SANM - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Sanmina Corporation's First Quarter Fiscal Year 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker for today, Ms. Paige Melching. ma'am. you, Thank ahead. Please go

Paige Melching

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

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

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

future variable, events that this and you other charges various regarding differ Commission. and plan sales, key of During of just factors result on in quarter call, we reliance other forward-looking of actual performance may make significant a to we the small annual that company's arising as of portion cause the results the forth the and are with caution actually the markets factors target, the or projections or including can the future conference may statements projections. We risks Exchange our of company's adverse financial The income a from to uncertainties Securities significantly operations, sales reports of operations substantial quarterly company-wide in our second rightsizing future for to international statements the filed amount company. net and such a be recorded customers set number related our restructuring changes

financial you have a fiscal as in slides statements information. non-GAAP our year we on XX, today provided operations with December as GAAP XXXX, note for You'll press well and quarter ended release of certain that basis the and issued

and posted non-GAAP our press the other information restructuring infrequent unusual costs, to extent and acquisition information release and material. stock-based amortization website. is or In Reconciliation and also provided non-GAAP our expense GAAP expense, in compensation financial between noncash integration certain costs, items excludes general, the on slides the

gross financial share, our be we call income make results. as operating this per will relates at income, non-GAAP to we call, measures operating otherwise income when net our this gross stated taxes, referring comments to are directed in Accordingly, refer statement margin, non-GAAP conference the profit, to Any information. earnings margin, and unless on it we

like Officer. Hartmut the over to would call now Executive Chief Liebel, turn to I

Hartmut Liebel

Paige, ladies and with being us and Thanks afternoon good you and for Welcome thank gentlemen. today. here

In few addition to company, and new -run Kurt Adzema the I management current that smoothly. on I roles team. to the call. can and quickly an Kurt a working Paige, at up assumed months our our of with with beginning is with organization is exceptional transition CFO, the We're is the tell first today's you getting speed After well QX. me Sanmina

I that be and think to Kurt of echo excited of team. us the part both would are

the take through financial we and that, Kurt With operational the provide I to on After our call will to priorities. us that, team's turn and end will markets serve Kurt? management color results. some I the

Kurt Adzema

more lower on as lean the to to billion excess due with flat pleased our call. gross flexible the of $X.XXX billion Thanks, turn billion. revenues discussed started in quarter we our I high prior X.X% create Hartmut. end X. $X.XX in inventory was see result levels, relatively a the to first had to of sequentially, of as revenue Revenue sector down range, our processes. the of restructuring previously outlook $X.XXX prior and am announced to we exceeded associated and lower the primarily channel non-GAAP the actions revenue margin X.X%, and expected Please manufacturing benefits had report despite was communications prior QX Slide to as the of program earnings quarter,

relative $X.X to gain down quarter. $X were other approximately earnings corresponding corporate This restructuring completed be related impact expenses. million partially level. by approximately to the fiscal end approximately assets, million had share equally deferred quarter expenses and to per the offset manufacturing gains non-GAAP the we $X.X prior largely relative QX compensation second net to is which expected to deferred expenses a driven the quarter. of no declined This prior in of as are QX compensation on million. the program at on is was The non-GAAP increases drive was non-GAAP as schedule with continue by and operating efficiencies operating

amounts under borrowings lower accounts In addition, revolver our we factoring. receivable of benefited from lower and

$X.XX. outlook were QX earnings exceeded were GAAP This Finally, of of $X.XX earnings the to QX per non-GAAP share share end of prior $X.XX. per $X.XX. range our high the

$XX depreciation cash the purposes, were For in quarter. expenditures capital $XX flow million, and approximately first amortization approximately and million was

X. Slide to turn Please

can Here, income and the related first associated quarter details additional comparisons. fiscal to you see statement

Now discuss to turn Slide I will two please our X. now segments.

of due sector segment As as you see approximately call. as graph in the we as primarily non-GAAP the earnings down of the margin was modest in on was sequentially prior result revenue the lower can on discussed to the in communications this left, our revenues was result lower had from from level. the the expected gross prior IMS channel excess decline quarter. This inventory million The $XX revenue

quarter. were prior operating slightly due to the over On million is gross second the Products, the to improved our Revenues by and segment Components, right Non-GAAP margins quarter down efficiencies. prior Services. $X

Now please X. to Slide turn

down Cash end and sheet million, and improved the balance turns the X.Xx. cash to was Inventory strong. inventory of equivalents remains were approximately $XXX approximately at $XX quarter. Our million

was an on flow approximate from levels standpoint, million $XXX.X a focused pretax very had we accounts efficiency invested cycle $XX.X improve during liability generate Cash payable We in capital are XX.X. decrease Non-GAAP reducing was million. on From quarter. cash operations to were and flow. cash capital inventory XX.X%, the and return days

a X.Xx. maintain to continue We low of leverage

a we of During shares the quarter, approximately $X total approximately repurchased for XXX,XXX million.

strong free will repurchasing flow, generate to continue opportunistic in shares. we we be As cash

I turn Slide to would now ask you to X.

fiscal quarter associated and the Here, to first you see balance additional related sheet can comparisons. details

turn X. please to Now Slide

be $X.X billion of by range the revenue billion. in to is for This the driven Our $X.X is revenue in sequential outlook decline second fiscal that expected seasonality. will quarter primarily

QX, longer-term more We are Hartmut the X.X%. still discuss subsequent basis, positive a expect X.X% and will beyond On to that we range in be about this of remarks. outlook will non-GAAP my to revenue margin gross the

completed announced revenue. and will of last our the We to flat the allow the of expect the it program expected the restructuring restructuring keep we despite second us to previously to in fiscal quarter program benefits on end margin is revenue relatively --decline compared expect quarter. be by schedule The

should operating be approximately expenses X.X% the non-GAAP range $XX with in million operating margin Non-GAAP to of million $XX to X.X%.

will of $X.X million. expenses range million $X.X We expect that the in non-GAAP to other be

this we to around tax fully the range our believe around $X.XX. non-GAAP XX.X we be and of will When expect with non-GAAP consider XX%, guidance, be count should up Our to we you shares. outlook non-GAAP rate diluted all end that earnings $X.XX share per in million share

of estimated an per diluted for earnings per $X.XX to compensation stock-based $X.XX. expected Adjusting $X.XX GAAP is share between share, and be

we For expenditures cash to $XX million. around and flow your be depreciation amortization million capital to be modeling, while expect $XX around

in We expect the to flow generate free second fiscal quarter. cash

and well for to as turn our Sanmina's I further segments market call on the longer-term as the comments Hartmut outlook will priorities. now

Hartmut Liebel

Kurt. Thanks

for Please more few outlook comments So add Slide XX. longer-term to me turn environment a about current that. let and business the

revenues in really Sanmina and first and largest know, our is complex, instance segment market The system offset team, aerospace We well positioned markets. and the engineering was see manufacturing, I Working defense IT by much automotive. our that you certifications end-to-end on high softness defense really us. industrial, expertise of In pretty automotive segment total XX% a these growth and markets, markets. remained regulatory design, includes and As in with had differentiate complexity, and in industrial, approximately in these was medical one focused flat regulated Sanmina good heavily Sanmina's sequentially. quarter. medical, regulated in

These like as companies to in partner markets Sanmina. continue with company to expand these look segments more a

opportunities, we important and very day. Sanmina we channel. We a improving for with This market XXXX. primarily I'm progress of expect every grow as with enjoy was second largest X.X% on XX% new market where pleased of we down work fiscal projects is excess result strong, about segments the year first also of the good the in is which pipeline our inventory customer long-standing in quarter. This customers as through relationships. segment Network new revenue a at sequentially obviously Communications a to

As of channel. primarily us driven hear And I fiscal burning call, half we we first seeing the are demand our be excess new including for What telling softer demand our inventory XG. should the earnings said, customers, of by on programs ramp off the prior year, in improving that longer-term they're this segment. from as in our

fiscal of grew be all some down short quarter the with products expect about years cloud our segments quarter, end is us. from of Sanmina focused on toward market us. X% that seasonality. excited eliminated modestly the so about some In we summarize X.X% Solutions trend opportunities Sanmina have recall which out were to cloud is in as good was also up you flushed strictly to technology be revenue. sequentially the segment, and ahead this our that and Cloud business, we the total I such to to in right is computing box what ahead programs. as customers And have If well-positioned and see of inventory beneficial I'm our lower term, markets believe are today we due of in setup to I we needs and prior some second the products. solution is high-end

I and strong on will the continued Based our good I year us. believe Longer for on a opportunities. customer from economy, Sanmina I focused is right assuming term, believe hear market XXXX and a customers be global right what

me priorities now my management for team. let that With to turn

For Slide that refer XX. please to

on on of high where to revenue future and foremost are partner we in see customers. right believe end growth opportunities we and the a focus plenty First I profitable customers focused current markets. with through is complexity, end mission-critical key markets

from manufacturing benefit offering. lean services they So can our

Our accelerate on capital. Second our and onboarding the time new leading really for programs? market satisfaction it boosting value us to customer helps a exceptional this. big revenue is plays customers in It part processes return invested and

program to our flexible earnings is company call, the that of that to further to operational toward restructuring attractive started regardless the environment. lean and the this have to to And Related at we improve processes continued last we quarter. margins and see efficiencies. the course, manufacturing of first intend continue will in the Third program the to corporate see allow announced benefits drive business

generation. on Finally, a keen cash focus

there structure the opportunistic For last and share in improve. generation flexibility minimize Sanmina repurchases. A believe to the inventory. and sheet growth made to invest in additional opportunities reducing customers, optimize with balance cash through progress capital quarter dilution consistent our gives we example, I good share are strong

heading. With that And team let what we I XX. can all Please these call. to about me management we're summarize say that today's priorities. in our refer locked into direction covered are excited we Slide is

For the high and revenue share first both billion earnings the guidance quarter, $X.XX $X.XX end of non-GAAP the of range. we achieved of exceeding per

of terms billion for we due lower to outlook to revenue to seasonality. In $X.X be expected primarily billion, $X.X between QX, ranging modestly

to We $X.XX of EPS in $X.XX. range expect non-GAAP the

generate In and addition, and during term, we new margins we And we the that resume will to In burned to programs. continue quarter. excess inventory the is free growth will long ramp expect cash meaningful the positive channel revenue off. flow believe as improve

few the drive for end high priorities in growth markets. key profitable the and a customers discipline on mission-critical We also to our initiatives matter management that with complexity, focused covered team

XXXX. be And, and to that. our company. a investor supplier customers you team. I'm build thank glad to to of this confidence can would look Thank all the working a and for forward I to great now we Catherine, the part all work support our good couldn't without this with call start you with for Q&A we Sanmina. session. in that global great like of employees the And to partners, open and We of for do

Operator

[Operator Instructions]

first of from the with comes of question Bhattacharya Our America. Ruplu line Bank

RupluBhattacharya

start you bit for you what saw end Thank Maybe taking the you can deeper little questions. my market. in a with, I if to off Hi. communications into delve was wondering

had inventory with -- delays XG of that earnings worth talked I also talked be burnt quarters off. probably you needed call, think and to you some about last that two about

had there you expected is you different versus wireless? you what you've can seen what anything that in versus talk about optical quarter So, this in and networking saw based on

HartmutLiebel

question. Sure. Ruplu, good Yes.

inventory the much overall working working in burn outlined the pretty Now the the remains same the the through market We're it we in -- what channel. as is last call. through off situation

we same. And the outlook overall has continue so I and our would the remained with dialog now that information pretty much we the customers. have say

very and the much this issue, outlined had with it's I just ago. the as timing working And -- we're matter same our a still we customers, is as timing it's right outlook outlined as so think the at few again I so, think And comments, in on what pretty a much a programs point. we we the months really right had

RupluBhattacharya

Do a And year-over-year. Okay. the half? still That's mean second Hartmut, half digits If XG see do you I think on the in year-on-year second you far I the grow quarter you the the the think year and in the expect coming you end markets revenue for of should we you half growth. posted double programs half year-over-year first in first I second for revenue other look said the can with in so or think recovering, decline revenue helpful. quarter, is longer at term and second down what guidance

HartmutLiebel

good question. No, Yes.

ready next that quarter. want the taking and one beyond improving as that the here to the will be execute time have right we sure at the comment We we now, this the really past day, in company week and here. when we And And focusing are on one this we it with demand don't point, to a at really are making like revenue visibility comes. the

So on and at optimistic it working again, a that take obviously we are right week we are one the time. we'll programs

RupluBhattacharya

can and that within which Kurt led maybe points for the specifically delve on question little okay. Products, Services, for can Components, and mean segment, the what Okay, the XX the into one you that further sequential, improved CPS improvement And a I going in improvement basis to bit margins long-term and improvement margins CPS? expectation how What And can margins margins think within you us remind about forward? in target? the What should and is there segment actually the we in is that be for segment?

KurtAdzema

say, reason the why here out would slides. we outlined we first total business as saw I in increase the the in beyond segment I this break the would say don't But all quarter twofold. was Yes, of in we've that general,

and of I that first to the I so think I think efficiency all, as we very improving positives some operations, mix our had well. on related focused there we're think very helpful. of also was

we echo term, would what our In earlier, taking are thing a long of one terms this said goals I at time. is Hartmut quarter which

margins to We we well are sure our further to that and revenue that's back making continue are goal. positioned the as improve comes

saw a on got what was we've we keep positive I note, in So, quarter momentum think in to going. but general, the the first CPS

RupluBhattacharya

Okay.

you be, events and my Okay, seen last you with question would China Coronavirus? chain in result have any the Have disruption a disruptions any that? supply the seen as from of

KurtAdzema

a obviously, or an very almost which of situation, us updates evolving basis. receiving so Yes, that's think I are much on day-to-day it's all hour-to-hour

very focused team much is on entire that. Our

We taken have curtailed and travel has local non-essential operation steps. necessary our

and probably operation remind as to not nor our -- We total much but you will impact to but supply I of have not any watch our on material at necessary very this that continue this maybe is very, some in business, very we our continue other our control, terms we this the China want far, carefully our to also as so very, steps. under of But do anticipate carefully. disruption monitor the take to point industry, have is in business. base players very to significant we

Operator

the comes Citi. Our next of with Suva from line Jim question

TimYang

Suva. the Jim Thanks of behalf question. on calling Yang Tim is this Hi, for taking

solution cloud outperformed Your quarter. last

down basis. quarter-over-quarter then on and positive out think growth your I was guidance came a actually you with sequential

I segment? some in So, just the on the maybe follow-up. can what's color And driving then you have provide strength

HartmutLiebel

a relatively for time, -- -- it's a the us. an At small for us it's segment important it's no, segment Yes, same for sector us.

and percentage we've of few easily here kind programs few there that just the ranges can a change So, the estimated months timing ago. a of

business, continues It's kind it So, for next business an difficult. more the a a makes us. bit estimates to that's be months important couple project-driven very for segment a of the little much revenue which of

we executing are are we exciting some know forward there you look ahead of and us. opportunities how So, happy on positioned to

TimYang

you. Got

quarter, So, you for think business, decline. guiding the and just the strength I next a this and are it's the more, quarter the of segment lumpiness is sequential

HartmutLiebel

So, it's a I way putting right. right, Yes. of it. -- think that's good That's

TimYang

Got you.

is Okay. question My on next margins.

five operating I a you achieved quarters basis. think margin in the expansion have year-over-year past on

think implied quarter, use I March to for the we margin is of the guidance guidance your a points just ago. XX However, lower compared if year midpoint basis a

guess second the that about second about your Thank you. my I I simply think we what half, margin variables how could first So forward? going margins than think half. margins here are stronger that question because the think Should is same for the the is your should half full-year, thing? we in impact Or the the

KurtAdzema

so can is to control. focused margins. on we're Relative year, down. We're last obviously very Yes, controlling focused now on what right revenue we

through working year. should in there. hard margin the get our And and this Hartmut our of range. at other time, we'll operational structure we restructuring the and to leverage a is in creating we then second as that a some very take efficiencies so one come But X-plus revenues at said, flexible should create time. guide the only half program And we're one and back quarter hope as hope operating this we maintain manufacturing still lean half, quarter to first And again, percent

HartmutLiebel

question Catherine, we probably that would Okay, have be more for time one great.

Operator

sir. Yes,

Schwab Your comes last from line with question Craig-Hallum. the of Christian

ChristianSchwab

lion's excess just share couple situation. talked guidance channel worked It segments multi-quarter in wanted first due Is on solid communications in a questions. that down the all of I seasonality. we inventory a like that Congratulations of of sounded situation inventory implied The to in series follow-ups the quick a to through? your to quarter. in the all being about

HartmutLiebel

-- majority is the if inventory question the So that of the, the has

ChristianSchwab

through the QX. the channel of in works excess Yes, the following inventory majority

HartmutLiebel

Yes.

don't we detailed with here of communication really customers, lack --many have own who visibility. them our we no, visibility. that have So, also were Again, ongoing their

a and again great week. these to the explain inventory seasonality the kind that variation needs effect factors wish of And given are here. complete two between yes, has I given -- factors mix So, understanding that off. those are But burned in so a which two of it's deal, I the had main --it's be the a that

ChristianSchwab

number, about Is -- kind Right. inside And or think one inventory communications we that your that as your of just the of correction. business or historically and market? historically end then top two that broad-based customers the is

HartmutLiebel

It's former. definitely broad-based. no. rather It's definitely Yes,

way the Just stated it. you

ChristianSchwab

you question And day-to-day follow-up. I know perfect. the Okay, of can then short an when time it's been target over currently you my last you business, there a a may margin of you just analysts idea besides is with quarter-to-quarter than operating doing drive we're investors to or the think what have a and have but idea back that margin at? and any have business time, Again, operating coming guys higher team, period gross if do only as

HartmutLiebel

you a I'm Yes, will being engage, point hands is At in and of so particular throughout as can business obviously driving I cash the so here more mind; and quality ourselves company, some the a the a of company we think update what the point, it's to seen with some see finding that of a are discover of continuous more like opportunities margins, run. obviously the process are also think what improve of are some at get of XXXX, kind better I regardless opportunities how improve goal we one expansion. I to we environment our in. very we some margin very, don't And this we are the look improve guys make I future. opportunities. as happy in process. But business, this And and the more I've I what Kurt flow, for execute, find this have that continuous of And think -- we'll we we the of kind

End of Q&A

Hartmut Liebel

for again today's call. joining you Thank you. Thank Great.

you on it to I in. And forward your for you again thank look And We up. And think dialing the much. our wraps day. update Thank business support. have an a you so thank earnings providing this you good call. for next on

Operator

gentlemen, participation. for call. concludes and this Ladies you Thank today's conference your

You may now disconnect.

Paige Melching	Vice President, Investor Relations
Hartmut Liebel	Chief Executive Officer
Kurt Adzema	Chief Financial Officer
Ruplu Bhattacharya	Bank of America
Tim Yang	Citigroup Investment Research
Christian Schwab	Craig Hallum

Sanmina (SANM) 27 Jan 202020 Q1 Earnings call transcript