Plexus(PLXS) - 2025 Q1 - Quarterly Results

Fiscal First Quarter 2025 Financial Results and Outlook Plexus reported strong Q1F25 financial results, exceeding guidance, with robust operational performance and increased free cash flow Executive Summary and Guidance Plexus exceeded Q1F25 guidance with $976 million revenue and $1.73 non-GAAP diluted EPS, initiating Q2F25 guidance Q1F25 Performance Highlights - Plexus reported fiscal first quarter 2025 revenue of $976 million, GAAP operating margin of 4.8%, and GAAP diluted EPS of $1.34[5] - Non-GAAP operating margin was 6.0% and non-GAAP diluted EPS was $1.73, excluding stock-based compensation and restructuring charges[5] - The company won 30 manufacturing programs, representing $212 million in annualized revenue when fully ramped[6] - Generated fiscal first quarter free cash flow of $27 million[6] Q1F25 Financial Summary and Q2F25 Guidance Q1F25 Results and Q1F25/Q2F25 Guidance | Metric | Q1F25 Results | Q1F25 Guidance | Q2F25 Guidance | | :--- | :--- | :--- | :--- | | Revenue (in millions) | $976 | $960 to $1,000 | $960 to $1,000 | | Operating margin (GAAP) | 4.8 % | 4.9% to 5.3% | 4.6% to 5.0% | | Diluted EPS (GAAP) | $1.34 | $1.25 to $1.40 | $1.22 to $1.37 | | Adjusted operating margin (Non-GAAP) | 6.0 % | 5.7% to 6.1% | 5.3% to 5.7% | | Adjusted EPS (Non-GAAP) | $1.73 | $1.52 to $1.67 | $1.46 to $1.61 | | Return on invested capital (ROIC) | 13.8 % | | | | Economic return | 4.9 % | | | - Non-GAAP adjustments for Q1F25 results included $0.24 for stock-based compensation expense and $0.15 for restructuring and other charges, net of tax[5] Management Insights CEO Todd Kelsey highlighted strong operating performance and robust Q1F25 financial results, with non-GAAP operating margin near the high end of guidance and non-GAAP EPS exceeding expectations. CFO Patrick Jermain noted the best Q1 free cash flow in five years, driven by improved cash cycle, and increased the fiscal 2025 free cash flow outlook to up to $100 million. Both executives emphasized strong manufacturing wins and growth opportunities in key market sectors - Q1F25 non-GAAP operating margin of 6.0% was near the high end of guidance and consistent with long-term goals, contributing to non-GAAP EPS of $1.73 which exceeded guidance[7] - Free cash flow generation surpassed expectations, benefiting from ongoing efforts to drive sustained improvement in working capital efficiency, resulting in $27 million generated[7] - The cash cycle of 68 days was 5 days favorable to expectations, leading to the best fiscal first quarter free cash flow performance in five years[7] - Fiscal 2025 free cash flow outlook is now up to $100 million[7] - 30 manufacturing wins in Q1F25, representing $212 million in annualized revenue, reflect strong contributions from Healthcare/Life Sciences and growth in Aerospace/Defense and Industrial market sectors[7] Detailed Financial Performance Analysis This section details Plexus's Q1F25 GAAP financial performance, including revenue, profitability, and segment contributions Quarterly Financial Comparison (GAAP) Plexus's Q1F25 revenue was $976.1 million, a slight decrease from Q1F24 and Q4F24. Despite the revenue dip, operating income and net income saw year-over-year improvements, with diluted EPS increasing to $1.34 from $1.04 in Q1F24 Quarterly Financial Comparison (GAAP) (in thousands, except EPS) | Metric | Dec 28, 2024 (Q1F25) | Sep 28, 2024 (Q4F24) | Dec 30, 2023 (Q1F24) | | :--- | :--- | :--- | :--- | | Revenue | $976,122 | $1,050,569 | $982,607 | | Gross profit | $100,692 | $107,912 | $88,140 | | Operating income | $46,860 | $53,858 | $45,158 | | Net income | $37,267 | $41,221 | $29,215 | | Diluted EPS | $1.34 | $1.48 | $1.04 | | Gross margin | 10.3 % | 10.3 % | 9.0 % | | Operating margin | 4.8 % | 5.1 % | 4.6 % | | ROIC | 13.8 % | 11.8 % | 10.3 % | | Economic return | 4.9 % | 3.6 % | 2.1 % | - Revenue decreased by 0.7% year-over-year (Q1F25 vs. Q1F24) and 7.1% quarter-over-quarter (Q1F25 vs. Q4F24)[8] - Diluted EPS increased by 28.8% year-over-year (Q1F25 vs. Q1F24)[8] Revenue by Business Segment and Market Sector In Q1F25, the Asia-Pacific segment remained the largest contributor to revenue, while the Industrial market sector continued to be the dominant sector. The company noted a slight decrease in revenue concentration from its top 10 customers Business Segment Revenue Business Segment Revenue ($ in millions) | Business Segments | Dec 28, 2024 (Q1F25) | Sep 28, 2024 (Q4F24) | Dec 30, 2023 (Q1F24) | | :--- | :--- | :--- | :--- | | Americas | $274 | $307 | $310 | | Asia-Pacific | $607 | $618 | $553 | | Europe, Middle East and Africa | $101 | $128 | $121 | | Total Revenue | $976 | $1,051 | $983 | - Plexus changed its internal management reporting to focus on value-add sales in each region and adjusted the allocation of certain corporate costs, with no effect on consolidated net sales, operating income, or net income[10] Market Sector Revenue Market Sector Revenue ($ in millions) | Market Sectors | Dec 28, 2024 (Q1F25) | Sep 28, 2024 (Q4F24) | Dec 30, 2023 (Q1F24) | | :--- | :--- | :--- | :--- | | Aerospace/Defense | $160 (16%) | $184 (18%) | $167 (17%) | | Healthcare/Life Sciences | $374 (38%) | $415 (39%) | $381 (39%) | | Industrial | $442 (46%) | $452 (43%) | $435 (44%) | | Total Revenue | $976 | $1,051 | $983 | - Top 10 customers comprised 51% of revenue during the first quarter of fiscal 2025, down 1 percentage point from Q4F24 and up 3 percentage points from Q1F24[9] Non-GAAP Financial Measures and Operational Efficiency This section explains Plexus's non-GAAP financial measures, including ROIC, economic return, and free cash flow, highlighting operational efficiency Non-GAAP Financial Measures Overview Plexus provides non-GAAP supplemental information, including ROIC, economic return, free cash flow, and adjusted operating income/margin/net income/EPS. These measures are used for internal management, decision-making, and to provide additional insight into financial performance by eliminating the effect of non-recurring items - Non-GAAP measures are used for internal management goals and decision-making, and to provide additional insight into financial performance[12] - These measures are useful to investors as they eliminate the effect of non-recurring items not reflective of continuing operations[12] Return on Invested Capital (ROIC) and Economic Return For Q1F25, Plexus reported an ROIC of 13.8%, which is 490 basis points above its weighted average cost of capital (8.9%), resulting in an economic return of 4.9%. This indicates efficient capital utilization and value creation - ROIC for the first quarter of fiscal 2025 was 13.8%[13] - Plexus's weighted average cost of capital for fiscal 2025 is 8.9%[13] - The economic return for Q1F25 was 4.9% (ROIC less weighted average cost of capital)[13] Free Cash Flow and Cash Cycle Plexus generated $27.1 million in free cash flow in Q1F25, driven by $53.6 million in cash flows from operations less $26.5 million in capital expenditures. The annualized cash cycle improved to 68 days, 5 days favorable to expectations, contributing to the strong free cash flow performance - Free cash flow for the three months ended December 28, 2024, was $27.1 million, calculated as $53.6 million in cash flows provided by operations less $26.5 million in capital expenditures[14] Cash Cycle Days | Cash Cycle Days | Dec 28, 2024 (Q1F25) | Sep 28, 2024 (Q4F24) | Dec 30, 2023 (Q1F24) | | :--- | :--- | :--- | :--- | | Days in Accounts Receivable | 56 | 54 | 61 | | Days in Contract Assets | 12 | 10 | 12 | | Days in Inventory | 134 | 127 | 161 | | Days in Accounts Payable | (69) | (59) | (66) | | Days in Advanced Payments | (65) | (68) | (73) | | Annualized Cash Cycle | 68 | 64 | 95 | - The annualized cash cycle improved to 68 days in Q1F25 from 95 days in Q1F24[15] Corporate Information This section provides an overview of Plexus Corp., its global operations, and safe harbor statements regarding forward-looking information About Plexus Plexus Corp., founded in 1979, is a global manufacturing services company that designs, manufactures, and services complex products for market-leading and disruptive companies. It operates across Aerospace/Defense, Healthcare/Life Sciences, and Industrial sectors with over 20,000 employees in 26 facilities worldwide - Plexus, founded in 1979, designs, manufactures, and services highly complex products in demanding regulatory environments[17] - The company provides solutions to market-leading and disruptive global companies in the Aerospace/Defense, Healthcare/Life Sciences, and Industrial sectors[17] - Plexus has a global team of over 20,000 members across 26 facilities in the Americas, Asia-Pacific, and Europe, Middle East and Africa regions[17] Safe Harbor and Fair Disclosure Statement This section outlines the company's forward-looking statements, which involve various risks and uncertainties. These risks include inflationary pressures, component shortages, customer delays, ability to realize savings from restructuring, lack of visibility of future orders, economic performance of served industries, litigation outcomes, trade disputes, and other global events - Statements that are guidance or not historical facts are forward-looking statements that involve risks and uncertainties[18] - Key risks include inflationary pressures, component shortages, customer delays, and the economic outlook of markets[18] - Other risks are detailed in the company's fiscal 2024 Form 10-K[18] Condensed Consolidated Financial Statements This section presents Plexus's condensed consolidated statements of operations and balance sheets, detailing financial position and performance Condensed Consolidated Statements of Operations The condensed consolidated statements of operations show a slight decrease in net sales year-over-year for Q1F25, but an increase in gross profit, operating income, and net income compared to Q1F24. Diluted EPS also improved significantly Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Dec 28, 2024 (Q1F25) | Dec 30, 2023 (Q1F24) | | :--- | :--- | :--- | | Net sales | $976,122 | $982,607 | | Cost of sales | $875,430 | $894,467 | | Gross profit | $100,692 | $88,140 | | Operating expenses: | | | | Selling and administrative expenses | $49,149 | $42,982 | | Restructuring and other charges | $4,683 | — | | Operating income | $46,860 | $45,158 | | Income before income taxes | $43,494 | $34,847 | | Income tax expense | $6,227 | $5,632 | | Net income | $37,267 | $29,215 | | Diluted EPS | $1.34 | $1.04 | - Net sales decreased by 0.7% year-over-year from $982.6 million in Q1F24 to $976.1 million in Q1F25[20] - Net income increased by 27.6% year-over-year from $29.2 million in Q1F24 to $37.3 million in Q1F25[20] - Diluted EPS increased by 28.8% year-over-year from $1.04 in Q1F24 to $1.34 in Q1F25[20] Condensed Consolidated Balance Sheets As of December 28, 2024, total assets were $3.07 billion, a decrease from $3.15 billion at September 28, 2024. Current assets decreased primarily due to lower cash and cash equivalents and inventories, while total liabilities also decreased Condensed Consolidated Balance Sheets (in thousands) | Metric | Dec 28, 2024 | Sep 28, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $317,161 | $345,109 | | Accounts receivable | $597,470 | $622,366 | | Inventories | $1,290,179 | $1,311,434 | | Total current assets | $2,387,323 | $2,477,150 | | Total assets | $3,071,317 | $3,153,821 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Current portion of long-term debt and finance lease obligations | $121,977 | $157,325 | | Accounts payable | $666,118 | $606,378 | | Advanced payments from customers | $625,315 | $709,152 | | Total current liabilities | $1,565,375 | $1,643,294 | | Total liabilities | $1,752,248 | $1,828,996 | | Total shareholders' equity | $1,319,069 | $1,324,825 | | Total liabilities and shareholders' equity | $3,071,317 | $3,153,821 | - Total assets decreased by $82.5 million from $3.15 billion at Sep 28, 2024, to $3.07 billion at Dec 28, 2024[22] - Cash and cash equivalents decreased by $27.9 million quarter-over-quarter[22] - Inventories decreased by $21.3 million quarter-over-quarter[22] Supplemental Non-GAAP Financial Information This section provides supplemental non-GAAP financial information, including reconciliations, ROIC, and detailed segment performance Non-GAAP Operating Income, Net Income, and EPS Reconciliation This section provides a reconciliation of GAAP to non-GAAP financial measures, showing adjustments for restructuring and other charges, and stock-based compensation. For Q1F25, non-GAAP operating income was $58.5 million (6.0% margin) and adjusted diluted EPS was $1.73, reflecting the exclusion of these items Non-GAAP Adjustments and Reconciliations (in thousands, except per share data) | Metric | Dec 28, 2024 (Q1F25) | Sep 28, 2024 (Q4F24) | Dec 30, 2023 (Q1F24) | | :--- | :--- | :--- | :--- | | Operating income, as reported | $46,860 | $53,858 | $45,158 | | Restructuring and other charges | $4,683 | — | — | | Stock-based compensation | $6,990 | $10,849 | $5,335 | | Non-GAAP operating income | $58,533 | $64,707 | $50,493 | | Non-GAAP operating margin | 6.0 % | 6.2 % | 5.1 % | | Net income, as reported | $37,267 | $41,221 | $29,215 | | Restructuring and other charges, net of tax | $4,191 | — | — | | Stock-based compensation, net of tax | $6,640 | $10,306 | $5,335 | | Adjusted net income | $48,098 | $51,527 | $34,550 | | Diluted earnings per share, as reported | $1.34 | $1.48 | $1.04 | | Restructuring and other charges, net of tax (per share) | $0.15 | — | — | | Stock-based compensation, net of tax (per share) | $0.24 | $0.37 | $0.19 | | Adjusted diluted earnings per share | $1.73 | $1.85 | $1.23 | - Restructuring costs of $4.7 million ($4.2 million net of taxes) were incurred in Q1F25, primarily for employee severance in the EMEA and AMER regions[24] ROIC and Economic Return Calculations (Supplemental) This table details the calculation of ROIC and economic return, showing an ROIC of 13.8% and an economic return of 4.9% for Q1F25. The average invested capital for Q1F25 was $1.27 billion, a decrease from previous periods ROIC and Economic Return Calculations (in thousands) | ROIC and Economic Return Calculations | Dec 28, 2024 (Q1F25) | Sep 28, 2024 (FY24) | Dec 30, 2023 (Q1F24) | | :--- | :--- | :--- | :--- | | Adjusted operating income (tax-effected) | $175,246 | $167,955 | $151,731 | | Average invested capital | $1,268,309 | $1,418,698 | $1,479,647 | | ROIC | 13.8 % | 11.8 % | 10.3 % | | Weighted average cost of capital | 8.9 % | 8.2 % | 8.2 % | | Economic return | 4.9 % | 3.6 % | 2.1 % | - Average invested capital decreased from $1.48 billion in Q1F24 to $1.27 billion in Q1F25[27] Supplemental Segment Information This section provides historical net sales and operating income by geographic segment (AMER, APAC, EMEA) for multiple quarters and fiscal years, reflecting the company's internal management reporting changes Net Sales by Segment (in thousands) | Net sales | Dec 30, 2023 (Q1F24) | Mar 30, 2024 (Q2F24) | Jun 29, 2024 (Q3F24) | Sep 28, 2024 (Q4F24) | Sep 28, 2024 (FY24) | Sep 30, 2023 (FY23) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | AMER | $309,753 | $296,177 | $306,522 | $306,773 | $1,219,225 | $1,468,996 | | APAC | $552,841 | $521,658 | $520,928 | $617,826 | $2,213,253 | $2,361,777 | | EMEA | $121,277 | $152,292 | $136,670 | $127,814 | $538,053 | $402,427 | | Total Net Sales | $982,607 | $966,900 | $960,751 | $1,050,569 | $3,960,827 | $4,210,305 | Operating Income by Segment (in thousands) | Operating Income | Dec 30, 2023 (Q1F24) | Mar 30, 2024 (Q2F24) | Jun 29, 2024 (Q3F24) | Sep 28, 2024 (Q4F24) | Sep 28, 2024 (FY24) | Sep 30, 2023 (FY23) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | AMER | $18,950 | $15,480 | $23,964 | $25,306 | $83,700 | $123,099 | | APAC | $77,132 | $72,878 | $75,285 | $87,906 | $313,201 | $313,120 | | EMEA | $3,197 | $9,729 | $9,287 | $8,820 | $31,033 | $16,013 | | Corporate and other costs | $(54,121) | $(68,617) | $(69,290) | $(68,174) | $(260,202) | $(256,412) | | Total Operating Income | $45,158 | $29,470 | $39,246 | $53,858 | $167,732 | $195,820 | - The Asia-Pacific (APAC) segment consistently generated the highest net sales and operating income across the reported periods[31]