Sanmina's Second Quarter Fiscal 2024 Financial Results

Rhea-AI Summary

Sanmina reported revenue of $1.83 billion and GAAP operating margin of 4.1% for the second quarter of fiscal 2024, with positive movement in previously depressed end-markets. The company remains optimistic about sequential improvement in 2024.

Positive

• Positive movement in previously depressed end-markets
• Focused execution and operating discipline yielding financial results in line with outlook

Negative

• None.

Insights

Financial Analyst

Sanmina Corporation's recent disclosure of its second quarter financial results provides a mixed bag for investors. The reported revenue of $1.83 billion may signal stable growth and the GAAP operating margin of 4.1% aligns with industry standards for manufacturing firms. However, one would be amiss not to scrutinize the non-GAAP operating margin of 5.4% and non-GAAP diluted EPS of $1.30. While non-GAAP metrics can sometimes provide a clearer picture of a company’s operating performance by excluding one-time expenses, investors should exercise caution and understand the adjustments made.

Another point to consider is the cash flow from operations at $72 million, coupled with a strong ending cash position of 651 million. This strong liquidity position may provide some comfort to investors about the company's ability to invest in growth opportunities or weather economic downturns. For the keen-eyed investor, comparing these figures to previous quarters could reveal trends in working capital management and operational efficiency.

Market Research Analyst

The commentary from the CEO regarding 'positive movement in some end-markets' is a subtle cue that could indicate recovering demand in certain segments. However, the mention of 'macroeconomic uncertainty' suggests that investors should temper their expectations and remain cognizant of the broader economic context affecting Sanmina's operations. Future growth is contingent upon economic stability and investor sentiment may sway with changes in market conditions.

Detailed analysis of Sanmina's market segments might reveal which areas are improving and could potentially drive revenue growth. This would benefit investors who focus on sector-specific performance. On the flip side, the company's optimism about 'sequential improvement' should be weighed against actual performance in coming quarters to assess the accuracy of these forward-looking statements.

SAN JOSE, Calif., April 29, 2024 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the fiscal second quarter ended March 30, 2024 and outlook for its fiscal third quarter ending June 29, 2024.

Second Quarter Fiscal 2024 Financial Highlights

• Revenue: $1.83 billion
• GAAP operating margin: 4.1%
• GAAP diluted EPS: $0.93
• Non-GAAP⁽¹⁾ operating margin: 5.4%
• Non-GAAP⁽¹⁾ diluted EPS: $1.30
• Cash flow from operations: $72 million
• Ending cash and cash equivalents: $651 million

⁽¹⁾See Schedule 1 below for more information regarding our use of non-GAAP financial measures. A reconciliation of the non-GAAP financial information contained in this release to their most directly comparable GAAP measures is included in the financial statements furnished with this release.

"Our focused execution and operating discipline yielded financial results in line with our outlook," stated Jure Sola, Chairman and Chief Executive Officer. "During the quarter, we started to see positive movement in some end-markets that have been notably depressed for the last few quarters. While there is still macroeconomic uncertainty, the team continues to demonstrate resilience. We remain optimistic that we will see sequential improvement as we progress through 2024."

Third Quarter Fiscal 2024 Outlook

The following outlook is for the fiscal third quarter ending June 29, 2024. These statements are forward-looking and actual results may differ materially. 

• Revenue between $1.8 billion to $1.9 billion
• GAAP diluted earnings per share between $0.95 to $1.05
• Non-GAAP diluted earnings per share between $1.22 to $1.32

Safe Harbor Statement

The statements above including our financial outlook for the third quarter fiscal 2024 and our expectations for sequential improvement in 2024 generally, constitute forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in these statements as a result of a number of factors, including adverse changes to the key markets we target; significant uncertainties that can cause our future sales and net income to be variable; reliance on a small number of customers for a substantial portion of our sales; risks arising from our international operations; geopolitical uncertainty, including from the war in Ukraine and conflict in the Middle East; and the other risk factors set forth in the Company's annual and quarterly reports filed with the Securities Exchange Commission.

The Company is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the Investor Relations section of our website whether as a result of new information, future events or otherwise, unless otherwise required by law.

Company Conference Call Information

Sanmina will hold a conference call to review its financial results for the second quarter and outlook for the third quarter of fiscal 2024 on Monday, April 29, 2024 at 5:00 p.m. ET (2:00 p.m. PT). The access numbers are: domestic 800-836-8184 and international 646-357-8785. The conference will also be webcast live over the Internet. You can log on to the live webcast at Q2'24 Earnings. Additional information in the form of a slide presentation is available on Sanmina's website at www.sanmina.com. A replay of the conference call will be available for 48-hours. The access numbers are: domestic 888-660-6345 and international 646-517-4150, access code is 35579#.

About Sanmina

Sanmina Corporation, a Fortune 500 company, is a leading integrated manufacturing solutions provider serving the fastest growing segments of the global Electronics Manufacturing Services (EMS) market. Recognized as a technology leader, Sanmina provides end-to-end manufacturing solutions, delivering superior quality and support to Original Equipment Manufacturers (OEMs) primarily in the industrial, medical, defense and aerospace, automotive, communications networks and cloud infrastructure markets. Sanmina has facilities strategically located in key regions throughout the world. More information about the Company is available at www.sanmina.com.

Sanmina Contact
Paige Melching
SVP, Investor Communications
408-964-3610

Sanmina Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(GAAP)
(Unaudited)
	March 30, 2024		September 30, 2023
ASSETS
Current assets:
Cash and cash equivalents	$          650,858		$          667,570
Accounts receivable, net	1,138,413		1,230,771
Contract assets	449,419		445,757
Inventories	1,383,739		1,477,223
Prepaid expenses and other current assets	75,050		58,249
Total current assets	3,697,479		3,879,570
Property, plant and equipment, net	641,008		632,836
Deferred tax assets	169,533		177,597
Other	178,243		183,965
Total assets	$       4,686,263		$       4,873,968
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$       1,443,002		$       1,612,833
Accrued liabilities	260,086		267,148
Accrued payroll and related benefits	127,168		127,406
Short-term debt, including current portion of long-term debt	17,500		25,945
Total current liabilities	1,847,756		2,033,332
Long-term liabilities:
Long-term debt	303,884		312,327
Other	207,531		209,684
Total long-term liabilities	511,415		522,011
Stockholders' equity	2,327,092		2,318,625
Total liabilities and stockholders' equity	$       4,686,263		$       4,873,968

 

Sanmina Corporation
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(GAAP)
(Unaudited)
	Three Months Ended				Six Months Ended
	March 30, 2024		April 1, 2023		March 30, 2024		April 1, 2023
Net sales	$     1,834,595		$     2,320,103		$     3,709,393		$     4,675,911
Cost of sales	1,679,838		2,128,914		3,393,796		4,289,336
Gross profit	154,757		191,189		315,597		386,575
Operating expenses:
Selling, general and administrative	69,199		63,390		133,984		124,120
Research and development	6,323		6,394		12,612		11,993
Restructuring	3,274		804		5,464		1,435
Total operating expenses	78,796		70,588		152,060		137,548
Operating income	75,961		120,601		163,537		249,027
Interest income	3,412		2,539		7,069		5,472
Interest expense	(8,218)		(9,286)		(16,630)		(17,967)
Other income (expense), net	3,276		(2,768)		2,143		(9,480)
Interest and other, net	(1,530)		(9,515)		(7,418)		(21,975)
Income before income taxes	74,431		111,086		156,119		227,052
Provision for income taxes	19,122		25,779		40,446		46,631
Net income before noncontrolling interest	55,309		85,307		115,673		180,421
Less: Net income attributable to noncontrolling interest	2,824		5,686		6,120		8,786
Net income attributable to common shareholders	$          52,485		$          79,621		$        109,553		$        171,635
Net income attributable to common shareholders per share:
Basic	$               0.94		$               1.37		$               1.95		$               2.96
Diluted	$               0.93		$               1.33		$               1.91		$               2.87
Weighted-average shares used in computing per share amounts:
Basic	55,585		58,269		56,062		57,999
Diluted	56,699		59,819		57,470		59,863

 

Sanmina Corporation
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			March 30, 2024		December 30, 2023		April 1, 2023
GAAP Operating income			$           75,961		$           87,576		$        120,601
	GAAP Operating margin		4.1 %		4.7 %		5.2 %
Adjustments:
	Stock compensation expense (1)		14,651		12,585		12,534
	Amortization of intangible assets		—		—		249
	Distressed customer charges (2)		4,299		—		—
	Legal and other (3)		1,350		—		695
	Restructuring		3,274		2,190		804
Non-GAAP Operating income			$           99,535		$         102,351		$        134,883
	Non-GAAP Operating margin		5.4 %		5.5 %		5.8 %
GAAP Net income attributable to common shareholders			$           52,485		$           57,068		$          79,621
Adjustments:
	Operating income adjustments (see above)		23,574		14,775		14,282
	Legal and other (3)		(4,967)		—		(3,630)
	Adjustments for taxes (4)		2,849		3,961		4,844
Non-GAAP Net income attributable to common shareholders			$           73,941		$           75,804		$          95,117
GAAP Net income attributable to common shareholders per share:
	Basic		$               0.94		$               1.01		$               1.37
	Diluted		$               0.93		$               0.98		$               1.33
Non-GAAP Net income attributable to common shareholders per share:
	Basic		$               1.33		$               1.34		$               1.63
	Diluted		$               1.30		$               1.30		$               1.59
Weighted-average shares used in computing per share amounts:
	Basic		55,585		56,538		58,269
	Diluted		56,699		58,240		59,819
(1)	Stock compensation expense
	Cost of sales		$             4,416		$             4,050		$            4,025
	Selling, general and administrative		9,984		8,340		8,304
	Research and development		251		195		205
	Total		$           14,651		$           12,585		$          12,534
(2)	Relates to accounts receivable and inventory write-downs (recoveries) associated with distressed customers.
(3)	Represents expenses, charges and recoveries associated with certain legal and other matters.
(4)	GAAP provision for income taxes		$           19,122		$           21,324		$          25,779
	Adjustments:
	Tax impact of operating income adjustments		2,611		1,951		1,288
	Discrete tax items		385		(1,347)		(1,082)
	Deferred tax adjustments		(5,845)		(4,565)		(5,050)
	Subtotal - adjustments for taxes		(2,849)		(3,961)		(4,844)
	Non-GAAP provision for income taxes		$           16,273		$           17,363		$          20,935

 

Q3 FY24 Earnings Per Share Outlook*:			Q3 FY24 EPS Range
			Low		High
	GAAP diluted earnings per share		$                  0.95		$                  1.05
	Stock compensation expense		$                  0.27		$                  0.27
	Non-GAAP diluted earnings per share		$                  1.22		$                  1.32
* Due to uncertainty regarding the timing of recognition of restructuring charges, impairment charges and other unusual or infrequent items, if any, that could be incurred during the third quarter of FY24, an estimate of such items is not included in the outlook for Q3 FY24 GAAP EPS.

 

Sanmina Corporation
Condensed Consolidated Cash Flow
(in thousands)
(GAAP)
(Unaudited)
	Three Month Periods
	Q2'24		Q1'24		Q4'23		Q3'23		Q2'23
GAAP Net income before noncontrolling interest	$      55,309		$      60,364		$      65,355		$      81,737		$      85,307
Depreciation and amortization	30,274		30,726		30,521		29,898		29,282
Other, net	18,634		18,185		21,947		21,174		17,075
Net change in net working capital	(31,900)		16,750		(40,966)		(76,300)		(67,086)
Cash provided by operating activities	72,317		126,025		76,857		56,509		64,578
Purchases of long-term investments	(700)		(600)		(500)		(500)		(700)
Net purchases of property & equipment	(29,611)		(34,216)		(37,803)		(52,167)		(63,458)
Cash used in investing activities	(30,311)		(34,816)		(38,303)		(52,667)		(64,158)
Holdback paid in connection with previous business combination	—		—		—		(8,558)		—
Net share repurchases	(17,477)		(115,619)		(30,397)		(52,072)		(13,376)
Net borrowing activities	(4,375)		(12,820)		4,070		(4,375)		(4,375)
Cash used for financing activities	(21,852)		(128,439)		(26,327)		(65,005)		(17,751)
Effect of exchange rate changes	(886)		1,250		(1,245)		(452)		220
Net change in cash & cash equivalents	$      19,268		$    (35,980)		$      10,982		$    (61,615)		$    (17,111)
Free cash flow:
Cash provided by operating activities	$      72,317		$    126,025		$      76,857		$      56,509		$      64,578
Net purchases of property & equipment	(29,611)		(34,216)		(37,803)		(52,167)		(63,458)
	$      42,706		$      91,809		$      39,054		$        4,342		$        1,120

 

Schedule 1

The statements above and financial information provided in this earnings release include non-GAAP measures of operating income, operating margin, net income and earnings per share. Management excludes from these measures stock-based compensation, restructuring, acquisition and integration expenses, impairment charges, amortization charges and other unusual or infrequent items, as adjusted for taxes, as more fully described below.

Management excludes these items principally because such charges or benefits are not directly related to the Company's ongoing core business operations. We use such non-GAAP measures in order to (1) make more meaningful period-to-period comparisons of the Company's operations, both internally and externally, (2) guide management in assessing the performance of the business, internally allocating resources and making decisions in furtherance of Company's strategic plan, (3) provide investors with a better understanding of how management plans and measures the business and (4) provide investors with a better understanding of our ongoing, core business. The material limitations to management's approach include the fact that the charges, benefits and expenses excluded are nonetheless charges, benefits and expenses required to be recognized under GAAP and, in some cases, consume cash which reduces the Company's liquidity. Management compensates for these limitations primarily by reviewing GAAP results to obtain a complete picture of the Company's performance and by including a reconciliation of non-GAAP results to GAAP results in its earnings releases.

Additional information regarding the economic substance of each exclusion, management's use of the resultant non-GAAP measures, the material limitations of management's approach and management's methods for compensating for such limitations is provided below.

Stock-based Compensation Expense, which consists of non-cash charges for the estimated fair value of equity awards granted to employees and directors, is excluded in order to permit more meaningful period-to-period comparisons of the Company's results since the Company grants different amounts and value of equity awards each quarter. In addition, given the fact that competitors grant different amounts and types of equity awards and may use different valuation assumptions, excluding stock-based compensation permits more accurate comparisons of the Company's core results with those of its competitors.

Restructuring, Acquisition and Integration Expenses, which consist of employee severance, lease termination costs, exit costs, environmental investigation, remediation and related employee costs and other charges primarily related to closing and consolidating manufacturing facilities and those associated with the acquisition and integration of acquired businesses, are excluded because such charges (1) can be driven by the timing of acquisitions and exit activities which are difficult to predict, (2) are not directly related to ongoing business results and (3) generally do not reflect expected future operating expenses. In addition, given the fact that the Company's competitors complete acquisitions and adopt restructuring plans at different times and in different amounts than the Company, excluding these charges or benefits permits more accurate comparisons of the Company's core results with those of its competitors. Items excluded by the Company may be different from those excluded by the Company's competitors and restructuring and integration expenses include both cash and non-cash expenses. Cash expenses reduce the Company's liquidity. Therefore, management also reviews GAAP results including these amounts.

Impairment Charges for Goodwill and Other Assets, which consist of non-cash charges, are excluded because such charges are non-recurring and do not reduce the Company's liquidity. In addition, given the fact that the Company's competitors may record impairment charges at different times, excluding these charges permits more accurate comparisons of the Company's core results with those of its competitors.

Amortization Charges, which consist of non-cash charges impacted by the timing and magnitude of acquisitions of businesses or assets, are also excluded because such charges do not reduce the Company's liquidity. In addition, such charges can be driven by the timing of acquisitions, which is difficult to predict. Excluding these charges permits more accurate comparisons of the Company's core results with those of its competitors because the Company's competitors complete acquisitions at different times and for different amounts than the Company.

Other Unusual or Infrequent Items, such as charges or benefits associated with distressed customers, expenses, charges and recoveries relating to certain legal matters, and gains and losses on sales of assets, are excluded because such items are typically non-recurring, difficult to predict or not directly related to the Company's ongoing or core operations and are therefore not considered by management in assessing the current operating performance of the Company and forecasting earnings trends. However, items excluded by the Company may be different from those excluded by the Company's competitors. In addition, these items include both cash and non-cash expenses. Cash expenses reduce the Company's liquidity. Management compensates for these limitations by reviewing GAAP results including these amounts.

Adjustments for Taxes, which consist of the tax effects of the various adjustments that we exclude from our non-GAAP measures, and adjustments related to deferred tax and discrete tax items. Including these adjustments permits more accurate comparisons of the Company's core results with those of its competitors. We determine the tax adjustments based upon the various applicable effective tax rates. In those jurisdictions in which we do not expect to realize a tax cost or benefit (due to a history of operating losses or other factors), a reduced tax rate is applied.

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SOURCE Sanmina Corporation

FAQ

What were Sanmina's revenue and GAAP operating margin for the second quarter of fiscal 2024?

Sanmina reported revenue of $1.83 billion and GAAP operating margin of 4.1% for the second quarter of fiscal 2024.

What is Sanmina's outlook for the fiscal third quarter ending June 29, 2024?

Sanmina remains optimistic about sequential improvement in 2024 for the fiscal third quarter ending June 29, 2024.