Sanmina(US:SANM)2025-07-28 22:02Financial Data and Key Metrics Changes - The company reported solid revenue of $2,040 million for the third quarter, representing a 10.9% year-over-year increase [11][14] - Non-GAAP diluted earnings per share (EPS) was $1.53, a 22.8% increase compared to the same period last year [16] - Non-GAAP gross margin improved to 9.1%, reflecting a 60 basis point increase year-over-year [14][15] - Non-GAAP operating margin was 5.7%, at the high end of the company's outlook [13][15] Business Line Data and Key Metrics Changes - IMS revenue reached $1,650 million, up 11.6% year-over-year, driven by growth in communications networks and cloud infrastructure [18] - CPS revenue was $422 million, an 8.8% increase year-over-year, with a non-GAAP gross margin of 14.7%, a 320 basis point improvement [19] - DPS non-GAAP gross margin was 14.7%, driven by higher revenue and operational efficiencies [19] Market Data and Key Metrics Changes - The communications networks and cloud infrastructure segments showed strong demand, with revenue of $786 million, a 19.1% increase year-over-year [32] - The industrial, energy, medical, defense, aerospace, and automotive segments generated $1,256 million, growing 6.2% year-over-year [32] Company Strategy and Development Direction - The company is focused on improving operating margins to exceed 6% in the long term [31] - A strategic acquisition of ZT Systems is expected to significantly enhance revenue, potentially doubling net revenue within three years [26][27] - The acquisition aligns with the company's strategy to capitalize on long-term growth trends in data center and AI infrastructure [40][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver solid revenue and profitability growth despite uncertainties in the geopolitical landscape [25][31] - The company anticipates continued growth in fiscal year 2025, with revenue expected to increase by 6% to 8% [39] - Management noted a strong pipeline of new opportunities and positive customer sentiment regarding future demand [31][34] Other Important Information - The company ended the quarter with cash and cash equivalents of $798 million and no outstanding borrowings, indicating strong liquidity [20] - Capital expenditures for the quarter were $33 million, with expectations to invest strategically in capacity and technology [22] - The company is committed to maintaining a strong balance sheet while pursuing growth opportunities [28] Q&A Session Summary Question: Update on ZT Systems acquisition and revenue expectations - Management remains optimistic about the ZT Systems acquisition, expecting annual revenue run rate to be between $5 billion and $6 billion, with plans to stabilize and grow the business [48][49][57] Question: Concerns about potential slowdown in Q4 growth - Management clarified that while Q4 growth appears modest compared to previous quarters, the business is stable and expanding, with positive customer forecasts [60][62] Question: CPS margins and future expectations - CPS margins improved due to business mix and ongoing investments, with expectations to maintain or exceed 15% margins in the future [66][69] Question: Risks associated with inventory in the ZT deal - Management confirmed thorough evaluation of inventory as part of the acquisition, aiming to mitigate risks associated with potential write-downs [73][75] Question: Progress on Ingen joint venture and tariff impacts - The joint venture in India is progressing well, with expectations for growth across various markets, while management is closely monitoring tariff impacts on customer strategies [90][96][100]