Plexus Corp. (NASDAQ:PLXS) Q1 2024 Earnings Call Transcript

Plexus Corp. (NASDAQ:PLXS) Q1 2024 Earnings Call Transcript January 25, 2024

Plexus Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Plexus Corp. Conference Call regarding its Fiscal First Quarter 2024 Earnings Announcement. My name is Livia, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for questions. The conference call is scheduled to approximately one hour. Please note that, this conference call is being recorded. I would now like to turn the call over to Mr. Shawn Harrison, Plexus Vice President of Investor Relations.

Shawn Harrison: Thank you, Livia. 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 September 30, 2023, and the safe harbor and fair disclosure statement in our press release.

We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus’ website at 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. With today’s earnings calls, Todd will provide summary comments before turning the call over to Oliver 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. There were many positives during our fiscal first quarter. These included strong quarterly wins across our market sectors, totaling $261 million, including the addition of two new exciting healthcare life sciences logos. Robust expansion of our funnel of qualified manufacturing opportunities, which now exceeds $4 billion. When combined with a total available market exceeding $240 billion, this supports our expectation of continued industry leading revenue growth with a targeted CAGR of 9% to 12%. Ongoing advancement of our sustainable and responsible business practices, along with numerous efforts by our team members to help create a better world and positively impact our communities.

Yet the quarter had its challenges, primarily associated with further demand softening in the Healthcare/Life Sciences sector and certain subsectors of the industrial market. The resulting revenue decline has created inefficiencies across our organization, which we are addressing as we remain focused on delivering 5.5% GAAP operating margin in fiscal 2025. These actions will be discussed in more detail later in the call. Please advance to Slide 4 for a review of our fiscal first quarter results. We delivered fiscal first quarter revenue of $983 million, GAAP operating margin of 4.6%, including 54 basis points of stock-based compensation expense, and GAAP EPS of $1.04, including $0.19 of stock-based compensation expense. These results met the updated guidance provided on January 16, 2024 and reflected the impact of significant negative operating leverage as demand weakened late during the fiscal first quarter, limiting our ability to appropriately adjust expenses.

Please advance to Slide 5. Our go-to-market organization is leveraging the current environment to create significant opportunity for future growth. We won 30 new manufacturing programs worth $261 million annually when fully ramped into production, led by continued strength from our Healthcare/Life Sciences market sector as well as strong performance from our Industrial market sector. Concurrently, we expanded our funnel of qualified manufacturing opportunities by more than $300 million versus the prior quarter to greater than $4 billion. The funnel increase was highlighted by a large expansion and opportunities in our Aerospace and Defense and Healthcare/Life Sciences market sectors. Our Aerospace and Defense funnel is at an all-time high positioning us for continued strong growth in the sector.

Please advance to Slide 6. I’m proud of how our Plexus team continues to innovate and operate to advance our sustainable and responsible business practices. During the quarter, Plexus joined the U.N. Global Compact, a voluntary leadership platform for the development, implementation and disclosure of socially responsible business practices. Further, we set fiscal 2024 sustainability goals, including an additional 5% energy intensity reduction globally as well as 5% waste intensity reduction. I’d also like to highlight some well-deserved recognition for our team members as they create a better Plexus and a better world positively impacting our communities. The Malaysia chapter of HR Asia selected Plexus as one of the best companies to work for in Asia for a remarkable third time.

In addition, they presented Plexus the HR Asia Diversity, Equity and Inclusion Award. Plexus was selected by the Fox Cities Chamber of Commerce in Wisconsin as the 2023 Large Company of the Year. Our Neenah operations site hosted more than 80 high schoolers in support of a Smart Girls Rock event that connected mentors from a variety of STEM-related careers, inspiring these students to pursue a career in STEM. And finally, Insight Magazine named Pat Jermain, Wisconsin Public Company CFO of the Year for 2023. Pat, congratulations and thank you for your leadership and commitment to fostering the growth and development of our company and our team. Please advance to Slide 7. For the fiscal second quarter, we continue to see healthy commercial aerospace orders, inclusive of unfulfilled customer demand, slowly rebounding semiconductor capital equipment demand aided by share gains and an ongoing tailwind from new industrial program ramps.

However, the near-term demand weakness and inventory corrections from the Healthcare/Life Sciences market sector and certain sub-sectors of the industrial market our greater than previously anticipated, creating numerous inefficiencies across our business. While the move to outsourcing continues as highlighted by our robust funnel of qualified manufacturing opportunities, we are seeing some slowness in customer decision making on new product development projects, particularly in the Healthcare/Life Sciences market sector, which is creating challenges for our engineering team. As a result, we are guiding fiscal second quarter revenue of $930 million to $970 million. Non-GAAP operating margin of 4.0% to 4.4%, inclusive of approximately 72 basis points of stock-based compensation expense, and non-GAAP EPS of $0.80 to $0.95 inclusive of $0.25 of stock-based compensation expense.

Our GAAP EPS guidance of $0.48 to $0.63, also includes approximately $10 million or $0.32 of restructuring charges. We expect to complete the associated restructuring actions by our fiscal third quarter and believe they will result in approximately $20 million of annualized cost savings. While we anticipate some cost leverage and margin benefit from these actions during the fiscal second quarter, typical seasonal cost headwinds and other investments, which Pat will discuss later in the call, coupled with our lower revenue forecast will more than offset the immediate benefit. While I continue to challenge our team to deliver $5 billion in annual revenue with 5.5% GAAP operating margin by our fiscal 2025. The path to $5 billion in that timeframe has become more challenging, given current market dynamics.

As a result, we are implementing several strategic actions, leading to the restructuring charge to enable better scalability, create greater efficiency and align our cost structure to position Plexus for future investments and long-term growth. We are rightsizing in areas where we have excess capacity, which includes personnel reductions. While these actions are necessary to position Plexus for future success, they are incredibly difficult for all of us, given the personal effect to our valued Plexus team members. In addition, we are actively managing discretionary spending, including implementing a temporary salary reduction for our executive leadership team. We understand that, we cannot control the demand environment, but we can ensure that, we continue to evolve in order to deliver great operational efficiency, supporting the industry-leading returns that our shareholders value and expect.

We anticipate the second quarter of fiscal 2024 will represent a revenue trough and are expecting sequential revenue growth with our operating margin expansion of 30 to 50 basis points, during each of the fiscal third and fourth quarters. We expect to deliver operating improvements resulting from the restructuring actions, increased manufacturing revenue and improved utilization within engineering and remain committed to delivering 5.5% GAAP operating margin in fiscal 2025. Please advance to Slide 8. Finally, as we look forward, I remain confident that Plexus will deliver then exceed $5 billion in annual revenue, while also achieving superior returns for our shareholders. We see tremendous runway for continued organic growth in excess of the industry without any substantial shifts to our target market sectors or strategy.

Even with some of our markets still recovering post-COVID, we grew revenue at an approximately 8% CAGR during the last five fiscal years ended to 2023. This performance is 25 basis points in excess of the industry and in many cases more than 2x or 3x the growth rate of our competitors. As detailed on this slide, our market sector leaders estimate there is a greater than $420 billion total addressable market that is directly aligned to the customers and products that fit our strategy and our mission to be the leader in markets featuring highly complex products in demanding regulatory environments. This addressable market is approximately 40% outsourced today, creating a $240 billion opportunity in future outsourcing for Plexus, supporting our 9% to 12% revenue CAGR goal.

As an organization, we continue to evolve in order to sustain our success. We are focused on driving efficiencies and creating scale, while accelerating the pace of change. Our talented Plexus team is at the heart of our strategy creating trust with our customers, while delivering customer service excellence and exceptional results. We continue to advance our operations to ensure our organic revenue growth remains well in excess of our peers, in line with our 9% to 12% goal, and that we push to deliver at least 5.5% GAAP operating margin, more consistent and greater free cash generation in the industry leading returns that our shareholders value and expect. I will now turn the call over to Oliver for additional analysis of the performance of our market sectors.

Oliver?

Oliver Mihm : Thank you, Todd. Good morning. I will begin with a review of the fiscal first quarter performance of each of our market sectors, our expectations for each sector for the fiscal second quarter and some directional sector commentary for fiscal 2024. I will also review the annualized revenue contribution of our wins performance for each market sector in the region, and then provide an overview of our funnel of qualified manufacturing opportunities. Starting with the industrial sector on Slide 9, revenue increased 4% sequentially in the fiscal first quarter. This result was below our expectation of a high-single-digit increase. Softer end market demand across some market sub-sectors contributed to the weaker result.

As we start the fiscal second quarter, we are experiencing forecast lightness as customers burned down inventory, most notably within the communications sub-sector offset in part by strength in green energy and an incremental increase in SemiCap. This will result in a low-single-digit decline for the industrial sector for the fiscal second quarter. Industrial market sector had strong wins in the fiscal first quarter of $125 million. Wins were balanced across our sub-sectors including SemiCap. New programs include a follow on commercial vehicle charging platform that will be produced in our Appleton, Wisconsin facility. We also expanded our portfolio with the newer SemiCap customer to include engagement from the Americas region with a complex mechanical assembly that will be produced in our Guadalajara, Mexico campus, we are now engaged with this customer from all three of our regions.

One additional highlight from the quarter is an assessment that our engineering team is performing on a product that our customer is currently designing, called a lifecycle assessment, these high value add engagements examine and measure the environmental impact of a product throughout its lifecycle. By identifying improvement opportunities early and then helping to solution them, Plexus is able to partner with our customers to create products that build a better world. Looking ahead, we anticipate mid-single-digit revenue growth for our industrial market sector for our fiscal 2024, a result of a continued gradual rebound in SemiCap demand, a tailwind from our support of green energy markets, offset by a greater-than-forecast headwind from a technology transition within the communications market.

Please advance to Slide 10. Revenue in our Healthcare/Life Sciences sector was down 15% sequentially for the fiscal first quarter, which was below our expectation of a low-double-digit decrease. Market weakness, inventory corrections, customer design modifications and supplier issues drove the decline. In the near-term, we see soft demand as our customers continue to decrease inventory levels. The net result is that, we anticipate our Healthcare/Life Sciences sector to see a mid-single-digit decrease for the fiscal second quarter. Healthcare/Life Sciences sector wins for the fiscal first quarter totaled $113 million and marked the fourth consecutive quarterly increase. This is also the strongest quarter of wins since the second quarter of fiscal 2022.

Our wins included programs with two new customers. We have been awarded the production of a drug delivery device and an aesthetic laser-therapy system. Both products will be produced in our Penang, Malaysia campus. Our fiscal first quarter wins also included a competitive market share gain, due to the exceptional operational performance of our team in Oradea, Romania. Looking at the Healthcare/Life Sciences market sector for fiscal 2024 with some inventory corrections lingering into our second fiscal half and the approximately 5 percentages point growth headwind from the year-over-year reduction of components procured at above historical market prices, we anticipate year-over-year revenue decline in the teens. Advancing to Slide 11, our Aerospace and Defense sector increased 6% sequentially in the fiscal first quarter, strengthening modestly and meeting our expectation of a mid-single-digit increase.

While unfulfilled customer demand remains, our supply chain team continues to improve component deliveries to support robust underlying commercial aerospace demand. As we look to the fiscal second quarter, temporary declines due to new customer program ramp delays in defense and space are partially offset by continued robustness within commercial aerospace. As a result, we expect a low-single-digit decline for the Aerospace and Defense sector. Our fiscal first quarter wins for the Aerospace and Defense sector were $23 million. We won two strategic defense programs with the current customer, both of which will be produced in our Boise, Idaho facility. We also won an unmanned aerial program that will be produced in our Penang, Malaysia campus.

Lastly, our Neenah, Wisconsin facility won a program that reflects the continuation of multiple awards over the past year for design validation and production work related to its space program, including systems for power management, control and guidance. For fiscal 2024, Aerospace and Defense demand remains generally robust and is supported by an ongoing backlog. As a result, we expect revenue growth for fiscal 2024 exceeding the high-teens growth witnessed in fiscal 2023. Advancing to Slide 12, we can review the regional highlights of the manufacturing wins for the Fiscal first quarter. The Americas wins were robust at $139 million and included the second consecutive quarter with a substantial win from a newer top 10 medical OEM for our Guadalajara, Mexico campus.

The APAC region’s first fiscal quarter wins at $86 million reflected a marked increase in contribution from the Healthcare/Life Sciences sector with over half of the region’s wins from that sector. The region also continued trend of strong wins performance from the industrial sector, including meaningful wins from two of our existing SemiCap customers. The EMEA region’s wins first quarter wins of $36 million adds to the $280 million of wins from fiscal 2023, supporting the region’s continued robust revenue growth outlook and improved profitability forecast. Please advance to Slide 13, for a review of our funnel of qualified manufacturing opportunities. Despite the strong wins performance, the total funnel increased over $4 billion as all regions saw meaningful increases in their funnel.

This $4 billion result is our second largest reported funnel. Given the strength of their wins performance, the industrial sector funnel dipped slightly to $914 million. Aligned with our sector strategy, the opportunities reflected in our funnel are balanced across a variety of markets. Additions to the funnel from both customers and targets in our SemiCap sub-sector helped to backfill the wins. The Healthcare/Life Sciences sector funnel saw a sizable increase to $2.2 billion more than offsetting the impact of this quarter’s strong wins performance. The strength of wins and the increasing funnel of qualified manufacturing opportunities provide optimism for future growth within the Healthcare/Life Sciences sector. The Aerospace and Defense sector grew the funnel to a record high of $923 million, nearly doubling the funnel from Q1 F’23.

This is supported in part by growth with new targets in addition to growth of opportunities from our current customers. Lastly, the funnel of opportunities for our engineering services saw increases across all market sectors and hit a record high. While there has been delayed decision-making, particularly with our engineering customers in the Healthcare/Life Sciences sector, the funnel strength furthers our optimism for future growth and significantly improved performance. I will now turn the call to Pat for an in-depth review of our financial performance. Pat?

Pat Jermain : Thank you, Oliver, and good morning, everyone. Our fiscal first quarter results, I summarized on Slide 14. With revenue below our original guidance, gross margin of 9% came in slightly lower than expected. Reduced fixed cost leverage and unfavorable mix led to the gross margin result. Selling and administrative expense of $43 million was within our guidance range. As a percentage of revenue, SG&A was 4.4%, which was slightly above expectations given the late quarter decline in demand. GAAP operating margin of 4.6% was below our original guidance due to the loss of leverage within gross margin and SG&A expenses. Non-operating expenses of $10.3 million were consistent with expectations. GAAP diluted EPS of $1.04 was below the original guidance due to the factors previously mentioned along with a slightly unfavorable tax rate.

While we continue to measure our performance against GAAP metrics, next quarter we will begin sharing non-GAAP operating margin and EPS exclusive of stock-based compensation expense for easier comparability to peers. Turning to our cash flow and balance sheet on Slide 15. We used $3 million of cash to support our operations and spent $29 million on capital expenditures, resulting in negative free cash flow of $32 million for the fiscal Q1. This result was favorable to initial expectations as we intentionally delayed a portion of capital spending to more evenly spread-out cash payments throughout fiscal 2024. With the fiscal first quarter typically requiring investments within operations, we did not repurchase any of our stock under the existing authorization.

However, as announced last week, our Board approved a new $50 million share repurchase authorization, bringing the total available amount to approximately $56 million. Starting next week, we plan to begin purchasing shares under these authorizations, while taking market conditions into consideration. We plan to fund investments in operations and share repurchases with our strong and liquid balance sheet. We ended the fiscal first quarter with a cash balance of $232 million and total debt of $443 million. We had $257 million available to borrow under our credit facility and a conservative gross debt-to-EBITDA ratio of less than 1.7x. For the fiscal first quarter, we delivered return on invested capital of 10.3%, which was 210 basis points above our weighted-average cost of capital.

Cash cycle ended the fiscal first quarter at 95 days, sequentially higher by eight days. Please turn to Slide 16 for details on our cash cycle. The majority of the cash cycle increase came from inventory days primarily due to lower revenue. While days increased by seven, gross inventory dollars were only modestly higher by $13 million compared to the prior quarter and were favorable to expectations. We continue to be encouraged by the work our supply chain and regional teams are doing to drive reduction in inventory, while facing challenges with customer forecast reductions in a still constrained component environment. As Todd has already provided the revenue and EPS guidance for the fiscal second quarter, I will review some additional details which are summarized on Slide 17.

Fiscal second quarter gross margin is expected to be in the range of 8.8% to 9.2%. At the midpoint, gross margin would be consistent with for first quarter. This quarter gross margin will be burdened approximately 60 basis points by seasonal compensation cost increases and the reset of payroll taxes for U.S. employees. We plan to earn through this margin headwind with productivity improvements across all three of our manufacturing regions along with a portion of savings recognized from our restructuring efforts. We expect selling and administrative expenses in the range of $46.5 million to $47.5 million, which represents a modest increase year-over-year. Sequentially, SG&A is higher primarily due to the seasonal compensation headwinds and investments in essential IT solutions to support our business.

Non-operating expenses are anticipated to be in the range of $10.5 million to $11 million fairly consistent with fiscal first quarter. Our non-GAAP effective tax rate for both the fiscal second quarter and fiscal year is expected to be in the range of 15% to 17%. Our expectation for the balance sheet is that, working capital investments will increase slightly compared to the fiscal first quarter. Based on our revenue forecast, we expect this level of working capital will result in cash cycle days in the range of 99 to 103 days. At the midpoint, this would be sequentially higher by six days, primarily due to inventory requirements and anticipated advanced payments returning to customers. With modest working capital investments coupled with our restructuring activities and higher capital spending to support anticipated future revenue growth, we expect the usage of cash for the fiscal second quarter.

A few comments on the full year. We have reduced our expected capital spending by $10 million to now be in the range of $100 million to $120 million. We are projecting slightly higher working capital investments compared to the prior year to fund growth expectations in the second half of fiscal 2024. With this said, we believe both gross inventory and advanced payments from customers will be at levels lower than the past two fiscal year ends. Also, we expect to deliver improved free cash flow as we move through fiscal 2024 ending the year with up to $50 million. With that, Livia, let’s now open the call for questions.

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Q&A Session

Operator: [Operator Instructions] And our first question coming from the line of David Williams with The Benchmark Company.

David Williams: So a lot to get through here, but just I guess firstly, if you kind of think about the softness in the Industrial segment, which isn’t really surprising. But can you kind of give us a sense of how your customers’ tone has been and kind of partially maybe the inventory versus the demand side and how much of this is the burn down versus just more cautious outlook in the future quarters?

Todd Kelsey: Yes. So, I think I will start David and talk a bit about our different markets and what we’re seeing and then pass it off to the rest of the team to talk about inventory as it relates to demand. It’s really interesting our markets. There’s a bit of, I would call it a rolling progression across our markets post pandemic and stimulus as to when they’ve shown strength and when they’ve shown weakness. And so it varies a lot by sector. So, if you look at Aerospace and Defense, which I’d say is the furthest along, had lots of struggles post pandemic is very much in a boom cycle right now and performing incredibly well. As Oliver had mentioned, we’re coming off a high-teens growth year and we expect to do better than that in fiscal ’24.

So, it’s really strong growth supported by a strong funnel. If you transition over to industrial, there’s a couple of different spaces within industrial that need to be considered, the first being SemiCap. And of course, we saw SemiCap drop precipitously a little over a year ago. It’s hit the bottom in our Q4 of fiscal ’23 and is on — I would call it a climb upwards, although very modest at this point and a lot of it driven by share gain. So, we’re seeing growth there, but some of the other markets in industrial are struggling right now, particularly the communications. And that’s where we’re seeing the biggest near-term headwind. Now we believe that to be a transitory situation as new technology is worked into the market. And then finally, there’s Healthcare/Life Sciences.

And I’d say again, we view this as transitory too, but we must say the down cycle has been a lot and that’s right in the down cycle. Now, we would have to say that’s a lot deeper than we’ve historically witnessed within our Healthcare/Life Sciences space. And there’s a few reasons why that’s occurring, one is that the inventory corrections as certain device making OEMs have overshot their demand. There is also the impact of components that were purchased last year at above market prices that are back to more normalized levels this year, that’s having an impact as well. Also some delays in program ramps, as a result of customer design issues or supply chain, supplier issues, I would say on those components. It’s very different by market, but right now, because of the near-term impact in both healthcare and communications that’s having an outsized impact on our business.

I will pass it over to…

Oliver Mihm: Sure. I mean specific to the industrial sector, because I think that’s where we started, right? We do see some general inventory burden down. But as Todd noted, it’s really focused on the communications sub-sector and as we look across the rest of that sector, there is I think I’d say signs for optimism. I think we see some incremental improvement here ahead of us in test and measurement. We have got some nice tailwind in green energy, although admittedly that’s coming off of a smaller base, but that provides a bit of a tailwind. And then Todd also mentioned our SemiCap sub-sector. One additional data point I will note there is, if we look at our F’24 outlook for SemiCap, that held flat quarter-over-quarter. So I think another data point that suggests signs for optimism in that sub-sector.

David Williams: Great. Thanks for the color there. And then maybe secondly on the restructuring and you think about some of the reductions that you are making. How do you think about that in terms of the second half rebound? And just maybe, if you could walk through some of the changes or the restructurings that you are making, where those are and what we should expect in terms of demand, excuse me, of impact to the your capabilities? Thank you.

Todd Kelsey: I mean, I want to start David by saying that, we don’t take actions like this lightly, given the impact on our team members and the communities that we are a part of. But we do have and we have talked about having a playbook to protect our profitability. So we want to ensure that we are positioning ourselves for this 5.5% GAAP operating margin target that we have and we believe that’s what we are doing. So what we’re doing is, we are taking a look at areas where we can enable better scalability, create greater efficiencies, align our cost structures to position us for future investments. So that primarily involved, I’d call it, rightsizing capacity and mostly across our operations, it hit manufacturing, services and engineering.

We talked about engineering being light due to healthcare, that’s having a pretty substantial drag on our operating margin performance, given the ratio of cost the essence that, the cost within engineering is relatively fixed. So we think we are putting in place opportunities to better position our company for the future as we go forward on this. When we talked about, what it does to the second half and the second half rebound, as I mentioned in the prepared scripts, we look at it as being about a $20 million annualized cost savings or about $5 million per quarter. So you can think of it as, once we get these fully implemented and moving forward somewhere in the order of 50 basis point impact.

Operator: Our next question coming from the line of Melissa Fairbanks with Raymond James.

Melissa Fairbanks: First of all, I just wanted to say, thanks for giving us a framework for the full year revenue — segment revenue its super helpful. So, to start, I’ve got a quick one for Oliver. I pretty much ask the same question every quarter. Could we get an update on the lead times? Last quarter, I think you noted even though lead times were coming down, they were still running at about twice the normal range. Have we gotten any closer to normalization there?

Oliver Mihm: Yes. Thanks, Melissa. Happy to answer that. So, similar to the message from last quarter, commodities are broadly showing stability. I think when we talked about this last quarter, we said that as you noted just over six months, we’ve moved from essentially 23 weeks to 22 weeks across our broader commodity base, so just an incremental improvement there. As I reflect on the whole dynamic for us, I’ll say that our shortages and the challenge spots are less semiconductor focused. So, a couple of quarters ago that was really just in the semiconductor slice of our supply chain and now includes an element of passes as well. So, that I view that as a further step towards normalization. Within semiconductor, we came from 200 days down to 188 days.

So, just running a bit over six months. And then within semiconductor, as we’ve talked about historically, still see and high-end semiconductor with lagging edge technology, we still see tight inventory and the occasional unexpected de commit and then generally no stock on the open market to help address that.

Melissa Fairbanks: So, I just wanted to follow-up on the last question, about the restructuring actions you’re taking. Maybe a little bit less delicately. So, Todd, I think you explained that there’s some consolidation or optimization across from your facilities. Is there a factor or is there business you expected to win and had capacity dedicated to it, but now maybe that’s no longer an opportunity so you’re resizing some of those businesses?

Todd Kelsey: No, there’s really none of that Melissa. It’s really more of a softening in markets that we’re seeing. No, as we talked about in engineering, we’re seeing some delays in decision-making and such, which is causing us to pause there. But when we look at manufacturing or services, it’s just general market softening and it really relates primarily to our Healthcare/Life Sciences market sector.