Sanmina (SANM) 11 May 232023 Q2 Earnings call transcript

Welcome to the Sanmina's Second Quarter Fiscal 2023 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session.

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

You may begin.

Paul. 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

Good afternoon.

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

Good afternoon.

Then and the call results with follow-up additional up on the today's is the for will will agenda review open of Jure details our we future for questions. goals. and Our call Kurt our will financial results comments

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

along follow provided website. can on You our our the prepared remarks in slides with

of Harbor Please our turn slide take Safe of to statement. three our presentation note and

projections of the or forward-looking may conference regarding statements this events company. performance we call, the During financial or other future make future

that you a in materially Harbor caution company's differ projections. just could our as We result results statements projections statements actual set forth such these statement. of factors a those The from Safe are in number of

and call, is Relations of statements disclaims otherwise earnings of result no our events, otherwise, the by the future whether made or obligation this the update expressly any unless Investor required company The to in any such forward-looking presentation, earnings as a release, or or alter the under conference obligation of website, section new information, law.

also we the with A as GAAP press and have posted well in a Included of between you financial basis on slides Xst, for today, information non-GAAP non-GAAP on financial information. provided ended release GAAP in our certain April the and website. is and the XXXX provided release issued and press slides operations our statements reconciliation quarter as

expense, non-GAAP our costs, and stock-based information items. other non-cash or infrequent costs, compensation expense, general, and unusual excludes acquisition amortization In integration restructuring

income, stated call will non-GAAP in be per results. Accordingly, relates income directed as otherwise make income, Any to gross unless financial referring net when and refer profit, margin, call, are this it information. our we the our margin, taxes, at comments earnings to to we non-GAAP operating operating this we on conference statement measures share, gross

I'd like call to over now turn to Kurt. the

Thanks Paige.

discuss results, discuss historical our I the like QX release. the to of I'd mention press results restatement of a in Before

One into part X% for long-term our our of divisions approximately basis. total contracts of project and accounts customer on price primarily business, revenue a enters fixed is CPS of

GAAP of profit is a requires completion that estimated be of contract expected realized revenue the and contract. profitable life the the over amount upon of to recognized

is the completion. upon result a upon to contract if that recognized it XXX% is which estimated contract unprofitable a be completion, be initially of in a in will expected period However, loss the must in loss

recovery the ability seek seek extend contract actual or company may to To its anticipated the customer. the has overruns, any from

of FY over division failed the our cost During properly substantiate costs statements, life to contracts. that other QX estimates XXXX financial had update materials the and company determined for certain preparation certain of the personnel and

XXXX by respectively. apologize. sorry, was result $X.X overstated understated $XX.X said $XX.X XXXX, should it and QX FY FY in Also $XX.X million I million these have FY million a as I'm Primarily $XX.X XXXX. FY revenue overstated in by XXXX in FY of XXXX, million findings, million approximately by

by Q FY XXXX, and -- GAAP by respectively XXXX. FY $X.XX XXXX, EPS QX $X.XX, XXXX, $X.XX was in in approximately understated $X.XX, overstated and and

filed please X-K see this, we today. the on details more For

turn slide quarter. on to Now, the second to Please five.

due a This high billion seasonally supply an despite improvements exceeded primarily QX down revenue was team outstanding the QX of to job billion $XX.X outlook chain. financial typically in Our strong quarter. of $X.X our billion of delivering to end continued performance. the did $X.X being

our of of was EPS margin was Non-GAAP Non-GAAP upper margin $X.XX X.X%. was X.X%. diluted end $X.XX. fully $X.XX range gross at guidance to operating Non-GAAP the

fully Finally, EPS $X.XX. QX GAAP was diluted

Please turn slide to six.

billion XXXX billion. from compare grew in FY our FY results X.X% QX EPS XXXX, $X.XX $X.XX over from and XX% you QX revenue in to FY finally, grew QX XXXX FY Operating QX $X.XX XXXX. XXXX, $X.XX in QX margin XX% X.X% FY QX to FY with XXXX in If improved from to

We're This Please fiscal start and including a strong turn half of operating the shows our to revenue, slide strong XXXX. annual seven. trends margin, in of the financial first results to EPS. off

half track First first half of operating in time of Non-GAAP billion prior over revenue margins mid-teens the operating X.X%. relative to the grow for full fiscal to on $X.X and improve with year year. margins XXXX was non-GAAP is to continued have

of run continuation result of FY our $X the XXXX. FY XXXX rest FY the to over for XXXX current EPS would for Finally, rate compared EPS for year

turn eight. to please Now slide

FY half primarily IMS billion. supply $X.X First of in to was continued XXXX, This revenue the is chain. due the improvements

$XXX First was half FY million. revenue XXXX CPS

non-GAAP for half margin XX.X% FY gross First XXXX. to CPS to improved

Now please turn slide to eight.

sheet cash $XXX revolver competitive balance and company provides Cash our There have quarter a at million that the to of $XXX continue the equivalents the We QX. end no of was our advantage. very under borrowings healthy end at million. a were

Cash The And to $XX flow repurchasing $XXX approved relates shares. million. opportunistic an the continue of share of company had $XX from of Board it At we ops be will authorization $XXX to of end for were the million approximately million. authorization. approximately additional as repurchases. million Capital the expenditures QX, quarter was recently

Turning to nine. slide

efficient management. XX.X% QX XX We pre-tax in continue was non-GAAP Cash days ROIC approximately days cash to QX. and remain were for cycle focused on

slide to Finally, turn please XX.

QX supply to well $X.X revenues Coming we billion. be expect of a of the in environment, macroeconomic QX related the Let's billion $X.X off talk about political and strong the to as QX range given the very as to and uncertainty outlook. chain continued

range of margin to to non-GAAP XX%, range operating to and of X.X% non-GAAP Non-GAAP range gross XX% on dependent are in the X%. the operating the expect mix. in margin be We product of X.X% in expected expenses to X.X%

the continued driven in rates. increases We expect million, by expenses non-GAAP to interest $XX be and other interest approximately

to approximate $X estimate addition, reduction net the In interest our partners JV net equity income joint venture. in Indian of to our we an income non-cash reflect million

approximately We expect non-GAAP non-GAAP million tax count XX.X% share XX of shares. diluted approximately rate of and fully

this you guidance, all for range $X.XX. non-GAAP of in the $X.XX EPS When is to of outlook consider our

We to future by around of expect QX and driven programs growth. $XX million, the dollars support of growth be capital expenditures new

of depreciation million. around QX expect We $XX

Overall, further we the very there pleased model That are that over to with results. our said, we our continue to recent business long-term. an believe opportunity being is improve

turn that, to with I'll And Jure. it over

all, bad I Thanks think I me, it. and of hopefully gentlemen, get can Kurt. can Ladies cold you this through and but understand got first I

here thank today. being again, you for all with us So,

Sanmina like for as employees take heard would I leadership to doing great from job our a to First, this and you Kurt. recognize opportunity

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

I'll comments Let me XXXX. review few the add more for and the a financial end outlook third second and markets the rest fiscal quarter quarter highlights and the for of year about the

a from the ship and semi results delivered allowed Sanmina better us and operational a with great Kurt, for supply heard quarter, our more. chain for to that strong second you As execution components got lot

Our outstanding continued job. ongoing has macroeconomic Sanmina done strategy. focus our a of team uncertainty, Despite our an are execution these reflection and results of

to sorry, XX turn -- talk -- XX. let's slide to Now, slide

end about revenue the by quarter second markets. talk Let's for

across quarter, the the most second products markets. stable For of was demand for the

infrastructure $X.XXX slightly year-over-year second growth X% quarter of for industrial, quarter-over-quarter was automotive, strong million, billion. was delivered we down was a X% medical, the XX%. strong growth and of XX%. For $XXX and that growth and Communication The and defense pretty cloud year-over-year networks

quarter, a delivered typical quarter for we Typically, had down quarter as seasonally, was -- is than this billion. -- $X.XX second seasonality a but this we stronger

customer but base. X%, growth we down slightly year-over-year up flat, was quarter-over-quarter So, Also, XX%. very diversify strong, to our was continue

can XX% XX As see, of revenue. customers for you our the second quarter top our was

Please turn to slide XX.

to year third our talk outlook about me and you fiscal Let quarter XXXX.

for third see quarter. expect nice growth we all, the of quarter-over-quarter First to

heard you from about Kurt, $X.X $X.X to forecast billion billion. is As our revenue

growth industrial, defense, expect For to nice see markets, automotive we medical, year-over-year. and

expect also and communication cloud growth a nice year-over-year. And networks to see infrastructure, we

does serve can is you markets complexity, on all, high consumer Sanmina markets. at our focus As heavy-regulated not see,

year expansion me fiscal growth. and growth year-over-year let we deliver to mid-teens to EPS and expect XXXX, you to about track We're Now, on fiscal XXXX. margin deliver revenue talk for year more

tell growth XXXX and has fiscal base continue it's I in We'll leading talent well-diversified and and you that for to invest beyond. technology year the support can Sanmina customer growing. to

into Overall, more profitable our capacity projects. we expanding are

me let give some So, you example.

established. the future, in and all, of markets first automotive, in defense, look time, and these new on same pipeline. well the we we the medical, At were both programs the For opportunities that as large are programs have some

equipment, through fair a projects. For -- many what industrial, I safety electromechanical system see amount some grid we management, across more of, call, also public energy, precision, renewable industrial growth revenue

and stability. cloud These businesses and long-term new communication products. and around on storage and products the focus margin produce higher should networking growth we For infrastructure,

challenging Let's macro talk this through environment. about management

strong well-positioned any any navigate focused to do have space in the management global market company Sanmina's we continuing and conditions. able market for environment, be to embedded are We dynamics. job. the have resiliency Sanmina we to is monitor our but positioned to economical market

of growth today leaders revenue focus with to mission-critical on market on partnerships. Our base, customer our is and continuing diversify building right quality We focus in lasting products.

we Yes, focused on quality long-term. productivity. earnings, for consistency improve and short-term the are continue We of and

quarter, on Please solid turn execution, top for In the second to delivered results. the we both summary, XX. and slide bottom-line

Our priorities not changed. have

about and working, for I make the you that delivering and to future continue results. is can tell strategy it's excited Our are the growth We'll investments we future.

support. like gentlemen, we're thank to all and ready Operator, lines your question to would With and now for Thank that, and ladies you now open time I again. you answers. for

from And question Craig-Hallum. comes our Instructions] from first Schwab Christian [Operator

Your line is open.

than questions. quarter-over-quarter, about on going couple to I given help about maybe Hey, just letting as we of you was manage your wondering a for level of I those nicely any us went through. a it forward decisions first, couple the ago set $X.X guess, and this level what down is could Tyler constrained you came if is think us inventories kind inventories Christian. business billion. normalized you sequentially what environment maybe Thanks a made behalf guess of larger was of you ask years level want I

Yes.

over a let turns ask are we customers have we to -- to to today. because that our basically over the more we experienced they Before our inventory. inventory And lot than better us years, of the shortages forced really be me CFO, last -- our -- us where believe that it I turn two buy you should

it expect inventories, that, With in I'll we the is it to XXX% Good next thing of to continue our is those to quarters. over couple down committed turn work to and Kurt. customer

years look if of think you overall, our increased. over the last levels I inventory couple have obviously dramatically Yes,

have gotten ultimately, to seven inventory how times almost get to we've turns is through our eight. six ideally think And turn. and I historically think I we it inventory think -- three of years to

progress we that. to year a should as we happen improve got XXXX. opportunity through But start and fiscal overnight. It further the some lot to into we've see said, Jure won't as So, benefit

Again, supply we continue to see starting and in to improvement see are the chain.

And things so it to things, quarters -- for normalize a that does normalize. to should take but help while multiple --

next I fiscal we progress. say not most So, year, likely, normal will would make until but

And strong. And that your great that. drive I as following cash That's then grow as you should as inventory color. up free very flow. cash down, then, continue only appreciate regarding also well that to on balance, maybe work

much So, how cash a level share like guess to cash that expanded your rather comfortable what's or you business buyback, your of I run with? do have great. you'd which looks excess

-- sheet cash industry. there. very strongest Well, the balance position feel we as have and again, think our of we We we I the about the leverage lack good in talked,

only going we're opportunistic repurchases. said, to be being that as and it share comes cautious think to I

us coming what's we're best for So, the months. over same to I going But time, adding shareholders. gives authorization, flexibility by at think to it the I think do the

a collect of We Cash tends end of vary with a inside and the at beginning a quarter. lot lot cash to spend quarter at of of the to then quarter. of tend cash a lot the the

level to needless "right" hard cash. in we of with But it's say So, the candidly, unlevered the most say, comfortable to it's feel really industry. sheet, what's very and our balance believe, the I

us. as all well. Jure, feel That’s you better for great. sounds hope That

Yes. Thanks.

from Sidoti. our And you. from next question Soderstrom comes Thank Anja

Your live. line is

And quarter. myself. cold with I'm on week good sorry, of you, I'm everyone. feeling my second Jure, Hi the Congratulations on running

the indicates the slight a for decline, of terms sort In revenue third quarter, right, guidance the it question? of

to billion Again, we $X.X billion. finished at is $X.XX billion. The guidance $X.X

it's I down, slightly guidance. say the would flat,

getting decline Are What you that? same? and in as hearing the I'm had you that in Okay. are seeing you are of pushed. seeing a And that there some you others seeing communication terms from well. of else? are terms Are delays things networks, something in the

like on. Well, The there lot parts are but demand as earlier, pushed I it is in that going I here we operating environment. out now good some said get this is and Anja, still there. right seem think changes thing There's of macro are moving a there,

But a last in projects, as pretty the the is of can in cloud good we true. communication some quarter two very the quarter. strong, that in see. and quarters Definitely were Actually, you second had communication

happy So, I'm We're with with think are. can we in do even push we to see. for financial this the numbers. still deliver I still to good maximum -- these And quarter. are environment, going every personally we'll we Anja, -- where numbers But try we in

Thank Okay. terms normalized down cash to the in get targeting you. basis, cycle -- you that is a to? what what of And are days, on

Well, in cash we've over if cycle the days manage I kind ranges, or in how XX minus. -- we think, you -- those it's again, at been of look time, typically plus

at same comes and as accounts obviously, -- time, that's well. but the as down helpful, it's think I inventory So, come payables down,

you despite all XXs three range. actually, challenges, managed at in look pretty we've our the years, have consistently if So, history, the it last over those

in it be we're looking So, more I'd expect to but there, always be to efficient.

Okay. follow-up Craig-Hallum's are And all anticipated dividend? you a in balance a think balance -- improved terms further at improved sheet. of -- you Do on considering your

at that times. at looked We've

to So, that, but time. have evaluate and we'll intention at we'll no we continue -- this

me. from all was That Okay.

Anja. Thanks Hope feel you better too.

too. you Yes,

[Operator no management. Instructions] turn questions, the to call further back And I'll over seeing

a lot. thanks Paul,

ladies get sorry all, next for lot I'm gentlemen, Hopefully, First you and quarter. of today. can't very yell better that thank much. the I a I'll

I a with your So, Thanks that, appreciate support. lot.

you. Thank

have conference today's call. a day. That you joining pleasant for and concludes Thank