Earnings call transcript: Plexus Q4 2025 beats EPS forecast, stock steady

Plexus Corp. (PLXS) reported its fourth-quarter 2025 earnings, delivering a robust performance with an EPS of $2.14, surpassing the forecast of $1.87 by 14.44%. Revenue matched expectations at $1.058 billion, aligning with the company’s guidance. The company maintains strong financial health, earning a "GOOD" rating from InvestingPro, with a perfect Piotroski Score of 9, indicating excellent operational efficiency. Despite this earnings beat, the stock showed little movement, closing at $146.1, a minor 0.07% drop, suggesting that the market had priced in these results.

Key Takeaways

• Plexus exceeded EPS expectations by 14.44%.
• Revenue aligned with forecasts at $1.058 billion.
• Stock remained stable post-earnings, reflecting market anticipation.
• Strong performance in AI and aerospace sectors.
• Continued focus on operational efficiency and innovation.

Company Performance

Plexus demonstrated strong financial health in Q4 2025, continuing its trend of surpassing earnings forecasts. The company’s strategic focus on AI-adjacent technologies and aerospace and defense sectors has bolstered its market position. Compared to previous quarters, Plexus maintained its trajectory of robust growth, supported by new program wins and operational efficiencies.

Financial Highlights

• Revenue: $1.058 billion, in line with guidance.
• Earnings per share: $2.14, a 14.44% surprise over forecast.
• Non-GAAP Operating Margin: 5.8%.
• Free Cash Flow: $154 million for fiscal 2025.
• Return on Invested Capital: 14.6%.

Earnings vs. Forecast

Plexus reported an EPS of $2.14 against a forecast of $1.87, marking a significant earnings surprise of 14.44%. This performance underscores the company’s effective cost management and strategic growth initiatives, particularly in high-growth sectors like AI and aerospace.

Market Reaction

Despite the positive earnings report, Plexus’ stock remained relatively unchanged, closing at $146.1, a slight decrease of 0.07%. According to InvestingPro analysis, the stock is currently trading near its Fair Value, with analysts setting price targets between $140 and $165. The stock’s beta of 0.8 indicates lower volatility than the broader market, while its PEG ratio of 0.52 suggests attractive valuation relative to growth. This stability suggests that the market had already anticipated strong results, or external factors may be influencing investor sentiment. The stock remains within its 52-week range, indicating a stable outlook.

Outlook & Guidance

Looking ahead, Plexus has provided revenue guidance for Q1 2026 between $1.05 and $1.09 billion, with an operating margin forecast of 5.6% to 6.0% and EPS expected to range from $1.66 to $1.81. Three analysts have recently revised their earnings estimates upward, as reported by InvestingPro. The company anticipates revenue growth exceeding end markets, targeting a 9-12% increase, and plans capital expenditures between $90 million and $110 million. This outlook aligns with the company’s five-year revenue CAGR of 5% and demonstrates continued momentum in key markets.

Executive Commentary

CEO Todd Kelsey highlighted the company’s achievements, stating, "Fiscal 2025 was an outstanding year for Plexus Corp." He emphasized the strategic focus on data center and power generation, adding, "We are definitely putting more focus around [these areas]." Kelsey also expressed confidence in future growth, noting, "We expect to deliver revenue growth through ongoing ramps inclusive of market share gains."

Risks and Challenges

• Potential supply chain disruptions could impact future production.
• Market saturation in certain sectors may limit growth opportunities.
• Macroeconomic pressures, such as inflation or interest rate changes, could affect profitability.
• Dependence on AI and aerospace sectors may pose risks if these markets slow down.
• Regulatory changes in key markets could impact operations.

Q&A

During the earnings call, analysts inquired about the impact of a potential government shutdown, to which executives responded that no significant effects are expected. Questions also focused on the company’s investments in AI technologies and operational efficiencies, with management expressing continued commitment to these strategic areas.

Full transcript - Plexus Corp (PLXS) Q4 2025:

Speaker 2: Ladies and gentlemen, thank you for joining us and welcome to the Plexus fiscal fourth quarter and fiscal year end 2025 conference call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you’ve dialed in to today’s call, please press Star 9 to raise your hand and Star 6 to unmute your line. I will now hand the conference over to Shawn Harrison, Vice President of Investor Relations. Please go ahead.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Good morning, and thank you for joining us today.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Some of the statements made and information provided during our call today will be forward-looking statements, including without limitation those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation, and future business outlook. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of factors that could cause actual results to differ materially from those discussed, please refer to the Company’s periodic SEC filings, particularly the risk factors in our Form 10-K filing for the fiscal year ended September 28, 2024, as supplemented by our Form 10-Q filings and the Safe Harbor Compare disclosure statement in our press release.

We encourage participants on the call this morning to access the live webcast and supporting materials at the Plexus website at www.plexus.com, clicking on Investors at the top of that page. Joining me today are Todd Kelsey, President and Chief Executive Officer; Oliver Mihm, Executive Vice President, Chief Operating Officer; and Pat Jermain, Executive Vice President, Chief Financial Officer. With today’s earnings call, Todd will provide summary comments before turning the call over to Oliver and Pat for further details. With that, let me now turn the call over to Todd Kelsey.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Todd, thank you, Shawn. Good morning, everyone. Please advance to Slide 3. Fiscal 2025 was an outstanding year for Plexus Corp., highlighted by our ongoing delivery of a differentiated value proposition for our customers that created the opportunity for Plexus Corp. to expand customer relationships and gain market share. Our robust and well-balanced new program win results across our solutions will support future growth, our team’s dedication to innovating responsibly to help create a better world, and our strong financial performance. With a 40 basis point expansion of non-GAAP operating margin, 30% non-GAAP EPS growth, another year of tremendous free cash flow generation, and robust ROIC, I’m excited that the momentum gained during fiscal 2025 across these areas positions Plexus Corp. during fiscal 2026 to deliver revenue growth in excess of our end markets through new program ramps inclusive of market share gains, accelerated revenue growth positioning Plexus Corp.

toward our 9% to 12% goal, strong financial performance with a focus on achieving our goal of a 6% non-GAAP operating margin while also investing in talent, technology, facilities, and advanced capabilities to support sustained future revenue growth and greater operational efficiency, and robust free cash flow generation that will be deployed to create additional shareholder value. Please advance to Slide 4. Revenue of $1.058 billion approached the high end of our guidance range, marking our third consecutive quarter of sequential growth. Our team’s ability to support late quarter demand upside from semicap and energy customers more than offset minor delays in new program transitions in our aerospace and defense market sector. Non-GAAP EPS of $2.14 substantially exceeded our guidance due to favorable discrete tax items, with inline non-GAAP operating margin of 5.8%.

We expanded non-GAAP operating margin by 40 basis points and non-GAAP EPS over 30% in fiscal 2025 as compared to fiscal 2024. Finally, we delivered fiscal fourth quarter free cash flow of $97 million, resulting in fiscal 2025 free cash flow of $154 million, an amount that substantially exceeded our projections. We have now generated $495 million of free cash flow over the past two fiscal years while deploying excess cash to reduce our borrowing and accelerate our share repurchase activity. Please advance to Slide 5. For the fiscal fourth quarter, we secured 28 new manufacturing programs worth $274 million in revenue annually when fully ramped into production. Included in these wins were expanded relationships with commercial aerospace customers, growth in our exposure to unmanned aircraft, expansion of share with existing healthcare, life sciences and industrial customers, and notable market share gains within semicap.

For fiscal 2025, our team generated 141 manufacturing wins representing $941 million in annualized revenue. In addition, efforts to diversify our engineering solutions engagements successfully drove increased wins for fiscal 2025, including a record result in aerospace and defense. Finally, our Sustaining Services team achieved record wins for the fiscal year, positioning the offering for stronger future financial performance. In addition, while producing the strong wins performance, we expanded our funnel of qualified opportunities versus the prior quarter and year over year. Please advance to Slide 6. At Plexus, we are committed to boldly driving positive change and promoting a sustainable future for and through our people, our solutions, and our operations, all of which is built on a foundation of trust and transparency. The following are recent highlights of how Plexus lives our value of innovating responsibly. In September, G.E.

Vernova presented Plexus its Supplier Innovation Award at the Gas Power Supplier Conference in Shanghai, China. This award recognized Plexus’ strategic engagement and collaboration in supporting a successful program transition to our facility in Xiamen, China, well ahead of G.E. Vernova’s original timeline. Next, as we reflect on the accomplishments of fiscal 2025 and our guiding principle that people are the heart of who we are and what we do, I’m thrilled to share that our global team members completed over 32,000 volunteer hours during the fiscal year. This incredible achievement is a 47% increase compared to fiscal 2024 and serves as a powerful testament to how our team members live our vision of building a better world. Additionally, in fiscal 2025, we granted $1.4 million to global nonprofits through our Plexus Community Foundation, deepening our connections to causes and organizations in the communities where we live and work.

Further, through a focused effort across our operations, we reduced our waste to landfill by over 30% globally in fiscal 2025, far exceeding our goal. This achievement is underscored by a remarkable eight sites reaching zero waste to landfill status, which accounts for over 40% of our manufacturing sites. Finally, we reduced absolute scope 1 and 2 emissions by over 10% across our global manufacturing sites versus our fiscal 2023 baseline. This reduction represents the second consecutive year of exceeding our emissions reduction goal. I’m incredibly proud of and grateful for the contributions of our global team members as they deliver a consequential environmental and social impact in support of our vision of building a better world.

Speaker 2: Please.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Advance to Slide 7. For our fiscal first quarter, we are guiding revenue of $1.05 to $1.09 billion, non-GAAP operating margin of 5.6% to 6.0% and non-GAAP EPS of $1.66 to $1.81. With modest end market growth across the majority of our sectors, we expect to deliver revenue growth through ongoing ramps inclusive of market share gains. In addition, during the fiscal first quarter, we will continue to invest in talent, technology, facilities and advanced capabilities to expand our industry-leading solutions, drive greater long-term operational efficiency and prepare for accelerated fiscal 2026 revenue growth. For fiscal 2026, we anticipate another year of strong operational and financial performance. Currently, we expect to deliver revenue growth in excess of our end markets, realizing year-over-year growth in each of our market sectors while accelerating momentum toward our 9% to 12% revenue growth goal.

We also anticipate delivering another strong year of operating margin and free cash flow performance even as we continue to make significant investments to increase our long-term competitiveness. In closing, thank you to our global team for making fiscal 2025 outstanding through your support of our custom communities and each other. We’re excited to leverage this momentum during fiscal 2026 into generating growth in excess of our end markets, delivering strong financial performance and creating long-term shareholder value. I will now turn the call over to Oliver for additional analysis of the performance of our market sectors.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Oliver.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Thank you, Todd. Good morning. I will begin with a review of the fiscal fourth quarter performance of each of our market sectors, our expectations for each sector for the fiscal first quarter, and directional sector commentary for fiscal 2026. I will also review the annualized revenue contribution of our wins performance for each market sector and then provide an overview of our funnel of qualified manufacturing opportunities, starting with our Aerospace and Defense sector on Slide 8. Revenue decreased 6% sequentially in the fiscal fourth quarter, below our expectation of flat revenue. Minor delays in the timing of new program ramps contributed to the performance. Fiscal 2025 saw essentially flat revenue for the Aerospace and Defense sector as various new product launch delays and inventory adjustments in the commercial aerospace supply chain more than offset double-digit growth in the defense and space subsectors.

For the fiscal first quarter, we expect revenue for the Aerospace and Defense sector to be up mid-single digits from strength and new program ramps within the commercial aerospace, defense, and unmanned aircraft subsectors. Our wins for the fiscal fourth quarter for the Aerospace and Defense sector were $54 million. This is the strongest wins performance for the sector since the fiscal first quarter of 2021. Our Boise, Idaho site won a follow-on award from an existing customer in our unmanned aircraft subsector based on the strength of the partnership that we’ve built with this customer. We also captured share gain through two new programs in the commercial aerospace subsector that were awarded to our team in Penang, Malaysia.

Our robust growth outlook for fiscal 2026 is supported by strong defense sector growth, new program ramps in the unmanned aircraft subsector, and a return to growth in commercial aerospace associated with new program ramps and the expectation of modest market growth. Please advance to Slide 9. Revenue in our Healthcare Life Sciences market sector was up 1% sequentially for the fiscal fourth quarter, aligned to our expectation of a low single-digit increase. Fiscal 2025 for our Healthcare Life Sciences sector saw a 5% revenue increase based on strength from the imaging and monitoring subsectors. New program ramp revenue and customer demand increases with previously ramped products contributed to the result. For the fiscal first quarter. We expect the Healthcare Life Sciences market sector to be up high single to low double digits, driven by multiple ongoing program ramps and strengthening customer demand in the monitoring and imaging subsectors.

Fiscal fourth quarter Healthcare Life Sciences sector wins of $55 million included a follow-on award for the remediation and repair of a therapeutics product for our Guadalajara, Mexico campus. Our sustaining services team’s exceptional quality and delivery performance drove the win. Our Irdia, Romania facility is welcoming a new customer to Plexus Corp. as we were awarded the assembly for an AI-powered digital cell analysis platform. Our proactive, flexible, and collaborative engagement through the quoting process, as well as a strong cultural alignment between the two organizations, contributed to the win. As we look to the next fiscal year, revenue contributions from ongoing and new program ramps, as well as improved end market demand, support our robust growth outlook. Advancing to the industrial sector on Slide 10, revenue was up 11% sequentially in the fiscal fourth quarter. The result exceeded our guidance for up low single digits.

Increased end market demand for specific customers in the semicap, broadband communications, and energy subsectors more than offset various other demand changes. Revenue was flat for fiscal 2025. Low double digit growth in the semicap subsector offset reductions in industrial equipment and vehicle electrification. Our fiscal first quarter outlook for the industrial sector of a high single digit decrease is driven by seasonality within our energy subsector and generally muted near-term demand. The industrial market sector wins for the fiscal fourth quarter were strong at $165 million. This marks a nine-quarter high for the sector. Our semicap wins were robust, including an award for two substantial programs from an existing customer for our Bangkok, Thailand facility. Continued operational excellence contributed to the awards, which included share gains on a growth platform. Our Appleton, Wisconsin facility was awarded the assembly of a high voltage complex product supporting the global rail industry.

The flexibility of our engagement and supply chain solutions contributed to the award from this new customer. Our modest growth outlook for the industrial sector for fiscal 2026 is supported by strength in both the semicap and energy subsectors, offsetting otherwise muted demand. Please advance to Slide 11 for a review of our funnel of qualified manufacturing opportunities. The funnel of qualified opportunities is up 2% sequentially, positive performance given the strength of quarterly wins, and robust at $3.7 billion inclusive of a record high value of aerospace and defense sector opportunities. The sector’s momentum is further supported by a record high aerospace and defense funnel for our engineering solutions, reflecting the continued progress of our diversification efforts. In summary, our continued focus on delivering excellence and creating customer success is being recognized by our customers.

Ongoing and new program ramps, market share gains, and specific subsector end market growth supports our view that we will deliver revenue growth in excess of our end markets and accelerate growth for fiscal 2026 toward our 9 to 12% goal. I’ll now turn the call over to Pat.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Pat, thank you, Oliver, and good morning, everyone. Our fiscal fourth quarter results are summarized on slide 12. Gross margin of 9.9% was consistent with our guidance, as anticipated. Gross margin was slightly lower than the fiscal third quarter due to mix and additional incentive compensation expense. At the same time, we experienced improved fixed cost leverage from higher revenue and continued productivity gains realized across our manufacturing sites. Selling and administrative expense of $51.7 million was slightly above our guidance due to additional incentive compensation expense, mainly driven by our strong performance as a percentage of revenue. SG&A was consistent with the fiscal third quarter. Non-GAAP operating margin of 5.8% was within our guidance range. Non-operating expense of $3.4 million was favorable to expectations due to lower than anticipated interest expense and foreign exchange losses.

Non-GAAP diluted EPS of $2.14 exceeded the top end of our guidance due to the items mentioned and a favorable tax rate. Turning to our cash flow and balance sheet on slide 13, as shown across these financial metrics, we continue to improve our performance and liquidity. We were extremely pleased with our free cash flow performance as we wrapped up the fiscal year. For the fiscal fourth quarter, we delivered $132 million in cash from operations and spent $35 million on capital expenditures, generating free cash flow of approximately $97 million. Over the past two years, we have generated close to a half billion dollars in free cash flow, an outstanding result. For fiscal 2025, we reduced our debt by over $100 million while continuing to return cash to shareholders through our expanded share repurchase program.

For the fiscal fourth quarter, we acquired approximately 161,000 shares of our stock for $21.5 million. At the end of the fiscal year, we had approximately $85 million remaining on the current repurchase authorization. Similar to last quarter, we ended the fiscal year in a net cash position. We had $40 million outstanding under our revolving credit facility with $460 million available to borrow. For fiscal 2025, we delivered a return on invested capital of 14.6%, which was 570 basis points above our weighted average cost of capital. Our invested capital base is significantly lower than the prior year due to our efforts to drive sustained improvement in working capital. This, combined with improved operating performance, drove the expansion in ROIC over the prior year and represents the highest ROIC in four years.

Cash cycle at the end of the fiscal year was 63 days, favorable to expectations and 6 days lower than the fiscal third quarter and 1 day lower than last year. This level of cash cycle was the best result delivered in the past five years. Please turn to Slide 14 for details on this exceptional performance. Along with the seventh consecutive quarterly reduction in gross inventory dollars, we experienced a 10 day sequential improvement in inventory days. Increased revenue and continued progress on working capital initiatives contributed to the sizable reduction in inventory days. Our teams delivered a year over year reduction in gross inventory of $82 million and a reduction of over $330 million. When compared to the fiscal 2023 year end balance for days in advance payments, we experienced a four day reduction with a net of $17 million being returned to customers during the quarter.

As Todd has already provided the revenue and EPS guidance for the fiscal first quarter, I’ll review some additional details which are summarized on Slide 15. Fiscal first quarter gross margin is expected to be in the range of 9.8% to 10.1%. At the midpoint, gross margin would be slightly above last quarter, despite additional investments in talent, technology, facilities, and advanced capabilities to support future revenue growth and greater operational efficiency. We expect selling and administrative expense in the range of $51.5 to $52.5 million, which is fairly consistent with the prior quarter. Note that this estimate is inclusive of approximately $6.6 million of stock based compensation expense. Fiscal first quarter non-GAAP operating margin is expected to be in the range of 5.6% to 6%, exclusive of stock based compensation expense.

Looking towards the fiscal second quarter, we expect to maintain margins at a similar level with an opportunity to meet or exceed our 6% margin target as the year progresses. Non-operating expense is anticipated to be approximately $4.6 million, which is sequentially higher, primarily due to an increase in interest expense. Prior quarters had benefited from the capitalization of interest expense associated with site additions. Consistent with our expectations, we are anticipating an increase to our effective tax rate with the impact of global minimum tax taking effect in certain jurisdictions. As such, we are estimating an effective tax rate between 16% and 18% for both the fiscal first quarter and for fiscal 2026. Diluted shares outstanding are expected to be approximately 27.3 million. Our expectation for the balance sheet is that working capital investments will increase compared to the fiscal fourth quarter.

Based on our revenue forecast, we expect this level of working capital will result in cash cycle days in the range of 66 to 70. We anticipate improvements in our cash cycle as we progress through the year and would expect to end the fiscal year at a similar level to fiscal 2025, despite greater investments in working capital to support revenue growth. With these higher investments in working capital, we expect a usage of cash for the fiscal first quarter, a trend we have experienced the last several years. While a usage this quarter, we expect to follow up fiscal 2025 with robust free cash flow of approximately $100 million. For fiscal 2026, we plan to continue to deploy any excess cash to create additional shareholder value.

One final comment on fiscal 2026, we expect capital spending to be in the range of $90 million to $110 million, which would be consistent with our fiscal 2025 spending. With that, John, let’s now open the call for questions.

Speaker 2: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand. Now, if you’ve dialed in to today’s call, please press 9 to raise your hand and 6 to unmute. Please stand by while we compile the Q&A roster. Your first question comes from David Williams with The Benchmark Company. Your line is open. Please go ahead.

David Williams, Analyst, The Benchmark Company: Hey, good morning everyone. Congrats on the solid results, and thank you for letting me ask a question here.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah, thanks, David. Appreciate it.

David Williams, Analyst, The Benchmark Company: I guess maybe first, this quarter seems like there was a lot of discussion around the investments that you’re making across the business, and it feels like you’ve really pointed to that to support your future growth. It sounds to me like you’re getting at least a little more confident in that kind of growth trajectory. I guess, first question, is that fair to say? What gives you that confidence as you look out into this year in terms of the growth opportunity?

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Yeah.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: David, yeah, it does imply that we’re getting more confident in the future growth potential. We think we’re on a nice growth trajectory and creating substantial momentum as we go into fiscal 2026 with regards to investments. We do, and we’ve talked about our new Penang facility coming online, which is having a bit of a near-term impact. Amazingly, in one quarter that site will break even, and in two quarters it’ll be close to corporate profitability. That’ll be a very near-term drag for us. Hence Pat’s projection that Q2 will recover nicely and be better than a typical quarter, which is usually down for us. Back to the confidence in the growth trajectory, a lot of it comes back to the new program ramps. We have a number of substantial new program ramps in play.

Oliver highlighted a few substantial share takeaways in the semicap market this quarter, which certainly play into this. There are others that are well underway. In addition, I would say from an end market standpoint, on aggregate, we’re seeing modest improvement in end markets as we look forward, which is really nice to see. Although we still haven’t factored in any substantial aerospace rebound, that could be additional upside for us as we look to fiscal 2026.

Speaker 2: Great.

David Williams, Analyst, The Benchmark Company: No great color there. Thanks so much for that. Maybe secondly here, just kind of curious, I know that on the AI side there’s been a lot of discussion, at least in terms of your participation there and those potential opportunities. It sounds like, and forgive me if I’m wrong here, but it sounds like you said Romania, you picked up the new AI platform there. Just kind of curious if you could give us a little more color around that and maybe what your opportunities are in the AI space overall.

Speaker 2: Thanks.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Yeah, what I was talking about there was a new product, and the product itself, it has AI technology in it to help with that cell analysis.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: What I’d add, David, is we’re seeing a lot of opportunity within power generation and thermal management within AI. As we’ve talked about in the past, we believe the compute market is not the right space for us to be in. We believe that’s going to commoditize quite heavily. We’re focused on power and thermal. In addition, we participate via the semicap business. Oliver pointed out an example within healthcare. A number of the technologies that we’re engaged with are leveraging AI. I would say healthcare is a real leader in leveraging AI. We have a number of programs in play where the product itself is leveraging AI.

David Williams, Analyst, The Benchmark Company: Thanks so much. Best of luck on the quarter, Gillin.

Speaker 2: Thanks.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Thank you.

Speaker 2: Next question comes from James Ricchiuti with Needham & Company. Your line is open. Please go ahead. You may need to unmute yourself via Zoom, James.

James Ricchiuti, Analyst, Needham & Company: Sorry about that. First question is, I was wondering, are you anticipating any fallout in any of the major market verticals from the government shutdown, particularly the defense area or maybe some of the other markets? Any sense of that yet if this continues?

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah, so far we’re not seeing any indications of slowdown as a result of the government shutdown. I mean, we’re certainly keeping our eyes open on that. I don’t know, Oliver, if you have any additional color you want to add on that front?

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: I’ll just corroborate what Todd said. No indication of any change from our customers.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Broadly, just in terms of continued government regulatory changes, we keep watching from a supply chain perspective, partnering with our customers and ensuring that we have good diversification of supply so we can ensure we have components.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: To build their products.

James Ricchiuti, Analyst, Needham & Company: Got it. The second question I had is I was hoping to drill down into your comments a little bit more about the strength in semicap and the growth in energy. I’m wondering, you know, has your view of semicap for fiscal 2026 changed at all versus, you know, a few months ago, just given the modest expectations for WFE in 2026. On the energy side, you highlighted, I think, power channels. How big a driver is what we’re hearing in the data center build out?

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: I’ll start with the semicap and Oliver can jump into the power generation. With regards to semicap, at this point we’re viewing 2025 and 2026 to be pretty similar. The forecast we’re seeing are WFE growth in the low single digits. I think overall that kind of corroborates where the sweet spot of our customer forecasts are. We do expect some pretty significant share gain. If you look at fiscal 2025, we ended as we had been targeting during our commentary over the course of the past year in the low double digits, so in the low teens within semicap growth. We’d expect to do something fairly similar as we look to fiscal 2026 on the back of share gains.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: From an energy perspective, I’ll jump in. There are a couple things that we’re seeing. One is, more specifically, what we’re seeing is customer revenue growth inside infrastructure and power generation as well as electrification. We talked about the fact program wins are helping to accelerate that revenue growth through fiscal 2026. We’re also seeing increased opportunity in EMEA and energy.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Thank you.

Speaker 2: Your next question from Melissa Fairbanks with Raymond James. Your line is open. Please go ahead.

Melissa Fairbanks, Analyst, Raymond James: Hi guys, excuse me, not sure if you can hear me. I had a question. Okay, great, great. Good morning. Good morning. Good to hear from you guys. I had a question probably for Oliver on the healthcare life sciences business. You know, finally seeing some strength in imaging and some of the monitoring stuff. This was an area over the past year or couple of years where there was a lot of inventory overhang, you know, limiting your growth opportunities. Just kind of wondering how much of the strength in this area is from maybe we finally mitigated that inventory overhang or if it’s new program ramps that are driving that revenue.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Melissa, good morning. I’ll say it’s a bit of both. We are certainly, as we gave directional guidance here for fiscal 2026 of robust growth, that does include strength of new program ramps. In general, I think the inventory overhang has worked itself through the system. We also noted that some modest market growth is expected, and that was intended to be indicative of the fact that inventory has been worked.

Melissa Fairbanks, Analyst, Raymond James: Okay, great. Another one for you, Oliver. In industrial, it’s pretty clear that semicap is pretty strong. You did also highlight broadband communications, which had been a driver over this past fiscal year. I know that business tends to be kind of lumpy, driven around geographic upgrade cycles. Just wondering what you’re seeing going forward in that business.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: I think we previously used the term nonlinear. I think lumpy is a good term as well as we see the industry working through. I’d say, you know, testing solutions and figuring out what they’re going to, where they’re going to go with that. We did highlight part of our Q4 beat was from some strength in that specific subsector as we got some orders for legacy product from our customers.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Looking at F26, I mean, you know, difficult to call. Exactly when is that going to become more linear? I generally lump that into the broader or the recognition that broader industrial was muted for the year.

Melissa Fairbanks, Analyst, Raymond James: Okay, great. Thank you. Having covered that space for a while, I would say it’s probably never going to be linear, but thank you very much, guys. That’s it for me.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah.

Speaker 2: As a reminder to ask a question, please raise your hand if you’ve dialed in to today’s call. Please press Star 9 to raise your hand and Star 6 to unmute. Your next question comes from the line of Reuben Roy with Stifel. Your line is open. Please go ahead.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Hey, guys, thanks for letting me ask a question.

Reuben Roy, Analyst, Stifel: Todd, I want to ask a maybe bigger picture question on sort of customer conversations. There was a lot of volatility earlier this year with tariffs and otherwise inventories moving around, some customers maybe not ramping as quickly as we thought they might. I’m wondering, as you kind of get towards the end of the year here, calendar year, how the customer conversations are going in terms of, I know tariffs is maybe not.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Discussed as much, but how are you?

Reuben Roy, Analyst, Stifel: Feeling about sort of visibility that you’re getting from your customers as you think about, I guess, calendar 2026, fiscal 2026, however you want to, you know, sort.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Thank you for talking about that topic.

Anja Soderstrom, Analyst, Sidoti & Company: Yeah.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: I think in general, visibility seems okay right now. Markets have kind of stabilized and are trending up a bit. The programs that we have underway that are ramping are generally progressing well. We feel good about that and a lot of focus on making sure that they continue in that direction. You mentioned tariffs and tariffs. The situation’s fairly similar internally as to what we’ve talked about. Not really any movement of existing products, just given the uncertainty of the end state as well as the cost that’s associated with moving and moving the supply chain. A lot of thought about where to source next generation programs and next programs and a lot of efforts from our trade compliance team just around mitigating challenges that come up on a regular basis.

USMCA being one, but there’s certainly others around various components and what have you that need to be worked through.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: That’s helpful.

Reuben Roy, Analyst, Stifel: Thanks, Todd. I had a follow up.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: On the energy.

Reuben Roy, Analyst, Stifel: There’s been a lot of discussion, even last week at a trade event conference, on kind of going forward power generation into data centers and around data centers, etc. Is that something that you would characterize as, I think you just kind of mentioned how you’re going and sourcing new programs, et cetera. Is this something that you put more focus or emphasis into, Todd, just given how much activity there is around power and data center and obviously AI?

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah, we are definitely putting more focus around there, Ruben. I mean, we talked about an award we got from a pretty substantial player within that space. We have some other customers in that space as well, so we are positioned well, we believe, to capitalize on that demand.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Perfect. Last question for Pat.

Reuben Roy, Analyst, Stifel: Pat, you mentioned that as the year progresses, fiscal 2026, you potentially have the ability to meet or exceed the operating margin target. I’m wondering if you could maybe just walk through some puts and takes. Is that based on getting towards that 9% to 12% revenue goal or are there other factors that might impact the operating margin?

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Thank you.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Yeah, sure. Definitely, revenue growth will benefit us.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: A fixed cost leverage perspective.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Although I would point out we do expect higher incentive compensation this year given that a key component of that program is based on revenue growth. We do have to overcome that headwind, which we expect to do. Todd had mentioned how quickly we’re ramping the Malaysia facility. The other one I’m really pleased about is Thailand. Oliver had mentioned new programs going into Thailand and year over year we expect a nice margin improvement within that facility that will benefit us overall. I talked about some of the productivity and automation efforts that we’re investing in. We’ve seen some of that take hold in fiscal 2025 with the 40 basis point improvement in operating margin from 2024 to 2025. We expect that to continue in 2026.

As Todd pointed out, we’re looking at pretty similar margins for Q2 and that ability to improve as the year goes on with automation and continuous improvement efforts.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Great.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Thanks, guys.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Thank you.

Speaker 2: Your next question comes from Anja Soderstrom with Sidoti & Company. Your line is open. Please go ahead.

Anja Soderstrom, Analyst, Sidoti & Company: Hi, and thank you for taking my questions. Covered a lot of ground here already. I’m curious, with a quick ramp of Penang, Malaysia, are you going to reach full capacity pretty quickly then? How should we think about further expansions and CapEx?

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: No, we won’t reach full capacity. In fact, there’s an enormous amount of expansion capacity within that facility. It’s just the efficiency with which our sites run it in Malaysia. They’ll be at a fraction of their full capacity but still be at corporate margins just because of the way that the facilities are run there.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Excuse me, Shawn.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: One of the things we’re doing with Plexus Corp.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Our automation and efficiency efforts are really looking to create more revenue capacity within our existing sites. Whether it’s warehouse automation or machines within our facilities, utilizing them more efficiently, driving down CapEx long term by being more efficient within the sites, we have to drive more revenue out of each as well as more profitability.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: To add just a hair more to that as well, I think given our current footprint and the efforts that are underway, we feel pretty comfortable that we’re set for a bit. Barring any major changes in the geopolitical landscape that would make one location significantly more desirable than it is today, right now we have good capacity in each of our locations.

Anja Soderstrom, Analyst, Sidoti & Company: Thank you. You mentioned that the target for this year in revenue doesn’t account for a return of the commercial aerospace. What are you seeing there?

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah, you want to jump in? Oliver, why don’t you take it?

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Yeah. We are, as we noted earlier, expecting some commercial aerospace tailwind here as we look at the broader fiscal year, or fiscal 2026, I should say, but that’s not contemplating any Boeing or Airbus demand change, so to speak. The recent news just last week, regulatory bodies allowing them to increase their production rates, I should say, has not trickled through to a demand signal change for us yet.

Anja Soderstrom, Analyst, Sidoti & Company: Okay. You do not have any sort of indication on when you expect that to happen, or it seems like you’re not expecting it to happen this year?

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: It could happen this year. I mean it needs to happen at some point as Boeing and Airbus run through the inventory that they have at their facilities and through the gliders and other situations. It just remains to be seen. There just isn’t visibility to us as to when that’s going to happen.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Anja, the announcement was made last Friday. If we see a change in a demand signal, we can pick that up typically within 90 days. If it flows through to the customers we support, that would begin to potentially help us out sometime in calendar 2026.

Anja Soderstrom, Analyst, Sidoti & Company: Okay, great, thank you. That was all for me.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Great, thanks.

Speaker 2: Your next question comes from Stephen Fox with Fox Advisors. Your line is open. Please go ahead. Stephen, you may need to unmute with Star six.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Hi, good morning. Sorry about that. A couple of clarifications if I could. First, on the comment that you could accelerate towards like 9 to 12% revenue growth, is that an indication that maybe exiting the year, second half of the year you can get there?

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: What are the biggest sort of.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Wild cards to sort of getting to that pace of growth, you know, over time? Yeah, I don’t think it’s necessarily, we’re not thinking of a hockey stick kind of revenue ramp to the year. It’s more of a, call it a linear ramp is the way that we’re looking at it right now. I think the things to getting in the 9 to 12 is continued steadiness to modest improvement in end market and then just continued focus on product or new, new program ramps that are underway. Okay, that’s helpful. Secondly, just another clarification in terms of the investments because you mentioned.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: It several times, are we, should we.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Consider the level of investments to be.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Mainly focused around Penang.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: It’s not just Penang, can you sort.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Of call out what the next sort of biggest items are and how this.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Sort of the investments relate to like.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: The fiscal year just complete. I’m trying to understand if there’s an unusual drag on margins for the investment level.

Anja Soderstrom, Analyst, Sidoti & Company: Yeah.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Thanks, Steven. This is Oliver. I’ll start by saying Pat noted that our CapEx guide for the year is $90 million to $110 million. That encompasses all of that and that’s fairly consistent to prior year. What we’re looking at is less about bricks and mortar and more about specific investments to help either improve operational efficiency or enable further revenue growth. Some examples would be, one, we’re investing in IT infrastructure to support CMMC compliance, which enables further defense opportunity. We continue to invest in a number of different tools and technology. We previously talked about automating our warehouse and based on our initial pilot that we did in fiscal 2024, we saw a 300% increase in pick rate, a 60% reduction in space, and similar reduction in labor. We rolled that out for two additional sites in fiscal 2025.

We’re looking at doing another four-ish sites in fiscal 2026. By the end of fiscal 2026, we’ll probably have captured about half of our opportunity across our sites there based on where that would be applicable. Other tools that we have, Shawn mentioned earlier, there’s tools that we’re using to essentially optimize machine performance. If we think about a surface mount technology line, we’ve decommissioned and turned off a number of lines. That creates improved operating costs for us and then less CapEx as we continue to grow and utilize those in the future. We’re deploying automated material robots across the organization. That has quite a fast ROI and we’re looking at having that deployed at all of our sites by spring of 2026. That’s the kind of stuff that we’re investing in: tools, advanced capabilities to drive operational efficiency.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: The one thing I’d add to Steve is that it’s not a long-term drag that we’re anticipating on margins. We have a near-term drag, mostly driven by Bridgeview, the new site that we have in Penang, Malaysia. That’ll quickly be overcome. In the meantime, in the background, we continue to invest in these other technologies. We believe we’ll overcome them very quickly and then they’ll start to provide additional productivity improvements as we move forward.

Speaker 2: Great.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: That’s all very helpful.

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Thank you.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Sure.

Speaker 2: As a reminder, if you have any additional questions, please raise your hand to join the queue. Next question comes from the line of Steve Barger with KeyBanc Capital Markets. Your line is open. Please go ahead.

Reuben Roy, Analyst, Stifel: Hey, good morning, guys. Hey, Steve, just a longer term question. You know, you drove about 40 basis points of annual margin expansion over the past three years to the 5.9% in FY25. That’s on revenue that really didn’t grow much since 2022 or FY22. Looking forward, I know this is an investment year, but after this, do you expect you can get back onto a margin expansion plan similar to that or, you know, how are you kind of thinking about long term ability to drive operating margin expansion given the current investments you’re making and the mix you see going forward?

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Yeah. Steve, this is Pat. As you know, a few years ago we reevaluated our operating margin target and set it at 6% or above. You’re right, the last several quarters we’ve been able to hit that 6%. What I’d like to see is kind of getting through fiscal 2026 and our performance and our ability to hit that 6%. I could see us sitting here a year from now reevaluating that margin target. What gives me some confidence in that is something I said earlier about this year. We do have to overcome the incentive compensation headwind. Once we do that, I think we have that ability to see better fixed cost leverage with revenue growth. As Oliver pointed out, a lot of the automation efforts that we’re investing in now I think will drive productivity improvements for us in the future again.

One last thing Shawn mentioned was just improving capacity within our existing sites to cut down on footprint expansions as quickly as we would normally have had to to put up new sites. I think all of that combined could have us sitting here next year looking at what’s our next target to go after.

Reuben Roy, Analyst, Stifel: Understood.

Speaker 2: Yeah.

Reuben Roy, Analyst, Stifel: I guess kind of a related question. I know engineering and sustaining services are a small part of the mix, but they are good for margin. Are the wins there causing you to think differently about your pricing strategy broadly?

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: I wouldn’t say they’re causing us to think broadly different about our pricing strategy, but we certainly feel optimistic about our ability to be able to grow those businesses, which engineering is already well above corporate target margins and sustaining, we believe, has the potential to get there as it scales. Got it.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Thanks.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Sure.

Speaker 2: We have a follow-up question from James Ricchiuti with Needham & Company. Your line is open. Please go ahead. You may need to unmute on Zoom. James.

James Ricchiuti, Analyst, Needham & Company: Sorry, I thought I was unmuted. Just on the program ramp timing issue for Q4, was that mainly in the defense area that you alluded to?

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Yeah, sorry, I thought there was maybe something else coming on your question there.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Q4 timing is.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: Yeah.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Minor delays in defense is what is the big contributor to the quarter’s result. Yep.

James Ricchiuti, Analyst, Needham & Company: That is behind you looking into Q1, Q2, and then maybe just a follow-up on the A and D wins that you talked about. Again, is that mainly coming from defense, and to what extent is unmanned going to be a bigger driver for you, just given all the activity we’re hearing in that market? Thank you.

Oliver Mihm, Executive Vice President, Chief Operating Officer, Plexus Corp.: Yeah, so that is behind us. We are, as noted previously, guiding Q1 up mid single for aerospace and defense, for the sector as a whole. I want to make sure I catch all your components. Your question that you talked about, unmanned aircraft. Yeah, we do see that as being a bigger factor going forward. That market as we’ve been watching it, has evolved. We saw a good fit. We see a strong opportunity for us to be a value add player there. That is what warranted the explicit focus and the commentary today around that specific subsector. Also talked about the fact that we had additional follow on win there. That just further corroborates our ability to grow that subsector as we go forward here in F26. Did I catch all the components of your question?

Shawn Harrison, Vice President of Investor Relations, Plexus Corp.: Thank you, Jim and Shawn, just one follow-up. I mean we do expect, you know, a really strong growth year in defense in fiscal 2026. We’ve picked up new wins, expanded engagements over the past, you know, couple quarters as well as couple years. Todd, or Todd and Oliver mentioned investments. You know, we’re doing so, particularly technology and cybersecurity investments to make us an even more relevant player in that market as we see future growth opportunities, expanding our competitive moat. We are investing in looking to gain additional businesses. We expect to see over time additional military spending in both the U.S. and Europe. Really strong outlook for defense, really strongly positioned there to capture new business winning market share.

Pat Jermain, Executive Vice President, Chief Financial Officer, Plexus Corp.: Thank you.

Speaker 2: Again, there are no further questions at this time. I will now turn the call back to Todd Kelsey for closing remarks.

Todd Kelsey, President and Chief Executive Officer, Plexus Corp.: All right, thank you, John. I’d like to thank shareholders, investors, analysts, and all of our Plexus team members who joined the call this morning. In summary, I’d like to reiterate that we’re pleased with our strong finish to fiscal 2025 with three quarters of sequential revenue growth, strong wins across all of our services, a 40 basis point expansion to our non-GAAP operating margin, 30% non-GAAP EPS growth, and greater than $150 million of free cash flow generation. We believe we’re well positioned to carry this momentum into fiscal 2026 and anticipate accelerating revenue growth and strong financial performance. Thank you again and have a nice day.

Speaker 2: This concludes today’s call. Thank you for attending. You may now disconnect.

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