SANM - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Sanmina Second Quarter Fiscal 2022 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Thank you. I would now like to hand the conference over to your speaker today, Paige Melching, Senior Vice President of Investor Communications. Please go ahead, Ma'am.

Paige Melching

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

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

Jure Sola

Good afternoon

Paige Melching

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

Kurt Adzema

Good afternoon.

Paige Melching

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

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

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

Jure Sola

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

market First, employees material opportunity environment. and navigating leadership managing for I'd take to our this to successfully recognize around our in team like constraints this and

can strong deliver quarter. you As for see, we second a results

thank you up. you, and to team, it So, Sanmina keep

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

Kurt Adzema

turn to Slide Please Jure. Thanks, X.

help This mitigate due suppliers coordination billion. demand customers $X.X QX to and the and end second strong $X.X job high to with cash quarter. the strong generation our and excellent growth of an of revenue billion Our as by significantly revenue to outlook customer was well billion quarter, team did as grew outstanding substantially prior $X.XX of from in and the approximately profit primarily material material exceeded X% delivering challenges.

Our $X.XX supply quarter, salary no prior second by end the fully benefit of was and tax unified the diluted gross enabled the portion singular our and costs, grew as exceeded platform. quarter significantly per holiday resetting Sanmina's compared leveraging impact to well the fiscal by chain of higher in by comparable to margin increases, internal of Non-GAAP payroll as quarter capabilities quarter. approximately operating $X.XX. job a to for primarily operations $X.XX, of Non-GAAP due Non-GAAP of XXX material earnings did to a X%, share in excellent margin to in the employer IT prior X.X% distinct the to direct the shutdown. an outlook XX was upper team X% and annual prior X.X% compared annual

at EPS $X.XX. Finally, QX was GAAP

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

quarters. deliver constraints. X with last We continue gross performance over consistent associated and the supply chain Non-GAAP despite years, to have the consecutive challenges financial last COVID exceeded X% the the eight for margins

six non-GAAP been the last quarters. for or X% have of In margins addition, higher operating seven

to by the and Now, X. chain please QX mitigate CPS approximately challenges. Non-GAAP stronger material margin segments IMS basis for grew and both to primarily chain increased help customer Component was our customer customers significantly million $X.XX due to revenue to excellent turn improve to revenue XX supply margins supply demand compared and billion, prior our our In products we for coordination X% strong to $XXX abate. by revenue demand. will team operations increased IMS and to points as quarter. believe XX.X%. Non-GAAP Slide and will to grow gross constraints summary, for X.X% X% services with in gross due margin by suppliers

Slide to X. turn please Now

equivalents company a sheet healthy our $XXX million. competitive balance advantage. cash a was that have provides Cash very and We

cash availability at Between position of outstanding facilities, $X.X under were debt our total There our no revolver Our have liquidity. end revolver is and liquidity other of billion strong. and under the approximately QX. we borrowings

cash free through the cash addition, flow was revenue position and new our during strong million cash from dynamics flow In as we we believe manage customers. significant market We support the $XX Cash operations $XX to flow and generated well with current existing as million. have a growth QX. was

to X. Slide turn please Now

flow generation balance sheet to allows shares to and strong repurchase and return Our to capital company opportunistically continue our the shareholders. cash

see we chart, you including last X.X $X $XXX in the of the purchased years. from in years, a the over almost As million billion shares can X.X last

shares During total through million XXX QX, of X.X X.X we authorization share end repurchase at the repurchased approximately the bringing million of was the to million. QX QX shares. end Remaining

capital our announced remained inventory, authorized levels X we steady days we turn that relatively cycle cash to additional XXX of share million the repurchases. ROIC working XX today, to able Non-GAAP at pretax to Slide an addition, higher In [XX]. were Despite to Please of Board days. improve (sic) continued such manage XX.X%.

Please to XX [XX]. (sic) Finally, Slide turn

outlook. the chain. demand is to supply overall Overall there chain QX supply talk Let's lockdowns be about in strong, including global uncertainty challenges, China COVID continues of customer but impact and of the the

We expect billion. revenue QX of $X.XXX $X.XXX a range to billion be to

on We the range margin Non-GAAP of expect expenses non-GAAP gross to range $XX margin million X.X% in X.X% in $XX and million the product X.X%. range the in mix. to to operating of of operating depending X% non-GAAP

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

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

constraints supply and We time chain in and leverage model company that, as turn deliver the over are continue confident to business to our Jure. I'll it with abate. to cashflow expect the operating back strong And

Jure Sola

let quarter gentlemen, operational with rest in in cycle key a flexibility, these closely consistent right a to and to suppliers Through short of outstanding and and customers flexibility excellence our comments and year talk time. Kurt. build the product the drivers make we're the quarter. working was by requirements. results Ladies customers' creating delivering business about me third beyond. Kurt. as critical you more second by it and you few calendar to the deliver XXXX great able Sanmina execution and quarter-over-quarter And demand. heard operational of the you, supply Thank for differentiate and Sanmina of a in we done market growth the outlook based second to you tell growth is It broad about that I'll quarter, our continue an strong we about as were chain environments can industry-leading nice from XX.X%. delivered growth, year-over-year Overall, and I organic our capabilities. X% job our team The has

XX. to please Now turn Slide

second highlights more few for markets. you give of revenue quarter by the me end Let

the quarter-over-quarter As was revenue. this Communication XX revenue, you by infrastructure of our defense on was slide, automotive optical across around segment in This were XX% and grew was infrastructure. cloud XG in networks end driven growth by see Medical, and growth we industrial growth and of and our of XX% X%. X%. systems, Top can That Automotive medical, delivered XX% and customers Defense cloud driven markets. networks all around Industrial, revenue. around XX%

let tell bookings. Now you me more about

pipeline turn X. and second The quarter-over-quarter. to can grow is also XX. bookings that X.X to we be tell strong. I continue Book-to-bill Slide opportunities can to to was to of you quarter expect continue Please the solid, bookings

talk be end our upside quarter. third across me news all segments strong. you demands to Good see about by to have We Now segments. that outlook the continued for revenue let is customer potential market market

on what component on forecast we constraints seeing the today will quarter based continue, markets. and third are Our is based it is in

strong and as supply possible. get with have we customers in are critical and working chain suppliers soon We as closely to our team materials place,

Even is heavy the mainly markets, Sanmina with quarter In these exciting. with Sanmina expect manage future these We more Sanmina challenges, high beyond. healthy constraints. to for and around well-positioned a backlog services the material regulated of markets. mission-critical, third successfully these is complexity,

wins project New the driving are growth.

quarter, defense industrial, also revenue automotive that XG and XX% systems, of infrastructure cloud will optical from third XX% of And networks cloud networking Driving and the be the revenue storage systems. growth forecasting for will from approximately For come the that communication markets. and are quarter networks, enterprise plus medical, we're in we third markets. forecasting

about healthy. for present market XXXX 'XX The remains for fiscal visibility Based Now Sanmina. forecast, year our to very new and talk me you beyond. growth let be calendar year year growth a will the on customer growth strong and opportunities pipeline,

are technology more leading support talent and XXXX investing year beyond. and fiscal growth a in for lot to We the

can we I a you has let tell growth. grow. customer expect to long-term you me end markets about to Sanmina we to diversify well-diversified talk that base, continue today and Now as

there. We pipeline strong. well-positioned believe continue segment and well-positioned expand, will medical electrical on lot to be by continue to our focusing We the driven vehicles. this a have business, in Defense automotive

by projects see continue and we services. to have position industry-leading are and engineering see in infrastructure, R&D cloud expanding build other segment strong to expansion order, more are We growth profitable always to configure future. also. but to Communication this nice and Industrial, to providing Overall, in well-positioned more we in technical from solutions we order

for growth driven solid million. X% of margin opportunities are in We exceeded expansion of to summary, translating In free All our guidance, these cash XX. non-GAAP EPS and into of Sanmina. Slide That's turn Please $X.XX our non-GAAP these $X.XX. and strong outlook, second markets demand. diluted above quarter flow revenue $XX operating and strong by delivered margin the of

quarter, third from the demand customer our are For base. strong we forecasting

We to billion this continue $X.XXX billion. outlook to time and our supply expect at constraints is revenue $X.XXX

to all $X.XX the objectives we that are Ladies gentlemen, very Thank open and our I say for question profitable And to set lines these operator, diluted of support. of also again, expect in $X.XX. We for tell to you to year. XXXX you. like would answers. time ready that and non-GAAP thank now your beginning confident can and basically growth you we I year EPS fiscal remain we deliver

Operator

Instructions]. [Operator

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

line Your is open.

Ruplu Bhattacharya

Hi. for my taking Thank questions. you

Jure Sola

Hello, Ruplu.

Ruplu Bhattacharya

looks question first details relates can wondering than more your My in guidance your just you I higher margins. I It revenue provide mean, came like Jure. Hi, if range. some was to there.

sequentially. IMS sequentially. seems as I basis mean X% I I at year-on-year, up XX.X%, think last million related declined sequentially quarter. the was stayed XXX although level margin up And looking I And in because IMS declined basis different XX was to just it was have to at CPS, segments, to the points revenues grew that $XXX components, same it your then points. but segment, think But and the by X% curious at margins

was the in So, second just were the quarter? what about you talk I can if margin dynamics wondering

Jure Sola

to over Yes, I Ruplu, and our just it me let turn add, will CFO.

First driven mix of a lot itself. margin is all, a by

X% as in what feel we of longer have what is it the CFO. X% over keep a fair gross margin But amount it say And upside. we long I the environment in good at this there will We turn would this overall margin. we I to in as call respectable. that And environment, plus we it's believe term,

Kurt Adzema

Thanks, Jure. Yes, Ruplu.

have you prior just of annual for the don't benefit year, year, the the the that we mix as that resetting the we holiday second other of the in pass pointed at payroll of things of portion higher increases, always costs, customers, obviously, other So, then we while call, margin. I like every is United fiscal beginning quarter. the out, impact to Jure But shutdown the salary all, able first to direct have that it are factor. is of thing and impact a had tax in And fiscal employer does you the the have material mentioned the And the States. the quarter on the we on the had in

think I be margin we played for for outlook quarter, will into the things again, X.X%. between this X% do all for it next those But So, think and quarter. somewhere

Ruplu Bhattacharya

you're gross X.X%, and talking about margins? X%

Kurt Adzema

margin, falls OpEx. gross then Yes, relatively margin to expecting obviously we because flat are which operating the

Ruplu Bhattacharya

for the guidance revenues, on Thanks on Just that. for some I my Can ask second clarification Okay. question? Jure.

revenue cloud said your of be your think XX% infrastructure about guidance networks fiscal XQ the At you communication I billion. revenue. is and $X.XXX should midpoint,

these So and be revenues. this you quarter what you well. like would with strong doing strong you and would of the slightly optical a backlog, than is that about have the networking looks lower things reported in X, of And market wondering, terms just communications I'm said XX% be

So, just second if is midpoint revenue if $XXX of slightly because the lower you clarify should I you is think $XXX just which than how quarter. about misunderstood you XX% million, growth was I reported or that the can the curious the in million the like

Jure Sola

let that again. me explain So

in strong quarter overall, my First early very have statement a actually demand that we that. the I for said of many behind all, as very, third and prepared quarters

is there. demand So,

We in the I last our us, are think a I going are for industry. it's constraints think we mentioned as just component to we manage -- as that by great able it. quarter, in I did be job, driven team and I prepared said to the statement, think the in

and We how expect to get to us continue it going components the to well drive we is overall manage growth. that those

components. downside. But there's downside this mainly So, to a lot is more upside than in

Ruplu Bhattacharya

you. Kurt, my that I No, if And it. then sense. Got makes for last one, ask can

conversion I think you cycle at sequentially, held inventory but guys days. grew days the XX cash XX%

the So, we cash think how should just should your wondering on can over was And positive quarters? can give if us of quarter. next I next few you how was some idea flow? how the thoughts couple And we about free about give that you trends us think It trending that over this quarters?

Kurt Adzema

Sure, absolutely.

their and has result gone closely is a we yes, what So is our inventory forecast very up. absolutely, be. think our of with customers That working to future to suppliers going demand

to what that's do. And part a think trying we're of so I big

flow continue again quarter. to our generate as very we cash next about cash positive expect side, I times. sheet, do the On several mentioned it good to feel I flow. I And I say balance would

Ruplu Bhattacharya

details. for the all Okay. Thank help. Thank appreciate you. the you I

Kurt Adzema

Ruplu. Thanks,

Operator

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

is line open. Your

Jure Sola

Hello, Jim.

Jim Suva

good Hey, evening.

Jure Sola

Good evening.

Jim Suva

help those may seen because or could model Have near out potentially higher costs, shifting of does, if so destinations? seems for like onshore that customers destinations the it to your all materialize, COVID, much I discussions? because ask, start undocking, custom am margins reduce issues, that it we cost be of so issues, shipping to I wars, Thanks in hearing to closer are production [ph] end details your correct you it labor is boat And strategically, their more wanted that. far. to trade cost-plus actually

Jure Sola

markets. right first Well, to that are moving them be end closer the to all, makes of around to customers sense for you're what business their

But we to Europe direction, So, everything these time. taking definitely, old as you in was it's In to in are know, more this come a supply we as one that. going set days, -- Americas to regional And like for are in going in be chain. we it's market, more growth see up going us words, other Sanmina things now up. regionalized. and always Jim,

lot lot of know, As a you more realize. world the than people a interconnected

And the more I Those to really -- part the see more closer stay going in of to type are margins. to are believe mission-critical. us driving, to those same this of time, So growth. longer I home. margin benefit And say XX, I focusing term. drive we on Jim, are we that drive of we but would moving the on markets regional. will months, we our products, that’s strategy, expect products next can are the in XX And the that better At products

As you far so growth can year. see, we see this a nice

we start as can long that and important to growth, material, As to expect bringing continue, see the we down are but going a good to more get line. bottom we we that that

Jim Suva

much Thank clarifications, for Great. the you and congratulations. details so and

Jure Sola

Thanks, Jim.

Operator

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

line open. Your is

Jure Sola

Anja. Hello,

Anja Soderstrom

questions, and you congratulations taking Thank Hi. great my on the for quarter.

Jure Sola

Thank you.

Anja Soderstrom

see do of curious, Is give supply just it it stabilizing? Is I'm can you there? what us chain you end? terms what kind -- color your of on of improving? sort Or in the what

Jure Sola

-- week still week and for it's got challenging. say then good. everything need some everything would looks we that I good. looks We sale, I would very

but I this short-term. right I from but But suppliers, now, it's, is 'XX, from improvement think it, I think see a say, don't but continue definitely I I'm what not see to improves. And through export it's week-to-week, going it customers, it XX. our see let's -- stable, I would I Anja. our don't an major on -- hope I

Anja Soderstrom

cost on gross could you also the the pass mentioned we in was to mentioned increase. you materials impacted Okay. that But those Thank money And Q&A customers. you. by

there the negatively ...? why about that's the think lag a quarters margin Is between or should how that should gross there we benefit during and impacted and So that? coming was

Jure Sola

Yes.

out our of this the to I between minimize our a real that. on our minimize very close way when work we that do them pretty, customers our partnership. But what we we environment in all, world, customers impact model and transparent in as with the close projects in model, our call, chase it's First suppliers worked we to these know, relationship, designed a partners these a critical lot especially with of business our call Anja, I is around components very you there,

So, them. we very work with close

not paid for do to, business increases. we for these how I Our -- can't say, afford model

ones our burden increases, but definitely, So customers minimize on with we are the them to to impact have unfortunately customers. very these work the closely our

Anja Soderstrom

Okay. Thank you. then there surprises of sort were of any markets, considered that? your And end in in terms there

Jure Sola

surprises. major No

are I think us, in for automotive, strong now, major in some on years we the major a as of talked businesses. for us, expand component a infrastructure, communication that months. are a there position, we Anja, we but were especially our opportunities we component believe, in vehicles. XX for in strength to are of continue lot is 'XX And where in strong grow. the next have always electrical very will position. that and a expansion the grow, focus not to we Industrial, businesses, And driving -- cloud and are I about, around are medical, critical we we right growing we I these markets to such just couple we as markets mode of look really out, in defense,

the things those So margins -- up. not we drive and to that hopefully, hopefully -- expect

Anja Soderstrom

And Thank Okay. questions. have two I then also, more you.

or In that the indirectly have lockdowns terms from impact any there, of and you seen ...? China

Jure Sola

some definitely, impact seen Well, there. we’ve

shut down was think, I X.X for, weeks. Our plant

working We around it. are

talking to normal other getting it's Kurt as a to last as we shortages. were have in. that COVID, are and and and just it I it, use but used about to we As week, environment managers I it much like survive excuses, material

Kurt Adzema

Yes.

in the just China implications factories on, I right. chain. of touched the Anja, are potential our supply not It's lockdowns China, or global In on those think the in or key it's about just thing you is that plants the plants China whole exist that

that lot that there's all So, seen gets of I'd of of tremendous uncertainty impact the can't but how of stuff getting we’ve say out logistics there. and yet, say backed there's about gets up. uncertainty a lot China I of still a kind unwound

Anja Soderstrom

of then kind And quarter sort what does guidance? kind risk what of to that of Okay. third have? visibility do Then, your you impulse

Kurt Adzema

Yes.

mean, of the this into I account mentioned, uncertainty are Jure we think aware that takes As I time. guidance we the that gave

I account think it's dynamic in environments, And guidance. we've obviously, these in -- be I conservative. best our think I into think to that taken

Anja Soderstrom

Thank for was great. Okay, all That me. you.

Kurt Adzema

Thank you, Operator, have more one for Anja. time question. we

Operator

Capital. comes the from of Christian Sir, line your question Schwab last Craig-Hallum from

open. Your line is

Jure Sola

Christian. Hello,

Christian Schwab

Hey, on great the Congrats Jure. quarter.

to is growth an themselves expected had the said X% of commentary the type Your 'XX kind a and Analyst talked about broader they one in belief their industry, industry and to things rate growth of your regarding be to of of kind that recently long-term beyond, lot stated. Day of EMS competitors and kind X% they given same outperform a of you that

a the and growth to thinking clarity you numbers what wasn't be rate So, put Sanmina? of exactly in type we behind is want that? There 'XX on about beyond for that that should

Jure Sola

you numbers. year opportunities I far, above Well, just look what problem. are not be the if guiding the quarters, think is if to put we so and in this a going this first delivered growth At it, Christian, I what front will 'XX yes, us time, we those at for in at look two of

number I resolution think growth there. investing big visibility markets the to not need products itself, us, challenge right right key to for put really this are But to like these long-term. internally, just to out material before see these but a margins more to our we expand we technologies, in I for drive into shortages

Christian Schwab

you the constraints? of due last guys that months under supply customer much shipped to end demand an you do XX how the of over my material and is, Great. have question Perfect. Then last Jure, to idea course

Jure Sola

fair most amount critical if get Yes. tell I it you, have our the materials. more are of because a The customers this meet trying that We to we that just what those they in more cases, shipped service stopped only need can my customers, customers. could we thing a lot changing most I some critical just in schedule demand most their to operate and environment on critical counting could

So, to stop it's because a go. flexible, are very be our today not and very we have efficiencies good

that so As are better we stabilize on, materials I shipping just we revenue and today. margins expect the on

Christian Schwab

Thank Great. questions. No you. other

Jure Sola

thank Well, you.

all, I'd say of and like us looking First please to today to of most to of next to not, questions. we you back thank XX giving you support. your to your us and you us Hopefully, If get answered listening all for forward to talking days.

Kurt Adzema

Thank you.

Jure Sola

Bye-bye.

Operator

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

You may now disconnect.

Sanmina (SANM) 3 May 222022 Q2 Earnings call transcript