Plexus Corp 2026 Q4 Earnings Call

Shawn, please go ahead. Good morning, and thank you for joining us today.

Some of the statements made and information provided during our call today will be forward-looking statements, including, without limitation, those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation, and future business outlook. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of factors that could cause actual results to differ materially from those discussed, please refer to the company's periodic SEC filings, particularly the risk factors in our Form 10-K filing for the fiscal year ended September 27, 2025, and the safe harbor and fair disclosure statement in our press release.

We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus's website at www.plexus.com, clicking on Investors at the top of that page. Joining me today are Todd Kelsey, President and Chief Executive Officer, Oliver Mihm, Executive Vice President and Chief Operating Officer, and David Abuhl, Senior Vice President and Chief Financial Officer. With today's earnings call, Todd will provide summary comments before turning the call over to Oliver and David for further details. Before turning the call over to Todd, please note that Plexus will attend Baird's Global Industrial Conference in Chicago on November 11, and Raymond James TMT and Consumer Conference in New York City on December 7. With that, let me now turn the call over to Todd.

Thank you, Shawn. Good morning, everyone. Please advance to slide 3. Plexus delivered an outstanding fiscal 2026 that exceeded expectations. Our differentiated value proposition, anchored by unmatched quality and delivery, creates significant opportunities for new and expanded customer relationships, positioning Plexus to generate robust financial returns and shareholder value. Plexus generated record fiscal fourth quarter revenue of $1.43 billion. This resulted in fiscal 2026 revenue increasing 23% year-over-year to approximately $5 billion. We're now forecasting fiscal 2027 revenue growth in the mid to upper teens. Our wins performance remains strong while our funnel of qualified manufacturing opportunities reached another record level, expanding $1.2 billion year-over-year to nearly $5 billion, supporting our diversified and accelerating revenue growth momentum. We delivered fantastic operating performance that exceeded our guidance.

Fiscal fourth quarter non-GAAP operating margin of 6.7% increased 40 basis points sequentially and nearly 100 basis points year-over-year. Plexus exceeded its 6% non-GAAP operating margin goal for fiscal 2026, expanding non-GAAP operating margin 30 basis points to 6.2%. We are introducing a new non-GAAP operating margin goal of 6.5%-7%, given our expectation of continued revenue growth and ongoing dividends from efficiency investments and our continuous improvement culture. Finally, fiscal 2026 ROIC exceeded our 15% enduring goal, supported by continued robust working capital efficiency and disciplined capital investment. We anticipate another strong ROIC result for fiscal 2027 and, at the anticipated revenue growth rate, continue to forecast free cash flow for fiscal 2027 exceeding $100 million. Please advance to slide 4. Record revenue in the fiscal fourth quarter of $1.43 billion substantially exceeded our guidance range and increased 9% sequentially and 35% year-over-year.

Excellent performance by our supply chain and operations teams helped our customers gain market share and Plexus capture stronger than anticipated end market demand. In addition, non-GAAP operating margin of 6.7% and non-GAAP EPS of $2.84 substantially exceeded our guidance ranges on strong operating leverage from the revenue upside and continued efficiency gains. Please advance to slide 5. Our go-to-market team secured 36 fiscal fourth quarter new manufacturing wins worth $290 million in annualized revenue when fully ramped into production. Each market sector delivered strong performance and secured exciting new customer programs and relationships that Oliver will discuss in more detail. With the strong fiscal fourth quarter performance, Plexus captured new manufacturing wins for fiscal 2026 worth nearly $1.2 billion in annualized revenue when fully ramped into production.

This outstanding result reflected shared gains with longstanding customers, the addition of exciting new customers that support growth technologies, and continued expansion into attractive secular growth markets such as aerospace and defense, where we generated fiscal 2026 manufacturing wins of nearly half a billion dollars. The team generated these very strong wins while also expanding Plexus' funnel of qualified manufacturing opportunities by an exceptional $1.2 billion, or 33% year-over-year, to reach another record of $4.9 billion. The combination of our strong manufacturing wins performance and significantly expanded funnel of qualified manufacturing opportunities positions Plexus to sustain our diversified and accelerating revenue growth momentum. Please advance to slide 6. Plexus' culture is foundational to our success and embodied by our team as they live our vision to help create the products that build a better world. Supporting our customers as the most trusted partner is central to our strategy.

During the fiscal fourth quarter, Eaton recognized our team for operational excellence and honored Plexus with a Supplier Excellence Award at its Global Supplier Conference, a distinction granted to only 30 of Eaton's 30,000 global suppliers. Early in fiscal 2027, GE Vernova's Power Conversion and Storage business honored Plexus with its Lean Manufacturing Excellence Award. GE Vernova recognized the strong execution, continuous improvement culture, and exceptional delivery performance by our sites in Oradea, Romania and Xiamen, China. I am also incredibly proud to share that our Kelso, Scotland operations were named Manufacturing Business of the Year at the 2026 Scottish Borders Business Excellence Awards, while also earning high commendations for both Innovation in Business and Large Business of the Year. These recognitions celebrate our Kelso team's operational leadership, technological innovation, and role as an employer and partner of choice in the EMEA region.

Our team members' dedication also extends deeply into our communities. For fiscal 2026, our global team shared its time and talents with various local causes, donating approximately 35,000 hours of paid volunteer time off. Further, the Plexus Community Foundation granted $1.5 million in charitable donations to nonprofits globally, expanding our community impact and demonstrating how we actively live our vision of building a better world. Finally, we continue to take proactive steps to reduce our environmental impact. In fiscal 2026, we generated an incredible result and reduced our absolute Scope 1 and Scope 2 greenhouse gas emissions by more than 50% across our global manufacturing sites compared to our fiscal 2023 baseline. I continue to be immensely proud of our global team members as we deliver excellence, live our values, and create a lasting positive impact for our customers, our communities, and the world. Please advance to slide seven.

For our fiscal first quarter, we are guiding revenue of $1.41 billion to $1.46 billion, representing 1% sequential and 34% year-over-year growth at the midpoint. We anticipate strong year-over-year revenue growth from each of our market sectors, with sequential revenue expansion in aerospace and defense and Healthcare/Life Sciences market sectors, balancing a demand normalization in our industrial market sector. We are also guiding non-GAAP operating margin of 6.0%-6.4%, an increase of 40 basis points year-over-year at the midpoint, and non-GAAP EPS of $2.46-$2.62. We remain focused on expanding operating margin and delivering robust returns, even as we are increasing our investments in our people and technology to support stronger than anticipated revenue growth. For fiscal 2027, we are increasing our revenue growth forecast to reflect our robust fiscal 2026 finish, stronger end market demand, and continued program ramps.

We now anticipate to deliver mid to upper teens revenue growth, with expansion in operating margin and sustained working capital efficiency. We continue to see exceptionally strong growth from our aerospace and defense and industrial market sectors, including semiconductor capital equipment, associated with our support of growth technologies and the benefit of ongoing market share gains. In addition, we now anticipate stronger growth from our Healthcare/Life Sciences market associated with increased end market demand, particularly from new programs we launched during fiscal 2026. Finally, through our aligned focus on innovation and continuous improvement culture, Plexus is creating customer success, scaling the company for the future, and developing substantial long-term efficiencies that will generate robust financial returns and shareholder value. I will now turn the call over to Oliver for additional analysis of the performance of our market sectors.

Oliver. Thank you, Todd. Good morning.

For each of our market sectors, I will discuss our fiscal fourth quarter and fiscal year performance, our expectations for our fiscal first quarter, review the annualized revenue contribution of our quarterly wins performance, and offer growth commentary for fiscal 2027. I will also provide an overview of our record funnel of qualified manufacturing opportunities. Beginning with our aerospace and defense sector on slide eight. Fiscal fourth quarter revenue decreased 4% sequentially compared to our expectation of approximately flat performance as timing dynamics with materials more than offset strength in new program ramps and customer demand pull-ins. We anticipate capturing any deferred demand during our fiscal first quarter. Fiscal 2026 saw the aerospace and defense sector revenue grow 23%.