Jim Ricchiuti: And then finally, you talk about the 5.5% GAAP operating margin in fiscal ’25 and that you’re committed to protecting that. Does that require if we see in the past, you’ve talked about $5 billion of revenue? It sounds like you’re suggesting, you get to those targets even with the restructuring and the cost actions you’re doing, even if revenues are not at that level, is that, or am I misinterpreting what you said?
Pat Jermain: No, I don’t think you are, Jim. I mean, what we’d like to get to the $5 billion in revenue, but obviously with current dynamics and the current results and guide that would take a pretty substantial market improvement to be able to do that. But we can control the operating performance and the operating margin. That’s part of the reason for us looking at the restructuring actions as well as some other activities is we believe that that’s a level of performance that we need to deliver.
Jim Ricchiuti: But basically from the actions you’re taking, you don’t necessarily anticipate anything additional that you have to consider to get, given the current state of the businesses?
Todd Kelsey: No, we don’t believe so. I mean, obviously, we’ll need to get some additional revenue growth, so we get leverage. It really comes down to the restructuring actions, better utilization within our engineering team and then some manufacturing leverage.
Operator: And I see we have a follow-up question from David Williams from Benchmark.
David Williams: First, I missed this earlier, but I want to say congratulations to Pat on the CFO of the year, it’s certainly well-deserved and I think we would all agree to that. So, congratulations there.
Pat Jermain: Thanks, David.
David Williams: Yes, of course. And then secondly, just want to ask real quickly on the previous unverified list addition that you guys were [indiscernible] on. Was there any impact from that and anything longer term we should think about here, any further risk or just any color around that would be helpful I think?
Todd Kelsey: Yes. So, we’ve been able to recover through, I’d call it a heroic efforts from our supply chain team and our APAC team in the region. So, we don’t believe there’ll be any impact to our fiscal Q2, although it wasn’t easy. But what I would say is that the addition to the list wasn’t merited, excuse me. It reflected more of a communications issue and a delay in a routine verification of a shipment to our Xiamen facility. The quick removal from the list, which I think was probably like record speed, reflects these facts. So, I would like to call out though the Bureau of Industry and Security within the Department of Commerce and their strong partnership on this to resolve this. So, was very happy with the response that we were able to get. And I’d just like to reiterate, we have a strong compliance program and we remain committed to all laws as well as a strong partnership with the BIAF. So, nothing additional and we’re happy that this is behind us.
David Williams: Nice work getting that clear quickly. And then just secondly, regionally, it looks like Americas was down quite a bit. Is there anything specific maybe to that area? Is it fair to assume that maybe the more heavily-leveraged to the healthcare industry or anything maybe just around Americas that drove the sequential and year-over-year decline?
Oliver Mihm: Yes. And so I think you have already hit it there, David. I think as we look at the Americas region and the exposure relative to Healthcare/Life Sciences as well as the communication sub-sector is creating that result. And as those sectors come back, we will see the Americas region come back with that.
Operator: We have a follow-up from Matt Sheerin with Stifel.
Matt Sheerin: Thank you. My follow-up is on the inventory situation. Pat, you talked about the total inventory days at 161. I know, but I didn’t get the percentage or the number of days backed by customer deposits. Could you give us that number? And you also mentioned you expected those deposits to come down, as customers want their cash back, given lead times are getting back to more normal? So what does that percentage look like and how does that impact your cash flows over the next few quarters, as that percentage comes down?
Pat Jermain: Matt that’s a really good point, because we do have to look at it on a net basis, because I expect significant reduction in gross inventory dollars year-over-year. It could be upwards of $100 million. But we will see a significant portion of the advance payments being returned as well as we burn down that inventory. So to give you just some examples of what happened from a day’s perspective, from Q4 to Q1 days of customer deposits came down too. We would expect that coming down quite a bit in the back half of this year. So when you look at it on a net-net basis, our cash cycle, we ended at 87 days in fiscal 2023. I expect improvement in ’24, probably in the low-80s on a net-net basis. So much greater reduction in inventory, but also a reduction in the advance payments as well.
Matt Sheerin: Got it. But as a percentage, do you expect those advance payments to come down?
Pat Jermain: As a percentage of gross revenue or inventory? Yes. Let me just do some…
Matt Sheerin: Now it’s what over 30%, right?
Pat Jermain: Right. It would be still probably similar to that by the end of fiscal 2024. Again our goal is to return those upon liquidating the inventory so it would probably be around that low 30% range.
Matt Sheerin: It’s not going to change. It’s just the growth. The number is going to change, which is lower.
Pat Jermain: Both dollars will reduce.
Matt Sheerin: Got it. Okay. That’s it for me. Thank you.
Operator: Thank you. And that concludes our Q&A session. I will now turn the call back over to Mr. Todd Kelsey for any closing remarks.
Todd Kelsey: All right. Thank you, Livia. I’d like to thank our shareholders, investors, analysts, as well as our Plexus team members that joined the call this morning. In closing, I want to say that, as I look forward, I remain very confident in our future. And it’s our exceptional Plexus team that provides the basis for this view. They continue to differentiate Plexus in the market and with our customers where we’re the leaders in the markets featuring highly complex products and demanding regulatory environments. When we look at this differentiated performance and couple it with the strategically aligned large available markets in which we participate in our commitment to delivering superior operating results, I’m optimistic that we’ll continue to outgrow our industry and deliver the strong returns our shareholders expect. Thank you all, and have a great day.
Operator: Ladies and gentlemen, that does conclude conference for today. Thank you for your participation. You may now disconnect.
