Plexus Corp. · NASDAQ:PLXS
Plexus — Investor Day (June 2019)
81 slides from Plexus's investor day presentation, Jun 5, 2019
Slide 1: A differentiated strategy
PLXS A differentiated strategy Todd Kelsey | President & Chief Executive Officer
Slide 2: The leader in markets with highly complex products
PLEXUS CONFIDENTIAL The leader in markets with highly complex products and demanding regulatory environments. OUR DIFFERENTIATION Consistent, proven strategy Growing markets, unique portfolio Commitment to customers, exceptional execution Consistent, superior financial results Experienced, engaged l
Slide 3: PLXS strategy
PLEXUS CONFIDENTIAL PLXS strategy FOCUS on highly complex products and • Product realization solutions demanding regulatory • Innovative engineering environments • Biased towards organic growth • Operational Excellence Superior EXECUTION • Customer Service Excellence • Employee engagement DISCIPLINE
Slide 4: The focused transformation of our unique portfolio
PLEXUS CONFIDENTIAL The focused transformation of our unique portfolio $1.8B HC/LS I/C A/D N/C 21% 16% 10% 53% F08 $3.2B HC/LS I/C A/D COMM 39% 30% 17% 14% F19* *Street consensus Highly complex products and demanding regulatory environments Healthcare and Life Sciences Industrial and Commercial Aero
Slide 5: A track record of growth in the sectors where we differentiate
PLEXUS CONFIDENTIAL A track record of growth in the sectors where we differentiate Plexus Product EMS Market Market Sector Life Cycle 5 Year Growth Future Growth (years) CAGR CAGR Expectations F13-F18 Healthcare/Life Sciences 8-10 13% Mid-teens 5% Industrial/Commercial 5-10 11% Low-teens 7% Aerospac
Slide 6: Exceptional execution is the path to $5B
PLEXUS CONFIDENTIAL Exceptional execution is the path to $5B 6
Slide 7: Our commitment to customer success
PLEXUS CONFIDENTIAL Our commitment to customer success Net Promoter Score 84% 100% 76% 79% 81% 82% 80% 60% 40% 20% 0% 2014 2015 2016 2017 2018 We’ll help you create the products that build a better world. 7
Slide 8: Building long-term partnerships
PLEXUS CONFIDENTIAL Building long-term partnerships 15-30+ years 10-14 years 5-9 years 0-4 years Operational Excellence and Customer Service Excellence enable success 8
Slide 9: Engineering is core to PLXS
PLEXUS CONFIDENTIAL Engineering is core to PLXS $100M • A 40-year history of problem solving • Innovation engine for our customers • Global network of collaborative design centers • High value and customer longevity • Source of exceptional quality manufacturing programs F13 F14 F15 F16 F17 F18 F19 *
Slide 10: Committed to financial discipline to create shareholder value
PLEXUS CONFIDENTIAL Committed to financial discipline to create shareholder value Revenue ($M) Economic Return $3,500 10% PLXS EMS Industry $3,151 $2,873 Average $3,000 Economic Revenue $2,654 $2,556 $2,528 Revenue $2,231 $2,307 $2,378 Return CAGR $2,500 $2,013 $2,228 CAGR 5% (avg.) Enduring Goal 50
Slide 11: Committed to creating shareholder value
PLEXUS CONFIDENTIAL Committed to creating shareholder value 20.0% Plexus achieves differentiated ROIC1 results 15.0% 17.3% 10.0% 5.0% 7.4% PLXS EMS 0.0% Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Source: J.P. Morgan 1 Calculated as LTM net income divided by the sum of the average of the current period and l
Slide 12: A differentiated strategy designed for $5B
PLEXUS CONFIDENTIAL A differentiated strategy designed for $5B Revenue ($M) • Focused, unique portfolio $6,000 • Exceptional execution to grow $5,000 share with our customers $4,000 • Strong culture and exceptional talent $3,000 $2,000 • Disciplined financial performance aligned to $1,000 shareholde
Slide 13: We'll help you create the products that build a better world
We’ll help you create the products that build a better world.
Slide 14: Differentiation: The journey to $5B
Differentiation: The journey to $5B Steve Frisch | Executive VP & Chief Operating Officer
Slide 15: The leader in markets with highly complex products
PLEXUS CONFIDENTIAL The leader in markets with highly complex products and demanding regulatory environments. OUR JOURNEY Evolution of Plexus’ differentiation Differentiation: the customers’ needs Our path forward 15
Slide 16: The evolution of differentiation: New technology disruption
PLEXUS CONFIDENTIAL The evolution of differentiation: New technology disruption 1979-90 Industry trends PLXS response • Electronic content integrated • Plexus founded in 1979 THE BEGINNING OF into products • Engineering and Manufacturing services THE • OEM’s traditional vertical EMS INDUSTRY integra
Slide 17: The evolution of differentiation: Advanced manufacturing
PLEXUS CONFIDENTIAL The evolution of differentiation: Advanced manufacturing 1990-97 Industry trends PLXS response & results • High density packages • Plexus develops state-of-the-art COMPLEXITY OF (Ball Grid Array) manufacturing and test ASSEMBLY TECHNOLOGY • Advanced manufacturing and test • Plexu
Slide 18: The evolution of differentiation: Capacity
PLEXUS CONFIDENTIAL The evolution of differentiation: Capacity 1997-2003 Industry trends PLXS response & results • Significant customer demand drives • Plexus strategically expands in DOT-COM BOOM rapid global expansion EMEA and APAC with ROI focus • EMS growth through M&A: • Plexus F97–F03 CAGR: 13
Slide 19: The evolution of differentiation: Market strategy
PLEXUS CONFIDENTIAL The evolution of differentiation: Market strategy 2003-08 Industry trends PLXS response & results • Dot-Com crash requires strategy • Plexus established mid- to low- volume, DIVERGING STRATEGIES, high complexity focus for differentiated beyond capacity DEFINING MARKETS • EMS stra
Slide 20: The evolution of differentiation: Productivity
PLEXUS CONFIDENTIAL The evolution of differentiation: “Productivity” 2008-16 Industry trends PLXS response & results • Financial crisis and a sluggish economy • Plexus de-emphasizes Networking COST REDUCTION slowed growth for customers • Plexus F08-F16 CAGR: 4% REIGNS SUPREME • Focus on cost reducti
Slide 21: The evolution of differentiation: Quality and delivery
PLEXUS CONFIDENTIAL The evolution of differentiation: Quality and delivery 2016-PRESENT Industry trends PLXS response & results • OEM’s focus on disruptions due to • Operational Excellence and A STANDARD OF delivery and quality Customer Service Excellence EXCELLENCE • Zero defects and 100% • Plexus
Slide 22: Differentiation: the customers' needs
Differentiation: the customers’ needs 22
Slide 23: Meeting the customers' needs
PLEXUS CONFIDENTIAL Meeting the customers’ needs Customer requirements: • 12 months of Zero Quality Escapes • 12 months of 100% On-Time in Full (OTIF) Plexus delivers: • Zero Quality Escapes since August 2016 • 100% On-Time in Full since December 2014 Customers reward partners that consistently deli
Slide 24: The customers' needs
PLEXUS CONFIDENTIAL The customers’ needs Our cost of quality is at least $600M…our delivery performance [to our customer] is only 85%. - Chief Executive Officer Looking for perfection! Our first priority is quality. - Chief Procurement Officer We are now making supplier selections on quality, not ju
Slide 25: The path forward
The path forward (PLEXUS
Slide 26: Exceptional execution is the path to $5B
PLEXUS CONFIDENTIAL Exceptional execution is the path to $5B 26
Slide 27: A strong foundation
PLEXUS CONFIDENTIAL A strong foundation “Who we are” Best People - pillar of our strategy Culture – tenured leadership • Integrity & honesty • Talent development • Diversity & Inclusion Employee Net Promoter Score 27
Slide 28: Operational Excellence
PLEXUS CONFIDENTIAL Operational Excellence “What we deliver” Flawless Execution – pillar of our strategy Quality Begins with Me (QBwM) Investments: • Toyota Way continuous improvement • Automation • Industry 4.0 - Global Shop Floor Delivery – On time to request (OTTR) 28
Slide 29: Customer Service Excellence
PLEXUS CONFIDENTIAL Customer Service Excellence “How we deliver” The 5 E’s • Empathetic • Entrepreneurial • Ensure Accountability • Empowered • Engaged Market sector intimacy – pillar of our strategy “Success from the customer’s perspective” Net Promoter Score: 84% 29
Slide 30: Global team, global solutions
PLEXUS CONFIDENTIAL Global team, global solutions “Working together” Global toolset • Enterprise resource planning (ERP) • Design environment • Manufacturing environment Global management, regional execution Net Promoter Score feedback 30
Slide 31: The path to $5B is straightforward
PLEXUS CONFIDENTIAL The path to $5B is straightforward 31
Slide 32: We'll help you create the products that build a better world
We’ll help you create the products that build a better world.
Slide 33: Delivering revenue growth that outpaces the market
Delivering revenue growth that outpaces the market Andy Hyatt | Sr. Vice President, Global Customer Solutions
Slide 34: Delivering revenue growth that outpaces the market
PLEXUS CONFIDENTIAL Delivering revenue growth that outpaces the market. SUSTAINABLE GROWTH ENGINE Unique markets and growth potential Diligent approach to enabling growth Business development pipeline Wins model analytics 34
Slide 35: Ample growth potential in our differentiated markets
PLEXUS CONFIDENTIAL Ample growth potential in our differentiated markets $200 49% 41% 14% 87% Market Penetration Percentage PLXS Addressable Market $150 Billions $100 PLXS Addressable Market PLXS Addressable Market Market Penetration $50 PLXS Addressable Market Market Penetration Market Penetration
Slide 36: Sector-focused, disciplined targeting approach
PLEXUS CONFIDENTIAL Sector-focused, disciplined targeting approach Process focused, research based approach Emphasis on • Market leaders • Emerging companies • Technologies we can leverage Quality vs. quantity Relationship expansion with customers Disciplined approach, unafraid to say “no” • Shiny o
Slide 37: Disciplined sales management approach
PLEXUS CONFIDENTIAL Disciplined sales management approach Process Proprietary Business Development analytics Gate 1 Bench Unqualified account assigned Gate 2 Talent Prospect Account confirmed as a fit Creating growth by Above Gate 3 leveraging exceptional the funnel Define Project defined and moved
Slide 38: A history of exceptional wins performance
PLEXUS CONFIDENTIAL A history of exceptional wins performance Trailing Four Quarters (TFQ) Manufacturing Wins $1,000 50% $900 45% $800 40% $700 35% New Wins $M % of TFQ Sales $600 30% $500 25% $400 20% $300 15% $200 10% $100 5% $0 0% Q2F18 Q3F18 Q4F18 Q1F19 Q2F19 TFQ Wins TFQ Wins % of TFQ Sales New
Slide 39: A track record of growth in the sectors where we differentiate
PLEXUS CONFIDENTIAL A track record of growth in the sectors where we differentiate Plexus Product EMS Market Market Sector Life Cycle 5 Year Growth Future Growth (years) CAGR CAGR Expectations F13-F18 Healthcare/Life Sciences 8-10 13% Mid-teens 5% Industrial/Commercial 5-10 11% Low-teens 7% Aerospac
Slide 40: We'll help you create the products that build a better world
We’ll help you create the products that build a better world.
Slide 41: Leadership in the Healthcare and Life Sciences Industry
Leadership in the Healthcare and Life Sciences Industry Mike Tendick | Market Sector Vice President, HC/LS
Slide 42: Leading expertise in each of our markets
PLEXUS CONFIDENTIAL Leading expertise in each of our markets IMAGING THERAPEUTIC MONITORING LIFE SCIENCES 42
Slide 43: PLXS capitalizing on industry trends
PLEXUS CONFIDENTIAL PLXS capitalizing on industry trends Industry trends PLXS opportunities Favorable developed and The market will see strong growth emerging market demographics for the next 10+ years OEMs need to reduce cost Plexus’ innovative solutions enable OEMs to combat cost pressures Healthc
Slide 44: Innovative engineering generates consistent growth
PLEXUS CONFIDENTIAL Innovative engineering generates consistent growth F05 F06 F07 F08 F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 F19 * *F19 revenue is estimated 44
Slide 45: Providing solutions our customers need, where they need them
PLEXUS CONFIDENTIAL Providing solutions our customers need, where they need them AMER 4 Design Centers 3 Manufacturing • FDA Class II & III • Single Use Device Assembly EMEA 3 Design Centers 2 Manufacturing • FDA Class II APAC 1 Design Center 3 Manufacturing • FDA Class II & III • Single Use Device
Slide 46: Strategic long term relationships
PLEXUS CONFIDENTIAL Strategic long term relationships GROWING WITH OUR CUSTOMERS OF CHOICE • Industry leaders • Rapidly growing technology innovators 13 15 • Market disruptors TAKING THE LONG TERM VIEW of • Patience and persistence • Roadmap alignment TOP HC/LS COMPANIES ENSURING PLEXUS BECOMES THE
Slide 47: The strategy is working, driving long term growth
PLEXUS CONFIDENTIAL The strategy is working, driving long term growth Healthcare and Life Sciences Revenue Growth $1B F10 F11 F12 F13 F14 F15 F16 F17 F18 F19E* F20E F21E F22E * *Revenue is a target 47
Slide 48: Key takeaways: Healthcare and Life Sciences
PLEXUS CONFIDENTIAL Our customers aren’t the only ones counting on us to get it right. KEY TAKEAWAYS Innovation leader in Healthcare and Life Sciences Plexus’ solutions enable customer success Strategic customer relationships drive strong growth 48
Slide 49: We'll help you create the products that build a better world
We’ll help you create the products that build a better world.
Slide 50: Herb Coussons, MD
PLEXUS CONFIDENTIAL Herb Coussons, MD • Customer engagements are proprietary • Plexus will not comment on current customer engagement specifics • Companies referenced in this presentation are for reference only 50
Slide 51: Robotic and Computer Assisted Surgery
Robotic and Computer Assisted Surgery Growth, development and impact on healthcare
Slide 52: SRI is Silicon Valley's soul
PLEXUS CONFIDENTIAL “SRI* is Silicon Valley’s soul.” - Business Week • DARPA project at SRI in early 1980’s • Licensed to Intuitive Surgical in 1995 • FDA approved in 2000 by a 510K equivalency pathway *Stanford Research Institute (SRI) 52
Slide 53: Intuitive Surgical | 2000-2015
PLEXUS CONFIDENTIAL Intuitive Surgical | 2000-2015 GROWTH ADOPTION THROUGH CLINICAL DATA 510(k) approval • Safety and equivalency to laparoscopy • Limited efficacy or clinical data required Gained clinical indications from 2000-2007 • CTS, Gyn Cancer & Benign, Urology, Gen Surg, ENT Clinical efficac
Slide 54: Clinical benefits | Minimally invasive surgery
PLEXUS CONFIDENTIAL Clinical benefits | Minimally invasive surgery Wristed Scaling of 3D HD optics Image stability instruments movements • Less blood loss • Faster recovery • Fewer thromboembolisms • Fewer transfusions • Faster return to work/family • Less readmissions • Lower infection rates • Lowe
Slide 55: Clinical benefits | Minimally invasive surgery
PLEXUS CONFIDENTIAL Clinical benefits | Minimally invasive surgery Wristed Scaling of 3D HD optics Image stability instruments movements • Less blood loss • Faster recovery • Fewer thromboembolisms • Fewer transfusions • Faster return to work/family • Less readmissions • Lower infection rates • Lowe
Slide 56: Business growth and development
PLEXUS CONFIDENTIAL Business growth and development 13-17% Worldwide Procedure Trend growth* 2012 2013 2014 2015 2016 2017 2018 2019 Urology Gynecology General Surgery Other *projection for 2019 Source: JP Morgan Healthcare Conference 2019 56
Slide 57: Computer Assisted Surgery's role in the future of healthcare
PLEXUS CONFIDENTIAL Computer Assisted Surgery’s role in the future of healthcare The Quadruple Aim • The patient experience • Better outcomes Better Improved • Cost competition clinician outcomes experience • Clinician benefits • Technologic enablers • Variation reduction • Learning curves Lower Imp
Slide 58: Growth potential of Computer Assisted Surgery
PLEXUS CONFIDENTIAL Growth potential of Computer Assisted Surgery • 5,600 systems worldwide (2019) • Over 1M procedures in 2018 $4B CURRENT REVENUE • Over 10% annual growth 2012 to 2019 • Product expansion into other specialties • Ortho and spine • Vascular • Navigation systems $100B • Over 40 compe
Slide 59: A culture of problem solving and innovation
A culture of problem solving and innovation Mike Running | Sr. VP, Global Engineering Solutions & Aftermarket Services
Slide 60: Success demands a singleness of purpose
PLEXUS CONFIDENTIAL “Success demands a singleness of purpose.” – Vince Lombardi
Slide 61: Innovative solutions for the most complex product challenges
PLEXUS CONFIDENTIAL Innovative solutions for the most complex product challenges. ENGINEERING EXCELLENCE Culture created over 40 years Seamless integration in all aspects of Plexus Talent source for the organization Best in class breadth and depth of capabilities 61
Slide 62: Integrated engineering enables manufacturing growth
PLEXUS CONFIDENTIAL Integrated engineering enables manufacturing growth DESIGN AND SUPPLY CHAIN NEW PRODUCT MANUFACTURING AFTERMARKET DEVELOPMENT SOLUTIONS INTRODUCTION SERVICES 63% $575M MANUFACTURING WINS WITH ENGINEERING FIRST ENGAGEMENT (TRAILING FOUR QUARTERS) 62
Slide 63: Success driving growth and world-class talent
PLEXUS CONFIDENTIAL Success driving growth and world-class talent R&D Engineering direct headcount 900 785 60 727 60 750 684 60 594 600 35 545 34 478 32 450 300 150 0 F16 F17 F18 F19* F20 * F21* *Values are estimated 63
Slide 64: Success driving growth and world-class talent
PLEXUS CONFIDENTIAL Success driving growth and world-class talent Technical resource tenure distribution 45% 32% Well experienced technical resources 23% Fresh engineering –--- talent Reliable execution –--- Veteran technical Contemporary leaders methods / technical ---- studies Strong technical fou
Slide 65: Global collaboration, greater customer value
PLEXUS CONFIDENTIAL Global collaboration, greater customer value AMER BOULDER, NEENAH, RALEIGH, GUADALAJARA, COLORADO WISCONSIN NORTH CAROLINA MEXICO EMEA LIVINGSTON, DARMSTADT, ORADEA, UNITED KINGDOM GERMANY ROMANIA APAC Engineering as One Plexus through unified tools, systems and processes PENANG,
Slide 66: Innovating for a smarter world
PLEXUS CONFIDENTIAL Innovating for a smarter world 66
Slide 67: Making connections that are transforming the world
PLEXUS CONFIDENTIAL Making connections that are transforming the world 67
Slide 68: Where zero defects takes on a whole new meaning
PLEXUS CONFIDENTIAL Where "zero defects" takes on a whole new meaning 68
Slide 69: When creating a breakthrough is more than finding an answer
PLEXUS CONFIDENTIAL When creating a breakthrough is more than finding an answer 69
Slide 70: We'll help you create the products that build a better world
We’ll help you create the products that build a better world.
Slide 71: Delivering shareholder value
PLEXUS CONFIDENTIAL Delivering shareholder value Pat Jermain | Executive Vice President & Chief Financial Officer
Slide 72: A disciplined strategy committed to consistent financial performance
PLEXUS CONFIDENTIAL A disciplined strategy committed to consistent financial performance. CREATING SHAREHOLDER VALUE Balanced portfolio Exceptional margins and return performance Strong cash generation Commitment to shareholders returns 72
Slide 73: Our differentiated portfolio
PLEXUS CONFIDENTIAL Our differentiated portfolio $1.8B HC/LS I/C A/D N/C 21% 16% 10% 53% F08 $3.2B HC/LS I/C A/D COMM 39% 30% 17% 14% F19* *Street consensus Portfolio aligned to achieve operating margin commitments Healthcare and Life Sciences Industrial and Commercial Aerospace and Defense Communic
Slide 74: Delivering strong operating margins
PLEXUS CONFIDENTIAL 6.0% Delivering strong operating 5.0% margins 4.0% 3.0% CONSISTENTLY OUTPERFORMING COMPETITORS • Differentiated portfolio supports target margins 2.0% • Growth in Engineering and AMS 1.0% • Commitment to Operational Excellence 0.0% CY16 CY17 CY18 • GAAP reporting compared to comp
Slide 75: Widening ROIC gap through consistent attention and focus
PLEXUS CONFIDENTIAL Widening ROIC gap through consistent attention and focus 20.0% PLXS EMS 15.0% 17.3%1 10.0% 5.0% 7.4%1 0.0% Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Source: J.P. Morgan 1 Calculated as LTM net income divided by the sum of the average of the current period and last period’s debt plus boo
Slide 76: Focus on cash generation
PLEXUS CONFIDENTIAL 140 $133 120 $99 Focus on cash generation $94 $97 100 $88 80 60 • Solid operating performance $50 $43 40 • Attention to working capital $23 20 • Focused investments to drive future growth $4 0 • Average annual free cash flow, over $70M F11 F12 F13 F14 F15 F16 F17 F18 F19E* Our co
Slide 77: Commitment to shareholder returns
PLEXUS CONFIDENTIAL Commitment to shareholder returns 50 250 Buyback 45 225 $200 $200 Outstanding Shares Outstanding Shares (millions) 40 200 Buyback (in millions of $) $180 35 175 30 150 $140 25 125 20 100 15 75 $50 10 50 $34 $30 $30 $30 5 25 0 0 F07 F08 F09 F10 F11 F12 F13 F14 F15 F16 F17 F18 F19
Slide 78: Compelling financial model
PLEXUS CONFIDENTIAL Compelling financial model Financial metrics Target and assumptions Revenue Growth 9% to 12% • Tax rate ~ mid-teens Gross Margin 9.1% to 9.6% • Capital Spending ~ 2% to 3% of Revenue SG&A as a % of Revenue 4.4% to 4.6% • Debt to EBITDA < 2X Operating Margin 4.7% to 5.0% Cash Conv
Slide 79: Significant opportunity to create shareholder value
PLEXUS CONFIDENTIAL Significant opportunity to 16.4 64% 15.7 create shareholder value 48% • Focused, disciplined strategy • Outpacing industry growth • Differentiated engineering solutions • Strong margins with focus on ROIC • Management integrity, trust 3-yr TSR NTM P/E Plexus S&P 500 TSR and NTM S
Slide 80: Significant opportunity to create shareholder value
PLEXUS CONFIDENTIAL Significant opportunity to create shareholder value • Focused, disciplined strategy • Outpacing industry growth • Differentiated engineering solutions • Strong margins with focus on ROIC • Management integrity, trust A strategy that supports double-digit returns to shareholders t
Slide 81: We'll help you create the products that build a better world
We’ll help you create the products that build a better world.