Q3 2024 Sanmina Corp Earnings Call
Operator: Good afternoon, ladies and gentlemen, and welcome to the Sanmina Corporation 3rd Quarter Fiscal 2024 Earnings Conference Call. At this time, all lines are in listen-only mode.
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Sanmina Corporation third quarter fiscal 2024 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session.
Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, July 29, 2024. And I would now like to turn the conference over to Paige Melching. Please go ahead.
Speaker Change: If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, July 29, 2024. And I would now like to turn the conference over to Paige Melching. Please go ahead.
Paige Melching: Thank you, Ina. Good afternoon, ladies and gentlemen, and welcome to Sanmina's third quarter fiscal 2024 earnings call. A copy of our press release and slides for today's discussion are available on our website at sanmina.com in the investor relations section. Joining me on today's call is Jure Sola, Chairman and Chief Executive Officer. Good afternoon. And Jon Faust, Executive Vice President, Chief Financial Officer. Good
Paige Melching: Thank you, Ina. Good afternoon, ladies and gentlemen, and welcome to Sanmina's third quarter fiscal 2024 earnings call. A copy of our press release and slides for today's discussion are available on our website at sanmina.com in the investor relations section.
Speaker Change: Joining me on today's call is Jure Sola, Chairman and Chief Executive Officer. Good afternoon. And Jon Faust, Executive Vice President, Chief Financial Officer. Good afternoon. Before I turn the call over to Jure, let me remind everyone that today's call is being webcasted and recorded and will be available on our website.
Paige Melching: Before I turn the call over to Jure, 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 and take note of our 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.
Speaker Change: You can follow along with our prepared remarks in the slides provided on our website.
Paige Melching: The company's actual results could differ materially from those projected in these statements as a result of factors set forth in the Safe Harbor Statement. 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, their earnings presentation, 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.
Speaker Change: Please turn to slide 3 of our presentation and take note of our Safe Harbor Statement.
Paige Melching: Included in our press release and slides issued today, we have provided you with statements of operations for the third quarter ended June 29, 2024 on a gap basis, as well as certain non-GAAP financial information. A reconciliation between the 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, non-cash stock-based compensation expense, amortization expense, and other unusual or infrequent items.
Speaker Change: During this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company.
Speaker Change: 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 factors set forth in the Safe Harbor Statement.
Speaker Change: The company is under no obligation to, and expressly disclaims any such obligation to, update or alter any of the forward-looking statements.
Speaker Change: made in this earnings release, their earnings presentation, 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.
Speaker Change: Included in our press release and slides issued today, we have provided you with statements of operation for the third quarter ended June 29, 2024 on a gap basis.
Speaker Change: as well as certain non-GAAP financial information. A reconciliation between the GAAP and non-GAAP financial information is also provided in the press release and slides posted on our website.
Speaker Change: In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, non-cash stock-based compensation expense, amortization expense, and other unusual or infrequent items.
Paige Melching: Any comments we make on this call as it relates to the income statement measures will be directed at our non-GAAP financial results. 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 also like to let investors know that Sanmina will be participating in the Jeffries Semiconductor IT Hardware and Communications Conference at the end of August and Citi's 2024 Global TMT Conference at the beginning of September.
Speaker Change: Any comments we make on this call as it relates to the income statement measures will be directed at our non-GAAP financial results.
Speaker Change: Accordingly, and less 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.
Jure Sola: I would also like to let investors know that Sanmina will be participating in the Jeffries Semiconductor IT Hardware and Communications Conference at the end of August and Citi's 2024 Global TMT Conference at the beginning of September . I'd now like to turn the call over to Jure.
Paige Melching: I'd now like to turn the call over to Jure. Thanks, Paige. Good afternoon, ladies and gentlemen, and welcome. And thank you all for being here with us today. First, I would like to take this opportunity to recognize the Sanmina leadership team and our employees for doing a great job. So to you, Sanmina's team, thank you for your dedication and delivering excellent service to our customers.
Jure Sola: Thanks, Paige. Good afternoon, ladies and gentlemen, and welcome. And thank you all for being here with us today.
Jure Sola: First, I would like to take this opportunity to recognize Sanmina leadership team and our employees for doing a great job.
Jure Sola: So, to you, Sanmina's team, thank you for your dedication and delivering excellent service to our customers, and let's keep it up.
Jure Sola: And let's keep it up. Now, let's go to our agenda for today's call. We have John, our CFO, to review details of our results for you, and I will follow up with additional comments about Sanmina's results and future goals.
Speaker Change: Now, let's go to our agenda for today's call. We have John , our CFO , to review details of our results for you. I will follow up with additional comments about Sanmina results and future goals.
Jure Sola: Then John and I will open the call for questions and answers. And now, I'd like to turn this call over to John. John. Okay. Thanks.
Speaker Change: Then John and I will open for questions and answers. And now I'd like to turn this call over to John . John ? Great. Thank you, Yuri. And good afternoon, ladies and gentlemen, and thank you for joining us here today.
Jure Sola: Great. Thank you, Jure.
Jonathan P. Faust: And good afternoon, ladies and gentlemen, and thank you for joining us here today. Before we go through the financial results, I want to thank the entire Sanmina team for their hard work and dedication and for delivering results in line with our expectations. Now, please turn to slide five to discuss the P&L highlights. Third quarter revenue was $1.84 billion, in line with our outlook of $1.8 billion to $1.9 billion and up 0.4 percent sequentially. We are beginning to see customer inventory absorption improve as the communications networks and cloud infrastructure and market grew 8.3% sequentially, partially offset by declines in the industrial and automotive end markets.
John: Before we go through the financial results, I want to thank the entire Sanmina team for their hard work and dedication and for delivering results in line with our outlook.
Jonathan P. Faust: Non-GAAP gross margin was 8.5%, just short of the midpoint of our outlook, and down 40 basis points sequentially and 10 basis points compared to the same period last year, driven by an unfavorable mix, which I will comment on in more detail on the next slide. Non-GAAP operating expenses were $60.2 million, within the guided range; non-GAAP operating margin was at the low end of our outlook at 5.3%, down 10 basis points sequentially and 40 basis points compared to the same period last year, driven by the lower gross margin that I referenced earlier. Our operating margin continues to be in line with the 5% to 6% short-term target range that we have previously communicated.
John: Now, please turn to Slide 5 to discuss the P&L highlights.
John: Third quarter revenue was 1.84 billion dollars in line with our outlook of 1.8 billion dollars to 1.9 billion dollars and up 0.4 percent sequentially.
John: We are beginning to see customer inventory absorption improve as the communications networks and cloud infrastructure and market grew 8.3% sequentially, partially offset by declines in the industrial and automotive end markets.
John: non-GAAP growth margin was 8.5%, just short of the midpoint of our outlook, and down 40 basis points sequentially, and 10 basis points compared to the same period last year, driven by unfavorable mix, which I will comment on in more detail on the next slide.
John: non-GAAP operating expenses were $60.2 million within the guided range.
John: non-GAAP operating margin was at the low end of our outlook at 5.3 percent, down 10 basis points sequentially, and 40 basis points compared to the same period last year, driven by the lower gross margin that I referenced earlier.
John: Our operating margin continues to be in line with the 5% to 6% short-term target range that we have previously communicated.
Jonathan P. Faust: Non-GAAP Other Income and Expense was $7.7 million, favorable to our guidance of approximately $12 million. This was driven by our strong cash flow results as we generated higher interest income and incurred less interest expense. Non-GAAP earnings per share came in at $1.25 based on approximately 57 million shares outstanding on a fully diluted basis and in line with our outlook. Now, please turn to slide six to discuss the segment results.
John: non-GAAP other income and expense was $7.7 million, favorable to our guidance of approximately $12 million.
John: This was driven by our strong cash flow results as we generated higher interest income and incurred less interest expense.
John: non-GAAP earnings per share came in at $1.25 based on approximately 57 million shares outstanding on a fully diluted basis and in line with our outlook.
Jonathan P. Faust: IMS revenue came in at $1.48 billion, up 1.1% sequentially, driven by growth in the communications, networks, and cloud infrastructure and market. IMS non-gap gross margin was down 10 basis points sequentially to 7.6%, due primarily to an unfavorable mix. CPS revenue came in at $388 million, down 2.5% sequentially, driven mostly by short-term delays in two programs which have since been resolved and will ship in the fourth quarter. CPS non-gap gross margin was down 140 basis points sequentially to 11.5%, due primarily to the delay in the two programs that I just mentioned.
John: Now please turn to slide 6 to discuss
John: IMS revenue came in at 1.48 billion dollars, up 1.1% sequentially, driven by growth in the communications, networks, and cloud infrastructure and market.
John: IMS non-GAAP gross margin was down 10 basis points sequentially to 7.6%, due primarily to unfavorable mix.
John: CPS revenue came in at $388 million, down 2.5% sequentially, driven mostly by short-term delays in two programs which have since been resolved and will ship in the fourth quarter.
John: CPS non-GAAP gross margin was down 140 basis points sequentially to 11.5% due primarily to the delay in the two programs that I just mentioned.
Jonathan P. Faust: We expect CPS's non-GAAP gross margin to return to recent levels in the coming quarter. Now, please turn to slide 7 to discuss the balance sheet highlights. Sanmina has a very strong balance sheet, which is a competitive advantage for the company, and we continue to manage it well. Cash and cash equivalents were $658 million. At the end of the quarter, we had no outstanding borrowings on our $800 million revolver, leaving us with substantial liquidity of approximately $1.5 billion.
John: We expect CPS non-GAAP gross margin to return to recent levels in the coming quarter.
John: Now, please turn to slide 7 to discuss the balance sheet highlights.
John: Sanmina has a very strong balance sheet, which is a competitive advantage for the company, and we continue to manage it well.
John: Cash and cash equivalents were $658 million.
John: At the end of the quarter, we had no outstanding borrowings on our $800 million revolver, leaving us with substantial liquidity of approximately $1.5 billion.
Jonathan P. Faust: We ended the third quarter with inventory of $1.3 billion and turns at 4.9 times, which was a slight sequential improvement. As a reminder, we purchase inventory based on commitments from our customers, but we believe there is an opportunity to reduce our inventory levels even further, so that, as well as increasing our inventory turns, will remain a priority going forward.
John: We ended the third quarter with inventory of $1.3 billion and turns at 4.9 times, which was a slight sequential improvement.
John: As a reminder, we purchase inventory based on commitments from our customers, but we believe there is an opportunity to reduce our inventory levels even further, so that, as well as increasing our inventory turns, will remain priorities going forward.
Jonathan P. Faust: Our non-GAAP pre-tax ROIC was 21.1% for the quarter, well above our weighted average cost of capital. We continue to have one of the strongest balance sheets in the industry with low leverage of 0.48 times, which allows us to both navigate complex market environments and capitalize on long-term opportunities. Now, please turn to slide 8, where I'll talk about cash flow and capital allocation highlights. As I have mentioned before, cash flow is a key focus area at Sanmina, and I am pleased that we have delivered another strong quarter of cash flow performance.
John: Our non-GAAP pre-tax ROIC was 21.1% for the quarter, well above our weighted average cost of capital.
John: We continue to have one of the strongest balance sheets in the industry with low leverage of 0.48 times, which allows us to both navigate complex market environments and capitalize on long-term opportunities.
Jonathan P. Faust: Cash flow from operations was $90 million for the quarter, which brings the year-to-date total to $288 million and is a $130 million improvement on a year-over-year basis. Capital expenditures were $23 million for the quarter, adding up to $87 million for the year.
John: Now, please turn to slide 8, where I'll talk about cash flow and capital allocation highlights.
John: As I have mentioned before, cash flow is a key focus area at Sanmina and I am pleased that we have delivered another strong quarter of cash flow performance.
John: Cash flow from operations was $90 million for the quarter, which brings the year-to-date total to $288 million and is a $130 million improvement on a year-over-year basis.
John: Capital expenditures were $23 million for the quarter, adding up to $87 million for the year.
Jonathan P. Faust: As a reminder, last year we made significant capital investments across multiple geographies and strategic end markets to position the company for future growth and new opportunities. Free cash flow was $67 million for the quarter and now stands at $202 million on a year-to-date basis, which is up $196 million year-over-year. During the quarter, we repurchased 845,000 shares for approximately $55 million, which adds up to a total of 3 million shares for approximately $162 million for the year so far.
John: As a reminder, last year we made significant capital investments across multiple geographies and strategic end markets to position the company for future growth and new opportunities.
John: Free cash flow was $67 million for the quarter and now stands at $202 million on a year-to-date basis, which is up $196 million year-over-year.
John: During the quarter, we repurchased 845,000 shares for approximately $55 million, which adds up to a total of 3 million shares for approximately $162 million for the year so far.
Jonathan P. Faust: As of June 29th, we had approximately $118 million left on our board-authorized plan, and we continue to repurchase shares on an opportunity-based basis. Our strong cash flow performance gives us the flexibility to continue to invest in the business while also returning cash to shareholders over time as a part of a disciplined approach to capital allocation. To conclude on the Q3 actual results, overall, it was a solid quarter as we delivered on what we said we would.
John: As of June 29th, we had approximately $118 million left on our board-authorized plan, and we continue to repurchase shares on an opportunity basis.
John: Our strong cash flow performance gives us the flexibility to continue to invest in the business while also returning cash to shareholders over time as a part of a disciplined approach to capital allocation.
John: To conclude on the Q3 actual results, overall it was a solid quarter as we delivered on what we said we would.
Jonathan P. Faust: Now, please turn to slide 9, where I'll cover our outlook for the fourth quarter, which is based on what we are seeing in the market and the forecast from our customers, which are starting to trend upward. Our outlook is as follows. Revenue between $1.9 billion and $2.0 billion, which is up 6% sequentially on a midpoint basis. Now, while we're not providing guidance beyond the fourth quarter, we are seeing signs of stabilization and demand improvement as we look out into FY25.
John: Now, please turn to slide 9, where I'll cover our outlook for the fourth quarter, which is based on what we are seeing in the market and the forecast from our customers, which are starting to trend upwards.
Jonathan P. Faust: Non-GAAP gross margin of 8.3% to 8.8%, consistent with prime quarters and dependent on May, operating expenses of $60 million to $64 million in line with normal levels. As our revenue starts to increase, we expect to achieve operating leverage as we have driven efficiencies in our cost structure and don't expect to make material spending increases. Non-GAAP operating margin of 5.3% to 5.7%. We expect other income and expense to be approximately $10 million, which is in line with recent levels driven by strong cash management.
John: Our outlook is as follows.
John: Revenue between $1.9 billion to $2.0 billion, which is up 6% sequentially on a midpoint basis.
John: Now, while we're not providing guidance beyond the fourth quarter, we are seeing signs of stabilization and demand improvement as we look out into FY25.
John: non-GAAP gross margin of 8.3% to 8.8%, consistent with prime quarters and dependent on mix.
John: Operating expenses of $60 million to $64 million in line with normal levels.
John: As our revenue starts to increase, we expect to achieve operating leverage as we have driven efficiencies in our cost structure and don't expect to make material spending increases.
John: non-GAAP operating margin of 5.3% to 5.7%.
John: We expect other income and expense to be approximately $10 million, which is in line with recent levels driven by strong cash management.
Jonathan P. Faust: A tax rate of 17% to 18%. And to account for our India joint venture partners' interest, we estimate an approximate $3 to $3.5 million non-cash reduction to our net income. Non-GAAP EPS in the range of $1.30 to $1.40 based on approximately 56 million fully diluted shares outstanding. Capital expenditure is expected to be around $30 million as we continue to invest in future opportunities and further strengthen our capability. And finally, depreciation of approximately $30 million.
John: A tax rate of 17% to 18%.
John: And to account for our India joint venture partners' interest, we estimate an approximate $3 to $3.5 million non-cash reduction to our net income.
John: non-GAAP EPS in the range of $1.30 to $1.40 based on approximately 56 million fully diluted shares outstanding.
John: Capital expenditure is to be around $30 million as we continue to invest in future opportunities and further strengthen our capabilities.
John: And finally, depreciation of approximately $30 million.
Jonathan P. Faust: In summary, based on the demand signals from our customers and our fourth quarter outlook, we now expect to return to growth. We have the right set of customers and capabilities to be successful, and I'm excited about the opportunities ahead. And with that, I will turn the call back over to Jure. Thank you, John.
John: In summary, based on the demand signals from our customers and our fourth quarter outlook, we now expect to return to growth.
John: We have the right set of customers and capabilities to be successful, and I'm excited about the opportunities ahead. And with that, let me turn the call back over to Jure.
Jure Sola: Thank you, John. Ladies and gentlemen, let me add a few more comments about our third quarter, and I'll also review our end markets. And I'll give you a clue for the fourth quarter.
Jure Sola: Thank you, John . Ladies and gentlemen, let me add a few more comments about our third quarter. And I'll also review our end markets and outlook for the fourth quarter.
Jure Sola: And I'll make two more comments about the next year, our fiscal year 2025. Please turn to slide 11. For the third quarter, we delivered good results, as you heard from John, in line without outlawing. In our focus markets, we had nice growth in communication networks and the cloud infrastructure market, as we continue to see softness in the automotive and industrial markets during the quarter. I can also tell you that we are working very closely with our customers as they are slowly burning through their inventory.
Jure Sola: And I'll make a few more comments about the next year, our fiscal year 2025. Please turn to slide 11.
Jure Sola: For the third quarter, we deliver good results, as you heard from John , in line with our outlook.
Jure Sola: In our focus markets we had a nice growth in communication networks, cloud infrastructure market, as we continue to see softness in automotive and industrial during the quarter.
Speaker Change: I can also tell you that we are working very closely with our customers as they are slowly burning through their inventory.
Jure Sola: We're starting to see better forecasts from some of our customers, and in this environment, the Sanmina team continues to demonstrate resilience by delivering solid financial results. Overall, we are seeing stabilization in some end markets. To talk more about that, please turn to slide 12.
Speaker Change: We're starting to see better forecasts from some of our customers.
Speaker Change: And in this environment, Sanmina team continues to demonstrate resilience by delivering solid financial results.
Speaker Change: Overall, we are seeing stabilization in some end markets. To talk more about it, please turn to slide 12.
Jure Sola: As you heard from John, revenue for the third quarter was $1.84 billion, within our guidance. Revenue was slightly up, quarter over quarter. Industrial, medical, defense, aerospace, and automotive were 64% of our revenue, but that was down 3.6% quarter over quarter.
Speaker Change: As you heard from John , revenue for the third quarter was $1.84 billion, within our guidance.
Speaker Change: Revenue was slightly up.
Speaker Change: quarter over quarter.
Speaker Change: Industrial, medical, defense, and aerospace and automotive was 64% of our revenue. That was down 3.6%, quarter over quarter. But for communication networks, cloud infrastructure, that was 36% of our revenue. Here we had a nice improvement in demand.
Jure Sola: But for communication networks and cloud infrastructure, that was 36% of our revenue. Here, we had a nice improvement in demand, and that was up 8.3%, quarter over quarter.
Speaker Change: And that was up 8.3% quarter over quarter.
Jure Sola: For the third quarter, our top 10 customers represented 49.7% of our revenue. And I can tell you that Sanmina is a well-diversified company. Regarding bookings, we had strong bookings in the last six months. Book-to-bill over the last two quarters was 1.121. Mostly newer products are driving better bookings. Please turn to slide 13.
Speaker Change: For the third quarter, the top 10 customers represented 49.7% of our revenue.
Speaker Change: And I can tell you that Sanmina is a well-diversified company.
Speaker Change: Regarding bookings, we had strong bookings in the last six months. Book-to-bill over the last two quarters was 1.121.
Speaker Change: Mainly newer products are driving better bookings.
Speaker Change: Please turn to slide 13.
Jure Sola: Let me make a few more comments about our end market. I can tell you that Sanmina has been investing in faster growing and higher margin end markets in the last year, year and a half, which are Cloud Infrastructure, Defense and Aerospace, Medical, Automotive, Industrial Energy, High Density Performance Network, and in cloud infrastructure. For AI applications, I continue to see more opportunities driven by upgrades to cloud networks to meet AI traffic in the future.
Speaker Change: Let me make a few more comments about our end markets.
Speaker Change: I can tell you that Sanmina has been investing in faster growing and higher margin and markets in last year, year and a half.
Samina: which is cloud infrastructure, defense and aerospace, medical, automotive, industrial energy, high-density performance networks.
Samina: In cloud infrastructure,
Samina: For AI applications, I continue to see more opportunities driven by upgrades to cloud networks to meet AI traffic for the future.
Jure Sola: In defense aerospace, we continue to see solid demand. We're adding more capacity in our high-technology printed circuit board fabrication business and for Defense Systems Belt. Here, mainly new program wins should continue to drive growth. Our medical market is driven by digital health around medical devices. In medical, we have a strong base of customers with positive trends in the long term, driven by new opportunities in the pipeline. We are focused around the electric vehicle, car connectivity, advanced driver assistance systems, and electrical chargers.
Samina: In defense aerospace, we continue to see solid demand. We're adding more capacity in our high-technology printed circuit board fabrication business and for defense systems build.
Samina: Here, mainly new programs wins should continue to drive the growth.
Samina: Our medical market is driven by digital health around medical devices. In medical, we have strong base of customers with positive trends long-term driven by new opportunities in the pipeline.
Adam Ortiz: in automotive.
Speaker Change: We focused around electrical vehicle, car connectivity, advanced driver assistance systems.
Jure Sola: I can tell you that Sanmina is well positioned with new projects to drive growth for us in this segment. In the industrial and energy market, we have a solid customer base with new projects in a pipeline. Good opportunities around energy generation and storage of energy, power controls and management, factory automation, and for semiconductor infrastructure, we're focused around lithography products. AI architecture is driving opportunities for high-density, high-performance IP routing, computing, and
Speaker Change: electrical chargers.
Speaker Change: I can tell you that Sanmina is well positioned with the new projects to drive the growth for us in this segment.
Speaker Change: In industrial and energy market, we have solid customer base with new projects in a pipeline.
Speaker Change: Good opportunities around energy generation and storage of energy, power controls and management, factory automation, and for semiconductor infrastructure, we're focused around lithography products.
Speaker Change: AI architecture is driving opportunities for high-density, high-performance IP routing, computing and storage.
Jure Sola: And we continue to expand our optical business around advanced packaging focused on 400 gigabytes and 800 gigabytes, and 1.6 terabytes in development. For these markets, we see positive trends for the future. Please turn to slide 14.
Speaker Change: And we continue to expand our optical business around advanced packaging focused on 400 gig and 800 gig.
Speaker Change: and 1.6 terabytes in development. For these markets, we see positive trends for the future. Please turn to slide 14.
Jure Sola: In summary... For the third quarter, our team executed well by delivering revenue of $1.84 billion in line with our outlook, non-GAAP operating margin of 5.3%, and non-GAAP diluted EPS of $1.25 in line with our outcome. And, as John said, we delivered solid cash for the quarter. For the fourth quarter, visibility is getting better.
Speaker Change: In summary,
Speaker Change: For the third quarter, our team executed well by delivering revenue of $1.84 billion in line with our outlook.
Speaker Change: non-GAAP operating margin at 5.3% and non-GAAP diluted EPS of $1.25 in line with our outlook.
Speaker Change: And as John said, we delivered a solid cash for the quarter.
Jure Sola: For revenue, as you heard earlier from John, we are guiding up $1.92 billion in revenue and non-GAAP diluted EPS between $1.30 and $1.40. I am personally excited about long-term growth for Sanmina. Fiscal year 24 has been a transition year for us. We're navigating these market dynamics pretty well and positioning Sanmina for a better future. We expect that fiscal year 25 will be a growth year for our end markets, and we are focused on optimizing our capital structure to drive growth in the next two to three years. That's basically 25 to 27 and beyond in the short term.
Speaker Change: For the fourth quarter, visibility is getting better. For the revenue, as you heard earlier from John , we are guiding up $1.92 billion in revenue and non-GAAP diluted EPS $1.30 to $1.40.
Speaker Change: I am personally excited about long-term growth for Sanmina. Fiscal year 24 is been transition year for us.
Speaker Change: We're navigating these market dynamics pretty well.
Speaker Change: and position Sanmina for a better future.
Speaker Change: We expect that fiscal year 25 will be a growth year for our end markets.
Speaker Change: We are focused on optimizing capital structure to drive the growth in the next two to three years, that's basically 25 to 27 and beyond.
Speaker Change: Short-term operating margin should be stable in a range of 5 to 6 percent.
Speaker Change: Long term, we're making improvements to drive operating margin up to 6 plus percent.
Speaker Change: Driven by investments we made in our Integrated Manufacturing Solutions Group and Technology Components Group and products around AI, enterprise, cloud infrastructure.
Speaker Change: In summary, our focus is to drive profitable growth in a heavy regulated market where we have competitive advantage. Again, I'm excited by the opportunities in front of us.
Jure Sola: Operating margins should be stable in a range of five to six percent. In the long term, we're making improvements to drive operating margin up to 6 plus percent, driven by investments we made in our integrated manufacturing solutions group and technology components group and products around the AI enterprise cloud infrastructure. In summary, our focus is to drive profitable growth in a heavily regulated market where we have a competitive advantage. Again, I'm excited by the opportunities in front of us. Ladies and gentlemen, now I would like to thank you all for your time and support. Operator, we're now ready to open the lines for questions and answers. Thank you again.
Speaker Change: Ladies and gentlemen, now I would like to thank you all for your time and support. Operator, we're now ready to open the lines for questions and answers. Thank you again.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the 1 on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys.
Operator: Thank you. Ladies and gentlemen, we will now begin the webinar. We will now begin the webinar. Thank you. Ladies and gentlemen, we will now begin the webinar.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad.
Speaker Change: You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question.
Operator: One moment, please, for your first question. Your first question comes from the line of Ruplu Bhattacharya from Bank of America. Please go ahead.
Speaker Change: Your first question comes from the line of Ruplu Bhattacharya from Bank of America. Please go ahead.
Ruplu Bhattacharya: Hi, thank you for taking my questions. Hi, Jure. I was wondering, can you give us more details on the communications and market? What are you seeing specifically within optical, within wireless, and networking? What did you see in the third quarter, and what are your expectations for the fourth quarter that you're guiding?
Ruplu Bhattacharya: Hi, thank you for taking my questions.
Ruplu Bhattacharya: Hi, Jure. I was wondering, Jure, can you give us more details on the communications and market? What are you seeing specifically within optical, within wireless and networking? What did you see in the third quarter, and what are your expectations for the fourth quarter that you're guiding?
Jure Sola: Well, as we said in a prepared statement, Ruplu, communication networks, and cloud infrastructure grew approximately 8% plus quarter over quarter. We expect this market to continue to move in the right direction.
Jure Sola: What, as we said in a prepared statement, Ruplu, communication networks cloud infrastructure grew approximately 8% plus quarter over quarter.
Rupu: We expect this market to continue to move in the right direction. Again, you know, as I said, I think it's been driven by our high-performance network, cloud-grade routing, IP router switches.
Jure Sola: Again, you know, as I said, I think it's been driven by our high performance network, cloud-grade routing, IP router switches, and some optical packaging systems that we've been using, some of these are new programs. And also, we're starting to see pickup from some of the existing customers that they're working their inventory down, not at the level that they want it yet and not at the level that we would like to see it, but it's moving in the right direction.
Speaker Change: some optical packaging systems that we've been some of these are new programs and also we started to see pickup from some of the existing
Speaker Change: customers that they're working their inventory down not at the level that they wanted yet and not the level that we would like to see it but it's moving in the right direction.
Jure Sola: And some of the new programs that we're able to ship. Basically, last quarter, there were some challenges around getting the material and test equipment. I think we mentioned that in our second quarter. But that started to move in the right direction, and we should see that continue to move in the right direction in our fourth quarter.
Speaker Change: and some of the new programs that we're able to ship.
Speaker Change: that basically last quarter there were some challenges around getting the material and test equipment. I think we mentioned that in our second quarter. That started to move in the right direction, and we should see that to continue to move in the right direction in our fourth quarter.
Jure Sola: So maybe we can build on that point that you just mentioned. I think you talked about two programs that got pushed out of CPS. What caused that push out? How much was the dollar impact? And can you tell us which end markets those programs were?
Speaker Change: So maybe let's build on that point that you just mentioned. I think you talked about two programs that got pushed out in CPS. What caused that push out? How much was the dollar impact? And can you tell us which end markets that those programs were in?
Jonathan P. Faust: John, you want to talk about it? Yeah. So just to touch on, like we had said in the prepared remarks, you know, we expect both the ship and Q4, the issues have been resolved. It was really just working with our customers on... I think he's asking about the components product group at this school.
Speaker Change: John , you want to talk about it? Yeah, so just to touch on... So like we had said in the prepared remarks, you know, we expect both the ship and Q4, you know, the issues have been resolved. It was really just working with our customers on... I think he's asking about the...
Rupalu: The CPS program is correct. Yeah, exactly. So those to push out, we expect them in Q4. From a dollar perspective, Ruplu, you know, if it was not for that, we would have been, you know, at the overall Sanmina level, a little bit above the midpoint of our revenue guide.
Speaker Change: and the same for EPS. But on both fronts, you know, the issues have been resolved, you know, and we expect to see the numbers in our Q4 results.
Jonathan P. Faust: And John, just to clarify, the sequential decline in CPS margins, was that all because of just those two programs, or did you have any other impacts or any other issues impacting margins?
Speaker Change: And, John , just to clarify, the sequential decline in CPS margins, was that all because of just those two programs, or did you have any other impacts or any other issues impacting margins?
Jonathan P. Faust: Yeah, we, like all of us, we have some puts and takes, but if you look at where we were in the last couple of quarters, we were at about 13 percent, right, this last quarter we were at 11.5, and those two programs combined, Ruplu, were about a point to that impact, a little bit over. So we would have been down just slightly overall in CPS, but the majority of the impact was related to those two programs.
John: Yeah, we, like all of us, we have some puts and takes, but if you look at where the last couple of quarters, we were at about 13 percent, right, this last quarter we were at 11.5, and those two programs combined, Ruplu, were about a point to that impact, a little bit over. So we would have been down just slightly overall in CPS, but the majority of the impact was related to those two programs.
Jure Sola: Okay, okay, got it. Maybe for the last one, Jure, if I could ask a little bit more detail on the IMDA segment. There are four different end markets there. What are you expecting for each of those end markets in the fourth quarter? How do you expect them, and how do you expect revenues to trend in the fourth quarter for these end markets?
Roopaloo: Okay, okay, got it. Maybe for the last one, Yuri, if I can ask a little bit more detail on the IMDA segment. There are four different end markets there. What are you expecting for each of those end markets in the fourth quarter? How do you expect them – how do you expect revenues to trend in the fourth quarter for these end markets?
Jure Sola: As I said in my prepared statement, we have some softness in the automotive and industrial sectors. For the automotive sector, at this time, we expect the softness to continue. On the industrial side, I'm more optimistic. There are a lot of good programs around energy.
Jure Sola: As I said in my prepared statement, we have some softness in automotive and industrial. For automotive, at this time, we expect also the softness to continue.
Yuri: On industrial, I'm more optimistic. There's a lot of good programs around the energy. We'll see how we're able to ship those out. I think the opportunities are there.
Jure Sola: We'll see how we're able to ship those out. I think the opportunities are there. Medical, I would say it's flat down.
Jure Sola: It's mainly driven by. We're still having an impact on what happened during COVID because we had a very strong demand there. But I like where we are on the medical side of the business with existing customers and also some of the new programs with existing and new customers that are coming up, so that is good. On the defense and aerospace side, we're in a good position there. Demand is strong. And as I said earlier, we're also expanding, and we've been investing a fair amount into our circuit board fabrication for military boards, high technology military boards.
Yuri: Medical, I would say it's flat down.
Yuri: It's mainly, you know, driven, you know, we're still having an impact what happened during the COVID because we had a very strong demand there. But I like where we are in the medical side of the business, you know, with existing customers and also some of the new programs with existing and new customers that are coming up, so that is good.
Yuri: on defense and aerospace.
Yuri: You know, we're in a good position there, demand is strong, and as I said earlier, we're also expanding and we've been investing a fair amount.
Jure Sola: Demand there is strong for us and also for system assembly. So expect the business to continue to move in the right direction. So overall, I would say if I had to guess today, flat, maybe slightly up.
Yuri: into our circuit board fabrication for...
Yuri: military boards, high technology military boards, the mandate is strong for us and also including system assembly, so expect the business to continue to move in the right direction.
Yuri: So, overall, you know, we're probably going to, I would say if I had to guess today, you know, flat, maybe slightly up.
Ruplu Bhattacharya: Okay. All right. Thank you for all the details. I appreciate it.
Jure Sola: Thanks, Ruplu.
Yuri: Okay. All right. Thank you for all the details. Appreciate it. Thanks, Ruplu.
Operator: Thank you. Once again, should you have a question, please press star, then the number one on your telephone keypad. And your next question comes from the line of Stephen Fox from Fox Advisors. Please go ahead.
Speaker Change: Thank you. Once again, should you have a question, please press star, then the number one on your telephone keypad. And your next question comes from the line of Stephen Fox from Fox Advisors. Please go ahead.
Stephen FOX: Hi, I had two questions as well. Hello, how are you? Hi, good afternoon, Yuri.
Speaker Change: Hi, I had two questions as well. Hello Steve, how are you? Hi, good afternoon Yuri.
Stephen FOX: Maybe just, John, could you start off with talking about inventories a little bit more from your own balance sheet? You guys already have, like, I would say, best-in-class inventory turns, but it sounds like you think you could do better. Can you sort of give us a sense for how much better you could do, what's driving that, and then add a follow-up?
Stephen FOX: Maybe just, John , can you start off with talking about inventories a little bit more from your own, on your own balance sheet? You guys already have, like, I would say, best in class inventory turns, but it sounds like you think you could do better. Can you sort of give us a sense for how much better you can do? What's driving that? And then I had a follow up.
Jonathan P. Faust: Yeah, sure, Steve. Thanks for joining the call today. So, in terms of inventory, like I mentioned, we were at 4.9 turns overall. And from a DOI perspective, that was about 75 days. You know, if you go back into our history, a couple of years back, we think we could get back into the mid-60s. So, we definitely think that there's opportunity there. And from a terms perspective, you know, we're driving more towards a number like six, right?
Jonathan P. Faust: Yeah, sure, Steve. Thanks for joining the call today.
Jonathan P. Faust: In terms of inventory, like I mentioned, we were at 4.9 turns.
Speaker Change: Overall, and from a DOI perspective, that was about 75 days. You know, if you go back into our history a couple years back, you know, we think we can get back into the mid-60s. So we definitely think that there's opportunity there. And from a terms perspective, you know, we're driving more towards a number like six.
Jonathan P. Faust: So, we did make some progress. If you look at, you know, quarter over quarter, sequentially, inventory dollars on an absolute basis were pretty much flat, but we made some progress, but there is more room to go on that front. So, that's what we're driving from a cash conversion cycle perspective.
Speaker Change: Right, so we did make some progress. If you look at, you know, quarter over quarter, sequentially, inventory dollars on an absolute basis was pretty much flat, but made some progress, but more room to go on that front. So that's what we're driving from a cash conversion cycle perspective.
Jonathan P. Faust: And just to be clear, is that based on your own improving internal capabilities, better efficiencies, or is that as demand recovers, and mix recovers? How much of that is under your control?
Speaker Change: And just to be clear, is that based on your own improving internal capabilities, better efficiencies, or is that like as...
Jonathan P. Faust: Yeah, it's both, Steve, at the end of the day. So, you know, certainly customers are still working through inventory absorption, like I was mentioning at the beginning of the call, and that's a little bit different by end markets. You know, we are seeing some improvement and getting back to the quote-unquote kind of normalized levels, but we think there's some room on that front. Then, for us, we're always looking to drive efficiencies, right, and so I think there's some on both sides.
Speaker Change: Demand recovers, mix recovers. How much of that is like under your control?
Speaker Change: Yeah, it's both, Steve, at the end of the day. So, you know, certainly customers are still working through inventory absorption, like I was mentioning at the beginning of the call, and that's a little bit different by end markets. You know, we are seeing some improving and getting back to the quote-unquote kind of normalized levels, but we think there's some room on that front. Then for us, you know, we're always looking to drive efficiencies, right, and so I think there's some on both sides.
Jonathan P. Faust: That's helpful. And then, Jure, can you talk a little bit more about the Book-to-Bill? So 1.1 for two quarters in a row.
Steve: That's helpful. And then, Yuri, can you talk a little bit more about the book to bill? So 1.1 for two quarters in a row. You mentioned newer products. Can you talk about one what's driving it and like...
Stephen FOX: You mentioned newer products. Can you talk about, one, what's driving it, and, like, how much of the bookings are maybe longer term and how much maybe turns into revenues in the next two quarters? Thanks. Yeah. As I said, Steve, yeah, bookings for the last quarter were...
Speaker Change: How much of the bookings is maybe longer term and how much maybe turns into revenues in the next few quarters? Thanks.
Jure Sola: Yeah, as I said, Steve, bookings for the last quarter were pretty strong, 1.121, mainly driven by new programs. And the way we look at the bookings is really the bookings that are released to build now. The next is typically, you know, two to three, four quarters maximum. We don't put in booking orders that are not released to be built, so that is clear. So, for example, in the military, we might get a contract, but if there is, let's say, over five years, I'm just throwing out examples, Steve, $100 million.
Yuri: Yeah, as I said, Steve, yeah, bookies for the last quarter were pretty strong.
Yuri: 1.121, mainly driven by new programs. And the way we look at the bookings is really the bookings that are released to build now.
Yuri: The next typically, you know, two to three, four quarters maximum, because we don't put in bookings orders that are not released to be billed. So that that is clear. So for example, in military, we might get a contract.
Yuri: But if there is, let's say, over five years, I'm just throwing out examples, Steve, $100 million, but first year is only $20 million, and that's released on a quarterly basis. We'll only count bookings for what's released. We do not count for projects.
Jure Sola: But the first year is only $20 million, and that's released on a quarterly basis. We'll only count bookings for what's released. We do not count for projects that are booked but not released to build. So that's pretty clear.
Jure Sola: So all this stuff that I'm talking about is really released to be built, and also we started to see with our existing customers as they develop in the new programs, you know, they've been working on in the last year, year and a half. So let me just go back, and overall, I know we've been going through this inventory correction, and, you know, our customers, some of our customers are being affected by it.
Steve: They are booked, but not released to build. So that's pretty clear. So all this stuff that I'm talking about is really released to be built.
Steve: And also, we started to see with our existing customers as they're developing the new programs they've been working on in the last year, year and a half.
Steve: Those are starting to come out, and that's also helping bookings. So let me just go back, and overall, I know we've been going through the cementary correction.
Steve: You know our customers some of our customers being affected by it, but I can tell you things are starting to improve
Jure Sola: But I can tell you things are starting to improve. I can't tell you for sure everything is going to be perfect for the next four or five quarters, but definitely, all the signs are moving in the right direction. And most of our customers are more optimistic about the future as they are starting to work their inventory more, I would say, in the next couple quarters or the rest of this calendar year than I've seen it, let's say, six months ago or so.
Steve: I can't tell you for sure everything is going to be perfect for the next four or five quarters, but definitely all the signs.
Steve: are moving in the right direction, and most of our customers are more optimistic about the future as they're starting to work their inventory more, I would say, next couple quarters or rest of this calendar year than I've seen it, let's say, six months ago or so. So those are positive trends. And then, you know, we've got a lot of good opportunities in our pipeline that, you know, it's going to drive our growth the next couple years, the stuff that we'll be working on.
Jure Sola: So those are positive trends. And then, you know, we've got a lot of good opportunities in the pipeline that's going to drive our growth over the next couple years, the stuff that we'll be working on. So, as John mentioned in his prepared statement, we've been investing a fair amount. So we're set up to do a lot more than what we are shipping today, Steve, and so a lot of the focus internally is on growth.
Steve: As John mentioned in his prepared statement, we've been investing a fair amount.
Steve: So, we're set up to do a lot more than what we are shipping today, Steve.
Jure Sola: The good thing is that, you know, we didn't lose any customers. If anything, we've been winning some programs, or in a lot of cases, customers had multiple sources. We believe we're gaining there. So those are positive things, but we like to wait a little bit more before we can say everything is good.
Steve: So a lot of focus internally is to grow. A good thing is that, you know, we didn't lose any customers.
Speaker Change: If anything, we've been winning some programs, or in a lot of cases, that customer had multiple sources. We believe we're gaining there. So a lot of positive things, but we like to wait a little bit more before we can say everything is green.
Speaker Change: Understood. That's helpful. Thank you.
Steve: Thanks, Steve.
Speaker Change: Thank you. Operator, go ahead.
Operator: Yes, thank you. And your next question comes from the line of Christian Schwab from Creek Harlem Capital Group. Please go ahead.
Speaker Change: Yes, thank you. And your next question comes on the line of Christian Schwab from Creek Harlem Capital Group. Please go ahead.
Christian David Schwab: Last quarter, you guys talked about inventory headwinds, you know, and things bottoming out. And now we're kind of still being impacted by pushouts. And it kind of sounds like, you know, we're a little bit more guarded about exactly what the customer inventory is broadly across the entire business, kind of impacting the business maybe for multiple more quarters. You know, last quarter, I think you guys talked about an opportunity to exit this fiscal year and return to strong growth.
Christian David Schwab: Hey, Jure, last quarter you guys talked about inventory headwinds, you know, and things bottoming.
Christian David Schwab: And now we're kind of still being impacted by pushouts. And it kind of sounds like, you know, we're a little bit more guarded exactly what the customer.
Speaker Change: Inventory broadly across the entire business, you know, kind of impacting the business maybe for multiple more quarters.
Speaker Change: Last quarter, I think you guys talked about an opportunity to exit this fiscal year and return to strong growth.
Christian David Schwab: And in 2025, what should we be thinking about as far as a top-line growth range for next fiscal year, given the pushes and takes, you know, strong bookings momentum, nice new design wins, but, you know, ebbs and flows of real visibility from the end customer regarding demand and inventory may be remaining. Not crystal clear. Yeah. So, Christian, let me take that one on.
Speaker Change: and 25, what should we be thinking about as far as...
Speaker Change: a top-line growth range for next fiscal year given the pushes and takes, you know, strong bookings momentum.
Speaker Change: Nice new design wins, but ebbs and flows of real visibility from the end customer regarding demand and inventory may be remaining.
Speaker Change: not crystal clear. Yeah so Christian let me let me take that one on. First of all
Jure Sola: First of all, for the last quarter, I would say that our forecast for shipments was pretty stable. When we're talking about pushouts on these small projects in our components product group, we're talking about $10 million, $15 million in revenue, and, you know, it's a more profitable business, so it affects you a little bit, but nothing major. I would say that inventory, you know, maybe it's coming down at a slower rate than what I personally thought at the beginning of this fiscal year. I thought the second half would—demand would be stronger, and the inventory would be burned out at a faster rate. So inventory is continuing to be burned down, but it's being burned down at a slower rate.
Christian David Schwab: In the last quarter, I would say that our forecast
Christian David Schwab: shipments were pretty stable. When we're talking about push-outs on this,
Christian David Schwab: [inaudible]
Speaker Change: in our components product group. We're talking about $10, $15 million in revenue and, you know, it's a more profitable business so it affects you a little bit, but nothing major. I would say their inventory, you know, maybe it's coming down at a slower rate.
Speaker Change: than what I personally thought beginning of this fiscal year. I thought the second half...
Speaker Change: The demand will be stronger, the inventory will be burned out at a faster rate. So inventory is continuing to be burned down, but it's being burned down at a slower rate.
Jure Sola: What we're saying today is that demand is going up for this fourth quarter, as you heard from us, $1.9 to $2 billion. So it's definitely a right step in the right direction, and as John and I said, if you look at the customer forecast and visibility, that's moving on a positive side. For 25, and then I'll turn it over to John and give you his comments, we definitely feel very comfortable based on all the key customers that we have, the key markets that we focus on, that we will have positive growth in 25 from the markets that we are following. So we're ready to make a commitment that we expect today to grow in 2025. But we're not ready to tell you how much.
Speaker Change: What we're saying today...
Speaker Change: We're guiding up for this fourth quarter, as you heard from us, $1.9 to $2 billion. So it's definitely a right step.
Speaker Change: in a right direction, and as we both, John and I said, if you look at the customer forecast and visibility, that's moving on a positive side.
Speaker Change: For 25, and then I'll turn it over to John and give you his comments, we definitely feel very comfortable based on all the key customers that we have, the key markets that we focus that we will have a positive growth.
John: in 25 from the markets that we are following.
John: So we're ready to make a commitment that we expect today to grow in 2025, but we're not ready to tell you today how much. We really want to go through this quarter.
Jure Sola: We really want to go through this quarter into the fiscal year 2025 so that sometimes in that first quarter of 2025, I think that will be a smarter thing for us to tell you at that time what we're going to do. But we are optimistic. I like what's in front of us. I like the new programs that we won, some of the new programs that we just basically talked about. What drove our communication up was mainly the new program.
John: into the fiscal year 25 so that
John: Sometimes in that first quarter of 2025, I think that will be a smarter thing for us to tell you at that time what we're going to do. But we are optimistic. I like what's in front of us. I like the new programs that we won.
John: Some of the new programs that just basically, we just talked about it, what drove our communication up was mainly new program.
Jure Sola: And that's going to help us this quarter, next quarter, and hopefully longer, and some of the new programs that we have coming up. So that's my commitment today. But I can tell you again that we believe what we see today that 2025 will be a growth year. And we're not ready to tell you the percentage today until about 90 days from now.
John: And that's going to help us this quarter, next quarter, and hopefully longer and some of the new programs that we have coming up. So that's my commitment today, but I can tell you again that we believe, what we see today, that the 25 will be a growth year. But I'm not ready to tell you percentage today until about 90 days from now.
Jonathan P. Faust: John? Yeah, just to add to what Yuri was saying, Christian, and the level set on some of the numbers. So if you think about our Q3 guide, we came in just shy of the midpoint. If we had guided the 1.8 to 1.9, it would have been a midpoint of 1.85. If not for those two programs that I mentioned before, like when I was answering Ruplu's question, we would have been slightly above that and would have been about a 1% sequential improvement.
John: John
Christian David Schwab: Yeah, and just to add to what Yuri was saying, Christian, and the level set on some of the numbers. So if you think about our Q3 guide,
Speaker Change: So we came in just shy of the midpoint. We had guided the 1.8 to 1.9, would have been a midpoint of 1.85. If not for those two programs that I mentioned before, like when I was answering Ruplu's question, we would have been slightly above that. That would be about a 1% sequential improvement. If you think about the Q4 guide of 1.9 billion to 2 billion revenue,
Jonathan P. Faust: If you think about the Q4 guide of 1.9 billion to 2 billion revenue, the midpoint of that would be about a 6% sequential increase. So we do expect to be getting on the correct trajectory from that perspective. And inventory-wise, when we started this fiscal year, we were at $1.7 billion. We're now down to about 1.384, and we've improved our turns as well. And like I was mentioning just a little bit ago, we think that there's more opportunity to work through that inventory on the customer side, and then certainly efficiencies that we're going to be driving to get turns back up. So as we look ahead, we definitely see Q4 as that return to growth, where we're going to start to make that progress into the next fiscal year.
Jonathan P. Faust: Great. Thanks for all the clarity. No other questions. Thank you. Thanks, Christian. Operator.
Speaker Change: You know, the midpoint of that would be about a 6% sequential increase, right? So we do expect to be getting on the correct trajectory from that perspective.
Speaker Change: Inventory-wise, you know, when we started this fiscal year, we were at $1.7 billion. You know, we're now down to about $1.384 billion, and we've improved our turns as well. And like I was mentioning just a little bit ago, you know, we think that there's more opportunity to work through that inventory on the customer side, and then certainly efficiencies that we're going to be driving to to get turns back up. So, you know, as we look ahead, we definitely see Q4 as that return to growth, where we're going to start to make that progress into the next fiscal year.
Speaker Change: Great. Thanks for all the clarity. No other questions. Thank you. Thanks, Christian. Operator, it looks like we don't have any further questions. I would like to thank everyone for joining us today, and we look forward to speaking with you again in a few months.
Jure Sola: Operator, it looks like we don't have any further questions. I would like to thank everyone for joining us today, and we look forward to speaking with you again in a few months to discuss our fourth quarter and the physical year 2025. Thank you very much.
Operator: This concludes today's call. Thank you for participating. You may all disconnect.
Speaker Change: to discuss our fourth quarter and the physical year 2025. Thank you very much. Thank you. Bye-bye. This concludes today's call. Thank you for participating. You may all disconnect.