Plexus (PLXS) Q4 2019 earnings summary

Executive summary

• FY19 net sales rose 10.1% to $3,164.4M; operating income increased 20.1% to $142.1M, supported by higher sales and favorable customer mix.

• FY19 net income was $108.6M vs. $13.0M in FY18, when U.S. Tax Reform drove $85.9M of non-recurring tax expense; adjusted diluted EPS was $3.43 vs. $3.23.

• Q4 FY19 net sales were $810.2M, gross profit $77.8M, net income $36.8M and diluted EPS $1.23.

Financial highlights

• FY19 gross profit increased 13.3% to $291.8M; gross margin was 9.2%, up 20 bps YoY.

• FY19 operating margin was 4.5%, up 40 bps; selling and administrative expense rose $8.8M, including $1.7M of restructuring costs.

• Reported FY19 income tax expense was $17.3M vs. $94.6M; FY19 included a $10.5M benefit from changing the permanent reinvestment assertion and $7.0M of special tax expense.

• FY19 adjusted income tax expense was $21.0M and adjusted effective tax rate 16.5%, vs. $11.5M and 9.5% in FY18.

• Q4 FY19 gross profit was $77.8M and net income $36.8M; Q4 FY18 net income was $72.7M, including non-recurring tax benefits.

Outlook and guidance

• FY20 annual effective tax rate expected at 13.0%-15.0%.

• FY20 capital expenditures estimated at $60M-$75M, following $90.6M in FY19.

• Strategic financial goals include 12.0% organic revenue growth and Economic Return of 5.0%, defined as ROIC 500 bps above WACC.

• Available cash, projected operating cash flow, potential credit-facility borrowings and leasing capacity expected to cover working and fixed capital needs for the next 12 months.