Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Plexus Corp (PLXS, Financial) achieved a non-GAAP operating margin of 6.2%, meeting their long-term goal a year earlier than expected.
- The company generated record free cash flow of $194 million in the quarter, contributing to a fiscal 2024 total of $341 million, more than doubling their previous record.
- Plexus Corp (PLXS) reported revenue of $1.05 billion, exceeding their guidance range due to stronger demand across multiple market sectors.
- The company won 26 manufacturing programs worth $230 million in annual revenue, with significant contributions from the healthcare and life sciences sector.
- Plexus Corp (PLXS) reduced waste to landfill by over 10% globally and decreased scope one and two emissions by over 5% across their manufacturing sites.
Negative Points
- Revenue growth is expected to pause in the fiscal first quarter of 2025 due to a challenging demand environment and the impact of pull-ins from the previous quarter.
- The aerospace and defense sector is facing uncertainty due to the unresolved Boeing strike, which could impact growth projections.
- The healthcare and life sciences sector experienced a 17% revenue decline in fiscal 2024 due to inventory corrections and demand softness.
- The industrial sector saw a 3% revenue decline in fiscal 2024, with ongoing demand weakness in various subsectors.
- Plexus Corp (PLXS) anticipates a sequential increase in cash cycle days in the fiscal first quarter of 2025, primarily due to the return of advanced payments and higher working capital investments.
Q & A Highlights
Q: How is Plexus Corp managing the risks associated with the Boeing contract situation in the aerospace and defense sector?
A: Todd Kelsey, CEO, explained that Plexus has taken a conservative approach in its projections for Boeing, which should mitigate risks. Despite the unresolved Boeing strike, the company anticipates strong growth in the aerospace and defense sector, driven by new program ramps in the defense subsector.
Q: What is Plexus Corp's outlook on the semiconductor capital equipment (semicap) space, given the variable demand trends?
A: Todd Kelsey, CEO, stated that Plexus expects to outperform market forecasts in the semicap space due to share gains. The company anticipates double-digit growth in this area, even with a conservative market outlook.
Q: Can you provide an update on the non-semicap industrial business, particularly the broadband communications sector?
A: Oliver Mihm, COO, noted that the outlook for the communications sector is flat, acknowledging macro tailwinds but also recognizing that project fruition is not always linear. The company remains cautious in its projections.
Q: What are Plexus Corp's capital allocation priorities given the recent strong free cash flow performance?
A: Patrick Jermain, CFO, mentioned that the company plans to continue its share repurchase program and may further reduce debt. Additionally, Plexus is investing in footprint expansion in Malaysia to support growth opportunities.
Q: How is Plexus Corp achieving its operating margin targets, and what are the expectations for fiscal 2025?
A: Oliver Mihm, COO, highlighted the focus on manufacturing efficiency, automation, and organizational alignment around technology and innovation as key drivers. Patrick Jermain, CFO, added that while margins may fluctuate quarterly, the company aims to maintain strong operational performance and achieve its target of 6% non-GAAP operating margin by the end of fiscal 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
