Q4 2022 Sanmina Corp Earnings Call

Good afternoon, and welcome to the Sanmina is fourth quarter and fiscal year 2022 earnings conference call. All participants will be in a listen only mode.

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After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

Withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Paige Melching Senior Vice President of Investor Communications. Please go ahead.

Thank you Paul good afternoon, ladies and gentlemen, and welcome to Sanmina fourth quarter and fiscal year 2022 earnings call a copy of our press release and slides for today's discussion are available on our website at Sanmina Dot com in the Investor Relations section.

Joining me on the call today is Gerry Sola, Chairman and Chief Executive Officer.

And Curt as FEMA Executive Vice President and Chief Financial Officer, Good afternoon.

Before we begin our prepared remarks, let me remind everyone that today's call is being webcast and recorded and will be available on our website.

You can follow along with our prepared remarks in the slides provided on our website. Please turn to slide three of our presentation or the press release Safe Harbor statement.

During this conference call, we may make projections or other forward looking statements regarding future events or the future financial performance of the company. We caution you that such statements are just projections the company's actual results could differ materially from those projected in these statements as a result of a number of factors set forth in the company's annual and quarterly reports filed with the <unk>.

Curious and exchange Commission.

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

Included in our press release and slides issued today, we have provided you with statements of operations for the quarter and fiscal year ended October one 2022 on a GAAP basis as well as certain non-GAAP financial information.

Conciliation between GAAP and non-GAAP financial information is also provided in the press release and slides posted on our website.

In general our non-GAAP information excludes restructuring costs acquisition and integration costs and non cash stock based compensation expense amortization expense and other unusual or infrequent items.

Any comments, we make on this call as it relates to the income statement measures will be directed at our non-GAAP financial result.

Accordingly, unless otherwise stated in this conference call when we refer to gross profit gross margin operating income operating margin taxes net income and earnings per share. We are referring to our non-GAAP information I would now like to turn the call over to Ursula. Thanks page.

Good afternoon, ladies and gentlemen, and welcome and thank you all for being here with us today.

Please turn to slide four.

First I would like to take this opportunity to recognize.

Leadership team and all our employees for doing an exceptional job.

So to us thank.

Thank you for delivering strong and consistent results for the fourth quarter and fiscal year 2022, and now let's keep it up.

For the fourth quarter Semina delivered strong and consistent results, we had a strong broad based revenue growth.

Margin expansion and EPS growth, we delivered solid cash flow.

Again, okay.

<unk> job by <unk>.

Despite ongoing supply constraints in this microeconomic uncertainty.

These results are a reflection of our continued focus on execution of our strategy.

Now let me give you a quick overview of our new joint venture in India, which closed on October 3rd.

Please turn to slide five.

We are very excited about joint venture with reliance one of our leading companies in India.

So I mean that has been operating in India for 12 years with established state of Art manufacturing Technology Center of excellence.

He is joined debenture is focused on high technology and mission critical markets and servicing customers around the world.

We are leveraging our reliance expertise in the India business ecosystem, and semi sanmina technology and manufacturing expertise.

This venture is capitalized with over $200 million of cash to fund future growth.

The goal is to accelerate growth in India by focusing making India strategy.

We are planning to build a world class engineering technology and manufacturing company in India.

So for the rest of the agenda, we have that Kurt our CFO to review the details of our results for you.

I will follow up with additional comments about our resolve and future goals.

And Kurt and I will open for question and answers and now I'd like to turn this call over to Kurt Kurt.

Thanks, a lot Gary if everybody could turn to slide seven.

As you already mentioned in the fourth quarter, our team did an outstanding job delivering strong revenue and profit growth as well as cash generation.

Q4 revenue was $2 2 billion grew substantially by approximately nine 1% from the prior quarter and exceeded the high end of our outlook of $1 95 to 2.15 billion.

This was primarily due to strong customer demand and excellent coordination with suppliers and customers to mitigate material challenges.

non-GAAP gross margin was eight 3% compared to $8 four in the prior quarter, primarily due to product mix.

non-GAAP operating margin was five 6% compared to $5 five in the prior quarter, primarily due to operating expense leverage.

non-GAAP fully diluted earnings per share grew significantly by approximately 15% to $1 50 compared to $1 30 in the prior quarter and exceeded the upper end of the outlook of $1 27 to $1 37 by 13 cents.

Finally, Q4, GAAP fully diluted EPS was a dollar it.

Now please turn to slide eight.

This slide shows the quarterly trends of our financial results.

It continued to deliver improved financial performance, despite the challenges associated with the supply chain constraints.

non-GAAP gross margins have ranged from eight one to $8 five over the last five quarters.

In addition, non-GAAP operating margins had been 5% or greater over the last four quarters, and five 5% or greater over the last two quarters.

Earnings per share grew from 95 cents in the fourth quarter of fiscal 'twenty, one to $1 50 in the fourth quarter of fiscal 'twenty, two a 58% improvement.

Please turn to slide nine.

Q4, IMS revenue increased to $1 8 billion, an increase of 10, 8% over the prior quarter, primarily due to strong customer demand and excellent coordination.

With suppliers and customers to help mitigate material challenges.

non-GAAP gross margin for IMS was 7.2 compared to 7.3 in the prior quarter.

Components products and services revenue grew to 447 million or approximately four 4%.

GAAP gross margin for C. P. S was flat at 11, 9%.

Now please turn to slide 10.

Fiscal 2022 was a strong year driven by strong customer demand and operational excellence.

Fiscal 'twenty two revenue was $7 9 billion compared to $6 8 billion in fiscal 'twenty, one a growth rate of 16, 8%.

Operating margins improved from four 9% in fiscal 'twenty, one to five 3% in fiscal 'twenty, two primarily due to higher revenue and operational efficiencies.

Earnings per share grew from $3.97 in fiscal 'twenty, one to $4.99 in fiscal 'twenty to a growth rate of over 25%.

Please turn to slide 11.

We have a very healthy balance sheet, which provides us a competitive advantage cash.

Cash and cash equivalents was 530 Milligan.

Between cash and availability under our revolver and other debt facilities, we have approximately $1 4 billion of liquidity.

There were no borrowings outstanding under our revolver at the end of Q4.

In addition, during the quarter, we refinanced our term loan to extend the maturity until September 2027.

Inventory remains at an elevated level to support customer demand and due to supply chain shortages.

non-GAAP pretax ROIC was 34, 1% for Q4 fiscal 'twenty two.

Now please turn to slide 12.

Cash flow generation was strong during both the fourth quarter and for all of fiscal 'twenty two.

Cash flow from ops was $82 million in Q4, and 331 million for fiscal 'twenty two.

Free cash flow was 34 million in Q4, and 201 million in fiscal 'twenty two.

During Q4, we repurchased approximately 535000 shares for $24 million and for the year, we repurchased approximately 8 million shares for $317 million.

The remaining share purchase repurchase authorization at the end of Q4 was 164 milligrams.

Our capital allocation priorities have not changed our primary focus is again investing in the business to drive organic growth.

In addition, we will opportunistically explore strategic transactions debt reduction and share repurchases.

If you would please turn to slide 13.

Let's talk about the outlook for Q1.

As you already said overall demand is strong, but there continues to be uncertainty related to supply chain challenges as well as the macroeconomic and political environment.

We expect Q1 revenue to be in the range of 2.1 to 2.2 billion.

We expect non-GAAP gross margin to be in the range of eight 1% to 6% depending on product mix.

non-GAAP operating expenses in the range of 59 to 61 million and non-GAAP operating margin in the range of five 3% to five 8%.

We expect non-GAAP interest and other expenses of about 12 million.

This total reflects the benefit of interest income of $2 million related to the approximate to 215 million dollar investment by reliance in our Indian joint venture, which closed subsequent to the end of the fourth quarter.

In addition, we estimate an approximate $2 5 million non cash reduction to net income to reflect our JV partner's equity interest in the net income of the Indian JV.

We expect non-GAAP tax rate of approximately 17, 5%.

And non-GAAP fully diluted share count of approximately 60 million shares.

When you consider all this guidance our outlook for non-GAAP .

Diluted earnings per share is in the range of $1 41 to $1 51.

We expect Q1 capex to be about 50 million driven by growth of new programs and to support future growth.

We expect Q1 depreciation of around 30 million.

In summary demand remains strong across our customer base, we're confident in our business model and expect the company to continue to deliver strong operating leverage overtime.

I'll turn the call back to Eric Thanks, Kurt.

Ladies and gentlemen, let me add few more comments about our financial highlights for our 22 in the fourth quarter.

I will also review with you our end market outlook for the first quarter and fiscal year 'twenty three.

As you heard from Kurt we deliver strong and consistent results for fiscal year 'twenty two revenue grow nicely up 16, 8% to $789 billion.

Operating income improved to five 3%.

And we did exit the fourth quarter at five 6%.

Diluted earnings per share was $4 99.

And that grew nicely up 25, 6%.

We did exit the fourth quarter.

EPS.

Dollars 50 per share.

Our <unk> team has done an outstanding job as we continue to differentiate.

Our industry leading capabilities.

And all of this is translating into growth and margin expansion for Sanmina. Please turn to slide 16.

Let me talk to you now about revenue for the fourth quarter by end markets.

For industrial.

Medical and automotive.

Our revenue was a one point to eight $8 billion.

Little quarter over quarter of 55, 7%.

Communication networks, and cloud infrastructure was $915 million.

And that growth was quarter over quarter or 14, 2%.

For industrial medical defense and automotive, we saw nice growth up 21, 2% to $4 $7 billion for a year.

And communication networks grew 10, 8% per year.

And revenue of $3 175 billion.

We continue to diversify our end market successfully.

For fiscal year 'twenty, two top 10 customers were 48, 7% of our revenue.

Book to Bill continues to be strong for fiscal year 'twenty two was 105 to one.

Overall strong demand and solid backlog for the future. Please turn to slide 17.

Yeah.

Now, let me talk to you about competitive advantages in the markets that we serve.

Some of the key Differentiators for <unk>.

As a customer centric company sanmina is build around our customer needs.

In our culture.

We're a critical partner to our customers, we deliver deep technical and market expertise and superior performance.

We provide complex mission critical products.

And servicing our customer end to end.

We partner with customers from design and engineering through entire product lifecycle.

So I mean, it has embedded a resilient team led by our strong global management.

Supply chain simplification is industry, leading supply chain and its all vertical integration advantage.

Similar structure, a focus on a regional manufacturing on a global scale.

We use standardized equipment and standardized processes globally copy exact.

And this all is managed by one single global system.

The smart manufacturing systems gives us gives our customers visibility globally at real time.

But the most important is that sanmina delivers predictable and consistent performance globally.

Please turn to slide 18.

Now let me give you some highlights assuming that's focused markets.

<unk> has a well diversified customer base in a heavy regulated markets. We expect to continue to expand our end markets that require greater technical capabilities that gives us a competitive advantage to win in these mission critical markets.

We provide technology leadership through all of these markets.

For industrial markets with both with scenario of renewable energy Smart grid management.

Test and measurement security and public safety equipment optical.

Optical inspection equipment.

Industrial X Ray equipment semiconductor capital equipment as you can see we're well diversified in this industrial markets why we're so excited.

This diverse and growing market for us we established a long term customer base here and.

And still this market is at the early stage of outsourcing.

We're also working with local governments for the initiatives.

To grow a regional market.

Manufacturers.

We leverage so I mean, this higher technology components.

As we continue to build full systems.

Billy.

Please turn to slide 19.

For medical market.

We establish.

We are well established in this medical industry for over 45 years.

Areas that we focus on is diagnostic imaging such as MRI CPE scan equipment.

<unk> monitoring equipment laboratory biotech.

Furyk surgical equipment and medical delivery system.

Why are we excited in this market.

We're industry exports, providing critical services to this industry, we continue to see Alcid outsourcing opportunity that's a large scale.

Semina has established significant processes medical a deceleration and simplification globally that allowed us to lead in this industry.

We also have learn long term customer base in this market.

Now please turn to slide 20.

Let me talk to you about defense and aerospace market.

We serve this market through our defense divisions.

Our products.

Under the Sci brand.

And in this business for over 60 years, and so the <unk> technology components group.

So I mean, it's well recognized brand in defense and aerospace industry and most important we have proven and resolved in this market segment.

Our focused areas around the aircraft systems.

Defense and commercial tactical communications unmanned aerial systems satellite systems and others.

Why are we excited Sabina service product components and EMS offering from designed to full system in this market.

These projects have long product cycle, which is a benefit to us. This is a high complexity heavier.

Related market.

We arent long term customer base.

We provide rigorous security affluent and simplification, we have industry leading structure in place.

As we look at the market, we believe the new programs that we won will drive the growth.

This market is an early stage of product outsourcing and we believe we have a lot of upside in this market now.

Now please turn to slide 21.

Let's talk now about the automotive market.

We see a long term growth in this market segments, we focus on electrical vehicle.

Basically focusing and building stuff around the electrical motor power systems safety systems electronic control system.

<unk> radar systems charging station and infotainment why are we excited.

This industry is new for us, but we established last in last five to 10 years.

And EV and.

In advanced automotive electronics is that unlimited right now as we see a lot more technology is going into these cars.

We are leading and we are working with the industry leaders and we expect to see nice growth for many years new programs are also driving the growth for us. Please.

Please turn to slide 22.

Let me talk to you about communication networks and cloud networks.

Focus area for us it's been a long time, <unk> mobile networks optical packaging switching and IP at Audi networks and cloud infrastructure why were excited.

Well first of all we have a deep industry expertise in this market and long term customer base dimmed.

Demand for greater bandwidth. This is faster data is continuing.

Greater need for storage.

Our long term relationship with these key markets leaders will continue.

As we continue to leverage <unk> technology for this market.

New and existing programs are driving the growth, especially in our cloud networking side of our business now.

Now please turn to slide 23.

Now, let me talk to you about our first quarter fiscal year 'twenty three.

In summary, as you can see Sanmina does not serve consumer markets at all.

Our focus is on high complexity heavier than that.

<unk> markets the key markets for US I mean number one is industrial medical defense and aerospace automotive communication net force and cloud networks.

We see strong demand across all end market segments for this first quarter.

I can also tell you the new project wins are continue to driving the growth for us we expect supply to supply chain constraints to continue through the first quarter and into calendar year 'twenty three but good news is that things are getting better.

Please turn to slide 24.

Let me give you some more information what we see today for fiscal year 'twenty, two 'twenty three and beyond.

We're excited about <unk> future and we are positioned to build on.

Fiscal year 'twenty, three we expect to see nice improvements over fiscal year 'twenty two.

Revenue growth will be driven by existing and new programs, we see strong forecast from our key customers.

We are well diversified in the growth markets and.

And we also see strong pipeline of opportunities.

That we are working on right now.

Margin expansion to be driven by revenue growth in our IMS business, our technology components business, our defense products.

Tickle packaging products and other services.

Also we see improving our manufacturing efficiencies as component availability improves.

And with our lean Opex leverage as we continue to drive efficient structure.

So four to 'twenty three we expect to deliver strong cash flow.

That will fund our growth for fiscal year, 'twenty three and beyond.

Now please turn to slide 25.

Let me talk to you about our priorities.

Our priorities have not changed.

Strategy is proven to deliver results.

We will continue to build around our customer needs.

Rock and retain long term customer partnerships with leading companies in a growth industry.

We'll continue to invest in our leading technology continued.

Continued tune up lean and flexible global structure that we have.

And most important continues to invest in this column.

This gives us competitive advantage that supports attractive margins regardless of business environment.

Definitely with the focus of sustainable and profitable revenue growth.

We have a great customer base.

But we also focus on our customers. We don't have in this special industry that we drive every day.

Yeah.

You should see a continuous strong cash generation from us.

And the key here is to optimize our capital structure to drive growth for fiscal year, 'twenty three and beyond.

You have our commitment that we will continue to be focused on maximizing shareholder value for short term and long term.

Yeah.

The key here is still alive total volume of Semina capabilities.

We can do more.

And we still have a lot of leverage as Sanmina business model. Please turn to slide 26.

Yeah.

In summary for our fiscal year 'twenty, two we delivered solid execution consistent and predictable results.

We will continue to diversify revenue growth with these key market leaders.

We are well positioned to navigate any market dynamics that comes up.

<unk> has a healthy balance sheet to build on for fiscal year 'twenty three and beyond.

<unk> continued to deliver strong cash flow.

From operation to fund the future growth.

Again, we expect revenue and EPS growth and margin expansion in our physical 2023.

So ladies and gentlemen, now I would like to thank you for all your time and support.

Later, we are now ready to open the lines for question and answers. Thank you again.

Okay.

Thank you and we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

Withdraw your question. Please press Star then two.

At this time, we'll pause momentarily to assemble the roster.

And our first question today will come from <unk> back to Charles <unk> with Bank of America. Please go ahead.

Hi, Thank you for taking my questions maybe at this time.

Hi, Gary how are you maybe this time I'll start with a couple of questions for card and then I'll come and ask you a question.

Maybe I'll start with slide 12, which is the capital allocation priorities that you laid out.

And the share buybacks you said the priority Hasnt change in share buybacks are the lowest on the list, but if we look at this year. It looks like you spent 317 million on buybacks and but that compares to free cash flow will need $200 million right. So I mean, if I did the math correct if I am.

Doing it correctly it looks like share buybacks have added more than 55 cents.

In earnings this year, so I'm just trying to understand how sustainable is this allocation strategy of you invest at 150% of your free cash flow and share buybacks and even if you can.

You have net cash on the balance sheet, but does that.

Maybe do you think that's a good use of cash or is it if you have all of these.

Five D and are there opportunities I mean does it make sense to maybe invest in organic growth. So just trying to understand you know what.

How are you thinking about capital allocation in fiscal 'twenty, three and if this is sustainable this level of buybacks versus free cash flow.

Yeah. So first of all I don't think as I mentioned I don't think our capital allocation priorities have changed its always been focused primarily on funding organic growth I Didnt really number the last three I said each of the other three strategic transactions debt reduction and share repurchases.

Where do opportunistic way.

To me given the volatility in the market that we saw over the last year.

I do think it created a good opportunity <unk> to buy back more shares than we typically have bought back that being said you know if you look back from FY 14 to FY 'twenty two we bought $1 2 billion in share. So so you know our business generates a fair amount of cash like I said our firm.

Priority is always to invest that in the business and we did do that we invested about 130 million of Capex last year.

Do you hear and intend to do more of this year. So that's our priority, but we'll continue to look opportunistically at share buybacks, depending on how the markets are.

Okay. Thanks for that.

Maybe another question for you.

The margins have been good on the operating margin level and one of the things that has helped in Mena It looks like is.

Even though in fiscal 'twenty. Two you grew revenue, 17% year on year, but opex only grew less than 2% like one 7% essentially you kept it flat at $239 million of Opex.

So I mean, if you're guiding for fiscal 'twenty three revenue growth.

B what are the puts and takes in terms of Opex growth for this fiscal year, I mean, given labor costs and given inflation. How are you thinking about opex and what are the what are the levers you have to keep opex again flat.

If that's possible.

Yeah, well again I think as you already mentioned when he was talking about the FY 'twenty three outlook, we expect to get leverage in Opex that does not necessarily mean, the nominal dollar amount of Opex will stay flat, but as you as you look at Opex as a percent of revenue I would expect that to continue to go down I think we have.

As you already mentioned, we have the infrastructure to support a much larger business and so we do expect to get a fair amount of leverage there as well as ultimate way to leverage at the gross margin line, which is it gives us confidence over time that our overall our margins will expand.

Okay. Okay. Thanks for the details there let me ask you one question.

And the outlook for both the first quarter and fiscal 'twenty three you said that.

The company can grow revenues year on year.

When I look at the first quarter guide.

<unk>, one 5 billion at the midpoint, that's pretty strong growth I mean, that's like 22% year on year.

Compared to the first quarter of fiscal 'twenty two.

But when we look at the.

The year on year compares as we go into the second quarter third quarter fourth quarter, they get progressively more tough.

Tough right. So I mean, it looks like every quarter. The compares are 12% or so tougher because you've had strong growth in the second half of this fiscal year.

So how should we think about this growth is there any way that you can quantify or qualitatively tell us how much growth you think fiscal 'twenty three because you're guiding 22% growth for the first quarter is that something sustainable for the rest of the year and then first half versus second half how should we think about growth rates model.

<unk> as we go through the fiscal 'twenty three thank you yes.

Let me I will definitely answer every one of your question, but I want to add to the <unk>.

Questions you ask.

Kurt earlier, I didn't keep where sanmina.

As you look at the walk how can we maximize shareholder value.

We still believe that our stock is.

Great value and.

As we look at opportunities water that as you know we have very strong balance sheet and we have a lot of options to maximize the shareholder value. We just need to be smart about it and we believe the smartest things for US was last year is to continue to buy the shares.

And as Karl said, we're going to be very opportunistic to maximize the shareholder value. So but back to your question first of all I'm not really concerned about year over year growth are more concerned about this quarter and next quarter in quarter out there.

Our company.

Is in a good position, we believe we have a good visibility on Corona loss.

I think if anybody grows in a market out there I think <unk> will do just as well if not better.

And.

We still operating with lot of shortages once we resolve all these shortages in industry I believe there is more opportunity for us, especially when it comes to productivity as I said earlier I think we can do a lot better than what we're doing today and Thats My personal focus it's not just a comparison, but.

As you know, we don't know whats going to happen you know if.

If you look at the 12 months out.

But what we see in front of US we're very optimistic what we can do yeah very blue I mean, we tend to take one quarter at a time right. I mean, this is well certainly our business and our demand as you already mentioned the customer demand is strong.

We realize you know when you read the headlines like everybody else and so you know what I think we were going to just take one quarter at a time here, but we do feel good about the business and we do see strong customer demand that is very broad based at this point and as you already pointed out you know we don't we don't do a lot in where we didn't do anything.

In the consumer side, which is where you know you're seeing the impact of some of the things going on in the economy. So yes.

Yes, let me thanks for all the details there.

Like don't follow I have a follow on with the Union in terms of the revenue growth, but I mean, thanks for all the details on the on the share buyback program I mean I understand that.

Buying back shares helps me does that mean the share count also has relatively low but I'm just thinking if you have so many growth opportunities maybe doing other things like inorganic growth or other things to grow organically and maybe that.

It also helped but I understand what youre, saying can I just follow up on my question to you very well.

You know just just in terms of the growth from the various end markets.

A little hard to quantify because you've got all of these end markets that are grouped together. So when we look at like <unk> like the industrial medical defense and automotive segment versus communication networks, and cloud infrastructure, which segment do you think has has more chance of growing faster in fiscal 'twenty, three because I think youre seeing strong.

Growth in <unk>, but also you have opportunities in industrial so so kind of help us quantify like you know just qualitatively even if you can talk about the relative strength of our <unk> end markets as you see them today. Thank you well thanks for all that he has.

Yes.

As you've seen it last year, we grew our.

Industrial medical defense and automotive business at a higher rate than communication networks and cloud infrastructure. So we're very optimistic in that group of industrial medical and defense and automotive as I mentioned, we are well positioned in those four key markets were very strong.

Communication networks, especially for new products as I said in my prepared statements on cloud net force, we expect to see a fair amount of growth and by the way in that group.

I don't like to break it down at this time, but we have a lot of business in their cloud networks, and we expect a fair amount of growth.

Okay. Thanks for all the details I appreciate it thanks, so much.

And our next question will come from Anja Soderstrom with Sidoti. Please go ahead.

Hello, and thank you for taking my questions and congratulations on the good quarter and outlook. So.

I'm, just going to dwell a little bit further into this year.

Of your revenue growth.

What you think you are going to be growing sequentially throughout the year.

So that the guidance you gave for the first quarter starting.

Starting stepping stone for you as we said in our prepared statement.

Yeah.

Yes.

We look at the first quarter would have.

Throwing backlog strong demand.

It's all about getting all the components. So we feel very confident we will take one quarter at a time, but we do expect.

So we'll have a better year on top line and our bottom line in 'twenty three than we did in 'twenty two.

Okay. Thank you and could you just speak a little bit about the backlog in <unk>.

[laughter] quantify that and how you were able to backfill that with new orders.

Well today.

Today, we can ship even more if we can get all the critical components in the first quarter.

And.

If we look at our forecast from our key customers. They look good for 'twenty, three and as new programs that we have that we already wanted that we basically waiting for the equipment that we sold for the growth going to be spending few more extra box for us we're investing for growth. So we've put.

Optimistic about the future, but we will take one quarter at a time on you.

Okay. Thank you and what I hear from on your parents is that.

These supply chain challenges to sort of deepen their customer relationships and they're sort of.

Order visibility in these times with their customers so they have better visibility into that.

Planning do you see the same are you.

Well, we have a very we have a very good visibility our customers have been very nice to us and giving us a lot of forecast. There are 12 months 18 months some cases three years long.

We are still suffering a little bit of shortages. So it's getting better as I said and we expect to see some better improvements in 'twenty three but for this quarter definitely we start continue to see similar challenges as we had last quarter, but it's getting better.

Okay. Thank you and then have you seen any sort of changing sentiment among your customers I know you are in.

A very solid end markets now.

Probably it's more favorable for them.

It's cyclical tailwind spot, but have you seen any kind of changing sentiment.

As I mentioned in my prepared statement, we don't do any consumer the market that we unlike medical defense automotive industrial.

No.

Cloud and it seems like looking good.

We had a couple customers and are in the.

They were building Covid brought a project that's low slow down but thats about it.

Okay and have you seen any sort of changes in the competitive environment.

There's always competitive environment by only worry what we do.

Yeah.

I don't know.

My competition to us.

Yes.

Actually I have one more on your capex it it wasn't a little bit higher in this quarter and you're guiding for the same for next quarter is that something specific going on or is that going to be the run rate for next year.

This is well it's all it's always hard to predict taxes I think again, if you look for the overall year and FY 'twenty.

'twenty two I think it ended up being about 17.4, and we're forecasting 17.5 for fiscal 'twenty three.

But the tax rate always always comes down to always comes down to to the mix.

Okay, sorry, I think.

I mean, I thought you said tax rate not Capex My my apology well now you learned about tax rate to bonus question. Yeah. I mean look I think as you already talked about you know last year Capex is about 130, this quarter, where folk forecasting about 50.

We are seeing growth and we think theres opportunities both in terms of new programs and as well as our expansion with existing customers. So our capex was 48 last quarter, we expect it to be about 50, this year and I'd expect it to be you know.

And that similar ballpark as we move forward, but it all depend on demand and program wins.

Okay, great. Thank you that was all for me. Thanks.

Thanks Tanya.

And our next question will come from Jim Suva with Citi. Please go ahead Hello, Jim.

Good evening and congratulations to you and your team for just a really strong year of performance. Thanks, Jan Thanks, Jim.

Good morning.

Yes in your prepared comments and follow up on the Q&A I can't remember one of you mentioned that 2020 through the fiscal year should be stronger than 'twenty two there.

There's two ways to interpret that one means sales growth.

Another way to say that as some people may view that as revenue growth to be even.

Higher or better than the growth that you just had just had a remarkable year of up 16% or 17%. So can you help us understand when you say a stronger year in 'twenty, three or you're just really dollar amount or actually the growth rate even being.

Stronger well, Jim Let me, let me I said that and let me kind of thing.

And to put that in a simple English first of all to US most importantly profitable growth.

Number one we expect to improve our financial results for the 23 over 22, and we expect to see to see the growth.

We know it's there.

And that's one of the reasons, we are spending a little bit more money, you know, bringing new equipment and some of the new processes that will need us for growth not just for 'twenty three but also for 'twenty four.

These are the you know.

Right customers that we have a very strong partnership with <unk> and so on and so on but definitely we do expect to have a better year bolt on topline and bottom line in 'twenty three over 22, right and Jim that's measured in dollars were not talking about growth rates right. So he is saying.

Higher revenue higher EPS and earnings.

No, we're not necessarily comparing growth rates year over year.

Yeah, that's what I see and then on the new joint venture in India. Congratulations how will that be accounted for on your books is it consolidated or minority interest line and then what about Capex funding for it is it now fully funded or there'll be capex flowing out of state.

Statement of cash flows we should be thinking about.

Yeah, Let me let me handle this so we are consolidating financial results. So we're right you will see above the line all the revenue and all the profits.

But as I mentioned in the guidance then we have to back out below the net income line.

<unk>.

They are our partner share of the net.

Net income.

So in this case, we estimated that to be a reduction of about two and a half milligan. So as I said in the guidance.

<unk> of the cash that came in we expect approximately $2 million.

More interest income but.

But we do based on the accounting treatment have to back out 50% of the net income for the JV, which we currently estimated for that quarter at two and a half.

And that happens after the net income line, but before you calculate EPS.

Alright, and then on the Capex does it also up 100% on your books or so in a sense.

It's consolidated.

So it will show up on our books.

But back to your other question as you already pointed out based on the investment are the Indian entity is now capitalized with over $200 million of cash and so back cash will be used.

To expand the operations there as necessary as that business grows which is certainly our vision forward.

For the JV.

Okay, and we have a hopefully I mean, we have a high hopes for India.

Both companies are committed to make something.

Very big.

And then strategically at that site or facility are there certain end markets slash products that you think are you know on the early innings of.

Ramping that we should just be mindful of because I assume that there are certain whether it be communications or what theyre five G rollout or something thats, probably a lot earlier than maybe other things like medical devices, but I, just maybe backwards yeah. We diversified Jim. This operation is very good and we've got over 35 customer they're really good.

All diversifying in our medical and industrial.

Definitely some telecommunication I'd say medical having a medical and alternative energy.

But definitely you know we are we'll be expanding some of the <unk> network.

In optical networks there.

Right.

Congratulations to you and your teams and thanks again for your support.

And our next question will come from Christian Schwab with Craig Hallum Capital Group. Please go Hello Christian.

Hey, Gary.

Congrats on another great quarter and guide.

On the joint venture in India, you know, obviously focusing on complex mission critical stuff.

100 acre campus that it seems to me that that should be a large revenue number.

Over time, you know I mean could this.

I assume that you.

Is this joint venture to become an India based company, which makes it a little bit easier to do any type of business, They're correct me if I'm wrong.

But number two could this be like a billion plus dollar revenue business over time.

First of all yes, we are.

This joint venture has made under one long goal is to be Indian company that can really as you know, India and places not the easiest place to do we believe there's a lot of upside in India market, especially if you look three 510 years out so yes, we are.

We have plenty of space in this one.

Hunter acres, and we expect to expand in other parts of India. So yeah. This better be big Christian or this was a bad move.

Right.

But when you know when is it logical that you know that it becomes you know.

Easier for.

For investors to understand that the business is beginning to scale.

At a high level yeah since we are.

Putting these numbers I'll turn it over to Kurt.

Definitely we will communicate it and you'll have all the information, but Kirk do you want to add yeah I mean.

What we're what I would say is as you already said, we're very optimistic about the opportunity here again, we just closed the transaction on October 3rd.

So I think we'll have a lot more I'll say a disclosure related to it as we progress and develop.

Where we're going to take that business with our joint venture partner. So I think at this point all we can say is it's early innings, but we think that there's a lot of opportunity there and as you already said over the next three to five years, we expect this to become a very big part of of the revenue.

Great. That's fair and then in fiscal year 'twenty to Kurt did you have any 10% customers.

Yeah in in fiscal 'twenty, two we had we had 210% customers we will disclose that in the 10-K, when we when we file it and a couple of days.

Perfect and then just a little bit more color on the supply chain getting better I know you guys talked about it's still impacting December kind of slightly impacting potentially at the beginning of the year.

As we get you know through the middle of the calendar.

Calendar.

No 23 do you do you believe the vast majority of the supply chain problems or headaches that you've been dealing with for <unk>.

Quite some time now that the majority of those will be over.

Well.

If you look at that data it should be by middle or hopefully most of it.

Big percentage resolved, but you never know we.

We will see all of them what goes what happens with the market, but we do definitely expect.

Better conditions and comes to material next year than what we experienced in 'twenty two.

And then is that supply chain, you know loosens loosens up well becomes more available for black better reward.

Is that what we're going to really probably have never.

The opportunity to meaningfully reduce the aggregate inventory dollars that we have.

I would assume the vast majority of that stuff is sitting around waiting for a few components to come right.

You know so next year it could be you know.

Potentially a very substantial cash flow year, yeah. So I'll definitely that's the <unk>.

<unk>.

Christian next year, and that's what we're driving to and we're putting the systems in place to accomplish that sooner than later.

Okay, Great no other congrats a question congrats again.

Thank you Kristian first of all I'd just like to thank all of you for joining us today.

Hopefully we answered most of your questions if not please give us a call other vessel restock in 90 days from now thanks, a lot. Thank you bye bye.

Yeah.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Okay.

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