Plexus (PLXS) Q4 2017 earnings summary

Executive summary

• Focused on mid-to-low-volume, higher-complexity EMS programs, offering design, supply-chain, manufacturing and aftermarket services across four market sectors.

• FY17 net sales declined 1.1% YoY, while gross margin rose 120 bps and operating margin rose to 5.1%, supporting higher net income and EPS.

Financial highlights

• FY17 net sales were $2,528.1M, down 1.1% YoY; gross profit was $255.9M, up 12.5%, and gross margin was 10.1% versus 8.9%.

• Operating income increased to $129.9M from $99.4M; operating margin improved to 5.1% from 3.9%.

• Net income rose 46.7% to $112.1M; diluted EPS increased to $3.24 from $2.24.

• Cash from operations was $171.7M versus $127.7M; free cash flow was $133.2M versus $96.6M.

Outlook and guidance

• FY18 effective tax rate expected at 8.0%–10.0%; FY18 capital expenditures estimated at $80M–$90M.

• Financial model targets a 4.7%–5.0% operating margin, 5.0% Economic Return and 12.0% targeted organic revenue growth.

• Topic 606 adoption is expected at FY19 start using the modified retrospective approach; a significant portion of revenue is expected to shift from recognition at delivery to recognition over production time.