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.

• Grows by delivering quality, on-time products, outpacing industry peers with an 8% revenue CAGR over five years.

• 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.

• Aerospace and defense saw robust growth, with commercial aerospace up 17% in FY23 and expected to exceed that in FY24.

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

• Healthcare faced a 5% revenue headwind from component price normalization and inventory adjustments, but continues to win new business.

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

Supply chain and operational improvements

• Focused on highly complex products with long life cycles, often using lagging-edge semiconductors, which remain supply-constrained.

• Developed an AI model to forecast supplier lead times, reducing inventory, working capital, and improving flexibility.

• Customers provided significant cash deposits for inventory during supply constraints; as inventory normalizes, deposits are being returned.