Plexus Corp. [PLXS] Q1 2023 Earnings Conference Call January 26, 2023 8:30 AM ET

Company Participants

Todd Kelsey - CEO

Steve Frisch - President & CSO

Pat Jermain - EVP & CFO

Oliver Mihm - EVP & COO

Shawn Harrison - VP, Communications & IR

Conference Call Participants

Jim Ricchiuti - Needham & Company

David Williams - The Benchmark Company

Matt Sheerin - Stifel Nicolaus

Paul Chung - JPMorgan

Anja Soderstrom - Sidoti & Company

Operator

Good morning, and welcome to the Plexus Corp. conference call regarding its fiscal first quarter 2023 earnings announcement. My name is Liz, and I will be your operator for today's call. [Operator Instructions].

I would now like to turn the call over to Mr. Shawn Harrison, Plexus’ Vice President of Communications and Investor Relations. Shawn?

Shawn Harrison

Thank you, Liz. Good morning, everyone, 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 are 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-K filing for the fiscal year ended October 1, 2022, and the Safe Harbor and fair disclosure statement in yesterday's press release. We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus' website, www.plexus.com, clicking on Investors at the top of that page.

Joining me today are Todd Kelsey, Chief Executive Officer; Steve Frisch, President and Chief Strategy Officer; Pat Jermain, Executive Vice President and Chief Financial Officer; and Oliver Mihm, Executive Vice President and Chief Operating Officer. Consistent with prior earnings calls, Todd will provide summary comments before turning the call over to Steve and Pat for further details.

Let me now turn the call over to Todd Kelsey. Todd?

Todd Kelsey

Thank you, Shawn. Good morning, everyone. Please advance to Slide 3. Our fiscal 2023 started strong, as we capitalized on the momentum built during fiscal 2022. As I reflect on the market conditions and supply chain dynamics of 12 months ago, I'm quite pleased with our performance in the fiscal first quarter. Amid unexpected demand volatility, we met our guidance and delivered 34% year-over-year revenue growth, generated an industry-leading GAAP operating margin, and nearly doubled our GAAP earnings per share year-over-year. We also advanced our efforts to be an ESG leader, an endeavor that our customers are taking notice. Our fiscal first quarter revenue of $1.09 billion, reflected strong demand from many customers, even as we experienced unexpected volatility from others. Semiconductor capital equipment demand was lower than our customers anticipated 90 days ago due to weakness in the memory market, paired with the effects from the US export control order. In addition, we experienced new program ramp schedule changes, a dynamic that is expected to be resolved as we move through fiscal 2023. Finally, we continued to have unfulfilled demand by more than $100 million, given ongoing supply chain challenges associated with lagging edge semiconductors. I would note that our average semiconductor lead time declined only 4% from last quarter, and remains in excess of 300 days. We delivered GAAP operating margin of 5.2%, inclusive of stock-based compensation expense and the cost associated with the ramp up business at our new facility in Bangkok, Thailand. With strong customer interest, we continue to anticipate our operations in Bangkok will be profitable exiting this fiscal year. Finally, we delivered GAAP EPS of $1.49, which included $0.21 of stock-based compensation expense. We won 29 new manufacturing programs during the quarter worth $158 million, including several programs associated with secular growth markets. As we discussed in recent quarters, supply chain conditions continue to slow the decision-making process for some customers that we anticipate will partner with Plexus. However, we see this trend reversing during our fiscal second quarter, driving increased wins for the remainder of the fiscal year. Our funnel of qualified manufacturing opportunities expanded nearly $250 million sequentially to a record $3.6 billion, reflecting the delayed decision-making and significant potential to increase our wins. Please advance the Slide 4.