SANM - Earnings call transcript Q2 2021

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Operator

Good day, and thank you for standing by, and welcome to the Sanmina Corporation's Second Quarter Fiscal 2021 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker for today, Ms. Paige Melching, Senior Vice President of Investor Communications. Thank you, ma'am. ahead. go Please

Paige Melching

are Good Sanmina's Catherine. copy and and Relations today's gentlemen, our sanmina.com website Thank the in Quarter afternoon, Fiscal to Investor discussion for slides Second release A on XXXX welcome our press at you, section. and ladies available Earnings of Call.

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

Jure Sola

Good afternoon.

Paige Melching

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

Kurt Adzema

afternoon. Good

Paige Melching

on and call prepared website. available we me today's webcasted let our our that remarks, is begin will and recorded Before everyone remind being be

You Slide can prepared the and our follow statement. along with remarks website. or harbor the our our on Please slides press presentation X provided release, safe turn to of

income During forward-looking projected the is made release, and are obligation could Relations regarding disclaims the any Exchange in We company's expense, under the set amortization the on in items. obligation update these in we conference XXXX, presentation, excludes have and or or unusual as by in and we costs, as GAAP otherwise any Included press expense, when the statements from for as provided conference of on as the the at unless operating gross information compensation other infrequent today, this Investor no relates the company's posted this company. on measures to, result income earnings income, section call of we events conference restructuring the taxes, In operating GAAP ended now factors as or we stated like release Accordingly, our to just filed will refer the non-GAAP required and between or general, non-GAAP Securities materially of actual Any directed or slides unless earnings net website, in financial information. issued turn our annual you I'd are integration financial on our reports performance expressly results projections margin, result law. alter otherwise with non-GAAP slides or such of forward-looking earnings to noncash and future statements a to operations our and margin, you acquisition forth whether statement a well a A new information information, statements costs, to stock-based otherwise, call financial gross information. such also other future share, The Sola. that quarterly and provided release press company the with X, reconciliation Jure per quarter projections. is of differ certain number non-GAAP website. those call, of basis of this caution call over comments a be April information. referring statements The we Commission. statements may our profit, the call, and and it to make to the events future our non-GAAP financial make

Jure Sola

few comments. for today. here a employees first, would importantly, for material say and our XXXX. COVID great team like Thanks, Again, the But ladies customers. shortages. the Good that these managing and meet our I'm team you challenges, Welcome. for Paige. being to needs were team to this Despite of strong gentlemen. delivered to with a quarter and effort, we around was of Sanmina our through challenges very thank results Definitely, year most able fiscal I like second us I'd proud all leadership make afternoon, and

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

Kurt Adzema

Jure. gross $X.XX Please prior financial an results. chain the and to of challenges the of in to midpoint strong gross to primarily $X.X billion of QX job to mix margins. of $X.XX the segment. to through revenue outlook Slide COVID seasonality the constraints lower was leading billion. our to QX our despite met revenues X% the consistent improved did margin Thanks, margin related strong operating In non-GAAP second quarter, CPS the excellent turn managing with supply QX non-GAAP favorable as team a due X. X.X%, due to the as at typical well quarter

primarily favorable slide of non-GAAP shows management's QX a efficiencies. outlook Finally, in of diluted on Slide the the to financial focus result CPS $X.XX $X.XX, as our to This exceeded and trends driving the quarterly Please results. $X.XX mix our earnings fully X. of of turn per share segment

operating for has You greater the margins excellent supply consecutive job did now last X the share consecutive fully can through the and $X our X Non-GAAP And per gross have non-GAAP quarters. challenges team margins see X% for been X% COVID. have the Non-GAAP to earnings the exceeded managing or finally, chain for the X related quarters. last last diluted exceeded quarters.

turn If Slide X. you now, to please

X.X%. and constraints. margin well $XXX our and revenue revenue improved favorable due decline higher IMS Products margin declined $X.XX now to This to favorable Slide of revenue Services primarily the Again, Non-GAAP turn prior improved million X.X%. $XXX gross was mix. X. XX.X%, less the in the lower was a for quarter. Here, billion. impact gross overall, CPS level quarter IMS to gross grew as to mix. Non-GAAP to the Please to from non-GAAP in the the typical for million as and The level to seasonality due supply to Components, margin revenue see revenue you'll was due chain for

balance sheet. Let's talk the about

$XXX sheet remains the $XX at balance by Our increased equivalents Cash and quarter. strong. end the of cash million million to

from balance generated year-to-date. and to flexibility million million, We depreciation million cash $XX million in continue $XXX $XX of quarter availability we long-term us million the generated was cash operations cash objectives. billion our flow a maintain and Overall, We ratio $XX sheet our to for debt-to-cash gives turn quarter of revolver, Net have generated Slide we've $X.X support to now to X. have expenditures Between liquidity. Free date. million. capital were and Please under X.Xx. low the QX our approximately of of $XX to compared $XXX

you'll see Here, continue $XX our balance down was metrics approximately be million. strong. Inventory sheet to

of Our team rate this around reflects XX.X. days Cash an capital focusing job inventory invested COVID. Non-GAAP which our on uncertainty given were continues efficiency pretax business. in on focus the to return be to cycle We high supply do challenging chain excellent believe continues the on XX.X%. was the management, operational

turn little about bit outlook. We'll a XX. Finally, talk the to Slide please

be but QX $X.XXX to the revenue there to billion expect grow uncertainty chain related $X.XXX customer is and the is stronger, We billion. in to be constraints COVID. and range demand to supply expected to of Overall,

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

of of expenses within the range X.X% million, million non-GAAP the to to operating X%. to non-GAAP $XX expect be and We margin $XX operating in to range be

non-GAAP be rate non-GAAP approximately expect expenses to our and be $X to tax million We other XX.X%. about

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

million $XX and be We to be and $XX around amortization expect is around Demand capital expenditures million. be expected depreciation to stronger. to

our Jure. I'm uncertainty to to to the that I'll company turn confident ultimate well back through will with and of call positioned challenge lot supply that the economic well a COVID. currently constraints working in is is from now related the chain closely our team, navigate customers this there benefit recovery. However,

Jure Sola

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

quarter. from As the Sanmina heard results Kurt, for strong you financial delivered second

we quarter we broad-based work off. is that this great continuing as in were: to and execution and hard by Our efficiencies. testament was performance demand growth mix, Components, is market paying had driven Key Services; end we had we a a in business a drive are in drivers favorable have operational Products a stable quarter demand; this

the flow. in management are challenges despite supply excellent I dynamic is supply still management. I well environment. chain say, We cash Sanmina we cash that this wrestling and think a our strong would well some did excellent executed of executing delivered job. with;

second we with our that for to our strategic XX. Slide we quarter, building summary, leadership Please expanded customers key the are markets serve. grew In During in the and turn a we better future.

me more Now markets. about revenue tell let quarter end by second you

$XX stable have quarter. approximately We demand, but shortages revenue million impacted by this to million material $XX

XX% XX.X% was also some Our was Communication top of strong, can our year Slide first mainly 'XX, the networks XX. cloud shortages XX And our for were about automotive the defense X.X. book-to-bill industrial, of Overall, revenue was quarter that driven markets turn infrastructure And and to revenue. fiscal comparing X% down medical, seasonality. customers were Please you the tell I slightly XX%. to and by over and quarter material of revenue.

me give demand the Let improvements are more Overall, to seeing few in continue. comments we third quarter and a market's you on outlook.

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

upside with forecasting For good industrial, overall potential. we're demand

QX, seeing demand of half For slower second a we year. for we're in calendar but the some see medical, pickup

have For are defense, projects. and strong to continue winning long-term demand, we we

segment. can demand to you and tell the starting that continues Automotive, backlog improving. stable grow -- I in is So to see we're

systems, IP we mobile networks, routing, communication segment, includes this seeing For optical networks. XG demand are networking, advanced in stronger going forward. which Overall,

we're computing, and nice storage, high-end cloud see computing to starting For positive improvements.

in are Continue and this is opportunities, a pipeline and you pipeline continuous improving. improve a is Kurt's, tell present and we for key the challenges Based the I goal COVID, the Please healthy three still the rest turn opportunities And calendar in better Slide is improvements, to rest financial on going and customer of year to also the profitable very are market. of year and focused future. of are: about and we chain solid for mix supply that there Sanmina both growth. growth forecast very the XX. improvements drive the on presentation XXXX. talked can of for margin visibility the deliver calendar drive we positive my The to XXXX. around of the feel of metrics we remains positioning to have business; continue drivers as efficiency; we While lot about, to are The number forward

year technology me priorities fiscal we competitive more continuing our industry-leading to tell end-to-end for And advantage The is leading success you to about key our providing that and beyond. industry do We're our by capabilities. customers. Let solutions. delivering for 'XX management differentiate

our strong I believe and customer build that is with recovers. partnering market new we We focused positioned by leaders. expanding market are profitable partnerships, and we the to growth, as partnership Management continue to customer driving on are on well

As pipeline I is mentioned, strong.

the next Short-term, our logistics. to chain in growth We and nice to X X expect on supply see a focus is years.

are experiencing components. shortages across We material electronics all

We have have world will strong Based supply believe we be IT believe right have be that we chain, our a our the to one key results. customers the more global right able suppliers communicate group, deliver this all our able to with instantly. to capabilities structure, chain supply we on important, and right and we the have around team through I management But manage systems.

metrics. So back financial to

X%, and financial value operating I driving shareholders' diluted to $X.X strong that we non-GAAP We of the of for by internally of profitability. to Slide delivered our XX.X%. And sustainable And deliver you all outlook; group, non-GAAP ROIC maximizing business this, summary, operating total of respectable value. strong second already, outlook; turn margin at by non-GAAP improvements. for the are as EPS and believe back exceeded exceeding heard room results call there's cash to Revenue, still flow lot industry-leading results In I of billion of I pretax capabilities of our midpoint the $X.XX financial basics. metrics what a quarter: believe jobs each XX. $XX outlook; million; margin free With Sanmina's consistent of leverage improving would unlock Please

daily The strong quarter and So challenges. continue is for COVID the work for to I as the manage third to quarter, chain mentioned, demand. key we supply have third around

on lot financial still metrics, model. in leverage of a we remain management, because business As a believe there's focused we Sanmina's

So per for to planning outlook, revenue billion Kurt to outlook to deliver $X.XX. earnings $X.XX of $X.XXX as $X.XX billion. non-GAAP diluted we're share mentioned, And

overall, about summary, in feel So we our future. good

ready you your Thank now now lines for all to and ladies again. Operator, question like time thank I the and we're gentlemen, and So support. for to open answers. you, would

Operator

Instructions]. [Operator

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

Ruplu Bhattacharya

think versus remarks, you fiscal revenues the outlook, terms the has Do year think be just year-on-year 'XX, the was you thoughts And the that this visibility second can half year can you first at the what have mean, possible? stronger revenue second when said your you then year? of the revenue can Jure, seeing? think during look half? are full I thoughts low us improved. just you -- we any do second wondering fiscal on is half half prepared in single-digit puts half. I first you the if on the So and of takes, year than give and do you you we grow full growth can

Jure Sola

Well, Ruplu, as about biggest the challenge definitely, is Right visibility first of around improving. the mentioned, our demand. all, I not materials, is it's now,

small we I we definitely, all you get if can growth like can materials, think year-over-year, the said, the see percentages.

The materials. today. planning Demand that good first now will -- look than is there, be more seen of for I've we As but have, Again, a we're base about it's customer thing what XXXX. they we Ruplu, at ahead for seeing that long are all is that a time. calendar quarter year the us,

So in as cases, we as have much quarters in out. X some visibility,

So as the all managing I said, material. it's about

We have and in both operations purchasing in team place, a and a planning. good

one best systems real the We're IT what's As of can look we at see globally -- I we everything world. We have, the on connected. I said, going time. think, in

So key thing. be working we're our through to But right we to have this place able in really through the way going this closely get and we systems get only is believe very to the that with customers suppliers. a a

lot a work but left. optimistic, very I'm So of

Ruplu Bhattacharya

networking down sense. you Jure, seeing are a can also you versus wireless? end you that give that into bit communications market? end the drill can optical What makes Any market? on versus No, us details in Yes.

Jure Sola

and networks. XG to nicely Well, pick first starting of quarter the we thought in that on mobile comment fourth year. the will up all, let of me and third start make a it That's rest as

that's moving So right direction. in the

said, upside systems now. driven with you. with Customers our just network healthy. in module I to honest as is optical very lot a the our be business, which the networking, the Our advanced orders us -- optical, it's optical that of part it is of given It's up, and filling

a especially market. of lot demand that So short-term, in

Ruplu Bhattacharya

Got CPS, also sequentially. what I you had is little bit a a forward? drill in that? for can. into gross couple Services if sustainable Kurt, Products any one-times? a questions that XXX Components, I Can bps margin improved level healthy that Were drove of The think just the it. do and margins of going you there And

Kurt Adzema

Sure, Ruplu.

contributor I think, So growth. obviously, the the biggest was

$XXX So we grew to a revenue perspective, basically over XX% $XXX quarter-over-quarter, going million from million.

then think, obviously, the better our were that's And that I some of are products So products. part. there inside of the biggest we CPS, selling

mix. did have we So favorable a

a revenue So volume those X. I think certainly, it's or helps. always of But combination level

that margins depending be growth business will as help level what's in certainly, about, quarters achievable as continue efficiencies. operational revenue improve drive we're And of terms in continue Jure over continuing that on but to we're grows, time. talked we're to to to and the I -- going us long-term, drive satisfied, mix, we'll There's to and In mean, efficiencies. and continuing not downs revenue ups

Ruplu Bhattacharya

Can Got ask the I And us debt you it. do in how buybacks. I priorities on give balance acquisitions, last if taking for environment? more can reducing or you for any share Kurt, debt one, to cash mean your this you. would

uses on of thoughts cash? any So

Kurt Adzema

Sure, absolutely.

and the in those to priority business. at capital is plenty our can our we And So of always relationships investing our looking customers' have opportunities with and first expand needs. customers serve investing we how

cash as So continues you've to one. seen, Again, that's always number increase. our priority

we've been lower our to able And so leverage.

do to continue we'll So that.

deal the at hurdle. look anything a that. And this opportunistically at we M&A, We'll pretty terms of but is But priority In at right we're along, have continue organic to rule to point, if our focused going high came really out. certainly, that. look we on don't growth

Operator

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

James Suva

suppliers been or It's entire and the year a employees. tough your and customers, and Sanmina, for two world

if shortages and component be footprints it'd like working because is now the shortages that the there. ever view COVID? that, assembly, maybe I'm whether shipping need is to more than Or or back, and changed? airplane answer meet Is to and a geopolitical previously demand to sourcing maybe due be there look need you a chips capital? As to before demand more hold seems now, shortages, wondering there's it even

of be views Or prudent? kind kind of is other And strategic best priorities? of of of that changing? think any -- some of maybe the So capital? about working that we days kind Would kind permanently use of should inventory

Jure Sola

those Jim, because day are you rest but good, every we with. that make great they not saying Yes. just and all all feel questions, great I'm are to questions that

of how lot we things get environment. These through First probably learn us company to look say a people the to world, also lot we're of from of differently. we We tune reasons. management. to were up, to this challenge got biggest for pandemic And around right. to all, a able different and learn a at and today. the But to great you're maybe will Yes. and a all better around had ideas a challenger be I to lot management But things this was the challenging it the years a able our biggest And yes, things -- tighten made up lot. was Sanmina's we world

years those global are structure. You're are right, regarding still ago. were Yes, material, logistics. they question mean today than I XX to worlds challenges. the your different of both Back a XX,

will X think years. the a be next I in that different

well in we tuned Sanmina that up So pretty case.

very I today the think have around world. structure a we lean

to going the to tuning I driven crazy. our do look be at really more If really up. today, don't more need we growth. it's It's So structure anything by

the to just more face be adding all demand. working the to to inventory. our know, meet growth capital, Not world. time, customers' we the as in wise, business comes able going adding too we're hate more you extra mean, capabilities this you've be to much around been back, I capacity As long Back but

Our afford much like We customers to have supply hate Those time, it. gone. We are can't on shortages. never chain, too is perfect What it. with we to have too hate much. no always days

I the those a and definitely fourth to to in quarters talking yes, that all looking into have partners cases, a And our to to that I customers quarters you extra now. can actually, things, chips, third X on have our you tell some they're right customers, with has that. X working suppliers so guaranteed key Jim, And our our from by take components, that XXX% -- make risk carrying on So we call not just commitment example, now them customers. as our from for can't We we're quarter know, for us bigger now, are covered we're model, by we but customers. quarter, be the to in maybe, unless

on these as ship there material more get working definitely, on, prepared things. of if can today. we a Definitely all statement said lot going needed, focus supply a we are can So on to And chain. lot we more the we all I are my be in

does, do these are is So good going that it this to improve. I for continue Definitely, hoping believe changing positive, if headaches economy I to think is And we'll I'm fine. have. environment to and

but every answered minute. So that -- answer be it's hard really to will all those details your something that question, you hope I asked I

Operator

the a question with from Capital Schwab Craig-Hallum [Operator do Christian line have We of Instructions]. Group.

Christian Schwab

the good Jure and team. execution, on Congrats

Jure Sola

because, the for the best you questions. leave last always We you. Thank

Christian Schwab

the that for talked about the current most in most impact quarter. impact the is What million in component $XX you $XX recent in to shortages guiding you're quarter? So million

Jure Sola

in and hopefully, material. think, taken more the there's And directly. we to really, then Well, all in get easier we'll will and yes, it. ship parts Yes, the we to I But everything that, give plan, of definitely, if can calculated already discount now, going a first what all, moving consideration. I'm trying we it be And right we be not that that's materials, to answer lot see there. that. all of guidance, in not is that's But

planning. We are definitely

what we are know out. we on We we floor material bring are because have planning more things a the the forecasting, certain that to in move will lot that

else to fill right we're So be components bringing everything able once in to in. get the in we

our we of amount Christian, manage that but it moving in deliver So be parts, feel confident, to fair guidance. and able we'll

Christian Schwab

That's great.

shortages? long that there So follow-up a should of is we being -- kind $XX are of Should to on we lost forever that life impacted, can happens products million as that the you the shelf these out shipping million components long we meaning revenue is products. lost as that, life to on occur? $XX Jure, a type soon are assume that thought revenue, there's to component assume it's this And due

Jure Sola

will for specifically are that wouldn't custom-made infrastructure. what ship quarter, I be we this is These this we last say couldn't shipping products quarter. all

of you As These all needed. programs. mission-critical build we know, are that long-term these products are type

I just would of say majority stuff does disappear. not So this

Christian Schwab

question do on Great. That's what to I operating last expect. has My margins.

we're We you have greater to successfully of give Can navigated supply puts being takes at margin. operate shortages COVID at operating of the the why and type or X% kind a us kind those that? midpoint below levels, and and not component of

Jure Sola

missed that you Could question first? regarding, you there repeat I

Christian Schwab

margins supply No, I at just well have X you COVID guys saying operating X% chain issues as for that issues. during as quarters was operated

the Or change the Is business guiding be midpoint. of that given bit at type we little should that environment? all mix you're is of? that conservatism a in below aware Now the some there

Jure Sola

Yes.

can So let then over. it try, take and me Kurt

lot First COVID. to of a around uncertainties we and hate myself all, of repeat are with still operating, I the

As India, you what's you some going those in Asia, in of Southeast look now, on know, if on going right countries. at what's

going to COVID. happen know So we with don't what's

lot a stuff and So go there's those in regions. of

think management, our pretty in we I lucky. shut far, continue with our that, safe, people there's We've there. our risk hope to kept but and been So still we've We kept been -- down. never

trying think be to we're I real.

everything in perfectly. Kurt, the We both there and more me than Kurt said Not I running it and I even believe is. room there's goal margin. for is know is Our improvement maybe still

all mix of about the it's think business. I So

that get improve growth comes the growth, will the we margin and, Kurt, anything to if else in and mix, the the faster. a add. want on you if think lot I

Kurt Adzema

of No, mean, given of is. to what less the I that. the is, the revenue revenue to chain, hard uncertainty -- composition supply it's echo I the the know it what down comes much

gross then goes And consistent conservative this there, be we quarter. down going so obviously level. is results the and I our margin to do that to to think operating from quarter-to-quarter, our perspective, to a to we're that financial again do to best want obviously, But try goal provide certainly, and margin

Jure Sola

Well, ladies and gentlemen, days that's be talking get I we'll all we have today. if you Hopefully, the we us. answered all, XX not guess, Otherwise, now. to some to in of your please questions, next, from back

So thank Bye, much bye. support. you very for your

Operator

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

disconnect. now may You

Sanmina (SANM) 4 May 212021 Q2 Earnings call transcript