Q4 2024 Sanmina Corp Earnings Call

Good afternoon ladies and gentlemen and welcome to the Sanmina Sport Quarter and fiscal year 2021 earnings conference call. At this time, I'll line your analysis only mode. Following the presentation, you will conduct a question and answer session.

But any time during this call, you require immediate assistance, these precious stars are over the operator. This call is being recorded on Monday, November 4, 2024. I would know like to turn the conference over to Paige Melching, singer-vice president of Investor Communications, please go ahead.

Paige Melching: Thank you, Loody. Good afternoon, ladies and gentlemen, and welcome to San Meena's fourth quarter in fiscal year 2024 earnings call. A copy of our press release and slides for today's discussion are available on our website at SeenMeena.com in the Investor Relations section.

Paige Melching: Joining me on today's call is Yuri Sola, Chairman and Chief Executive Officer. We're out to a new one. And John Faust, Executive Vice President and Chief Financial Officer. Good afternoon.

Before I turn the call over to Yeri, let me remind everyone that today's call is being webcasted and recorded and will be available on our website. You can follow along with our prepared remarks in the slides provided on our website.

Yuri Sola: 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. The coming is actual results could differ materially from those projected in these statements as the results of factors set forth in the safe harbor statement.

Paige Melching: The company is under no obligation and expressly disclaims any such obligation to.

Paige Melching: Update or alter any of the forward-looking statements made in this earnings release, the earnings presentation, the conference call, or the investor-relation section of our website, whether as a result of new information, future events or otherwise, unless otherwise required by law.

Paige Melching: Included in our press release in slides this year today, we have provided you with statements of operation for the fourth quarter in fiscal year ended September 28, 2024 on a gap basis, as well as certain non-gap financial information.

Paige Melching: A reconciliation between the gap and non-gap financial information is available in the press release and slides posted on our website.

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

Any comments we make on this call that relates to the income statement measures will be directed at our non-gap financial results.

Accordingly, unless otherwise stated in this conference call, when we're here for the gross profit, gross margin, operating income, operating margin, taxes, net income, and earnings for share, we're referring to our non-gap information. I'd now like to turn the call over to Yuri.

Yuri: Thanks Paige, a good afternoon ladies and gentlemen, welcome and thank you all for being here with us today. First, I would like to take this opportunity to recognize Sanmino's leadership team and our employees for doing a great job.

Yuri: So, to use I mean a theme, thank you.

for your dedication and delivering an excellent service to our customers.

You finished the year with a solid momentum. For a 4-4, you deliver solid revenue of $2 billion and non-gap EPS of $1.43 per share.

Yuri: Again, to Salinas employees, thank you and let's keep it up.

Yuri: 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 Salmina results and future goals.

The John and I will open for question and answers and I would like to turn this call over to John John

John: Thank you, Jure and good afternoon, ladies and gentlemen and thank you for joining us here today.

John: Before we go to the financial results, I want to thank the entire San Mena team for their hard work and dedication and for executing a solid close to the fiscal year.

Yuri: Now please turn to slide five to discuss the P&L highlights.

Yuri: We're very pleased with our fourth quarter results, as we delivered revenue of $2.02 billion, which exceeded our outlook of $1.9 billion to $2.0 billion, and was up 9.6% sequentially.

We saw sequential growth across the majority of our unmarkets and year over your growth in our communication networks and cloud infrastructure and market, which Jure will speak to in more detail as a part of his prepared remarks.

Yuri: The End

Yuri: Non-Gapros, Profit was $175 million or 8.7% to revenue at the higher end of our outlook and up 20 basis points sequentially.

Yuri: This was driven by favorable mix in our CPS segment, which I will comment more on shortly, as well as focused execution and strong operating discipline.

Yuri: Non-gap operating expenses were $68.2 million, above our outlook, as we continue to make targeted investments in the business to drive future growth.

Yuri: Non-Gap operating profit was $107 million or $5.3% of revenue in line with our outlook and flats to quenchily driven by the higher non-Gap operating expenses that I just referenced.

Yuri: It's important to note that our non-gap operating margin continues to be in line with the 5% to 6% short-term range that we have previously communicated.

Yuri: Now, get out other income and expense was $2.8 million. Favorable to our guidance driven by our strong cash flow results.

Yuri: Non-Gap Deluded Irines for Share came in at $1.43, based on approximately 56 million shares outstanding exceeding the high end of our outlook of $1.30 to $1.40.

Yuri: Now, please turn this slide six to review the quarterly trends.

Yuri: As we have discussed previously, we expected FY24 to be a transition year, while we partnered with our customers across multiple and markets to adjust inventory levels, which ultimately led to a year-over-year revenue decline.

However, we also said that we expected the second half of the year to be better than the first, and we delivered on that commitment as Revenue flattened out in the third quarter and grew almost 10% sequentially in the fourth quarter, which puts us on a great trajectory as we head into the new fiscal year.

Yuri: In addition, we delivered non-gap gross margin of 8.7% for the quarter, a 20 basis point improvement sequentially, and held it relatively steady throughout the year despite a fluctuating revenue base.

Yuri: Driven by favorable mix and strong operating discipline.

Yuri: Our non-gap operating margin was 5.3% for the quarter, which was flat to quenchily and relatively stable throughout the year and was well within our 5% to 6% short-term outlook range.

Yuri: We also delivered strong non-gap diluted earnings per share with our fourth quarter actuals coming in at $1.43, which was a 14% improvement sequentially and we started to turn the corner with a 1% improvement versus the prior year.

Yuri: Now please turn to slide seven to discuss the segment results.

Yuri: IMS revenue came in at $1.63 billion, up 10.1% sequentially driven by growth across the majority of our end markets.

Yuri: IMS Nongap Gross Marchin was 7.3% down 30 basis points sequentially and 70 basis points compared to the same period of year ago due primarily to unfavorable mix.

Yuri: We believe there is room for margin expansion in IMS and expectancy improvements in the new fiscal year.

Yuri: CPS revenue came in at $418 million, up 7.6% sequentially, driven by higher demand and multiple-end markets as well as the two programs that were delayed in the prior quarter.

Yuri: CPS, Nogap, Gross, Margin was 13.6% up 210 basis points sequentially and up 280 basis points compared to the same period a year ago.

Yuri: We're pleased with the performance of the CPS Business Discoordered and we'll continue to focus on driving improvements going forward.

Yuri: Now please turn to slide A to discuss our fiscal year results.

Yuri: On the quarterly trend slide, I commented on how FY24 was a transition year, but also how we delivered on our commitments and made a lot of progress with the business.

Yuri: To provide a few examples, as you can see on this slide, Nongalchro's margin grew 20 basis points year over year, despite the lower revenue base and was significantly higher than the two years prior to that.

Yuri: This was driven by the successful diversification of our business and strong operating discipline.

Yuri: While our non-gap operating margin climbed 40 basis points for us at the prior year, that was primarily due to the targeted investments that we made in the business to drive future growth and was still significantly higher than the two years prior to that.

Yuri: Similarly, while our non-gap earnings per share declined 16% versus the prior year, they were up 13% versus the fiscal 2022 results and up 46% versus the fiscal 2021 results.

Yuri: Now please turn this slide nine to discuss the balance sheet highlights.

Yuri: As with the PNL results we close the fiscal year well and maintain the very strong balance sheet that I've referenced all year long.

Yuri: Cash and Cash Equivalence were $626 million.

Yuri: And at the end of the quarter, we had no outstanding barrains on our $800 billion revolver, leaving us with substantial liquidity of approximately $1.5 billion.

Yuri: We ended the fourth quarter with inventory of $1.33 billion, which was down approximately 4% sequentially.

Yuri: While managing inventory in absolute dollars is important, it will fluctuate based on customer demand and that's why we believe it's most important to focus on inventory turns.

Yuri: Our inventory turns improved to 5.4 times this quarter, which represents a significant improvement from the 4.9 times in the prior quarter.

Yuri: This is a great result, but there is still room to improve, and inventory turns will continue to be a focus area for us going forward.

Yuri: Our non-gap pre-text RLIC was 23% for the quarter. Well above our weighted average cost of capital and a solid improvement from the 21.1% last quarter.

Yuri: We continue to have one of the strongest balance sheets of the industry with no net debt and the low gross leverage ratio of 0.5 one times, which puts us in a great position to execute on our strategy to drive growth and margin expansion.

Yuri: Now please turn to slide 10, we're all talk about cash flow and capital allocation highlights.

Yuri: Thanks to Discipline Working Capital Management by the team, our fourth quarter cash flow from operations was $52 million and came in very strong for the fiscal year at $340 million.

Speaker Change: The End of the World

Yuri: Capital expenditures were $23 million for the quarter and $109 million for the year or 1.4% of revenue.

Yuri: This is in line with our historical levels of cap expanding, which typically ranges between 1% to 2% of revenue.

Yuri: As we move forward into the new fiscal year, we will continue to make strategic investments in the technologies and capabilities required to strengthen our position in the market and support our long-term financial objectives.

Yuri: Free Cash Lo was $29 million for the quarter and $231 million for the year up $186 million versus the prior year.

Yuri: Now turning into our capital returns to shareholders.

Yuri: During the quarter, we repurchased $945,000 for approximately $65 million, which equates to a total of $4 billion for approximately $227 million for the year.

Yuri: Now, just to provide some more perspective, that means we return almost 100% of free cash flow to shareholders.

Yuri: Go in forward, we intend to continue to repurchase shares opportunistically as we still believe our stock is undervalued.

Yuri: Our strong cash flow performance gives us the flexibility to continue to invest in the business, while also returning capital to our shareholders through a discipline and balanced capital allocation approach.

Yuri: To conclude on the fiscal 2024 results, I'd like to commend the entire Sanmean team for doing an excellent job in a very challenging market environment.

Yuri: At the start of this year, we explained to investors that it would be a transition year, as we partnered with our customers to work through inventory absorption.

Yuri: While it certainly was challenging, we executed very well.

Yuri: and ultimately delivered on three key priorities for the year.

Yuri: Number one, expanding gross margin, number two, making targeted investments in the business to drive future growth, and number three, generating solid cash flow, all of which helped us establish a strong foundation for the future.

Yuri: This is a testament to our resilience, our ability to operate in dynamic market conditions and to deliver on what we say we will, which Jure and I and the rest of the management team are very proud of.

Yuri: Now, please turn to slide 11 where I'll cover our outlook for the first quarter of fiscal 2025, which is based on what we've seen in the market and the forecasts from our customers.

Yuri: Our outlook is as follows.

Yuri: We expect revenue between $1.92 billion to $2.025 billion.

Yuri: Nogap, gross margin of 8.4% to 8.8% dependent on mix.

Yuri: Operating expenses of $62 million to $66 million.

Yuri: As a reminder, as our revenue grows, we believe our operating expenses will provide leverage as we have driven efficiencies in the organization and don't expect to make material increases.

Yuri: Non-gap operating margin of 5.3% to 5.7%.

Yuri: We expect other income and expense to be approximately $8 million.

Yuri: For the tax rate, we expect a range of 20% to 22% which includes the final utilization of our US federal mat operating losses, the expected impact of the pillar to global minimum tax, mix of jurisdictional earnings and other tax credits and incentives.

Yuri: We estimate an approximate 3, the $3.5 million non-cash reduction to our net income to reflect our India joint venture partners equity interest.

Yuri: NonGap EPS in the range of $1.30, $1.40 based on approximately 56 million fully-deluted shares outstanding.

Yuri: Please note that the new tax rate change as an impact of approximately 7 cents on the non-gap EPS outlook for the first quarter.

Yuri: Capital expenditures to be around $30 million and finally depreciation of approximately $30 million.

Yuri: In summary, based on the demands signals from our customers and our first quarter outlook, we expect FY25 to be a growth year.

Yuri: We have the right set of customers and capabilities to be successful and I'm excited about the opportunities ahead.

Speaker Change: With that, let me turn the call over to Yuri.

Yuri Sola: Thank you, John. Ladies and gentlemen, let me add to you more comments about our results for the fourth quarter and fiscal year 2024.

Yuri Sola: and I'll tell you more about our outlook for fiscal year 25 and future goals. Please turn to slide 13.

Yuri Sola: As you heard from John, our team delivered solid execution and excellent service to our customers.

Yuri Sola: Revenue in on GAP, EPS, exceeded our outlook as we are starting to see better visibility from our customers.

Yuri Sola: Most of our customers continue to burn through their inventories. I can tell you today that things are getting better.

Yuri Sola: Salmina Stink continues to demonstrate resilience by delivering solid financial results.

Yuri Sola: Nangab Ros, margin and operating margin came in line with our outlook. We delivered it a sequential year over year growth in communication efforts and cloud infrastructure segment.

Yuri Sola: and sequential growth in industrial, medical, defense, aerospace and automotive segments.

Yuri Sola: To talk more about it, please turn to slide 14.

Speaker Change: Let's look at the revenue by a market for a 4-4. As you heard from John, the revenue was up 9.6% sequentially. We saw growth in majority of our end markets.

Yuri Sola: For industrial medical defense and aerospace and automotive, that came in $1,250,000,000,000. There was 62% of our revenue and it was up 4% over 4%

Yuri Sola: Communication at Forcing Cloud Infrastructure came in at 765 million. That was 38% of our revenue and that came up at 16% for over quarter.

Yuri Sola: Top 10 customer represented 51.3% of all revenue.

Yuri Sola: and for a 4-4 we have no customers over 10% of our revenue.

Yuri Sola: I can tell you that we continue to see solid bookings. Book 2 Bill was one to one for a four-quarter. Please turn.

Yuri Sola: To slide 13.

Yuri Sola: Let me talk to you more about fiscal year 24 markets.

Yuri Sola: For Industrial Medical Defense and Automotive, there was 65% of our revenue for a year. Industrial Approximately was 27%.

Yuri Sola: High Performance Communication Network was 20%.

Yuri Sola: and High Performance Cloud Infrastructure approximately 15%.

Yuri Sola: Defense and Aerospace and Aramori was 18%. Medical approximately 20%. As you can see, Sannina is well-diversified company.

Yuri Sola: Now please turn to Flight 16.

Yuri Sola: Now let me talk you about end markets and what we are seeing today.

Yuri Sola: What we've seen today, I can tell you we see positive trends for fiscal year 25. For industrial, we see we have solid customer base and we're exciting a lot of new projects in a pipeline.

Yuri Sola: We have some great opportunities around the energy, generation and storage. Power controls and management systems, factory automation and semi-conductor equipment and safety equipment. Overall, I can tell you this segment is doing well.

Yuri Sola: For medical, mainly driven by digital health and medical devices. We are strong, based our customers for a long time here, we are well diversified within the market itself. Overall, I will say it's a stable demand with a good future opportunities in front of us.

Yuri Sola: For different and aerospace we continue to see solid demand from critical defense projects, including Samina Products itself.

Yuri Sola: New programs win will drive the growth for us. We're also growing our advanced printer circuit boards.

Yuri Sola: Business for Defense Market

Yuri Sola: and we are also starting to expand our precision machining systems. We believe there's a lot of opportunity there.

Yuri Sola: For our motive and transportation, in this segment I can tell you that our customer base is doing well in this challenging market.

Yuri Sola: Our business here is mainly based on around electrical vehicles, electrical charges. But I can tell you that we have a strong pipeline of new opportunities to drive the growth in fiscal year 25.

Yuri Sola: Procommunication Networks can cloud infrastructure, also we see positive trends.

Yuri Sola: We focus on high density, high performance, net force and cloud infrastructure.

Yuri Sola: AI Architecture is driving new opportunities for us. We're expanding our optical business and we're expanding optical advanced packaging.

Yuri Sola: Cloud Infrastructure is driving new opportunities for Samina.

Yuri Sola: AI requirements are continuing to involve at the rapid pace and it's driving technology advancement. So what does that mean for us? It's driving a new business opportunity and we are well positioned in this month's segment.

Yuri Sola: Now, please turn to slide 17.

Yuri Sola: I'd like to spend a few minutes talking to you, what do we do for cloud data center?

Yuri Sola: Well today, Samina provides end-to-end solution. Samina has been investing heavily and expanding into this growth segment. So what do we do? First of all, we do not compete with our customers. We work together with our customers to serve as a disagreement.

Yuri Sola: As you can see on this slide, we provide rock and closure which is basically open compute both standard and custom. We provide cables. We provide advanced optical modules. We provide custom memory.

Yuri Sola: We fabricate high technology, printer circuit boards with several boards that go into this system, including backlamps.

Yuri Sola: We also have a group, where we call Viking Enterprise solution that does a full design.

Yuri Sola: Server and Story Systems. We believe build basically complete system through joint development or all the M for our customers. We provide cooling, manifolds for the rocks and enclosures.

Yuri Sola: We are also partnering with a third party around liquid and we've been heavily investing in this segment ourselves. We also provide bus bars that go into these rocks, precision plastics.

Yuri Sola: and end of the day we build a full system integration.

Yuri Sola: for these segments. And we provide what we call internally built-in order and configured to order. So Samina is involved, well involved in this segment, and we continue to invest, because we believe we see a great future for us. Please turn to slide 18.

Yuri Sola: Now let me talk to you about fiscal year 25 outlook.

Speaker Change: As Jon said, our fiscal year 25 outlook is based on our customers' forecast today.

Speaker Change: I can tell you that we are forecasting revenue to grow high single digits in fiscal year 25.

Speaker Change: The growth will come from new and existing programs.

Yuri Sola: We continue to diversify with a target market and developing adding new customers to our portfolio.

Yuri Sola: We focused on margin expansion.

Yuri Sola: Non-GAAP EPS should grow faster than revenue.

Yuri Sola: Margin expansion should be driven by revenue growth, which we expect in fiscal year 2025, new programs with the higher margin opportunities.

Yuri Sola: And we're going to continue to improve our manufacturing efficiencies as our business grows. And also, we're going to get benefits from OPEX leverage.

Yuri Sola: We expect to generate strong cash flow to fund investments in technology that we are investing right now and capital equipment for the future growth.

Yuri Sola: Again, we expect fiscal year 25 to be a growth year for us.

Yuri Sola: Now please turn to slide 19.

Yuri Sola: Let's talk about our priorities.

Yuri Sola: Sarmina priorities are aligned and focused.

Yuri Sola: Sarmina strategy is mainly built around our customers. We have what we call internally customer-centric strategy. We will continue to build around our great diversified customer base, and we'll continue to deliver competitive advantage.

Yuri Sola: by providing leading technology for our customers in these heavy regulated markets.

Yuri Sola: We remain focused in a long-term growth, margin expansion, and strong cash flow.

Yuri Sola: We are focused on a margin expansion and short-term, our operating margin goal is to deliver 5-6%.

Yuri Sola: And longer term, our goal is to deliver operating margin at 6 plus percent. We believe that our business will allow us to do that and type of technology that we are expanding into.

Yuri Sola: And we'll continue to maximize the shareholders' value. We're not going to do anything crazy, but we'll focus on growth and profitability and service in our customer. So we believe we'll provide a maximized shareholder value in the short term and the long term. Please turn to slide 20.

Yuri Sola: In summary,

Yuri Sola: We continue to execute on our strategy that we've been talking to you. Fiscal year 24 was a transition year.

Yuri Sola: We finished the fourth quarter with solid momentum and with a strong customer base that gave us a growth for fiscal year 25.

Yuri Sola: We have ongoing focus on diversifying the growth markets and expanding it to new customers and we've been we've been investing in that and we're going to continue to invest in that. Sanmina has well-established manufacturing footprint and is well aligned with our customer needs.

Yuri Sola: We will deliver consistent cash generation to fund the business with a disciplined approach.

Yuri Sola: We remain focused on the fundamentals and future financial performance. And the most important, we'll continue to be a partner of choice with our top customers, industry market leaders.

Speaker Change: https://www.youtube.com or the link in the description for more videos.

Yuri Sola: So ladies and gentlemen, now what I would like to, first of all, thank you for your support. Operator, we're ready to open the lines for questions and answers. Thank you again.

Speaker Change: Thank you, and ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press the star followed by the number 2. Once again, please press the star 1 to join the queue.

Speaker Change: And your first question comes from the line of Ruplu Bhattacharya with Bank of America. Please go ahead.

Speaker Change: Hello, this is Pat.

Ruplu Bhattacharya: Where do you see growth within the cloud business? I mean, what specifically are the growth areas and how should we think about cloud? Do you think the business grows now from 2024 to 2025? And what growth rate should we think for this business?

Speaker Change: Well, Ruclu, excellent question. First of all, yeah, you're right, if you, that's why we, you know, use the word transition. Twenty-four was, from a growth point of view for us, was a challenging year affected by the inventory, too much inventory in a pipeline with our customers.

Yuri Sola: You know, a lot of that, most of our customers, I would say 60-70% of our key partners.

Yuri Sola: are their products being shipped to the data centers, to cloud. We've been investing a lot, as I just showed you on that slide 17, if you look at it, is that, you know, we provide a lot of the critical technologies.

Yuri Sola: that goes into these systems and we believe we are well positioned and we are working on our new programs.

Yuri Sola: that we believe will grow, and we're very optimistic and very positive for growth in this segment in what we call communication networks and cloud infrastructure.

Speaker Change: Okay, thanks for that. And then maybe just on the communication side, I mean I know Sanmina has a good, very strong optical footprint. Can you talk about the trends you're seeing in communication, specifically in networking and optical? You said that maybe the inventory correction is coming to an end. How many more quarters of that do you see? And even within communications, where do you see growth in Fiscal 25?

Speaker Change: Well, first of all, as I mentioned in my prepared statement, RUPL inventory is definitely coming down.

Speaker Change: Some customers are already clear pretty well, and a few customers are still going through it.

Speaker Change: to reduce those. But where the business is coming, I think it will come across all our key customers. I think we're well positioned in that networking side of the business. As you mentioned, I think our optical networks are very strong. We focus on our high-end...

Speaker Change: The performance, I mean the

Yuri Sola: IP networking capabilities that we do for our key customers. All of these key customers today are positioned for a growth and that's what we're hearing from them. So we're pretty optimistic about this group.

Speaker Change: Okay, got it. If I can ask John a couple of quick questions. Just on, I wanted to focus John on margins. So fiscal 4Q revenue came strong at the high end. Operating margin was at the low end. You mentioned some investments. How should we think about the progression of operating margin in fiscal 25? And can you just talk about your areas of investment in this year?

Speaker Change: Yeah, sure. Thanks. Thanks for the questions, Rupalu. So just to touch on the first point, you know, as you think about Q4 results, you know, we did come in on the higher end of gross margin, a little bit on the lower end of operating margin, due to those targeted investments, right? As we look ahead, we still see margin expansion, as I was saying in my prepared remarks, in both the IMS and CPS segments, and I'm talking gross margin there, so we see opportunity on that front. Also, as we return to revenue growth, we think that we'll get natural operating leverage from OPEX. We talked about that, too.

Yuri Sola: But in this last quarter, and in Q4 specifically, when you look at the OPEX...

Yuri Sola: You know, Yuri and I are always looking at investment opportunities. That's part of what we do through an ROI-based approach. And we have a decent percentage of our op-ecs. It's variable in nature. So that gives us the flexibility to be able to invest when we need to and pull back when we need to.

Yuri Sola: And for this quarter specifically, I'll give you three areas of investment. One was across R&D, you know, mainly around the programs that Yuri was talking about in the cloud and data center space.

Yuri Sola: Number two, you know, looking at some strategic opportunities, some more SG&A spending related to to try and lock in those strategic opportunities to drive growth for the future, and then number three in our workforce.

Yuri Sola: And so all the time we're looking at those opportunities, you know, and whenever we feel like we've got a good one that makes sense to invest in, well, we'll do that. And we had those opportunities this quarter.

Yuri Sola: Any thoughts on priorities of cash? Thank you. Yeah, I would say our priorities for capital allocation haven't changed, and really the foundation for that root clue is to drive growth.

Yuri Sola: And just to remind you of what the priorities are.

Yuri Sola: Number one is around organic investments, and I just talked about some of those that we were making, you know, also in capital expenditures, right? We look at that just to make sure, as I mentioned in my prepared remarks around having the right capabilities put in place to be successful and provide a competitive advantage for our customers. That's number one.

Yuri Sola: Number two on, you know, strategic acquisitions

Yuri Sola: Yuri made a comment, I'm sure he'll say some more words that, you know, we're not looking to do anything crazy, but we certainly are always looking at opportunities there to help expand our portfolio and to be successful.

Yuri Sola: Three is around debt, and as you know, you know, we don't have a lot of long-term debt, right? We have no net debt, and our gross leverage ratio is pretty low when you look across the industry.

Yuri Sola: And then last, as we did a lot of this year, is Cherry Purchases.

Yuri Sola: And as I mentioned in my prepared remarks, you know, we still feel that we're undervalued, but we'll take that same discipline, ROI-based approach to make decisions between which of those priorities we want to pursue first.

Yuri Sola: Yeah.

Speaker Change: Just to add a few things on that, if you look at an area that we are playing, especially for our future, as I said, technology is more involved now because of demand around AI and so on. That's perfect for our company because we believe we can grow organically. We got plenty of cash.

Speaker Change: and deliver the right solution for our customers and make money. And I believe that we are positioned to do that. And our focus is a growth, growth, and growth. So, hopefully you'll see that more in the next few years and that's the focus for us. 25, 26, 27, a great time for Sanmina Corporation.

Speaker Change: Okay, thank you for all the details. Appreciate it. Thanks Rupul.

Speaker Change: Thank you. And your next question comes from the line of Anja Söderström with Sidorean Company. Please go ahead.

Speaker Change: Yes, hello, this is Alex on for Anya. Thanks for taking questions.

Speaker Change: She has a better voice, so go ahead, Alex.

Speaker Change: I try my best, you know, to honor her.

Alex: Could you talk a little bit about room for further improvement in cash flow and what some of the drivers would be?

Speaker Change: Yeah, absolutely Alex. Thanks for the question. So, number one, we had a great year for cash flow as I was talking about earlier.

Speaker Change: But there's still definitely opportunity ahead. You know, Yuri had mentioned, and I mentioned too, about our inventory terms improvement this quarter. But we still think longer term, we should be back up above six.

Speaker Change: And even if you look at our cash conversion cycles, some great improvement this past quarter, got to about 68 days. You know, we were in the mid 70s there for a while.

Speaker Change: But there's still improvement to be had because if you go back further into our history, cash conversion cycle is more in the mid-50s.

Speaker Change: More opportunity to continue to work through that absorption, and we think that'll get better with growth. Even accounts payable, you know, our DPO, we think there's some room there. But I would tee it up mostly to our cash conversion cycle overall. So that's what we're going to be focused on.

Speaker Change: Great, very helpful. Thank you.

Speaker Change: And I think we heard, you know, a fair amount about how AI was affecting, you know, the business and creating, you know, new business opportunities. Curious if you could share a little bit about how you're, you know, integrating and utilizing AI and, you know, maybe how that's changing the business internally and perhaps aiding margin.

Speaker Change: Yeah, Alex, this is Jure. Let me first of all make comment what we do outside. First of all, around AI, you know,

Speaker Change: This really started about last let's say 18 months that we started to see movement in this direction

Speaker Change: especially in the last 12 months, we see a lot of new opportunities that our partners, and what I mean by partners, the customers they had in our portfolio, you know, for over 10 years plus, are expanding their business around it and we see fair amount of growth.

Speaker Change: So, Salmina participates in a very complex systems.

Speaker Change: you know, around AI. So we believe AI is going to be around, not just here for the next 12 months, but hopefully there's a lot of opportunities in the next two, three years for us.

Speaker Change: which we are investing, and also other markets that I mentioned earlier, such as defense and so on.

Speaker Change: through manufacturing.

Speaker Change: We have a very smart manufacturing set up, set up across all our manufacturing around the world, but we believe in a lot of these cases where we can potentially use artificial intelligence to move in the right direction around the supply chain, definitely, as you know.

Speaker Change: that we buy around the world and 22 countries. So, a lot of those things we feel we can do better. We have to be a better company. So, we are investing back inside also to basically become more competitive and bring a little bit more profits to the bottom line. John, anything else that I... I think you said it well, Jure. The only one that I would add to that is employee productivity. Yeah. You talked about the portfolio, like what's happening in the end markets and what we're doing from a manufacturing perspective, but then our own employees too, working with our IT team and otherwise. So, yeah.

Speaker Change: Very helpful, thank you. And last one. Go ahead. Yeah, of course, last one from us.

Speaker Change: You know, I think you did a nice job talking about capital allocation priorities and, you know, M&A pipeline.

Speaker Change: Maybe just to touch on one other facet, you know, I know the Reliance Industries, you know, joint venture, you know, happened a couple of years ago, so maybe we could just get an update on how that's trending and your thoughts around, you know, additional joint venture opportunities.

Speaker Change: Good question, Alex. First of all, yeah, the deal was done about a little bit over a year ago. I can tell you where two years, yeah, time flies. We're very happy with the partnership that we have with Reliance.

Speaker Change: and also opportunities we have in India for an India market and also India, we believe, in the next few years.

Speaker Change: will become a major exporter in high technology products for North America, Europe, and other parts of the world.

Speaker Change: So we like what's going on, actually we're ahead of the game, we're doing a lot better than what I thought we were going to do. We continue to invest and we're making a major investment this year to position our group in India for our growth.

Speaker Change: We are very optimistic and there's a lot of work left to do, but also there's a lot of opportunities there. But very, very happy with our partnership with Reliance.

Speaker Change: Jon, anything else I missed?

Jon: I think the only other thing that I would add, Jure, you touched on all the key points, right? But the unique setup that we have in there, whereas we manage the business, but Reliance owns the majority of the stake. So any customers that are looking to work with an indigenous India company, they can work with Sanmina and achieve that. So a pretty unique aspect to the JV. Yeah, but the percentage is almost 50-50. Yeah, correct. Anything else, Alex?

Alex: No, that's all for much. Thank you very much. Thank you.

Jon: Operator, is there any more questions?

Speaker Change: We have no further questions at this time.

Speaker Change: Well, ladies and gentlemen, first of all, I appreciate your time and your spending with us today. And if there's any questions that we didn't answer, please get back to us and looking forward to talking to you in approximately 90 days from now. All the best. Thanks a lot.

Speaker Change: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.