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01/11 03:20
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Sanmina reported strong financial results with an 8.1% revenue increase and 7.8% EPS growth, alongside an optimistic guidance for Q2. The share repurchase program further supports a positive outlook. Despite risks related to tariffs and geopolitical factors, management's strategic investments in technology and capacity, especially in high-growth areas like cloud infrastructure, are promising. The Q&A revealed no major demand shifts, and the company's agile approach to market challenges is reassuring. Given the market cap, a positive stock price movement (2% to 8%) is expected over the next two weeks.
Revenue $1.98 billion, up 8.1% year-over-year, driven by growth across the majority of end markets.
Non-GAAP EPS $1.41 per share, up 7.8% year-over-year.
Non-GAAP Gross Profit $181.3 million, or 9.1% of revenue, up 20 basis points year-over-year, driven by favorable mix and operational efficiencies.
Non-GAAP Operating Income $110.6 million, or 5.6% of revenue, up 20 basis points year-over-year, driven by growth, mix, and focused execution.
Non-GAAP Operating Expenses $70.7 million, above outlook due to targeted investments for future growth.
Cash Flow from Operations $157 million for the quarter, $221 million for the first half, reflecting disciplined working capital management.
Free Cash Flow $126 million for the quarter, $173 million for the first half.
Inventory $1.2 billion, down 8% year-over-year, with inventory turns improving to 5.9 times from 5.0 times.
Non-GAAP Pre-tax ROIC 23% for the quarter, up from 22% year-over-year.
Capital Expenditures $31 million for the quarter, in line with outlook.
CPS Revenue $411 million, up 3.3% year-over-year, driven by higher demand in most end-markets.
CPS Non-GAAP Gross Margin 13.9%, up 100 basis points year-over-year, driven by favorable mix and operational efficiencies.
IMS Revenue $1.60 billion, up 9.8% year-over-year, driven by growth in Communication Networks and Cloud Infrastructure.
IMS Non-GAAP Gross Margin 7.7%, flat year-over-year.
New Product Development: We are expanding our capabilities to meet present and future demand, particularly in AI and cloud infrastructure.
ODM Products: We deliver custom memory and custom optical modules, expanding our offerings in service and storage systems.
Market Expansion: We are adding new customers with higher margin opportunities and expanding our precision mechanical systems for Defense and Aerospace.
End Market Growth: Communication Networks and Cloud Infrastructure revenue grew 20.3% year-over-year, indicating strong market positioning.
Operational Efficiency: Non-GAAP gross margin improved to 9.1%, driven by favorable mix and operational efficiencies.
Cash Flow Management: Strong cash flow performance with $157 million from operations in Q2, allowing for continued investment.
Strategic Investments: Targeted investments in capacity and technology across the U.S., India, and Mexico to strengthen market position.
Focus on Higher Margin Markets: We remain focused on investing in faster-growing and higher-margin end markets.
Tariffs and Geopolitical Uncertainty: The company acknowledges considerable uncertainty around tariffs and the current geopolitical landscape, which may impact customer demand. They emphasize the importance of agility and responsiveness to navigate these challenges.
Supply Chain Management: Sanmina has a well-established materials, supply chain, and trade compliance team to manage complex trade requirements, indicating potential risks in supply chain disruptions.
Economic Environment: The management highlights the dynamic environment they are operating in, suggesting potential economic factors that could affect business performance.
Competitive Pressures: The company mentions the need to remain agile and responsive to customer requirements, indicating competitive pressures in the market.
Investment in Technology and Capacity: While the company plans to make strategic investments in technology and capacity, there is a risk associated with the execution of these investments in a volatile market.
Revenue Growth: For the second quarter of fiscal year 2025, Sanmina reported revenue of $1.98 billion, up 8.1% year-over-year, driven by growth across most end markets.
Operating Margin: Non-GAAP operating margin for the second quarter was 5.6%, consistent with the short-term target range of 5% to 6%.
Capital Expenditures: Capital expenditures for the second quarter were $31 million, with expectations to be approximately 2% of revenue for the full year.
Investment in Technology: Sanmina plans to make targeted investments in capacity and technology across the U.S., India, and Mexico to strengthen market position.
Focus on High-Margin Markets: The company is focused on investing in faster-growing and higher-margin end markets to drive future growth.
Third Quarter Revenue Outlook: Sanmina expects third quarter revenue between $1.925 billion to $2.025 billion, with a midpoint of $1.975 billion, representing a 7.3% increase year-over-year.
Non-GAAP EPS Guidance: Non-GAAP EPS is expected to be in the range of $1.35 to $1.45 for the third quarter, with a midpoint of $1.40, indicating a 12% increase year-over-year.
Full Year Revenue Growth: The company anticipates full-year revenue growth between 6.0% and 8.0%.
Operating Margin Guidance: Short-term operating margin is expected to remain stable in the range of 5% to 6%, with long-term expectations of over 6%.
Depreciation and Other Expenses: Depreciation is expected to be approximately $30 million for the third quarter.
Share Repurchase Program: During the quarter, we repurchased approximately 1.03 million shares for approximately $84 million. As of March 29, 2025, we had $253 million remaining on our share repurchase program.
The earnings call summary and Q&A indicate strong financial performance with increased margins and cash flow. The strategic acquisition of ZT Systems is expected to significantly boost revenue, and management is optimistic about growth in key markets. While some guidance details were deferred, the overall sentiment is positive with potential for revenue doubling in three years. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction (2% to 8%).
Sanmina's earnings report shows strong financial performance with revenue and margin improvements, particularly in CPS. The Q&A indicates stable growth and strategic investments in ZT Systems and the Indian joint venture, despite some uncertainties. The positive analyst sentiment and strategic partnerships, like with AMD, suggest a favorable outlook. However, the lack of detailed guidance in some areas tempers expectations slightly. Overall, the company's performance and strategic moves point to a positive stock price movement, especially given its market cap.
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