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Plexus announced financial results for its fiscal first quarter ended December 29, 2018, and guidance for its fiscal second quarter ending March 30, 2019.
Fiscal First Quarter 2019 Information
- Won 33 manufacturing programs during the quarter representing $230 million in annualized revenue when fully ramped into production
- Trailing four quarter manufacturing wins total $920 million in annualized revenue when fully ramped into production
- Purchased $50.1 million of our shares at an average price of $57.53 per share under our existing share repurchase program
Todd Kelsey, president and CEO, commented “Our fiscal first quarter results were aligned with our expectations entering the quarter. We delivered revenue of $766 million and non-GAAP EPS of $0.91, which represented increases of 13% and 21%, respectively, over the comparable period in fiscal 2018. In addition, we achieved strong operating performance with operating margin of 4.8%, firmly within our enduring target range of 4.7% to 5.0%.”
Patrick Jermain, senior vice president and CFO, commented, “Fiscal first quarter GAAP diluted EPS included $0.22 per share of expense related to additional regulations issued by the U.S. Department of the Treasury in November 2018 under the U.S. Tax Cuts and Jobs Act. During the quarter, we repurchased over $50 million of our shares, which was partially funded with repatriated cash. Since the enactment of U.S. tax reform, we have brought back over $450 million.”
Kelsey continued, “As we look ahead to the fiscal second quarter, we expect new program ramps will offset weakness in the semiconductor capital equipment market. Therefore, we are guiding revenue of $760 million to $800 million. We anticipate revenue at this level will lead to GAAP diluted EPS in the range of $0.80 to $0.90.”
Jermain concluded, “We anticipate non-operating expenses in the fiscal second quarter to be approximately $1.6 million, or $0.05 per share, higher than the fiscal first quarter. The increase is primarily related to additional interest expense from expected increased borrowing under our revolving credit facility and the commencement of a capital lease for our new facility in Guadalajara, Mexico. In addition, our operating margin is expected to be slightly below our enduring target range as we absorb the reset of payroll tax for U.S. employees and seasonal salary adjustments.”
Kelsey concluded, “Within the fiscal first quarter our teams delivered $230 million of new manufacturing wins, consisting of a healthy mix of programs with new and existing customers, bringing our trailing four quarter wins to a recent high of $920 million. When we couple the new wins strength with largely stable end markets in our non-traditional sectors, we expect a solid growth year in fiscal 2019. In addition, we anticipate operating margin within our 4.7% to 5.0% target range for the fiscal year as we mitigate the second quarter seasonal cost pressures through improved productivity. These factors, combined with our share repurchase program, are expected to result in EPS leverage in fiscal 2019.”
Business Segment and Market Sector Revenue
The Company 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 the Company’s global market sector focused business development strategy. Top 10 customers comprised 59% of revenue during the fiscal first quarter, consistent with the fiscal fourth quarter of 2018.
ROIC and Economic Return
ROIC for the fiscal first quarter was 14.6%. The Company defines ROIC for the fiscal first quarter as tax-effected annualized adjusted operating income divided by average invested capital over a two-quarter period. Invested capital is defined as equity plus debt, less cash and cash equivalents. The Company’s weighted average cost of capital for fiscal 2019 is 9.0%. ROIC for the fiscal first quarter less the Company’s weighted average cost of capital resulted in an economic return of 5.6%.
Free Cash Flow Calculation
The Company defines free cash flow as cash flows provided by operations less capital expenditures. For the three months ended December 29, 2018, cash flows used in operations were $33.3 million, less capital expenditures of $24.9 million, resulting in negative free cash flow of $58.2 million.
About Plexus – The Product Realization Company
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, providing global Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing, and Aftermarket Services. Plexus is an industry leader that specializes in serving customers with complex products used in demanding regulatory environments. Plexus delivers customer service excellence to leading global companies by providing innovative, comprehensive solutions throughout the product’s lifecycle.