue to benefit from new program ramps and share gains, while Healthcare customer demand is improving after a prolonged period of inventory correction. We continue to expect growth in our Industrial market sector. This expectation reflects robust growth in semi cap associated with contributions from new program wins and share gains amidst an outlook of modest semi cap market growth. Todd KelseyPresident & CEO at Plexus00:09:34In addition, we see some early signs that inventory corrections may have peaked in the broader industrial market. Finally, Plexus uniquely supports customer success, leveraging our comprehensive product lifecycle solutions and passion for operational excellence delivered through our globally united team. Our ongoing strategic investments in talent, technology, facilities and advanced capabilities position Plexus to proactively navigate evolving landscapes and dynamic market environments to enable our customers' success. I will now turn the call over to Oliver for additional analysis of the performance of our market sectors. Oliver? Oliver MihmExecutive VP & COO at Plexus00:10:17Thank you, Todd. Good morning. I will begin with a review of the fiscal second quarter performance of each of our market sectors, our expectations for each sector for the fiscal third quarter and some directional sector commentary for fiscal twenty twenty five. I will also review the annualized revenue contribution of our wins performance for each market sector and then provide an overview of our funnel of qualified manufacturing opportunities. Starting with our aerospace and defense sector on slide eight, Revenue increased 8% sequentially in the fiscal second quarter meeting our expectation of a high single digit increase. Oliver MihmExecutive VP & COO at Plexus00:10:53Continued softness in the commercial aerospace sub sector was offset by demand increases in both the defense and space sub sectors. We expect revenue for the aerospace and defense sector to be up mid single digits in the fiscal third quarter reflective of broad based increases in customer demand and an increase in volume for a new product ramp. Our wins for the fiscal second quarter for the aerospace and defense sector were healthy at $27,000,000 Reflective of our continued strength of execution, we received awards for products currently manufactured in house at two of our customers in the defense sub sector. We also received an award for further new product launch builds for a customer that continues to invest in their space product portfolio. Plexus is the sole provider for these new product launch builds. Oliver MihmExecutive VP & COO at Plexus00:11:41And our focus to expand our engineering design services with aerospace and defense customers continues to build momentum with the award of our largest ever aerospace and defense sector design project. Consistent with our outlook last quarter, we expect continued sequential growth as we finish the fiscal year, resulting in modest growth for our aerospace and defense market sector in fiscal twenty twenty five. Strength in the defense and space subsectors is being substantially offset by reduced near term demand in the aerospace subsector, muting the impact of robust underlying long term commercial aerospace market demand and the anticipated growth contribution from our ongoing wins and share gains. Please advance to slide nine. Revenue in our HealthcareLife Sciences market sector was up 10% sequentially for the fiscal second quarter beating our expectation of a high single digit increase. Oliver MihmExecutive VP & COO at Plexus00:12:37Inside the quarter demand increases across a number of customers contributed to the strong result. For the fiscal third quarter, we expect the HealthcareLife Sciences sector to grow revenue mid single digits driven primarily by increased end market demand and supported by strength from new program ramps. Fiscal second quarter HealthcareLife Sciences sector wins of $118,000,000 included our largest ever award for sustaining services. This substantial award from an existing customer marks a shift in the strategy from in house to outsourced services. Our strong history of execution with this customer and the strength of our executive relationships contributed to the award. Oliver MihmExecutive VP & COO at Plexus00:13:18This product will be serviced in our Guadalajara, Mexico campus. Our wins also included subassemblies for a customer's next generation MRI support equipment. Again, our historical strength of execution and executive partnerships contributed to the award. In this instance, our customer engaged exclusively with Plexus on this opportunity. These assemblies will be built in our Penang, Malaysia campus. Oliver MihmExecutive VP & COO at Plexus00:13:45Our Penang, Malaysia campus also received an award to build subassemblies in support of an orthopedic robotic assisted surgical system. As we look to the full year, our outlook for fiscal twenty twenty five for the healthcare life sciences sector has slightly improved on the strength of new program ramps and multiple customers increasing demand. Advancing to the industrial sector on slide 10, revenue decreased 10% sequentially in the fiscal second quarter. The result was in line with our expectation of a high single digit to low double digit revenue decline. Near term demand increases across a number of customers for both existing and new product production offset other forecast changes in the portfolio. Oliver MihmExecutive VP & COO at Plexus00:14:31Our fiscal third quarter outlook for the industrial sector of a low single digit increase reflects demand strength in our semi cap sub sector and new program ramp strength in our energy management sub sector. The industrial market sector wins for the second quarter were $60,000,000 As a result of the continued non linearity of the new technology transition within the broadband communication sub sector, our customer has awarded us further production of legacy products as some end customers invest to optimize their installed infrastructure. We also expanded our engagement with a leading construction and mining equipment customer as they awarded us production for a safety system that was part of a recent acquisition. Flexus' ability to support the resulting transition reflects a high value add offering and the strength of our partnership. Finally, our wins performance continued to show strength across the portfolio of our semi cap customers with both new program wins and share gains. Oliver MihmExecutive VP & COO at Plexus00:15:32Our expectation of growth for the industrial sector in fiscal twenty twenty five remains unchanged. Share gains and new program ramps are driving robust growth for our semi cap sub sector, while despite some early green shoots trends remain generally uneven across the majority of our industrial submarkets. Please advance to slide 11 for a review of our funnel of qualified manufacturing opportunities. The funnel of qualified manufacturing opportunities remains robust at $3,500,000,000 Our positive outlook for Funnel Health is in part supported by the strength of early stage opportunities in our industrial and aerospace and defense sectors. In summary, after considering current dynamic market conditions, our share gains, program ramps, continued strength in certain subsectors and increased demand in recently challenged subsectors, we continue to forecast sequential revenue growth during the second half of fiscal twenty twenty five. Oliver MihmExecutive VP & COO at Plexus00:16:34Before turning the call over to Pat, reflecting on the recent tariff volatility, I'd like to take a moment to recognize and appreciate the efforts of our trade compliance team and our Global Plexus team as we continue to provide agile, proactive and complicated analysis and responses in support of our customers' success. Our customers have noted their appreciation and we'd like to add our appreciation to theirs. Thank you. I will now turn the call over to Pat. Pat? Patrick JermainEVP & CFO at Plexus00:17:03Thank Patrick JermainEVP & CFO at Plexus00:17:03you, Oliver, and good morning, everyone. Our fiscal second quarter results are summarized on slide 12. Gross margin of 10% was at the top end of our guidance due to a favorable mix of service offerings and better fixed cost leverage. Productivity improvements associated with operational efficiency initiatives helped to reduce the impact from our typical seasonal compensation cost increases. Selling and administrative expense of $49,000,000 was at the midpoint of our guidance. Patrick JermainEVP & CFO at Plexus00:17:35Non GAAP operating margin of 5.7% was at the top end of our guidance due to the strength in gross margin. Non operating expense of $3,800,000 is favorable to expectations due to improved foreign exchange performance and lower than anticipated interest expense. Non GAAP diluted EPS of 1.66 exceeded our guidance due to the items mentioned and a slightly favorable tax rate. Turning to our cash flow and balance sheet on slide 13. As shown across these financial metrics, our performance was strong and consistent with the fiscal first quarter. Patrick JermainEVP & CFO at Plexus00:18:15As a result, we delivered $36,700,000 in cash from operations and spent $20,200,000 on capital expenditures, generating free cash flow of $16,500,000 This performance exceeded expectations and positions us well to meet our fiscal twenty twenty five free cash flow projection of up to $100,000,000 During the quarter, we continued to return cash to shareholders through our share repurchase program by acquiring approximately 86,000 shares of our stock for $12,200,000 We have approximately $25,000,000 available under the current $50,000,000 authorization. We are taking advantage of our strong financial performance and robust balance sheet to hold an earlier review with our Board of Directors to discuss an additional buyback authorization once the current program is completed. This review is planned for next month. Similar to the prior quarter, we ended the fiscal second quarter in a net cash position. We had $15,000,000 outstanding under our revolving credit facility with $485,000,000 available to borrow. Patrick JermainEVP & CFO at Plexus00:19:30Given our available capacity, we anticipate borrowing under this facility when our $100,000,000 placement notes mature this June. We will take market conditions into consideration if and when we would refinance any amount longer term. For the fiscal second quarter, we delivered invested capital of 13.7%, which was four eighty basis points above our weighted average cost of capital. Our invested capital base is significantly lower than the prior year due to our efforts to drive sustained improvement in working capital. This combined with improved operating performance drove the expansion in ROIC over the prior year. Patrick JermainEVP & CFO at Plexus00:20:14Cash cycle at the end of the fiscal second quarter was sixty eight days, three days favorable to expectations and consistent with the fiscal first quarter. This result represents a 25% improvement in our cash cycle days from one year ago. Please turn to Slide 14 for details on our cash cycle. With a continued sequential reduction in gross inventory dollars this quarter by 10,000,000 we experienced a two day improvement in inventory days. We have now reduced the dollar value of inventory for five consecutive quarters with gross inventory $370,000,000 lower than the fiscal twenty twenty three high point. Patrick JermainEVP & CFO at Plexus00:20:57For days in advance payments, we experienced a two day reduction with $14,000,000 being returned to customers during the quarter. As Todd has already provided the revenue and EPS guidance for the fiscal third quarter, I'll review some additional details which are summarized on slide 15. Fiscal third quarter gross margin is expected to be in the range of 9.9% to 10.2%. At the midpoint, gross margin would be slightly improved from last quarter. We expect selling and administrative expense in the range of 50,000,000 to $51,000,000 which is fairly consistent with the prior quarter. Patrick JermainEVP & CFO at Plexus00:21:34Note that this estimate is inclusive of approximately $6,400,000 of stock based compensation expense. Fiscal third quarter non GAAP operating margin is Fiscal expected to be in the range of 5.7% to 6.1% exclusive of stock based compensation expense. Non operating expense is anticipated to be approximately $4,500,000 We continue to anticipate lower interest expense consistent with our reduced borrowing. For the fiscal third quarter, we are estimating an effective tax rate between 1416% and diluted shares outstanding of approximately $27,600,000 In support of anticipated program ramps, our expectation for the balance sheet is that working capital investments will increase compared to the fiscal second quarter. However, based on our anticipated sequential revenue growth, we expect our cash cycle days to remain consistent with the fiscal second quarter. Patrick JermainEVP & CFO at Plexus00:22:34Hence, are guiding a cash cycle range of sixty six to seventy days. With investments to support anticipated program ramps and higher levels of capital spending associated with completing the build out of our new facility in Penang, Malaysia, we expect breakeven to a slight generation of free cash flow for the fiscal third quarter. Fiscal '20 '20 '5 capital spending is expected to be in the range of 110,000,000 to $130,000,000 slightly lower than our previous guidance. Once again, given our improved performance through the first half of the fiscal year, we anticipate generating up to $100,000,000 of free cash flow for fiscal twenty twenty five. With that, Angela, let's now open the call for questions. Operator00:23:26Thank you. We will now begin the question and answer simply press star one again. If you are called upon to ask your question and are listening by loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Also, Your first question comes from the line of David Williams from The Benchmark Company. Your line is now open. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:07Hey, good morning everyone. Thanks for taking the question and congratulations on just navigating this environment as well as you are here. Patrick JermainEVP & CFO at Plexus00:24:14Thank you, David. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:16Yes. So lots I think there's lots of things that we David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:19could talk about here. But I guess first is really around the tariffs and this has been obviously a big topic of discussion. But in the past, you've talked about your in country, four country kind of strategy that has helped there and you talked about hiring some logistics and some support staff. But just can you talk maybe a little more about how the tariffs are impacting you? And are you hearing anything from your customers? David WilliamsEquity Research Analyst at The Benchmark Company LLC00:24:42Are you seeing their forecast shift? And maybe what are those discussions that you're having today with them? Todd KelseyPresident & CEO at Plexus00:24:49Sure. So I mean, first of all, what I would say is we would all like to get to a steady state because I think that will help us plan for the future and move forward with our customers. Because right now our customers are largely taking a wait and see type approach. We're doing a bit of modeling for some customers on potentially moving regions, although those aren't necessarily to The U. S. Todd KelseyPresident & CEO at Plexus00:25:14They could just be to lower tariff jurisdictions or things such as that. But in general, we believe we're positioned really well as we move forward through this. One is the investments in trade compliance from a standpoint of people, tools and process. Again, to remind everybody on the call, we pass the tariffs on to our customers, so we don't absorb those costs ourselves. And that's moving forward fine as we would anticipate it to right now. Todd KelseyPresident & CEO at Plexus00:25:43And we think we're positioned well from a footprint standpoint and a services and tools standpoint that we'll be able to adjust and help our customers achieve a successful solution regardless of what that final state is. We have available capacity in each of our regions, including within The U. S, so we're well positioned to be able to do that. We still think an in region, four region is the likely end state as this continues to migrate. We think that's the typical solution that we'd get towards. Todd KelseyPresident & CEO at Plexus00:26:14But we again believe we're well positioned to continue to adjust as our customers see the final end state. One of the things from a standpoint of demand too, David, at this point we're seeing no impact to demand, and that includes no demand degradation or no pull forward into the current into earlier time periods right now. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:26:40Okay. Very good. Certainly appreciate the color there. And then maybe you talked a little bit about having excess capacity. But if you think about new facilities, if you were to build that, can you talk a little bit about that CapEx investment and then the timing in order to bring up a new facility? David WilliamsEquity Research Analyst at The Benchmark Company LLC00:26:58How quickly can that happen if a customer came to you and said, Hey, we want to move to The U. S. If you David WilliamsEquity Research Analyst at The Benchmark Company LLC00:27:02didn't have capacity? Patrick JermainEVP & CFO at Plexus00:27:04Yes. Well, the good news, David, this is Pat. We've got really good capacity in all three of our regions. As we mentioned, we've got the Penang Malaysia site coming on board this summer. Patrick JermainEVP & CFO at Plexus00:27:15We've got available capacity in Europe and then in Mexico and The U. S. So all three of those regions can handle any additional volume that's put into it. How quickly if the need would arise in the future, it's probably a four to six quarter period to do that build. But with some of the improvements we're making within our facilities and Oliver could talk more about this, but we're trying to expand capacity within our existing facilities through automation efforts and a number of other initiatives that can delay the need for a new site after we put the one in Malaysia. Oliver MihmExecutive VP & COO at Plexus00:27:59Yeah, I can just expanding on that. As we drive operational improvements into our manufacturing facilities not only are we working on improvements that reduce our cost basis, but also on our asset utilization. And so Pat mentioned automation that could be process automation, material handling automation as a specific example there. We've automated our warehouse in Penang last fiscal year. And through doing that, we saw a 60% reduction in space utilization as we automated that warehouse, 300% increase in pick rate, and also better labor efficiency. Oliver MihmExecutive VP & COO at Plexus00:28:35And so we're now rippling that through another three facilities this fiscal year, and that's a way that we can continue to make and create additional capacity with the existing bricks and mortar that we have. Operator00:28:53Your next question comes from the line of Melissa Fairbanks with Raymond James. Your line is now open. Melissa FairbanksVice President at Raymond James Financial00:29:02Hey guys, thanks so much. Pat, I just wanted to touch on the cash cycle days since this is the last topic that you spoke about before we went into Q and A. We have seen it leveling out around sixty eight days. Obviously, a significant improvement from where we were a year ago. Just wondering understanding that there is going to be some fluctuation on a quarterly basis, but wondering what your longer term target is for those cash cycle days? Patrick JermainEVP & CFO at Plexus00:29:33Yes. Thanks, Melissa. I mean, it's changed a bit because as you recall last year, I was probably in the kind of low 70s to mid-70s. And then we frankly were a bit surprised ending the fiscal year in 'twenty four at sixty four days. And we've kind of continued in the 60s and that's where I'm guiding the fiscal third quarter. Patrick JermainEVP & CFO at Plexus00:29:54I think we have opportunity though to get back into kind of the mid to low 60s. I think that's a good target for us. I think there is opportunity around gross inventory to bring that down. But we do have to recognize we have sizable customer deposits also offsetting that gross inventory that some of that's going to be returned to customers in 2025 and 2026. But keep in mind that every one of those days that we're able to reduce frees up $10,000,000 of cash flow for us. Patrick JermainEVP & CFO at Plexus00:30:28And it's been a huge improvement to our balance sheet from a borrowing standpoint and ability to support our buyback and other growth initiatives. Melissa FairbanksVice President at Raymond James Financial00:30:40Yes, absolutely. Absolutely. Oliver, I had a follow-up for you. One thing that you said was kind of interesting. In the aerospace and defense segment, you noted that you won some new product launches, two of which had previously been done in house by the customer. Melissa FairbanksVice President at Raymond James Financial00:31:01Correct me if I'm misunderstanding what you said. But I'm curious what some of the dynamics are. You know, this is kind of something that we've talked about a lot of outsourcing of manufacturing. If it's in aerospace and defense, that's always an area that tends to move very, very slowly. And so I'm curious what some of the dynamics behind two of those wins or or some of the your newer product launch wins, was. Oliver MihmExecutive VP & COO at Plexus00:31:30Yeah. I think just, Melissa, in general so you did hear correctly. And just in general, I think as customers are experiencing different external market conditions as well as if they have significant changes Oliver MihmExecutive VP & COO at Plexus00:31:44in Oliver MihmExecutive VP & COO at Plexus00:31:44capacity, so or relative to demand sorry. Should say significant changes in demand relative to their capacity. Those are the types of instances that we've historically seen them cause the question, hey, should we take this outside instead of doing this inside? I think the other piece here that we also talked about with the aerospace and defense sector, largest ever engineering design win. And as we've talked about historically, as we do that engineering product development, we're often then doing basically all the time doing the production on the tail end of that. Oliver MihmExecutive VP & COO at Plexus00:32:18And so that would be another circumstance that would cause that production to come to Plexus. Todd KelseyPresident & CEO at Plexus00:32:22I think one of the things from a broader trend standpoint that we're seeing is more of an openness to outsource. I mean, are long term historical industrial companies that are becoming that have manufacturing assets that are becoming much more open to outsourcing and see the benefits of it. I think it's a good long term trend for us. Operator00:32:48Your next question comes from the line of Steven Fox with Fox Advisors LLC. Your line is now open. Steven FoxFounder & CEO at Fox Advisors, LLC00:32:57Hi, good morning guys. I had two questions also. First of all, I was wondering if you could provide a little bit more color on the healthcare sustainable services program that you highlighted. I think you said you're doing in Guadalajara, but, can you give us a sense for, just sort of what exactly you're doing, how it ramps and, what it could mean for other wins in the future? Then I have a follow-up. Todd KelseyPresident & CEO at Plexus00:33:22Yes. So we can't get into a lot of details around the product itself, Steve. I mean other than to say it involves a single use aspect of a piece of capital equipment is what I would say. The potential the program has potential to ramp though over a two to three quarter time period and the volumes could be fairly large. Steven FoxFounder & CEO at Fox Advisors, LLC00:33:49And does it open up for any other opportunities if you prove yourself capable of ramping it? Todd KelseyPresident & CEO at Plexus00:33:55Well, it's definitely follow on with the similar program. So the volumes that we're considering right now could go up from there and could result in future wins. The relationship with the customer itself is a very strong and very long term partnership with one of our top healthcare customers. Steven FoxFounder & CEO at Fox Advisors, LLC00:34:16Understood. Thank you. And then just as a follow-up, I couldn't help but notice that like your June guidance for operating margins at the high end has a six handle. And I thought after the September, we were sort of assuming you wouldn't get back to like 6% margins to the fourth quarter of this fiscal year. Is there any reason for thinking that can happen sooner than previously assumed? Steven FoxFounder & CEO at Fox Advisors, LLC00:34:41Or anything else we should think about with the high end of the guidance? Thanks. Todd KelseyPresident & CEO at Plexus00:34:46Yes. I think it's on two fronts, Stephen. It has to do a lot with what we saw in the results for Q2. But I think we're seeing the benefits of our operational efficiencies flow through quicker than we had anticipated. We're also seeing a nice mix of services with engineering and sustaining services being quite strong. Todd KelseyPresident & CEO at Plexus00:35:04So I think the two of those are leading to us accelerating margin growth a little bit faster than we had anticipated. So we think Q3 is certainly a potential that it could start with a six as is Q4. Operator00:35:24Your next question comes from the line of Ruben Roy with Stifel. Line is now open. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:35:32Thank you. Hi, guys. Todd, I wanted to have a quick follow-up on your tariff answers to David's questions. And obviously, lot of uncertainty out there at this point, a lot of moving pieces. But in terms of it sounds like you've had some discussions with and how the costs would look like in pass throughs, etcetera. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:35:55Have you gotten any feedback on movement of products based on tariffs at this point? Or is that still on the come? Todd KelseyPresident & CEO at Plexus00:36:04Yes. It's still pretty early, Ruben. What we're seeing is there's a handful of customers that I would say we're doing some modeling on about potential movement of product. There's a small amount of product that we're we're locating. We're moving out of China into different geographies right now. Todd KelseyPresident & CEO at Plexus00:36:22But it's relatively limited, I would say, this point. And I think in general, our customers are waiting to see what the end state looks like before they make any decisions or really push too far in that area. Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:36:35Got it. Thank you, Todd. And then a quick follow-up as well for Oliver. On the industrial commentary, Oliver, in the green shoots, it sounded to me like that was sort of a statement that it had to do more with inventory than demand or sort of new programs, etcetera. Is that the way to think about it? Ruben RoyManaging Director - Equity Research at Stifel Financial Corp00:36:54Or are you actually starting to see some movement in terms of demand on some of your industrial from some of your industrial customers? Oliver MihmExecutive VP & COO at Plexus00:37:03Yes. I guess I can slate those two, right? And so I think what we had been seeing over prior quarters was customers had a lot of extra inventory in the channel and that was muting their demand to us. And so now that that inventory it seems like we've maybe bottomed out in aspects of our broader industrial portfolio and then that manifests to us as a stronger demand signal. So does that answer the question? Shawn HarrisonVice President - IR at Plexus00:37:32Ruben, it's Sean. I would say there are some pockets where we believe the end demand is strengthening above some of the moderation in inventory headwinds. But it's small pockets right now. It's spring in the Midwest, so green shoots is an appropriate term. Operator00:38:02And your next question comes from the line of Chris Grego with Needham. Chris GrengaEquity Research Associate at Needham & Company00:38:11Hi, good morning. This is Chris on for Jim. Thank you for taking the questions. As you are approaching the opening of the new Penang site this summer, it sounds like the capacity is filling up and particularly with the MRI assembly win and others. Do you see any gross margin headwind as that facility ramps over the course of the next few quarters? Patrick JermainEVP & CFO at Plexus00:38:42Yes. Chris, this is Pat. We'll see a little, but it's going to be very minimal. And Asia, especially Malaysia has a great track record of getting up to profitability within a three to four quarter period, and then getting to corporate averages soon after that. So I'm pretty confident in that. Patrick JermainEVP & CFO at Plexus00:39:04And I mean occasionally we have this. We had that with Thailand. And so it's something we factor into our margin targets that we will be expanding periodically. But I think in this case it will come pretty quick. Chris GrengaEquity Research Associate at Needham & Company00:39:22Got it. Thank you. And just looking at the funnel chart, healthcare it bumps around, but it looks like it ticked down a bit sequentially in Q2. And just wondering how I should think about that relative to the improvements that you're seeing in underlying demand and new program ramps? Oliver MihmExecutive VP & COO at Plexus00:39:50Yeah. So I think just talking about the funnel couple of things. We've mentioned this in prior calls but haven't maybe talked about in a while. We don't manage funnel and wins to quarterly boundaries like we would say operational results. And so you'll see some ebb and flow from one quarter to the next. Oliver MihmExecutive VP & COO at Plexus00:40:08I'd also highlight for healthcare versus prior year, the funnel is up. Sorry, our wins are up 8% versus prior year. So just generally I think we continue to be optimistic about our ability to grow there. We've also mentioned with the extra demand increases we're seeing from customers we expect that to flow through to additional decision making which would then Oliver MihmExecutive VP & COO at Plexus00:40:30flow through to additional wins. Chris GrengaEquity Research Associate at Needham & Company00:40:35Great. Thank you very much. Operator00:40:41Your next question comes from the line of Tee Barger with KeyBanc Capital Markets. Your line is now open. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:40:50Thanks. Good morning. I wanted to go back to Industrial. If you exclude semi cap equipment, is the net effect of the other industrial submarkets showing growth? Or is that still flat or down? Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:41:03And any specifics you can give around heavy equipment, power management, automation would be great. Todd KelseyPresident & CEO at Plexus00:41:09Yes, Steve. Good morning. This is Todd. So just to give you a little bit of insight, the balance of industrial except excluding semi cap is down. And it's down fairly reasonably because our semi cap business is up, I would call it in the high teens for the fiscal year. Todd KelseyPresident & CEO at Plexus00:41:28So the sectors that are seeing some pressure are test and measurement, heavy equipment, energy and electrification. So it's pretty broad based of seeing headwinds right now excluding semi cap with maybe the exception being communications, which is a bit volatile though as well. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:41:51Yeah. That's great. I appreciate it. And I understand the comments about maybe seeing inventory stabilization. You said there hasn't been demand degradation or pull forward. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:42:02I guess, to the extent that you know, are you seeing any uptick in aftermarket service business for Industrial Products, meaning end users maybe slowing CapEx decisions and that's driving an uptick in MRO? And if that did happen, what's the margin benefit for you or the margin impact? Shawn HarrisonVice President - IR at Plexus00:42:24Steve, it's Sean. So just to put a fine point on Todd's comments, that was on a year over year basis. Quarter over quarter, the non semi cap industrial is looking up. We aren't seeing any kind of sustaining services uptick for that market sector or incremental demand of someone trying to sweat the assets in the time of uncertainty. This is either less inventory headwinds or better pure demand. Operator00:42:59Your next question comes from the line of Anja Sotherstorm with Sidoti. Your line is now open. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:43:09Hi, thank you for taking my question. I'm curious within the engineering wins that you mentioned that was very strong, helped by diversification efforts. Can you elaborate on what those are? Todd KelseyPresident & CEO at Plexus00:43:22Yes. So historically, our engineering wins were dominated by the health care market sector. And we saw some, over recent quarters, some substantial diversification within those markets where it's really hitting all of our sectors. Oliver had mentioned the very large aerospace and defense win that we had, which was our largest ever. We had a large life sciences win this quarter and we performed very well in both industrial and semi cap as well. Todd KelseyPresident & CEO at Plexus00:43:52So it's been pretty broad based, it's like I say, it's a good sign for the future in that we see that diversification because engineering wins lead to manufacturing wins. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:44:07Thank you. And also you mentioned share gains. Who are you taking shares from? Shawn HarrisonVice President - IR at Plexus00:44:16Anya, it's Sean. Shawn HarrisonVice President - IR at Plexus00:44:17It's broad based. And so based upon end market, based upon submarket, we are seeing share gains based upon as Oliver highlighted, the strength of our executive relationships, the strength of our execution, our focus on our customers' success. In some cases with the one example Oliver highlighted, we were the sole EMS company our customer engaged with just because of the strength of the relationship. Not going to put a fine point and make it that easy for you on where we're winning share gains, but I would say it's broad based across our market sectors and sub sectors. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:44:53Okay. Thank you. And I'm also curious in terms of, the weakening dollar. Anja SoderstromSenior Equity Research Analyst at Sidoti & Company00:44:57Are you hedging for that? Or how are you thinking about Patrick JermainEVP & CFO at Plexus00:45:04We are hedging. We do a portion of our non U. S. Currencies hedging. So we do have some exposure. Patrick JermainEVP & CFO at Plexus00:45:15And with the volatility especially, that we saw the last month, we could see some impact on our P and L. But we are hedging for it and we'll watch for Operator00:45:37next question comes from the line of Tee Barger with KeyBanc Capital Markets. Your line is now open. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:45:44Great. Thanks for taking the follow-up. Really good to hear semi cap is running at mid teens. Can you talk through what you're seeing for leading edge metrology versus memory versus trailing edge? Shawn HarrisonVice President - IR at Plexus00:45:57Yes. It's better than mid teens, Steve. So not going to dilute the strength we're seeing. But what we're seeing is, as Oliver highlighted, growth across semi cap in terms of wins with customers. We play front end to back end. Shawn HarrisonVice President - IR at Plexus00:46:14We're seeing growth across the customers in all areas and some customers maybe they were a little over inventory the past two years and so demand is coming back there as well. But I wouldn't put it into a single bucket of technology or front end or back end where we're seeing strength. It's pretty broad based and I would just go back to the fact that we've won a lot of market share over the past couple of years from competitors as well as new programs coming to market. We had an effort as highlighted in engineering but also in manufacturing to diversify and that's bearing fruit as well. And so it's really broad based strength for us. Shawn HarrisonVice President - IR at Plexus00:46:52I wouldn't I hesitate to characterize it was one area of semi cap versus another because it's broad based. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:47:00Got it. Okay. And then one last one. Some of the semi cap names have been talking about a memory tool upgrade cycle rather than new tool builds. If that happens, do you get that business if if it was your original build? Oliver MihmExecutive VP & COO at Plexus00:47:17Yes. Steve BargerManaging Director - Equity Research at KeyBanc Capital Markets00:47:20Perfect. Thanks. Operator00:47:26That concludes our question and answer session. I will now turn the conference back over to Mr. Todd Kelsey, President and CEO for closing remarks. Todd KelseyPresident & CEO at Plexus00:47:36All right. Thank you, Angela. I'd like to thank shareholders, investors, analysts and our Plexus team members who joined the call this morning. Concluding with a few summary comments, with our investment in talent, technology, facilities and tools, we believe Plexus is well positioned to enable our customers' success in this dynamic environment in support of our vision to help create the products that build a better world. Evidence of this view is the breadth of our new program wins across our solutions, markets and technologies. Todd KelseyPresident & CEO at Plexus00:48:10Further, while we are acknowledging the macroeconomic uncertainty, we continue to anticipate meaningful EPS growth in fiscal twenty twenty five, driven by revenue growth in each of our market sectors, strong operating margin performance and continued free cash flow generation used to create additional shareholder value. Thank you again and have a nice day.Read moreParticipantsExecutivesShawn HarrisonVice President - IRTodd KelseyPresident & CEOOliver MihmExecutive VP & COOAnalystsPatrick JermainEVP & CFO at PlexusDavid WilliamsEquity Research Analyst at The Benchmark Company LLCMelissa FairbanksVice President at Raymond James FinancialSteven FoxFounder & CEO at Fox Advisors, LLCRuben RoyManaging Director - Equity Research at Stifel Financial CorpChris GrengaEquity Research Associate at Needham & CompanySteve BargerManaging Director - Equity Research at KeyBanc Capital MarketsAnja SoderstromSenior Equity Research Analyst at Sidoti & CompanyPowered by