Plexus Announces Fiscal Second Quarter Financial Results
DATE: Apr 21, 2021
- Fiscal second quarter 2021 revenue of
$881 million - GAAP diluted EPS of
$1.42 , including$0.07 of restructuring charges and$0.22 of stock-based compensation expense - Initiates fiscal third quarter 2021 revenue guidance of
$875 to$915 million with GAAP diluted EPS guidance of$1.23 to$1.38 , excluding any unforeseen COVID-19 impacts
Three Months Ended | |||||||||
Q2F21 Results | Q2F21 Guidance | Q3F21 Guidance | |||||||
Summary GAAP Items | |||||||||
Revenue (in millions) | |||||||||
Operating margin | 5.8 | % | 5.0% to 5.5% | 5.1% to 5.6% | |||||
Diluted EPS (1) | |||||||||
Summary Non-GAAP Items (2) | |||||||||
Return on invested capital (ROIC) | 17.3 | % | |||||||
Economic return | 9.2 | % | |||||||
(1) Includes stock-based compensation expense of |
|||||||||
(2) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures and a reconciliation to GAAP. |
Fiscal Second Quarter 2021 Information
- Won 42 manufacturing programs during the quarter representing
$284 million in annualized revenue when fully ramped into production - Trailing four quarter wins total a record
$1.044 billion in annualized revenue when fully ramped into production - Purchased
$29.2 million of our shares at an average price of$83.39 per share under our existing share repurchase programs. A balance of$53.4 million remains outstanding under the$100 million fiscal 2021 program.
Quarterly Comparison | Three Months Ended | ||||||||||
(in thousands, except EPS) | |||||||||||
Revenue | $ | 880,885 | $ | 830,355 | $ | 767,364 | |||||
Gross profit | 91,002 | 79,277 | 61,445 | ||||||||
Operating income | 50,687 | 46,866 | 17,209 | ||||||||
Net income | 41,763 | 36,199 | 12,926 | ||||||||
Diluted EPS | 1.42 | 1.23 | 0.43 | ||||||||
Gross margin | 10.3 | % | 9.5 | % | 8.0 | % | |||||
Operating margin | 5.8 | % | 5.6 | % | 2.2 | % | |||||
ROIC (1) | 17.3 | % | 16.3 | % | 11.4 | % | |||||
Economic return (1) | 9.2 | % | 8.2 | % | 2.6 | % | |||||
(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 income, 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 55% of revenue for both the fiscal first and second quarters of 2021.
Business Segments ($ in millions) | Three Months Ended | |||||||||||||
$ | 365 | $ | 327 | $ | 334 | |||||||||
459 | 451 | 388 | ||||||||||||
83 | 79 | 74 | ||||||||||||
Elimination of inter-segment sales | (26 | ) | (27 | ) | (29 | ) | ||||||||
Total Revenue | $ | 881 | $ | 830 | $ | 767 |
Market Sectors ($ in millions) | Three Months Ended | ||||||||||||||||
Industrial (1) | $ | 407 | 46 | % | $ | 378 | 46 | % | $ | 339 | 44 | % | |||||
Healthcare/Life Sciences | 350 | 40 | % | 319 | 38 | % | 271 | 35 | % | ||||||||
Aerospace/Defense | 124 | 14 | % | 133 | 16 | % | 157 | 21 | % | ||||||||
Total Revenue | $ | 881 | $ | 830 | $ | 767 | |||||||||||
(1) At the beginning of fiscal 2021, Plexus consolidated the previously reported |
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 the fiscal second quarter was 17.3%. Plexus defines ROIC as tax-effected annualized adjusted operating income divided by average invested capital over a three-quarter period for the fiscal second quarter. 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 2021 is 8.1%. ROIC for the fiscal second quarter less Plexus’ weighted average cost of capital resulted in an economic return of 9.2%.
Free Cash Flow
Plexus defines free cash flow as cash flows provided by operations less capital expenditures. For the three months ended
Cash Cycle Days | Three Months Ended | |||||
Days in Accounts Receivable | 52 | 53 | 55 | |||
Days in Contract Assets | 12 | 12 | 13 | |||
Days in Inventory | 89 | 93 | 99 | |||
Days in Accounts Payable | (61) | (59) | (62) | |||
Days in Cash Deposits | (20) | (19) | (18) | |||
Annualized Cash Cycle * | 72 | 80 | 87 | |||
* 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 2021 Q2 Earnings Conference Call and Webcast |
When: | |
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 second quarter 2021 results will also be made available ahead of the conference call. Conference Call: +1.866.922.5180 with passcode: 3860807 |
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: 3860807 |
Investor and Media Contact
+1.920.751.3612
shawn.harrison@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 approximately 19,000 individuals who are dedicated to providing global Design and Development,
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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Net sales | $ | 880,885 | $ | 767,364 | $ | 1,711,240 | $ | 1,619,773 | |||||||
Cost of sales | 789,883 | 705,919 | 1,540,961 | 1,479,138 | |||||||||||
Gross profit | 91,002 | 61,445 | 170,279 | 140,635 | |||||||||||
Operating expenses | |||||||||||||||
Selling and administrative expenses | 38,286 | 38,233 | 70,697 | 77,489 | |||||||||||
Restructuring and impairment charges | 2,029 | 6,003 | 2,029 | 6,003 | |||||||||||
Operating income | 50,687 | 17,209 | 97,553 | 57,143 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (3,818 | ) | (3,814 | ) | (7,904 | ) | (7,946 | ) | |||||||
Interest income | 390 | 533 | 764 | 1,178 | |||||||||||
Miscellaneous, net | (825 | ) | 154 | (2,343 | ) | (2,019 | ) | ||||||||
Income before income taxes | 46,434 | 14,082 | 88,070 | 48,356 | |||||||||||
Income tax expense | 4,671 | 1,156 | 10,108 | 4,424 | |||||||||||
Net income | $ | 41,763 | $ | 12,926 | $ | 77,962 | $ | 43,932 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.45 | $ | 0.44 | $ | 2.71 | $ | 1.50 | |||||||
Diluted | $ | 1.42 | $ | 0.43 | $ | 2.65 | $ | 1.46 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 28,736 | 29,291 | 28,799 | 29,216 | |||||||||||
Diluted | 29,310 | 29,925 | 29,409 | 29,999 |
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 294,370 | $ | 385,807 | |||||||||||||||||||||||||
Restricted cash | 142 | 2,087 | |||||||||||||||||||||||||||
Accounts receivable | 508,576 | 482,086 | |||||||||||||||||||||||||||
Contract assets | 116,440 | 113,946 | |||||||||||||||||||||||||||
Inventories | 771,605 | 763,461 | |||||||||||||||||||||||||||
Prepaid expenses and other | 37,787 | 31,772 | |||||||||||||||||||||||||||
Total current assets | 1,728,920 | 1,779,159 | |||||||||||||||||||||||||||
Property, plant and equipment, net | 379,014 | 383,661 | |||||||||||||||||||||||||||
Operating lease right-of-use assets | 68,877 | 69,879 | |||||||||||||||||||||||||||
Deferred income taxes | 22,351 | 21,422 | |||||||||||||||||||||||||||
Other | 39,226 | 35,727 | |||||||||||||||||||||||||||
Total non-current assets | 509,468 | 510,689 | |||||||||||||||||||||||||||
Total assets | $ | 2,238,388 | $ | 2,289,848 | |||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||||
Current portion of long-term debt and finance lease obligations | $ | 50,229 | $ | 146,829 | |||||||||||||||||||||||||
Accounts payable | 529,948 | 516,297 | |||||||||||||||||||||||||||
Customer deposits | 175,099 | 159,972 | |||||||||||||||||||||||||||
Accrued salaries and wages | 64,860 | 76,927 | |||||||||||||||||||||||||||
Other accrued liabilities | 100,722 | 103,492 | |||||||||||||||||||||||||||
Total current liabilities | 920,858 | 1,003,517 | |||||||||||||||||||||||||||
Long-term debt and finance lease obligations, net of current portion | 188,730 | 187,975 | |||||||||||||||||||||||||||
Accrued income taxes payable | 47,974 | 53,899 | |||||||||||||||||||||||||||
Long-term operating lease liabilities | 34,751 | 36,779 | |||||||||||||||||||||||||||
Deferred income taxes | 7,042 | 6,433 | |||||||||||||||||||||||||||
Other liabilities | 25,081 | 23,765 | |||||||||||||||||||||||||||
Total non-current liabilities | 303,578 | 308,851 | |||||||||||||||||||||||||||
Total liabilities | 1,224,436 | 1,312,368 | |||||||||||||||||||||||||||
Shareholders’ equity: | |||||||||||||||||||||||||||||
Common stock, |
|||||||||||||||||||||||||||||
53,838 and 53,525 shares issued, respectively, | |||||||||||||||||||||||||||||
and 28,659 and 29,002 shares outstanding, respectively | 538 | 535 | |||||||||||||||||||||||||||
Additional paid-in-capital | 627,176 | 621,564 | |||||||||||||||||||||||||||
Common stock held in treasury, at cost, 25,179 and 24,523, respectively | (986,539 | ) | (934,639 | ) | |||||||||||||||||||||||||
Retained earnings | 1,373,041 | 1,295,079 | |||||||||||||||||||||||||||
Accumulated other comprehensive loss | (264 | ) | (5,059 | ) | |||||||||||||||||||||||||
Total shareholders’ equity | 1,013,952 | 977,480 | |||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,238,388 | $ | 2,289,848 | |||||||||||||||||||||||||
NON-GAAP SUPPLEMENTAL INFORMATION Table 1 | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Operating income, as reported | $ | 50,687 | $ | 46,866 | $ | 17,209 | $ | 97,553 | $ | 57,143 | ||||||||||
Operating margin, as reported | 5.8 | % | 5.6 | % | 2.2 | % | 5.7 | % | 3.5 | % | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Restructuring and impairment charges (1) | $ | 2,029 | $ | — | $ | 6,003 | $ | 2,029 | $ | 6,003 | ||||||||||
Adjusted operating income | $ | 52,716 | $ | 46,866 | $ | 23,212 | $ | 99,582 | $ | 63,146 | ||||||||||
Adjusted operating margin | 6.0 | % | 5.6 | % | 3.0 | % | 5.8 | % | 3.9 | % | ||||||||||
Net income, as reported | $ | 41,763 | $ | 36,199 | $ | 12,926 | $ | 77,962 | $ | 43,932 | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Special tax impacts (2) | — | — | — | — | (814) | |||||||||||||||
Restructuring and impairment charges, net of tax (1) | 1,816 | — | 5,373 | 1,816 | 5,373 | |||||||||||||||
Adjusted net income | $ | 43,579 | $ | 36,199 | $ | 18,299 | $ | 79,778 | $ | 48,491 | ||||||||||
Diluted earnings per share, as reported | $ | 1.42 | $ | 1.23 | $ | 0.43 | $ | 2.65 | $ | 1.46 | ||||||||||
Non-GAAP per share adjustments: | ||||||||||||||||||||
Special tax impacts (2) | — | — | — | — | (0.02) | |||||||||||||||
Restructuring and impairment charges, net of tax (1) | 0.07 | 0.18 | 0.06 | 0.18 | ||||||||||||||||
Adjusted diluted earnings per share | $ | 1.49 | $ | 1.23 | $ | 0.61 | $ | 2.71 | $ | 1.62 |
(1) | During the three months ended During the three months ended |
(2) | During the three months ended |
NON-GAAP SUPPLEMENTAL INFORMATION Table 2 | ||||||||||||||
(in thousands) | ||||||||||||||
(unaudited) | ||||||||||||||
ROIC and Economic Return Calculations | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||
2021 | 2021 | 2020 | ||||||||||||
Operating income, as reported | $ | 97,553 | $ | 46,866 | $ | 57,143 | ||||||||
Restructuring and impairment charges | + | 2,029 | + | — | + | 6,003 | ||||||||
Adjusted operating income | $ | 99,582 | $ | 46,866 | $ | 63,146 | ||||||||
x | 2 | x | 4 | x | 2 | |||||||||
Adjusted annualized operating income | $ | 199,164 | $ | 187,464 | $ | 126,292 | ||||||||
Adjusted effective tax rate | x | 13 | % | x | 13 | % | x | 13 | % | |||||
Tax impact | 25,891 | 24,370 | 16,418 | |||||||||||
Adjusted operating income (tax effected) | $ | 173,273 | $ | 163,094 | $ | 109,874 | ||||||||
Average invested capital | ÷ | $ | 1,002,260 | ÷ | $ | 1,002,087 | ÷ | $ | 966,630 | |||||
ROIC | 17.3 | % | 16.3 | % | 11.4 | % | ||||||||
Weighted average cost of capital | - | 8.1 | % | - | 8.1 | % | - | 8.8 | % | |||||
Economic return | 9.2 | % | 8.2 | % | 2.6 | % |
Three Months Ended | |||||||||||||||||||||||||||
Calculations | 2021 | 2021 | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||||||||||||
Equity | $ | 1,013,952 | $ | 1,006,959 | $ | 977,480 | $ | 944,821 | $ | 892,558 | $ | 908,372 | $ | 865,576 | |||||||||||||
Plus: | |||||||||||||||||||||||||||
Debt and finance lease obligations - current | 50,229 | 148,408 | 146,829 | 145,993 | 107,880 | 67,847 | 100,702 | ||||||||||||||||||||
Operating lease obligations - current (1) (2) | 9,314 | 9,351 | 7,724 | 8,061 | 8,546 | 9,102 | — | ||||||||||||||||||||
Debt and finance lease obligations - long-term | 188,730 | 188,148 | 187,975 | 188,626 | 186,327 | 186,827 | 187,278 | ||||||||||||||||||||
Operating lease obligations - long-term (2) | 34,751 | 37,052 | 36,779 | 38,077 | 39,617 | 41,764 | — | ||||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Cash and cash equivalents | (294,370 | ) | (356,724 | ) | (385,807 | ) | (296,545 | ) | (225,830 | ) | (252,914 | ) | (223,761 | ) | |||||||||||||
$ | 1,002,606 | $ | 1,033,194 | $ | 970,980 | $ | 1,029,033 | $ | 1,009,098 | $ | 960,998 | $ | 929,795 |
(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. |