Plexus(PLXS)2024-07-25 19:35Financial Data and Key Metrics - Non-GAAP operating margin for Q3 FY2024 was 5.8%, exceeding the guidance range of 5.2% to 5.6%, representing a nearly 90 basis point sequential increase [13] - Non-GAAP EPS for Q3 FY2024 was 114 million, the second highest quarterly performance in company history [45] - Revenue for Q3 FY2024 was 163 million in Q3 FY2024, including a new healthcare life sciences sector customer for the Chicago facility [30] - APAC region wins in Q3 FY2024 were 59 million, including a healthcare life sciences sector drug delivery device to be produced in the Oradea, Romania facility [53] Company Strategy and Industry Competition - The company expects 9% to 12% revenue growth for FY2025, with 5.5% GAAP and greater than 6% non-GAAP operating margin exiting FY2025 [12] - The company is focusing on environmental impact reductions, such as installing 1,600 solar panels at the Kelso, Scotland facility [14] - The company is committed to customer service excellence, as evidenced by awards from Honeywell Aerospace and Medtronic [4] Management Commentary on Business Environment and Future Outlook - Management expects sustained momentum into FY2025, with revenue benefits from share gains, new program wins, and healthy growth across market sectors [129] - The company anticipates continued strong demand in aerospace and defense, healthcare life sciences, and semiconductor capital equipment markets [16] - Management highlighted the importance of operational excellence and customer service excellence in driving market share gains and customer loyalty [89][90] Other Important Information - The company reduced borrowing by 18.6 million [46] - The company expects capital spending in the range of 110 million for FY2024, equating to less than 3% of revenue [50] - The company achieved an 8.4% energy intensity reduction across global manufacturing sites and launched two new employee resource groups [19] Q&A Session Summary Question: Gross Margin and SG&A Outlook - Gross margin is expected to remain in the high 9s (9.8% to 10%) due to manufacturing efficiencies and automation efforts [64] - SG&A is expected to be in the mid-4s to lower 4% range on a GAAP basis, with additional incentive compensation tied to revenue growth and return on invested capital [65] Question: Customer Tone and Demand Trends - Customer sentiment is incrementally positive, with strong demand in aerospace and defense, semi cap, and healthcare life sciences, while industrial markets show some weakness [72][73] Question: Operating Margin Drivers - Operating margin improvements are driven by gross margin gains, restructuring efficiencies, and automation efforts, with potential for further improvements [75] Question: Regional Profitability in Europe - Margins in Europe are improving, with additional wins expected to benefit profitability, particularly in Oradea and Livingston facilities [79] Question: Market Share Gains - Market share gains are driven by customer service excellence, operational excellence, and strong execution, with many wins coming from existing customers [89][90] Question: Healthcare Life Sciences Headwinds - The headwind from purchasing components at inflated prices is expected to normalize in FY2025, with minimal impact on revenue [102] Question: Power Generation and AI-Driven Opportunities - The company is seeing increased demand for power generation and AI-related infrastructure, with potential for growth in FY2025 [109] Question: Aerospace and Defense Funnel Composition - The aerospace and defense funnel is balanced between commercial and defense sectors, with robust demand for engineering solutions [110]