Sanmina (SANM) Q3 2024 earnings summary

Executive summary

• Q3 revenue reached $1.84 billion, in line with guidance, with sequential growth in communications, networks, and cloud infrastructure, while automotive and industrial segments remained soft; year-over-year revenue declined 16.6% due to reduced demand and inventory absorption.

• Non-GAAP diluted EPS was $1.25 and GAAP diluted EPS was $0.91; non-GAAP operating margin was 5.3%, and GAAP operating margin was 4.5%.

• Net income attributable to common shareholders was $51.6 million for Q3, down from $76.5 million year-over-year.

• Cash flow from operations was $90 million for Q3, with free cash flow of $67 million; year-to-date operating cash flow was $288 million, up $130 million year-over-year.

• Share repurchases totaled 845,000 shares for $55 million in Q3, with 3 million shares repurchased for $162 million year-to-date; $118 million remains authorized.

Financial highlights

• Non-GAAP gross margin was 8.5% and GAAP gross margin was 8.3% for Q3; non-GAAP operating margin was 5.3% and GAAP operating margin was 4.5%.

• Cash and cash equivalents stood at $658 million at quarter end, with no outstanding borrowings on the $800 million revolver, providing $1.5 billion in liquidity.

• Inventory turns were 4.9x, days of inventory at 75, and days sales outstanding at 56.

• Non-GAAP pre-tax ROIC was 21.1%, and leverage ratio was 0.48x.

• GAAP net income for Q3 was $51.6 million; non-GAAP net income was $70.8 million.

Outlook and guidance

• Q4 revenue guidance is $1.9 billion–$2.0 billion, with non-GAAP EPS expected at $1.30–$1.40 and GAAP EPS at $1.02–$1.12.

• Non-GAAP gross margin expected at 8.3%–8.8%, operating margin at 5.3%–5.7%.

• Fiscal 2025 is expected to be a growth year, with a long-term focus on operating margin improvement to 6%+.

• Capital expenditures projected at $30 million for Q4.

• Management expects near-term revenue headwinds as customers continue to absorb finished goods inventory, particularly in telecom.