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PLEXUS CORP (PLXS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 delivered $976M revenue and GAAP EPS of $1.34; non‑GAAP EPS was $1.73 as operating execution drove a 6.0% adjusted margin, near the high end of guidance .
  • Management highlighted mixed sector dynamics: strength in Semicap within Industrial and parts of Healthcare, offset by commercial aerospace production headwinds; non‑GAAP EPS beat company guidance on efficiency gains, lower interest, and slightly favorable tax rate .
  • Q2 FY25 guidance: revenue $960M–$1.00B, GAAP EPS $1.22–$1.37, non‑GAAP EPS $1.46–$1.61; gross margin expected at ~9.7%–10.0% given seasonal compensation headwinds; tax 14%–16% and non‑op expense ~$4.5M .
  • Free cash flow was $27M (best fiscal Q1 in 5 years) as the cash cycle improved to 68 days; FY25 FCF target increased to “up to $100M” and ROIC reached 13.8% (490 bps above WACC) .
  • Estimates context: S&P Global consensus data were unavailable at time of request; company indicated non‑GAAP EPS exceeded its guidance, but we cannot quantify beats/misses vs. Street without S&P estimates .

What Went Well and What Went Wrong

What Went Well

  • Non‑GAAP operating margin reached 6.0% (near high end), driving non‑GAAP EPS of $1.73 that exceeded company guidance; drivers included operational efficiencies, lower interest expense, and a slightly favorable tax rate .
  • Robust commercial momentum: 30 manufacturing wins worth $212M annualized; Engineering Solutions wins approached a two‑year high, both viewed as leading indicators of future growth .
  • Working capital execution: cash cycle at 68 days (5 days favorable to plan) enabled $27M FCF in Q1 and supports up to $100M FY25 FCF target; ROIC of 13.8% produced 4.9% economic return .
  • Quote: “Non‑GAAP EPS of $1.73 exceeded guidance…free cash flow generation surpassed expectations” — CEO Todd Kelsey .

What Went Wrong

  • Commercial aerospace softness weighed on Aerospace/Defense, with negative forecast adjustments and a delayed ramp pushing A&D below earlier internal expectations .
  • Mixed demand in Healthcare/Life Sciences and Industrial intra‑quarter: strength in semicap and select test & measurement offset by broader industrial and some healthcare demand degradation .
  • GAAP profitability compressed sequentially on lower revenue: revenue fell to $976M from $1,051M in Q4, with GAAP operating margin down 30 bps to 4.8% and GAAP EPS to $1.34 from $1.48 .
  • Q2 gross margin guide (9.7%–10.0%) implies ~50–60 bps seasonal downtick from Q1 due to merit increases and U.S. payroll tax reset .

Financial Results

Headline P&L vs. prior quarter and prior year (GAAP and non‑GAAP)

MetricQ3 FY24Q4 FY24Q1 FY25
Revenue ($M)$960.8 $1,050.6 $976.1
Gross margin9.8% 10.3% 10.3%
Operating margin (GAAP)4.1% 5.1% 4.8%
Diluted EPS (GAAP)$0.91 $1.48 $1.34
Adjusted operating margin5.8% 6.2% 6.0%
Adjusted Diluted EPS$1.45 $1.85 $1.73

Notes: Q1 FY25 non‑GAAP excludes $0.24 SBC and $0.15 restructuring (net of tax) .

Segment Revenue by Region ($M)

RegionQ3 FY24Q4 FY24Q1 FY25
Americas$332 $335 $274
Asia‑Pacific$522 $618 $607
EMEA$137 $128 $101
Eliminations($30) ($30) ($6)
Total$961 $1,051 $976

Market Sector Revenue ($M and mix)

SectorQ3 FY24Q4 FY24Q1 FY25
Aerospace/Defense$178 (18%) $184 (18%) $160 (16%)
Healthcare/Life Sciences$380 (40%) $415 (39%) $374 (38%)
Industrial$403 (42%) $452 (43%) $442 (46%)
Total$961 $1,051 $976

Key Performance Indicators

KPIQ3 FY24Q4 FY24Q1 FY25
Free Cash Flow ($M)$114.2 $193.8 $27.1
Cash Cycle (days)83 64 68
ROIC10.4% 11.8% 13.8%
Top 10 customers (% of rev)48% 52% 51%
Share repurchase ($M)$18.6 $19.5 $12.8

Non‑GAAP/definitions: FCF = CFO less capex; ROIC and cash cycle definitions per company disclosures .

Non‑GAAP Adjustments (Q1 FY25)

  • Restructuring and other charges: $4.7M ($4.2M net of tax; ~$0.15/share) primarily severance in EMEA/AMER .
  • Stock‑based compensation: $7.0M ($6.64M net of tax; ~$0.24/share) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ1 FY25 (guide from Oct-24)$960M–$1,000M Actual $976M In‑line (within range)
GAAP Diluted EPSQ1 FY25 (guide from Oct-24)$1.25–$1.40 Actual $1.34 In‑line (within range)
Adjusted EPSQ1 FY25 (guide from Oct-24)$1.52–$1.67 Actual $1.73 Above guidance
RevenueQ2 FY25—$960M–$1,000M New
GAAP Operating MarginQ2 FY25—4.6%–5.0% New
Adjusted Operating MarginQ2 FY25—5.3%–5.7% New
GAAP Diluted EPSQ2 FY25—$1.22–$1.37 New
Adjusted EPSQ2 FY25—$1.46–$1.61 New
Gross MarginQ2 FY25—9.7%–10.0% New
S&A ExpenseQ2 FY25—$48.5M–$49.5M (incl. ~$6.2M SBC) New
Non‑Operating ExpenseQ2 FY25—~$4.5M New
Effective Tax RateQ2 FY25—14%–16% New
Diluted SharesQ2 FY25—~27.7M New
Cash CycleQ2 FY25—69–73 days New
FY Capital ExpendituresFY25$90–$110M (FY24) prior actual $120–$150M (incl. ~$60M Penang site) Raised YoY
FY Free Cash FlowFY25$50M–$100M (prior commentary) Up to $100M Maintained upper bound

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 FY24)Current Period (Q1 FY25)Trend
Semicap (Industrial)Recovery underway; expected outgrowth vs WFE on share gains High‑teens growth expected for PLXS in CY/FY as share gains continue; demand stable overall Improving
Commercial AerospaceQ4: uncertainty; conservative modeling given OEM issues Near‑term production headwinds weighed on A&D; conservative outlook maintained Near‑term softer; cautious
Healthcare/Life SciencesQ3: inventory corrections mostly behind; wins at record Mixed intra‑quarter demand; guided to high‑single‑digit Q2 growth on ramps Stabilizing
Working Capital & FCFQ3/Q4: cash cycle improved to 83→64 days; record FCF Q1 cash cycle 68 days; best fiscal Q1 FCF in 5 years; FY25 FCF up to $100M Strong execution
Tariffs/Trade PolicyNot emphasized in Q3/Q4Active monitoring; global trade org/tools; costs passed to customers; nimble footprint Manageable risk
Europe (EMEA)Q3: ramping Oradea; margins improving Macro industrial softness heavier in Europe; restructuring helps profitability Mixed
Engineering SolutionsGrowing diversification; leading indicator for manufacturing Wins near two‑year high; strong pipeline visibility Positive
Capex/CapacityQ4: Malaysia expansion planned; FY25 capex up FY25 capex $120–$150M; new Penang facility ~$60M; first shipments late FY25 Investment up

Management Commentary

  • Strategic focus: “We remain confident in achieving meaningful EPS growth in fiscal 2025 by leveraging revenue expansion in each of our market sectors, ongoing strong operating margin performance and continued deployment of our free cash flow” — CEO Todd Kelsey .
  • On Q1 performance drivers: “Non‑GAAP operating margin of 6.0% was near the high end…non‑GAAP EPS of $1.73 exceeded guidance…free cash flow generation surpassed expectations” — CEO .
  • Working capital and returns: “Cash cycle of 68 days…best fiscal first quarter free cash flow performance in five years…ROIC 13.8%, 490 bps above WACC” — CFO Patrick Jermain .
  • Sector outlook: Expect sequential revenue growth in back half; A&D growth more subdued near‑term due to commercial aerospace; Semicap outgrowth from share gains; moderate HLS growth as inventory normalizes .

Q&A Highlights

  • Semicap durability: PLXS expects high‑teens growth for its Semicap exposure, outgrowing market via share gains; demand “stable on aggregate,” with some customer variance .
  • Aerospace/Defense conservatism: Modeling derates OEM production rates to avoid over‑committing; long‑term commercial aero backlog supportive, but near‑term cautious .
  • Tariffs readiness: Centralized global trade org and tools enable scenario planning and rapid footprint shifts; tariff costs passed to customers .
  • Europe softness and profitability: Industrial weakness sharper in Europe; restructuring and customer profitability actions improving regional margins .
  • Gross margin cadence: Q2 gross margin down ~60 bps seq. on seasonal comp/payroll resets; targeting ~10% gross margin through the remainder of the year as productivity offsets .
  • Capex/FCF: FY25 capex $120–$150M (incl. ~$60M Penang); despite higher capex and working capital for ramps, company still targets up to $100M FCF .

Estimates Context

  • S&P Global consensus estimates for Q1 FY25 and forward periods were unavailable at time of request due to data access limits. As such, we cannot quantify beats/misses versus Street consensus. Company disclosed that non‑GAAP EPS of $1.73 exceeded its own guidance range and revenue landed within guided bounds .
  • Implication: In the absence of Street estimates, we anchor to company guidance; non‑GAAP EPS beat and margin execution are positives, while Q2 gross margin seasonality and continued commercial aerospace headwinds temper near‑term upside .

Key Takeaways for Investors

  • Non‑GAAP execution remains resilient: 6.0% adjusted operating margin and $1.73 non‑GAAP EPS above guidance despite mixed demand; efficiency and cost control are key levers .
  • Free cash flow discipline: Cash cycle improvements sustain positive FCF even in seasonally soft quarters; FY25 guide up to $100M supports ongoing buybacks and prudent debt reduction .
  • Semicap remains PLXS’s growth engine in Industrial; expect outgrowth vs. market on share gains, though management’s stance remains conservatively modeled .
  • Commercial aerospace is the primary near‑term drag in A&D; long‑term backlog underpins demand, but near‑term production rate challenges and conservative planning limit upside .
  • Q2 guide embeds seasonal gross margin headwinds (merit/payroll taxes) and higher non‑op expense assumptions; look for margins to rebuild into the back half with productivity and mix (Engineering Solutions) .
  • Regional mix: APAC remained the largest contributor; Europe faces macro industrial softness, though restructuring is supporting profit improvement .
  • Watch catalysts: pace of Semicap ramps and customer share gains; signs of stabilization in commercial aerospace production; cash cycle progress; Engineering Solutions bookings converting to manufacturing ramps .

Additional Context and Other Q1 FY25 Materials

  • Other press/information: Partnership news in Pro AV (PlexusAV and intoPIX) underscores interoperability progress in adjacent markets; not material to Q1 financials but indicative of technology engagements .

Citations:

  • Q1 FY25 8‑K/press release and exhibits .
  • Q1 FY25 press release (GlobeNewswire) .
  • Q1 FY25 earnings call transcript .
  • Prior quarters for trend: Q4 FY24 8‑K and call ; Q3 FY24 8‑K and call .