Plexus(US:PLXS)2025-11-14 13:13Financial Performance - Net sales for fiscal 2025 increased by $72.2 million, or 1.8%, to $4,033.0 million compared to fiscal 2024[171] - Gross profit for fiscal 2025 increased by $28.0 million, or 7.4%, with a gross margin of 10.1%, up 50 basis points from fiscal 2024[181] - Operating income for fiscal 2025 rose by $34.7 million, or 20.7%, to $202.4 million, with an operating margin of 5.0%, an increase of 80 basis points[182] - Net income for fiscal 2025 increased by $61.1 million, or 54.7%, to $172.9 million, driven by higher operating income and lower other expenses[190] - Diluted earnings per share increased to $6.26 in fiscal 2025 from $4.01 in fiscal 2024[190] - The company's return on invested capital (ROIC) for fiscal 2025 was 14.6%, reflecting an economic return of 5.7%[194] - Cash and cash equivalents decreased to $306.8 million as of September 27, 2025, from $347.5 million as of September 28, 2024[197] - Cash flows provided by operating activities decreased to $249.2 million in fiscal 2025 from $436.5 million in fiscal 2024, a decline of 42.9%[200] - Free cash flow (FCF) for fiscal 2025 was $154.0 million, down from $341.3 million in fiscal 2024, representing a decrease of $187.3 million[207] - Cash flows used in financing activities decreased to $196.4 million in fiscal 2025 from $255.6 million in fiscal 2024, a reduction of 23.1%[211] Market and Customer Base - In fiscal 2025, Plexus served approximately 190 customers, with no single customer accounting for over 10% of total sales[24] - The distribution of net sales by market sectors in fiscal 2025 was 17% Aerospace/Defense, 40% Healthcare/Life Sciences, and 43% Industrial[25] - The company's 10 largest customers accounted for 49.1% and 47.8% of net sales in fiscal 2025 and 2024, respectively, indicating a high customer concentration risk[74] Operational Strategy - Plexus aims for a long-term revenue growth rate of 9-12% and a return on invested capital (ROIC) of 15%, exceeding its weighted average cost of capital (WACC) of 8.9% for fiscal 2025[17] - Plexus operates 26 facilities totaling approximately 5.0 million square feet, strategically located to support global supply chains[23] - The company has a dedicated team for new product introduction, focusing on decreasing time to market and transitioning products to full volume manufacturing[26] - The company maintains a flexible workforce strategy, utilizing skilled temporary labor alongside full-time employees to maximize efficiency[56] - The company conducts regular talent reviews to assess performance, potential, and retention rates, ensuring a strong leadership pipeline[45] Sustainability and Compliance - The company focuses on reducing emissions, waste, and water usage while transitioning to renewable energy and optimizing operations through new technologies[37] - The company has 17 out of 18 manufacturing facilities certified to ISO 14001 Environmental Management standards, and 3 certified to ISO 45001 Occupational Health and Safety Management standards[53] - The company is committed to human rights, prohibiting discrimination, child labor, and forced labor, while supporting fair wages and humane treatment of workers[44] - The company’s operations are subject to various compliance obligations, including environmental and product safety regulations, to mitigate risks of non-compliance[60] - Compliance with evolving data privacy regulations, such as GDPR, is critical, with potential legal and reputational risks for non-compliance[103] Risks and Challenges - The company faces significant competition, which may lead to price reductions, reduced sales, and loss of market share due to competitors with greater resources and market presence[73] - The company relies on timely payments from major customers, and any failure to meet obligations could adversely affect its financial condition and results[77] - The Healthcare/Life Sciences sector is significantly impacted by government reimbursement rates and health crises, which could affect customer purchasing behavior and margins[82] - The company has experienced component shortages and delays, which can reduce revenue and operating profit due to supply chain constraints[93] - Operations outside the U.S. represent a majority of net sales and operating income, particularly concentrated in Malaysia, exposing the company to geopolitical risks[86] - Cybersecurity threats pose significant risks, including potential data breaches that could disrupt operations and lead to financial liabilities[101] - Labor availability issues, including wage pressure and high turnover rates, may adversely affect operations and financial results[119] - Inflationary pressures and increased personnel costs could materially impact operating results and cash flows if not offset by price increases or operational efficiencies[120] Shareholder and Financial Management - As of September 27, 2025, the company repurchased a total of 160,582 shares at an average price of $134.07 per share[164] - The company has authorized a share repurchase program of up to $100.0 million under the 2026 Program, which became effective upon completion of the 2025 Program[165] - The cumulative total return on Plexus common stock increased from $100 in 2020 to $202 in 2025, outperforming the S&P MidCap 400 Index and Nasdaq-Electronic Components Index[161] - The company anticipates retaining the majority of earnings for capital expenditures and working capital requirements, with no cash dividends paid in the past[163] - The effective tax rate for fiscal 2026 is expected to be approximately 17.0% to 19.0%[189] Inventory and Cash Management - Days in inventory decreased by nine days to 118 days for the three months ended September 27, 2025, compared to 127 days for the same period in 2024[204] - Days in accounts receivable increased by three days to 57 days for the three months ended September 27, 2025, compared to 54 days for the same period in 2024[201] - The annualized cash cycle days decreased by one day to 63 days as of September 27, 2025, compared to 64 days as of September 28, 2024[202]