PLEXUS CORP

Cash and cash equivalents and restricted cash were $269.9 million as of June 29, 2024 as compared to $256.7 million as of September 30, 2023.

As of June 29, 2024, 87% of our cash and cash equivalents balance was held outside of the U.S. by our foreign subsidiaries. Currently, we believe that our cash balance, together with cash available under our Credit Facility, will be sufficient to meet our liquidity needs and potential share repurchases for the next twelve months and the foreseeable future.

Our future cash flows from operating activities will be reduced by $31.4 million due to cash payments for U.S. federal taxes on the deemed repatriation of undistributed foreign earnings that are payable over an eight year period that began in fiscal 2019 with the first payment. The table below provides the expected timing of these future cash outflows, in accordance with the following installment schedule for the remaining two years (in millions):

Cash Flows. The following table provides a summary of cash flows (in millions):

Operating Activities. Cash flows provided by operating activities were $216.4 million for the nine months ended June 29, 2024, as compared to cash flows provided by operating activities of $76.0 million for the nine months ended July 1, 2023. The increase was primarily due to cash flow improvements (reductions) of:

•$(28.2) million decrease in net income.

•$156.9 million in inventory cash flows driven by a decrease in inventory in the nine months ended June 29, 2024 compared to an increase in inventory in the nine months ended July 1, 2023 due to inventory reduction efforts and fewer program ramps requiring upfront inventory procurement.

•$76.4 million in accounts payables cash flows primarily driven by the timing of materials procurement and payments to suppliers.

•$19.8 million in contract assets cash flows driven by lower demand from over time customers.

•$(39.4) million in advanced payments from customers cash flows driven by a decrease in advanced payments in the nine months ended June 29, 2024 compared to an increase in advanced payments in the nine months ended July 1, 2023.

•$(28.6) million in other current and non-current asset cash flows driven by an increase in tax prepayments related to timing of payments and a larger increase in prepayments to suppliers in the nine months ended June 29, 2024 compared to the nine months ended July 1, 2023.

•$(19.9) million in accounts receivable cash flows driven by timing of shipments and mix of customer payment terms.

•$(17.6) million in other current and non-current liabilities cash flows driven by federal income tax payments.

The following table provides a summary of cash cycle days for the periods indicated (in days):

We calculate days in accounts receivable and contract assets as each balance sheet item for the respective quarter divided by annualized sales for the respective quarter by day. We calculate days in inventory, accounts payable and advanced payments as each balance sheet line item for the respective quarter divided by annualized cost of sales for the respective quarter by day. We calculate annualized cash cycle as the sum of days in accounts receivable, days in contract assets and days in inventory, less days in accounts payable and days in advanced payments.

As of June 29, 2024, annualized cash cycle days decreased seven days compared to July 1, 2023 due to the following:

Days in accounts receivable for the three months ended June 29, 2024 decreased two days compared to the three months ended July 1, 2023. The decrease is attributable to the timing of customer shipments and payments as well as the mix of customer payment terms.

Days in contract assets for the three months ended June 29, 2024 decreased one day compared to the three months ended July 1, 2023. The decrease is primarily attributable to an increase in advanced payments from customers with arrangements requiring revenue to be recognized over time as products are produced.

Days in inventory for the three months ended June 29, 2024 decreased ten days compared to the three months ended July 1, 2023. The decrease is primarily due to inventory reduction efforts and fewer program ramps requiring upfront inventory procurement.

Days in accounts payable for the three months ended June 29, 2024 decreased six days compared to the three months ended July 1, 2023. The decrease is primarily attributable to timing of materials procurement and payments to suppliers.

Days in advanced payments for the three months ended June 29, 2024 remained flat compared to the three months ended July 1, 2023.

Free Cash Flow. We define free cash flow ("FCF"), a non-GAAP financial measure, as cash flow generated or used in operations less capital expenditures. FCF was $147.5 million for the nine months ended June 29, 2024 compared to $(3.8) million for the nine months ended July 1, 2023, an improvement of $151.3 million. The improvement in FCF was primarily due to lower working capital investments in inventory to support our customers and favorable accounts payable activity due to timing of payments.

Non-GAAP financial measures, including FCF, are used for internal management assessments because such measures provide additional insight to investors into ongoing financial performance. In particular, we provide FCF because we believe it offers insight into the metrics that are driving management decisions. We view FCF as an important financial metric as it demonstrates our ability to generate cash and can allow us to pursue opportunities that enhance shareholder value. FCF is a non-GAAP financial measure that should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with GAAP.

A reconciliation of FCF to our financial statements that were prepared using GAAP as follows (in millions):

Investing Activities. Cash flows used in investing activities were $68.8 million for the nine months ended June 29, 2024 compared to $77.7 million for the nine months ended July 1, 2023. The decrease in cash used in investing activities was due to a $10.9 million decrease in capital expenditures.

We estimate capital expenditures for fiscal 2024 will be approximately $90 million to $110 million to support new program ramps and replace older equipment.

Financing Activities. Cash flows used in financing activities were $134.3 million for the nine months ended June 29, 2024 compared to cash flows used in financing activities of $22.4 million for the nine months ended July 1, 2023. The increase was primarily attributable to net repayments on the credit facility for the nine months ended June 29, 2024 of $83.0 million compared to net borrowings on the credit facility for the nine months ended July 1, 2023 of $34.0 million.

On August 18, 2022, the Board of Directors approved a share repurchase program under which we are authorized to repurchase up to $50.0 million of its common stock (the "2023 Program"). The 2023 Program was completed in February 2024. During the nine months ended June 29, 2024, we repurchased 59,277 shares under this program for $5.7 million at an average price of $95.59 per share. During the three months ended July 1, 2023, we repurchased 149,783 shares under this program for $13.5 million at an average price of $90.49 per share. During the nine months ended July 1, 2023, we repurchased 391,145 shares under this program for $37.4 million at an average price of $95.70 per share.

On January 16, 2024, we announced an additional $50.0 million in share repurchase authority (the "2024 Program") that authorizes us to repurchase our common stock. The 2024 Program became effective upon completion of the 2023 Program, which occurred in February 2024, and has no expiration. During the three months ended June 29, 2024, we repurchased 184,581 shares under this program for $18.6 million at an average price of $100.64 per share. During the nine months ended June 29, 2024, we repurchased 311,431 shares under this program for $30.5 million at an average price of $97.87 per share. As of June 29, 2024, $19.5 million of the 2024 Program remained available to repurchase shares.

All shares repurchased under the aforementioned programs were recorded as treasury stock.

We have Master Accounts Receivable Purchase Agreements with MUFG Bank, New York Branch (formerly known as The Bank of Tokyo-Mitsubishi UFJ, Ltd.) (the "MUFG RPA"), HSBC Bank (China) Company Limited, Xiamen branch (the "HSBC RPA") and other unaffiliated financial institutions, under which we may elect to sell receivables, at a discount. These facilities are uncommitted facilities. The maximum facility amount under the MUFG RPA as of June 29, 2024 is $340.0 million. The maximum facility amount under the HSBC RPA as of June 29, 2024 is $70.0 million. The MUFG RPA will be automatically extended each year unless any party gives no less than 10 days prior notice that the agreement should not be extended. The terms of the HSBC RPA are generally consistent with the terms of the MUFG RPA previously discussed.

We sold $201.4 million and $205.3 million of trade accounts receivable under these programs during the three months ended June 29, 2024 and July 1, 2023, respectively, in exchange for cash proceeds of $199.0 million and $202.9 million, respectively. We sold $638.8 million and $616.6 million of trade accounts receivable under these programs during the nine months ended June 29, 2024 and July 1, 2023, respectively, in exchange for cash proceeds of $631.1 million and $609.4 million, respectively. As of June 29, 2024 and September 30, 2023, $210.7 million and $220.5 million, respectively, of accounts receivables sold under trade accounts receivable programs and subject to servicing by us remained outstanding and had not yet been collected by MUFG Bank or HSBC Bank.

In all cases, the sale discount was recorded within "Miscellaneous, net" in the Condensed Consolidated Statements of Comprehensive Income in the period of the sale. For further information regarding the receivable sale programs, see Note 13, "Trade Accounts Receivable Sale Programs," in Notes to Condensed Consolidated Financial Statements.

Based on current expectations, we believe that our projected cash flows provided by operations, available cash and cash equivalents, potential borrowings under the Credit Facility and our leasing capabilities should be sufficient to meet our working capital and fixed capital requirements, as well as execution upon our share repurchase authorizations as management deems appropriate, for the next twelve months. We believe our balance sheet is positioned to support the potential future challenges presented by macroeconomic factors including increased working capital requirements associated with longer lead-times for components, increased component and labor costs, and operating inefficiencies due to supply chain constraints. As of the end of the third quarter of fiscal 2024, cash and cash equivalents and restricted cash were $270 million, while debt, finance lease and other financing obligations were $349 million. If our future financing needs increase, then we may need to arrange additional debt or equity financing. Accordingly, we evaluate and consider from time to time various financing alternatives to supplement our financial resources. However, we cannot be assured that we will be able to make any such arrangements on acceptable terms or at all.