8-K: Plexus Corp. Announces Strong Fiscal Fourth Quarter and Full Year 2024 Results, Exceeding Guidance

Plexus Corp. reported robust fiscal fourth quarter and full year 2024 financial results, surpassing expectations and achieving record free cash flow.

Summary

• Plexus Corp. announced its financial results for the fiscal fourth quarter and year ended September 28, 2024.
• The company reported Q4 revenue of $1.05 billion, a GAAP operating margin of 5.1%, and GAAP diluted EPS of $1.48.
• For the full fiscal year 2024, revenue reached $3.96 billion, with a GAAP operating margin of 4.2% and GAAP diluted EPS of $4.01.
• Non-GAAP measures for Q4 include an operating margin of 6.2% and diluted EPS of $1.85, excluding stock-based compensation.
• The full year non-GAAP operating margin was 5.5% and diluted EPS was $5.72, excluding stock-based compensation and restructuring charges.
• Plexus initiated fiscal first quarter 2025 revenue guidance of $960 million to $1.00 billion, with GAAP diluted EPS of $1.25 to $1.40.
• The company also provided non-GAAP EPS guidance for Q1 2025 of $1.52 to $1.67, excluding stock-based compensation and restructuring charges.
• Plexus won 26 manufacturing programs in Q4, expected to generate $230 million in annualized revenue when fully ramped.
• The company generated a record quarterly free cash flow of $194 million and a record annual free cash flow of $341 million.
• Plexus repurchased $19.5 million of its shares in Q4 and $55.7 million for the full year, and approved a new $50 million share repurchase program for 2025.

Sentiment

Score: 9

Explanation: The document conveys a very positive sentiment due to the company exceeding guidance, achieving record free cash flow, and providing a strong outlook for the next fiscal year. The management commentary is also optimistic, further reinforcing the positive sentiment.

Positives

• Plexus exceeded its own guidance for revenue, operating margin, and EPS in the fourth quarter.
• The company achieved record free cash flow for both the quarter and the full year.
• Plexus improved its cash cycle to 64 days, the best in four years.
• The company's ROIC of 11.8% and economic return of 3.6% demonstrate strong financial performance.
• Plexus is in a net cash position, with cash of approximately $347 million and reduced borrowing.
• The company has a strong outlook for fiscal 2025, with anticipated EPS growth and robust free cash flow.
• Plexus is actively returning capital to shareholders through share repurchases.
• The company is making progress in reducing global waste-to-landfill and Scope 1 and 2 emissions.
• Plexus was named one of the Top 100 U.S. Internship Programs for 2024 and a Business Friend of the Environment.

Negatives

• Fiscal year 2024 revenue was lower than fiscal year 2023 revenue, at $3.96 billion compared to $4.21 billion.
• GAAP diluted EPS for fiscal year 2024 was $4.01, lower than the $4.95 reported in fiscal year 2023.
• The company expects a slight decrease in revenue for the first quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024, with guidance of $960 million to $1.00 billion.

Risks

• The company faces risks related to inflationary pressures on production costs and the economic outlook of its markets.
• Component shortages and delays could impact the company's ability to meet customer demand.
• Customer delays, changes, cancellations, or forecast inaccuracies could affect revenue and profitability.
• The company's ability to realize anticipated savings from restructuring actions is uncertain.
• There is a lack of visibility of future orders, particularly in view of changing economic conditions.
• The company is exposed to risks related to litigation, regulatory investigations, and trade disputes.
• Fluctuations in currency values and raw material costs could impact profitability.
• The company faces risks related to information technology systems and data security.
• The company is subject to increasing regulatory and compliance requirements.
• Global events such as conflicts, health epidemics, and weather events could impact operations.

Future Outlook

Plexus anticipates a return to sequential revenue growth in the fiscal second quarter of 2025 and expects meaningful EPS growth in fiscal 2025 due to strong demand in the Aerospace/Defense sector, modest growth in Healthcare/Life Sciences and Industrial sectors, and solid operating margin performance. The company also anticipates delivering robust fiscal 2025 free cash flow of $50 million to $100 million.

Management Comments

• Todd Kelsey, President and Chief Executive Officer, stated that the team's focus on customer service and operational performance resulted in exceptional fiscal fourth quarter results and positions the company well for fiscal 2025.
• Pat Jermain, Executive Vice President and Chief Financial Officer, noted that the fiscal fourth quarter cash cycle of 64 days was favorable and the best result in the past four years.
• Mr. Jermain also highlighted the record free cash flow of $341 million for fiscal 2024, which was more than double the previous record and three times the fiscal 2024 net income.
• Mr. Kelsey added that the company is guiding fiscal first quarter revenue of $960 million to $1.00 billion, non-GAAP operating margin of 5.7% to 6.1% and non-GAAP EPS of $1.52 to $1.67.

Industry Context

Plexus' results reflect a strong performance in the electronics manufacturing services sector, particularly in the Aerospace/Defense market. The company's focus on operational efficiency and customer service aligns with industry trends emphasizing supply chain resilience and value creation. The company's performance is also notable given the current economic climate and supply chain challenges.

Comparison to Industry Standards

• Plexus' ROIC of 11.8% is a strong result compared to industry averages, indicating efficient use of capital.
• The company's free cash flow generation of $341 million is significantly higher than many of its peers, demonstrating strong operational performance.
• The cash cycle of 64 days is a notable improvement and compares favorably to other companies in the electronics manufacturing sector.
• Companies like Jabil and Flex, which are also major players in the electronics manufacturing services industry, have similar focuses on operational efficiency and customer service, but Plexus' specific results in free cash flow and cash cycle are particularly strong this quarter.
• Plexus' growth in the Aerospace/Defense sector is in line with the broader industry trend of increased defense spending and demand for advanced electronics.

Stakeholder Impact

• Shareholders will benefit from the strong financial results, share repurchases, and positive outlook.
• Employees will benefit from the company's commitment to sustainable and responsible business practices.
• Customers will benefit from the company's focus on customer service excellence and operational performance.
• Suppliers will benefit from the company's continued growth and strong financial position.
• The communities where Plexus operates will benefit from the company's charitable contributions and volunteer efforts.

Next Steps

• Plexus will continue to focus on delivering customer service excellence and driving operational performance.
• The company will ramp up the 26 new manufacturing programs won in Q4.
• Plexus will execute the 2025 Share Repurchase Program.
• The company will continue to invest in sustainable and responsible business practices.
• Plexus will host a conference call and webcast on October 24, 2024, to discuss the results.

Key Dates

Keywords

Plexus, Financial Results, Manufacturing, Electronics, Contract Manufacturing, Revenue, EPS, Operating Margin, Free Cash Flow, Share Repurchase, ROIC, Aerospace, Healthcare, Industrial