Plexus Corp. (NASDAQ:PLXS), a leading global electronics manufacturing services (EMS) provider, has reported its fiscal third-quarter 2024 results, showcasing strong financial performance and positioning the company for sustained growth in the coming year.

Financials

In the third quarter of fiscal 2024, Plexus delivered revenue of $961 million, which, while within the company's guidance range, fell short of the prior-year quarter's $1.02 billion. The revenue decline was primarily driven by weaker-than-expected demand in the Industrial and Aerospace/Defense sectors, partially offset by growth in the Healthcare/Life Sciences sector. Despite the revenue decline, Plexus' non-GAAP operating margin expanded significantly, reaching 5.8% compared to 5.3% in the prior-year quarter. This margin expansion was driven by improved manufacturing efficiencies, increased demand for the company's engineering solutions and sustaining services, and effective cost management.

Plexus' net income for the fiscal third quarter was $40.8 million, down from $45.5 million in the same period last year. However, the company's diluted earnings per share (EPS) of $1.45 exceeded the guidance range and was only slightly lower than the $1.62 reported in the prior-year quarter. The company's strong operational performance and lower interest expense contributed to the better-than-expected EPS result.

For the full fiscal year 2024, Plexus reported net income of $139.1 million on revenue of $4.21 billion. The company generated $165.8 million in annual operating cash flow and $61.8 million in free cash flow, demonstrating its ability to convert earnings into cash.

Guidance

Looking ahead to the fiscal fourth quarter, Plexus provided guidance for revenue in the range of $990 million to $1.03 billion, representing a sequential increase. The company also expects non-GAAP operating margin to be between 5.6% and 6%, and non-GAAP EPS to be in the range of $1.50 to $1.65. This guidance reflects the company's confidence in its ability to sustain its momentum and capitalize on the improving demand environment.

Geographic Performance

Geographically, Plexus' performance was mixed in the third quarter. The Americas region saw a 10.5% year-over-year decline in revenue, primarily due to weaker demand in the Industrial and Healthcare/Life Sciences sectors. The Asia-Pacific (APAC) region also experienced an 8.7% revenue decline, while the Europe, Middle East, and Africa (EMEA) region reported a 30.5% increase in revenue, driven by strong demand in the Healthcare/Life Sciences and Aerospace/Defense sectors.

Market Sector Performance

In terms of market sector performance, the Healthcare/Life Sciences sector was flat sequentially, meeting the company's expectations. The Industrial sector declined 4% sequentially, falling short of the company's expectations due to a new product introduction pushout. The Aerospace/Defense sector, however, increased 4% sequentially, though this was below the company's expectations due to supply constraints and customer design changes.

Outlook

Plexus' management team remains optimistic about the company's long-term prospects. The company's focus on customer service excellence, operational efficiency, and strategic program wins has positioned it well for continued growth. During the third quarter, Plexus won 35 new manufacturing programs worth $279 million in annualized revenue once fully ramped into production, including a record contribution from the Healthcare/Life Sciences sector.

The company's sustainability initiatives also continue to be a priority, as evidenced by the publication of its fiscal 2023 Sustainability Report. Highlights include expanding its capabilities to design and manufacture more environmentally sustainable products, joining the UN Global Compact, and achieving an 8.4% reduction in energy intensity across its global manufacturing sites.

Looking ahead to fiscal 2025, Plexus expects to deliver 9% to 12% revenue growth, with a GAAP operating margin of 5.5% and a non-GAAP operating margin exceeding 6% by the end of the fiscal year. The company's confidence in this outlook is driven by the momentum it is seeing in its end markets, the benefits of its operational optimization efforts, and the continued deployment of free cash flow to drive shareholder value.

Conclusion

In conclusion, Plexus' fiscal third-quarter results demonstrate the company's ability to navigate a challenging demand environment and position itself for sustained growth. With a focus on operational excellence, strategic program wins, and a commitment to sustainability, Plexus is well-positioned to capitalize on the improving market conditions and deliver value to its shareholders in the years to come.