Sanmina Conference Call Summary Company Overview - **Company**: Sanmina (NasdaqGS: SANM) - **Business Focus**: Global leader in design and manufacturing solutions, primarily in heavily regulated markets and complex products, avoiding the consumer space. Key sectors include communication networks, cloud infrastructure, medical, aerospace and defense, industrial, and energy [4][5][6]. Financial Performance - **Fiscal Year 2025 Revenue**: Approximately $8.1 billion, with high single-digit growth [5]. - **Cash Generation**: Generated about $621 million in cash [5]. - **Revenue Breakdown**: - Communication networks and cloud infrastructure: ~40% (~$3.1 billion) [6][23]. - Industrial, energy, medical, aerospace, defense, and automotive: ~60% (~$5 billion) [10]. Business Segments 1. Communication Networks and Cloud Infrastructure - **Growth**: High double-digit growth, with approximately 20% year-over-year growth [24]. - **Key Products**: Optical modules, transceivers, and data center networking equipment [23][24]. - **Acquisition Impact**: Recent acquisition of ZT Systems expected to enhance capabilities in cloud infrastructure and AI [8][25]. 2. Industrial and Energy - **Performance**: Mixed results; energy sector performing well with projects in power storage and controls, while industrial sector showing varied performance [12][13]. - **Customer Outlook**: Improved visibility with stable forecasts from customers [11]. 3. Medical - **Market Participation**: Engaged in a wide range of medical products from large hospital equipment to wearables [14]. - **Growth Outlook**: Low single-digit growth in FY2025, with expectations for improvement in the second half of FY2026 [15]. 4. Aerospace and Defense - **Business Mix**: Focused on U.S. Department of Defense and commercial aerospace, with stable performance expected due to long-term contracts [16][17]. 5. Automotive - **Focus**: Primarily on electric vehicles (EVs), with growth driven by expanding product offerings [19][20]. - **Market Dynamics**: Anticipated improvement in the second half of FY2026 despite broader automotive market challenges [20]. Acquisition of ZT Systems - **Acquisition Details**: Closed at the end of October 2025 for approximately $2 billion, with expected revenue contribution of $5.7 billion annually [28][36]. - **Strategic Partnership**: Collaboration with AMD for design engineering and manufacturing [35]. - **Growth Potential**: Focus on accelerated compute and storage solutions for hyperscalers and OEMs [34][36]. Financial Outlook - **FY1Q26 Guidance**: Legacy Sanmina revenue expected to be flat sequentially but up 5% year-over-year, with high single-digit growth anticipated throughout FY26 [45]. - **Operating Margin Targets**: Near-term target of high 5s to low 6%, with long-term goal of 6%-7% [48][51]. - **Free Cash Flow**: Generated $621 million in cash flow from operations last year, with a strong balance sheet to support growth [56][60]. Capital Allocation and Future Strategy - **M&A Appetite**: Open to future acquisitions that align with growth strategy while maintaining leverage ratios [63]. - **Share Buybacks**: Currently on hold, with focus on growth and capital allocation strategies [65]. Conclusion - **Company's Position**: Sanmina is well-positioned for growth with a strong legacy business and the recent acquisition of ZT Systems, which is expected to transform the company and expand its market reach [68].