SANM - Earnings call 1 2024 | Sanmina Corporation

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Sanmina's First Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Monday, the 29th of January 2024.

I would now like to turn the conference over to Paige Melching, Senior Vice President of Investor Communications. Please go ahead.

Paige Bombino

John. you, Thank and Fiscal ladies welcome Sanmina's to Good Earnings gentlemen, Call. Quarter XXXX First 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 Bombino

And Jon Chief President Vice Financial Faust, Executive and Officer.

Jonathan Faust

Good afternoon.

Paige Bombino

is call on recorded and and be available the over me turn webcasted Jure, I let everyone being remind website. our Before to that today's call will

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

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

or relates the reconciliation and acquisition posted GAAP non-GAAP integration non-GAAP unusual measures as Included noncash issued is our income ended certain as in expense financial it the will we be first XXXX, quarter also GAAP on this costs, compensation non-GAAP and results. release costs, information our as financial XX, you general, information. press the restructuring in we for to directed and well our In operations release expense, other and of with items. make non-GAAP press on infrequent and Any slides the information call at basis statements provided amortization slides today, stock-based our provided excludes comments between December on A have website. statement financial a

Accordingly, unless this gross taxes, we share, and income, we earnings profit, operating margin, EBITDA, operating to when stated refer gross in net margin, call, our information. to are conference income otherwise per non-GAAP referring

the I call turn over Jure. would like now to to

Jure Sola

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

Sanmina opportunity great take team First, a I recognize and to like job. would to leadership doing this employees for our

you, and delivering So your you, it Sanmina's up. customer and thank for excellent dedication service, team, to let's keep

business Please various on Sanmina X, to and Services Jon over strategies. would Head on years of ladies happy Hewlett with turn a Corporate He Slide I December Sanmina background. introduce you I HP to Faust, operational controls also Jon very has to roles a as accounting transformational Transformation team. record leader global track experience. Jon finance, Packard of and at Finance and It accomplished CFO. to tell previously Aruba, served Jon Inc. CFO XX proven XX, Enterprises. Hewlett He like gentlemen, Jon I'm and you, XXXX. extensive leadership company, of now and Enterprise and held have he Sanmina at a brings joined controller driving can Packard is highly leadership was And

today's go agenda call. to for let's our Now

goals, and our our to about future Sanmina for Jon review then I additional have follow I you. You details answers. will with open and question results Jon results for up will and comments of

to Jon? Jon. turn And like to now over I'd this call

Jonathan Faust

team now, the HP being pleasure have I ladies reputation earnings today with really customer-centric years industry. my of long learning X during respected company in call on for leader enjoyed I've gentlemen. It's first the approach, business. its Sanmina afternoon, Great. my weeks to Thank a at Sanmina. about here a you, been meeting I've market be EMS many be and and for overall that and excellence Good about and Jure. because of and the company a focus is the on operational to

strategy to While a and been to let's I'm talk leadership Slide for date X. the team here about drive our for the strengthened of to turn here shareholders. With rest and QX be has excited with that to experience to my value on short continue I've Jure only only deliver time, and to Please perspective. that, results. the Sanmina's to work

entire the in commend and financial to well market. to period the navigate in continuing while delivering executing the want difficult company's I Sanmina outlook team results for First, with line a

was of revenue to $X.XX our outlook $X.XX in quarter line billion. with billion $X.XX billion, First

XX As which and we've year, the compared gross the unfolding reminder, to last high driven sequentially points the is the decline revenue same period results basis managing outlook, at that our of market-driven which customers, is a our ongoing favorable line absorption end XX points was with in from been with up mix. our basis Non-GAAP inventory margin expectations. largely X.X%, by in

fully high earnings XX of down targeted on margin XX shares continue per at points based to $X.XX share last our manage outlook. and and of basis sequentially million outlook costs end on and X.X%, operating Non-GAAP period same investments XX came basis which at our at when make diluted a outstanding year, to the needed. is basis the in the carefully as Non-GAAP points was compared midpoint we

to margin down X% billion, Slide adjustments talk in I'll $XXX favorable came mix. operational sequentially at similar IMS XX% margin driving to due revenue down gross down turn was XX% we've X.X% lower to due revenue as non-GAAP been with at and XX basis to business. non-GAAP due CPS at and due but Please X, to customer the segment segment, revenue IMS and about sequentially million, the mix gross inventory results. the improvements dynamics across solid to where points ongoing came lower demand approximately in $X.X

X, equivalents company of and pillar has on sheet. is comment turn our balance Sanmina which value I'll the were please proposition ended down very inventory have year $XXX the quarter sequentially down to we to advantage where a is investors. on balance X% from to improving $X.X with Cash and ago cash and as focus first strong We Now of inventory sheet, a key a continued the which Slide billion, XX% the million. position. our of

which We on navigate of balance of to and have continue industry us. the in in sheets both strongest one leverage, to complex front us market low with capitalize environments the opportunity allows long-term the

our where we're a to drive great quarter. making allocation. did decisions. capital areas. requirements job putting for as about the to opportunities quarter, turn to we capital allocation talk Each right cash value, our Slide cash I've evaluate this and I'll managing capital Please I'm approach shareholder X, taking flow a reviewing priorities, And look use disciplined Sanmina's cash when been confident and in We ROI-based allocation

As opportunities. transactions; four, actual those reminder, three, a our The carefully growth; to debt number reduce priorities do on organic two, are mix which ratio; and on one, number strategic fund share manage and our number execute number and needs depends repurchases. of leverage to: our

operations for support Sanmina's as shares that approximately $XX on touch flow the were the continue XX, during And million. profitable of as quarter have million million. our flow $XX growth. end the make for million. Board we X.X long-term was cash million Capital highlights, we will quarter, cash $XXX repurchased approximately And left to we authorized plan. Free $XXX on million in To December expenditures a from was $XXX investments few markets

forward, Going share to opportunistically. we will look do repurchases

adjust strong a To levels. on delivered the it to what the as on face conclude QX customers results, was as said would, quarter headwinds continue we overall, we actual we despite inventory we

I'll is to customers. the based market from outlook our second everything our cover forecasts now Slide on are which XX. seeing for and in turn Please we the quarter,

Revenue follows: with Our essentially outlook $X.XXX prior to billion, the billion flat is $X.XXX between quarter. as

while with we're second of providing elaborate that improve Jure the and X.X% should Now start quarter, on are the beyond to year, guidance shortly. Non-GAAP to signs with in of will consistent revenue half margin the gross demand seeing X.X% we second not prior which income approximately to and of A levels. dependent of Operating of on in to to expense, $XX line rate margin mix. $XX levels. million, normal in Other operating X.X% tax $XX XX%. line normal million, XX% with quarters X.X%. and expenses million Non-GAAP

diluted opportunity the noncash look in We programs million pleased future this you strategy. million to also with our to fully reduction as meeting shares net our continue estimate expenditures And to approximately to $XX our million needed on million be outstanding. Capital quarter and with income board, range new on invest where to based opportunities the to JV ahead. I $X.X EPS I'm to reflect to your I'm $XX $X.XX finally, Non-GAAP $X.XX And support approximate million. Overall, to performance an $X our support equity very XX interests. of around of excited long-term perspectives. and now many that depreciation about of approximately hearing forward and we partner's

With that, turn back Jure. to me let it

Jure Sola

and for our second let I'll of comments add review more outlook rest XX. fiscal quarter, a first Ladies me to quarter the Thank Jon. financial and our the Slide few 'XX. Please gentlemen, the the you, about and highlights for end and year turn markets

this our overall, execution and quarter, macroeconomic heard, and the in manage demonstrated to first outlook, For as costs ability met we already you we operational environment.

inventory are coupled adjustment softer we across customer For industry. overall markets, with seeing the ongoing demand

environment? this Our business dynamics aligned to like to in advantage market is Sanmina is this. What adapt

We have operational execution. strong cost management and

key In our footprint performance Sanmina The capabilities, is to customer competitive in by bottom IT We focus growth markets. predictable by Connected well advantage we the industry-leading Smart that technical MES. and consistent requires Sanmina are global delivering managed markets diversified provides Sanmina a and systems regional globally. our on, customers line that

XX. to turn Please Slide

you the to talk by me revenue Let about end now markets.

in we environment. said, we a are operating dynamic very As

job aligned team outlook. a Our financial great quarter with results delivering first did our and

revenue inventory is in medical, in automotive we industrial, our see can you at billion was the graph, adjustments in softness $X.XXX was a and for revenue, Quarter-to-quarter medical here the of X.X%. What As XX% saw came and some sector. quarter. in down defense

million. cloud from softer XX% due communications or For and XX.X%, inventory to delivered revenue $XXX at market infrastructure, down networks demand adjustment and was mainly we markets. Quarter-on-quarter communications of end

some enterprise saw in also We softness cloud sector.

quarter of represented quarter, expect XX% is but of second of for top XX revenue. first than fiscal to Demand slightly half the for sequentially better we first the improvements second were customers see quarter flat, year Bookings in our quarter the our fourth 'XX. 'XX. sequential For

Slide XX. to turn Please

growth let's key investing Now drive going and markets for higher-margin and energy, to are medical, packaging. digital about vehicles, future has been for defense These markets. markets industrial that's Sanmina Cloud, us. end renewable electrical us. aerospace, the faster-growing health, optical the talk and in

needs traffic and aerospace for the around driven a of more we ML, demand. built solid networks AI meet basically upgrade see lot opportunities see by to cloud, AI and cloud continue future. Defense For will to new

For for medical base we fair have a of see electrical opportunities positive vehicle projects trends with and great us. lots new longer of digital term. we amount in health, and of vehicles strong a of front customers charges, Electrical

will energy, Renewable projects new growth. us drive for the

our and the business. of industrial, business of have gigs. optical a all new a XXX it's see base trends projects in for we this about For lot us, solid in And of packaging We pipeline. side

tell that pipeline exciting the our can I XX. is of for So Slide you to future. Please new the turn opportunity

Sanmina's one, around Now is requirements. growth. customer profitable basically everything build let talk priorities culture about to Sanmina long-term me drive to Number

company. We with able of a that, are partnership customer-centric strong long-term the we're to a build leaders. market very Because

to is in base technology existing can to we key in base. Number in customers to And We our markets. that And -- markets. strategic customer new have build two we even again, are around provide you needs. is strategy, I are the market, this a adding tell diversified leading continue customer regulated heavy to great

competitive technology to total solutions advantage. is Our systems. a We NPI from provide full

We are quality of and by industry customers our well for execution. respected

can for time they our at their the to products market new get also a flexibility faster We deliver market to so rate. customers

Sanmina Number for long-term positioned a three, growth. is

growth strong inventory improvements the pipeline of we're on, year 'XX, sequential do is in year base. opportunities. correction we a with and going second all year with invest to beginning that 'XX, half our of knew do expect the we'll the have fiscal fiscal the We new continue starting but that We in For opportunities. of a lower revenue

We X optimize structure to drive to the also in the X to capital continue years. next growth

billion. that run goal billion then can But billion $X I to tell is $XX get the flow four to us and way, you grow. Number back drive to don't revenue growth for want to rate just that $XX generation. and this is expansion margin we to cash So

goal do than look to last allow We able operating at we internally goal Longer years, a to high business percent. margin are end. is if those term, And focused deliver X-plus you X, our is margin on our us X% margin numbers long-term to that our more term, that. model we're And X the expansion. believe operating Short will X%. over

We is how we'll continue have high shareholder get there. cash do us maximize five we'll to to term for the this value term. short growth. And and confidence long drive And generate number we

As Jon told repurchased we shares you opportunistically. earlier,

over business significant is we leverage positive here $XXX our For million. model. we what in the first also have Sanmina bought still quarter, that in business And

now please Slide So XX. turn to

high margin $X.XX, outlook. For heard and of with solid from X.X% execution of operating performance quarter, our delivered of is end already we at EPS this excellent $X.XX diluted the of our we the delivered in a line outlook. Revenue by non-GAAP first and as you and had billion, non-GAAP team. our us, a We

outlook $X.XXX basically we're guiding to $X.XX, diluted revenue be $X.XX to second to billion quarter. And to our at EPS, which is For quarter $X.XXX non-GAAP between going first billion. flat

second support. Operator, as said, and of customer year, all see are the to to for year. we your again. of seeing we the open for this we Thank ongoing the year, of I for and believe you and the half But inventory thank to question expect already we half and improvements. Ladies like all the answers. in for you For gentlemen, demand now now first lines softness ready would time sequential we're absorption

Operator

Capital comes [Operator Group. Instructions] from question first line Schwab the Your of from Craig-Hallum Christian

Christian Schwab

us one or that tell two the driving Jure, year? can the anticipate back seeing the the growth in you just markets, specifically growth sequential you guys half -- which of can on you

Jure Sola

we calendar believe calendar as first are that there's industrial, next adjustments as year. inventory especially stable look are we third, we but Well, fiscal on improvements year going I at our medical, aerospace if nice mentioned quarter see earlier, us. markets you to or And our then pretty now, those markets, defense for exit some and expect in yes, and year

involved cloud see those comes lot communication customers improvements that a major of projects some a a projects and in -- of the there. that to fair up AI, correction the will look some of if markets. Also, when our of basically that the a their we beyond. upgrading about side, we networks you will than had those, infrastructure of and based So are let's participate at cloud a improvements second quarters be take We half, cloud in on and are lot coming new inventory to it believe on the market, networking that -- the that to are into amount are But talk couple we us, -- for with there. infrastructure, Sanmina some second half probably get then we will longer segment a year in in the have we

Christian Schwab

the the you this most is quarter, worst do So But on after the quarter, for vary. customer's of inventory levels part, do equipment some that communications multiple this possibly is as part, you think exiting a going again. ordering anticipate puts each and few to digestion quarters returning suggested, Or just as you you? and takes others be more to have are there of behind kind

Just -- wasn't that I guess clear.

Jure Sola

say see Yes, worst until quarter in but see But better quarter of across would that. expect our on is I improvements I the fiscal would more year, of fourth us. probably those to improvements some markets, behind third the even to

to our based I quarter, do -- smart the improve should how see customers, know this I I'm we definitely from and I but expect We'll hearing on what that would but expect know be third is if through would shipments. see I able go to quarter, -- key when we enough I'm bottom, don't what I

some has So the say X.X I that, worst communication these quarters. us. last yes, think going the is Because behind I of for can correction been on

Christian Schwab

Right. Correct. Correct, yes.

starts the the on Are industry any terabytes? seeing as So XXX then my positioned X.X gig. possibly to moving strengths, in talked last guys particular, Jure, about strength you well at question, or you optical, seeing

Jure Sola

Yes. Yes.

on the side business. programs, new yes, We those especially are working the of pluggable of some

Christian Schwab

market Okay. And in would Is that, you fair? would anticipate that that 'XX. solid be

Jure Sola

definitely, segment. some upside movements But a I us, That think there's expect positive was say amount 'XX-'XX, fair around. of I would -- of we the that end for in

Operator

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

Anja Soderstrom

terms some progress despite end than anticipated? also are of have that? on a environment. here do challenging the that's the you has there. been new from hearing to for a other quarter further markets there. as in little are solid inventory I What that the you and dive Congratulations heard that of into medical the here that peers ramping want will that longer bit well there corrections offset We sort if And

Jure Sola

Yes. at communications some okay? There more across almost side, every a now correction like had And impact. we in not are different that's a but Anja, inventory there, impact. an customer there's a out major level,

side, improvements On some just in the softness during third the and quarter inventory demand correction, in and the continue that hope in finished, medical quarter. second expect we that year. we some this fourth and to we that this and quarter we of had

base our XX% comes our medical. from of around of So we're -- revenue

So very lot of customer also 'XX that a a 'XX. even for and the to basically with we changing of it's 'XX have solid us, base end cases, some But in programs are into us.

also got the new in we've lot they upside, programs, some years, next So going upgrades. a but of X through have

Anja Soderstrom

that this about, And -- talking there Okay. that within particularly are those end was were groups any market any you strong... of

Jure Sola

ramping us our solid. strong. energy parts, was about the us is but programs. the up -- demand. saw especially new a of of on is for Renewable That us We're Industrial unique just XX% solid still lot was demand these certain some now chasing programs, and for It's of for revenue. Defense still Aerospace so technology. new are

earlier statement, to starting for prepared ML. the as I us. our cloud, to they of AI and like as said amount So be a fair on from solid switching And customers in see to that continued support are we're demand

Anja Soderstrom

terms here? seems Okay. Or a where great job inventory, think continue in that from managing are it are improvements to we should that? Do of And doing you as you in well. like you targeting see

Jure Sola

improvement. Yes. We definitely expect to see

Now with CFO, lot of actually improvement have I new a my there.

programs and and we're on. lot do hard and COVID customers. working and improvements, manage our with learned a We so now, internally have the to through we days, -- very on we So it expect how that

on make we focus So there's going if have smarter. how that inventory, side lot like on industry sure both especially with to we are we And of a forward, our have of course, and, customer the we the COVID. side hiccups do in manage

Anja Soderstrom

Okay. We're you talking achieving and kind think here years of margin. operating that of margin...? in to need couple revenue X-plus operating $XX level eventually billion do percent for $XX billion you a What revenue

Jure Sola

I our a the of so and -- in high as key run our to lot is the new the business, the we rate But components. we these almost once expect in see, billion the year, it's for much mix. as much exited comes to it But Xs. We're we technology Xs last mix our a from to how products products. it group on of and closer get can investing think get us $X.X technology think $X a plus, how I you plus, as -- a we billion billion. be does come But billion for year low us, and -- from $X.X to the we $X around

defense the industries. We in some are investing of

lithography. into investing are We

there European and have with so partners we We have equipment, precision lithography that some on. machining

-- those at for of long got spend we the come lot together, as because already the way a a our things as lot And plate. we growth. think I money So

don't internally. grow grow. But I make a grow got we focus We a for to got sure to growth to going mean the we've that's want now have smart. whole margins. We're we sake. to that So right respectable

Operator

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

Ruplu Bhattacharya

questions. few a have I

over start you good maybe have on top just can us months? are your tell me Let XX the what Jon. board. Thanks. It's focus by you to welcoming X, areas next X Maybe

Jonathan Faust

number more learning speaking Yes. one, looking things, to me. you, nice you. A the That forward would business, priority to top you It's for is say right? with couple and with just Ruplu. of Thank I the right? connect So

too. As weeks remarks, here been I down first here, about spending to of capabilities see mentioned business. and that team. our of able the the been week one X the my a just I've lot able to in really and the our into I've I details a major leadership of was some time trip facilities, and to important with for just be In meeting my make firsthand prepared done very the in Guadalajara was and Area, to getting then in Bay

of normal couple through business a for as were of we back went course just reviews. kind of call, So weeks the our business, in preparing we earnings of this all quarterly

to drive for in going opportunity So and deep be, to market, with customers to the just inventory an was priorities in be helping some that to do on to see about the improvements, of or of learn operational me to decide Jure need the divisions, it what's opportunity respective with otherwise. where a in great dig talking was what's right, happening Anja whether example, our about things all our what we drive as

Ruplu Bhattacharya

Got it.

and chime ask either question me you Let you in. or Jure another can

were as part XXX from that operational you've of part decline. improvement XQ CPS to I'm parse this, on sequentially you revenues you you've this because to past, about out can look if see -- mean sequential XQ, So the trying of points of that this margins I in if had quarter, is improvements. segment years mix down basis we saw is said

how this structurally XX% how -- sustainable mix as more this versus operational -- characterize related So this is level? you much structural would at improvement? And of

Jure Sola

let Ruplu, -- is this Jure. Yes. me

going what of kind on me going -- you last was of overview give quarter. what's Let an

the some of you component the demand because We back, see other to definitely, component to we when component believe see adjustments to end our XX%. so the business, our of that, us. right seeing starting some services, the that that As now we're it's products starting businesses were said, key minimum affected goal for we're our there that okay? -- businesses. for revenue first, that light inventory So get comes is tunnel. we the to and to Ruplu, come our a going Similar to in We're

factories. yes, it's down. getting We are investments percentage us, So these think I plus come And us into might we Ruplu, programs And in Area, short-term the And of is to in are our is help business you the that more to already working made, if you ever go you the not the that all and there I but it that profitable. we on of sustainable. the we show for and you around just But have think on take the what to it's minus up revenue. drive longer after side is about investments the a some Bay we have the and now business are time, really made or term, revenue, us. we'll have front that component

what Q... in last to want something to the learned you Jon, -- that you add So

Jonathan Faust

is Just for in a weeks here, that priority big X us. the CPS I've been but

I think I would add to what is saying. Jure

that And businesses different really continue boards, good you along machining, and expanding plastics, from of customers. focusing So if and our look all on more printed for circuit value point, more them, and the adding improvements. there there. precision there we some add lines just of Jure's to value customers think business, for that that our margins. expand But operational can we to grow saw we do is To

Ruplu Bhattacharya

about Jure, the double-digit sequential at I improvement when sequentially kind talk the expect like consensus you I in -- I level both Thanks details. that second Any Like couple revenue Since that? expecting? a of growth? is mean, the strong I mentioned is mean, growth improvement, What sequential do what you that think, of expecting you for mean that? you double-digit XQ, look are you XQ. you've think I times, estimates, half. Okay. about for consensus on sequential growth growth you're modeling a If color how of

Jure Sola

in at environment. be and -- guiding, really make shake it coming quarter, right sure okay? into get X the the here. I we are think going okay? fourth upside. Yes. We're base guiding time double to especially a third the strictly question the growth. all new We're the be just much, But hard quarter this programs fourth are Ruplu, are now how out. that can be quarter will that And in for The For up to I me much. quarter, It's third is it. only it to clear see But is that can it's how can but the our inventory up, as digits, going depends drive quarter, speculate customer We're how to we

can did. overcommit, but than the I bigger So don't positioned lot want to this I commit to that what longer just term, a be is company we

Ruplu Bhattacharya

more Okay. maybe squeeze one I'll Thanks and just for that. And try in.

think year? about cash EMS is talked Like target? how inventory we cash also this companies, free free you free strong You there have for about strong flow economy flow? Typically, flow cash sheet, if quarter, mean, free cash how -- sustainability free should and and the cash went down. a countercyclical I weak, for flow on thoughts full balance the flow. the should thoughts is Any the

Jure Sola

this amount you should did properly. know good just our Ruplu, we should business I quarter. mean, Yes, do. generating. be last as as a I utilizing And of definitely, we generating be we market, cash we're flow down as Yes. free is a In cash fair

at is volume. high stock Our

million of over bought $XXX debt. So we

million, continue million, be historically, flow Yes, $XXX level. we if we for flow you year. generating a cash free cash around should free $XXX look at we've to be and been invest. We that expect I at mean, to

Ruplu Bhattacharya

fiscal For 'XX?

Jure Sola

in gets term. the And in term, used this I'd up we say how short general we'll -- how just inventory see

carrying XXX% take they than off for turning We and of I have X into about more -- a bit But in just to all, are -- inventory. little tells it's just is these and charges first getting cash and charge that et going cetera. good only term, think industry, that customers inventory, our our short what know where that's contracts Ruplu, us we to the responsible thing might think you buy, this months. the for things buy our books I the we

right. All now thank said, And for say participants. answer Jon we first to questions, like all as to want our available, all especially of we we're right you. to if you all, as Jon didn't I'd Well, to get know your

So lot. Thanks call. please a us give a

Jonathan Faust

everyone. you, Thank

Operator

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

You may disconnect. now

Sanmina (SANM) 29 Jan 242024 Q1 Earnings call transcript