Q1 2025 Sanmina Corp Earnings Call
Background music playing
Paige Melching, Jure Sola
Paige Melching, Jure Sola Paige Melching, Jure Sola
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Sanminas First Quarter Fiscal 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.
Speaker Change: If at any time during this call you require immediate assistance, please press TOR0 for the operator.
Speaker Change: This call is being recorded on Monday, January 27th, 2025. I would now like to turn the conference over to Paige Melching, Senior Vice President of Investor Communications. Ma'am, please go ahead.
Paige Melching: Thank you, Constantine. Good afternoon, ladies and gentlemen, and welcome to Sanmina's first quarter fiscal 2025 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.
Jure Sola: Joining me on today's call is Jure Sola, Chairman and Chief Executive Officer. Good afternoon. And John Faust, Executive Vice President and Chief Financial Officer. Good afternoon.
Speaker Change: 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. You can follow along with our prepared remarks with the slides provided on our website.
Speaker Change: Please turn to slide 3 of our presentation and take note of our Safe Harbor Statement.
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 our State Farmer 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 made in this earnings release, the earnings presentation,
Speaker Change: 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 first quarter ended December 28, 2024 on a gap basis.
Speaker Change: as well as certain non-GAAP financial information. A reconciliation between 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.
Speaker Change: Any comments we make on this call as they relate to the income statement measures will be directed at our NOMGAP financial results.
Speaker Change: 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'd now like to turn the call over to Jure.
Jure Sola: Thanks, Paige. 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 Sanmina's leadership team and our employees for doing a great job.
Jure Sola: So, to you, Semina's team, thank you for your dedication and delivering excellent service to our customers.
Jure Sola: For the first quarter, fiscal year 2025, we deliver solid revenue of $2.01 billion and non-GAAP EPS of $1.44 per share.
Jure Sola: Again, to Sarmina's employees, thank you and let's keep it up.
Now, let's go to our agenda for today's call.
Speaker Change: 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: And John and I will open questions and answers. And now I'd like to turn this call over to John. John? Great, thank you, Jure. And good afternoon, ladies and gentlemen. And thank you for joining us here today.
John: Before I review our results for the first quarter, I want to acknowledge the entire Sanmina team for their focused execution and thank them for delivering a solid start to the new fiscal year.
Speaker Change: Now, please turn to slide five, where I'll speak to the financial highlights.
Speaker Change: We're very pleased with our first quarter results, which as you can see, either met or exceeded all of our Outlook commitments.
Speaker Change: Our revenue of $2.01 billion and our non-GAAP operating margin of 5.6% each came in towards the high end of our outlook.
Speaker Change: Also, our non-GAAP gross margin of 9.0% and our non-GAAP diluted earnings per share of $1.44 each exceeded our outlook.
Speaker Change: These results, combined with how we exited the last fiscal year, puts us on a good trajectory for the new fiscal year and sets us on the right path towards achieving our long-term financial goals of driving growth and expanding margins.
Speaker Change: Now please turn to slide six where I'll speak to the P&L performance.
Speaker Change: As I just mentioned, we delivered revenue of $2.01 billion, which was up 7.0% compared to the same period a year ago.
Speaker Change: This was primarily driven by growth in the communications networks and cloud infrastructure and markets, which Jure will speak to in more detail as part of his prepared remarks.
Speaker Change: Non-GAAP gross profit was $180.1 million, or 9.0% of revenue, up 20 basis points compared to the same period a year ago.
Speaker Change: This was driven by favorable mix as well as operational efficiencies.
Speaker Change: Non-GAAP operating expenses were $67.4 million, slightly above our outlook as we continue to make targeted investments to drive future growth.
Speaker Change: Non-GAAP operating profit was $112.7 million, or 5.6% of revenue, up 10 basis points compared to the same period a year ago, driven by mix, focused execution, and effective cost management.
Speaker Change: It's important to note that our non-GAAP operating margin continues to be in line with the 5% to 6% short-term target range that we have previously communicated.
Speaker Change: Non-GAAP Other Income and Expense was $2.3 million of net expense favorable to our guidance, driven by our strong cash flow results.
Speaker Change: Non-GAAP diluted earnings per share came in at $1.44 based on approximately 56 million shares outstanding, up 10.8% compared to the same period a year ago, or up 16.2% if you normalize for the tax rate change.
Speaker Change: As we mentioned on our prior call, we expect fiscal 2025 to be a growth year, and our results for the first quarter represent a solid start towards achieving that objective.
Speaker Change: Now please turn to slide 7, where I'll speak to the segment results.
Speaker Change: IMS revenue came in at $1.62 billion, up 7.8% compared to the same period a year ago, driven by growth in the majority of our end markets, but primarily in the communications networks and cloud infrastructure end markets.
Speaker Change: IMS non-gap gross margin was 7.9%, up about 30 basis points compared to the same period a year ago, due primarily to favorable mix and operational efficiencies.
Speaker Change: CPS revenue came in at 416 million dollars, up 5.4 percent compared to the same period a year ago, driven by higher demand in most of our end markets.
Speaker Change: CPS non-GAAP gross margin was 12.5 percent, down about 40 basis points compared to the same period a year ago, driven by unfavorable mix.
Speaker Change: While we're pleased with the performance of the IMS and CPS businesses this quarter, there is still room to improve, both in terms of revenue growth and margin expansion, and as such we will continue to focus on doing those going forward.
Speaker Change: Now please turn to slide 8 where I'll speak to the balance sheet highlights.
Speaker Change: As with the P&L results, we maintained a very strong balance sheet in the first quarter.
Cash and cash equivalents were 642 million dollars.
Speaker Change: 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.
Speaker Change: We entered the quarter with inventory net of customer advances of 1.3 billion dollars which was down approximately 5% versus the same period a year ago.
Speaker Change: When you look at our inventory reduction from either an inventory returns or days of inventory perspective, it represents a notable improvement from a year ago.
Speaker Change: While we're pleased with these results, there is still more work to be done when you look at where we've been historically. So inventory will continue to be an area of focus for us going forward.
Speaker Change: Our non-GAAP pre-tax ROIC was 23.5% for the quarter, well above our weighted average cost of capital, and an improvement from the 22.7% from the same period a year ago.
Speaker Change: As I've mentioned many times before, we have one of the strongest balance sheets in the industry with no net debt and a low gross leverage ratio of 0.49 times, which puts us in a great position to execute on our long-term financial goals to drive growth and expand margins.
Speaker Change: Now, please turn to slide 9, where I'll speak to the cash flow highlights.
Speaker Change: As a result of the team's disciplined working capital management, our first quarter cash flow from operations came in at a solid $64 million.
Speaker Change: Capital expenditures were $17 million for the quarter, below our outlook, largely due to timing.
Speaker Change: We continue to expect capital expenditures to be between 1% to 2% of revenue on a full year basis, consistent with historical practice.
Speaker Change: Also, as I've mentioned before, we will continue to make strategic investments in the technology and capabilities needed to strengthen our position in the market and support our long-term financial goals.
Free cash flow was $47 million.
Speaker Change: During the quarter, we repurchased 206,000 shares for approximately $16 million.
Speaker Change: As of December 28, 2024, we had $37 million remaining on our current share repurchase program.
Speaker Change: We're pleased with our strong cash flow performance as it gives us the flexibility to continue and to invest in the business and return capital to our shareholders all through a disciplined and balanced capital allocation approach.
Speaker Change: Now please turn to slide 10, where I'll speak to our capital allocation priorities.
Speaker Change: When it comes to capital allocation, it's incredibly important to have a clear strategy and a well-defined set of priorities when making decisions.
Speaker Change: Each quarter, we evaluate our capital allocation options and look for opportunities to maximize shareholder value, all while taking a disciplined, ROI-based approach.
Speaker Change: As I've mentioned before, our long-term financial goals are to drive growth and expand margins, and as such, two key capital allocation priorities are, number one, funding investments in organic growth, and number two, investing in strategic M&A and partnerships.
Speaker Change: It's also important to manage our leverage ratio, so we closely monitor our debt level and take the appropriate actions.
Speaker Change: And lastly, another key capital allocation option that can help us drive shareholder value is share repurchases.
Speaker Change: We believe that our stock is undervalued in the market and as such share repurchases remain an attractive capital allocation option.
Speaker Change: To that end, earlier today, we announced that our Board of Directors authorized an additional $300 million of share repurchases, which is incremental to the amount remaining on our prior program.
Speaker Change: This authorization has no expiration date as we intend to continue to repurchase shares opportunistically and in the context of the capital allocation strategy I just outlined.
[inaudible]
Speaker Change: Now, please turn to slide 11, where I'll provide our outlook for the second quarter, which is based on what we are seeing in the market, the forecast from our customers, and takes into consideration our typical seasonality.
Our second quarter outlook is as follows.
Speaker Change: We expect revenue between $1.9 billion to $2.0 billion, which at the midpoint of $1.95 billion puts us up 6.3% compared to the same period a year ago.
Non-gap gross margin of 8.4% to 8.8%, dependent on mix.
Operating expenses of $60 million to $64 million.
Non-GAAP operating margin of 5.3% to 5.7%.
Speaker Change: We expect other income and expense to be a net expense of approximately $5 million.
A tax rate of 20% to 22%.
Speaker Change: This is in line with our prior tax rate outlook, which, as a reminder, is up from the prior year due to the final utilization of our U.S. federal net operating losses, the impact of the Pillar 2 Global Minimum Tax, mix of jurisdictional earnings, and other tax credits and incentives.
Speaker Change: We estimate an approximate $3.0 million to $3.5 million non-cash reduction to our net income to reflect our India JV Partners equity interest.
Speaker Change: non-GAAP EPS in the range of $1.30 to $1.40 based on approximately 56 million fully diluted shares outstanding.
Speaker Change: At the midpoint of $1.35, that would put us up 3.5% compared to the same period a year ago, or up 9.5% if you normalize for the tax rate change.
Speaker Change: Capital expenditures to be around $30 million. And finally, depreciation of approximately $30 million.
Speaker Change: In summary, based on the demand signals from our customers and our second quarter outlook, continue to expect FY25 to be a growth year.
Jure Sola: We have the right set of customers and capabilities to be successful and are well positioned to take advantage of the opportunities ahead. And with that, let me turn the call over to Jure.
Jure Sola: Thank you, John. Ladies and gentlemen, let me add a few more comments about our results for the first quarter and the rest of the fiscal year 2025 and beyond.
Jure Sola: As you heard from John, our team delivers solid execution and excellent service to our customers.
Jure Sola: Revenue, gross margin, operating margin, and non-GAAP earnings per share were either met or exceeded our outlook. So overall, a good quarter. I can also tell you that our customers' inventories continue to come down.
Jure Sola: We're also starting to see new programs ramp up as we plan beginning of the year and we see more positive trends from our customers.
To talk more about it, please turn to slide 14.
Dr. Prima, Steven Fox, Anja Soderstrom,
Jure Sola: Let's look at an outlook at the revenue by end markets for the first quarter.
Jure Sola: Industrial and Energy, Medical, Defense, Aerospace and Automotive was 63% of our revenue, came at $1,269,000,000. It grew slightly of 1% year over year.
Communication network and cloud infrastructure was 37% of our revenue.
737 million, growth of 19% year-over-year.
Jure Sola: For the first quarter, total revenue of $2 billion plus is a solid start to a new year.
A year-over-year growth of seven percent.
Jure Sola: As you can see, top 10 customers for the quarter was 50.1% of our revenue.
Jure Sola: Bookings were solid. Book-to-bill came one-to-one. Please turn to slide 15.
Jure Sola: We continue to invest in key markets to drive the future growth. Industrial and energy, we have strong customer base and we see new projects in the pipeline to drive the growth.
Jure Sola: Medical, as always, we have solid customer base, well diversified within the market, and we see positive trends for a long-term growth.
defense and aerospace will continue to see strong market opportunities.
and we expect new programs.
to drive the growth.
Jure Sola: Automotive and transportation we continue to see solid demand. We see positive trends and opportunities for a long-term growth.
High-density, high-performance networks.
Jure Sola: AI is driving these opportunities around these high-performance networks and optical business.
For cloud infrastructure, we see exciting opportunities.
Jure Sola: For cloud infrastructure, we're expanding our capabilities to meet present and future demand.
Sanmina provides industry-leading capabilities, end-to-end solution from design to systems.
Jure Sola: For this segment, we provide high-technology printed circuit boards, which we fabricate here in the United States and Singapore. We assemble this product.
Jure Sola: We also fabricate and manufacture the rock enclosure and open rocks, how do I say, and liquid cooling systems.
We provide design and server for storage systems.
We provide optical modules.
Jure Sola: End of the day, we put all these things together and we deliver fully integrated systems to our customers.
Please turn to slide 16.
Jure Sola: Let me add a few more comments about fiscal year 25 outlook.
Jure Sola: For fiscal year 25, we're forecasting revenue growth in the high single digits.
We expect growth to come from new and existing programs.
We are also adding new customers with higher margin opportunities.
We are focused on margin expansion and earnings growth.
Jure Sola: Earnings per share should grow at a faster rate than revenue in fiscal year 25. Short term, as John mentioned, our operating margin will be stable at that five to six percent.
Jure Sola: But as you see, for the first quarter we delivered operating margin of 5.6%, compared to the last quarter of 5.3%. Very nice improvement quarter over quarter.
Jure Sola: For our business model, we expect to deliver operating margin of 6 plus percent.
Jure Sola: Again, for the fiscal year 25, we expect to continue to generate strong cash flow and will continue to maximize shareholders' value short-term and long-term.
Please turn to slide 17.
Jure Sola: In summary, we are focused on growing diversification in the key markets to drive profitable growth.
Jure Sola: Our manufacturing footprint is well aligned with the customer needs for the future.
Jure Sola: Sarmina will deliver consistent cash generation to fund the business with disciplined approach.
We remain focused on fundamentals and future financial performance.
Jure Sola: Sanmina continues to be a partner of our choice with our customers, the market leaders. We continue to execute on our strategy and we are positioning Sanmina to be a bigger company in the future.
Jure Sola: Again, we are confident we will grow revenue, expand margin, grow earnings per share, and generate cash in fiscal year 25 and beyond. We are excited about Sanmina's future.
Jure Sola: So, ladies and gentlemen, 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 all again.
Operator.
Jure Sola: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised.
Jure Sola: Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please make sure to lift your handset before pressing any keys.
Speaker Change: Your first question comes from the line of Rupul Bhattacharya from Bank of America. Your line is now open.
Hi, thank you for taking my questions.
Speaker Change: And how many customers do you have? Do you have one customer in cloud infrastructure? And how do you see that business growing?
Speaker Change: Well, first of all, Rupul, excellent question. Number one, Samina is well-diversified across the key markets that I just talked about. You know, industrial and energy is our largest single market. Then it's communication networks.
Speaker Change: then medical and defense and aerospace and then cloud infrastructure. So as you can see, we're well diversified. We have an industry-leading customer base that has been with Samena for a long time.
Speaker Change: based on what we offer to this market. We provide services here that are end-to-end, from design to full system. We provide high-technology boards that we fabricate here in North America or Singapore for the North American European market.
Speaker Change: We ship into this segment today rock enclosures out of our California operations and out of Mexico including liquid cooling.
Speaker Change: We design, through our Viking Enterprise Storage Group, we design storage products and servers. We've been in that business for a long time. We are establishing that business to grow. The key for us here at RUPLO is not just to do integration.
Speaker Change: but to offer some critical components that go inside of the rock.
Speaker Change: and then fully integrate that and test and deliver that product fully assembled to the customer's side. That's the model. So we are, you know, supplying.
Speaker Change: Not every hyperscaler or data center, we supply everything, but we're starting to expand into this market.
Speaker Change: But at the same time, we've been supporting this market through our components for a long time. So it's an opportunity for us to grow. We've been investing fairly, especially in the last 12 months and will continue because we have some great customer opportunities that I believe will allow us to grow. But we're not just dependent on this segment. We are well diversified, and we have no customers today over 10%.
Speaker Change: So, well diversified, and most importantly, we got some new, exciting customers that are top customers today.
Speaker Change: And I think just to add to that real quick if I can, this is John, so just a couple other things to note, if you look at the Q1 performance specifically,
Speaker Change: The communication networks and cloud infrastructure and markets, they grew 19% year over year.
Speaker Change: Now, the other category, industrial, energy, medical, defense and aerospace and automotive, was more flat, but in my prepared remarks, I mentioned how the majority of our end markets grew. So there was one that's still under pressure, but all in all, we expect that growth, back to your first question, to come from all.
Speaker Change: And then on the capabilities point, I'll just add to Jure's comments, you know, we are making targeted investments in R&D, certain programs to build out those capabilities. You know, you've got, you know that we've got some of our own IP, Viking Enterprise Solutions, for example. So, looking at programs like that, that can help us drive that future growth that I mentioned.
Speaker Change: Got it. Can I ask on the communication segment, I think you made a statement that the inventory at customers is going down. You know, this segment has been going through an inventory correction for the last year plus. Do you think that that inventory correction is over and how do you see your communication segment revenues growing this year?
First of all...
Speaker Change: I would say, as I said in my prepared statement, Rupu, the inventory continues to come down. I still believe there's a little bit left, but it's, you know, let's use the, I think we're in, you know, in the last inning, let's say if there's a nine inning in this game, I think we're in an eight or nine inning, depends on our customers. So definitely.
Speaker Change: There's a lot more excitement in communication and networking side of the business, especially in a high-end network that we participate in and high-end optical modules and so on.
Speaker Change: But how do I see this business? We expect this business definitely to grow a fair amount this year, at least what we've seen today and what we've seen from our key customers.
Speaker Change: Okay, maybe I'll ask a question to John. You announced that the board had authorized a new $300 million buyback. You also laid out your priorities for cash. Given that, do you see more opportunity to have M&A in organic growth? And how should we think about the pace of the buybacks?
Speaker Change: Yeah, so, you know, as I was mentioning in my comments, Rupalu, like when we think about capital allocation, we're all about driving growth. That's why the first two that I mentioned was, you know, investing in organic growth and then looking for opportunities and strategic M&A and partnerships.
Speaker Change: So we kind of lean more towards that because we really want to drive growth, but if we don't see immediate opportunities...
Speaker Change: Right, like that's when we can go towards cherry purchases and I think everybody's seen you've seen our debt levels We don't have a lot of long-term debt
So we service that, but it's at attractive rates.
Speaker Change: And that's why if you look at like last year, for example, we returned almost 100% of free cash flow to shareholders.
Speaker Change: because that was an attractive option to share repurchases and we felt that our stock was undervalued.
Jure Sola: And like I was saying earlier, you know, we still believe that we're undervalued today. So it remains to be an attractive option. But as opportunities come up quarter to quarter, Yuri and I will look at those and we'll make decisions, you know, on an ROI basis to say, hey, what's the best place to use or the best way to use our cash?
Thank you for all the details. Appreciate it. Thanks, Rupalu.
Speaker Change: Your next question comes from the line of Stephen Fox from Fox Advisors. Please go ahead.
Stephen FOX: Hi, good afternoon. Hey, Stephen, how are you? Hi, I'm very good, thank you. I guess, first off, you mentioned mix a bunch of times in terms of influencing, I think, generally, positively, the margins for the quarter and looking forward. Can you just be more specific on what the positive mix drivers were and maybe any negative mix drivers in the quarter that were partial offsets? And then I had a follow-up.
Sure, yeah, so let me
Speaker Change: Speak to it from a segment perspective, Steve, right? So on the IMS side, you look at our gross margin profile, and we did pretty well year over year and sequentially, right? And we've talked.
Speaker Change: Long-term, what's the expectations for IMS margins and CPS? And so IMS is more trending to the high-end and it's it's really the mix of the programs, right? We Yuri talked about the customers that we have we think we've got good Diversification and customers and we're always targeting high-end programs and every year we look to add more and more of those Right. So so this past quarter IMS did well had a good mix of programs And then we're always focused the culture of San Minas around operational efficiencies, right? So a lot of the capital investments
Speaker Change: that we made last year, for example, were about driving those efficiencies. If you go all the way back to 23, we were putting incremental capacity in place, and we still do that, but I would say last year it was more, trended more towards the efficiency side, so good outcome for IMS.
Speaker Change: On the CPS side, you know, we were pleased with the gross margin performance there, too, at about 12.5%, but that was down year-over-year from about 13, so I mentioned the 40 basis points. So, we had a couple programs there that were on the lower end, but still pleased with where CPS is at. You know, if you look at the last year, we were hovering between the 12, 13% of gross margin there, and that was in the down year, so we were pleased with that performance. And Q1 is a solid start, but as Jure and I have talked about before, you know, we think that there's a lot of room for improvement.
Speaker Change: there's more upside in that gross margin profile for CPS. So that's a big area where we're making investments too, because we think longer term, we should be able to do a couple points better there.
Speaker Change: That's helpful, but I'm just curious, is there any specific certain markets that were most responsible? Or John, are you saying that it was mainly because the mix of new programs is more attractive? I just wanna make sure I understand the drivers. And then I had a follow-up.
Speaker Change: Yeah, I would say on the IMS side, you know, we were pretty balanced between the end markets. I wouldn't say, Steve, that there was one or another, you know, that drove it to be much different. CPS side, you know, that business is a little bit different, the components, products, and services, right? And so that's really just a mix between the divisions from time to time, but not much of a difference there in terms of end markets either.
Speaker Change: Just to add to that, if you look at our markets, we came basically plus or minus 1% compared to the last quarter.
from the NAICS.
Speaker Change: Right, right, right. That's helpful. And then I guess obviously there's been a lot of talk today about
the future of cloud computing architectures.
Speaker Change: And you just obviously had a great quarter there. Can you just maybe give us a little more insight into what your customer needs are over, say, the next, I don't know, three quarters? So, first of all, let me qualify that I'm not 100% export. I'm a, my job is to service our customers. There's a lot of
Speaker Change: positive trends out there with the key customers and Stephen as you know we provide wide services from fabricating high-technology high-speed printer circuit boards
Speaker Change: Fabricating rocks, we've been fabricating rocks for hyperscalers for the last 10 years.
Speaker Change: We're now expanding into more liquid cooling. We're working with our customers by providing...
Speaker Change: More value to those rocks. We custom design some of these so we well diversified And but we are really also pushing more and more to provide a fully integrated
Speaker Change: Rocks at the high level. So we still believe there's opportunities and we're just starting to really expand that business. It's you know it's not a major
Speaker Change: impact or growth for us today or last 12 months and and it but I we believe it's going to be more positive at 25 but as we look at the you know longer term we think there's a more opportunity just the way Samina is set up.
Great. That's super helpful, Jure. Thank you.
Yeah.
Speaker Change: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your touchtone phone.
Speaker Change: If you'd like to decline from the polling process, please press star, then the number 2. If you are using a speakerphone, please make sure you lift your handset before pressing any keys.
Speaker Change: Again, if you'd like to ask a question, please press star followed by the number one.
Speaker Change: Your next question comes from the line of Anya Sunderstorm from Sidoni. Please go ahead.
Hello Anya
Anya Sunderstorm: Hi, thank you for taking my questions here. I'm just wondering, for the revenue target for fiscal 2025, is there a specific end market you think is going to be a main driver for that, or is it going to be more broad-based?
Speaker Change: I think for us, Anya, right now what we're seeing today is more broad-based. Industrial energy is still a very strong market for us. That's percentage-wise our largest segment.
Speaker Change: We've got a lot of great customers there and some good new opportunities in pipeline. Medical for us is stable, it's a solid base, maybe short term it's a slower growth, but the long term we've got a customer base that I believe will be able to expand longer term.
Speaker Change: area that we are counting on more on and we're investing a lot in defense and aerospace. We see a lot of strong market opportunities.
Speaker Change: We added additional management in that segment and we'll continue to invest in that segment going forward. So in the next couple of years we see a lot of opportunities there.
Speaker Change: For automotive and transportation, as I said earlier, we have a very strong customer base there with a lot of growth. We continue to see some solid, stable demand, and we expect to have an overall good year.
Back to that
Speaker Change: You know, cloud, communication networks, think of what we call high-performance networks and cloud infrastructure.
Speaker Change: I think we always were well-positioned there, both on the enterprise side, private data center, and we're starting to expand into hyperscaler. I think there's some good opportunities. So I'm more thinking, you know, 2025 will be a growth year for us, as we said in our PREPARE statement.
Speaker Change: But we're really positioned company to be a lot bigger company than what we are today and we're a lot more excited what we see in the future. Hopefully, we're right at the strong 25 and there should be a lot more in 26 and beyond.
Speaker Change: Okay and when you talk about the long-term and operating margin target of 6% plus, what kind of time frame are you talking about there? What kind of revenue level do you need to achieve this?
Speaker Change: Well, we like to get there right away. I think that we believe that our business model allowed us to get there, especially if we've been, you know, expanding our component businesses. We will continue to invest in that side of the business because that delivers, as you can see, better margin.
Speaker Change: Yeah, we like to see our revenue run rate around another 10 percent. I think once we get a run rate about $9 billion plus, I think we should be at that 6 percent plus and go from there.
Speaker Change: Yeah, I think to add to that, this is John, you know, if you go back in time, it was...
Speaker Change: And we did that because Yuri mentioned we're trying to drive the company to become much bigger, right? So we need to make those types of investments. So, you know, we're in that ballpark, like Yuri said, but, you know, we're always focused on the long-term, you know, and when we see those good investments to make, you know, we'll do those because we're really focused on the long-term success.
Speaker Change: Okay, and have you seen any changes to the competitive landscape at all?
Speaker Change: You never underestimate your competitors. I think there's more discipline in industry.
Speaker Change: I think industry itself understands we add a lot of value to our customers.
Speaker Change: You know, to be good in this business, you have to invest strategically, so our customers understand that. You know, it's more we're building strong partnership, and I personally believe that industry has a better future than what we saw, let's say, in the last three years.
Paige Melching, Jure Sola
Speaker Change: Okay, thank you. That was all for me. Thanks a lot. Thank you for your support, Tanya.
Speaker Change: There are no further questions at this time, so I'd like to turn the call over back to Yuri for any further comments. Sir, please, go ahead.
Yuri: Well, ladies and gentlemen, first of all, thank you for your time. We appreciate your support. And if we didn't answer all your questions, please get back to us. Otherwise, looking forward to talking to you 90 days from now.
Thanks a lot. Thank you. Bye-bye.