SANM - Earnings call transcript Q3 2021

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Operator

Good day and thank you for standing by. Welcome to Sanmina Corporation's third quarter fiscal 2021 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]. today's being that advised be conference recorded. is Please Instructions]. [Operator hand over to I would Melching. conference to like now Paige the Thank you. Please go ahead.

Paige Melching

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

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

Jure Sola

Good afternoon.

Paige Melching

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

Kurt Adzema

Good afternoon.

Paige Melching

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

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

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

Jure Sola

and comments few afternoon CFO. make to over to before like I for being it us ladies our welcome. I gentlemen would with Paige. Good Thanks here and a Thank turn today. you

around First, shortages. team and I would this employees our you our like component say leadership COVID to and to opportunity managing to take thank for

financial a were great third our important, And a to we challenges, Sanmina quarter of fiscal results these XXXX. able critical delivered most job. strong team needs Despite year the for changes or did all Our customers. meet

turn question-and-answers. with results. Kurt And I additional over review goals. open will to Sanmina will will to follow-up Then this we Kurt, and So I is for our agenda like future results Kurt. that call QX today, about for have CFO, comments and I Kurt? our would detail

Kurt Adzema

Please the well $X.XXX below team our profitability supply managing strong. $X.XX billion prevalence billion. did Jure. our was excellent an QX generation. chain slide billion outlook of five. slightly job as through turn Demand cash of of and quarter, strong to was Thanks increasing as margins revenue third the constraints In to $X.XXX leading to of

However, outlook to operating more earnings of with better believe primarily revenue we X.X%. than Non-GAAP fully as supply $X.XX, diluted quarter. exceeded a X%, by gross was $XXX was million consistent per to of margin impacted $X.XX due prior of than was constraints. $X.XX Non-GAAP gross our Non-GAAP result expected margin. chain share margin

GAAP was Finally, $X.XX. EPS

related $XX related the to had million gain tax of of $XX.X slide other of has foreign the Each and turn of subsidiaries foreign certain financial reserves, a of of a our to gain trend one of been liquidation to results. our During we items release the This sale million of related from million excluded these IP. quarter, X.X six. of to shows quarterly our income non-GAAP Please the the results. slide

quarters. excellent margins compare did our the operating during quarters. improved non-GAAP our of If consecutive can and to four operating X% this have from last to You gross for $X.XX been margin period. the X.X%, improved for improved the from has to to gross can an $X.XX. QX has five greater EPS of from X.X% team QX have margin X% last job see, XXXX, FY see level approximately consecutive FY Non-GAAP revenue, on the dynamic X% managing X.X% margins Non-GAAP results business XXXX we exceeded you has or same

believe constraints improvement. increase resolve. and lot material improve this a the chain supply hard Furthermore, XX will demonstrated as learned have and we We work months our margins continue of to will our the last revenue focus by and is our over year-over-year team

supply customer-specific $X.XX million The inventory $X.X chain and for to turn to slide impact of seven. products gross to associated costs improved to reserve. impact the constraints. due in less revenue, Non-GAAP QX programs. revenue to supply was declined $XXX IMS new to was CPS primarily due a and margin revenue defense-related of chain from IMS billion. to several please Non-GAAP due for million, gross the with margin declined Now decline revenue favorable Components, XX.X% due ramping favorable release X.X% impact to of and lower primarily services one-time mix a constraints. primarily mix of of the

for more summary, and constraints CPS CPS our non-GAAP to to in subsequently gross expect IMS return margin segments continue our margin Again, believe normalized QX our non-GAAP as gross to We thereafter. In supply overall level a will resolve. and and revenue was to X.X%. improve margins chain improve both increase we

Now please turn slide to eight.

talk the Let's sheet. balance about

sheet QX. and flow generation free in strong. remains million flow cash cash of $XXX generated and We from million operations balance Our $XX cash

$XXX and the cash million of last operations from million generated of have cash months. We free XX $XXX flow over

At cash manage million $XX.X expenditures million approximately our the long to we in liquidity. still $XXX facilities, to to quarter, billion the market XXX,XXX a and depreciation Between debt environment. During net for were and and we our Cash term $XX quarter, to have we equivalents compared of a support business increased the $XXX total us cash and balance the cost remaining of end shares of $XX.X $XX.X flexibility cash $X.X have QX repurchase availability other under objectives million. sheet capital Overall, approximately revolver authorization flow strong gives million. repurchased dynamic and of our million. million. of by

supply was million, given chain nine. challenges. to slide approximately turn please $XXX up the Inventory Now

We and supply return days level Cash Non-GAAP normalized a capital expect constraints this on invested pretax resolved. over to were time are inventory to to cycle more use XX.X. XX.X%. return as was

chain for QX. challenges. the outlook now slide we can XX, please Overall continues turn to is about demand talk you If be there strong supply but to customer

revenues like QX in and to purposes did. QX XX of non-GAAP in the fiscal Non-GAAP of expect to of Please to $X.XX $X.XX operating range of of to does not XXXX expenses range for operating X.X% billion. fiscal XXXX non-GAAP X.X%. comparison the weeks $XX in range X.X% expect $XX and We the the gross billion margin X.X%, be margin, grow have to note, million we of million in QX range

expenses shares other $XX.X is of all you earnings approximately approximately range non-GAAP our non-GAAP of When as $X.XX. of approximately of and non-GAAP million. as $X.XX in this the $X.X fully diluted expect non-GAAP for million XX% per diluted tax We to outlook rate guidance, well consider share

be expenditures and $XX around about new capital million. depreciation $XX million, driven to programs to by growth of be expect We

back EPS achieve we across the the to And be I am over the flow approximately constraints FY which Assuming expect company are non-GAAP us base. would manufacturing This time will that XX% cash midpoint with customer deliver our leverage would of remained $X. XXXX would confident strong for business I well positions operating compare to XXXX be a generation chain and QX, summary, resolved. growth model EPS it of demand FY and outlook to turn I now $X.XX year-over-year. that, In strong supply approximately our EPS as Jure. lean non-GAAP

Jure Sola

CPS gentlemen, you Sanmina the from IMS and Material free quarter tell the let delivered more with outlook Thanks environment for the will Kurt. and results me cash continue for respectable and Ladies about Kurt, strong growth, as quarter and for the you for revenue businesses. to both Again, margins quarter shortages about outlook for year third fourth heard third talk I flow. XXXX. fiscal strong and business impact

and quarter. to demand. you market talk a we third broad-based had in the was some We drivers key strong Let about This demand.

execution. in did our projects. environment this mix we team good, flexibility, Through critical a for we job Our operational operational was requirements And by supply our chain and an mainly delivered great driven excellent business the customers. new had

new Europe. added let the me tell Now Eastern in facility we about that

was this family. acquiring During a be Bulgarian is serve strategically going to the by with team our by to operations a in extension third to would skilled technology European of like European and operational manufacturing opportunity quarter, It This It's factory operations. Hungarian Sanmina staff I facility to owned highly IMS expanded take company. customers. located large operations state-of-art fully Eastern welcome Sanmina Bulgaria. to European formally the

customers this turn Sanmina slide work suppliers. environment our So in dynamic very in to summary, executing we closely XX. with Please well our as is to and continue

approximately Demand impact XX by by automotive the XX% product and third Let million. and medical, revenue our were customers and revenue. $XXX-plus more networks XX.X% did quarter grow. me defense you for services revenue. were tell quarter of Communication was about of industrial, end quarter shortages our Top cloud third XX% to third Material our infrastructure continues revenue and markets.

Now from X.X. quarter bookings. tell over XX. you about both Please Book-to-bill for the existing Bookings continue be slide turn to projects. and to let new me was the strong,

few by Overall we seeing relatively give quarter, a outlook comments the strong me and fourth you fourth for Let demand. the are quarter for market segments.

networks for forecasting quarter. this and are For networking, segment XG computing, communications systems, mobile be advanced and storage, for routing, high-end cloud IP we to and the involves which optical networks up computing

to flat forecasting industrial, For are up. automotive, and group medical, for this defense we

give me more Let you details.

see For good the we industrial, quarter. demand during

medical, flat are expand. see quarter strong for finish demand, term will flat, stable continues supply the it I expect Despite but Automotive, quarter, for demand forecasting to fourth we up. demand. this and we quarter call defense, For around chain, going to we but strong to challenges strong. up with longer demand that

Kurt year present our As customer for expect finish EPS non-GAAP strong approximately delivering growth to mentioned, XXXX we based the forecast, year by fiscal on XX%.

slide margins healthy. I nice that opportunities The strong challenges. We the work of tell we very growth to confident key around this through can remain you in continue XX. also will management manage us also manage supply I COVID for the pipeline Please expansion that to our deliver is the to flow. will successfully. of cash and team very turn daily chain are and

Let comes to for and it elements few of XXXX a things improvement beyond. term long when year margin highlight me fiscal

model. that lot you look business can a As have working. you operating Sanmina's we Sanmina's tell of I left Sanmina, leverage strategy at is in

to We competitive our are world. around delivering the advantage customers

on driving sustainable are revenue profitable growth. We focused and

CPS year in expect For in of and nice we ramp-up by markets. IMS see our Growth and growth will be CPS. fiscal targeted in new driven programs XXXX, to IMS

improve also that we continue beyond will by We to efficiencies. fiscal in and margins believe improving year XXXX

delivered third as OpEx Again, Please chain go revenue up, improves, go we growth and expansion utilization the in of the believe our we fiscal will capacity around exceeded Non-GAAP we operating delivered and will efficiencies can and we Revenue in results. leverage constraints, $X.XX as supply up to by of XX.X%. margin drive our of free We million see EPS In XX. you impacted Kurt delivered strong our from non-GAAP turn slide for growth. cash We myself. quarter, in to chain supply quarter and expect that X%. the flow margin outlook. consistent respectable summary, As diluted XXXX. ROIC heard $XX

quarter. respectable very said, I as overall, So

demand quarter strong. fourth for the you remains tell So I the quarter, fourth can

We are billion non-GAAP working time this $X.XX. $X.XX $X.XX billion. suppliers grow at requirements. diluted EPS $X.XX is closely to will Revenue with and our to meet outlook And critical and between customers outlook

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

Operator

Instructions]. [Operator

Your first Ruplu with from is question of America. Bhattacharya Bank

Ruplu Bhattacharya

my have we Jure, you questions. lasting of heard year. component about are talking from, companies most they for taking Thank Hi. next that into the well shortages

give the us next XQ, how margin constraints there, then baked quarter giving revenues much in you is for of giving still that impact is margins what better? what an you can confidence So be confidence fiscal are guidance? can an have into idea revenue CPS the And the improvement? If CPS on the

Jure Sola

supply it We calendar continue definitely time at hope all, first to of be to some Well, improvements what's see through with to going the hard when rest to forecast. comes of challenging to We going year. knowing material it's that. this very is after think this to Okay. happen

if at than So ship we what quarter, look can fourth you definitely are the get can material. if more we guiding we

includes customers, suppliers. all shortages potential forecast to We have. our talked that the our we So

ship about very Those you our potentially. definitely at the that is to we margin on XX%-plus run the When feel confident comes around services. product we more. CPS But if look lot So definitely guidance. let's margins look, could

I nice on our see think short in our see components boards. technology optical in high circuit term, We the our improvements businesses improvements. in component we

defense are nice is that to together, put to fourth expect and as our be move see we group. quarter. XX%. And improvements We improvements going you those nice you expect on right to those to believe the our I term, longer the over in to see in continue And internal direction goal in

Ruplu Bhattacharya

Got the it. on Thanks Jure. for details that,

any building you And about end-market In the component more which on is one of in? can components the impacting shortages, other? seeing you terms shortages just are than talk it

Jure Sola

is, a Well, a products most them the of and products sourced. we with do are of lot that a custom doing of lot single we are lot

that's our a the issue networking So it's companies military business, is And semi. in challenge what the major biggest has some in side a impact around and the been optical in of and and business. high of the a custom for end side us of been security

for been that's impact biggest So the us.

Ruplu Bhattacharya

weakness have give and that that communications Jure, Last some it. just And to tell what you Got Can just you optical, segments? had strong all the talking strength quarter demand saw details that? would up of us of these optical, you you within on networking, in Was can end-market? expected us there routing, sequentially. any IP or on be market the different would components in any

Jure Sola

strong it us, segments. across for those was all Actually, really demand

because earlier, revenue said we approximately million missed of we material. in As $XXX

in amount So markets. across fair was that was our around segment networks. But that all our a communication

Ruplu Bhattacharya

as up. And thoughts can What look being us it. year? we about But cycle can Got one, talked the this capital you. on about your management? then terms You for free Should I inventory your maybe in conversion is for sequentially Thank you we forward, give if on cash last any ask. Kurt, target flow this guidance of you cash think year? have? working

Kurt Adzema

Sure.

Let's inventory focus first. on

key I would constraints we return when more normalized when, chain think the we to levels the to supply of are said resolved. inventory

year. about, you of Jure talked to into look at go early if next part So we expect what that

the multiple are said, sevens. quarters. take turns to we going it's running high So That inventory in being

and resolve. get cash days. And I cash range so being about that I back would a chain expect question you supply think asked cycle as to in That said, constraints flow

flow are bit some quarter ramping being And just the little still a new but to remains depreciation. higher about We than less we strong. incredibly that expect continue. because programs cash CapEx this Our I talked

even expect we get to generate chain But even resolved challenges be better I flow strong flow at and to supply higher to levels. then seeing. generation have So really continue are better. obviously, And we continue cash cash think strong it will with constraints then the therefore we hopefully even the I and that these revenue margins, can that get as

Ruplu Bhattacharya

Okay. the I all details. Thanks it. appreciate for

Jure Sola

lot. a Thanks

Operator

Investment. Suva Jim Citigroup next comes Your from with question

Jure Sola

Jim. Hello

Jim Suva

such And team a environment. your congratulations to challenging in

Jure Sola

Jim. Thanks

Jim Suva

going customers? Given rising bit cost you and your also up. with Can that it's Or contracts see little about component cost-plus to metal are renegotiate I or you talk know they part? copper, is a environment in price Just a plastic, products aluminum, protected have resins, a of have lot steel, are put challenging, you do having like do whether in components, trying the like cost-adders. quite most to environment? for how you

Jure Sola

an excellent Jim, it's Yes. question.

is covered most of up, those, me of give answer are of yes, a most On you of summary materials we get kind that let First our the in go all, covered we when contracts. answer.

responsibility, Sanmina. contracts on few is comes the build cost-plus. contracts, design have it's that We to products we that our government and On especially our that

that we time fully prices to you And I But comes then going being mentioned. up. adders, our takes overall to competitors thing. our to are semiconductors, to on Everything flexible. So are are customers stuff. what's it chemicals raw increase well covered material think as on. understand those doing But unfortunately, same the They are

Jim Suva

may it on believe And I new follow-up is question then your Bulgaria. you wrong. had my said have was I that facility.

Jure Sola

That's correct.

Jim Suva

that up agreements again it starting it it? kind what's kind from set came any or with it equipment? also with come of for? run is Does Or Are production scratch? of And rate revenue

Jure Sola

people are manufacturing, in come material, ago. tell for business. because state-of-art helps just know, approximately really overview. years high It's that you XXX us Definitely, not have IMS some built let factory. This the a me It's well-trained. It's was factory it does end-to-end. technology with a we but designed little you about plant three It

Europe. We we needed this expansion project. overall, in Eastern like So

a fit. perfect it's So

Jim Suva

of of question. kind serves just what talk it so last a that. we little type be Can you My can aware about about end-markets Okay.

Jure Sola

a automotive other amount now, are is we business. Right part fair parts of to the a adding it. But

our this will operation. As I of extension said earlier, Hungarian be

have this amount of future. So factory overflowing that a fair business we can we in the to be near

Jim Suva

much appreciated. and you for It's Thank details. additional clarification so

Jure Sola

Jim. Thanks

Operator

[Operator Instructions].

Group. from question next with Capital is Your Craig-Hallum Christian Schwab

Christian Schwab

on another good quarter margins. Hi. guys gross Congrats on

Jure Sola

Thanks Christian.

Christian Schwab

is one custom some might making specifically I you have lot any customers guys you of it leading in know first? going area. thinking know that use area are lot But Or your your at area for think same you I sitting the chipset that that communication just up there or multiple scrambling there Is people. on semiconductor another of different in every you for also a are the I one vendors you have their now. for quick Is think one and there pace? do it up question gradually all of regarding here open improves products faster? a opens

Jure Sola

I of is on of our scrambling around, on your all, a depends words, First like there now. right customers. lot It going Christian,

with relationship Some certain have lot stronger customers some companies. semiconductor a

Some things customers long ordered some of time these ago.

So we flexibility. getting better are

have we of just chase the don't term. And short But some these, just everyday. see I in major to improvements overall,

we out. in shake are to we that fourth how going things are will see some hoping But the We quarter. see

think chasing the we are last overall better for months. I been getting a these we have parts bit because of some six-plus little

are see going At a longer in customers visibility cases, and on. we us time, contracts the given our and some forecast bit they some commitments working little are longer have So where with there guaranteed a same better. us can is

commitment can component. a we these on So make an go

overall commitments custom hoping, single So lot will improve. stuff as I the and we material But that earlier, that through source. a this is planning, said better combining buy better of of all

a becomes impact. that So bigger

Christian Schwab

I fair? just assume then you kind a shortages, clarify, doing material those shouldn't this in you as to due we is of That's, sole-source to demand, are lot components, potential lost quarter the lost right? that of million the that wanted just revenue Is that on any waiting $XXX fact given of this Right. And we stuff work?

Jure Sola

the it some out time. this And But hopefully, have last will just not been getting of next Yes. That's quarter quarter. kind be at overall, because expect move to quarter from to quarter push-out don't as a of lost. that there I this fair statement. enough material. We know pushed will in They just

Christian Schwab

questions. Great. No other Thank you.

Jure Sola

thanks Well, gentlemen, Well, all appreciated time ladies your thanks. and and for comments. I your

meantime, If you be let days to will you very us talking In now. Bye-bye. know. have please any from you the more Thank much. we questions, XX

Kurt Adzema

you. Thank

Operator

conference concludes This Thank today's call. for participating. you

disconnect. You may now

Sanmina (SANM) 2 Aug 212021 Q3 Earnings call transcript