PLEXUS CORP Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Todd Kelsey mentioned that during fiscal second quarter, Plexus achieved the largest-ever win for sustaining services and best quarterly engineering solutions wins in over five years. Won 42 manufacturing programs worth $205 million annually when fully ramped. Closed largest-ever sustaining services win for a healthcare customer. Generated highest quarterly engineering solutions wins since fiscal fourth quarter of 2019.
• Sustainability efforts highlighted: Plexus was selected as Manufacturer of the Year Mega Category by Wisconsin Manufacturers and Commerce. Partnered with GE Healthcare China on green supply chain initiative and with Bevy to celebrate Earth Day. Team in Aradia, Romania planted 1,000 trees as part of Planning Hope initiative.

Segment Performance

• Aerospace and Defense: Revenue increased 8% sequentially in fiscal second quarter, meeting expectations of a high single-digit increase. Expected mid-single digit revenue growth in fiscal third quarter. Wins for the fiscal second quarter were $27 million.
• Healthcare Life Sciences: Revenue was up 10% sequentially in fiscal second quarter, beating expectations of a high single-digit increase. Expected mid-single digit revenue growth in fiscal third quarter. Fiscal second-quarter wins for this sector were $118 million.
• Industrial: Revenue decreased 10% sequentially in fiscal second quarter, in line with expectations of a high single-digit to low double-digit decline. Expected low single-digit increase in fiscal third quarter. Wins for the fiscal second quarter were $60 million.

Guidance

• Fiscal third-quarter guidance: Revenue of $1.00 billion to $1.04 billion, non-GAAP operating margin of 5.7% to 6.1%, non-GAAP EPS of $1.65 to $1.80.
• Anticipate $100 million of free cash flow for fiscal 2025. Sequential revenue growth in fiscal fourth quarter with strong operating margin performance. Growth expected in aerospace and defense (mid-single digits in Q3), healthcare life sciences (improved forecast), and industrial (unchanged growth expectation with semi cap strength).

Risks

• Tariff uncertainty: Customers are in wait-and-see mode, with limited product relocation seen so far. Uncertainty around final tariff state impacts planning.
• Market volatility: Fluctuations in market sectors (e.g., industrial subsectors having uneven trends) and inventory correction impacts on demand.

Question and Answer

Q: David Williams asked about tariffs, their impact, and customer forecast shifts.

A: Todd Kelsey stated customers are waiting for final tariff state, Plexus is positioned well with trade compliance investments and available capacity in regions. Pat Jermain added CapEx for new facilities is 4-6 quarters out, but existing facilities can expand via automation.

Q: Melissa Fairbanks asked about cash cycle days.

A: Pat Jermain said cash cycle was 68 days, improved from prior year, with target to get to mid to low 60s, driven by gross inventory reduction and customer deposits.

Q: Steven Fox asked about healthcare sustainable services program.

A: Oliver Mihm said program could ramp over 2-3 quarters with potential for follow-on opportunities and strong customer partnership.

Q: Ruben Roy asked about tariff movement feedback.

A: Todd Kelsey said limited product relocation seen so far, customers waiting for final tariff state.

Q: Chris Grenga asked about Penang site and operating margin guidance.

A: Pat Jermain said minimal gross margin headwind for Penang site, and operating margin high end due to operational efficiencies and strong services mix.