PLEXUS CORP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fiscal 2024 Performance: Exited fiscal 2024 with exceptional performance, gained market share, achieved non-GAAP operating margin goal one year early, generated record free cash flow of $341 million.
• Fiscal Fourth Quarter Results: Revenue $1.05 billion exceeded guidance; non-GAAP operating margin 6.2% met long-term goal; non-GAAP EPS $1.85 exceeded guidance. Won 26 manufacturing programs worth $230 million in annual revenue in Q4.
• Program Wins: Fiscal 2024 had over $1 billion in program wins, including $568 million in healthcare life sciences. Fiscal fourth quarter won $230 million in annual revenue programs.
• Sustainability: Reduced waste to landfill by over 10%, reduced scope 1 and 2 emissions by over 5%, donated over $1 million, team members contributed over 20,000 volunteer hours.

Segment Performance

• Aerospace and Defense: Fiscal fourth quarter revenue increased 3% sequentially, above expectations. Fiscal 2024 revenue up 21%. Fiscal first quarter expected to decline high single digits. Won $45 million in manufacturing programs in Q4. Anticipated strong growth in fiscal 2025 driven by defense subsector new program ramps.
• Healthcare Life Sciences: Fiscal fourth quarter revenue up 9% sequentially. Fiscal 2024 saw 17% revenue decline due to inventory corrections. Fiscal first quarter expected to decline high single digits. Won $148 million in manufacturing programs in Q4, with 69% year-over-year increase in 2024 wins. Optimistic for growth in fiscal 2025 with program ramps and market improvements.
• Industrial: Fiscal fourth quarter revenue increased 12% sequentially. Fiscal 2024 saw 3% revenue decline. Fiscal first quarter expected to decline mid single digits. Won $37 million in manufacturing programs in Q4. Expect return to growth in fiscal 2025 with semi cap growth offsetting industrial subsector weakness.
• Regions: Americas wins $195 million (second consecutive strong quarter), APAC wins $30 million (46% increase in 2024 wins), EMEA wins $5 million. Funnel of qualified manufacturing opportunities at $3.5 billion.

Guidance

• Fiscal First Quarter 2025: Revenue expected $960M - $1.0B; non-GAAP operating margin 5.7% - 6.1%; non-GAAP EPS $1.52 - $1.67.
• Fiscal 2025 Outlook: Strong revenue growth in aerospace and defense; moderate growth in healthcare life sciences and industrial; expect to maintain strong operating margin, EPS expansion, and deploy free cash flow for shareholder value. Anticipate revenue growth in aerospace and defense from new program ramps, moderate growth in healthcare life sciences with program ramps and market improvements, and moderate growth in industrial with semi cap growth offsetting challenges.

Risks

• Aerospace and Defense: Uncertainty related to Boeing contract resolution, though positioned conservatively and derisked.
• Semi Cap Equipment: Variable demand trends, but expected to outperform market forecasts with share gains.
• Industrial: Program volatility with two customers, broader industrial market challenged by inventory corrections and weak demand.

Question and Answer

Q: About aerospace and defense, specifically Boeing contract resolution.

A: Todd Kelsey mentioned conservatism in projections, reasonably derisked for current situation, with potential upside if Boeing situation resolves. Anticipates strong growth in aerospace and defense in fiscal 2025.

Q: On semi cap equipment demand trends.

A: Todd Kelsey said they expect to outperform market forecasts with share gains, taking a conservative look at semi cap demand.

Q: On industrial non-SemiCap business.

A: Oliver Mihm talked about broadband communication recovery and leading indicators from engineering solutions revenue momentum.

Q: On program volatility in industrial.

A: Todd Kelsey said one-off situations, working with customers to resolve, and demand for programs is not perishable.

Q: On operating margin and capital allocation.

A: Oliver Mihm discussed focus on manufacturing efficiency, automation, and share repurchase program; Todd Kelsey talked about margin expectations for fiscal 2025 and capital allocation priorities including debt reduction and share repurchase.