Plexus (PLXS) Stifel 2024 Cross Sector Insight Conference summary

Company overview and strategy

• Operates globally with six design centers and seventeen manufacturing sites, focusing on highly complex, regulated products in aerospace, defense, healthcare, and industrial sectors.

• Revenue split: 20% aerospace/defense, 40% healthcare/life sciences, 40% industrial.

• Achieved 8% revenue CAGR over five years, outpacing peers by 250 basis points.

• Variable compensation is tied to 12% annual revenue growth and 15% ROIC, emphasizing profitable growth.

Recent performance and market dynamics

• Navigated a rolling recession with sector-specific demand corrections and inventory reductions, impacting profitability and cash flow.

• Commercial aerospace rebounded strongly post-COVID, with 17% growth in FY23 and expectations to exceed that in FY24.

• Semi-cap business saw a correction due to export regulations but is gradually recovering, aided by share gains and new program ramps.

• Healthcare experienced a 5% revenue headwind from normalization of component costs and inventory adjustments.

• Industrial sector faced inventory challenges in EV charging and factory automation, with corrections expected through FY24.

Supply chain and operational improvements

• Focused on highly complex products with long life cycles, leading to challenges with lagging-edge semiconductor supply.

• Developed an AI model using historical data to more accurately forecast supplier lead times, reducing inventory and working capital.

• Customers provided significant cash deposits during supply chain constraints, now being returned as inventory normalizes.