Sanmina(SANM) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q4 revenue reached $2.2 billion, a substantial increase of approximately 9.1% from the prior quarter, exceeding the outlook of $1.95 billion to $2.05 billion [16] - Non-GAAP gross margin was 8.3%, slightly down from 8.4% in the prior quarter, while non-GAAP operating margin improved to 5.6% from 5.5% [17] - Non-GAAP fully diluted earnings per share grew approximately 15% to $1.50 compared to $1.30 in the prior quarter, exceeding the upper end of the outlook by $0.13 [17] - Fiscal 2022 revenue was $7.9 billion, a growth rate of 16.8% compared to $6.8 billion in fiscal 2021 [21] - Operating margins improved from 4.9% in fiscal 2021 to 5.3% in fiscal 2022, with earnings per share growing from $3.97 to $4.99, a growth rate of over 25% [21][29] Business Line Data and Key Metrics Changes - Q4 IMS revenue increased to $1.8 billion, a 10.8% increase over the prior quarter, driven by strong customer demand [19] - Component products and services revenue grew to $447 million, approximately 4.4%, with non-GAAP gross margin for CPS remaining flat at 11.9% [20] - For fiscal 2022, revenue from Industrial, Medical, Defense, and Automotive was $4.7 billion, growing 21.2% year-over-year [31] Market Data and Key Metrics Changes - Revenue from Industrial, Medical, and Automotive markets was $1.288 billion, growing 5.7% quarter-over-quarter [30] - Communication Networks and Cloud Infrastructure revenue was $915 million, with a quarter-over-quarter growth of 14.2% [30] - Book-to-bill ratio for fiscal year 2022 was strong at 1.05:1, indicating solid demand and backlog [31] Company Strategy and Development Direction - The company is focused on high-technology mission-critical markets and plans to build a world-class engineering and manufacturing company in India through a joint venture with Reliance [14][15] - The strategy emphasizes customer-centric operations, leveraging deep technical market expertise and superior performance [32] - The company aims to diversify its end markets and expand in sectors requiring greater technical capabilities, such as renewable energy and medical devices [34][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand across customer bases despite ongoing supply chain challenges [24][26] - The outlook for Q1 2023 anticipates revenue in the range of $2.1 billion to $2.2 billion, with non-GAAP gross margin expected between 8.1% and 8.6% [24] - Management is optimistic about fiscal year 2023, expecting improvements in revenue and margins driven by operational efficiencies and new programs [43][44] Other Important Information - The company has a healthy balance sheet with cash and cash equivalents of $530 million and approximately $1.4 billion in liquidity [22] - Cash flow from operations was $82 million in Q4 and $331 million for fiscal 2022, with free cash flow of $34 million in Q4 and $201 million for the year [23] Q&A Session Summary Question: Concerns about capital allocation strategy and sustainability of share buybacks - Management clarified that capital allocation priorities focus primarily on funding organic growth, with share buybacks being opportunistic [52] Question: Expectations for operating expenses growth in fiscal 2023 - Management expects operating expenses as a percentage of revenue to decrease, indicating leverage despite potential nominal increases [55] Question: Year-over-year revenue growth expectations - Management is optimistic about revenue growth, emphasizing strong visibility and demand across markets [59] Question: Backlog and order visibility - Management confirmed strong backlog and customer forecasts, indicating confidence in meeting demand [68] Question: Changes in customer sentiment and competitive environment - Management noted stable sentiment in key markets, with no significant changes in competitive dynamics [71][72] Question: CapEx guidance for fiscal 2023 - Management expects CapEx to remain in the range of $50 million, driven by growth opportunities [76] Question: Joint venture in India and its potential - Management expressed high hopes for the joint venture, anticipating significant revenue growth over time [89][91]