Sanmina(US:SANM)2021-11-09 03:35Financial Data and Key Metrics Changes - Q4 revenue was $1.64 billion, slightly below the outlook of $1.65 billion to $1.75 billion, impacted by supply chain constraints estimated to affect revenue by more than $200 million [14][15] - Non-GAAP gross margin was 8.2%, a decline from Q3 due to lower revenues and incremental costs from supply chain issues [16] - Non-GAAP operating margin was 4.8%, slightly lower than the prior quarter, but in line with outlook [16] - Non-GAAP fully-diluted earnings per share were $0.95, within the expected range of $0.93 to $1.03 [16] - Fiscal 2021 revenue was $6.8 billion, relatively flat compared to fiscal 2020, with non-GAAP gross margins improving by 70 basis points to 8.4% [22][24] Business Line Data and Key Metrics Changes - Q4 IMS revenue was $1.32 billion, slightly down from Q3, with non-GAAP gross margin declining to 6.8% from 7.6% due to supply chain constraints [19] - CPS revenue increased to $357 million, with non-GAAP gross margin improving to 12.8% as costs associated with new defense programs had less impact in Q4 [21] - Non-GAAP gross margins have exceeded 8% for the last six consecutive quarters, indicating consistent performance [17] Market Data and Key Metrics Changes - Communication, networks, and cloud infrastructure accounted for 44% of revenue in Q4, slightly up quarter-over-quarter, while industrial, medical, defense, and automotive saw a slight decline [36] - Book-to-bill ratio for Q4 was 1.14, indicating strong demand [37] Company Strategy and Development Direction - The company aims to provide industry-leading technology solutions and expand partnerships in high-complexity, heavily regulated markets [42] - Management is focused on resolving supply chain shortages and logistics challenges while maximizing shareholder value [42] - The outlook for fiscal year 2022 anticipates approximately 60% of revenue from industrial, medical, defense, and automotive markets, and 40% from communication networks and cloud infrastructure [40] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth despite ongoing supply chain constraints, emphasizing strong customer demand and a robust backlog [38][41] - The company expects to generate healthy cash flow and maintain operational efficiency despite current challenges [51] - Management acknowledged that material shortages, particularly in semiconductors, have significantly impacted operations and revenue [73][75] Other Important Information - Cash and cash equivalents increased to $650 million, with total liquidity of $1.4 billion [25] - The company repurchased 827,000 shares for approximately $32 million in Q4, with a total of 1.5 million shares repurchased for $54 million in fiscal 2021 [30] Q&A Session Summary Question: Fiscal 2022 outlook and revenue growth expectations - Management expects nice growth based on strong backlog but emphasizes that growth is dependent on material availability [46][48] Question: Inventory levels and working capital - Inventory increased by 16% sequentially, and management expects high inventory levels to persist until supply chain constraints ease [49][50] Question: Margin dynamics in IMS and CPS segments - IMS margins declined due to a prior quarter's favorable reserve reversal, while CPS margins improved due to reduced costs from defense program ramp-ups [52][55] Question: Long-term adjustments with clients regarding inventory - Management is actively discussing supply chain strategies with customers to mitigate risks and improve logistics [62][66] Question: Trends in communications network and cloud infrastructure - Strong demand for optical networking and 5G products is expected to continue, with customers eager for higher-end systems [68][70] Question: Component shortages and their impact - Semiconductors remain the primary constraint, with management noting that all sectors are affected by material shortages [74][75]