Plexus Corp. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Todd Kelsey noted fiscal 2025 was outstanding with 40 basis point expansion of non-GAAP operating margin, 30% non-GAAP EPS growth, strong free cash flow. Secured 28 new manufacturing programs in fiscal fourth quarter, 141 wins in fiscal 2025 with $941M annualized revenue. Global team members completed over 32,000 volunteer hours, reduced waste to landfill by over 30%, and reduced Scope 1 and 2 emissions.
• Oliver Mihm reviewed sector performances, wins, and outlooks, including Aerospace and Defense, Healthcare/Life Sciences, and Industrial sectors.
• Pat Jermain discussed financial results, cash flow, balance sheet, and guidance for fiscal first quarter and 2026, including revenue, margin, and cash flow expectations.

Segment Performance

• Aerospace and Defense: Fiscal fourth quarter revenue decreased 6% sequentially, below expectations; fiscal 2025 was essentially flat due to new product launch delays in commercial aerospace and double-digit growth in defense and space. Fiscal first quarter expected mid-single digit growth. Wins for fiscal fourth quarter were $54 million.
• Healthcare/Life Sciences: Fiscal fourth quarter revenue up 1% sequentially, aligned with expectations; fiscal 2025 up 5% due to imaging and monitoring subsectors. Fiscal first quarter expected high single to low double digits. Wins for fiscal fourth quarter were $55 million.
• Industrial: Fiscal fourth quarter revenue up 11% sequentially, exceeding guidance; fiscal 2025 flat. Fiscal first quarter expected high single-digit decrease. Wins for fiscal fourth quarter were $165 million.

Guidance

• Fiscal first quarter revenue guidance: $1.05 billion to $1.09 billion; non-GAAP operating margin 5.6% to 6.0%; non-GAAP EPS $1.66 to $1.81.
• Fiscal 2026: Anticipates revenue growth in excess of end markets, aiming for 9% to 12% revenue growth goal, strong operating margin and free cash flow while investing in talent, technology, etc.

Risks

• Geopolitical landscape changes could impact location desirability.
• Regulatory changes and supply chain issues may affect operations.
• Impact of global minimum tax on effective tax rate.

Q: Congrats on the solid results. Seems like you're more confident in future growth. Is that fair to say? What gives you confidence?

A: Todd Kelsey said yes, and confidence comes from new program ramps, modest end market improvement, and potential aerospace rebound.

Q: Curious about AI opportunities, specifically the Romania AI platform.

A: Oliver Mihm said it's a new product with AI for cell analysis; Todd Kelsey added focus on power and thermal management in AI.

Q: Anticipating fallout from government shutdown in defense?

A: Todd Kelsey said no indication of slowdown; Oliver Mihm corroborated no change from customers.

Q: Healthcare/Life Sciences strength, inventory overhang?

A: Oliver Mihm said it's a bit of both new program ramps and inventory overhang working itself out.

Q: Industrial broadband communications outlook?

A: Oliver Mihm said it's lumpy due to geographic upgrade cycles.

Q: Customer conversations, visibility for fiscal '26?

A: Todd Kelsey said visibility is okay, markets stabilized; Ruben Roy asked about energy focus, Todd Kelsey said positioned well.

Q: Operating margin target, puts and takes?

A: Patrick Jermain said revenue growth helps, but higher incentive compensation is a headwind, but automation and efficiency efforts will help.

Q: Quick ramp of Malaysia, full capacity?

A: Todd Kelsey said won't reach full capacity but will be at corporate margins; Oliver Mihm discussed automation and efficiency efforts.

Q: Commercial aerospace return?

A: Oliver Mihm said no demand signal change yet, but could happen this year.

Q: Long-term margin expansion, investments?

A: Patrick Jermain said expecting margin expansion with automation and efficiency; Oliver Mihm discussed investments in IT, automation, etc.

Q: Program ramp timing in Q4, defense?

A: Patrick Jermain said minor delays in defense were the contributor; Oliver Mihm discussed Aerospace and Defense outlook, including unmanned aircraft as a bigger driver.