PLXS FY2026 Q4 Earnings Call Transcript
Date: 2026-10-29
Source: Financial Modeling Prep

Operator: Hello everyone. Thank you for joining us, and welcome to the Plexus Fourth Quarter 26 and Fiscal 26 Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *. To raise your hand. To withdraw your question, press * again. On the call today to answer your questions after the presentation, are Todd Kelsey, president and CEO; David Abuhl, CFO and Senior Vice President and Oliver K. Mihm, executive vice president and COO. I will now hand the conference over to Shawn Matthew Harrison, VP of Investor Relations. Shawn, please go ahead.
Shawn Matthew Harrison: 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 their inherent difficulties are 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 09/27/2025, 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 of Plexus' website www.plexus.com. Clicking on investors at the top of that page. Joining me today are Todd Kelsey, president and chief executive officer; Oliver K. Mihm, Executive vice president and chief operating officer; 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 & Consumer Conference in New York City on December 7. With that, let me now turn the call over to Todd.
Todd Kelsey: Thank you, Sean. Good morning, everyone. Please advance to slide 3. Plexus delivered an outstanding fiscal 26 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 are now forecasting fiscal 2027 revenue growth in the mid to upper teens. Our wins performance remained 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 6.0% 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% to 7.0%, 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 27 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 26 worth nearly $1.2 billion in annualized revenue when fully ramped into production. This outstanding result reflected share gains with long standing 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 $500 million. 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 thousand global suppliers. And early in fiscal 2027, GE Vernova's Gas 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 Scot 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 thousand 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 7. 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 sequential revenue expansion in aerospace and defense, and health care life sciences market sectors balancing a demand normalization in our industrial market sector. We are also guiding non GAAP operating margin of 6.0% to 6.4% an increase of 40 basis points year over year at the midpoint. And non GAAP EPS of $2.46 to $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 26 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 26. 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 K. Mihm: 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 27. I will also provide an overview of our record funnel of qualified manufacturing opportunities. Beginning with our aerospace and defense sector on slide 8, Fiscal fourth quarter revenue decreased 4% sequentially. Compared to our expectation of approximately flat performance, as timing dynamics with materials more than offset strength and new program ramps, and customer demand. We anticipate capturing any deferred demand during our fiscal first quarter. Fiscal 2020 saw the aerospace and defense sector revenue grow 23% Growth was driven by remarkable strength in the defense and unmanned subsectors, a return to growth in commercial aerospace, and new program ramps. In the security and space subsectors. For our fiscal first quarter we expect revenue to be up high single digits sequentially on strength in the defense and space subsectors. Fiscal fourth quarter wins for the aerospace and defense sector was strong at $90 million This quarterly result reflects a 67% year over year increase and brings the total fiscal year wins from the sector to an extraordinary $490 million. For comparison, this fiscal year's aerospace and defense sector wins performance exceeds the combined wins in this sector for fiscal years 2024, 2023, and 2020. Our team in Neenah, Wisconsin is excited to welcome a new customer to Plexus, with a win of a product that supports defense pilot combat training. The partnership our teams developed over the past 18 months as they work together to ensure a smooth product launch supported the win. In addition, our historically strong execution and depth of knowledge contributed to the award of a flight refueling system from an existing customer for our team in Kelso, Scotland. Looking ahead to our fiscal 2027, we continue to see the potential for another year of robust revenue growth for our aerospace and defense sector. We expect revenue growth to exceed 20% with exceptional growth from our defense, unmanned, security, and space subsectors associated with program ramps market share gains, and robust end market demand as well as continued commercial aerospace demand improvement. Please advance to slide 9. Our healthcare/life sciences market sector revenue increased 6% sequentially for our fiscal fourth quarter. The result exceeded our expectation of approximately flat revenue. Due to improved demand from our customers and our team's ability to pull in the required materials to support the growth. Our health care life sciences market sector grew a robust 19% for fiscal 26. Well ahead of our estimate of a mid single digit market growth rate. The therapeutics and imaging subsectors drove the strong performance. For fiscal first quarter, we expect revenue growth to be up low single digits on strength in the therapeutics and monitoring subsectors. From demand increases and program ramps. Our healthcare/life sciences sector wins for the fiscal fourth quarter were $74 million representing a 35% year over year increase. Our wins for the fiscal fourth quarter included the addition of 3 new customers to Plexus, Our team in Chicago, Illinois welcomes 1 of these new customers, and will be building a light imaging product that supports robotic surgical procedures. Our proactive engagement, our ability to support the customer with product design, manufacturing production, aftermarket sustaining services contributed to the win. Another of the new customers will be supported by our team in Bangkok, Thailand, as they were awarded the production of a Class III registered FDA device cardiac defibrillation. The customer noted that Plexus' medical device and regulatory competence as well as our regionalization expertise, drove the award. Looking ahead to fiscal 27 our health care/life sciences sector, we now see the potential to grow revenue high single digits exceeding market growth, which we estimate to be mid single digits. Our updated outlook is supported by existing and new program ramps, and general demand increases led by the strength in the therapeutics and monitoring subsectors. Advancing to the industrial sector on slide 10, fiscal fourth quarter revenue increased 17% sequentially. Well ahead of our forecast for high single digit to low double digit growth. Driving the upside was the ability of our supply chain and operations teams to quickly react and support semi-cap, industrial equipment and communications customers in capturing stronger demand and market share-gain opportunities. Our industrial sector grew 27% in fiscal 2026. This extraordinary result was driven substantially by our semi-cap subsector where revenue increased 50% year over year. As well as growth in our industrial equipment subsector, Market share gains, new program ramps, and customer demand increases all contributed to the outstanding result. For the fiscal first quarter, we expect revenue for the industrial sector to be down low single digits. Semi-cap subsector revenue increases are being offset by customer program timing dynamics, and demand normalization in our communications subsector following fiscal fourth quarter upside. Wins for the industrial market sector were strong for the fiscal fourth quarter at $126 million Our team in Boise, Idaho won a substantial award from a new customer. For the production of a Cleantech battery energy storage system supporting smart grid applications. The customer noted the strength of our collaboration and our culture as contributing to the award. In addition, our team in Penang, Malaysia won a substantial follow on award from an existing semi-cap customer based on the strength of our historical execution. We continue to see the potential for a very strong fiscal 2027 for our industrial market sector. We expect revenue growth to exceed 20% supported by continued robust growth from our semi-cap subsector as well as growth from our test and measurement robotics and automation, and energy subsectors. Please advance to slide 11. For a review of our funnel of qualified manufacturing opportunities. The funnel reached another record this quarter, The strength of our funnel is positively influenced by a number of factors. Including the breadth of our service offering, our commitment to creating strong partnerships with our customers, and our relentless focus on providing unmatched quality and delivery. At $4.9 billion, the funnel grew 33% year over year and a 10% sequential increase. Driven by record contributions from our aerospace and defense, and industrial market sectors. The funnel growth is remarkable considering the strong fiscal 2020 wins performance of $1.2 billion I will now turn the call over to David. David.
David Abuhl: Thank you, Oliver, and good morning, everyone. Our fiscal fourth quarter results are summarized on slide 12. Gross margin of 10.2% met our guidance. Benefiting from leverage on higher revenue, and continued operational efficiency gains. Selling and administrative expense of $59.7 million, included typical stock based compensation, as well as expenses related to executive retirement. Excluding these expenses, we gained 30 basis points of sequential leverage. Our fiscal fourth quarter non GAAP operating margin of 6.7%, exceeded our guidance. Benefiting from end of year fixed cost leverage on the stronger than anticipated customer demand operational efficiencies and continued cost discipline. Non GAAP diluted earnings per share of $2.84 exceeded the top end of our guidance, due to higher revenue and the other items mentioned, partially offset by a tax rate at the upper end of guidance. Turning to our cash flow and balance sheet on slide 13. For the fiscal fourth quarter, we delivered better than expected free cash flow of $6 million reflecting $29 million in cash from operations, and $23 million in capital expenditures. We repurchased approximately $21 million of our stock in the quarter, completing the expanded 2026 share repurchase program. The 2027 share repurchase program was approved by our board in August for $100 million, all of which is available for fiscal 2027, and our repurchases are underway. We ended the fourth quarter in a net cash position, and we had $159 million outstanding under our revolving credit facility with over $340 million available to borrow. Return on invested capital was 15.8% in the fiscal fourth quarter, 680 basis points above our weighted average cost of capital. Our fiscal fourth quarter result was the highest in nearly a decade. And above our enduring goal of 15%. While continuing to increase invested capital to support our robust revenue growth, we anticipate to continue to generate healthy ROIC for fiscal 2027 from our expanding margins and working capital efficiency. Now turning to working capital trends on slide 14. We ended fiscal 26 at a 62-day cash cycle, our best performance on record. And down 1 day compared to the prior year. I am very pleased with how our teams are partnering closely with our customers and suppliers and driving improvements across all areas of working capital. While continuing to make the investments needed to fuel our robust revenue growth. Please advance to slide 15. I would like to take a moment to commend our teams on delivering a really great year. And I am especially pleased to see the progress on expanding our margins. For fiscal 26, we delivered non GAAP operating margins of 6.2%. A 30 basis point increase from the prior year including a tremendous result in the fourth quarter. Going forward, having consistently exceeded our previous 6% goal, we are introducing a new non GAAP operating margin goal, of 6.5% to 7.0%. This new goal will be supported by our strong operational momentum. Continued anticipated revenue leverage, and a balanced ongoing approach toward investments in growth, people, and technology. We take a methodical approach to setting our financial goals. And our expectation is to consistently meet and then progress through the goal. We expect to deliver on our 6.5% to 7% non GAAP operating margin goal. From continued revenue leverage and operational efficiencies. While we expect a fairly muted impact, from price and mix. We will balance these benefits with continued investments in our people technology, capacity, and capabilities. This new target represents a larger step up than we have historically provided. As we have growing confidence in the dividends from our efficiency and automation initiatives. And our continuous improvement culture. Over the past 2 years, our team's efforts have driven a greater than 10% gain in our equipment efficiency. Allowing our operations to generate greater revenue and profitability. Without significantly expanding capital spending. We have also seen revenue per team member expand by approximately 20% over the same time period. And while the revenue outlook is an important backdrop for our new margin goal, we are seeing dividends from our investments in operational efficiency, and we expect to continue to accrue benefits. Now let me turn to our fiscal first quarter guidance summarized on slide 16. As Todd has already provided the revenue and EPS guidance, I will review some additional details. Fiscal first quarter gross margin is expected to be in the range of 9.7% to 10.0%, including expansion of investments in people and technology. For fiscal 27, we expect gross margins to remain at approximately 10.0%. Our outlook for selling and administrative expense for the fiscal first quarter in the range of $61 million to $62 million including stock based compensation. Excluding these expenses, expect the percent of revenue to be flat compared to the prior quarter, while for fiscal 27, we expect to gain leverage on higher revenue, and continued cost discipline. Fiscal first quarter non GAAP operating margin is expected to be in the range of 6.0% to 6.4%. Exclusive of stock based compensation. At the midpoint, this would represent a sequential decline compared to the fiscal fourth quarter as we expand investments in people and technology given the improved fiscal year revenue outlook. Given the timing of the investments in our revenue momentum we currently anticipate minimal to no decline in our fiscal second quarter operating margins from typical seasonal cost increases. And finally, for fiscal year 27, we continue to expect our ongoing investments will result in operating flow through at the low end of our 8% to 12% target range driving expansion in non GAAP operating margin compared to the prior year. We are estimating a non GAAP effective tax rate of between 16% to 18% for the fiscal first quarter and a similar range for fiscal 27. In support of our accelerating revenue momentum, we continue to strategically increase our working capital investments. And expect our fiscal first quarter cash cycle to be in the range of 66 to 70 days. We typically experience around a 6-day sequential increase in our fiscal first quarter cash cycle days associated with the end of many of our customers' fiscal years. For fiscal 27, we continue to expect cash cycle days to be in the low to mid sixties. Turning to capital expenditures. Long term, continue to target spending in the range of 2% to 3.0% of revenue. Given our robust revenue growth trends, capital expenditures for fiscal 27 will likely fall toward the upper end of that range. Remain committed to deploying capital diligently. And are pleased with the very strong returns our investments and capabilities capacity, and technology are generating. As a result of these factors and the timing of our working capital investments, we are forecasting a use of free cash flow in the fiscal first quarter including the annual payments for our incentive compensation program. For fiscal 27, we still expect to generate in excess of $100 million of free cash flow. Benefiting from our sustained robust profitability and our focus on working capital efficiency. With that, Operator, let's open the call for questions.
Operator: Thank you. We will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of David Williams with Needham and Co. Your line is open. Please go ahead.
Patrick: Hi. Good morning. This is Patrick Jermain on for David Williams at Needham. Congrats on the quarter. To jump right into it, how much of the demand acceleration reflects customer forecast increases? Versus pulling orders forward to secure that capacity or components are you guys seeing forecast revised upwards that may give you more confidence in the durability of demand? Thank you.
Oliver K. Mihm: Yeah. Good morning. I would say that customer demand increases is forming a substantial part of our outlook and the increase that you saw in outlook relative to last quarter. And then relative to our ability to pull in materials, we you saw the results from Q4. Certainly, from a materials perspective, we consider the environment to be challenged. We are always working the angle here to help support our customers. Close partnership with our customers, a number of tools we have in place to help ensure that we can capture those materials. I can go into more detail there if you would like. But in general, I think our assessment of risk associated with material is already contemplated in the forecast.
Patrick: Okay. Great. Thank you for that. And then maybe quickly as a follow-up. In semi cap, how much of that growth is driven by increasing the in demand on existing programs versus new customer programs? Or is that also coming from share gains? And if the demand in the wafer fabrication equipment environment moderates, how quickly will that flow through to your business? Thank you, and congrats again.
Todd Kelsey: Yeah. Thanks again, Patrick. This is Todd this time. Within semi cap, there is a number of factors that are driving our revenue growth there. There certainly is increasing end market demand, but we took a significant amount of share particularly through the last downturn within the semi cap market. And that is coming to bear right now. We also continue to take some additional share as we are going through this upcycle because of our ability to be able to outperform. And if you take a look at our results, as Oliver mentioned, the fiscal year, we are up about 50% within the semi cap space, way above WFE and we expect we will continue to do that as we go through fiscal 2 thousand 27.
Shawn Matthew Harrison: And I think to the downturn question, Patrick, this is Sean Harrison. The surprising thing is, typically, we take more share during the downturn, as Todd mentioned. And, you know, you see less share gains during an upturn as customers are just looking to secure you know, demand and fulfill demand. And so the fact that we are taking share during an upturn is a positive sign, and we would expect, as we have seen in last cycles, to be able to outperform the market because of the share capture we generate.
Todd Kelsey: Okay. Great. Thank you for that. Alright. Thanks, Patrick.
Operator: Your next question comes from the line of Steve Barger with KeyBanc Capital Markets. Your line is open. Please go ahead.
Steve Barger: Hi. Thanks. Good morning. I wanted to start with free cash flow. You expect $100 million in FY 2027 despite raising revenue to the upper mid to upper teens. If demand exceeds that outlook again, does free cash flow necessarily decline because of working cap? Or are you seeing customer funding and operating efficiency that kind of changes that relationship? And you can maintain that level on revenue upside?
David Abuhl: Hi, Steven. This is David. Good morning. We are pleased with the outlook at the moment. And if you looked at the delivery on cash cycle days, and we ended at a record low, Our teams are really performing well in terms of the efficiency of the capital investments we are making and working capital. And we usually say we need about 15 to 20¢ of working capital for revenue growth. And that is. We are right in that maybe 17% range. In fact, we have added nearly 1.5 billion of revenue growth in the last year on an annualized basis, but we have added $250 million of working capital to support that. And so as we go through the year, we are confident in generating that $100 million of free cash flow, and let's see how we do as we re-rate the year But so far, so good, and I think we are pretty confident in this business generating great free cash flow this year.
Shawn Matthew Harrison: And, Steven, it is Sean. just to follow-up on that. like, we, and the team, are very diligent in trying to you know, offset investments in working capital with corresponding commensurate investments by our customers in that inventory to make sure that you know, we are continuing to hit these record low cash cycle days, which as David said, is you know, the best we have seen in. On record. So it is. It was fantastic result.
David Abuhl: Yeah. And it is good outcome.
Steve Barger: And just thinking about the operating margin goal of 6.5 to 7%, can you frame up what brings you to the low versus the high end? Is it versus leverage? Or Penang maturation? Or just what are the swing factors that you see in that range?
David Abuhl: Yes, Steven. On these targets, we like to consistently but then progress through these targets. We have a track record of doing that with the last couple that we have set. And in the moment, you will see our flow through rate. You know, we stayed at 8 to 12 flow through on revenue growth. And at the moment, we are tracking toward the lower end of that. Given the investments we are making with the ex. To support accelerating revenue momentum. Yeah. And so as you model in that flow through rate, think that will get you a pretty good balance of what we think, your margins will look like for you know, the quarter, for the year, etcetera. But our teams are really working hard to consistently meet this next target and then progress through it. But I would say that the growth elements are there. The up elevators, as I like to call them on margin, are strong in terms of leverage on revenue growth. The operational efficiency gains are really coming through strong as well. Then we just need to balance that with the investments needed for the kind of the next chapter of growth that is ahead of us. But overall, it is, it is upward momentum for us, and we would like to progress through this target. So I would say the answer to that you know, it is. Watch that 8% to 12% kind of closely as the investments, are the balancing factor there. Got it. Thank you.
Todd Kelsey: Thanks for the question.
Operator: A reminder. If you would like to ask a question, please press *. on your telephone. To withdraw your question, please press * again. Your next question comes from the line of Melissa Dailey Fairbanks with Raymond James. Your line is open. Please go ahead.
Melissa Dailey Fairbanks: Hey, guys. Good morning. I would wish you congratulations on the Brewers win last night, but I am still a little bit sore as a Rays fan. So, anyway, congratulations on a great quarter. I have a question probably for Oliver. Looking into the aerospace and defense, some of these new wins, I think a quarter or a couple of quarters ago, some of the commentary had been that you have not yet seen an uptick in NATO spending. Wondering what some of the dynamics are there, if these are new spending. Understanding that these are very long term, but if these are new spending programs or if this is just an extension of newer technologies that are moving into this space.
Oliver K. Mihm: Good morning, Melissa. Yeah. I will say it is a bit of both. So we do see that defense spending flowing through to an extent. But then as we noted, some of the technology wins here that we had recently in this past quarter, also seeing new technology, new entrants 1 of the things that we like is our engagement with new primes, I will say, within this space. We think that is a really good fit in a tailwind as we look forward here. And then I will put that also over to Europe and say, I mean, from an EU side, still early days and still seeing a potential tailwind as we look forward from an EU perspective. We think we are well positioned there as well.
Melissa Dailey Fairbanks: Okay. Perfect. And maybe I will stretch that same question into the Healthcare/Life Sciences business We know that historically, you guys have had really strong engagements on the imaging and the diagnostics and surgical side, it sounds as though you may be extending into newer types of engagements. Wondering if you could comment there.
Oliver K. Mihm: Yeah. A couple things there. I think our optimism, our confidence, and our growth outlook here certainly stems from coming off a really strong 2026 to 19%, well ahead of market we think is mid single digits. As you noted, the strength in therapeutics and monitoring underscores, right? And so that is maybe to your point about we have historically seen. Certainly seeing our engagement with secular growth technology so like robotic surgical, like pulsed-field ablation. I think those things give us further optimism here as we look forward into the coming year. Yeah. And 1 other comment I will make, which is not directly related to your question, but I think provides us some optimism on future tailwinds. Is historically our engineering development work has been a bit of a leading indicator for us. And our funnel inside engineering for health care life sciences took a marked uptick in Q4. So that gives us also some optimism here in terms of future outlook.
Melissa Dailey Fairbanks: Excellent. Okay. Great. Thanks so much, guys.
Todd Kelsey: Thanks, Melissa.
Operator: Your next question comes from the line of Anja Soderstrom with Sidoti. Your line is open. Please go ahead.
Anja Soderstrom: Hi. And thank you for taking my questions. Congratulations on the great quarter here on the year. Just curious in aerospace and defense, first of all, the commercial aerospace commercial air, what are you seeing there?
Todd Kelsey: Yeah. We are seeing slightly incremental demand improvements in commercial aerospace. I think it still has not hit the levels that we think it is capable of once we see the Boeing demand flow all the way through to us.
Anja Soderstrom: And is that included in your guidance now? Or the more meaningful comeback there? or no?
Todd Kelsey: No. it is not. We are still taking a conservative approach on when that happens and to what level it happens.
Anja Soderstrom: Okay. Thank you. And then within space, are you -- do you have any exposure to the LEO at all, or.
Shawn Matthew Harrison: So, Anja, it is Sean. In space, yeah, we -- it as we like to say, have more electronics on orbit than any other EMS provider. And probably by a considerable amount. We play strongly in LEO satellites and communication systems. And so you know, unmatched quality and delivery is paramount in generating success in that market. And so very strong position and would anticipate, you know, to see strong growth as that market continues to expand.
Anja Soderstrom: Okay. And then within semi cap, where do you think we are there now in the cycle? What are you seeing? What kind of visibility do you have in the coming quarters or years?
Todd Kelsey: Yeah. I guess I will start by saying, we talked on the call in our prepared remarks about our growth here in the past fiscal year being 50% As we contemplate the calendar year, which will be coming up here at the end of this quarter, we expect that growth rate to be even stronger And so our demand continues to show improvement. I mentioned that here for the current quarter outlook. We continue to see strength of demand So generally, I would say still strong and still growing. We probably have. I mean, I would say we have reasonable visibility for the next year or so, within the within the pipeline of our customers.
Shawn Matthew Harrison: Anja, I would say that visibility came into view probably a little bit earlier than normal. We talked about that last quarter, which gave us some of the confidence in providing, you know, early fiscal year view back in July. I know some of the industry forecasts are strengthening throughout years. Being conservative as we are, we also understand that semi cap is cyclical. And so just taking a cautious approach of how that market will sustain the growth but also very focused on capturing the market share, which, you know, drives our outgrowth.
Anja Soderstrom: Okay. Thank you. And then, have you seen any changes to the comp. Competitive environment at all?
Todd Kelsey: Not really, no. it is pretty similar. Okay. Thank you. That was all for me.
Operator: Your next question comes from the line of David Williams with Needham. Your line is open. Please go ahead.
David Williams: Hey, good morning, everyone. Thanks for taking my follow-up, and as a seatholder, I certainly appreciate it.
Todd Kelsey: Congrats on the really solid results. Thank you. Thanks, David.
David Williams: Just quickly wanted to ask maybe, on the semi cap visibility, and I think you touched on this a bit earlier. But 1 of your competitors or maybe not peers had mentioned that the demand forecasts are certainly firming and they are seeing forecast out to 2029 and 2030. Do you think that is it fair to say you are probably seeing the same things and that demand is fairly sustainable? And, you know, it is it is always cyclical, and I think, Todd, you talked about that earlier. But I am just kind of curious what you are seeing from that demand environment It feels like those elongated forecasts are getting maybe more prevalent.
Todd Kelsey: Yeah. The demand environment's good, but I think to project out several years would probably be a little bit too far at this point.
Shawn Matthew Harrison: Yeah, David, I would say if we feel comfortable with fiscal 27, but I would not wanna look out any further than that. We have seen the industry forecast strengthening is everybody has in terms of the third party forecasters. I would just go back to the earlier statement that you know, we take a conservative approach in understanding a market that historically has had some cyclicality.
David Williams: Sure. No. That makes sense, and I think that is very fair. Then maybe secondly, just maybe across the customer base, is there a way to maybe disaggregate the revenue by maybe customers that are increasing their demand forecast or existing programs versus maybe how much of the demand or the growth that you are seeing is coming from new program?
Oliver K. Mihm: Yeah. I will give that a shot, David. Broadly, I mean, especially given the strength of our outlook here on the fiscal year, customers are strengthening their forecast. We gave some specific commentary that we are seeing uplift there in the Healthcare/Life Sciences. That was a bit of a turning of a corner for us, or seeing an improvement, maybe a better word choice. And then with an industrial and aerospace, that is generally been strong. Obviously, there is always puts and takes but I would say that net, quite strong in terms of supporting our outlook here for fiscal 27.
David Williams: Fantastic. Thanks so much for the help. Thank you.
Operator: Your next question comes from the line of Steve Barger with KeyBanc Capital Markets. Your line is open. Please go ahead.
Steve Barger: Hey, thanks for the follow-up. Just wanted to ask about the top 10 customers. I think that increased from 49% in fiscal 2025 to 56% in fiscal Q4 2026. And I get it, like, you are seeing some really significant ramps from large programs. But when you look at the funnel, are you becoming structurally more concentrated as you scale, or how should we think about that?
Todd Kelsey: I would say in general, Steve, the answer is no. The 56% is kind of a historical number that we have had if you go back over time and 49% was a little bit on the low side. But we did get some pretty good growth from our top 10 customers this year. So we are certainly aware of that and appreciative of that from our customers.
Steve Barger: Got it. Okay. And then, last 1, can you give us an update on some of the AI investments or the productivity initiatives and how you are thinking about increasing revenue per square foot in North America versus Europe versus Asia, just any update operationally on how you are getting more throughput through the plants?
Oliver K. Mihm: Yeah. Sure. Happy to handle that or talk to that. So this. I will. I would like to provide a couple of examples because I think it makes it real for folks for folks, right? So just as an example, 1 of the tools that we have internally that we call excellence guide is a tool that enables operator efficiency, agility, and quality and enables us to turn over the line quickly as we move from 1 assembly to the next. And our deployment on that front saw a 110% pickup year over year. So those are the kinds of things that we are doing to drive efficiency. We talk about specific outcomes to that. For instance, revenue per employee up 25% if you compare Q4 fiscal 24 to Q4 of fiscal 26. And so those are the types of activities that are driving both to improve our labor efficiency our labor output, as well as driving improvement from I will say, asset utilization, whether that is bricks and mortar machine capacity. We have talked historically about from a machine capacity perspective over that same time period 12% increase in how we are utilizing those machines and getting more efficiency out of the capital. Are those initiatives kind of uniformly spread across the footprint?
Steve Barger: Or do you expect to see some pretty -- are there still sizable levers to pull in terms of driving incremental efficiency from here?
Oliver K. Mihm: Well, there is certainly still sizable opportunity in front of us. So we continue to focus on it. This is not a thing that we did last year, and then we are done. I would say that it is fairly consistent across the organization. But as you can imagine, there are things that we pilot in 1 organization, and then we propagate that more globally. And so by way of an example there, we use AI to automate the procurement of low dollar orders to our suppliers, We are currently handling about 80% of our receipts through that AI agent that started in the AMER region is now deploying out into our Asia Pacific and EMEA region. What that enables us to do, it enables our procurement folks to instead work on closing the gaps, find the miracle, secure the parts for challenging dynamics, hit the upside for our customers and potentially help them to capture share gain. Does that help answer that?
Steve Barger: Yeah. No. that is great detail. Thanks.
Operator: There are no further questions at this time. I will now turn the call back to Todd Kelsey for closing remarks.
Todd Kelsey: Thank you, Operator. In closing, thank you to our Plexus Global team for their passionate leadership in delivering a fantastic fiscal 2026. Additionally, thank you to our customers for their partnership as we help create the products that build a better world. I am excited for fiscal 2027 and the positive momentum created by our team. I expect they will generate a fantastic performance in fiscal 2027 and I look forward to speaking with everyone early next year. Thank you to all who joined our call today. Have a nice day.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.