Plexus Corp. 10-Q Summary: Fiscal Q1 2026
Business Context and Reporting Period
This filing covers the quarterly period ended January 3, 2026 (Fiscal Q1 2026). Plexus Corp. is a global manufacturer of complex products for the Aerospace/Defense, Healthcare/Life Sciences, and Industrial sectors. The quarter included 14 weeks, compared to 13 weeks in other fiscal quarters.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 (Prior Year) |
|---|---|---|
| Net Sales | $1,069.9 million | $976.1 million |
| Gross Profit | $106.1 million | $100.7 million |
| Gross Margin | 9.9% | 10.3% |
| Operating Income | $54.5 million | $46.9 million |
| Operating Margin | 5.1% | 4.8% |
| Net Income | $41.2 million | $37.3 million |
| Diluted EPS | $1.51 | $1.34 |
| Cash from Operations | $(15.4) million | $53.6 million |
| Free Cash Flow | $(50.6) million | $27.1 million |
| Total Debt & Obligations | $158.0 million | $137.8 million |
| Cash & Equivalents | $249.4 million | $306.8 million |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 9.6% year-over-year, driven by production ramps in new products and increased end-market demand. The AMER segment saw a 25.9% increase, while Healthcare/Life Sciences revenue grew 24.6%.
- Margin Compression: Gross margin decreased 40 basis points to 9.9% due to an increase in fixed costs, despite higher sales volume. Operating margin improved 30 basis points to 5.1%, aided by the absence of restructuring charges that impacted the prior year ($4.7 million reduction in charges).
- Cash Flow Deterioration: Operating cash flow swung from a $53.6 million inflow to a $15.4 million outflow. This was primarily driven by a $74.9 million increase in inventory (ramping programs) and a $22.8 million increase in accounts receivable.
- Debt Utilization: Borrowings under the Credit Facility increased from $40.0 million to $60.0 million to support working capital needs.
Guidance, Outlook, and Risks
- Capital Expenditures: Management estimates fiscal 2026 capital expenditures will be between $100.0 million and $120.0 million to support new program ramps.
- Tax Outlook: The annual effective tax rate for fiscal 2026 is expected to be approximately 16.0% to 18.0%, higher than the prior year due to the implementation of the global minimum tax.
- Share Repurchases: Under the 2026 Program, the company repurchased $22.4 million of stock in Q1. Approximately $62.6 million of authorization remains.
- Risks: Key risks include supply chain constraints, component shortages, customer forecast inaccuracies, and the impact of tariffs and trade disputes. The company notes that inventory purchased on behalf of customers carries the risk of write-offs if not consumed.
Investor Verification Checklist
- Inventory Build: Verify the sustainability of the $74.9 million inventory increase and the associated risk of obsolescence or customer non-consumption.
- Working Capital Cycle: Monitor the cash cycle days, which increased slightly to 69 days, driven by higher receivables and inventory days.
- Fixed Cost Leverage: Assess whether the fixed cost increases impacting gross margin are temporary (ramp-up) or structural.
- Debt Covenants: Confirm continued compliance with debt covenants as credit facility utilization rises.
- Segment Mix: Track the shift in revenue mix toward higher-growth sectors (Healthcare/Life Sciences) versus the declining Industrial sector.