Sanmina(SANM) - 2024 Q4 - Annual Results

Financial Results Overview Fourth Quarter Fiscal 2024 Highlights Sanmina reported strong fourth-quarter fiscal 2024 results, with revenue reaching $2.02 billion and non-GAAP diluted EPS of $1.43, exceeding outlook and showing sequential growth Fourth Quarter Fiscal 2024 Performance | Metric | Value | | :--------------------- | :------------- | | Revenue | $2.02 billion | | GAAP Operating Margin | 4.4% | | GAAP Diluted EPS | $1.09 | | Non-GAAP Operating Margin | 5.3% | | Non-GAAP Diluted EPS | $1.43 | - Revenue was up 9.6% sequentially, and non-GAAP diluted earnings per share increased by 14.3% over the prior quarter, surpassing the company's outlook[2] - Growth was observed in the majority of end-markets, particularly driven by strength in communications networks and cloud infrastructure[2] Fiscal Year 2024 Highlights For fiscal year 2024, Sanmina achieved $7.57 billion in revenue and a non-GAAP diluted EPS of $5.28, alongside robust cash flow from operations and significant share repurchases Fiscal Year 2024 Performance | Metric | Value | | :--------------------- | :------------- | | Revenue | $7.57 billion | | GAAP Operating Margin | 4.4% | | GAAP Diluted EPS | $3.91 | | Non-GAAP Operating Margin | 5.4% | | Non-GAAP Diluted EPS | $5.28 | Cash Flow and Share Repurchases | Metric | Q4 FY24 (Millions) | FY24 (Millions) | | :------------------------- | :----------------- | :-------------- | | Cash flow from operations | $52 | $340 | | Free cash flow | $29 | $231 | | Share repurchases (shares) | 0.9 | 4.0 | | Share repurchases (value) | $65 | $227 | | Q4 ending cash & equivalents | $626 | N/A | Management Commentary & Business Outlook CEO Jure Sola highlighted solid momentum in Q4, with growth in key end-markets, and noted that FY24 results met expectations despite a challenging first half. The company demonstrated resilience and expects fiscal 2025 to be a growth year based on customer forecasts and healthy demand - The company finished the year with solid momentum, with Q4 revenue up 9.6% sequentially and non-GAAP diluted EPS up 14.3% over the prior quarter, exceeding outlook[2] - Growth was observed in the majority of end-markets, primarily driven by strength from communications networks and cloud infrastructure[2] - Fiscal year 2024 results were in line with expectations, managing a challenging first half with improvements in the second half, and delivering another solid year of cash flow from operations[3] - Sanmina repurchased 4 million shares for $227 million in fiscal 2024, demonstrating a commitment to return value to shareholders[3] - Based on customer forecasts and healthy demand levels, fiscal 2025 is expected to be a growth year[3] First Quarter Fiscal 2025 Outlook Sanmina provided an outlook for the first quarter of fiscal 2025, projecting revenue between $1.925 billion and $2.025 billion, with GAAP diluted EPS between $1.03 and $1.13, and non-GAAP diluted EPS between $1.30 and $1.40 Q1 FY25 Outlook | Metric | Low Range (Billions) | High Range (Billions) | | :--------------------- | :------------------- | :-------------------- | | Revenue | $1.925 | $2.025 | | GAAP Diluted EPS | $1.03 | $1.13 | | Non-GAAP Diluted EPS | $1.30 | $1.40 | Company Information & Disclosures About Sanmina Corporation Sanmina Corporation is a Fortune 500 company and a leading integrated manufacturing solutions provider in the global Electronics Manufacturing Services (EMS) market, serving various high-growth sectors including industrial, medical, defense, aerospace, automotive, communications networks, and cloud infrastructure - Sanmina is a Fortune 500 company and a leading integrated manufacturing solutions provider in the global Electronics Manufacturing Services (EMS) market[6] - The company provides end-to-end manufacturing solutions to Original Equipment Manufacturers (OEMs) in industrial, medical, defense and aerospace, automotive, communications networks, and cloud infrastructure markets[6] - Sanmina operates facilities strategically located in key regions worldwide[6] Conference Call Details Sanmina hosted a conference call on November 4, 2024, to discuss its Q4 and FY24 financial results and Q1 FY25 outlook, with replay options available - A conference call was held on Monday, November 4, 2024, at 4:30 p.m. ET (1:30 p.m. PT) to review financial results and outlook[5] - Access numbers for domestic and international participants, as well as webcast details and a 48-hour replay, were provided[5] Safe Harbor Statement The report includes forward-looking statements, and actual results may differ materially due to various factors such as adverse market changes, sales variability, customer reliance, international operations risks, and geopolitical uncertainties - Statements regarding the financial outlook for Q1 FY25 and expectations for FY25 growth are forward-looking[4] - Actual results could differ materially due to factors including adverse changes to key markets, significant uncertainties causing sales and net income variability, reliance on a small number of customers, risks from international operations, and geopolitical uncertainty[4] - The company is not obligated to update or alter any forward-looking statements unless required by law[5] Condensed Consolidated Financial Statements (GAAP) Condensed Consolidated Balance Sheets As of September 28, 2024, Sanmina's total assets were $4.71 billion, a decrease from $4.87 billion in the prior year, primarily driven by reductions in inventories and cash, while stockholders' equity increased to $2.36 billion Condensed Consolidated Balance Sheets (Thousands) | Asset Category | Sep 28, 2024 (Thousands) | Sep 30, 2023 (Thousands) | Change (Thousands) | | :----------------------------- | :----------------------- | :----------------------- | :----------------- | | Cash and cash equivalents | $625,860 | $667,570 | $(41,710) | | Accounts receivable, net | $1,337,562 | $1,230,771 | $106,791 | | Contract assets | $384,077 | $445,757 | $(61,680) | | Inventories | $1,335,744 | $1,477,223 | $(141,479) | | Prepaid expenses & other current assets | $79,301 | $58,249 | $21,052 | | Total current assets | $3,762,544 | $3,879,570 | $(117,026) | | Property, plant and equipment, net | $616,067 | $632,836 | $(16,769) | | Deferred tax assets | $160,703 | $177,597 | $(16,894) | | Other assets | $175,646 | $183,965 | $(8,319) | | Total assets | $4,714,960 | $4,873,968 | $(159,008) | Condensed Consolidated Liabilities & Equity (Thousands) | Liability & Equity Category | Sep 28, 2024 (Thousands) | Sep 30, 2023 (Thousands) | Change (Thousands) | | :----------------------------- | :----------------------- | :----------------------- | :----------------- | | Accounts payable | $1,485,484 | $1,612,833 | $(127,349) | | Accrued liabilities | $196,681 | $267,148 | $(70,467) | | Accrued payroll & related benefits | $133,129 | $127,406 | $5,723 | | Short-term debt | $17,500 | $25,945 | $(8,445) | | Total current liabilities | $1,832,794 | $2,033,332 | $(200,538) | | Long-term debt | $299,823 | $312,327 | $(12,504) | | Other long-term liabilities | $220,835 | $209,684 | $11,151 | | Total long-term liabilities| $520,658 | $522,011 | $(1,353) | | Stockholders' equity | $2,361,508 | $2,318,625 | $42,883 | | Total liabilities & stockholders' equity | $4,714,960 | $4,873,968 | $(159,008) | Condensed Consolidated Statements of Income For fiscal year 2024, Sanmina's net sales decreased to $7.57 billion from $8.94 billion in FY23, resulting in a lower net income attributable to common shareholders of $222.5 million ($3.91 diluted EPS) compared to $310.0 million ($5.18 diluted EPS) in the prior year Condensed Consolidated Statements of Income (Thousands, except EPS) | Metric (Thousands, except EPS) | Q4 FY24 | Q4 FY23 | FY24 | FY23 | | :----------------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | $2,017,505 | $2,052,019 | $7,568,328 | $8,935,048 | | Cost of sales | $1,846,212 | $1,878,591 | $6,927,899 | $8,191,837 | | Gross profit | $171,293 | $173,428 | $640,429 | $743,211 | | Operating income | $89,590 | $99,266 | $335,494 | $455,658 | | Income before income taxes | $86,778 | $86,751 | $317,535 | $412,807 | | Provision for income taxes | $19,438 | $21,396 | $79,784 | $85,294 | | Net income attributable to common shareholders | $61,381 | $61,841 | $222,536 | $309,970 | | Diluted EPS | $1.09 | $1.04 | $3.91 | $5.18 | | Diluted Weighted-average shares | 56,235 | 59,178 | 56,970 | 59,815 | - Net sales for FY24 decreased by approximately 15.2% year-over-year[8] - Diluted EPS for FY24 decreased by approximately 24.6% year-over-year[8] Condensed Consolidated Cash Flow Sanmina generated $340.2 million in cash from operating activities and $231.0 million in free cash flow for fiscal year 2024, a significant increase from FY23, despite a net decrease in cash and cash equivalents for the year Condensed Consolidated Cash Flow (Thousands) | Cash Flow Metric (Thousands) | Q4 FY24 | FY24 | FY23 | | :--------------------------- | :--------- | :----------- | :----------- | | Net income before noncontrolling interest | $67,340 | $237,751 | $327,513 | | Cash provided by operating activities | $51,875 | $340,216 | $235,168 | | Cash used in investing activities | $(25,897) | $(114,396) | $(192,458) | | Cash used for financing activities | $(60,412) | $(269,707) | $94,505 | | Net change in cash & cash equivalents | $(31,849) | $(41,710) | $137,713 | | Free cash flow | $29,278 | $231,020 | $45,210 | - Cash provided by operating activities increased by approximately 44.7% from $235.2 million in FY23 to $340.2 million in FY24[11] - Free cash flow saw a substantial increase of approximately 411% from $45.2 million in FY23 to $231.0 million in FY24[11] Non-GAAP Financial Measures and Reconciliation Reconciliation of GAAP to Non-GAAP Measures Sanmina provides non-GAAP financial measures by adjusting GAAP results for items such as stock-based compensation, restructuring, and other unusual charges to offer a clearer view of core business operations. For FY24, non-GAAP operating income was $406.1 million and non-GAAP diluted EPS was $5.28 GAAP to Non-GAAP Reconciliation (Thousands, except %) | Metric (Thousands, except %) | Q4 FY24 | FY24 | FY23 | | :--------------------------- | :----------- | :----------- | :----------- | | GAAP Operating income | $89,590 | $335,494 | $455,658 | | GAAP Operating margin | 4.4% | 4.4% | 5.1% | | Total Operating income adjustments | $17,739 | $70,563 | $64,119 | | Non-GAAP Operating income | $107,329 | $406,057 | $519,777 | | Non-GAAP Operating margin | 5.3% | 5.4% | 5.8% | | GAAP Net income attributable to common shareholders | $61,381 | $222,536 | $309,970 | | Total Net income adjustments | $18,914 | $57,600 | $64,218 | | Non-GAAP Net income attributable to common shareholders | $80,295 | $300,868 | $374,230 | | GAAP Diluted EPS | $1.09 | $3.91 | $5.18 | | Non-GAAP Diluted EPS | $1.43 | $5.28 | $6.26 | Q1 FY25 EPS Outlook Reconciliation | Q1 FY25 EPS Outlook (Range) | Low ($) | High ($) | | :-------------------------- | :------ | :------- | | GAAP diluted EPS | 1.03 | 1.13 | | Stock compensation expense | 0.27 | 0.27 | | Non-GAAP diluted EPS | 1.30 | 1.40 | Explanation of Non-GAAP Adjustments Management excludes specific charges and benefits from non-GAAP measures to provide a more relevant comparison of core business operations, acknowledging that these exclusions are still GAAP-required and may impact liquidity - Management excludes stock-based compensation, restructuring, acquisition and integration expenses, impairment charges, amortization charges, and other unusual or infrequent items, adjusted for taxes, from non-GAAP measures[12] - These exclusions are primarily made because such charges or benefits are not directly related to the Company's ongoing core business operations, aiding in period-to-period comparisons and management assessment[13] - A material limitation is that excluded items are still GAAP-recognized and, in some cases, consume cash, reducing liquidity; management compensates by reviewing GAAP results and providing reconciliations[13] Stock-based Compensation Expense Stock-based compensation is excluded to enable more meaningful period-to-period comparisons of results and to allow for more accurate comparisons with competitors, given variations in equity award grants and valuation assumptions - Exclusion permits more meaningful period-to-period comparisons as equity award amounts and values vary quarterly[15] - Allows for more accurate comparisons with competitors who may grant different amounts and types of equity awards and use different valuation assumptions[15] Restructuring, Acquisition and Integration Expenses These expenses are excluded because they are often unpredictable, not directly related to ongoing business results, and do not reflect expected future operating expenses, facilitating better comparisons with competitors - Excluded because they are driven by unpredictable timing of acquisitions and exit activities, not directly related to ongoing business results, and generally do not reflect expected future operating expenses[16] - Exclusion allows for more accurate comparisons with competitors who complete acquisitions and restructuring plans at different times and amounts[16] - These expenses include both cash and non-cash components, with cash expenses reducing liquidity, which management addresses by reviewing GAAP results[16] Impairment Charges for Goodwill and Other Assets Non-cash impairment charges are excluded due to their non-recurring nature and lack of impact on liquidity, which helps in comparing core results with competitors - Excluded because they are non-cash, non-recurring charges that do not reduce the Company's liquidity[17] - Exclusion permits more accurate comparisons of core results with competitors who may record impairment charges at different times[17] Amortization of Intangible Assets Amortization charges are excluded as they are non-cash, influenced by unpredictable acquisition timing, and do not affect liquidity, allowing for better comparative analysis with competitors - Excluded because they are non-cash charges impacted by the timing and magnitude of acquisitions, which are difficult to predict, and do not reduce liquidity[18] - Exclusion permits more accurate comparisons of core results with competitors who complete acquisitions at different times and for different amounts[18] Other Unusual or Infrequent Items These items, such as distressed customer charges or legal matters, are excluded because they are typically non-recurring, difficult to predict, or not directly related to ongoing core operations, aiding in assessing current operating performance and forecasting - Excluded because they are typically non-recurring, difficult to predict, or not directly related to ongoing or core operations[19] - These items are not considered by management in assessing current operating performance and forecasting earnings trends[19] - Includes both cash and non-cash expenses; cash expenses reduce liquidity, which management addresses by reviewing GAAP results[19] Adjustments for Taxes Tax adjustments are applied to reflect the tax effects of non-GAAP operating income adjustments, deferred tax, and discrete tax items, ensuring more accurate comparisons of core results with competitors - Consist of tax effects of various adjustments excluded from non-GAAP measures, and adjustments related to deferred tax and discrete tax items[20] - These adjustments permit more accurate comparisons of the Company's core results with those of its competitors[20] - Tax adjustments are determined based on applicable effective tax rates, with a reduced rate applied in jurisdictions where a tax cost or benefit is not expected[20]