SANM - Earnings call transcript Q2 2024

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Operator

Good afternoon, ladies and gentlemen, and welcome to Sanmina's Second Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Paige Melching. Please go ahead.

Paige Bombino

Thank you, Jenny. Good afternoon, ladies and gentlemen, and welcome to Sanmina's Second Quarter Fiscal Year 2024 Earnings Call. press our slides the website section. our are today's Investor of on available at copy release for and discussion Relations A sanmina.com in

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

Jure Sola

afternoon. Good

Paige Bombino

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

Jonathan Faust

Good afternoon.

Paige Bombino

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

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

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

Jure Sola

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

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

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

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

now I'd up Jon to to have turn Jon? Jon question of will and goals. and over like our follow details call results to Sanmina's I open We answers. And Jon. future and for I additional with will comments you. Then results about for this review

Jonathan Faust

Great. here today. Thank afternoon, ladies you, Jure, and you gentlemen. and for joining Thank good us

delivering job. results, Sanmina want continuing the executing with to through for to company's team in I and financial go we do acknowledge outlook and line excellent Before the entire results the financial an

and less income that previously period our the asset of by income mentioned same This but operating our range in execution improvements as headwinds believe remarks. Non-GAAP his as impacted more very the guidance X.X%, at outlook. and usage line high outlook is points year. basis gain range, expense noted period in due based revolver. our this approximately and result Slide margin due $XX.X of by X.X%, per cash generation strong strong to diluted end was compared year. set Please $XX the I of end results the and was million, the well $X.XXX X. which million, XX last talk which fully was shares quarter the incremental other a approximately let's $X.XXX to outlook XX of sequentially. $X.X slightly interest and We We're million deferred billion incremental outstanding margin operating compensation plan operating basis billion mix, combination our our high gain about X% revenue expense earlier that a basis of that low is at points to I which the the up share favorable is the earnings to this turn QX same down we with X%, and $X.XXX and as margin solidly sequentially other to to short-term guidance Jure the year. Non-GAAP $X.XX was driven to in driven $XX to outlook were expense the expect basis came margin last which Second Now asset lower customer also X% gross $XX in operating perspective, the earlier, to still above sequentially expenses the XX has exceeded prepared our was our on we XX and basis of business discipline. Non-GAAP expense expense slightly favorable absorption of I ahead at and revenue pleased million interest was our inventory primarily on points results. in was on will million, at down billion out an leveled approximately and related from higher which which by deferred item. Non-GAAP was offset see of dissipate, a of gross comment compensation compared our points quarters income result, Non-GAAP completely to midpoint due million end XX at focused by to

approximately talk the to in $X.XX about X segment X% results. Slide billion, came revenue to turn please sequentially. IMS Now down at

margin efficiencies. in came non-GAAP sequentially points X% up basis CPS to at However, on unfavorable to and up our $XXX down due to margin was mix. million, operational revenue about gross strong due and basis and XX execution sequentially points CPS sequentially, XX driving slightly non-GAAP gross to IMS at continued focus XX.X% X.X% was manufacturing

pleased with the we results, we're CPS supporting While margin both further our segments forward, to continue for objectives. and these IMS in see longer-term opportunity going margin improvement

talk the please Slide sheet. turn to to Now about X balance

the on million. balance team to equivalents cash quarter. did Our again a it sequentially, of company quarter, of borrowings us Cash pillar with job and the great slightly $X.XX and had substantial end proposition up our the key this the a inventory investors, managing we were is and value our sheet X.X%, billion. revolver, advantage with down At no slightly ended $X.X quarter leaving were of sequentially. liquidity billion, turns $XXX and a of the second inventory over of We

on improving inventory to increasing turns. focus continue We our and position

pretax the of Our was cost quarter, capital. weighted for non-GAAP ROIC our XX% well above average

on did have the million a $XX leverage the capitalize opportunity on and navigate from sheets allows the We industry and ratio both operations half. Capital market in the $XXX continue $XX few to were million of balance low with quarter strongest complex environments for in long-term of one for million we for flow which in the to the as the will us X.XXx, to was investments that flow about To half. a make cash million I'm highlights. cash touch in are the a turn continue growth. quarter simultaneously. Please quarter Free talk putting Sanmina's Slide the $XX We for and approximately I'll cash where allocation. confident areas. markets and was first first capital for expenditures flow use us million right quarter, support cash X, and our we this to to end the great of long-term job managing profitable $XXX front Cash

for million. we've the we shares During for million. repurchased million $X.X for half, $XXX approximately the quarter, shares X.X XX,XXX And repurchased approximately first

of have on we an to basis. XX, approximately As $XXX to plan continue repurchase intend left opportunistic our million shares on and March Board-authorized we

Overall, the execution decisions, is for we the value drive and the we those a us continue strong to provides we to success. results. forward. To look what set delivered said we quarter as for cash business. up the on practice we opportunities to on making on was we investment actual while conclude focus will and follow a to would, which approach, continue future invest going ROI-based Our generation QX When in disciplined with it a taking flexibility shareholder company

we please Now our based the to the now market in outlook our cover seeing third turn are which customers. Slide for and from quarter, what forecasts on X. is I'll

$X.X is sequentially. billion, between outlook to as billion revenue up slightly Our $X.X follows:

demand quarter But to on and Now of we which $XX X.X% and on normal to at of prudent up only elaborate mix. of shortly. Non-GAAP $XX Jure we time. levels. seeing in up are line in signs are million that continue X a to to environment, market it's X.X%, starting slightly type X.X%, will this with believe with million, X.X% slightly improve, practice revenue margin sequentially. margin our sequentially Non-GAAP Operating of guiding operating to of gross expenses dependent

quarter to of long-term $XX shares income to to estimate to rate our as reflect future million, $X.XX in reduction EPS million. approximately outstanding. million opportunities expenditures to to India more turn me XX $XX we support XX%. We JV's would. With as And around based range let over invest $X to our finally, expense business. I'm be line our an our in $X.X strategy. we to very approximately noncash $XX expect of and million to and delivered programs on partner's that, net diluted interest. Non-GAAP where $X.XX we fully Jure to income new We the performance Overall, support approximate needed continue depreciation the equity million Tax with on Capital million the to about said what pleased XX% other approximately of with be levels. this call we normal talk to

Jure Sola

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

met results. for outlook. heard from you delivered Overall, quarter, we our As Jon, the second good we

stabilization and through very seeing to end Recovery incremental this are good but at in slower customers results burning can expected closely of of are inventory. resilience remains. the deliver year, environment. demand. as and are team than financial macroeconomic our Sanmina in slightly markets uncertainty But the we improvements continues demonstrate We working is you in their some our I that beginning they with tell

tell So base diversified advantage market? [indiscernible] us what you Sanmina markets. big customer get through main can are well market help strong a of in we to leaders has environment. that to is growth this I the in

key as market with growth drive projects our are with very We working improves. and to customers new closely existing

aligned business Our market well is to to present dynamics. adapt

strong management cost have We place. in

Jon as flexibility value. And have to our demand. We to Sanmina the balance maximize aligned cost Industry's us a leading gives of mentioned, lot business present sheet shareholder

So please turn to Slide XX.

within let our roughly talk was X.X% by you quarter slightly billion, more for was approximately revenue quarter-over-quarter aerospace I guidance. were quarter-over-quarter. quarter. markets. to of slightly defense, Industrial, XX% can automotive down the about end say this medical, predictable X% Now our forecast me Revenue and down second $X.XXX revenue,

For and good aerospace this demand saw we automotive, defense, quarter. during

quarter-over-quarter. Also, ship For XX% that testing you will was it revenue, cloud These we third shortages of capacity issues. material from had of but tell I some can we resolved and networks, segment, and be in that quarter. could infrastructure communication cloud in our not communication X.X% issues higher demand new projects networks our because slightly a down

revenue. XX top And bookings X.X can quarter, over our you well-diversified plus. the I nicely. to quarter We're XX% For customers plus for improved also have represented customers we that a Book-to-bill XX.X% of was X. no tell second company. second

Slide and such XX. has products and optical Sanmina to in end infrastructure, a higher-margin aerospace, markets. packaging. Newer medical, renewable invest cloud energy, faster-growing to advanced demand. Please defense are automotive, continued and driving turn industrial as

of a each make them. few So let me comments on

positioned traffic upgrades cloud AI been Sanmina us. to in is opportunities well new from ML infrastructure, our meet driving mainly and driving been AI. benefit to is For needs. driven -- AR it's We've growth in for by networks cloud

to in the XXXX. of 'XX, opportunities calendar some bigger see We we're and and year expecting right have but now rest more benefited benefits the

For continue defense see solid we program long-term and are wins driving demand. aerospace, to our new growth.

medical and surgical, Medical, disposable health systems. drug consumables, diagnostic imaging lab such and delivery, For our on as focus is digital diagnostic devices,

we term. of have long trends well positioned We We strong and base see customers, a positive here. are

-- our as calendar new longer For a vehicle year term in is Short-term September year drive fiscal motive, the a focus we better quarter, on electrical see and demand charges. and forecast beyond. we enter but will electrical for December We demand see expect mainly softer 'XX we to opportunities and improvements growth. and

controls to been storage renewable we power, around of power new and We've generation For management. win energy, continue and projects. focusing

opportunities the Here for growth driving are same thing, us. new

We on equipment. solid have measurement we and and Industrial, see For automation, customer inspection focusing We've been test stable factory base. demand.

For on term. 'XX. semiconductor been new Overall, see for part lithography. half of projects improvements of more the stable, industrial, but has the the us we business we will in second we longer in pipeline solid that have growth That should focus drive the

and XXX we're and mainly AI to few I Again, starting AI -- where to the around data slides in term. Please I X.X today. Advanced drive longer we and for growth business Growth pictures product modules, this participates you and new center for applications few slide this Optical Packaging, Samina of a wanted Slide For the XX. turn and ML in a this will show expand segment cloud to mean here. for terabytes. see just gig to do R&D introduction good opportunities optical on

see, across And as equipment you cloud and storage. Consumption such all and doing back hardware, servers, product ML modules, transportation, automotive, going learnings infrastructure aerospace. utilizing lines management, of our and as our such powder can software factories optical power then, optical is machine by and safety, communication, for security, IC AI/ML controls, defense office. service care, capital, as As we're and markets automating AI as for such ML what health internally components, development of such networking multiple semiconductor across and infrastructure course, AI and

margin, drive diluted are I a this revenue of future we XX. $X.XX EPS we quarter, AI, In summary, turn in and high involved believe line see, $X.XX, Non-GAAP in outlook. with our us. Please for will our had operating of can Slide you X.X%, better for second to solid as end So execution, non-GAAP billion, of heavily outlook.

respectable So quarter. overall,

is customers For what our end today. market seeing from Jon third as mentioned, our quarter, outlook, we're

visibility of The and $X.X $X.X of normalization better, to side, third see to On starting we're I guidance EPS Non-GAAP billion is will chain. $X.XX. quarter should positive will some at our supply to have be a billion. $X.XX or more getting say,

forecast as growth fourth For And see we improvements move our optimistic see of are are can second quarter, Sanmina. to tell you into personally getting will stronger about we for starting for that we the as forecasting. I sequential the our half quarter remain we that long-term year. I'm we excited September

fiscal for before, year a As is transition I said year XXXX us.

dynamics are changes in time, are the our these margins stable to holding positioning X% the market percent. of and pretty improvements We margin term, are X%. making they're by navigating well. the to range Short to drive operating At and operating we same longer company X-plus term,

we that end and 'XX year got will focus a a advantage, is drive we be for that's and in markets, heavy to the regulated growth expect fiscal markets, the year there. believe competitive our our where have We positioned growth we've

all to and would thank thank manage your you for for short for now the term, Operator, like to to well So answers. dynamic gentlemen, and positioned your to open and again. support. market. Ladies we're in lines I ready summary, term and question through I'd now say you is like Operator? Sanmina long this time

Paige Bombino

Jenny, are you there?

Operator

from question Ruplu [Operator from Instructions] first Your of Bank is America. Bhattacharya

Ruplu Bhattacharya

optical trending next seeing mean Communications how segment did how versus end can us The you help the in networking And and couple that was out quarter? within versus communications, how cloud inventory do details year-on-year. being pan XX% much that of this they within over parse some markets and are how different grow? How correction the down segment? did segment? see Can I quarters? did How that? did wireless? And give us And communications was Cloud more down you you you how much

Jure Sola

question. the for thanks Ruplu,

of no in all, down X bottom I surprise come has now, asked of you it. my when for communication inventory there's mainly quarters, to segments. opinion, in that in driven by market the certain to going the end? demand is last softer been believe adjustments question, the some But First and we

forward, think it supply is think starting to on. and more to so forecast. And we're starting we're on As most when as visibility I some we importantly, our I comes predictable I go and and some so said, I better normalization as see see said, chain to

for on itself back you if XX% of -- got of cloud cloud about to XG around is it That's affected, business -- I about is look so revenue, on around of and that you at communication us. half networks. I the A do has is the so But and think if lot better -- optical and think, the communication demand that half today, doing networks the is and we whole Ruplu. on. of the especially networks,

starting on it's not the of end we're train it's see and to but -- a -- tunnel, anymore. light side, positive the So the

Ruplu Bhattacharya

Got what it. stuff on And optical become the So can I technologies in you a Maybe you you've XXX will That's time phase? line packaging Slide ask that think a about when in like these do to talked about and of you is type these X.X detail you. shipping you're when become adopted? on? little helpful. -- more as XXX-gig mainstream, what any Can it. talk Or On working you expertise and for Sanmina's that us Got projects are more bit Jure, testing are technologies now? XX, follow-up, terabyte. give

Jure Sola

line pretty product on that's the X couple in been We and started gig designs gig of packaging. especially business couple our Yes. with a shipments years. making of strong. X, do development we a XXX years optical investing type of process. fair time, product. NPI ours amount in say, a X.X of doing a to starting long in [indiscernible] Overall, and and last would been a partners for That been We've We're for I modules, customer optical in business optical getting strong XXX advanced our optical us optical We've have We've networks. involved across is into base. some terabyte last

Ruplu Bhattacharya

Okay.

ask I'll question maybe And one Okay. Jon. to

quarter. sequentially your of you uses a on cash you free So inventory cash, and environment? this cash conversion we flow in give bit your cycle about on us thoughts trending? cash remind of prioritize was how overall uses down just us And how think you how Can this little the see should

Jonathan Faust

Thanks Yes. the question. for Ruplu. Sure,

cash of the you But history the of in the closer we're terms right XXs. mid in the if So now. cycle, look at back into we're XXs Sanmina, conversion

to if a going not bit got we've be Inventory is quite certainly And room between the DSO, beyond several And DOI, elevated to been, is board. historical our DPO what down little itself I so have we're striving break think improve DPO, right? towards, that bit high. days that's of quite as you a levels across what

definitely into of that should X changed, on of priorities and generate line, down capital more allocation, us And everybody bring to you our just reiterate for going got we're to So working the be help back in focused them to else cash. And those for on initiatives terms haven't capital we've right? which call.

in is and at down levels which paying or continue X growth, growth repurchases, three, low transactions pretty four, already is indeed, strategic then share number our organic mentioned, opportunistically. to will number inorganic do the two, So as business; debt, I which,

Jure Sola

expect of to strong strong cash the add to generate for about rest million and we X that, months, pretty to to Just $XXX the for cash year. was continue flow

Jonathan Faust

Yes. absolutely. Yes,

Ruplu Bhattacharya

And do of for flow strong 'XX? rest free you to expect the calendar cash continue

Jonathan Faust

as time, X QX at cash the very we to Ruplu, expect first guiding into you are the pleased in going in QX. in then to but half, know, that we quarter Jure the as here as guide and positive And a first flow saw cash generate mentioned, quarters, And with X performance Yes. we we well. be

Operator

Steven Fox is Your from from Advisors. next Fox question

Unknown Analyst

questions, A could. of couple if I

Then terms talking the to on sure in and and sure just we're -- how capacity of some chain test during -- what expand some markets make you issues all want mentioned of sort I I have make that and solving you're another... quarter. constraints Can -- you that supply First problem? just of about

Jure Sola

X good Communication top customer And quarters. put the that X, from a customer this Yes, driven on a and test design X, customer of design Steve, fixturing. size came should next go Yes. that also want our base. mainly We around Cloud project to our for

modification in production, to some And got be of the involved realized as we made. modification needed we some

the shortages some we're changing. At to We materials. same time, have

and should On sometimes the sometime continue and this start the going should good things be positive quarter then resolved side, a program next hopefully to quarter, and for we forward. this be end these shipments make pretty will us of quarter

Unknown Analyst

than it. see were you know, opportunity, Got walk as you you helpful. That's to a next, through do the X just And Can say, what quarters? improvement from you see don't margin as room mentioned, your gross then expected. gross X gross better margins margin And bit little for here. over the I still

Jure Sola

that to our some sell the the is our customers. mechanical Steve, integration driven the we're what premium ML, all on we're from but not circuit so by goes coming providing some the think technologies It are more to that if AI we lot our working provide to that and printed some the our high-technology of cooling market boards, value creating circuit you goal mix rocks here I Well, we especially of improve customers the server requires boards. value, of of offering and around more in market just leading the are at and look it a price that And Sanmina's advanced with new the I business a requires out. that to way to sell believe storage. technology

I area the few I in talking drive optical margin able a about and earlier mentioned we're going always investing expanding up. into be participate moving be starting going we've -- to strong -- next area years. And to components in But optical the to that that been we'll demand We optical optical that's believe optical now and systems. modules basically to there's huge the very -- So networks on optical were we're to. our An in that business.

that's way all so another for on especially that lot for upgrade from to has us on. Renewable We so fits strong, the It business. and printed providing board from high area assembly power boards our assembly and also cloud. that circuit focus the system heavy on requires to energy, because aerospace that we to expanding want the been business the deliver. that be electronics, and capabilities -- AI end-to-end and of Demand mechanical, business model, to expand Industrial the technology and around a technology continue solid. we our defense

think the things we I are investing right there, too.

So driven margin have would our internally. will capabilities type and of that number say to we're our overall, tuning solution the products. And advantage things be I by the providing end-to-end for mission-critical customers providing in customers, more that the one, more we said competitive markets I then that

positioned I things what because tune up. type try for company correction, company went and those think transition slower You this lot invested growth. call to a demand. because we 'XX we basically and through What your Combination do of at as we I year. COVID is a inventory in down look things Unfortunately, you went meant demand X -- for [indiscernible] of growth, and it, of a year, we then transition of in this environment? the

us that most do job So better to to and shareholders. better take is our the care customers as market our back comes a results also for importantly and deliver the allows better of

that, anything all if of to that Jon, So else I you -- add? know don't combining have

Jonathan Faust

I it very think you here. said well

that and better as of right? to operating So that on driving results. to Jure should company if you everything add said, growth, in as leverage driving or would about believe that's our mix well, add natural and for some the add segment return the top, saying, only the there's still businesses top margin was think Steve, why we get upside to we both overall. all segments that which customers thing Jure is we I on value within what But I for

Unknown Analyst

That's offline. an explanation. my I appreciate color. other questions I'll take awesome the

Operator

Your next question Sidoti. from is from Anja Soderstrom

Anja Soderstrom

due do lower in as next that I'm and guidance end just were sort things that of What communications? that range shipments revenue -- driving pushed that? Or curious, the lower the those out the you expect of for confidence quarter. end improvement there this you Is of you gives growth sequential in on to came other are in well? quarter

Jure Sola

a of really revenue we the But yes, they're based what confidence We are would first have telling question, from have Anja, us a today's our information. Well, what extra. thanks looked now than bit delivered. what shipped little on seeing all, we better little for is bit we our had customers, could right

believe take through will what said, is I a visibility As environment. seen this X getting quarter that we've we time in [indiscernible] we better.

think burn [indiscernible] are a year looking A our of I with telling forecasts our better key calendar half down are of customers will second the and the lot the get lot you of customers. better.

those anything of some in we all move of and should to combination new So things the us of the allow direction. Jon, coming programs up that have right else?

Jonathan Faust

inventory point, QX just absorption. are we midpoint, and that look pretty expecting if you our for corner demand -- turning would at Jure's on sequential is Jure add, see his modest point, I guide customers Anja some the and the to Yes, But to market still dynamic with and to improvement. the markets end

as on looking close that and on staying our much we're with we customers So can. as delivering

Anja Soderstrom

lower like trending? quarter? had for Okay. India, a venture in that seems payment how that this And the is joint you It

Jure Sola

Yes.

give that. Let on view point make from me of Jon, and the you just a business you comment can

all, run of India, is First same venture in going as every joint it We before. well. the we way run

India. lot from we and interest growth expect in a lot our We a have of customers, of

point that about happy the I'm where future. Jon, view, had So from more and very happy of any comments? we

Jonathan Faust

Yes.

$X in we the Anja, distribution, just it's Jure's about think said you we that. shy executing and million if point. of guided, And what look at right, did well I we to

So pretty much right on target, right where we be. want it to

Jure Sola

look XX or XX the months. potential, at if A next especially lot of you upside

Operator

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

Christian Schwab

quick one have just I Jure, asked. hasn't question that been

if AI that? -- what the products revenue is machine, that laid percentage you all of total out, On of you

Jure Sola

About -- what did But quarter will of quarter. Well, than next did We don't Cloud at the we last half that quarter. a cloud. we than Communication break last from more quarter. be about it that. down in It quarter XX% comes more cloud, last it's in is definitely, this

it's centers. that And really customers' driven data of So of required definitely right lot it's going with in upgrades for products the direction. our the are new a

Christian Schwab

have Okay. I that things were in you we AM learning, your other guess machine but there that's in okay. including

show just kind that strong follow on you improvement I guess you levels? of I follow-up an hyperscale optical spending that the earlier when question, said a that, expect the a current guess business spending. optical from just follow-up to would would So to of you cloud thought kind mean

Jure Sola

say if come a make personally I see a going to lot a kind quarter forecast can We're we our that are I Ladies some let help quarter, of said, your some this quarter. comment see looking support. up fourth way. would I in September December on I definitely time want And sector. for communication to segment. that -- this and in from in really quarter. and gentlemen, And move more would a that Well, I improvement nice I to year, help we me bad will cloud end fourth direction. Christian. believe like our but cycle, that of thank whole expect then you again, in your in the and of right

Thank you appreciate questions, more see please everything, back talk and any or you. to us. from we'll have to get XX days you now. in Bye-bye. If Otherwise, you I

Operator

conference now ended. Thank the all you. has you Ladies joining. Thank for and gentlemen,

You disconnect. may all

Sanmina (SANM) 29 Apr 242024 Q2 Earnings call transcript