SANM - Earnings call transcript Q1 2022

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Operator

Good day and thank you for standing by. Welcome to the Sanmina First Quarter Fiscal 2022 Earnings 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. now today, hand Paige would to conference I speaker your Melching. Instructions] like the to over [Operator Please go ahead.

Paige Melching

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

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

Jure Sola

afternoon. Good

Paige Melching

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

Kurt Adzema

Good afternoon.

Paige Melching

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

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

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

Jure Sola

us with ladies good all turn here a comments I Thank to few and you, to before thank gentlemen. over and for I’d today. and you afternoon, Welcome being Kurt. like Paige, make it

navigating like leadership employees around our opportunity our recognize for First, I around and shortages managing take would to team material to successfully and this COVID.

these our quarter the to challenges, like doing fiscal to for year you. first delivered and are thank So team, I’d results Sanmina job, excellent of strong an you XXXX. Sanmina all Despite

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

Kurt Adzema

the impact the supply an did In turn well quarter, Slide managing as Please growth, excellent cash grew profitability due to billion. the first revenue to and team by X% through our delivering our QX teams. $X.X strong strong chain billion as execution approximately and primarily billion outlook the $X.XX Jure. job of supply from of quarter prior and margins constraints, revenue exceeded our chain was $X.X This X. operations generation. of Thanks, to of

mentioned, strong. Jure demand As be continued to

the However, the improved the to compared chain impact of gross operating margin revenues. X.X% primarily constraints X.X% also to to due Non-GAAP compared continued. improved to to higher in quarter, Non-GAAP supply X.X% in margin X% end prior of approximately upper margin. to quarter, earnings fully diluted $X. and Non-GAAP primarily our exceeded prior better $X.XX quarter XX% per share to to outlook $X.XX in the gross due grew of compared the to $X.XX prior

was EPS quarterly results. X. Please financial to trends of GAAP slide QX turn the our This Slide Finally, $X.XX. shows

can exceeding X% of for the dynamic our through Non-GAAP an team managing done excellent You business quarters. the consistent, job have through business the period. margins managing – see has seven been gross this very consecutive last

revenue five our addition, believe increase our over chain the last will quarters. In resolve. operating We for non-GAAP material six margins expand higher as X% been have and will margins supply or constraints

Components, summary, are to Now both grow team. XX.X%, due revenue gross gross margin primarily for for increased primarily improved and mix. gross X.X%, supply QX and to Again, $X.XX to overall Non-GAAP CPS due due the increased X. Services to please supply strong for revenue margin improve X.X% operations primarily Slide constraints chain our CPS our believe non-GAAP from chain execution billion, IMS to and Non-GAAP In X.X%. and to to to higher revenue IMS Products as turn margins $XXX to we resolved. by IMS million. our revenues. margin declined product will improved

Now please X. to Slide turn

Between level impact balance constraints. revolver. and $X.X of was about our approximately supply of we inventory a the $XXX and market unconstrained cash believe cash availability liquidity. the the the strong equivalents under in outstanding help of revolver dynamics. with parts us manage customers. our no Inventory the increase resulting based an we position have QX, to to million. This borrowings and from under At due chain on through driven debt increase other were were facilities, conversations Cash have our Let’s increased the We billion cash current there the sheet. end talk of

this of expect are normalize steady to inventory, in be constraints XX.X%. ROIC the able working approximately pretax overtime. resolved such inventory that at levels We we the Despite inventory were capital to as cycle XX remained manage of supply chain higher balance improved to Non-GAAP will days. days cash consumed

X. please if turn Now Slide you to

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

to generate remain used the being with forward organic on to cash and cash focused primarily continue drive expect growth. going continue invest cash in to business to We generation to

repurchased $XXX total a end approximately purchase of we million. QX, during million we X.XX of approximately $XX of addition, quarter, for shares authorization million. remaining In the had cost the At

turn please Slide Now to XX.

the talk about QX Let’s outlook.

mentioned, demand customer Jure but As strong, there is continues overall challenges. be to chain supply

shares. approximately $X.XX per to billion gross $X.XX. operating for revenue share approximately the expenses We billion; million count X.X%; tax of XX When range of all is $XX range of $X.X earnings outlook million $X in to of range in you of expenses to depending in operating non-GAAP our to non-GAAP $X.X the to rate other non-GAAP non-GAAP X.X%, million; non-GAAP guidance, be non-GAAP diluted consider in this XX%; of range the mix; the diluted range margin in to product be non-GAAP million; of $XX share X% expect of QX on margin and fully X.X% approximately to the

remains of We across In around expect our to million. capital and growth the $XX $XX quarter strong approximately driven be million, demand depreciation summary, expenditures be by base. new for customer programs to

deliver to as We it With Jure. the are confident cash operating the that generation and constraints manufacturing business lean our company flow strong chain our and results. back model leverage supply I’ll turn to expect that, overtime

Jure Sola

the let year quarter about Ladies rest the highlights Key the gentlemen, and few environment me you, quarter. for business a the outlook comments outlook first of Kurt. the fiscal and for second quarter, make XXXX. first Thank for an more for

to As our this and were: tell first is chain you challenges, the critical our able for closely delivered flexibility, our start good with great supply and I in year our quarter leg Kurt, COVID very creating results you, excellent from for well quarter. can environment. operational heard off Key fiscal material executing operational customers Sanmina customers. up Overall, team a we’re drivers support through we’re for a ability build right XXXX. in to working to requirements Despite suppliers; first by execution, strong products;

me -- you please XX. Let give turn to Slide

markets. few growth. We of Let delivered you for all nice revenue me was highlights end Demand markets. for product by quarter-over-quarter give across strong quarter a first our

our revenue, Industrial, For first material XX%. revenue experienced was about in infrastructure XX% that this networks nicely Also shortages. represented impacted automotive was revenue. down medical, our was here, customers Communication and quarter, top Revenue X%, shortages and segment. XX% of slightly of XX% cloud was defense revenue. material of up by and XX we

strong. was X.X our Please Let me Bookings bookings. to Book-to-bill about be first Slide X. turn XX. talk continued to for quarter to

let Now segments about to quarter. market by talk revenue for me second outlook you

short-term, market good it’s be customers’ The For our the segments, component to news across quarter-over-quarter, by strong. but growth. quarter, We that upside we forecasting potential all do are have second demands constraints. flat limited is continue

networks our and of networking from driven and networks, come we’re markets. XG by that communication optical enterprise systems, second forecasting For cloud will storage revenue infrastructure systems. quarter, XX% cloud It’s

medical renewable test security radar that and system, et and and driven military plus systems. technical LiDAR systems, it’s approximately equipment, XX% equipment and by systems equipment; of management systems diagnostics, aircraft for unmanned safety products; revenue measurements be systems, monitoring driven patient driven and and aerial by communication, driven lab defense ventilators, system, systems, are motor electronic electrical forecasting will power semiconductor automotive, We from control cetera; products, industrial satellite by aerospace safety by energy ultrasound and

tell about a you high-complexity, is most these by in I future let the as in recognized Sanmina our we more future. customers. Now is The heavy are talk markets important established regulated exciting. markets. can And mission-critical, is these me leader the

present So but the some year the environment to the chain this will Materials we and rest see fiscal year we our challenges second half as work our I of of to with short-term. let’s closely customers well shortages, supply this in Sanmina suppliers XXXX. year. of about is resolve expect the rest continue about year Based the dynamic market in and feel especially improvement on do and visibility customer calendar through positive COVID fiscal forecast, XXXX. continue very talk XXXX, executing in to

talk tell of The me let growth the healthy. growth. for well-positioned about remains you to opportunities Now is can that I Sanmina growth. pipeline you

these continue to We we existing defense, on to customer growth medical, key the as vehicle, communications of profitable to our key into infrastructure. more all in industrial, focus customers. expand technology focusing by and such our invest margin markets, opportunities new and advantage am growth translate competitive expand for continue automotives a market will to projects cloud The management expansion. leading and to opportunities electrical into in optimistic partnerships, I and drive our is to continue delivering that

do year results. expect solid So to for XX. fiscal turn Please Slide we deliver XXXX, to

first our outlook, for free Non-GAAP this. summary, we result, quarter, our I cash diluted continue in strong million. $XX margin strong of exceeded this would our on So operating execution. outlook. Non-GAAP EPS of above $X.XX, And was say, focus X%, revenue flow good

remains we For expect constraints to a Demand continue to is environment, this but supply strong, expects continue, second navigate to have market agility with quarter, also operate believe and manageable. it successfully In good we we’ll dynamics. quarter.

to $X.X $X.XX $X.X to this diluted and of revenue stable, $X.XX. quarter, for is non-GAAP outlook billion outlook EPS Our billion

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

Operator

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

is open. line Your

Ruplu Bhattacharya

Thank my for taking you questions.

Jure Sola

Ruplu. Hello,

Ruplu Bhattacharya

Hi, Jure.

medical, help came was see you industrial, it defense as of Communication automotive. quarter, a very which X%. the the you end four that. than each did one the better And markets, bit, up down up Networks, Obviously, guided as end looks be IMDA, the slightly. well It sequentially. the communication was us weaker? parse IMDA within XX% What Can that and networks, performed had little it it was how markets You stronger, in which one those like to was much the for cloud same

markets weaker just you the had Can that getting expected? networking you… wireless, in what So into about more end you optical just than was these details each talk of

Jure Sola

Yes.

your cover regarding question medical, defense me automotive. industrial, Let first and

First all, demand was of there. overall,

side, strong XG. markets all routing, again, On up as networking a in getting on time. materials. say IP was systems, very getting communications the right better We was such demand was cloud It all optical actually on challenging challenge key was this in materials. luck, better system, biggest Our nicely segment, I it’s luck that material our the had and XX%. When just more getting

close So in thing, all about very material. demand about our It’s our It’s in customers with is and all thing there. a good as getting the is the said good working is enough But our statement, there. I suppliers prepared demand execution.

Ruplu Bhattacharya

pieces the holding is it your Got forward? more quarter up will one, Meaning just inventory? like is because Kurt. inventory like Kurt, – in increase increase, versus a XX% of help question second of much you the of How it. It cost of that inventory going it inflation sequentially. in component and really up in suppliers? ask increase shipments because to would you’re actual looks that going you the inventory inventory Maybe December actually costs that is going still is the say because I’ll of from up Or was

Kurt Adzema

Yes.

question, it’s Ruplu. a think I So, yes, good

honestly. it’s So I both, of a think bit

of with going all, through. I the constrained parts some to that first hopes of are we buying think out come the there are inventory I really think,

don’t, err through. And our of some fact the to per side sometimes of parts tend with – that constrained the they we conversations so our will the come on most customers,

so make the secondary it in have sure bottlenecks what have or the I’ll call covered. to And BOM the the we tertiary – we

that number is part units right. absolutely units, down we the you’re then costing it of but So are are of more. tracking Those

It’s it’s the these units, of means harder-to-find also bottleneck are the So in the call primary that BOM. units. tertiary the some that bottleneck the I that cost secondary but aren’t not those number of the what in or units just – consequently particular, of the

a So of both. combination it’s

Ruplu Bhattacharya

Okay, the it. on question. my thanks Maybe for last Kurt. for that, appreciate I just details

me you about sequentially, down looks like It ask CPS basis points. Let on margins. segment they were XXX

help can about, out Just we’re what think were COVID. And you that? coming some of the reasons for us of

we CPS components, about should we has As about business the because and seasonality products think it services. has fiscal in XXXX, think it how

revenue So seasonality seasonality how margin like XXXX fiscal and going another? should we one to think from about in quarter

Kurt Adzema

sure. Yes,

then take to I’ll question So question. and the first, seasonality the let’s circle CPS back

quarter So overall, historically constraints. seasonality, to tell it, will some X% we’ve to And backdrop of – supply X% It’s hard seasonality. due the given second that. of to our seasonal the down, been call there probably be in

guidance that of terms and more to perspective deliver you is extent, our the parts see some experience being a as And our other more be units revenue hope, able so and make in our of to up to we’ll seasonality we can certain based on parts for on of down do able in business, chasing products.

can seasonality, think there So that the I extent don’t there’s to down zero through we products but our hopes seasonality, parts. more of are, offset more chasing that help shipments is by

the of CPS remember I I businesses it’s you to of you question, think inside about think, set think that again, have CPS on there. margin, a diverse when

is margin so And around biggest the mix. around driver really

segment, those lot a inside and CPS of lumpiness of any businesses one we’ll that so drive And overall the margins. times, have of of will inside

up. we go bit. margin those and And for, quarter, to wasn’t mix margins happens what the it over had expect time, our consequently, hope hoped we a obviously, so But was so down time, this over we just

Ruplu Bhattacharya

and Okay. execution strong Thanks for congrats all the on in details the the quarter.

Jure Sola

Thank you.

Kurt Adzema

Thanks.

Operator

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

Your open. line is

Jure Sola

Hello Jim.

Jim Suva

I Good of constraints right you memory evening. on if that? more on is quarter? or about around so, this, supply so was have shifted? a Thank my that you quarter? do have much Is that curious but than memory it last you that how this could could more right remember if you $XXX of just have shipped can’t number Just And my am million right I much.

Jure Sola

analysis quarter million You’re to but about your call quarter than It it the is $XXX okay? similar. think in better and memory last best the last quarter, We was similar plus, Jim, XX% we our was correct. elephant’s, XXX% before. an

Jim Suva

or when I’m around then kind also EPS my flattish. that a wouldn’t higher And to Okay. looks about you why costs growth little EPS quarter note that get of to more kind revenues quarter-over-quarter. be lower inflation do hands of employee flat? mix? talked like Is trying your the forward of compensation, just due I

Jure Sola

Yes.

more. So add and one Kurt, let then, it me try to can you that

look we’re there, most the the have quarter of across of as And plenty to First more want than at able to ship of we all our out markets. what today. revenue customers all, – we

come, going mix in the So to going come that it’s is all through how to segment.

what best are of a can that’s fixed. So those out, our we things revenue guiding estimates, we to But today. if get lot more of get

Kurt Adzema

to Yes, on two other we’re It can I’d what But we mix. say And depends things right. there ship always mentioned. Jure is comes chain down a to able get that what are you absolutely supply from perspective. again,

we in typically United in all, from fiscal of some shutdowns, holiday our States. first have especially QX, the think, I benefit

have that in you QX. don’t that QX, have in So, you

I typically end to So it is usually in and the have U.S. of think – in the calendar of it at tax, you end of other thing gets payroll have beginning that the year. capped the the of restarts out year, QX the right? you the the calendar the resetting the towards

hits quarter. XQ, our that second fiscal So

mentioned, think factors our So in which on guidance. that addition to I margin are two impact mix, Jure other have QX those

Jim Suva

things And looser a still or resolution? you’re Great. getting with closer at then, tight and from supply actually and the chain towards stable where sitting getting tight

Jure Sola

think more going there’s been lot I planning on. a

we’ve been for almost plus. a scenario in know, year this we As

and are there being suppliers. lot our a key works So done of customers us between and

certain improvements have But raw mean right the you steel like in from semiconductor. We see pure normality we’re And I so starting second prepared this continue. I some now, believe anything, on working as we’re to that half. material get almost some our But some see shortages components. to Jim, to into out in aluminum, we’re improvements statements, this. said in going to kind of will

it we’re can that use one. a the as critical everything is SKUs. now. with it to And work carrying We just anymore So learning you need, when

strong we basis. place. global proper our getting and chain loading Efficiency think on got in I customers – suppliers daily with We’ve customers. good is a talk our We because got We daily not system. we one we’re a look to very management basis. a IT supply not connect very on

as hoping more materials, we’re lot some we can So, be improve the a on efficient. of can we

So, shortages with how to and with learning COVID. it, material work both we’re just

just, this normal to back is it’s So I now. guess,

Jim Suva

XXXX doesn’t a that’s hopefully Kurt Why or down some mentioned not And wars knows a earthquake in or strike so a things XXXX happen, working COVID trade hold normalize. XXXX normal there’s or this or if or inventory buffer who inventory now, case when – or what?

Jure Sola

is – are are we bringing when we it in just to and Well, to XXX% – It’s guaranteed I our purchase customer inventory, order. We this a what think contract bring in, our need with inventory’s by sake comes a this of to each a very coordinate or working bring understanding inventory for exactly very customers, this. close we here. don’t just is

Kurt Adzema

I clarify. Yes, as I supply year. want expect to of Jim, mean, go the through already to Jure the just constraints, end said, calendar we this

so even buffer an really build to And critical sort any point components. of opportunity this of is at

the our of that much constraint in option custom sure. customers in choose a especially an semiconductors. of times, these XXXX not or I’m there’s But So, road, be these some very that may Down to in still terms do.

Jure Sola

Yes, that’s correct.

Jim Suva

you much. such your a managing and you team to congratulations through Well, so time. challenging for Thank

Jure Sola

Jim. Thanks,

Operator

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

is line Your open.

Jure Sola

Christian. Hello,

Christian Schwab

Jure. Hey

to allocated XXXX specifically second of materials half that of that get expect shortages on clarity, them? silicone be Any alluded saying could But maybe starts some is that you better complex helping type a improvement lead quick Or what see? in one, some clarity great. just that wafer components. the customers you some Did as as here. of would elaborate comment? the one your far you question So, of raw component in you two or Can to

Jure Sola

I’m going what something make me an let not to expert, knowing is happen. can forecast I So and clear. what

really of what be Number probably it, half customers. say that from is we’re when is hearing thinking. will Some of the I’m I wishful hoping some two second better,

just hurting especially really bad, more are really to around Some closer. we’re a they’re and calls customers matter planning that with know quarters customer And allocation, two say of It varies better products. customers getting who Christian. us, it lot or getting from is and customer answers. a for the anybody better else parts. last were supplier allocations, let’s we getting the custom else, things and Everything doesn’t the working customer now lot And same some these are

we – with. that are it’s but something working So

How we – think get can we’ll better, definitely. much big question. better that’s I a

Christian Schwab

concerned, finished That sense. far levels? versus say, Okay. inventory of what XXXX does to that And as makes is then as And is inventory how the goods? WIP compare percentage

Jure Sola

inventory. now say, talking reason let’s parts raw are definitely that’s we we on is they’re three ago we Kurt there have. certain happening. we did the that XXXX, At two, material X%, then month as soon we there critical than are that in get extra a drives we in and the wait what bringing are that few was Well, XX% And more what’s percentage-wise as carrying or exactly parts to based bring to have XXXX, in, or really projects minutes time, also And because about available something to it. same us, the

is we’re is I say creating doing is that working operate, we our that an today short a right lot thing in cycle one So time process Sanmina now at really very for we would flexibility. because are, more working process environment

can that years know couple didn’t ago. things even a doing I do of We’re we

we a So create have components to that our able customers. to flexibility critical to to lot learned we be these because deliver

Christian Schwab

my more then, scale and to guess, obviously potential is I supply becoming and this front question And different or lot and applications? a or environment, last more are if are of sale? at Okay. not important everybody’s Or there partners different great. M&A. with an are geographies has different just of things do give even Can In chain guys That’s center mind. for you us update looking you things becoming

Jure Sola

we I need of strong – that in last looking all, have we said to of believe We’ve believe go earlier to. – direction we first to XX focused opportunities in We pipeline a been the we what months So did front us. present of of organic as a grow. we work that relationship. what We expanding are do, we really lot focusing

still of that believe offer. in I unique there’s and what existing capabilities base fits expand And then have. earlier, all win in as these industrial I some we’re growth I some medical, a we’ve think critical at been in new that looking to markets defense, lot communication. and And we customer mentioned we markets, investing

So at sense but M&A, a lot to we comes of other when look what’s Yes, has us there. – we are to grow. opportunities see options it to business available, what for makes Sanmina

We now, focus grow that’s management. my the of and right the have to rest and personal

Christian Schwab

a Great. Congrats on good quarter. Thanks.

Jure Sola

Christian, lot a good on. But of stuff going

operator, please. we more anyway, time for one So question, have

Operator

Soderstrom next comes Anja the of of Your from Sidoti. question line

line Your open. is

Jure Sola

Hello, Anja.

Anja Soderstrom

Hi, a Kurt. asked you my sense wanted XXXX, already. have about growth. of you’re about just taking for been fiscal I of Thank when you A But lot talking question. my for questions talked get solid the to Jure. Hi, full now

Are more between good about nuance What’s sort growth signal the and this you growth talking were there? the good you – Before, solid of growth. quarter?

Jure Sola

I not my is As the best. English said,

have can good And we we power you when efficiencies we of definitely time, good. to say if we are – but do have got will internally, I done not we better we did. had the we what very be strong growth shortages don’t all in. think could your materials So than feel trying that more a quarter, better Yes,

time this to the planning a At to same really we’ve So been company. can grow do we Anja, better. find we way know

to going of resolve behind shortages. the as scenes. are And a things these that be we lot more that of some of material hopefully, show there’s So able we’ll

Anja Soderstrom

But be before any nonperishable. that Okay. Thank any do then see you Do think backlog? Or – that you still think you that? is talking you risk I you to the some you’d but don’t – And you. if talking also, see of do backlog. about is think

Jure Sola

very demand with right Well, Yes. customers, is. exactly understand real what to now close our especially their work we Anja

see but in They’re little so programs, need know than we communicates for and – long-term. a they And more bit customer today, buying that with our plans certain we us.

of XX% So if look out, would I our to at – our we we comfortable. feel that pretty say, XX% backlog feel backlog, I

we know in think I enough details.

feel our will to good the rest for that good to comfortable I looks continue customers close XXXX. of look it very and We’re at that this least

Anja Soderstrom

That you. congratulations all execution. for on great Thank and me, the was Okay.

Jure Sola

reach a gentlemen, we’ll lot. please that’s back And appreciate have back to we get it. to Bye-bye. ladies answer thanks we Hey, the all talk we’ll for didn’t days that, all XX in definitely you you. I If to from now. Well, us. With and today. questions, next

Operator

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

now may disconnect. You

Sanmina (SANM) 1 Feb 222022 Q1 Earnings call transcript