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Sanmina's Third Quarter Fiscal 2023 Financial Results

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SAN JOSE, Calif., July 31, 2023 /PRNewswire/ -- Sanmina Corporation ("Sanmina" or the "Company") (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the fiscal third quarter ended July 1, 2023 and outlook for its fiscal fourth quarter ending September 30, 2023.

Third Quarter Fiscal 2023 Financial Highlights

•  Revenue: $2.21 billion

•  GAAP operating margin: 4.9%

•  GAAP diluted EPS: $1.28

•  Non-GAAP(1) operating margin: 5.7%

•  Non-GAAP diluted EPS: $1.55


Additional Third Quarter Highlights

•  Cash flow from operations: $57 million

•  Ending cash and cash equivalents: $657 million

•  Share repurchases: ~970,000 shares for ~$51 million

•  Non-GAAP pre-tax ROIC: 29.7%


(1)Non-GAAP financial measures exclude charges or gains relating to: stock-based compensation expenses; restructuring costs (including employee severance costs, environmental investigation, remediation and related costs and other charges related to closing and consolidating facilities); acquisition and integration costs (consisting of costs associated with the acquisition and integration of acquired businesses into our operations); impairment charges for goodwill and other assets; amortization expense; and other unusual or infrequent items (e.g. charges or benefits associated with distressed customers, expenses, charges and recoveries relating to certain legal matters, gains and losses on sales of assets, deferred tax adjustments and discrete tax items). See Schedule 1 below for more information regarding our use of non-GAAP financial measures, including the economic substance behind each exclusion, the manner in which management uses non-GAAP measures to conduct and evaluate the business, the material limitations associated with using such measures and the manner in which management compensates for such limitations. 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 third quarter results were in line with our outlook. We continue to execute well and deliver consistent operating margins and solid cash generation," stated Jure Sola, Chairman and Chief Executive Officer. "Our strong performance in the first nine months and achievement of our outlook for the fourth quarter would result in fiscal 2023 revenue growth of approximately 14 percent and non-GAAP EPS growth of approximately 35 percent. The team remains focused on excellence in quality, delivery and consistently meeting the needs of our customers. We have a strong foundation and promising future," Sola concluded.

Fourth Quarter Fiscal 2023 Outlook
The following outlook is for the fiscal fourth quarter ending September 30, 2023. These statements are forward-looking and actual results may differ materially. 

  • Revenue between $2.1 billion to $2.2 billion
  • GAAP diluted earnings per share between $1.24 to $1.34
  • Non-GAAP diluted earnings per share between $1.47 to $1.57

Safe Harbor Statement
The statements above concerning our financial outlook for the fourth quarter fiscal 2023 and our expectations for growth in revenue and non-GAAP earnings per share in fiscal 2023 should such outlook be achieved, 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, most notably ongoing supply chain constraints and geopolitical uncertainty, including from the conflict in Ukraine. Other factors that could cause our results to differ from our forward-looking statements include 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; 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 third quarter and outlook for the fourth quarter of fiscal 2023 on Monday, July 31, 2023 at 5:30 p.m. ET (2:30 p.m. PT). The access numbers are: domestic 833-816-1390 and international 412-317-0483. The conference will also be webcast live over the Internet. You can log on to the live webcast at Q3 Webcast Link. 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 877-344-7529 and international 412-317-0088, access code is 1520057.

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)







July 1,


October 1,







2023


2022


















Restated







(Unaudited)

ASSETS
















Current assets:








Cash and cash equivalents



$        656,588


$        529,857


Accounts receivable, net



1,279,966


1,138,894


Contract assets



459,145


475,721


Inventories




1,489,200


1,684,099


Prepaid expenses and other current assets


68,121


62,044



Total current assets



3,953,020


3,890,615










Property, plant and equipment, net



631,744


575,170

Deferred tax assets



187,434


209,554

Other





185,694


160,192



Total assets



$     4,957,892


$     4,835,531










LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:








Accounts payable



$     1,724,034


$     2,041,434


Accrued liabilities



277,515


281,599


Accrued payroll and related benefits


138,815


130,892


Short-term debt, including current portion of long-term debt

17,500


17,500



Total current liabilities



2,157,864


2,471,425










Long-term liabilities:







Long-term debt



316,552


329,237


Other




217,748


215,333



Total long-term liabilities



534,300


544,570










Stockholders' equity



2,265,728


1,819,536



Total liabilities and stockholders' equity


$     4,957,892


$     4,835,531

 

Sanmina Corporation

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(GAAP)

(Unaudited)












Three Months Ended


Nine Months Ended












July 1,


July 2,


July 1,


July 2,



2023


2022


2023


2022














Restated




Restated

Net sales

$   2,207,118


$   2,023,361


$    6,883,029


$    5,694,757

Cost of sales

2,023,910


1,861,176


6,313,246


5,244,780


Gross profit

183,208


162,185


569,783


449,977










Operating expenses:









Selling, general and administrative

68,828


61,506


192,948


184,798


Research and development

6,719


5,071


18,712


15,320


Restructuring and other

296


3,994


1,731


3,730


     Total operating expenses

75,843


70,571


213,391


203,848










Operating income

107,365


91,614


356,392


246,129











Interest income

4,213


540


9,685


1,198


Interest expense

(10,066)


(5,615)


(28,033)


(15,362)


Other expense

(2,508)


(7,774)


(11,988)


(7,110)

Interest and other, net

(8,361)


(12,849)


(30,336)


(21,274)










Income before income taxes

99,004


78,765


326,056


224,855










Provision for income taxes

17,267


1,543


63,898


42,835










Net income before noncontrolling interest

81,737


77,222


262,158


182,020










Less: Net income attributable to noncontrolling interest

5,243


-


14,029


-










Net income attributable to common shareholders

$        76,494


$        77,222


$       248,129


$       182,020



















Net income attributable to common shareholders
per share:









Basic

$            1.32


$            1.29


$             4.28


$             2.92


Diluted

$            1.28


$            1.25


$             4.14


$             2.83











Weighted-average shares used in









computing per share amounts:









  Basic

57,987


59,970


57,995


62,404


  Diluted

59,592


61,702


59,996


64,292

 

Sanmina Corporation

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)












Three Months Ended




July 1,


April 1,


July 2,




2023


2023


2022
















Restated









GAAP Operating income


$     107,365


$         120,601


$        91,614


GAAP Operating margin


4.9 %


5.2 %


4.5 %

Adjustments:








Stock compensation expense (1)


13,317


12,534


10,683


Amortization of intangible assets


669


249


251


Legal and other (2)


4,475


695


700


Restructuring costs


296


804


3,994

Non-GAAP Operating income


$     126,122


$         134,883


$      107,242


Non-GAAP Operating margin


5.7 %


5.8 %


5.3 %

















GAAP Net income attributable to common shareholders


$       76,494


$           79,621


$        77,222









Adjustments:








Operating income adjustments (see above)


18,757


14,282


15,628


Legal and other (2)


-


(3,630)


-


Adjustments for taxes (3)


(3,093)


4,844


(15,375)

Non-GAAP Net income attributable to common shareholders

$       92,158


$           95,117


$        77,475

















GAAP Net income attributable to common shareholders per
share:








Basic


$           1.32


$               1.37


$            1.29


Diluted


$           1.28


$               1.33


$            1.25









Non-GAAP Net income attributable to common shareholders
per share:








Basic


$           1.59


$               1.63


$            1.29


Diluted


$           1.55


$               1.59


$            1.26









Weighted-average shares used in computing per share
amounts:








Basic


57,987


58,269


59,970


Diluted


59,592


59,819


61,702

















(1)

Stock compensation expense was as follows:
















Cost of sales


$         4,518


$             4,025


$          3,724


Selling, general and administrative


8,588


8,304


6,819


Research and development


211


205


140


  Total


$       13,317


$           12,534


$        10,683









(2)

Represents expenses, charges and recoveries associated with certain legal matters.











(3)

GAAP provision for income taxes


$       17,267


$           25,779


$          1,543










Adjustments:








  Tax impact of operating income adjustments


1,817


1,288


534


  Discrete tax items


6,957


(1,082)


18,394


  Deferred tax adjustments


(5,681)


(5,050)


(3,553)










Subtotal - adjustments for taxes


3,093


(4,844)


15,375










Non-GAAP provision for income taxes


$       20,360


$           20,935


$        16,918

















Q4 FY23 Earnings Per Share Outlook*:


Q4 FY23 EPS Range






Low


 High












GAAP diluted earnings per share


$           1.24


$               1.34




  Stock compensation expense


$           0.23


$               0.23




Non-GAAP diluted earnings per share


$           1.47


$               1.57




* 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 fourth quarter of FY23, an estimate of such items is not included in the outlook for Q4 FY23 GAAP EPS.

 

Sanmina Corporation

Condensed Consolidated Cash Flow

($ in thousands)

(GAAP)

(Unaudited)












Three Month Periods


Q3'23


Q2'23


Q1'23


Q4'22


Q3'22






Restated


Restated


Restated

GAAP Net income before noncontrolling interest

$      81,737


$      85,307


$      95,114


$      58,364


$      77,222

Depreciation and amortization

29,898


29,282


28,536


26,686


27,065

Other, net

21,174


17,075


20,727


33,886


18,108

Net change in net working capital

(76,300)


(67,086)


(107,153)


(37,038)


(20,712)

       Cash provided by operating activities

56,509


64,578


37,224


81,898


101,683











Purchases of long-term investments

(500)


(700)


(800)


(300)


(700)

Net purchases of property & equipment

(52,167)


(63,458)


(36,530)


(48,155)


(37,434)

        Cash used in investing activities

(52,667)


(64,158)


(37,330)


(48,455)


(38,134)











Contingent consideration paid in connection with previous
business combination

(8,558)


-


-


-


-

Net share repurchases

(52,072)


(13,376)


(7,836)


(23,438)


(124,365)

Net borrowing activities

(4,375)


(4,375)


(4,375)


27,987


(4,688)

Proceeds from other notes receivable

-


-


-


-


500

Proceeds from sale of non-controlling interest

-


-


215,799


-


-

         Cash provided by (used for) financing activities

(65,005)


(17,751)


203,588


4,549


(128,553)











Effect of exchange rate changes

(452)


220


1,975


(1,440)


(1,584)











Net change in cash & cash equivalents

$     (61,615)


$     (17,111)


$    205,457


$      36,552


$     (66,588)











Free cash flow:










   Cash provided by operating activities

$      56,509


$      64,578


$      37,224


$      81,898


$    101,683

   Net purchases of property & equipment

(52,167)


(63,458)


(36,530)


(48,155)


(37,434)

   Proceeds from sale of intellectual property

-


-


-


-


500


$        4,342


$        1,120


$           694


$      33,743


$      64,749

 

Sanmina Corporation
Pre-Tax Return on Invested Capital (ROIC)
($ in thousands)
(Unaudited)




Three Month Periods



 Q3 FY23


 Q2 FY23


 Q1 FY23


 Q4 FY22


 Q3 FY22







 Restated


 Restated


 Restated

GAAP operating income


$   107,365


$    120,601


$      128,426


$      103,350


$       91,614


 x

4.0


4.0


4.0


4.0


4.0

Annualized GAAP operating income


429,460


482,404


513,704


413,400


366,456

Average invested capital (1)

 ÷

1,698,819


1,592,563


1,485,054


1,398,566


1,353,671

GAAP pre-tax ROIC


25.3 %


30.3 %


34.6 %


29.6 %


27.1 %












Non-GAAP operating income


$   126,122


$    134,883


$      140,899


$      117,232


$      107,242


 x

4.0


4.0


4.0


4.0


4.0

Annualized non-GAAP operating income


504,488


539,532


563,596


468,928


428,968

Average invested capital (1)

 ÷

1,698,819


1,592,563


1,485,054


1,398,566


1,353,671

Non-GAAP pre-tax ROIC


29.7 %


33.9 %


38.0 %


33.5 %


31.7 %


(1) Invested capital is defined as total assets (not including cash and cash equivalents and deferred tax assets) less total liabilities (excluding short-term and long-term debt).

Schedule 1

The statements above and financial information provided in this earnings release include non-GAAP measures of operating income, operating margin, net income, diluted earnings per share and pre-tax return on invested capital (ROIC). 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 severance, lease termination costs, exit costs, environmental investigation, remediation and related 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, 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, gains and losses on sales of assets, deferred tax adjustments and discrete tax items, 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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Sanmina Corp

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