Sanmina(US:SANM)2021-02-03 03:13Financial Data and Key Metrics Changes - Q1 revenue was $1.76 billion, exceeding the midpoint of the outlook of $1.7 billion to $1.8 billion, with revenue growth sequentially after adjusting for the 13 weeks in Q1 compared to 14 weeks in Q4 FY 2020 [13][15] - Q1 non-GAAP gross margin was 8.3%, marking the third consecutive quarter above 8%, while non-GAAP operating margin was 5%, the second consecutive quarter of 5% or greater [13][15] - Q1 non-GAAP fully diluted earnings per share (EPS) was $1.02, exceeding the outlook of $0.75 to $0.85, and this was the second consecutive quarter that non-GAAP EPS exceeded $1 per share [14][16] Business Line Data and Key Metrics Changes - IMS revenue was $1.5 billion, with non-GAAP gross margin improving from 7.2% to 7.3%, marking the third consecutive quarter with gross margins above 7% [17] - Products and Services revenue was $319 million, with non-GAAP gross margin at 12.4%, also the third consecutive quarter above 12% [18] Market Data and Key Metrics Changes - In Q1, communications networks and cloud infrastructure accounted for 41% of revenue, while industrial, medical, defense, and automotive contributed 59% [25] - For Q2, approximately 60% of revenue is expected from industrial, medical, defense, and automotive markets, with 40% from communication networks and cloud infrastructure [26] Company Strategy and Development Direction - The company focuses on safety, customer satisfaction, driving efficiencies, and delivering free cash flow as key drivers of success [24] - Management aims to unlock total value by maximizing operating leverage and expanding into more profitable projects in key markets [29] - The long-term operating margin target is set at 5% to 6%, with a strong customer base to support future growth [30] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating through COVID-19 and macroeconomic challenges, with expectations for stable demand across market segments [21][22] - The outlook for Q2 revenue is projected to be between $1.65 billion and $1.75 billion, with non-GAAP diluted EPS expected in the range of $0.76 to $0.86 [22][33] Other Important Information - The balance sheet remains strong, with cash and cash equivalents increasing to $516 million and a low debt-to-cash ratio of 0.7 [19] - Inventory was down approximately $42 million, with inventory turns improving to 7.7 [20] Q&A Session Summary Question: Clarification on communications networks and cloud infrastructure performance - Management noted that while there were some push-outs due to component shortages, overall demand was stable, with improvements expected in cloud computing based on new programs won [36][37] Question: Insights on operating margin performance - Management highlighted that controlling operating expenses allowed for maintaining a 5% operating margin despite lower revenues, with guidance for Q2 reflecting seasonal impacts and uncertainties [39][40][42] Question: Component shortages and inventory trends - Management acknowledged manageable component shortages affecting some orders, with a focus on improving inventory turns while navigating supply chain challenges [44][46] Question: Lead times and challenges in supply chain - Management identified custom ASICs, components for 5G, and automotive as the most challenging areas due to demand pressures, but emphasized strong relationships with suppliers to navigate these issues [61][62]