Plexus Announces Fiscal Fourth Quarter and Fiscal Year 2020 Financial Results

DATE: Oct 28, 2020

  • Record fiscal fourth quarter revenue of $913 million and record fiscal 2020 revenue of $3.4 billion
  • Fiscal fourth quarter GAAP diluted EPS of $1.26, including $0.23 of stock-based compensation expense
  • Initiates fiscal first quarter 2021 revenue guidance of $810 to $850 million with GAAP diluted EPS of $1.02 to $1.17

NEENAH, Wisc., Oct. 28, 2020 (GLOBE NEWSWIRE) -- Plexus (NASDAQ: PLXS) today announced financial results for our fiscal fourth quarter ended October 3, 2020, and guidance for our fiscal first quarter ending January 2, 2021.

    Three Months Ended
    Oct 3, 2020   Oct 3, 2020   Jan 2, 2021
    Q4F20 Results   Q4F20 Guidance   Q1F21 Guidance
Summary GAAP Items                
Revenue (in millions)   $913     $850 to $890     $810 to $850  
Operating margin   5.5%     4.8% to 5.2%     4.9% to 5.3%  
Diluted EPS (1)   $1.26     $1.05 to $1.20     $1.02 to $1.17  
                 
Summary Non-GAAP Items (2)                
Return on invested capital (ROIC)   14.0 %            
Economic return   5.2 %            
                 
(1) Includes stock-based compensation expense of $0.23 for Q4F20 results, $0.21 for Q4F20 guidance, and $0.19 for Q1F21 guidance.
 
(2) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures and a reconciliation to GAAP.

Fiscal Fourth Quarter 2020 Information

  • Won 44 manufacturing programs during the quarter representing $286 million in annualized revenue when fully ramped into production
  • Trailing four quarter wins total $952 million in annualized revenue when fully ramped into production
  • Purchased $21.9 million of our shares at an average price of $74.34 per share under our existing share repurchase program

Fiscal Year 2020 Information

  • Revenue of $3.4 billion, up 7% from fiscal 2019
  • GAAP diluted EPS of $3.93
  • Non-GAAP diluted EPS of $4.08, excluding a benefit of $0.03 per share related to special tax items and a charge of $0.18 per share related to restructuring activities
  • ROIC of 14.0%, delivering an economic return of 520 basis points above our weighted average cost of capital of 8.8%
  • Purchased $41.4 million of our shares at an average price of $67.86 per share under our existing share repurchase program

Todd Kelsey, President and CEO, commented, “Our team delivered outstanding results in the fiscal fourth quarter, achieving record revenue of $913 million and GAAP diluted earnings per share of $1.26, both exceeding the top end of our guidance ranges.  Strong demand in our Healthcare/Life Sciences and Industrial/Commercial sectors fueled this growth.  Our teams continued to drive improvements in our already exceptional operating performance as we navigated through the COVID-19 pandemic.  As a result, we achieved 5.5% GAAP operating margin in the fiscal fourth quarter.  This result represented the second consecutive quarter of operating margin above 5% and contributed to GAAP operating margin of 5.4% for the second half of fiscal 2020."

Patrick Jermain, Executive Vice President and CFO, commented, “We generated $109 million in free cash flow during the fiscal fourth quarter, a result well above our projections.  The fiscal fourth quarter cash cycle of 69 days was favorable to our expectations and sequentially lower by 10 days as we benefited from increased revenue and continued progress on our working capital initiatives.  This level of cash cycle was the best result we have delivered in the past 10 quarters.  We exited the fiscal year with record free cash flow of $160 million, an outcome significantly above our fiscal 2020 net income.”

Mr. Jermain continued, “We ended the year with a solid balance sheet.  Cash of approximately $388 million was sequentially higher by $88 million due in part to our strong cash flows from operations.  At the end of the fiscal fourth quarter, we had no outstanding borrowings under our revolving credit facility and we maintained a net positive cash position.”

Mr. Kelsey continued, “I am proud of our dedicated team members globally who continued to rise to the challenges presented during fiscal 2020.  Through our commitment to operational excellence and customer service excellence, our team delivered record revenue of $3.4 billion for the fiscal year, representing 7% year-over-year growth.  This strong growth, coupled with robust operating margin, led to record non-GAAP diluted earnings per share of $4.08 for fiscal year 2020, an increase of 19% from the previous fiscal year.” 

Mr. Kelsey concluded, “In alignment with our prior comments, we expect demand to moderate in the fiscal first quarter of 2021 and are guiding revenue in the range of $810 to $850 million.  We project continued operating strength and are guiding GAAP operating margin for the quarter in the range of 4.9% to 5.3%.  With this strong operating performance, we anticipate delivering GAAP diluted earnings per share of $1.02 to $1.17 for the fiscal first quarter.  Our guidance assumes that COVID-19 will not materially impact end markets or our operations beyond what has already occurred.  We expect a return to quarterly sequential revenue growth by the second half of fiscal 2021.  We also anticipate robust operating performance for the fiscal year.  We believe that the combination of these two factors should lead to solid EPS expansion for fiscal 2021.”

Quarterly & Annual Comparison Three Months Ended   Twelve Months Ended
(in thousands, except EPS) Oct 3, 2020   Jul 4, 2020   Sept 28, 2019   Oct 3, 2020   Sept 28, 2019
Revenue $ 913,227     $ 857,394     $ 810,195     $ 3,390,394     $ 3,164,434  
Gross profit 89,190     82,881     77,789     312,706     291,838  
Operating income 50,376     45,853     37,527     153,372     142,055  
Net income 37,705     35,842     36,831     117,479     108,616  
Diluted EPS   1.26       1.20       1.23       3.93       3.50  
Adjusted net income (1) 37,705     35,842     27,788     122,038     106,608  
Adjusted diluted EPS (1)   1.26       1.20       0.93       4.08       3.43  
                   
Gross margin 9.8 %   9.7 %   9.6 %   9.2 %   9.2 %
Operating margin 5.5 %   5.3 %   4.6 %   4.5 %   4.5 %
Adjusted operating margin (1) 5.5 %   5.3 %   4.8 %   4.7 %   4.5 %
                   
ROIC (1) 14.0 %   12.9 %   13.1 %   14.0 %   13.1 %
Economic return (1) 5.2 %   4.1 %   4.1 %   5.2 %   4.1 %
                   
(1) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed and/or disclosed in this release, such as adjusted operating margin, adjusted net income, adjusted diluted EPS, ROIC and economic return, and a reconciliation of these measures to GAAP.


Business Segment and Market Sector Revenue
Plexus measures operational performance and allocates resources on a geographic segment basis.  Plexus also reports revenue based on the market sector breakout set forth in the table below, which reflects Plexus’ market sector focused strategy.  Top 10 customers comprised 56% of revenue during both the fiscal fourth quarter and fiscal third quarter of 2020.  This is up five percentage points from the fiscal fourth quarter of 2019.  For both fiscal years 2020 and 2019, top 10 customers comprised 55% of revenue.

Business Segments ($ in millions) Three Months Ended   Twelve Months Ended
  Oct 3, 2020   Jul 4, 2020   Sept 28, 2019   Oct 3, 2020   Sept 28, 2019
Americas $ 334       $ 306       $ 344       $ 1,328       $ 1,429    
Asia-Pacific 503       482       416       1,824       1,557    
Europe, Middle East, and Africa 99       92       81       349       310    
Elimination of inter-segment sales (23 )     (23 )     (31 )     (111 )     (132 )  
Total Revenue $ 913       $ 857       $ 810       $ 3,390       $ 3,164    


Market Sectors ($ in millions) Three Months Ended   Twelve Months Ended
  Oct 3, 2020   Jul 4, 2020   Sept 28, 2019   Oct 3, 2020   Sept 28, 2019
Healthcare/Life Sciences $ 345   38 %   $ 330   39 %   $ 311   38 %   $ 1,258   37 %   $ 1,220   38 %
Industrial/Commercial 341   37 %   317   37 %   264   33 %   1,255   37 %   981   31 %
Aerospace/Defense 141   16 %   141   16 %   174   21 %   611   18 %   588   19 %
Communications 86   9 %   69   8 %   61   8 %   266   8 %   375   12 %
Total Revenue $ 913       $ 857       $ 810       $ 3,390       $ 3,164    
                             


Non-GAAP Supplemental Information
Plexus provides non-GAAP supplemental information, such as ROIC, economic return, and free cash flow, because such measures are used for internal management goals and decision making, and because they provide management and investors with additional insight into financial performance.  In addition, management uses these and other non-GAAP measures, such as adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted EPS, to provide a better understanding of core performance for purposes of period-to-period comparisons.  Plexus believes that these measures are also useful to investors because they provide further insight by eliminating the effect of non-recurring items that are not reflective of continuing operations.  For a full reconciliation of non-GAAP measures to comparable GAAP measures, please refer to the attached Non-GAAP Supplemental Information Tables.

ROIC and Economic Return
ROIC for fiscal year 2020 was 14.0%.  Plexus defines ROIC as tax-effected annualized adjusted operating income divided by average invested capital over a five-quarter period for the fiscal year.  Invested capital is defined as equity plus debt and operating lease obligations, less cash and cash equivalents.  Plexus' weighted average cost of capital for fiscal 2020 was 8.8%.  ROIC for fiscal year 2020 less Plexus’ weighted average cost of capital resulted in an economic return of 5.2%.

Free Cash Flow
Plexus defines free cash flow as cash flows provided by operations less capital expenditures.  For the three months ended October 3, 2020, cash flows provided by operations was $117.8 million, less capital expenditures of $8.9 million, resulting in free cash flow of $108.9 million.  For the fiscal year ended October 3, 2020, cash flows provided by operations was $210.4 million, less capital expenditures of $50.1 million, resulting in free cash flow of $160.3 million.

Cash Cycle Days Three Months Ended
  Oct 3, 2020   Jul 4, 2020   Sept 28, 2019
Days in Accounts Receivable 48     55     55  
Days in Contract Assets 11     12     10  
Days in Inventory 85     97     87  
Days in Accounts Payable (57 )   (65 )   (55 )
Days in Cash Deposits (18 )   (20 )   (17 )
Annualized Cash Cycle * 69     79     80  
* We calculate cash cycle as the sum of days in accounts receivable, days in contract assets and days in inventory, less days in accounts payable and days in cash deposits.


Conference Call and Webcast Information

What:  Plexus Fiscal 2020 Q4 Earnings Conference Call and Webcast
When:  Thursday, October 29, 2020 at 8:30 a.m. Eastern Time
Where:   Participants are encouraged to join the live webcast at the investor relations section of the Plexus website, https://plexus.gcs-web.com/events-and-presentations/upcoming-events, where a slide presentation reviewing fiscal fourth quarter 2020 results will also be made available ahead of the conference call.

Conference Call:  +1.866.922.5180 with passcode: 3398624
Replay:  The webcast will be archived on the Plexus website and available via telephone replay at +1.855.859.2056 or +1.404.537.3406 with passcode: 3398624

Investor and Media Contact
Heather Beresford
+1.920.751.3612
heather.beresford@plexus.com

About Plexus
Since 1979, Plexus has been partnering with companies to create the products that build a better world.  We are a team of over 19,000 individuals who are dedicated to providing global Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing, and Aftermarket Services.  Plexus is a global leader that specializes in serving customers in industries with highly complex products and demanding regulatory environments.  Plexus delivers customer service excellence to leading global companies by providing innovative, comprehensive solutions throughout the product’s lifecycle.  For more information about Plexus, visit our website at www.plexus.com.

Safe Harbor and Fair Disclosure Statement
The statements contained in this press release that are guidance or which are not historical facts (such as statements in the future tense and statements including believe, expect, intend, plan, anticipate, goal, target and similar terms and concepts), including all discussions of periods which are not yet completed, are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include the evolving effect, which may intensify, of COVID-19 on our employees, customers, suppliers, and logistics providers, including the impact of governmental actions being taken to curtail the spread of the virus. Other risks and uncertainties include, but are not limited to: the risk of customer delays, changes, cancellations or forecast inaccuracies in both ongoing and new programs; the lack of visibility of future orders, particularly in view of changing economic conditions; the economic performance of the industries, sectors and customers we serve; the effects of shortages and delays in obtaining components as a result of economic cycles, natural disasters or otherwise; the effects of tariffs, trade disputes, trade agreements and other trade protection measures; the effects of the volume of revenue from certain sectors or programs on our margins in particular periods; our ability to secure new customers, maintain our current customer base and deliver product on a timely basis; the risks of concentration of work for certain customers; the particular risks relative to new or recent customers, programs or services, which risks include customer and other delays, start-up costs, potential inability to execute, the establishment of appropriate terms of agreements, and the lack of a track record of order volume and timing; the effects of start-up costs of new programs and facilities or the costs associated with the closure or consolidation of facilities; possible unexpected costs and operating disruption in transitioning programs, including transitions between Company facilities; the risk that new program wins and/or customer demand may not result in the expected revenue or profitability; the fact that customer orders may not lead to long-term relationships; our ability to manage successfully and execute a complex business model characterized by high product mix and demanding quality, regulatory, and other requirements; the risks associated with excess and obsolete inventory, including the risk that inventory purchased on behalf of our customers may not be consumed or otherwise paid for by the customer, resulting in an inventory write-off; risks related to information technology systems and data security; the ability to realize anticipated savings from restructuring or similar actions, as well as the adequacy of related charges as compared to actual expenses; increasing regulatory and compliance requirements; the effects of U.S. Tax Reform and of related foreign jurisdiction tax developments; current or potential future barriers to the repatriation of funds that are currently held outside of the United States as a result of actions taken by other countries or otherwise; the potential effects of jurisdictional results on our taxes, tax rates, and our ability to use deferred tax assets and net operating losses; the weakness of areas of the global economy; the effect of changes in the pricing and margins of products; raw materials and component cost fluctuations; the potential effect of fluctuations in the value of the currencies in which we transact business; the effects of changes in economic conditions, political conditions and tax matters in the United States and in the other countries in which we do business (including as a result of the United Kingdom’s exit from the European Union); the potential effect of other world or local events or other events outside our control (such as changes in energy prices, terrorism and weather events); the impact of increased competition; an inability to successfully manage human capital; changes in financial accounting standards; and other risks detailed herein and in our other Securities and Exchange Commission filings, particularly in Risk Factors contained in our fiscal 2019 Form 10-K and subsequently filed quarterly reports on Form 10-Q.



 
PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
           
  Three Months Ended   Twelve Months Ended
  Oct 3,   Sept 28,   Oct 3,   Sept 28,
  2020   2019   2020   2019
Net sales $ 913,227       $ 810,195       $ 3,390,394       $ 3,164,434    
Cost of sales 824,037       732,406       3,077,688       2,872,596    
Gross profit $ 89,190       $ 77,789       $ 312,706       $ 291,838    
Operating expenses:              
Selling and administrative expenses 38,814       38,584       153,331       148,105    
Restructuring and impairment charges       1,678       6,003       1,678    
Operating income 50,376       37,527       153,372       142,055    
Other income (expense):              
Interest expense (4,228 )     (3,748 )     (16,162 )     (12,853 )  
Interest income 332       539       1,878       1,949    
Miscellaneous, net (1,072 )     (892 )     (3,691 )     (5,196 )  
Income before income taxes 45,408       33,426       135,397       125,955    
Income tax expense (benefit) 7,703       (3,405 )     17,918       17,339    
Net income $ 37,705       $ 36,831       $ 117,479       $ 108,616    
Earnings per share:              
Basic $ 1.29       $ 1.26       $ 4.02       $ 3.59    
Diluted $ 1.26       $ 1.23       $ 3.93       $ 3.50    
Weighted average shares outstanding:              
Basic 29,153       29,181       29,195       30,271    
Diluted 29,857       30,001       29,916       31,074    



 
PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
       
  Oct 3,   Sept 28,
  2020   2019
ASSETS      
Current assets:      
Cash and cash equivalents $ 385,807       $ 223,761    
Restricted cash 2,087       2,493    
Accounts receivable 482,086       488,284    
Contract assets 113,946       90,841    
Inventories 763,461       700,938    
Prepaid expenses and other 31,772       31,974    
Total current assets 1,779,159       1,538,291    
Property, plant and equipment, net 383,661       384,224    
Operating lease right-of-use assets 69,879          
Deferred income taxes 21,422       13,654    
Other 35,727       64,714    
Total non-current assets 510,689       462,592    
 Total assets $ 2,289,848       $ 2,000,883    
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt and finance lease obligations $ 146,829       $ 100,702    
Accounts payable 516,297       444,944    
Customer deposits 159,972       139,841    
Accrued salaries and wages 76,927       73,555    
Other accrued liabilities 103,492       106,461    
Total current liabilities 1,003,517       865,503    
Long-term debt and finance lease obligations, net of current portion 187,975       187,278    
Accrued income taxes payable 53,899       59,572    
Long-term operating lease liabilities 36,779          
Deferred income taxes 6,433       5,305    
Other liabilities 23,765       17,649    
Total non-current liabilities 308,851       269,804    
 Total liabilities 1,312,368       1,135,307    
Shareholders’ equity:      
Common stock, $.01 par value, 200,000 shares authorized,      
53,525 and 52,917 shares issued, respectively,      
and 29,002 and 29,004 shares outstanding, respectively 535       529    
Additional paid-in-capital 621,564       597,401    
Common stock held in treasury, at cost, 24,523 and 23,913, respectively (934,639 )     (893,247 )  
Retained earnings 1,295,079       1,178,677    
Accumulated other comprehensive loss (5,059 )     (17,784 )  
Total shareholders’ equity 977,480       865,576    
 Total liabilities and shareholders’ equity $ 2,289,848       $ 2,000,883    
       



 
PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 1
(in thousands, except per share data)
(unaudited)
                   
  Three Months Ended   Twelve Months Ended
  Oct 3,   Jul 4,   Sept 28,   Oct 3,   Sept 28,
  2020   2020   2019   2020   2019
Operating income, as reported $ 50,376       $ 45,853       $ 37,527       $ 153,372       $ 142,055    
Operating margin, as reported 5.5%       5.3%       4.6%       4.5%       4.5%    
                   
Non-GAAP adjustments:                  
Restructuring and impairment charges (1)             1,678       6,003       1,678    
Adjusted operating income $ 50,376       $ 45,853       $ 39,205       $ 159,375       $ 143,733    
Adjusted operating margin 5.5%       5.3%       4.8%       4.7%       4.5%    
                   
Net income, as reported $ 37,705       $ 35,842       $ 36,831       $ 117,479       $ 108,616    
                   
Non-GAAP adjustments:                  
Restructuring and impairment charges, net of tax (1)             1,502       5,373       1,502    
Special tax impacts (2)                   (814 )     7,035    
Accumulated foreign earnings assertion (3)             (10,545 )           (10,545 )  
Adjusted net income $ 37,705       $ 35,842       $ 27,788       $ 122,038       $ 106,608    
                   
Diluted earnings per share, as reported $ 1.26       $ 1.20       $ 1.23       $ 3.93       $ 3.50    
                   
Non-GAAP per share adjustments:                  
Restructuring and impairment charges, net of tax (1)             0.05       0.18       0.05    
Special tax impacts (2)                   (0.03 )     0.23    
Accumulated foreign earnings assertion (3)             (0.35 )           (0.35 )  
Adjusted diluted earnings per share $ 1.26       $ 1.20       $ 0.93       $ 4.08       $ 3.43    
                   
(1) During the twelve months ended October 3, 2020, restructuring and impairment charges of $6.0 million, or $5.4 million net of taxes, were incurred due to the previously announced closure of our Boulder Design Center.  During the three and twelve months ended September 28, 2019, restructuring costs of $1.7 million, or $1.5 million net of taxes, were incurred.
 
(2) During the twelve months ended October 3, 2020, there was $1.9 million in tax benefits related to U.S. foreign tax credit regulations issued during the fiscal year, partially offset by $1.1 million of tax expense as a result of special tax items.  During the twelve months ended September 28, 2019, special tax expense of $7.0 million was recorded in accordance with new regulations issued in November 2018 under U.S. Tax Reform. These regulations impacted the treatment of foreign taxes paid.
 
(3) During the three and twelve months ended September 28, 2019, Plexus reasserted that certain historical undistributed earnings of two foreign subsidiaries will be permanently reinvested, which resulted in a $10.5 million benefit.



 
PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 2
 (in thousands)
(unaudited)
           
ROIC and Economic Return Calculations Twelve Months Ended   Nine Months Ended   Twelve Months Ended
  Oct 3,   Jul 4,   Sept 28,
  2020   2020   2019
Operating income, as reported   $ 153,372       $ 102,996       $ 142,055  
Restructuring and impairment charges + 6,003     + 6,003     + 1,678  
Adjusted operating income   $ 159,375       $ 108,999       $ 143,733  
        ÷ 3        
          $ 36,333        
        x 4        
Adjusted annualized operating income   $ 159,375       $ 145,332       $ 143,733  
Adjusted effective tax rate x 14 %   x 13 %   x 16 %
Tax impact   22,313       18,893       22,997  
Adjusted operating income (tax effected)   $ 137,062       $ 126,439       $ 120,736  
                 
Average invested capital ÷ $ 978,939     ÷ $ 980,929     ÷ $ 923,107  
                 
ROIC   14.0 %     12.9 %     13.1 %
Weighted average cost of capital - 8.8 %   - 8.8 %   - 9.0 %
Economic return   5.2 %     4.1 %     4.1 %

 

  Three Months Ended
Average Invested Capital Oct 3,   Jul 4,   Apr 4,   Jan 4,   Sept 28,
Calculations 2020   2020   2020   2020   2019
Equity $ 977,480       $ 944,821       $ 892,558         908,372       $ 865,576    
Plus:                              
Debt and finance lease obligations - current 146,829         145,993         107,880         67,847       100,702    
Operating lease obligations - current (1) (2) 7,724         8,061         8,546         9,185          
Debt and finance lease obligations - long-term 187,975         188,626         186,327         186,827       187,278    
Operating lease obligations - long-term (2) 36,779         38,077         39,617         36,473          
Less:                                          
Cash and cash equivalents (385,807 )       (296,545 )       (225,830 )       (252,914 )     (223,761 )  
  $ 970,980       $ 1,029,033       $ 1,009,098         955,790       $ 929,795    
             
            Three Months Ended
Average Invested Capital           Jun 29,   Mar 30,   Dec 29,     Sept 29,
Calculations           2019   2019   2018     2018
Equity           $ 860,791       $ 875,444       $ 905,163       $ 921,143    
Plus:                                                
Debt and finance lease obligations - current           138,976       93,197         8,633       5,532    
Operating lease obligations - current (1) (2)                                  
Debt and finance lease obligations - long-term           187,581       187,120         187,567       183,085    
Operating lease obligations - long-term (2)                                  
Less:                                                
Cash and cash equivalents           (198,395 )     (184,028 )       (188,799     (297,269 )  
            $ 988,953       $ 971,733       $ 912,564       $ 812,491    
   
(1) Included in Other accrued liabilities on the Condensed Consolidated Balance Sheets.  
   
(2) In the fiscal first quarter of 2020, Plexus adopted and applied Topic 842 to all leases using the modified retrospective method of adoption. The prior year comparative information has not been restated and continues to be reported under the accounting standards in effect for fiscal 2019 and 2018.  

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