EX-99.1 2 plxsf23q4earningsrelease-e.htm EX-99.1 Document

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Plexus Announces Fiscal Fourth Quarter and Fiscal Year 2023 Financial Results
NEENAH, WI – October 25, 2023 - Plexus Corp. (NASDAQ: PLXS) today announced financial results for our fiscal fourth quarter and fiscal year ended September 30, 2023, and guidance for our fiscal first quarter 2024 ending December 30, 2023.
•Reports fiscal fourth quarter 2023 revenue of $1.02 billion, GAAP operating margin of 5.2% and GAAP diluted EPS of $1.44, including $0.21 of stock-based compensation expense
•Reports record fiscal 2023 revenue of $4.21 billion, GAAP operating margin of 4.7% and GAAP diluted EPS of $4.95, including $0.75 of restructuring and other charges as well as $0.76 of stock-based compensation expense
•Reports fiscal 2023 non-GAAP operating margin of 5.2% and non-GAAP EPS of $5.70, including $0.76 of stock-based compensation expense
•Initiates fiscal first quarter 2024 revenue guidance of $990 million to $1.03 billion with GAAP diluted EPS of $1.15 to $1.33, including $0.19 of stock-based compensation expense
Three Months Ended
Sep 30, 2023Sep 30, 2023Dec 30, 2023
Q4F23 Results
Q4F23 Guidance
Q1F24 Guidance
Summary GAAP Items
Revenue (in billions)$1.02$1.00 to $1.04$0.99 to $1.03
Operating margin5.2 %4.7% to 5.2%4.8% to 5.3%
Diluted EPS (1)$1.44$1.18 to $1.36$1.15 to $1.33
Summary Non-GAAP Items (2)
Return on invested capital (ROIC)13.4 %
Economic return 4.4 %
(1)
Includes stock-based compensation expense of $0.21 for Q4F23 results, $0.19 for Q4F23 guidance and $0.19 for Q1F24 guidance.
(2)Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for additional information regarding non-GAAP financial measures.
Fiscal Fourth Quarter 2023 Information
•Won 30 manufacturing programs during the quarter representing $192 million in annualized revenue when fully ramped into production
•Delivered fiscal 2023 manufacturing wins of $946 million in annualized revenue when fully ramped into production
•Purchased $3.4 million of our shares at an average price of $98.91 per share under our current $50.0 million share repurchase authorization, leaving $5.7 million available
Fiscal Year 2023 Information
•Delivered $62 million of free cash flow
•Produced ROIC of 13.4%, representing an economic return of 440 basis points above our weighted average cost of capital of 9.0%
•Purchased $40.9 million of our shares at an average price of $95.96 per share under our share repurchase authorization


Todd Kelsey, Chief Executive Officer, commented, “Fiscal 2023 was an exceptional year for Plexus. Our team’s focus on delivering operational and customer service excellence resulted in outstanding financial performance. For fiscal 2023, we delivered revenue growth in excess of 10%, 5.2% non-GAAP operating margin and free cash flow of $62 million. We also delivered excellent results for our fiscal fourth quarter, with in-line revenue of $1.024 billion, GAAP operating margin of 5.2%, which met the high-end of guidance, and GAAP EPS of $1.44, which exceeded guidance.”

Mr. Kelsey continued, “Our strong fiscal 2023 performance was also demonstrated through the advancement of our sustainable and responsible business practices. I am proud of how our team members supported our vision of helping to build a better world in fiscal 2023, contributing more than 19,000 volunteer hours to our local communities, significantly expanding the reach and impact of our employee resource groups, donating over $1 million through our Plexus charitable foundation and substantially exceeding our 5% energy intensity reduction goal for the year. In addition, the Bevi smart water dispenser that is manufactured in our Appleton, WI facility was recently voted the Coolest Thing Made in Wisconsin for 2023. This product highlights how we partner with our customers to combine innovation and sustainability to build a better world.”

Patrick Jermain, Executive Vice President and Chief Financial Officer, commented, “We generated $66 million in free cash flow for the fiscal fourth quarter, a result well above our projections. Contributing to this strong performance was our fiscal fourth quarter cash cycle of 87 days, which was favorable to our expectations and sequentially lower by 3 days. For fiscal 2023, we delivered return on invested capital of 13.4%, which was 440 basis points above our weighted average cost of capital. We drove this result and created substantial shareholder value through strong operating performance, prudent capital investments and reductions in inventory.”

Mr. Kelsey commented, “We are guiding fiscal first quarter revenue of $990 million to $1.03 billion, GAAP operating margin of 4.8% to 5.3% and GAAP EPS of $1.15 to $1.33. We expect to benefit from sustained, robust commercial aerospace demand, improving semiconductor capital equipment demand and new program ramps, while also facing headwinds as a result of short-term inventory corrections with a small number of Healthcare/Life Sciences customers and ongoing supply chain challenges with certain lagging edge semiconductors.”

Mr. Kelsey concluded, “We continue to forecast accelerating revenue growth as fiscal 2024 progresses, leveraging strong demand in our Aerospace/Defense and Industrial market sectors, increasing new program ramp momentum and lessening supply chain challenges, which creates the opportunity to capture our ongoing unfulfilled backlog of customer demand. As revenue growth accelerates, we also anticipate operating margin expansion. Consequently, we remain confident in achieving our goal of $5 billion in revenue with 5.5% GAAP operating margin by our fiscal 2025.”
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Quarterly & Annual ComparisonThree Months EndedTwelve Months Ended
(in thousands, except EPS)Sep 30, 2023Jul 1, 2023Oct 1, 2022Sep 30, 2023Oct 1, 2022
Revenue$1,023,947 $1,021,610 $1,123,848 $4,210,305 $3,811,368 
Gross profit96,716 93,646 107,105 394,554 347,229 
Operating income53,333 28,204 62,314 195,820 178,185 
Net income40,261 15,799 50,457 139,094 138,243 
Diluted EPS$1.44 $0.56 $1.78 $4.95 $4.86 
Gross margin9.4 %9.2 %9.5 %9.4 %9.1 %
Operating margin5.2 %2.8 %5.5 %4.7 %4.7 %
ROIC (1)13.4 %13.5 %13.0 %13.4 %13.0 %
Economic return (1)4.4 %4.5 %3.7 %4.4 %3.7 %
(1) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed and/or disclosed in this release, such as adjusted operating margin, adjusted net income, adjusted diluted EPS, ROIC and economic return.
Business Segment and Market Sector Revenue
Plexus measures operational performance and allocates resources on a geographic segment basis. Plexus also reports revenue based on the market sector breakout set forth in the table below, which reflects Plexus’ market sector focused strategy. Top 10 customers comprised 48% of revenue during the fourth quarter of fiscal 2023. This is down three percentage points from the third quarter of fiscal 2023 and ten percentage points from the fourth quarter of fiscal 2022. For fiscal 2023, top 10 customers comprised 50% of revenue, down six percentage points from fiscal 2022.

Business Segments ($ in millions)Three Months EndedTwelve Months Ended
Sep 30, 2023Jul 1, 2023Oct 1, 2022Sep 30, 2023Oct 1, 2022
Americas$389 $371 $380 $1,558 $1,311 
Asia-Pacific557 572 689 2,358 2,300 
Europe, Middle East and Africa108 105 85 403 316 
Elimination of inter-segment sales(30)(26)(30)(109)(116)
Total Revenue$1,024 $1,022 $1,124 $4,210 $3,811 

Market Sectors ($ in millions)Three Months EndedTwelve Months Ended
Sep 30, 2023Jul 1, 2023Oct 1, 2022Sep 30, 2023Oct 1, 2022
Healthcare/Life Sciences$449 44 %$451 44 %$467 42 %$1,875 44 %$1,565 41 %
Industrial417 41 %428 42 %520 46 %1,756 42 %1,753 46 %
Aerospace/Defense158 15 %143 14 %137 12 %579 14 %493 13 %
Total Revenue$1,024 $1,022 $1,124 $4,210 $3,811 

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Non-GAAP Supplemental Information
Plexus provides non-GAAP supplemental information, such as ROIC, economic return and free cash flow because such measures are used for internal management goals and decision-making, and because they provide management and investors with additional insight into financial performance. In addition, management uses these and other non-GAAP measures, such as adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted EPS, to provide a better understanding of core performance for purposes of period-to-period comparisons. Plexus believes that these measures are also useful to investors because they provide further insight by eliminating the effect of non-recurring items that are not reflective of continuing operations. For additional information on non-GAAP measures, please refer to the attached Non-GAAP Supplemental Information tables.

ROIC and Economic Return
ROIC for fiscal year 2023 was 13.4%. Plexus defines ROIC as tax-effected annualized adjusted operating income divided by average invested capital over a five-quarter period for the fiscal year. Invested capital is defined as equity plus debt and operating lease obligations, less cash and cash equivalents. Plexus' weighted average cost of capital for fiscal 2023 was 9.0%. ROIC for fiscal year 2023 less Plexus’ weighted average cost of capital resulted in an economic return of 4.4%.

Free Cash Flow
Plexus defines free cash flow as cash flows provided by operations less capital expenditures. For the three months ended September 30, 2023, cash flows provided by operations was $89.8 million, less capital expenditures of $24.2 million, resulting in free cash flow of $65.6 million. For the fiscal year ended September 30, 2023, cash flows provided by operations was $165.8 million, less capital expenditures of $104.0 million, resulting in free cash flow of $61.8 million.

Cash Cycle DaysThree Months Ended
Sep 30, 2023Jul 1, 2023Oct 1, 2022
Days in Accounts Receivable596360
Days in Contract Assets131211
Days in Inventory154161144
Days in Accounts Payable(64)(68)(72)
Days in Advanced Payments (1)(75)(78)(70)
Annualized Cash Cycle (2)879073
(1)Includes a reclassification in the presentation of advanced payments from customers reflected in prior period amounts. As of September 30, 2023, July 1, 2023 and October 1, 2022, the impact of this reclassification was an increase in the Company's days in advanced payments and a reduction in annualized cash cycle by 16, 21, and 27 days, respectively.
(2)Plexus calculates cash cycle as the sum of days in accounts receivable, days in contract assets and days in inventory, less days in accounts payable and days in advanced payments.


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Conference Call and Webcast Information
What:
Plexus Fiscal 2023 Q4 Earnings Conference Call and Webcast
When:
Thursday, October 26, 2023 at 8:30 a.m. Eastern Time
Where:
Participants are encouraged to join the live webcast at the investor relations section of the Plexus website, plexus.com. Participants can also join utilizing the links below:

Audio conferencing link:
https://register.vevent.com/register/BI5a69de202ccc46feab44d36aad3c82a2
Webcast link:
https://edge.media-server.com/mmc/p/vynass2n
Replay:
The webcast will be archived on the Plexus website and will be available as on-demand for 12 months
Investor and Media Contact
Shawn Harrison
+1.920.969.6325
shawn.harrison@plexus.com
About Plexus
Since 1979, Plexus has been partnering with companies to create the products that build a better world. We are a team of nearly 25,000 individuals who are dedicated to providing Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing and Sustaining Services. Plexus is a global leader that specializes in serving customers in industries with highly complex products and demanding regulatory environments. Plexus delivers customer service excellence to leading companies by providing innovative, comprehensive solutions throughout a product’s lifecycle. For more information about Plexus, visit our website at www.plexus.com.
Safe Harbor and Fair Disclosure Statement
The statements contained in this press release that are guidance or which are not historical facts (such as statements in the future tense and statements including believe, expect, intend, plan, anticipate, goal, target and similar terms and concepts), including all discussions of periods which are not yet completed, are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include the effect of inflationary pressures on our costs of production, profitability, and on the economic outlook of our markets; the effects of shortages and delays in obtaining components as a result of economic cycles, natural disasters or otherwise; the risk of customer delays, changes, cancellations or forecast inaccuracies in both ongoing and new programs; the ability to realize anticipated savings from restructuring or similar actions, as well as the adequacy of related charges as compared to actual expenses; the lack of visibility of future orders, particularly in view of changing economic conditions; the economic performance of the industries, sectors and customers we serve; the outcome of litigation and regulatory investigations and proceedings, including the results of any challenges with regard to such outcomes; the effects of tariffs, trade disputes, trade agreements and other trade protection measures; the effects of the volume of revenue from certain sectors or programs on our margins in particular periods; our ability to secure new customers, maintain our current customer base and deliver product on a timely basis; the risks of concentration of work for certain customers; the particular risks relative to new or recent customers, programs or services, which risks include customer and other delays, start-up costs, potential inability to execute, the establishment of appropriate terms of agreements, and the lack of a track record of order volume and timing; the effects of start-up costs of new programs and facilities or the costs associated with the closure or consolidation of facilities; possible unexpected costs and operating disruption in transitioning programs, including transitions between Company facilities; the risk that new program wins and/or customer demand may not result in the expected revenue or profitability; the fact that customer orders may not lead to long-term relationships; our ability to manage successfully and execute a complex business model characterized by high product mix and demanding quality, regulatory, and other requirements; the risks associated with excess and obsolete inventory, including the risk that inventory purchased on behalf of our customers may not be consumed or otherwise paid for by the customer, resulting in an inventory write-off; risks related to information technology systems and data security; increasing regulatory and compliance requirements; any tax law changes and related foreign jurisdiction tax developments; current or potential future barriers to the repatriation of funds that are currently held outside of the United States as a result of actions taken by other countries or otherwise; the potential effects of jurisdictional results on our taxes, tax rates, and our ability to use deferred tax assets and net operating losses; the weakness of areas of the global economy; the effect of changes in the pricing and margins of products; raw materials and component cost fluctuations; the potential effect of fluctuations in the value of the currencies in which we transact business; the effects of changes in economic conditions, political conditions and tax matters in the United States and in the other countries in which we do business; the potential effect of other world or local events or other events outside our control (such as the conflict between Russia and Ukraine, conflict in the Middle East, escalating tensions between China and Taiwan or China and the United States, changes in energy prices, terrorism, global health epidemics and weather events); the impact of increased competition; an inability to successfully manage human capital; changes in financial accounting standards; and other risks detailed herein and in our other Securities and Exchange Commission filings, particularly in Risk Factors contained in our fiscal 2022 Form 10-K.
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PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months EndedTwelve Months Ended
Sep 30,Oct 1,Sep 30,Oct 1,
2023202220232022
Net sales$1,023,947 $1,123,848 $4,210,305 $3,811,368 
Cost of sales927,231 1,016,743 3,815,751 3,464,139 
Gross profit96,716 107,105 394,554 347,229 
Operating expenses:
Selling and administrative expenses43,383 44,791 175,640 167,023 
Restructuring and other charges— — 23,094 2,021 
Operating income53,333 62,314 195,820 178,185 
Other income (expense):
Interest expense(8,130)(5,544)(31,542)(15,858)
Interest income847 454 3,138 1,305 
Miscellaneous, net347 (282)(6,403)(5,329)
Income before income taxes46,397 56,942 161,013 158,303 
Income tax expense6,136 6,485 21,919 20,060 
Net income
$40,261 $50,457 $139,094 $138,243 
Earnings per share:
Basic$1.47 $1.82 $5.04 $4.96 
Diluted$1.44 $1.78 $4.95 $4.86 
Weighted average shares outstanding:
Basic27,475 27,710 27,582 27,862 
Diluted27,972 28,293 28,114 28,439 


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PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
Sep 30,Oct 1,
20232022
ASSETS
Current assets:
Cash and cash equivalents$256,233 $274,805 
Restricted cash421 665 
Accounts receivable661,542 737,696 
Contract assets142,297 138,540 
Inventories1,562,037 1,602,783 
Prepaid expenses and other49,693 61,633 
Total current assets2,672,223 2,816,122 
Property, plant and equipment, net492,036 444,705 
Operating lease right-of-use assets69,363 65,134 
Deferred income taxes62,590 39,075 
Other assets24,960 28,189 
Total non-current assets648,949 577,103 
Total assets$3,321,172 $3,393,225 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance lease obligations$240,205 $273,971 
Accounts payable646,610 805,583 
Advanced payments from customers760,351 779,286 
Accrued salaries and wages94,099 88,876 
Other accrued liabilities71,402 58,473 
Total current liabilities1,812,667 2,006,189 
Long-term debt and finance lease obligations, net of current portion 190,853 187,776 
Accrued income taxes payable31,382 42,019 
Long-term operating lease liabilities38,552 33,628 
Deferred income taxes4,350 6,327 
Other liabilities28,986 21,555 
Total non-current liabilities294,123 291,305 
Total liabilities2,106,790 2,297,494 
Shareholders’ equity:
Common stock543 541 
Additional paid-in-capital661,270 652,467 
Common stock held in treasury(1,134,429)(1,093,483)
Retained earnings1,711,328 1,572,234 
Accumulated other comprehensive loss(24,330)(36,028)
Total shareholders’ equity1,214,382 1,095,731 
Total liabilities and shareholders’ equity$3,321,172 $3,393,225 

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PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 1
(in thousands, except per share data)
(unaudited)
Three Months EndedTwelve Months Ended
Sep 30,Jul 1,Oct 1,Sep 30,Oct 1,
20232023202220232022
Operating income, as reported$53,333 $28,204 $62,314 $195,820 $178,185 
Operating margin, as reported5.2 %2.8 %5.5 %4.7 %4.7 %
Non-GAAP adjustments:
Restructuring costs (1)— 8,865 — 8,865 2,021 
Other non-recurring charges (2)— 14,229 — 14,229 — 
Adjusted operating income$53,333 $51,298 $62,314 $218,914 $180,206 
Adjusted operating margin5.2 %5.0 %5.5 %5.2 %4.7 %
Net income, as reported$40,261 $15,799 $50,457 $139,094 $138,243 
Non-GAAP adjustments:
Restructuring costs, net of tax (1)— 7,920 — 7,920 1,809 
Other non-recurring charges, net of tax (2)— 13,346 — 13,346 — 
Adjusted net income$40,261 $37,065 $50,457 $160,360 $140,052 
Diluted earnings per share, as reported$1.44 $0.56 $1.78 $4.95 $4.86 
Non-GAAP per share adjustments:
Restructuring costs, net of tax (1)— 0.28 — 0.28 0.06 
Other non-recurring charges, net of tax (2)— 0.48 — 0.47 — 
Adjusted diluted earnings per share$1.44 $1.32 $1.78 $5.70 $4.92 
(1)
During the twelve months ended September 30, 2023, restructuring costs of $8.9 million, or $7.9 million net of taxes, were incurred for employee severance costs associated with a reduction in the Company's workforce as well as a lease agreement termination.

During the twelve months ended October 1, 2022, restructuring and impairment charges of $2.0 million, or $1.8 million net of taxes, were incurred for employee severance costs associated with a facility transition in the Company's APAC region.
(2)
During the twelve months ended September 30, 2023, a one-time, non-recurring charge of $14.2 million, or $13.3 million net of taxes, was incurred for an arbitration decision regarding a contractual matter in the Company's EMEA region.
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PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 2
 (in thousands)
(unaudited)
ROIC and Economic Return Calculations Twelve Months EndedNine Months EndedTwelve Months Ended
Sep 30,Jul 1,Oct 1,
202320232022
Operating income, as reported$195,820 $142,487 $178,185 
Restructuring and other charges+23,094 +23,094 +2,021 
Adjusted operating income$218,914 $165,581 $180,206 
÷3 
$55,194 
x4 
Adjusted annualized operating income$218,914 $220,776 $180,206 
Adjusted effective tax ratex13 %x13 %x13 %
Tax impact28,459 28,701 23,427 
Adjusted operating income (tax-effected)$190,455 $192,075 $156,779 
Average invested capital÷$1,425,626 ÷$1,423,003 ÷$1,207,357 
ROIC13.4 %13.5 %13.0 %
Weighted average cost of capital-9.0 %-9.0 %-9.3 %
Economic return4.4 %4.5 %3.7 %
Average Invested Capital CalculationsSep 30,Jul 1,Apr 1,Dec 31,Oct 1,
20232023202320222022
Equity$1,214,382 $1,184,362 $1,182,382 $1,150,259 $1,095,731 
Plus:
Debt and finance lease obligations - current240,205 304,781 294,011 329,076 273,971 
Operating lease obligations - current (1)8,363 8,772 8,358 8,878 7,948 
Debt and finance lease obligations - long-term
190,853 187,468 188,730 187,272 187,776 
Operating lease obligations - long-term38,552 40,515 31,257 32,149 33,628 
Less:
Cash and cash equivalents(256,233)(252,965)(269,664)(247,880)(274,805)
$1,436,122 $1,472,933 $1,435,074 $1,459,754 $1,324,249 
Average Invested Capital CalculationsJul 2,Apr 2,Jan 1,Oct 2,
2022202220222021
Equity$1,058,190 $1,040,591 $1,044,095 $1,028,232 
Plus:
Debt and finance lease obligations - current250,012 222,393 151,417 66,313 
Operating lease obligations - current (1)8,640 9,266 9,507 9,877 
Debt and finance lease obligations - long-term
184,707 186,069 187,075 187,033 
Operating lease obligations - long-term32,270 34,347 36,343 37,970 
Less:
Cash and cash equivalents(276,608)(307,964)(217,067)(270,172)
$1,257,211 $1,184,702 $1,211,370 $1,059,253 
(1)Included in other accrued liabilities on the Condensed Consolidated Balance Sheets.
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