NEENAH, Wis., Jan. 18, 2017 (GLOBE NEWSWIRE) — Plexus (NASDAQ:PLXS) today announced financial results for its fiscal first quarter ended December 31, 2016, and guidance for its fiscal second quarter ending April 1, 2017.
| Three Months Ended | |||||||||||||
| Dec 31, 2016 | Dec 31, 2016 | Apr 1, 2017 | |||||||||||
| Q1F17 Results | Q1F17 Guidance | Q2F17 Guidance | |||||||||||
| Summary GAAP Items | |||||||||||||
| Revenue (in millions) | $ | 635 | $620 to $650 | $620 to $650 | |||||||||
| Operating margin | 5.3 | % | 4.9% to 5.2% | 4.9% to 5.2% | |||||||||
| Diluted EPS (1) | $ | 0.82 | $0.74 to $0.82 | $0.71 to $0.79 | |||||||||
| Summary Non-GAAP Items (2) | |||||||||||||
| Return on invested capital (ROIC) | 17.3 | % | |||||||||||
| Economic Return | 6.8 | % | |||||||||||
| (1) Includes stock-based compensation expense of $0.10 for Q1F17 results and $0.11 for Q2F17 guidance. |
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| (2) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed in this release, such as ROIC and Economic Return, and a reconciliation of these measures to GAAP. |
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Fiscal First Quarter 2017 Information
- Won 51 Manufacturing Solutions programs during the quarter representing approximately $217 million in annualized revenue when fully ramped into production
- Trailing four quarter Manufacturing Solutions wins total approximately $785 million in annualized revenue
- Purchased $7.1 million of our shares at an average price of $48.79 per share
Todd Kelsey, President and CEO, commented, “Late in the fiscal first quarter we fulfilled a broad-based pull-in of demand from customers within our Communications market sector that offset weaker than anticipated revenue from the Defense/Security/Aerospace market sector. Consequently, fiscal first quarter revenue of $635 million was at the midpoint of our guidance range. Strong operating performance enabled us to achieve GAAP diluted EPS of $0.82, at the top of our guidance range.”
Mr. Kelsey continued, “Looking forward to our fiscal second quarter, we currently anticipate revenue in the range of $620 to $650 million. The midpoint of this guidance suggests revenue will be sequentially flat. Underlying revenue growth is expected to be offset by end-market weakness within the Communications market sector and an additional delay to the previously disclosed orders from a large Industrial/Commercial customer. As a result of our continued strong operating performance, we are guiding GAAP diluted EPS in the range of $0.71 to $0.79. Overall, our wins performance continues to accelerate with new program ramps progressing as anticipated, supporting our goal of achieving a $3 billion annual revenue run rate as we exit the fiscal year.”
Patrick Jermain, Senior Vice President and CFO, commented, “During the fiscal first quarter we generated $73 million in free cash flow, a result well above our projections. Results from working capital initiatives drove fiscal first quarter cash cycle to 66 days, which was favorable to our expectations.” Mr. Jermain continued, “Our sustained operating performance delivered fiscal first quarter GAAP operating margin of 5.3%. We are pleased to guide GAAP operating margins in the range of 4.9% to 5.2% for the fiscal second quarter, even with absorbing seasonal compensation cost increases and the reset of US payroll taxes.”
| Quarterly Comparison | Three Months Ended | ||||||||||
| Dec 31, 2016 | Oct 1, 2016 | Jan 2, 2016 | |||||||||
| (in thousands, except EPS) | Q1F17 | Q4F16 | Q1F16 | ||||||||
| Revenue | $ | 635,019 | $ | 653,064 | $ | 616,664 | |||||
| Gross profit | $ | 64,356 | $ | 61,530 | $ | 50,059 | |||||
| Operating profit | $ | 33,903 | $ | 23,651 | $ | 21,524 | |||||
| Net income | $ | 28,179 | $ | 19,093 | $ | 14,448 | |||||
| Diluted EPS | $ | 0.82 | $ | 0.56 | $ | 0.42 | |||||
| Adjusted net income* | $ | 28,179 | $ | 28,261 | $ | 15,955 | |||||
| Adjusted diluted EPS* | $ | 0.82 | $ | 0.82 | $ | 0.47 | |||||
| Gross margin | 10.1 | % | 9.4 | % | 8.1 | % | |||||
| Adjusted gross margin** | 10.1 | % | 9.9 | % | 8.1 | % | |||||
| Operating margin | 5.3 | % | 3.6 | % | 3.5 | % | |||||
| Adjusted operating margin* | 5.3 | % | 5.1 | % | 3.7 | % | |||||
| ROIC* | 17.3 | % | 13.8 | % | 10.8 | % | |||||
| Economic Return* | 6.8 | % | 2.8 | % | -0.2 | % | |||||
| *Refer to Non-GAAP Supplemental Information Tables 1 and 2 for a reconciliation to GAAP measures. | |||||||||||
| **Q4F16 adjusted gross margin excludes $2.9 million of primarily inventory losses sustained from a typhoon that impacted the Company’s manufacturing facilities in Xiamen, China that were recorded in cost of sales. |
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Non-GAAP Financial Measures
Plexus provides non-GAAP supplemental information, such as ROIC, Economic Return, and free cash flow, because such measures are used for internal management goals and decision making, and because they provide management and investors additional insight into financial performance. In addition, management uses these and other non-GAAP measures, such as adjusted net income, adjusted gross margin and adjusted operating margin, to provide a better understanding of core performance for purposes of period-to-period comparisons. Plexus believes that these measures are also useful to investors because they provide further insight by eliminating the effect of items that are not reflective of continuing operations. For a full reconciliation of non-GAAP measures to comparable GAAP measures, please refer to Non-GAAP Supplemental Information and the attached Non-GAAP Supplemental Information Tables.
Market Sector and Business Segment Revenue
Plexus reports revenue based on the market sector breakout set forth in the table below, which reflects the Company’s global market sector focused business development strategy. The Company measures operational performance and allocates resources on a geographic segment basis. Top 10 customers comprised 60% of revenue during the quarter, up one percentage point from the fiscal fourth quarter of 2016.
| Market Sectors ($ in millions) | Three Months Ended | ||||||||||||||||
| Dec 31, 2016 Q1F17 |
Oct 1, 2016 Q4F16 |
Jan 2, 2016 Q1F16 |
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| Healthcare/Life Sciences | $ | 211 | 33 | % | $ | 192 | 29 | % | $ | 191 | 31 | % | |||||
| Industrial/Commercial | 206 | 32 | % | 231 | 35 | % | 173 | 28 | % | ||||||||
| Communications | 131 | 21 | % | 128 | 20 | % | 157 | 25 | % | ||||||||
| Defense/Security/Aerospace | 87 | 14 | % | 102 | 16 | % | 96 | 16 | % | ||||||||
| Total Revenue | $ | 635 | $ | 653 | $ | 617 | |||||||||||
| Business Segments ($ in millions) | Three Months Ended | |||||||||||||
| Dec 31, 2016 Q1F17 |
Oct 1, 2016 Q4F16 |
Jan 2, 2016 Q1F16 |
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| Americas | $ | 315 | $ | 334 | $ | 305 | ||||||||
| Asia-Pacific | 310 | 299 | 300 | |||||||||||
| Europe, Middle East, and Africa | 39 | 44 | 42 | |||||||||||
| Elimination of inter-segment sales | (29 | ) | (24 | ) | (30 | ) | ||||||||
| Total Revenue | $ | 635 | $ | 653 | $ | 617 | ||||||||
Non-GAAP Supplemental Information
ROIC and Economic Return
ROIC for the fiscal first quarter of 2017 was 17.3%. The Company defines ROIC as tax-effected annualized adjusted operating profit divided by average invested capital over a two-quarter period for the first quarter. Invested capital is defined as equity plus debt, less cash and cash equivalents. The Company’s weighted average cost of capital for fiscal 2017 is 10.5%. ROIC for the quarter less the Company’s weighted average cost of capital resulted in an Economic Return of 6.8%.
| Cash Conversion Cycle | Three Months Ended | |||||||
| Dec 31, 2016 Q1F17 |
Oct 1, 2016 Q4F16 |
Jan 2, 2016 Q1F16 |
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| Days in Accounts Receivable | 49 | 58 | 53 | |||||
| Days in Inventory | 90 | 87 | 88 | |||||
| Days in Accounts Payable | (60 | ) | (61 | ) | (59 | ) | ||
| Days in Cash Deposits | (13 | ) | (13 | ) | (11 | ) | ||
| Annualized Cash Cycle* | 66 | 71 | 71 | |||||
| *We calculate cash cycle as the sum of days in accounts receivable and days in inventory, less days in accounts payable and days in cash deposits. | ||||||||
