Sanmina Q3 Earnings Call Highlights

Sanmina NASDAQ: SANM reported fiscal third-quarter revenue of $3.46 billion, up 69.7% from a year earlier, as growth in its core business and the contribution from ZT Systems lifted results. The company said revenue reached the high end of its outlook range, while non-GAAP operating margin and earnings per share exceeded its prior expectations. Non-GAAP operating margin was 8.0%, up 230 basis points year over year, and non-GAAP diluted earnings per share rose 116% to $3.31. Cash flow from operations totaled $124.5 million during the quarter ended June 27. Chairman and Chief Executive Officer Jure Sola said the company was executing to plan across both its core operations and the ZT Systems business. “We are expanding existing partnerships,” Sola said. “We’re adding new customers and new projects to drive future growth.” Core Sanmina revenue totaled $2.4 billion, an increase of 17% from the prior-year period, with growth across all end markets and continued strength in cloud and AI infrastructure. ZT Systems contributed $1.1 billion in revenue, landing at the midpoint of the company’s outlook. Executive Vice President and CFO Jon Faust said the company’s revenue performance reflected broad-based demand, while profitability benefited from business mix, cost management and non-recurring engineering services related to product launches. “Our revenue of $3.46 billion came in at the high end of our outlook range,” Faust said. “This was driven by both the core Sanmina business, which exceeded its outlook range, with growth coming from all end markets, and the ZT Systems business, which came in at the midpoint of its outlook range.” Integrated Manufacturing Solutions revenue was $2.96 billion, up 79.4% year over year. Its non-GAAP gross margin was 10.2%, up 270 basis points. Components, Products and Services revenue was $546 million, up 29.2% year over year. Its non-GAAP gross margin was 12.8%, down 190 basis points from a year earlier but up 120 basis points sequentially. The CPS revenue increase was driven by metal fabrication for AI system racks and high-technology printed circuit boards used in aerospace and defense products. The year-over-year margin decline in the segment reflected depreciation and other expenses associated with investments in new programs, according to Faust. Sanmina said it continued to integrate ZT Systems and invest in incremental power, liquid cooling, test-cell capacity and automation needed for the next generation of accelerated-compute products. The company said it secured additional customer orders during the third quarter, expanding its customer base beyond orders announced previously. Faust said customer validation efforts w...