They accused him of hiding in a corner. She gave us a thumbs up. All right, I think we're live. All right, welcome back, everyone. I'm Melissa Fairbanks. I cover analog semis and IT supply chain here at Raymond James. Thanks for joining us today. We are thrilled to have Plexus back. We've got the whole team here almost. We've got CEO Todd Kelsey. We've got CFO Pat Jermain. Shawn Harrison, he's in the little kids' table over there. And also in attendance, we have Ryan Weiland, who runs engineering services for Plexus. So I think we're going to go ahead and get started. We're not doing any slides or anything, but I would like, because it's a generalist conference, it'd be helpful to do a quick intro to the company. Sure. And just give us a brief overview. Sure. I'd be happy to do so, Melissa. First of all, I want to thank everybody for attending today. It's great to see the big crowd in here, and thanks for your interest in Plexus, so Plexus, what we do is we design, manufacture, and service our customers' products, and we're guided by our vision, which is we help create the products that build a better world, and that aligns to our market sectors of focus, where we focus on highly complex products demanding regulatory environments. So how does that break down? The three major market sectors that we were focused on, and I'll go through each in a little bit more detail. First is Healthcare/L ife Sciences, and in Healthcare/L ife Sciences, our focus is finished medical devices, typically for a hospital or clinical setting, quite frequently life-saving type equipment. That's about 40% of our business. So you can think of things like robotic-assisted surgery. You can think of advanced imaging systems, therapeutic devices. About 40% of our business then is in the Industrial market. And we break the Industrial market into two big chunks, one being about half of it is Semiconductor Capital Equipment. Now, in that space, we're doing quite complex systems. Many of them ship directly into the fabs, depending on the customer. And from an Industrial standpoint, we're doing things like vehicle electrification, warehouse and factory automation, test and measurement, communications equipment. The final market that we're focused on is Aerospace and Defense. About half of that business is Commercial Aerospace. The other half is a split between Defense and Commercial Space. So in Commercial Aerospace, it'd be subsystems for planes from tip to tail, in essence. It could be cockpit electronics. It could be braking systems. It could be entertainment systems, galley, you name it, and then when we look at Defense, it's life-saving devices for the war fighter, and then Commercial Space would be based off around Low Earth Orbit satellite systems, so Plexus is a global company. We're about 20,000 team members globally, and we're about $4 billion in revenue. Okay. Thanks for that overview. I mean, I would like to get started addressing some of the more current business dynamics. So if you could just give us a quick overview of maybe December quarter results, what you're seeing in the March quarter, and then maybe some changing dynamics within your end markets. Yeah, well, I'll talk about the margin dynamics we're facing. Wrapped up the fiscal fourth quarter at 6.2% operating margin, non-GAAP. Our target is 6% plus. Came into the December quarter, hit the 6.2% on relatively flat revenue. So pleased with the result. As we look longer term from a margin standpoint, this quarter, March quarter, will be burdened with merit increases. So we guide down typically the fiscal second quarter from a margin standpoint, then start to see it ramp back up towards the back half of the fiscal year. Hitting that 6% is our expectation. Longer term, though, I think there's a number of dynamics. We often get asked, can you exceed that target of 6%, non-GAAP? Number of factors go into that. Two that have stayed pretty consistent or constant over the last several quarters would be from a pricing standpoint. It's been pretty consistent in our market with our competitors, which bodes well for us. Our value proposition supports that additional pricing. The other area would be around markets. Todd talked about the markets we're serving. Right now, those markets have pretty consistent gross margins, low variation based on working capital requirements per market, but I don't see a lot of variation going forward from a market standpoint. So where do we see margin opportunities over the next few years? One would be from our services business. Our Engineering Solutions business carries higher margins than the manufacturing business. And then our aftermarket sustaining services business also carries higher margins. We put a lot of investment into that area over the last several years. I think that's an opportunity for us to achieve those similar types of margins that our engineering business is doing. Another area is just leverage with sequential revenue growth expected. There's pockets of capacity that we expect to fill up that can help us from a margin standpoint. Southeast Asia, we've got a new facility in Thailand that has the opportunity to put new business into and generate additional margin. And then the last area that we're trying to quantify, we just came out of a strategy session a couple of weeks ago, is around automation and productivity improvements. And this can be anywhere from warehouse automation equipment that we're putting into some of our sites that consolidates the warehouse equipment and improves space for us for future manufacturing, cuts down on labor. Visual inspection is another area that we're looking at automating. AI processes to improve workflow within our manufacturing sites. All of those have margin opportunities that we would expect could get us above 6% at some point. I know, Melissa, too, you had asked a bit about the state of our end markets right now and really how that shapes up from a revenue standpoint. In Q1, we finished about $980 million in revenue. We're guiding something similar for Q2, so expecting, in essence, flat. Our markets have been a little bit choppy overall as we've gotten through some inventory corrections, first in healthcare, currently in the Industrial market. And then within aerospace, as we see some of the challenges within some of the Commercial Aerospace vendors right now in ramping production. So a little bit choppy, but yet even with that said, we're expecting growth in each one of our market sectors in fiscal 2025. So when we look at the markets in general, within healthcare, we're starting to see some positive signs, although it's pretty early. We're seeing some increased demand from certain OEMs within the healthcare space, a bit of increased demand within life sciences. We're also engineering, our product development engineering tends to be a leading indicator of our business. We had a very strong quarter with product development wins as our best quarter in healthcare in eight quarters, so I think we're seeing some decision-making breaking within healthcare, so the trends are pretty good, and we believe as we go through the fiscal year, we'll start to see sequential growth throughout our healthcare market. Within Industrial, seeing roughly flat to modestly up markets within SemiCap, but from a Plexus standpoint, we're expecting double-digit growth into the high teens because of market share gains that we had over the course of the last two to three years, so we're seeing the fruits of those as those products tend to ramp up. But that's being offset by the general weakness in the Industrial markets, particularly within Europe. And then Aerospace and Defense, somewhat of a similar situation. I mean, we in essence have Commercial Aerospace, which is soft, not because of demand. I mean, the long-term demand trends are great. The backlogs for commercial jets are a decade plus long. But it's just a matter of ramping production at the OEMs to the appropriate level when we'll see that business come back. And that's offsetting some really strong gains within Defense as well as within Commercial Space. I'm going to jump around just a tiny bit because Pat kind of touched on this, that you hit that 6.2% operating margin. Previously, your long-term target business model was 5.5% GAAP on $5 billion in revenue. And now on a non-GAAP basis, you know that kind of equated to 6% plus non-GAAP. You've hit that on $4 billion in revenue now. So is it mainly a product of mix? Is it more increased penetration of some of these higher value services, the value-add services like the engineering services, the aftermarket, you know, life cycle services? Yeah, I think it's a couple of fronts. One is the benefit that we get from some of the higher value services like engineering and sustaining services. I think there's also the focus that we have around efficiencies within the organization. And that could be transformation costs where we look at the amount of costs it takes to turn materials into product, a heavy focus on that within our operations. But we're also looking very heavily across our support functions within our manufacturing as well as our support functions across the corporation to drive in efficiency. And the team's doing a good job of really driving an efficient business model, which has helped us get there a bit faster. Now, as we look forward, I mean, we still have some strong growth expectations. We believe the 9%-12% growth that we've targeted in the past is achievable again. I mean, we hit that in 2022 and 2023. We believe we can get back to those levels as we roll out of fiscal 2025. And in the meantime, beyond that, we're looking to continue to drive to expand margins, as Pat had mentioned earlier. I think I'm glad that we have Ryan here for the first time. He'll be in the breakout session and also in the one-on-one meetings today. But I'd love to talk about how engineering services plays into, you know, we discussed the margin benefit from that, but then also how that business is providing a strong funnel of revenue opportunities, giving you a little bit more visibility. Yeah, yeah, there's a number of advantages that our engineering brings, and first of all, the thing that it's important for everybody to understand is engineering has always been core to who we are and core to Plexus and core to our value proposition, so we've been engineering for, you know, over the 45 years that the company's been in existence, we've been developing products for our customers, so it's a unique service offering. We're very advanced in that way. We talked about the margin benefits. Another big benefit is you typically get access to bigger decision makers within the company, quite often into the executive management rather than just through the supply chain of the organization, then there's also the flow through to manufacturing, so generally, pretty much every product that we design will end up manufacturing. It just makes sense because we know the product well and we're designing in the supply chain and such. And that equates to about a third of the business that we, of the revenue that we manufacture, we've had engineering content in. And on the order of about 20%, we've had a product development where we've had some hardcore development access within that product. So it's a big needle mover for us on many different fronts. Sure, so when we talk about growth targets, returning to that 9%-12% growth, can the business model and the manufacturing footprint as it is today add a new facility over in Thailand? Yep. That continues to ramp and, you know, making some progress there. Talk about maybe what future expectations are for the footprint. Yeah, we've got capacity, good capacity in all three of our regions. You mentioned Thailand. We're also putting a new site up in Penang, Malaysia. That would be part of that campus that we've got there. So nice capacity there. North America, we've got two facilities in Guadalajara, Mexico. One that's got capacity to put additional revenue into. The United States has plenty of capacity as well if that's needed. And then Europe is a growth opportunity for us, newer region for us, but opportunities to put revenue within that region. So to answer your question, yes, we've got plenty of capacity to go north of $5 billion. Great. You kind of led into my next question, probably one of the hottest topics. You know, it's funny, we talk about looking at year-long, multi-year planning, even just 90-day frontier. At this point, I think we're on like a seven-day frontier. Maybe last year. Maybe not what I'm asking about. It's about tariffs. And the first question is, how do tariffs flow through your P&L? And then the second question as a follow-up to that is, how does your footprint play into maybe some advantages being able to move customers from one region to, you know, a possibly, you know, lower tariff type of region? Yeah, so first of all, tariffs. We pass tariffs along to our customers. So we're basically a cost-plus type business model. So those flow through. Now, you never know what the demand impact of that is going to be, which that's a bit of an unknown if it would impact demand. But from a standpoint of margin, not going to impact us negatively from a margin standpoint. There's actually, it would flow through as revenue, but it's pretty modest when compared to other revenue-generating factors that we have. From a footprint standpoint, we're in really good position with a solid global footprint with available capacity in each of our regions. So I think we can be flexible in movement of business as it might arise. I mean, for example, when the original China tariffs came into play several years ago, we moved about $50 million or $60 million worth of business out of China into primarily Malaysia at that point. But that was at our customer's request where we transitioned products. Now, that's not a simple process because these are complex products. It's a two to four quarter endeavor to move any product across regions. So it's not like it's something you'd plan to proactively do now. You'd want to do it if the situation warranted it in the future. So thinking a little bit more and just to expand on tariffs, kind of what are we doing about it or how are we looking at it? The biggest thing is we're looking to just continue to be flexible and knowledgeable about a very fluid situation that's going on right now. We've invested heavily over the last several years within our trade compliance team, both from a people and a tools standpoint. So they're really well positioned to be able to respond to our customers' needs as they come up. Our supply chain organization is proactively looking at how do we potentially shift supply chains where appropriate to be less dependent on countries that may end up in a tariff situation. And our Americas operations team has a very active effort just looking at how they would respond in various situations that could potentially occur in the Americas region. But the big thing is to just stay flexible and stay observant of the situations because we'll need to react quickly, but right now it's fluid and there really isn't a lot to react to at this very second. Right. Have you seen an increase in inbound calls from some of your customers that I know you still have very, very little manufacturing left in China? But, you know, Guadalajara is potentially a factor. Has there been an increase in customers saying, "We want to understand what our opportunities are if we need to," even if you're not prepared to move yet? Yeah, there's been less than I would have expected at this point. And I think it's largely because people just want to see what's going to happen. So they're not quite sure what they want to model at this point. But it's been a little bit less than I would have anticipated at this point. I think this is a question even before we got to, you know, tariffs and everything. Every time we meet, every time I'm in a meeting with you guys, you know, the question about nearshoring and onshoring. Obviously, this latest round of tariffs could impact something a little bit differently than historically. Yeah, but I think the onshoring dynamic of that in the past, maybe it was a little bit of a myth. It's difficult to get those cost efficiencies, even independent of tariffs. Yeah, I think there could be one of the trends that I think will continue, at least in our business, because the higher complexity products that we do, they tend to be lower volume. And the cost to move a supply chain is quite prohibitive. So the idea of something that's in manufacturing moving, the tariffs would have to be quite large. So I think that existing products are likely to stay in region or predominantly in region. But I think you could see more and more, for instance, U.S.-based sourcing, a U.S. consumption product if the tariffs really end up being what is out there as potential. Sure. It seems a lot of it is going to be determined by the supply chain that's available. I would like to address competitive advantages. And so I think it's very interesting that, you know, you are a relatively smaller-sized company in terms of revenue compared to some of the big guys that compete in your space. And Shawn may want to contribute on this as well. You know, I think the high mix, you kind of addressed that, relatively low volume, limited consumer. But maybe talk about where, when a customer comes to you, even if it's through engineering services or through commercialization services with a new product, how does Plexus win versus some of these bigger guys? Shawn, you want to jump in? I'll pick it up after that. It starts with our ability to manufacture complex products and the history we have with customers and succeeding in helping them manufacture complex products. It's also the expertise and regulatory dynamics. And so an example we highlight is we were the first company to build Class C registered devices in Malaysia 15 years ago. It was probably a decade before any of our competitors caught up with us. And so you lead with engineering, you engage with services, but a lot of it is the success we've had in multiple types of products where maybe it's 1,200 man-hours to assemble a piece of semiconductor capital equipment, or it's 3,000 sub-assemblies to build a robotic-assisted surgical device. And being able to pull that all together and then meet, you know, not only the manufacturing complexity, but the regulatory complexity with that. It's also, you know, helping launch products in the market quickly and, you know, engaging customer success at that level as well. The faster they can get to market, the better it is for everybody. It's great for us to drive efficiencies. It's great to get them into market. We're never going to be the lowest price. You have to be competitive. This is the next question. Yeah. I think the other thing is, you know, we've been winning market share. You know, we've talked about that across a lot of market sectors, you know, coming out of COVID. And it was the focus on quality as well as the ability to deliver upside. Customers, you know, sounds a bit trite, but they do value that extremely. And so our ability to meet upside to demand with quality has driven market share gains across all of our sectors. Okay. I've actually witnessed that. It's very cool to do site visits there. And you can see some products where, you know, maybe initially you lost it on price because customers think that they need to be price-sensitive and then ultimately come back to Plexus because of the quality and just the reliability of the supply. And I love seeing that. The weather's getting warmer, so if anybody wants to come visit. Yeah, that's right. We'll schedule a site visit up to Wisconsin. It's highly worth your time. So how much of your business is single-sourced today? Yeah, well, on a per-program basis, nearly all of it's single-sourced. Because again, you think about the volumes of the products that we're doing, it makes sense to put 100% in with one company. Now, for the most part, though, especially when you're talking the larger OEMs that are our customers, they have multiple suppliers, just not the same product. So I would say it's sub 10% is actually a dual-source product. It's not very common. Wow. Wow, and typically, because of your end market exposure and your customer exposure, your programs tend to be fairly long-lived. You're not chasing an annual kind of refresh cycle or technology refresh cycle. Is there any piece of your business left that is still a little bit more upgrade cycle-driven rather than just long multi-year programs? Yeah, maybe the communications business, Shawn. I mean, it's still not that short of a cycle, but. Yeah, it's upgrade-driven, but I mean, the products themselves have pretty long life cycles once you get the technology upgraded. But you're depending upon CapEx. That's probably one of the few areas that is a shorter cycle for us. Yeah, beyond that, pretty much everything is anywhere from five to 20-year product life cycle. Yeah. I want to open it up for questions before I move on to some other questions. Anyone in the audience? No? All right. We will keep going then. It's amazing how quickly 30 minutes can go over. So Pat, I do want to talk about the capital return strategy, but before we get to that, I think it's really important to address some of the cash flow initiatives that you guys started to enact about a year ago, maybe a little over a year ago. One, what were some of these initiatives? How are you driving the focus on cash flow and returns within the company? And then two, even as revenue has been challenged, and then two, what has that resulted in? Yeah, well, to your point, a year ago, we were in a much different spot. We measure working capital efficiency through cash cycle days. So AR days, inventory, less deposits, AP. We were at a high mark at that point after our first quarter of fiscal 2024 of 95 days, highest we've ever been. And put it in perspective, each one of those days represents $10 million of working capital investment. So pretty high investment in working capital. At that point, we decided we have to get after this, have a widespread effort to improve working capital. So at that point, it was along the lines of education, better education to our employees impacting working capital. Traditionally, we've used return on invested capital. I think that was more challenging for employees to wrap their head around, like, how can I really impact that versus free cash flow generation? So, education effort, we drove it down to the customer basis where we could look at specific elements within a customer that may be causing higher working capital investments, targeted those, had biweekly meetings on how to improve, hold people accountable. And it was brute force for the first several quarters. And we saw improvement. We went from 95 days, improved into the 80s, ended the fiscal year at 64 days. So you can imagine that improvement of 31 days, the impact it had on our free cash flow generation. But that was a lot of effort put forth during the fiscal year. We're putting longer-term improvement plans in place that will sustain that improvement, mainly around inventory processes, how we procure inventory, bring it in, minimum order quantities. All of that is longer-term structural improvements that we expect to carry on. End of the fiscal year, record free cash flow over $340 million. Coming into this fiscal year, the first quarter, we generated $27 million of free cash flow positive. What's important about that is it's a first year in fiscal first quarter in five years that we've generated positive free cash flow in the first quarter. Hence, the increase we made to this year's free cash flow forecast of up to $100 million. Really pleased with the efforts we've made. What has that meant from a balance sheet standpoint? We've delevered. If you go back a couple of years ago, we had our revolver balance above $400 million. We ended the fiscal first quarter of this year at just $15 million under the revolver. Now, we do have other debt, private placement of $150 million, but really nice improvement to the leverage position. Continue to support our share repurchase program. So last year, we executed on a $50 million authorization. Fiscal 2025 has another $50 million authorization in place that we're executing upon. So really good, I think, shareholder value that we've been providing over the last year or so. Yeah, for sure. How do you prioritize the use, obviously bringing down some of that leverage because it was at really unusually high levels during the supply chain crisis? But outside of that, what are your priorities? Yeah, well, and to touch on debt, I mean, the impact interest rates had and the borrowing was obviously really significant on our EPS. So that was a priority for us. Now we're to a point where I'm comfortable with the balance sheet. Share repurchase is obviously important, but probably most important is around organic growth and what that's going to take from a working capital standpoint, capital expenditures. We do expect capital spending to be a little higher this year compared to last year. That's to support the 9%-12% growth. So that would be probably the number one priority for us. Okay, great. What about M&A and EMS? I get asked about this all the time. Yeah, well, I think in general, we're not. I don't think you'll see Plexus go try to acquire a major competitor. But we do think about the whole make versus buy when it comes down to capabilities and what have you. So if there was a capability that we thought would help us drive further into one of our target markets or something that we believe fits us well from a company, it's possible you could see that, but it's not a high priority. Not so transformative. No, no, I don't think you'd see anything transformative. It'd be more just, again, to expand who we are and make us a better version of who we are. Yeah, and what I like about a balance sheet is it's in a spot right now to support those types of investments if they do come up, either organic or external, so. We've only got shockingly one minute left. I know, Todd, frequently you like to give kind of like an overview summary. If investors haven't looked at Plexus before, you know, let us know why they should. Yeah, well, I think we've hit on a number of the key points, but maybe just to tie it back together. When we think about Plexus from a revenue growth standpoint, we're transitioning nicely into a period where we should see sequential revenue growth and get back to that area where we're driving 9%-12% revenue growth. We're in a good, strong position from a margin standpoint, hitting our target margin more than a year earlier than we expected to do. So we believe we can continue to hit that on a periodic basis and then move beyond to perhaps a higher target as we move out into the future. We've got great free cash flow going, which we're using to increase shareholder value as well, too. So I think when you tie those all together, we see very strong, healthy EPS growth as we look forward. Excellent. Great. Our time is up. Thank you very much, Todd, Pat, Shawn, and Ryan. And thanks very much, everyone in the audience. Thank you. Thank you all.