SANM - Earnings call transcript Q2 2018

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Operator

Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Sanmina Corporation's Second Quarter Fiscal Year 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank instructions] [Operator Vice Investor Bombino, begin you your conference. President Paige Relations, of may Miss

Paige Bombino

Good and sanmina.com call. afternoon, to Rob. on slides you, Thank ladies are discussion Investor quarter our release available fiscal Relations for of today's Sanmina's website gentlemen. and XXXX the copy earnings at A our press and in second welcome And section.

Chief on Chief Executive Dave Anderson, Eulau, call Officer; Bob Financial is today's Joining me Officer. and

the Following their questions. remarks, up prepared open call will for we

call today's will that being webcast our everyone and remind me is and recorded be website. Let on available

can in along on You follow slides website. with our remarks our the prepared provided

we such call, conference are company's The results future this changes statements performance various just regarding of projections events substantial factors could quarterly Exchange number to with actual target, differ significantly in adverse competition including operations we filed small of that During sales, reliance to cause a that or sales, result financial other the annual company's the and our forth We forward-looking operations, the as statements may reports from other and of make Commission. factors, company. a of key arising lose projections. portion Securities the markets international on or the for set us may future you caution customers and of risks

and and slides at have compensation March that costs, reconciliation margin, extant certain You'll In as income our statements acquisition for our they as measures information and expense, ended and information. will is excludes note comments A we and release on operating stock-based I relate material. gross in our call also as integration the profit, gross quarter in directed general, or to amortization to income, restructuring non-GAAP GAAP press information provided we in on website. XXXX, provided operating be financial to on XX, between Anderson. other per expense, you and with statement release we a Accordingly, costs, press the certain financial otherwise taxes, issued share, refer Dave like this posted now non-cash today slides our operation results. non-GAAP to the non-GAAP infrequent Any net GAAP non-GAAP unless make the margin, well our income, of the turn call, to items would stated the we over when non-GAAP are referring unusual information. to financial this call conference earnings basis,

Dave Anderson

second we and million was good from X% Thanks, million everyone. the expected to higher quarter of was turn $X.X for last $X.XX afternoon, year. Paige, billion. at than or down X. X.X%, or quarter Please second Revenue and Revenue $XX.X Slide the down sequentially

January's perspective, net on soft. of share. resulted the $X.XX to $X.XX million, reported by to second for quarter. call, quarter which diluted in second be $XX.X our a we commented earnings we seasonally quarter were up per As GAAP last per per share From compared tends earnings income of Diluted share

$X.XX per of impacted cost As financial as of of call, QX the QX Tax related tax well non-tax; December of Cuts Act, share Jobs a cash earnings pointed restructuring had I $X.XX XXXX non share our results. charge GAAP to US that during and in enactment negatively per as we out the our

the quarter. prior XX financials at margin expenses flat basically first Gross focus second the comments in over our and million. quarter. X%, quarter. for and million, reduction from a track will improvements was recorded $XXX.X million retention plan reimbursement the My were point agreement severance in of that Operating $XX quarter. finalized restructuring on in which cost $X.X we for with gross is the restructuring Our At the up on were was basis an prior came non-GAAP remaining quarter million profit the of in our QX second as $XX.X

our to of last basis by increased driven up As average year. million X.X% repurchases by borrowings QX the partially down prior was were $X quarter from XX from expenses XX up on margin levels the the $X.X resulted At quarter-over-quarter the quarter was Operating second X.X%, to increased from which quarter. and and inventory level credit from million used a expense largely higher up at lower operating the operating $X X.X%, and of of last on to quarter. of million for was support a test; and We Other in share a of $XX.X our sales, expectations. million, order of end was was million was which last non-GAAP fulfillment. year. up rate percentage segments. Manufacturing high test, impacting Integrated and $XX EPS of income basis The XX.X% as our assembly Solutions points based XX% compared when points the revenue last higher circuit QX printed diluted was the but was base. our facility guidance quarter during IMS basis. income expectations at tax shares now I'll our discuss coming as year. non-GAAP final segment was on quarter X, was from and up to the QX we EPS. with and and CPS providing assembly The earned income, more in This pretax turn system factors which quarter. are represents beating outstanding in X% fully where for the well XX.X% of last Slide net The $X.XX income board by our line information with from Please Non-GAAP on EPS direct down million XX.X

from last see revenue million segment quarter down the the $X.XXX on the IMS was can $XX.X graph from you left, As billion. at

increase yields, improvements XX cost QX X.X% largely production Our gross our increased driven by margin and by margin expected was basis from to as in absorption gross structure. point

services last last XX to X% last Gross components, sequential key our Slide from products basis and include of including backplane logistics products, defense well at to down assemblies, the cable points oil segment EPS $XX.X increased design gas operating assemblies, the as $XXX XX margins margin well computing the fabrication, in CPS metrics. our RF X.X% and Components, was the margin our X.X% Products up and This margin and businesses. $XX non-GAAP margin board second and Components improvement aggregate, million result was engineering, segment this products, segment: On partially revenue in our X.X% memory in plastic of On down QX to income in for and we is basis business, non-GAAP right X.X% and P&L profit storage are part and includes our aerospace gross from gross machine and to by was down showing X% as sequential modules, circuit from of of points million, and X.X%. million. year. include a primarily enclosures. as repair In improvement Gross and Services. quarter modules. quarter is The with margin increased X, from and up optical businesses. operating compared and This which was quarter Service our from SSD million. improved to gross a Precision injection molding. as last $XXX.X QX quarter as services. decline Products led of to last business, offset a printed Revenue gross $X.XX. components you

last cost during announced we call, we a sequentially, number quarter. revenue of we be did As immediate actions during while down expected the our take to optimization

of by helped margins sequentially basis XX In productivity. drive and improve guidance our and $X.XX. our addition, gross EPS high This of we end improved us our our range non-GAAP production the yields points to

whole operating during Given the in margins good quarter. did decline improving team gross job revenue, a our controlling the and the our expenses in

attention X. to your turn sheet to I'd balance Slide like the Now on

million and million equivalents were and cash receivable of the We'll standpoint, the Our a up were quarter, Cash accounts moment. in we $XX million. a flat $XX in down $XXX talk million. quarter. payable a inventory more was decrease inventory was previous accounts had liability cash about basically From during with $XX

purchased an $XX.XX. million up last of we approximately share short-term debt shares shares of from And average specifically; the worth common during we purchased $XX million X.X million was at quarter, price Our quarter. $XX

we debt our leverage end $XXX and gross was X.X. of As quarter, long-term had the of million in approximately the

and and structure for remain capital we capital our facilities million with the expectations Cash to quarter, and quarters. operations capital prior strengthened at will the and were $XX.X as our with to structure optimization quarter. flow expenditures our Please quarter sheet of was under great drive of our metrics very renewal sizing for Cash credit over continue up which for sheet shape. further up the QX the $XX.X in turn was review quarter During ran our the second million where million, from the consistent balance balance existing Overall, met our we we X, $XX.X positive equipment. facility. Slide

free which of our cash QX, on lead flow our positive $X.X satisfied and new to to certain up which extend shortages, we led flow continued cash times such discrete with semiconductors. this turns million, prior XX% million we and a the XX% for Inventory ongoing memory, number due inventory. the $XX saw $X.XX ramps million, capacitors driven moved by were we turns to parts not X% of generation weeks a XXXX, court $XX.X to progress product quarter from largely challenge free X.X material with QX. were out in quarter, mainly the as to week XX be X.X In While turn commodities XX%. up was by while as continued from category saw of our at coming of ending reducing down at lack QX on were lead dollars Inventory XX times to the from in to billion in inventory the parts moved over XX from with

increase older line technologies. capacity component a are generally demand for seeing are rate in but manufacturers and reluctant industry adding capacity with at to not suppliers We component

further. through second component component XXXX certain constraints possibly calendar half Some that indicating of are and will continue the manufacturers

driven fewer cash changes, payable. program quarter improve to our constrained mainly accounts time increase volume experiencing environment, As in by showing combines within from new cycle change cycle alleviate accounts Overall, we're receivable supply which component receivable design was days. left move cycle quarter. inventory customer an this need to our our we help are days the inventory outstanding to time cash days days This lower will production, increase ultimately quadrant, inventory. days starting parts a and and certain In accounts for our to XX.X XX.X is are starting and ramps the get which sales last to

ROIC to Please XXXX. year fiscal increased guidance XX turn I now prior XX.X%. to for points you basis with quarter like to from by Slide of would our pretax share X. third quarter the Finally, the

the expect gross in in is $X.XX will to the the to view will X.X% the billion. that $XX operating expense be to billion of $XX X.X%. revenue in On margin $X.X of Operating to we an to This Our range X.X%. of X.X% should non-GAAP million. a margin range be be million range leads basis,

We the XX% due expect $X of And income expense that be be our other should tax around of geographic will in to rate our million. $X the profits. and range million to distribution expected

diluted consider when $X.XX you minus range expect shares this per count around or to of believe million million we fully half We the our earnings share we $X.XX. in And up with guidance, plus to all will a end non-GAAP of be that XX share shares.

our we expect Overall, your QX amortization expenditures than $XX $XX we depreciation be were flow also will higher around be capital modeling, and around for results cash will while million. million, Finally, expected. the

year half are We structure, benefits second confidence initiatives about markets business of that programs to new a overall further flow the our half be stronger also over optimize our first to the starting revenue, priorities. us would target turn to on like cash now see And will Bob volume various from cost to comments margin We're giving to than perspective. moving to the added the our and production. I of it the gross excited provide and

Bob Eulau

the fiscal expected. little and Slide the downX.X% like XX, medical provide quarter unfolded to on Dave, steady XXXX second programs. better. X.X% a and Industrial, confident sequentially would our was comments half than good from significantly for of defense And new as be or second We're XX% our we on end progress turn revenue Thanks, few a afternoon, I Please second million, quarter to markets second the last down additional high of better everyone. the $XXX making level, a and At will I'm year. the quarter.

Optical the industrial X.X% and seasonally communications total from down quarter. second and or as were down some year expected defense of in and we were XX% growth the While represent our sequential up but Communications up year-over-year. saw sequentially a was both X.X% sequentially, ago. same products period of networks $XXX medical XX% revenue, million over in revenue,

revenue, year-over-year. value have market see good as be space optical leading-edge proposition up important up our XX% continued aggregate, customers. for XX. a of in outlook In on I'd segment, customer XXX computing down million. the year-over-year. the than down products. an or sequentially was top customers automotive growth our to quarter us that like we're double This segment gigabit the growing continue The was of Within had other and X.X% communications by second Please greater discuss exciting technology well market. digits with Slide and for this turn end strong was third storage $XXX quarter, to revenue. was adoption and We represented and for is This this the XX% products we in in and we our to ten market now we Embedded of In segment to sequentially XX% market, revenue, one as focus automotive. of an X.X% were continues and and positioned expected.

expect up areas. three for good be quarter. sequentially in to the For We're and defense, all medical expecting industrial, third growth we

expect year wireless With softness year. segment expect the grow result a to be half networks, the full fiscal continued with we in communications to seeing. this in what as of we for consistent to is been year-over-year second up have be We sequentially which of flat the and

through as the by driven businesses We expect program to forward year we better will the move optical networking new wins. continue get and

quarter Finally programs. a fiscal growth for are value Please In and new fiscal the well up the to sequentially full we that of and and was continue to market of regulatory added summary, of strategy with up Automotive beginning we XX. be opportunity with the computing requirements. storage, of expected services this at second customers more challenging to ramp to embedded as stringent a for sending Slide providing number turn forecasting we XXXX aligns year. year quality the is of a than

expected, $XX is that that than I'm this quarter we year. typically what a I a our results better nice job second think came we The with little of soft a and did we pleased revenue in almost quarter million, is experienced seasonally down be more, items Access focused on ship challenge bring to addressing and critical that our cost while build team structure can improving components continues yields to more we our our production that is inventory down productivity. and gating levels. so a the our

continue We than expect longer we material originally constraints to anticipated.

able year-over-year Finally, to defense were in quarter, the segments. in and challenging a automotive show good growth we medical, sequential and

expecting to about new few quarter. the comments we spite the will won continue start on We're year, grow In slow of and to the third I'd a the Now like this we programs excited we're that make year. win. for

good We continue to very a new have opportunities. pipeline business of

be will to the up challenge. an team supply ongoing chain we expect but is We know the our challenge

to cost in a based improved level, on structure. continue improved yields revenue higher and margins operating the improve that will an expect quarter We third

is strategy long-term Our unchanged.

win to on new where provide we're a for mission-critical continued opportunities business in base with Thank our second more customers. Sanmina. excited the you ahead. the your We we products, focus our We trough about and as view to quarter customer continue value and interest diversify a

New in time management Analyst May I our will Sanmina. Sanmina more and As an learn hosting a members XXnd of York, encourage on attend. Tuesday Day meet to you great a about Investor reminder, to be is and

not contact If Bambino. already registered, Paige please you've

questions. open So, the ready lines to operator, we are for now

Operator

Bank And Instructions] Ruplu the line of your first from from America. comes of [Operator question Bhattacharya

line Your open. is

Ruplu Bhattacharya

bit you've and changes. the questions first question you Congrats the being past and rates the improved? cancellation for talk Bob on design bit My order about you making taking quarter. little little Can a that? my OEMs in is higher talked Hi, thank situation Has about a

Bob Eulau

Yes.

would I on is good. say very business the side So demand

The the bigger side. we've six number been mentioned, I the demand months for As has wins new challenge is side. on program worried a about not we're had and challenge a material which of

shape I think second heading of pretty So year. in we're the good half the into

Ruplu Bhattacharya

look XXXX, the three the segment XXXX, were quarter margins points decline anywhere like has third a basis looked when margins, to Right. we XXX at points. basis I CPS When in the in but significant quite XXXX, at margins seen second up sequentially looking past when quarter, from from the at CPS years XXX

you think quarter? in this can I are XQ different the drives margins CPS and in guiding margins so up, what higher situation gross be third this

Bob Eulau

Yes.

may Dave comments to a make couple add me more. Let and want

revenue of both segments. gross to And forward both segments, So, we're able as my all, show the we giving third were we move margin continue really quarter, where in clearly show first not it's by had of operating into with the that quarter segments. expectation I'm we to improvement but the pleased past in And down improvement. we guidance

know I quarter years CPS, and of exactly don't we're very but hard in CPS of So IMS. the situation prior working what both improve in to happened the third

Dave Anderson

Yes.

guidance specific Bob's the up segments, we've to pass, you we firm all I for go point the into have as that reference for the next confident going the the both don't guidance will the don't quarter set CPS but right. IMS think give we that I specific definitely forward. have and but the We breakdown, that by QX we're and

better position giving So anyway than think in specifics without the I past/ maybe we're a in

Ruplu Bhattacharya

can revenues actually of X% on full should guidance said can Bob I versus second look for revenues half thanks the better you've at being Okay, first is how we talked grow you revenues the I about second the And year year? half. think last in half that give than I that. Any first half question the you think about for my the XXX. think If year-over-year. last grew

guidance the on low we expecting single So think any half. second you're mean what in should digits? like I

Bob Eulau

want to much Yes. can I for giving beyond careful indicated be grow third the we just are quarter. confident really pretty the But quarter, last as I I we too guidance indicated about again year.

As I rate material. our team And that in working what mentioned, is demand determine our the growth will really securing hard is. the And the there. is on end

Ruplu Bhattacharya

Okay and in if one can I just one. squeeze last

was little inventory balance components? Your the that Are up up? some you sheet and components of buy bit. strength Is why inventory is to stock using a your

Bob Eulau

from don't really inventory a than We based on commitment No. customers. buy other our

ensure the need we the So more a there having lot on products. a it's of and to really some of function component material build to here of the

Operator

comes next line Suva Jim from from of Citi. the Your question

open. line is Your

Tim Young

did Hi. behalf This Suva. my is all, Tim on I questions. Young calling for taking congrats Jim perform quarter. first - quarters. on of the provide driver ramping my question embedded is, your quarter? is the had how of issue Hey, Can performance? you computing Thanks I question the you this color automotive it of my the auto first on guess some in prior key believe

behind you? largely So is that issue

Bob Eulau

Well, a definitely of was is piece automotive segment. becoming bigger that

And the show see to a quarter expect so explain as and and we very of the automotive few really changes next I overtime. my automotive lot it progress said continue second tends good actually. I remarks, to over to quarter-to-quarter did in in We the in years growth

Tim Young

will your or so that improvement saying - a you bit and you still ramping have resolved you have And little are is more issue

Bob Eulau

us that I progress in progress say the made third even more expect quarter. would to I make we and good

Tim Young

September quarter? normally And quarter-over-quarter quarter Got compared expect you, on basis, on we should increase then seasonally between seasonality thanks.

Bob Eulau

June? versus September - I'm

Tim Young

Yes, on seasonality.

Bob Eulau

on but again, in best to the September I at past. in Yes. too I probably what to mean, absence done the give thing guidance much is guidance of look don't we've want

Tim Young

that [indiscernible]. are certain Last component shortage. you or in that okay. miss shortage have material you Got is memory mentioned or the is believe in you, I that specific you component shortage? They question all our

Bob Eulau

be best component issues having done think I and really you that's the broad probably lot by resolved and the had Dave I still tough and biggest it But as when extending some in good we're now. But we identifying now and teams challenges. of based it's fairly me these through job of we would year. the can right said, outlined asked Well, at environment. we're think this guys issue months hoped ago the where six issues see a areas where really key doing I We a a see the the after now least I of early

Operator

comes Craig-Hallum And from your Christian next from Capital. line of Schwab the question

Your open. line is

Christian Schwab

issues and programs back where fiscal Hey, we components. us to the XXXX, that is thanks fiscal logical When into demand kind your plus memory of we quarter. kind ramping kind with be and rather to of to year not loosening back call, drive of year minus? revenue get look for get X% this that exit of than a say regarding are a XXXX of gross a capacitor of we then mix great as taking we is my go new were problem fiscal XXXX, If some to at more for comments it able margins or into the

Bob Eulau

the business. that point Yes. I new a mean new won number at a in on we've lot said we've plenty programs. mix of depends I whereas - We're got working time, but of on

a nice setting from which FYXXXX. think we go can into we're I platform

pretty feeling with happen business you of terms the good the what's long the to know we're term term going, in going is challenges. So other how never various short all in but over

Christian Schwab

infrastructure those new are in marker talk optical programs rather of new that going How and wins? better forward. with modest you program gains those size When talk become programs things new kind share might that about wireless new you a that driven multiyear getting of new Understood. they other decay? in thinking kind are programs those the When are about really should by or products to where been expected we have about programs,

Bob Eulau

complex a of kind It's discussion. Yes.

can't area I think before share of begins and there. on terms And everybody as market but So challenging from it's a XG. our at to optical mean overtime definitely share there. mentioned wireless, in us in I And fantastic at gain benefit this competitors. market our benefit. I are continue we for On the as we'll really think And of in have that some say share that and whether optical happen the will to I participate I maintain I we'll transition at hopefully that. side, all I to really point least And think time we stage think for footprint been we'll waiting think that a I gain for

Christian Schwab

the your of based Obviously so a you demand confidence optical of infrastructure year. And the wireless course is hand upon said throughout in not better in and problem. demands getting kind like earlier

Bob Eulau

mean I optical networking would Yes. I stronger part say the of is communications. and are weaker communications. again of Wireless part

Christian Schwab

can right. the Thanks remind clarity. for authorization All stock that you And us how buyback? much on is left

Bob Eulau

We $XXX have - Board authorized at this million. point is

Christian Schwab

again. Thank other questions. congrats Perfect, you. No

Bob Eulau

any Thanks, Christian. I other if don't know questions. there

Operator

no are I'll There at this over questions closing time. back for remarks. further to it presenters turn the

Bob Eulau

those New appreciate Day thanks be your to you more We in detailed York again. your I you come able of our give you Well, Okay. and update. Analysts And attention. even encouraged time and to are we'll that really able

thanks So and Thank you. have day. a good

Operator

This concludes today's conference call.

now may disconnect. You

Sanmina (SANM) 23 Apr 182018 Q2 Earnings call transcript