Plexus closed fiscal 2025 with fourth quarter revenue of $1.058 billion near the high end of guidance and non-GAAP EPS of $2.14 that substantially beat guidance on favorable tax items, capping a year of 40 basis points of operating margin expansion, over 30% EPS growth, and $154 million of free cash flow. Aerospace and defense dipped sequentially on minor program ramp timing delays, while industrial and healthcare contributed full-year strength, and the company booked $941 million in annualized manufacturing wins. Management guided fiscal Q1 2026 revenue of $1.05-$1.09 billion and framed fiscal 2026 as a year of accelerating growth toward its 9%-12% goal, supported by program ramps, share gains, and rapid ramp of its new Penang, Malaysia facility.
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 there are inherent difficulties in 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 September 28, 2024, as supplemented by our Form 10-Q filings and the Safe Harbor Compare disclosure statement in our press release.
We encourage participants on the call this morning to access the live webcast and supporting materials at the Plexus website at www.plexus.com, clicking on Investors at the top of that page. Joining me today are Todd Kelsey, President and Chief Executive Officer; Oliver Mihm, Executive Vice President, Chief Operating Officer; and Pat Jermain, Executive Vice President, Chief Financial Officer. With today's earnings call, Todd will provide summary comments before turning the call over to Oliver and Pat for further details. With that, let me now turn the call over to Todd Kelsey.
Todd?
Thank you, Shawn. Good morning, everyone. Please advance to Slide 3. Fiscal 2025 was an outstanding year for Plexus, highlighted by our ongoing delivery of a differentiated value proposition for our customers that created the opportunity for Plexus Corp. to expand customer relationships and gain market share. Our robust and well-balanced new program win results across our solutions will support future growth, our team's dedication to innovating responsibly to help create a better world, and our strong financial performance. With a 40 basis point expansion of non-GAAP operating margin, 30% non-GAAP EPS growth, another year of tremendous free cash flow generation, and robust ROIC, I'm excited that the momentum gained during fiscal 2025 across these areas positions Plexus Corp. during fiscal 2026 to deliver revenue growth in excess of our end markets through new program ramps inclusive of market share gains, accelerated revenue growth positioning Plexus
toward our 9%-12% goal, strong financial performance with a focus on achieving our goal of a 6% non-GAAP operating margin while also investing in talent, technology, facilities, and advanced capabilities to support sustained future revenue growth and greater operational efficiency, and robust free cash flow generation that will be deployed to create additional shareholder value. Please advance to Slide 4. Revenue of $1.058 billion approached the high end of our guidance range, marking our third consecutive quarter of sequential growth. Our team's ability to support late quarter demand upside from semicap and energy customers more than offset minor delays in new program transitions in our aerospace and defense market sector. Non-GAAP EPS of $2.14 substantially exceeded our guidance due to favorable discrete tax items, with inline non-GAAP operating margin of 5.8%.
We expanded non-GAAP operating margin by 40 basis points and non-GAAP EPS over 30% in fiscal 2025 as compared to fiscal 2024. Finally, we delivered fiscal fourth quarter free cash flow of $97 million, resulting in fiscal 2025 free cash flow of $154 million, an amount that substantially exceeded our projections. We have now generated $495 million of free cash flow over the past two fiscal years while deploying excess cash to reduce our borrowing and accelerate our share repurchase activity. Please advance to Slide 5. For the fiscal fourth quarter, we secured 28 new manufacturing programs worth $274 million in revenue annually when fully ramped into production. Included in these wins were expanded relationships with commercial aerospace customers, growth in our exposure to unmanned aircraft, expansion of share with existing healthcare, life sciences and industrial customers, and notable market share gains within semicap.
For fiscal 2025, our team generated 141 manufacturing wins representing $941 million in annualized revenue. In addition, efforts to diversify our engineering solutions engagements successfully drove increased wins for fiscal 2025, including a record result in aerospace and defense. Finally, our Sustaining Services team achieved record wins for the fiscal year, positioning the offering for stronger future financial performance. In addition, while producing the strong wins performance, we expanded our funnel of qualified opportunities versus the prior quarter and year-over-year. Please advance to Slide 6. At Plexus, we are committed to boldly driving positive change and promoting a sustainable future for and through our people, our solutions, and our operations, all of which is built on a foundation of trust and transparency. The following are recent highlights of how Plexus lives our value of innovating responsibly. In September, G.E.
Vernova presented Plexus its Supplier Innovation Award at the Gas Power Supplier Conference in Shanghai, China. This award recognized Plexus' strategic engagement and collaboration in supporting a successful program transition to our facility in Xiamen, China, well ahead of G.E. Vernova's original timeline. Next, as we reflect on the accomplishments of fiscal 2025 and our guiding principle that people are the heart of who we are and what we do, I'm thrilled to share that our global team members completed over 32,000 volunteer hours during the fiscal year. This incredible achievement is a 47% increase compared to fiscal 2024 and serves as a powerful testament to how our team members live our vision of building a better world. Additionally, in fiscal 2025, we granted $1.4 million to global nonprofits through our Plexus Community Foundation, deepening our connections to causes and organizations in the communities where we live and work.
Further, through a focused effort across our operations, we reduced our waste to landfill by over 30% globally in fiscal 2025, far exceeding our goal. This achievement is underscored by a remarkable eight sites reaching zero waste to landfill status, which accounts for over 40% of our manufacturing sites. Finally, we reduced absolute scope 1 and 2 emissions by over 10% across our global manufacturing sites versus our fiscal 2023 baseline. This reduction represents the second consecutive year of exceeding our emissions reduction goal. I'm incredibly proud of and grateful for the contributions of our global team members as they deliver a consequential environmental and social impact in support of our vision of building a better world.
Please advance to Slide 7. For our fiscal first quarter, we are guiding revenue of $1.05 billion-$1.09 billion, non-GAAP operating margin of 5.6%-6.0% and non-GAAP EPS of $1.66-$1.81. With modest end market growth across the majority of our sectors, we expect to deliver revenue growth through ongoing ramps inclusive of market share gains. In addition, during the fiscal first quarter, we will continue to invest in talent, technology, facilities and advanced capabilities to expand our industry-leading solutions, drive greater long-term operational efficiency and prepare for accelerated fiscal 2026 revenue growth. For fiscal 2026, we anticipate another year of strong operational and financial performance. Currently, we expect to deliver revenue growth in excess of our end markets, realizing year-over-year growth in each of our market sectors while accelerating momentum toward our 9%-12% revenue growth goal.
We also anticipate delivering another strong year of operating margin and free cash flow performance even as we continue to make significant investments to increase our long-term competitiveness. In closing, thank you to our global team for making fiscal 2025 outstanding through your support of our custom communities and each other. We're excited to leverage this momentum during fiscal 2026 into generating growth in excess of our end markets, delivering strong financial performance and creating long-term shareholder value. I will now turn the call over to Oliver for additional analysis of the performance of our market sectors.
Oliver.
Thank you, Todd. Good morning. I will begin with a review of the fiscal fourth quarter performance of each of our market sectors, our expectations for each sector for the fiscal first quarter, and directional sector commentary for fiscal 2026. I will also review the annualized revenue contribution of our wins performance for each market sector and then provide an overview of our funnel of qualified manufacturing opportunities, starting with our Aerospace and Defense sector on Slide 8. Revenue decreased 6% sequentially in the fiscal fourth quarter, below our expectation of flat revenue. Minor delays in the timing of new program ramps contributed to the performance. Fiscal 2025 saw essentially flat revenue for the Aerospace and Defense sector as various new product launch delays and inventory adjustments in the commercial aerospace supply chain more than offset double-digit growth in the defense and space subsectors.
For the fiscal first quarter, we expect revenue for the Aerospace and Defense sector to be up mid-single digits from strength and new program ramps within the commercial aerospace, defense, and unmanned aircraft subsectors. Our wins for the fiscal fourth quarter for the Aerospace and Defense sector were $54 million. This is the strongest wins performance for the sector since the fiscal first quarter of 2021. Our Boise, Idaho site won a follow-on award from an existing customer in our unmanned aircraft subsector based on the strength of the partnership that we've built with this customer. We also captured share gain through two new programs in the commercial aerospace subsector that were awarded to our team in Penang, Malaysia.
Our robust growth outlook for fiscal 2026 is supported by strong defense sector growth, new program ramps in the unmanned aircraft subsector, and a return to growth in commercial aerospace associated with new program ramps and the expectation of modest market growth. Please advance to Slide 9. Revenue in our Healthcare Life Sciences market sector was up 1% sequentially for the fiscal fourth quarter, aligned to our expectation of a low single-digit increase. Fiscal 2025 for our Healthcare Life Sciences sector saw a 5% revenue increase based on strength from the imaging and monitoring subsectors. New program ramp revenue and customer demand increases with previously ramped products contributed to the result. For the fiscal first quarter. We expect the Healthcare Life Sciences market sector to be up high single to low double digits, driven by multiple ongoing program ramps and strengthening customer demand in the monitoring and imaging subsectors.
Fiscal fourth quarter Healthcare Life Sciences sector wins of $55 million included a follow-on award for the remediation and repair of a therapeutics product for our Guadalajara, Mexico campus. Our sustaining services team's exceptional quality and delivery performance drove the win. Our Irdia, Romania facility is welcoming a new customer to Plexus Corp. as we were awarded the assembly for an AI-powered digital cell analysis platform. Our proactive, flexible, and collaborative engagement through the quoting process, as well as a strong cultural alignment between the two organizations, contributed to the win. As we look to the next fiscal year, revenue contributions from ongoing and new program ramps, as well as improved end market demand, support our robust growth outlook. Advancing to the industrial sector on Slide 10, revenue was up 11% sequentially in the fiscal fourth quarter. The result exceeded our guidance for up low single digits.
Increased end market demand for specific customers in the semicap, broadband communications, and energy subsectors more than offset various other demand changes. Revenue was flat for fiscal 2025. Low double digit growth in the semicap subsector offset reductions in industrial equipment and vehicle electrification. Our fiscal first quarter outlook for the industrial sector of a high single digit decrease is driven by seasonality within our energy subsector and generally muted near-term demand. The industrial market sector wins for the fiscal fourth quarter were strong at $165 million. This marks a nine-quarter high for the sector. Our semicap wins were robust, including an award for two substantial programs from an existing customer for our Bangkok, Thailand facility. Continued operational excellence contributed to the awards, which included share gains on a growth platform. Our Appleton, Wisconsin facility was awarded the assembly of a high voltage complex product supporting the global rail industry.
The flexibility of our engagement and supply chain solutions contributed to the award from this new customer. Our modest growth outlook for the industrial sector for fiscal 2026 is supported by strength in both the semicap and energy subsectors, offsetting otherwise muted demand. Please advance to Slide 11 for a review of our funnel of qualified manufacturing opportunities. The funnel of qualified opportunities is up 2% sequentially, positive performance given the strength of quarterly wins, and robust at $3.7 billion inclusive of a record high value of aerospace and defense sector opportunities. The sector's momentum is further supported by a record high aerospace and defense funnel for our engineering solutions, reflecting the continued progress of our diversification efforts. In summary, our continued focus on delivering excellence and creating customer success is being recognized by our customers.
Ongoing and new program ramps, market share gains, and specific subsector end market growth supports our view that we will deliver revenue growth in excess of our end markets and accelerate growth for fiscal 2026 toward our 9%-12% goal. I'll now turn the call over to Pat.
Pat, thank you, Oliver, and good morning, everyone. Our fiscal fourth quarter results are summarized on slide 12. Gross margin of 9.9% was consistent with our guidance, as anticipated. Gross margin was slightly lower than the fiscal third quarter due to mix and additional incentive compensation expense. At the same time, we experienced improved fixed cost leverage from higher revenue and continued productivity gains realized across our manufacturing sites. Selling and administrative expense of $51.7 million was slightly above our guidance due to additional incentive compensation expense, mainly driven by our strong performance as a percentage of revenue. SG&A was consistent with the fiscal third quarter. Non-GAAP operating margin of 5.8% was within our guidance range. Non-operating expense of $3.4 million was favorable to expectations due to lower than anticipated interest expense and foreign exchange losses.
Non-GAAP diluted EPS of $2.14 exceeded the top end of our guidance due to the items mentioned and a favorable tax rate. Turning to our cash flow and balance sheet on slide 13, as shown across these financial metrics, we continue to improve our performance and liquidity. We were extremely pleased with our free cash flow performance as we wrapped up the fiscal year. For the fiscal fourth quarter, we delivered $132 million in cash from operations and spent $35 million on capital expenditures, generating free cash flow of approximately $97 million. Over the past two years, we have generated close to a half billion dollars in free cash flow, an outstanding result. For fiscal 2025, we reduced our debt by over $100 million while continuing to return cash to shareholders through our expanded share repurchase program.
For the fiscal fourth quarter, we acquired approximately 161,000 shares of our stock for $21.5 million. At the end of the fiscal year, we had approximately $85 million remaining on the current repurchase authorization. Similar to last quarter, we ended the fiscal year in a net cash position. We had $40 million outstanding under our revolving credit facility with $460 million available to borrow. For fiscal 2025, we delivered a return on invested capital of 14.6%, which was 570 basis points above our weighted average cost of capital. Our invested capital base is significantly lower than the prior year due to our efforts to drive sustained improvement in working capital. This, combined with improved operating performance, drove the expansion in ROIC over the prior year and represents the highest ROIC in four years.
Cash cycle at the end of the fiscal year was 63 days, favorable to expectations and 6 days lower than the fiscal third quarter and 1 day lower than last year. This level of cash cycle was the best result delivered in the past five years. Please turn to Slide 14 for details on this exceptional performance. Along with the seventh consecutive quarterly reduction in gross inventory dollars, we experienced a 10 day sequential improvement in inventory days. Increased revenue and continued progress on working capital initiatives contributed to the sizable reduction in inventory days. Our teams delivered a year-over-year reduction in gross inventory of $82 million and a reduction of over $330 million. When compared to the fiscal 2023 year end balance for days in advance payments, we experienced a four day reduction with a net of $17 million being returned to customers during the quarter.
As Todd has already provided the revenue and EPS guidance for the fiscal first quarter, I'll review some additional details which are summarized on Slide 15. Fiscal first quarter gross margin is expected to be in the range of 9.8% to 10.1%. At the midpoint, gross margin would be slightly above last quarter, despite additional investments in talent, technology, facilities, and advanced capabilities to support future revenue growth and greater operational efficiency. We expect selling and administrative expense in the range of $51.5-$52.5 million, which is fairly consistent with the prior quarter. Note that this estimate is inclusive of approximately $6.6 million of stock based compensation expense. Fiscal first quarter non-GAAP operating margin is expected to be in the range of 5.6%-6%, exclusive of stock based compensation expense.
Looking towards the fiscal second quarter, we expect to maintain margins at a similar level with an opportunity to meet or exceed our 6% margin target as the year progresses. Non-operating expense is anticipated to be approximately $4.6 million, which is sequentially higher, primarily due to an increase in interest expense. Prior quarters had benefited from the capitalization of interest expense associated with site additions. Consistent with our expectations, we are anticipating an increase to our effective tax rate with the impact of global minimum tax taking effect in certain jurisdictions. As such, we are estimating an effective tax rate between 16% and 18% for both the fiscal first quarter and for fiscal 2026. Diluted shares outstanding are expected to be approximately 27.3 million. Our expectation for the balance sheet is that working capital investments will increase compared to the fiscal fourth quarter.
Based on our revenue forecast, we expect this level of working capital will result in cash cycle days in the range of 66 to 70. We anticipate improvements in our cash cycle as we progress through the year and would expect to end the fiscal year at a similar level to fiscal 2025, despite greater investments in working capital to support revenue growth. With these higher investments in working capital, we expect a usage of cash for the fiscal first quarter, a trend we have experienced the last several years. While a usage this quarter, we expect to follow up fiscal 2025 with robust free cash flow of approximately $100 million. For fiscal 2026, we plan to continue to deploy any excess cash to create additional shareholder value.
One final comment on fiscal 2026, we expect capital spending to be in the range of $90 million-$110 million, which would be consistent with our fiscal 2025 spending. With that, John, let's now open the call for questions.