Snapshot
Plexus Corp reported $1.02B of revenue in Q3 2025, up 6.0% year over year, with diluted EPS of $1.64 and an operating margin of 5.3%.
- Revenue
- $1.02B
- YoY growth
- +6.0%
- Diluted EPS
- $1.64
- Operating margin
- 5.3%
What management said
- •With today's earnings call, Todd will provide summary comments before turning the call over to Oliver and Pat for further details.
- •We generated solid new program wins, including opportunities supporting new customers with products aligned to exciting growth technologies.
- •We delivered non GAAP operating margin of 6%, matching our stated goal.
- •Through our commitment to enabling customer success, we are seeing ongoing strength in new program wins and opportunities to gain share in support of delivering growth outpacing our end markets.
- •In addition, our ongoing strategic investments that drive organizational and operational efficiency are generating strong profitability and free cash flow in support of creating long term shareholder value.
- •Non GAAP operating margin of 6% was near the high end of our guidance, increasing 30 basis points sequentially and meeting our stated goal of 6% or greater operating margin.
- •We have now achieved this goal and delivered operating margin at or above 6% for three of the last four quarters.
- •Non GAAP EPS of $1.9 exceeded our guidance, benefiting from strong operating performance, lower than anticipated interest expense and a favorable tax rate.
- •Finally, we delivered $13,200,000 of free cash flow, significantly better than our expectations entering the quarter as we continue to drive strong working capital management.
- •For the fiscal third quarter, we secured 41 new manufacturing programs with $250,000,000 in revenue annually when fully ramped into production.
- •We also added in each of our market sectors new customers with products aligned to exciting growth technologies.
- •Furthermore, similar to last quarter, the revenue contribution and diversification of the wins performance of our engineering solutions was strong.
What went well
- •Revenue of $1.018 billion met guidance and grew sequentially, marking continued momentum with improved order activity from some industrial and European customers.
- •Non-GAAP operating margin of 6% was near the high end of guidance, up 30 basis points sequentially and meeting the company's stated goal of 6% or greater, achieved in three of the last four quarters.
- •Non-GAAP EPS of $1.90 exceeded guidance, benefiting from strong operating performance, lower than anticipated interest expense, and a favorable tax rate.
- •The company secured 41 new manufacturing programs worth $250 million in annualized revenue when fully ramped, well balanced across all market sectors, including share gains and new customers aligned to growth technologies.
- •Free cash flow of $13.2 million was significantly better than expectations, and the funnel of qualified opportunities expanded sequentially to a robust $3.6 billion.
- •Return on invested capital of 14.1% was 520 basis points above weighted average cost of capital, the highest ROIC in nearly four years, while total debt was reduced by over $200 million since the prior year fiscal third quarter.
What went wrong
- •Healthcare Life Sciences revenue was up only 2% sequentially, below the expectation of a mid-single-digit increase, due to a customer design update that caused a temporary production delay.
- •Semi-cap experienced demand push-outs within the quarter, and the full-year fiscal 2025 semi-cap growth outlook weakened from mid-teens to low double digits.
- •The company is still not seeing pull-in from Boeing or Airbus for increased commercial aerospace production ramps, with that demand yet to flow through.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Revenue | Fiscal Q4 2025 | None | $1.05 billion - $1.09 billion | sequential growth anticipated |
| Non-GAAP operating margin | Fiscal Q4 2025 | 6.0% (Q3 actual) | 5.7% - 6.1% | None |
| Non-GAAP EPS | Fiscal Q4 2025 | $1.90 (Q3 actual) | $1.66 - $1.81 | None |
| Gross margin | Fiscal Q4 2025 | 10.1% (Q3 actual) | 9.8% - 10.1% | slightly lower at midpoint |
| Selling and administrative expense | Fiscal Q4 2025 | $50 million (Q3 actual) | $50 million - $51 million | fairly consistent |
| Effective tax rate | Fiscal Q4 2025 | None | 8% - 10% | lower due to release of tax reserves |
| Cash cycle days | Fiscal Q4 2025 | 69 days (Q3 actual) | 64 - 68 days | improvement |
| Capital spending | Fiscal 2025 | None | $80 million - $100 million | lowered from previous guidance as some Malaysia payments shift into fiscal 2026 |
| Free cash flow | Fiscal 2025 | None | approximately $100 million | None |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Aerospace and Defense revenue | None | Up 6% sequentially, meeting expectation of mid-single-digit increase, driven by new program ramps. |
| Healthcare Life Sciences revenue | None | Up 2% sequentially, below mid-single-digit expectation, due to a customer design update causing temporary production delay. |
| Industrial revenue | None | Up 4% sequentially, in line with low-single-digit expectation, as broadband communications and energy demand offset semi-cap push-outs. |
| Gross margin | None | 10.1%, slightly above midpoint due to favorable mix of service offerings and better fixed cost leverage. |
| Return on invested capital | None | 14.1%, highest in nearly four years, driven by lower invested capital from working capital improvement and better operating performance. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Semi-cap demand | mid-teens growth expected for fiscal 2025 | low double-digit growth for fiscal 2025, with within-quarter push-outs deferring revenue (not perishable) | softening near-term, deferred |
| Commercial aerospace (Boeing/Airbus) | awaiting production rate recovery | still no pull-in; fiscal 2026 outlook assumes steady state with no Boeing/Airbus recovery | flat, potential upside |
| European defense | None | early signs of increasing activity and interest, new space customer added in Kelso, Scotland | improving |
| Malaysia facility startup | None | new site beginning, minimal Q4 drag, expected to reach profitability within roughly four quarters | ramping |
| Tariffs | customers in wait-and-see mode | little change; costs passed to customers, minimal demand movement, USMCA compliance north of 80% in Mexico | stable |
Q&A summary
What is driving the semi-cap pushouts - demand, forecast changes, or the product ramp itself?
Oliver Mihm said it was idiosyncrasies specific to those programs, simply moving revenue to the right rather than perishable demand, and that Q4 is buoyed by new semi-cap program ramps.
Are you seeing the pull-in from aerospace customers as anticipated?
Todd Kelsey said they are still not seeing pull-in from Boeing or Airbus for increased production ramps, but are seeing strong demand in defense and space subsectors, plus early signs of increased European defense demand.
Can you size the Malaysia startup drag in Q4 and into early fiscal 2026?
Patrick Jermain said it will be a minimal drag in Q4, and based on past startups they can bring the site to profitability and near corporate average within roughly four quarters; the site is already seated with significant new business.
What is your current capacity and utilization, and what revenue run rate could you support?
Oliver Mihm said filling existing capacity would allow execution in excess of $5 billion in revenue, with utilization fairly consistent across all regions.
Can you expand on the engineering solutions strategy, its size, and margin profile?
Todd Kelsey said it is one of Plexus's most significant differentiators, in excess of $100 million in revenue, having an excellent year for growth and profitability with broadening diversification; Patrick Jermain added it typically earns double the manufacturing margin.
What gives you confidence about Healthcare Life Sciences growth in fiscal 2026?
Oliver Mihm cited the strength of ongoing and new program ramps, two new customers added in the quarter, and increased engineering design services activity acting as a leading indicator for life sciences.