PLEXUS CORP

RESULTS OF OPERATIONS

Consolidated Performance Summary. The following table presents selected consolidated financial data (dollars in millions, except per share data):

Net sales. For the three months ended January 3, 2026, net sales increased $93.8 million, or 9.6%, as compared to the three months ended December 28, 2024.

Net sales are analyzed by management by geographic segment, which reflects our reportable segments, and by market sector. Management measures operational performance and allocates resources on a geographic segment basis. Our global business development strategy is based on our targeted market sectors.

A discussion of net sales by reportable segment is presented below (in millions):

AMER. Net sales for the three months ended January 3, 2026 in the AMER segment increased $70.9 million, or 25.9%, as compared to the three months ended December 28, 2024. The increase in net sales was driven by an increase of $81.6 million due to production ramps of new products for existing customers and overall net increased customer end-market demand. The increase was partially offset by a decrease of $8.7 million due to disengagements with customers.

APAC. Net sales for the three months ended January 3, 2026 in the APAC segment increased $4.6 million, or 0.8%, as compared to the three months ended December 28, 2024. The increase in net sales was driven by an increase of $5.8 million due to production ramps of new products for existing customers and overall net increased customer end-market demand. The increase was partially offset by a decrease of $5.8 million due to a disengagement with a customer.

EMEA. Net sales for the three months ended January 3, 2026 in the EMEA segment increased $17.2 million, or 17.0%, as compared to the three months ended December 28, 2024. The increase in net sales was driven by an increase of $10.0 million due to production ramps of new products for existing customers and overall net increased customer end-market demand.

Our net sales by market sector for the indicated fiscal period were as follows (in millions):

Aerospace/Defense. Net sales for the three months ended January 3, 2026 in the Aerospace/Defense sector increased $18.3 million, or 11.5%, as compared to the three months ended December 28, 2024. The increase in net sales was driven by an increase of $33.9 million in production ramps of new products for existing customers.

Healthcare/Life Sciences. Net sales for the three months ended January 3, 2026 in the Healthcare/Life Sciences sector increased $91.9 million, or 24.6%, as compared to the three months ended December 28, 2024. The increase in net sales was driven by an increase of $53.9 million in production ramps of new products for existing customers and overall net increased customer end-market demand.

Industrial. Net sales for the three months ended January 3, 2026 in the Industrial sector decreased $16.4 million, or 3.7%, as compared to the three months ended December 28, 2024. The decrease in net sales was driven by a decrease of $10.3 million due to a disengagement with a customer and overall net decreased customer end-market demand.

Cost of sales. Cost of sales for the three months ended January 3, 2026 increased $88.3 million, or 10.1%, as compared to the three months ended December 28, 2024. Cost of sales is comprised primarily of material and component costs, labor costs and overhead. For each of the three months ended January 3, 2026 and December 28, 2024, approximately 89% of the total cost of sales was variable in nature and fluctuated with sales volumes. Approximately 88% of these costs were related to material and component costs.

As compared to the three months ended December 28, 2024, the increase in cost of sales in the three months ended January 3, 2026 was primarily driven by an increase in net sales and an increase in fixed costs.

Gross profit. Gross profit for the three months ended January 3, 2026 increased $5.4 million, or 5.4%, as compared to the three months ended December 28, 2024. Gross margin of 9.9% for the three months ended January 3, 2026 decreased 40 basis points compared to the three months ended December 28, 2024. The primary driver of the increase in gross profit was the increase in net sales, partially offset by an increase in fixed costs which drove the decrease in gross margin.

Operating income. Operating income for the three months ended January 3, 2026 increased $7.6 million, or 16.2%, as compared to the three months ended December 28, 2024. Operating margin of 5.1% for the three months ended January 3, 2026 increased 30 basis points compared to the three months ended December 28, 2024. The primary drivers of the increase in operating income and operating margin for the three months ended January 3, 2026 were the result of the increase in gross profit as well as a decrease of $4.7 million in restructuring and other charges. The restructuring and other charges for the three months ended December 28, 2024 consisted of severance costs associated with a reduction in the Company's workforce in the EMEA and AMER regions. The increase in operating income was partially offset by an increase of $2.5 million in selling and administrative expenses ("S&A"). The increase in S&A was primarily due to an increase in compensation costs.

A discussion of operating income by reportable segment for the indicated fiscal period is presented below (in millions):

AMER. Operating income increased $4.9 million for the three months ended January 3, 2026 as compared to the three months ended December 28, 2024, primarily as a result of an increase in net sales, partially offset by a negative shift in customer mix and an increase in fixed costs.

APAC. Operating income decreased $0.9 million for the three months ended January 3, 2026 as compared to the three months ended December 28, 2024, primarily as a result of an increase in fixed costs.

EMEA. Operating income increased $4.9 million for the three months ended January 3, 2026 as compared to the three months ended December 28, 2024, primarily as a result of an increase in net sales and a positive shift in customer mix.

Other expense. Other expense for the three months ended January 3, 2026 remained flat compared to the three months ended December 28, 2024.

Income taxes. Income tax expense for the three months ended January 3, 2026 was $9.9 million compared to $6.2 million for the three months ended December 28, 2024. This increase was primarily driven by the implementation of the global minimum tax across several jurisdictions in which we operate, as well as an increase in pre-tax book income.

Our annual effective tax rate varies from the U.S. statutory rate of 21.0% primarily due to the geographic distribution of worldwide earnings as well as a tax holiday granted to a subsidiary located in the APAC segment where we derive a significant portion of our earnings. Our effective tax rate may also be impacted by disputes with taxing authorities, tax planning activities, adjustments to uncertain tax positions and changes in valuation allowances.

The annual effective tax rate for fiscal 2026 is expected to be approximately 16.0% to 18.0% assuming no changes to tax laws.

Net income. Net income for the three months ended January 3, 2026 increased $3.9 million, or 10.5%, from the three months ended December 28, 2024 to $41.2 million. Net income increased primarily as a result of the increase in operating income, partially offset by the increase in tax expense as previously discussed.

Diluted earnings per share. Diluted earnings per share increased to $1.51 for the three months ended January 3, 2026 from $1.34 for the three months ended December 28, 2024, primarily as a result of increased net income due to the factors discussed above.

Return on Invested Capital ("ROIC") and economic return. We use a financial model that is aligned with our business strategy and includes an ROIC goal of 15%, which would exceed our weighted average cost of capital ("WACC") by more than 500 basis points and represent positive economic return. Economic return is the amount our ROIC exceeds our WACC.

Non-GAAP financial measures, including ROIC and economic return, are used for internal management goals and decision making because such measures provide management and investors additional insight into financial performance. In particular, we provide ROIC and economic return because we believe they offer insight into the metrics that are driving management decisions. We view ROIC and economic return as important measures in evaluating the efficiency and effectiveness of our long-term capital investments. We also use ROIC as a performance criteria in determining certain elements of compensation as well as economic return performance.

We define ROIC as tax-effected operating income before restructuring and other charges divided by average invested capital over a rolling two-quarter period for the first fiscal quarter. Invested capital is defined as equity plus debt and operating lease liabilities, less cash and cash equivalents. Other companies may not define or calculate ROIC in the same way. ROIC and other non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").

We review our internal calculation of WACC annually. Our WACC is 9.0% for fiscal 2026 and 8.9% for fiscal 2025. By exercising discipline to generate ROIC in excess of our WACC, our goal is to create value for our shareholders. For the three months ended January 3, 2026, ROIC of 13.2% reflects an economic return of 4.2%, based on our WACC of 9.0%, and for the three months ended December 28, 2024, ROIC of 13.8% reflects an economic return of 4.9%, based on our WACC of 8.9%.

For a reconciliation of ROIC, economic return and adjusted operating income (tax-effected) to our financial statements that were prepared using U.S. GAAP, see Exhibit 99.1 to this Quarterly Report on Form 10-Q, which exhibit is incorporated herein by reference.

Refer to the table below, which includes the calculation of ROIC and economic return for the indicated fiscal period (dollars in millions):