SANM - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Sanmina Corporation's First Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker for today Ms. President Communications. Vice Senior Melching, of Investor Paige Thank you ma'am. go ahead. Please

Paige Melching

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

and Officer. Joining today's me Executive call on is Chief Jure Sola, Chairman

Jure Sola

afternoon. Good

Paige Melching

Executive Adzema, Kurt Vice Chief Officer. And President Financial and

Kurt Adzema

afternoon. Good

Paige Melching

call me jump being into for remind the recorded everyone will webcasted is let and our today's we and Before website. on the that results available quarter, be

You in Safe Please release can on presentation follow turn along slides website. press with the Harbor our statement. our prepared our of or the remarks to X Slide provided

future update this the whether alter forward-looking presentation, Company a law. Exchange Commission. to no or of statements as the website, or section future under unless to performance events any reports the in just in During could future annual information, expressly as materially filed financial earnings We regarding otherwise, result the in Company. projections. or forth results differ this such Company's release, and those factors of call call, disclaims their such statements other from the our The conference may obligation conference quarterly events statements of is we and made and the any set the you otherwise make of caution a number required projections that Relations projections actual result with are of of Securities statements obligation Company's The or earnings forward-looking by new these Investor or

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

Jure Sola

being you for here Thanks, and gentlemen, us afternoon, and welcome and Good thank all Paige. with today. ladies

good off XXXX. COVID-XX component to the result for we delivered year year shortages, the fiscal We for a XXXX. and strong first are quarter fiscal Despite the start challenges around a

proud like through for of Our team challenging us supporting our it with industry I'm you is while. customers. needs COVID our it for I looks will tell our and employees in operating environments a a and of managing that can be leadership and

Then you Sanmina's And results CFO, that will now turn open we about details be future comments Kurt this over will for Kurt. review our our Kurt? call is I additional For and with will results financial agenda and question-and-answers. up have today to of the follow with and Kurt, goals. I'll I

Kurt Adzema

QX revenue had midpoint had the XX off macroeconomic first or QX lower were $X.X was above expenses XX a paid billion. exceeded X%, X%. relative for other environment. X% weeks. quarter X.X%, to posted QX. greater. the the FY margin our non-GAAP COVID XXXX second margin $X.X lower in market. expense million, non-GAAP of quarter fact to as Slide related the X. QX of $X.X result of after and appreciation sequentially while $X.XX turn non-GAAP grew last we due of generation, consecutive million outlook was in to operating its with QX Revenue gross uncertainty financial This consecutive billion associated including Please interest compensation the of $X.X primarily balance quarter, company performance, of QX strong the the challenges Jure. to cash QX million the that deferred to the gain $X.X despite as In to the the assets QX the stock adjusting $X.X Thanks, in revolver month of and QX was the billion compared third and million weeks

compensation gains on reminder, to deferred impact share. a no earnings assets or losses net related have per As

Finally, of management's per that focuses share. on of non-GAAP non-GAAP to $X per fully our share exceeded QX the primarily better of $X.XX diluted quarter as EPS This mix. second $X.XX exceeded consecutive earnings was was This $X.XX. the result outlook and driving

turn please results. shows X. to Slide our financial quarterly slide trends Now the of This

of XX You COVID. QX can drive fact sequentially in see FY been QX, that and QX the third consecutive the for for despite Revenue compared company to weeks after better of XXXX grew and XX XXXX. has that the challenges adjusting FY efficiencies QX, the quarter mix of benefit XXXX the weeks the able QX FY operating associated to had with

quarters. earlier, exceeded two As consecutive greater non-GAAP per two diluted gross non-GAAP or again, I the earnings for X% for fully has and X% quarters the last three has $X the And exceeded quarters. margin last margin share has non-GAAP been last mentioned operating consecutive consecutive for

margin QX efficiencies revenue comparison the in QX million. $X.XX despite of been the to of of and XXXX X% increased drive XXXX, FY earnings from COVID. share further This the Finally, and challenges company able operating $X.XX non-GAAP impact the mix year-over-year $X.XX of and per of despite better has lower demonstrates FY X% operating

weeks. gross the for IMS fact please that QX Non-GAAP for revenue XX adjusting Services the third X. was and $XXX was that margin gross revenue quarter gross X.X% were IMS million. higher. Now quarter to CPS QX X% consecutive the turn CPS while margin Slide from Products consecutive XX% weeks Components, was after $X.X XX.X%. grew or had gross billion for to margin was X.X%. improved This Non-GAAP and XX or XXXX had was third was for This IMS margins sequentially higher.

Now please X. turn to Slide

$XXX economic remains company Our operate well any is and balance sheet strong cash in equivalents Cash the increased million. positioned and to environment. to

$XX continue flow. net million cash QX We were low of to operations the the billion free revolver, debt-to-cash have availability ratio and liquidity. generated a compared $XX of Between million. expenditures cash of cash approximately of $XX to X.X. from we capital we of and In million million QX, depreciation under $X.X maintain $XX

$XX.XX. shares During approximately Please we an QX, XXX,XXX turn repurchased $X.X to now. average XX Slide price million of at for

of see improve efforts you reflects efficiency Here the was invested operational cycle down to XX.X. was can company. turns to on days approximately million $XX capital our and inventory return Non-GAAP were further inventory Cash This improvement X.X. the XX.X%. improved pre-tax

XX turn discuss the and please to we'll Now outlook. Slide

of We than potential segments. some reflects be there's $X.XX in and revenue demand be relatively will chain that the in the revenue market QX of expect to related uncertainty to QX typically QX all outlook stable range $X.XX supply expected constraints. lower customer billion. to is to our is Overall due This seasonality billion

the We of X.X% will to X.X%. range in expect non-GAAP gross margin be

annual of margin with million non-GAAP salary QX and X.X% to the in margin range and adjustments. the X.X%. resetting no for holiday shutdown, operating to reflective We range of and be associated gross to expenses that the in higher $XX the of margin non-GAAP operating million Please of portion in taxes the to annual expect note outlook $XX costs operating is payroll QX compared employer any of

that to expenses other approximately We $X expect non-GAAP million. be

is XX%. be rate tax non-GAAP to Our around expected

in share consider non-GAAP quarter million all earnings for approximately be shares. guidance, the to share count to fully this outlook $X.XX. you diluted for the range XX.X per $X.XX non-GAAP expect of We our is diluted When

are I'll positioned capital macroeconomic $XX of well expect from be million through And impact we like economic million. very ultimate have benefit to Jure. expenditures now turn navigated with it We $XX I around the and well to and and the that, amortization COVID feel depreciation back to to And believe recovery. today. we environment be I the around

Jure Sola

me the environment the and second quarter and you for rest first and for Ladies Kurt. let fiscal quarter year business tell of XXXX. you, Thank more the about outlook gentlemen,

heard Just consistent delivered to add Kurt, Sanmina the the you strong first from delivered we few first financial results for more results. as quarter, highlights important for most and quarter, predictable

course, management free driving Our key our testament success. the mix, efficiencies quarter and, is Primary our drives on things two, performance for and safety was of a the four focus number our customer satisfaction; cash flow. a of one, employees; strategy Number in better number delivering working. that three, creating that is

in off leadership a that by our in critical the Slide markets technologies, serve. XX. we services and first During XXXX. mission to we start expanded the year quarter, in summary, a customers delivering to Again are Please fiscal turn we for strategic key good products,

highlights Let me markets. give first by quarter the for revenue of end you

quarter our normal overall the for XX four As And a weeks, compare had you demand if our can fourth weeks. to a is quarter, first in quarter. had we stable you see we XX where it quarter this of

component In from were industrial, XX our point it but shortages, XX%. infrastructure quarter. of we cloud last was we're medical, Pipeline strong. the revenue; turn XX% had automotive that networks be up of quarter, defense, customers the Slide Please continue over of new So some to Communications view, our of to and revenue. actually XX. delivered manageable. slightly Top opportunities XX.X%

is heavy talk has by regulated about revenue the leader high Let's for mission-critical, as segments the markets. second in customers. market by markets outlook these in markets, quarter. right Sanmina Sanmina our complexity, the recognized now well-established

of the automotive from forecasting stable be infrastructure revenue networks and defense demand. and quarter XX% markets. markets in seeing approximately XX% today relatively are we communication For We're will good and industrial, medical, cloud second

down in So details. more me it break let

expect we industrial, a some seasonality. project For typical seeing for softer demand

do to For stable continue medical, expect well, demand. overall to we

and in to we we demand. expanding, defense, demand I very bookings see starting improvements are Automotive, nice growing. For are say strong winning long-term should have projects,

stable a typical systems, routing, see demand. fair networks, networking, overall, some communication which demand. includes For but IP we it's seasonality, advanced We and optical see

mobile term short-term XG seen a we've For long improvements network, and seeing growth. we're good

and computing, improvements For impact. cloud computing some some we're starting and to us positive a end storage see for and that's seasonality high

semiconductor with Please chain mainly around XX. For second some Slide and are quarter, supply to there turn components. uncertainties still constraints COVID

me for XXXX. a Let about fiscal year comments the few make environment the rest business of of more

total in profitable business to our our unlocking right and competitive focus our We are delivering value focused customer around customer; leverage advantage to by each expanding in to more operating is and Delivering the projects market. maximizing groups. needs. value-add strategy businesses Sanmina of key on build

second delivered margin X%. quarter the consecutive As we for operating around Kurt mentioned,

continue most the to of We drive is to can to this of pipeline for a XXXX. still is us and I there for management results can Based margin growth customer deliver will believe We is has important comfortable continue the And to is improvement. strong customers' to XXXX. make goal of that long-term visibility future. X% Today, operating the X% on to base for to we for mix. and in say build feels about progress calendar efficiencies Sanmina on solid room target The rest present And positive more fiscal and that better future. year goal our better forecast opportunities. feel a a year deliver

and more give few management you a comments me priorities. Let

$XX build customers. growth We Managers components leverage to and respectable success. shareholders model, leading capabilities key ROIC operating a flow; to for outlook; the future. end-to-end longer solution the discipline, cash customer business and the with operating deliver cash will the EPS of key million. to do financial and non-GAAP provide of about first is strategic the to a and Non-GAAP we In where technology X% flow goal we quarter. free it? will Revenue summary, look, markets we're diluted delivered of and products to exceeding non-GAAP and and of measured outlook, to Slide unlock volume how of our total partnership. Still That's continue excited results key is $X.XX; Sanmina's volume for with everything our driving industry strong our strong pre-tax margin The term. continue We're of XX. and Please Sanmina's midpoint turn growth billion lot maximize margin to in exceeding continue sustainable of $X.XX XX.X%. improve give

to we see billion to Non-GAAP $X.XX quarter outlook second $X.XX. EPS a of billion. of For $X.XX $X.XX diluted revenue outlook

We are demand. seeing relatively stable

our continue the to quarterly operational supply monitor outlook. Also will mix. into drive environment. as we already factor quarter during Kurt this We continue efficiencies components in, And we'll mentioned, and this to

at again time for and Q&A. like would operator we're thank this ladies gentlemen, you I to So you And ready Thanks all. again.

Operator

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

Ruplu Bhattacharya

had for segment, then it I demand a a networks or stable if when little taking less may. infrastructure communications my Kurt for I bit. at first couple the Jure couple look questions. for More Thanks quarter. was I have for and a cloud down expected you Jure, and the the

So you there last can parse saw happened? networking? talk us push what quarter a you were some maybe through about you had versus Like in cloud. bit And little help what said in optical outs just

little So trying quarter? come weaker did just in to was was those strong? the bit in? a So what understand What

Jure Sola

a we last of Yes. couldn't – stable we auto slightly quarter, was and in overall support. was few us, good, but weeks. your We some only outs, optical fourth remember But on last thanks Ruplu, again, for again Number was push weeks, based all But I for we last you would if had get. some to yes, down had had compare that year, one, XX networking components in quarter. this it quarter quarter the say where, XX it good.

So When comes six way. computing, that months. it last new some kind of mainly improvements to won based at we in yes, the see some on to cloud starting the we're of that it programs you look have to

Ruplu Bhattacharya

XG follow-up or out? thoughts have; and or in Jure, with are that to you expected the roll your Got a on they the as had coming you it. in then XG are that Just to mobile they faster And coming slower? just respect projects

Jure Sola

Yes.

all I based would based say was our of they in come feeling on our on and customer First XG, inputs. what

earlier, and we're see said I in think we I improvements As starting to longer that, expect term.

on the working we've some that forecast other our demand we look go up. customers you that to we're from a expect on, to and that the new at seen If of projects

Ruplu Bhattacharya

in guide you, to margin down think operating week operating And in I guided clarity and the some And XQ million, I extra to the then but you even X.X% have still had XQ be Kurt, the get for it. margin can ask Got fourth you midpoint. if more around X% your were performance. operating both revenues just performance, quarter, at I $XXX margin despite XQ? an mean,

at million your then for can what of lower, we think if you at you above look when mid-point factors maintain $XX the correctly $X.X another I it's some like margin? XQ, that X.X%. So, you're but to talk about helped were if this operating at And I X% guidance mean, the billion guiding, I heard

operating So us what lower can as is margin driving for operating basis queue, help XQ? if for XQ? that one performance in just as XX the So margin well the you guide points, frame

Kurt Adzema

Ruplu. Sure,

which the significantly had in QX, was same. weeks, the bit quarter, holiday a this able which I some fact for especially talk QX, benefit shutdown, gross relatively quarter mean XX the control which to we when But the you typically we QX, we'll or first, did get compare have. was it little So QX, about about the margin we again were OpEx to

was operating given it So costs in to that lower operating think, the about at really I margin. us a controlling come still allowed X% revenues,

lot it of around discipline So that. was a

we QX, As of around uncertainty, around Jure as but there's look component think mentioned, also lot a all shortages. not I to only first COVID, of

margin. will expenses our be relative again revenue relates midpoint. will, look to are up. quarter, if as is it quarter, And where going is range, And impact were bit margin down to gross seasonal it slightly got be a at a slightly little at to last laid we be we've at so down the So that and to that. conservative It you down gross operating

the I it finally of salary if portion three mentioned really no of in It's mentioned any kicked down it's to adjustments at year, script the you down, there. revenue, beginning tend employer on I shut the holiday there. things. payroll calendar of some see the in money then and And resetting tax. annual we save the there's that which typically the It's annual, as As the

to are to uncertainty conservatively, obviously, we'll component trying improve upper it chain. So COVID our the I are prudent think think the to it's those we're towards and continue those and – the takes, around the push about on and uncertainty supply the things end. performance gives always around But the given

Ruplu Bhattacharya

down last trends? if your you was I then how inventory And give can shortages; on it. component – about you quarter-on-quarter, Got working I just talked but for a talked question, you days? my shortages. capital inventory some about little bit; your think thoughts you do you've mean, think component talk us

year And appreciated? expect the So do be think thoughts would free on cash you any Thanks. for that build inventory? you flow to

Jure Sola

Sure.

able So to When two goes QX went I this reasons, we turns. focused that X.X. I down, think But versus I'd inventory goes XX satisfied. very weeks. in for certainly very improve say XX because and Turns mainly were the weeks we're with down turns. of to obviously. QX revenue down, down think revenue also We're again relative quarter never we're inventory the was although QX happy and on were the

you get particular inventory parts we're the and component obviously one to and and is of potential the is improve the turns think have of As bringing always in same not the missing in about product time XX% key there when at a challenging in risk inventory I being on. shortages you QX, able think to trying it

certainly I'd our I So, inventory relatively to say, flat. think keep goal is

flow future. always I flow, in last continue be. I cash and certainly a little normally to generating dynamic in that to many we do harder that certainly free dynamic, we've think maybe cash think generating quarters would the but that it now it improve, the to that consistent bit Given But try over than shown expect makes free of we're terms

sheet our continue balance to get think, only I stronger. will So,

Jure Sola

a moving comes but of add amount already can yes, think, there around when that, still there's that, challenges. if Ruplu a supply parts I I chain. We're fair to just And to planning it are

We we I this feel good better about days expect to ago. mean, today XX than quarter. have a quarter

as deliver continue a and good Kurt tune-up we there's lot this results. So, to be said, do to as to a done we expect of

Ruplu Bhattacharya

Okay. Thank details. Jure. Appreciate for you. Thanks all Thank the it.

Operator

Your next from Suva with line Citigroup of the comes Jim question Investment.

Jure Sola

Jim. Hello,

Jim Suva

you afternoon around gave A the pretty and becoming your well known. are you component which team. commentary question to shortages, Good some

of sales outlook? of by constrained the quarter in First any your this were all, it or

Jure Sola

shortages out. that there orders manageable. were as some a Well, I pushed was it that said to me There that few were were

quarter, pushed whole like out just quarter other more. to have in any but you seen industry, except think Definitely, look this – going lot certain the at already just I be our – part have quarter, going We from a outlook. automotive. demand are if we going that Jim. projects that get we're this we've of I – need, we're of we mean But what it's hoping to to you it's

demand XG creating the of really ASICs lot up, coming and in and have like some shortage, You things so that. a from on. that's especially And custom phones a

Jim Suva

ago? last you and better demand better component question you XX, from of ago. where the is shortages, today, or on better getting days it is mentioned And visibility stable sit shortages component XX the And days is or worse then is kind – getting XX, XX, getting my XX XX, from

Jure Sola

I would say getting it's not better.

we XX XX out. we're the last these We're are in out. in see to of days right say some out XX, components more ago, I starting to have go to would of some things months pushed days, thought we they were maybe I going six now that get think that.

Jim Suva

Got clarifications. appreciated. It's it. for so greatly you the much Thank

Jure Sola

Thanks, Jim.

Kurt Adzema

Thanks, Jim.

Jure Sola

one have we call. time for Operator, more

Operator

sir. you, Thank

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

Jure Sola

Christian. Hello,

Christian Schwab

guys. Hi,

quarter. a had You good

guess to be certainly is are lead rate your out ASICs is products I it networking you I at to the you – end a going stressed those – – power. it can even chain and know who there of the furthest. your low So out different of are for the talk and as kind that supply seems shortages, I times is I challenging? where the could but mean, types you mean MCUs, the business, top are your this three bunch look of component most – custom

Jure Sola

very think some more that. automotive, of challenging, MCUs, things I and will us, mentioned, ASICs, it's I some by the great used it's networking key We're has costumer I close ASIC, would and think supply XG, say, chain Sanmina MPUs team. automotive, custom a our already then for product. for with we're industry, driven suppliers. XG been that to like be again But probably and those but components you this. But working

in customers top the the have we customers, world. Our

hope just it be I So told that with we numbers together you. able lose the deliver be to did and will we we're that able Christian, working through navigate to this and you? to

Operator

I do believe he disconnected.

Jure Sola

us Well hit right. All up. a don't please us, Okay. you and we can call catch give maybe if Christian,

Jure Sola

But to and quarter. expect your in to to XX the for deliver We're you ladies and next It's thing thank one to now key having numbers from gentlemen, talking fun days we looking say a business. I and business. our and fun respectable still want you time, hard some forward work

So very with that, thank you much.

Operator

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

may You disconnect. now

Sanmina (SANM) 3 Feb 212021 Q1 Earnings call transcript