Plexus Announces Fiscal Fourth Quarter and Fiscal Year 2023 Financial Results
NEENAH, WI, Oct. 25, 2023 (GLOBE NEWSWIRE) -- 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, 2023 Sep 30, 2023 Dec 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 margin
5.2 % 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 authorizationTodd 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.”
*Quarterly & Annual Comparison* Three Months Ended Twelve Months Ended
(in thousands, except EPS) Sep 30, 2023 Jul 1, 2023 Oct 1, 2022 Sep 30, 2023 Oct 1, 2022
Revenue $ 1,023,947 $ 1,021,610 $ 1,123,848 $ 4,210,305 $ 3,811,368
Gross profit 96,716 93,646 107,105 394,554 347,229
Operating income 53,333 28,204 62,314 195,820 178,185
Net income 40,261 15,799 50,457 139,094 138,243
Diluted EPS $ 1.44 $ 0.56 $ 1.78 $ 4.95 $ 4.86
Gross margin 9.4 % 9.2 % 9.5 % 9.4 % 9.1 %
Operating margin 5.2 % 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 Ended Twelve Months Ended Sep 30, 2023 Jul 1, 2023 Oct 1, 2022 Sep 30, 2023 Oct 1, 2022
Americas $ 389 $ 371 $ 380 $ 1,558 $ 1,311
Asia-Pacific 557 572 689 2,358 2,300
Europe, Middle East and Africa 108 105 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 Ended Twelve Months Ended Sep 30, 2023 Jul 1, 2023 Oct 1, 2022 Sep 30, 2023 Oct 1, 2022
Healthcare/Life Sciences $ 449 44 % $ 451 44 % $ 467 42 % $ 1,875 44 % $ 1,565 41 %
Industrial 417 41 % 428 42 % 520 46 % 1,756 42 % 1,753 46 %
Aerospace/Defense 158 15 % 143 14 % 137 12 % 579 14 % 493 13 %
Total Revenue $ 1,024 $ 1,022 $ 1,124 $ 4,210 $ 3,811
*
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 Days* Three Months Ended Sep 30, 2023 Jul 1, 2023 Oct 1, 2022
Days in Accounts Receivable 59 63 60
Days in Contract Assets 13 12 11
Days in Inventory 154 161 144
Days in Accounts Payable (64 ) (68 ) (72 )
Days in Advanced Payments (1) (75 ) (78 ) (70 )
Annualized Cash Cycle (2) 87 90 73
(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.
*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.*PLEXUS CORP. AND SUBSIDIARIES*
*CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS*
(in thousands, except per share data)
(unaudited) Three Months Ended Twelve Months Ended Sep 30, Oct 1, Sep 30, Oct 1, 2023 2022 2023 2022
Net sales $ 1,023,947 $ 1,123,848 $ 4,210,305 $ 3,811,368
Cost of sales 927,231 1,016,743 3,815,751 3,464,139
Gross profit 96,716 107,105 394,554 347,229
Operating expenses:
Selling and administrative expenses 43,383 44,791 175,640 167,023
Restructuring and other charges — — 23,094 2,021
Operating income 53,333 62,314 195,820 178,185
Other income (expense):
Interest expense (8,130 ) (5,544 ) (31,542 ) (15,858 )
Interest income 847 454 3,138 1,305
Miscellaneous, net 347 (282 ) (6,403 ) (5,329 )
Income before income taxes 46,397 56,942 161,013 158,303
Income tax expense 6,136 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:
Basic 27,475 27,710 27,582 27,862
Diluted 27,972 28,293 28,114 28,439 *PLEXUS CORP. AND SUBSIDIARIES*
*CONDENSED CONSOLIDATED BALANCE SHEETS*
(in thousands, except per share data)
(unaudited) Sep 30, Oct 1, 2023 2022
*ASSETS*
Current assets:
Cash and cash equivalents $ 256,233 $ 274,805
Restricted cash 421 665
Accounts receivable 661,542 737,696
Contract assets 142,297 138,540
Inventories 1,562,037 1,602,783
Prepaid expenses and other 49,693 61,633
Total current assets 2,672,223 2,816,122
Property, plant and equipment, net 492,036 444,705
Operating lease right-of-use assets 69,363 65,134
Deferred income taxes 62,590 39,075
Other assets 24,960 28,189
Total non-current assets 648,949 577,103
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 payable 646,610 805,583
Advanced payments from customers 760,351 779,286
Accrued salaries and wages 94,099 88,876
Other accrued liabilities 71,402 58,473
Total current liabilities 1,812,667 2,006,189
Long-term debt and finance lease obligations, net of current portion 190,853 187,776
Accrued income taxes payable 31,382 42,019
Long-term operating lease liabilities 38,552 33,628
Deferred income taxes 4,350 6,327
Other liabilities 28,986 21,555
Total non-current liabilities 294,123 291,305
Total liabilities 2,106,790 2,297,494
Shareholders’ equity:
Common stock 543 541
Additional paid-in-capital 661,270 652,467
Common stock held in treasury (1,134,429 ) (1,093,483 )
Retained earnings 1,711,328 1,572,234
Accumulated other comprehensive loss (24,330 ) (36,028 )
Total shareholders’ equity 1,214,382 1,095,731
Total liabilities and shareholders’ equity $ 3,321,172 $ 3,393,225
*PLEXUS CORP. AND SUBSIDIARIES*
*NON-GAAP SUPPLEMENTAL INFORMATION Table 1*
(in thousands, except per share data)
(unaudited) Three Months Ended Twelve Months Ended Sep 30, Jul 1, Oct 1, Sep 30, Oct 1, 2023 2023 2022 2023 2022
Operating income, as reported $ 53,333 $ 28,204 $ 62,314 $ 195,820 $ 178,185
Operating margin, as reported 5.2 % 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 margin 5.2 % 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.
*PLEXUS CORP. AND SUBSIDIARIES*
*NON-GAAP SUPPLEMENTAL INFORMATION Table 2*
(in thousands)
(unaudited)
*ROIC and Economic Return Calculations * Twelve Months Ended Nine Months Ended Twelve Months Ended Sep 30, Jul 1, Oct 1, 2023 2023 2022
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 x 4
Adjusted annualized operating income $ 218,914 $ 220,776 $ 180,206
Adjusted effective tax rate x 13 % x 13 % x 13 %
Tax impact 28,459 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
ROIC 13.4 % 13.5 % 13.0 %
Weighted average cost of capital - 9.0 % - 9.0 % - 9.3 %
Economic return 4.4 % 4.5 % 3.7 %
*Average Invested Capital Calculations* Sep 30, Jul 1, Apr 1, Dec 31, Oct 1, 2023 2023 2023 2022 2022
Equity $ 1,214,382 $ 1,184,362 $ 1,182,382 $ 1,150,259 $ 1,095,731
Plus:
Debt and finance lease obligations - current 240,205 304,781 294,011 329,076 273,971
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-term 38,552 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 Calculations* Jul 2, Apr 2, Jan 1, Oct 2, 2022 2022 2022 2021
Equity $ 1,058,190 $ 1,040,591 $ 1,044,095 $ 1,028,232
Plus:
Debt and finance lease obligations - current 250,012 222,393 151,417 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-term 32,270 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.