Plexus Announces Fiscal Fourth Quarter and Fiscal Year 2020 Financial Results
10/28/2020 - 04:15 PM
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 t o $850 million with GAAP diluted EPS of $1.02 t o $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 t o $890 $810 t o $850 Operating margin 5.5% 4.8% to 5.2% 4.9% to 5.3% Diluted EPS (1) $1.26 $1.05 t o $1.20 $1.02 t o $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 t o $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 t o $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 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
ROIC and Economic Return 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 $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. 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
About Plexus
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.
