Plexus Corp. Q3 FY2025 earnings call

Plexus continues to gain momentum. It received national and regional recognition as a top workplace. Revenue of $1.018 billion met guidance. Non-GAAP operating margin of 6.0% was near the high end of guidance. Secured 41 new manufacturing programs with $250 million in annual revenue when fully ramped. Committed to sustainability, with Newsweek listing Plexus as one of America's greatest workplaces in manufacturing 2025. Also, the customer satisfaction score reached a 7-year high.

For the fiscal third quarter, the Aerospace and Defense sector saw revenue increase 6% sequentially. The Healthcare/Life Sciences market sector had revenue up 2% sequentially, which was below expectations due to a customer design update causing a temporary production delay. The industrial sector had revenue up 4% sequentially. The Aerospace and Defense sector's fiscal third quarter wins were $51 million, the Healthcare/Life Sciences sector's wins were $116 million, and the industrial sector's wins were $83 million. The funnel of qualified manufacturing opportunities increased 4% sequentially to $3.6 billion.

For the fiscal fourth quarter, revenue is forecasted to be in the range of $1.025 billion to $1.065 billion. Non-GAAP operating margin is expected to be between 5.7% and 6.1%. Non-GAAP EPS is projected to be between $1.82 and $1.97. Fiscal 2025 is forecasted to have approximately $100 million of free cash flow. For fiscal 2026, it is anticipated to have healthy year-over-year revenue growth from each market sector without assuming end market demand improvement, and to sustain strong operating margin and free cash flow performance.

There are tariff-related uncertainties on market sectors and evolving program ramp timelines.

Q: Can you provide more color on the semi cap pushouts?

A: That had to do with just some idiosyncrasy specific to those programs, and the push out is just moving the revenue to the right, not perishable demand.

Q: What are you seeing on the Aerospace side?

A: Still not seeing the pull-in from Boeing or Airbus for increased production ramps, but seeing strong demand within Defense and Space subsectors, including European defense demand.

Q: What's the sense on the Malaysia start-up expense?

A: It's going to be a pretty minimal drag in Q4, and the site is seated with a significant amount of new business already, so the ramp to profitability will be quick.

Q: What is the focus of the Malaysia site?

A: Initial focus is going to be semicap, but will be broad-based and quickly move on to healthcare within that site.

Q: What's the impact of tariffs?

A: Customers are in a wait-and-see mode, limited demand movement, and in Mexico operations, north of 80% USMCA compliance.

Q: Are you still expecting the cash cycle days to come down?

A: Yes, guiding Q4 to mid-60s and potential to come down further in fiscal '26.

Q: What's the impact of new tax legislation on CapEx?

A: Not from a CapEx standpoint, but looking at potential R&D expensing pull-through.

Q: What gives confidence in Healthcare/Life Sciences growth in fiscal '26?

A: Strength of ongoing and new program ramps, two new customers added this quarter, and engineering design services as a leading indicator.

Q: What about European defense in the defense business?

A: There's an increase in activity and interest, a new customer was added, and Plexus is strongly positioned to capture market share.