Q2 2025 Sanmina Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to Sanmina second quarter fiscal 'twenty 25 earnings conference call.
This time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session.
And at times. During this call you require immediate assistance. Please press star zero for operator.
This call is being recorded and Monday April 28th 2025.
Page Smelting: I would now like to turn the conference over to page smelting Senior Vice President of Investor Communications. Please go ahead.
Page Smelting: Thank you Constantine good afternoon, ladies and gentlemen, and welcome to Sanmina second quarter fiscal year 2025 earnings call a copy of our press release and slides for today's discussion are available on our website at Sanmina Dot com in the Investor Relations section join.
Speaker Change: Joining me on today's call is Jerry Sola, Chairman and Chief Executive Officer, Good afternoon, and John <unk> Executive Vice President and Chief Financial Officer. Good afternoon, before I turn the call over to Gerry Let me remind everyone that today's call is being webcast and recorded and will be available on our website.
Page Smelting: You can follow along with our prepared remarks in the slides provided on our website.
Page Smelting: Please turn to slide three of our presentation and take note of our Safe Harbor statement.
Page Smelting: During this conference call, we may make projections or other forward looking statements regarding the future events or the future financial performance of the company.
Page Smelting: 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 those factors set forth in the safe Harbor statement.
Page Smelting: 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. 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.
Page Smelting: Included in our press release and slides issued today, we have provided you with statements of operation for the second quarter ended March 29, 2025 on a GAAP basis as well as certain non-GAAP financial information a reconciliation between the GAAP and non-GAAP financial information is also provided in our press release and the slides posted on our website.
Page Smelting: In general our non-GAAP information excludes restructuring costs acquisition and integration costs noncash stock based compensation expense amortization expense and.
Page Smelting: And other unusual or infrequent items any comments, we make on this call as they relate 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're referring to our non-GAAP information.
Jerry Sola: I'd now like to turn the call over to Jerry.
Jerry Sola: 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 some in the leadership team.
Jerry Sola: And all the employees for doing a great job.
Speaker Change: So to use I mean his team. Thank you.
Jerry Sola: What are your dedication in delivering excellent service to our customers.
Jerry Sola: For the second quarter fiscal year 2025, we delivered solid revenue.
Jerry Sola: 1.98 billion.
Jerry Sola: non-GAAP EPS of $1 41 per share.
Jerry Sola: Again to Sanmina employees. Thank you.
Jerry Sola: Keep it up.
Jerry Sola: Now, let's go to our agenda for today's call we have John our CFO to review the details of our results for you.
Jerry Sola: I will follow up with additional comments about <unk> results and future goals.
Jerry Sola: And John and I will open for question and answers and now I'd like to turn this call over to John John Great. Thank you, Gary and good afternoon, ladies and gentlemen, and thank you for joining us here today.
Jerry Sola: Sure I review our results for the second quarter I want to acknowledge the entire sanmina team for their hard work dedication and support.
Jerry Sola: The team has been agile and supporting our customer needs in a very dynamic environment executed well while doing so.
Jerry Sola: Theory, and I and the rest of the same many of the management team I appreciate the effort and thank you for delivering a solid second quarter and a great first half of fiscal 2025.
Now please turn to slide five where I'll speak to the financial highlights.
Jerry Sola: We're very pleased with our second quarter results, which as you can see either met or exceeded all of our outlook commitments are revenue of $1.98 billion and our non-GAAP operating margin of five 6% each came in towards the high end of our outlook.
Jerry Sola: Also our non-GAAP gross margin of nine 1% and our non-GAAP diluted earnings per share of $1.41 each exceeded our outlook.
Jerry Sola: These results combined with what we delivered in the first quarter puts us on a solid trajectory for the fiscal year and sets us on the right path towards achieving our long term financial goals of driving growth and expanding margins.
Jerry Sola: Now please turn to slide six where I'll speak to the P&L performance for the second quarter.
Jerry Sola:
As I just mentioned, we delivered revenue of $1.98 billion, which was up eight 1% compared to the same period a year ago.
Jerry Sola: This was primarily driven by growth across the majority of our end markets, which Jerry will speak to in more detail as a part of his prepared remarks.
Jerry Sola: non-GAAP gross profit was $181.3 million or nine 1% of revenue up.
Jerry Sola: 20 basis points compared to the same period a year ago.
Jerry Sola: This was driven by favorable mix as well as operational efficiencies.
Jerry Sola: non-GAAP operating expenses were $70 $7 million above our outlook as we continue to make targeted investments to drive future growth.
Jerry Sola: non-GAAP operating income was $110 $6 million or five 6% of revenue 20 basis points compared to the same period, a year ago, driven by growth mix and focused execution.
Jerry Sola: 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.
Jerry Sola: non-GAAP other income and expense was $3 $2 million of net expense favorable to our guidance driven by our strong cash flow results.
Jerry Sola: non-GAAP diluted earnings per share came in at $1.41 based on approximately 56 million shares outstanding which was up seven 8% compared to the same period a year ago.
Jerry Sola: Now please turn to slide seven where I'll speak to the P&L performance for the first half of fiscal 2025.
Jerry Sola: Revenue for the first half was up seven 6% compared to the same period a year ago.
Jerry Sola: This growth was driven by strong performance across the majority of our end markets, but with particular improvement coming from the communication networks and cloud infrastructure end markets.
Jerry Sola: non-GAAP earnings per share for the first half was $2.84.
Jerry Sola: Eight 8% compared to the same period a year ago.
Jerry Sola: As we mentioned on our prior call, we expect fiscal 2025 to be a growth year and our results for the first half represents a solid start towards achieving that objective.
Jerry Sola: Now please turn to slide eight where I'll speak to the segment results.
Jerry Sola: Yeah.
Jerry Sola: IMS revenue came in at $160 billion up nine 8% compared to the same period, a year ago driven by growth in the majority of our end markets, but primarily in the communication networks and cloud infrastructure end markets.
Jerry Sola: I M. S. non-GAAP gross margin was seven 7%, which is flat when compared to the same period a year ago.
Jerry Sola: C. P. S revenue came in at $411 million up three 3% compared to the same period, a year ago, driven by higher demand in most of our end markets.
Jerry Sola: C. P. S. non-GAAP gross margin was 13, 9% up 100 basis points compared to the same period, a year ago, driven by a favorable mix and operational efficiencies.
Jerry Sola: We're pleased with the performance of the IMS and Cps businesses. This quarter, but there is still room to improve in terms of both revenue growth and margin expansion, which we will continue to focus on going forward.
Jerry Sola: Now please turn to slide nine where I'll speak to the balance sheet highlights.
Jerry Sola: Okay.
Jerry Sola: We maintained a very strong balance sheet in the second quarter.
Jerry Sola: Cash and cash equivalents were $647 million.
Jerry Sola: 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.
Jerry Sola: We ended the quarter with inventory net of customer advances of $1 $2 billion, which was down 8% in absolute dollar terms compared to the same period a year ago.
Jerry Sola: Inventory turns net of customer advances improved at 5.9 times for the quarter as compared to 5.0 times in the same period a year ago.
We were pleased with these results there is still room to improve.
Jerry Sola: Our non-GAAP pre tax ROIC was 23% for the quarter well above our weighted average cost of capital and an improvement from the 22% from the same period a year ago.
Jerry Sola: We continue to have one of the strongest balance sheets in the industry with no net debt and a low gross leverage ratio of 0.48 times, which puts us in a great position to execute on our strategy, while navigating the uncertainty of the current macroeconomic environment.
Jerry Sola: Now please turn to slide 10, where I'll speak to the cash flow highlights.
Jerry Sola: As a result of the team's disciplined working capital management, our second quarter cash flow from operations came in at a solid $157 million, which equates to $221 million for the first half.
Jerry Sola: Capital expenditures were $31 million for the quarter in line with our outlook and were $48 million for the first half.
Jerry Sola: 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 to support our long term financial objectives.
Jerry Sola: To that end in the second half, we expect to make targeted investments in both capacity and technology across the U S, India and Mexico geographies.
Jerry Sola: As such on a full year basis, we now expect capital expenditures to be approximately 2% of revenue.
Jerry Sola: Free cash flow was $126 million for the quarter and $173 million for the first half.
Jerry Sola: During the quarter, we repurchased approximately 1.03 million shares for approximately $84 million.
Jerry Sola: As of March 29, 2025, we had $253 million remaining on our share repurchase program.
Jerry Sola: Our strong cash flow performance gives us the flexibility to continue to invest in the business and return capital to our shareholders all through a disciplined and balanced capital allocation approach.
Jerry Sola: Now please turn to slide 11, where I'll cover our outlook for the third quarter.
Jerry Sola: Our outlook is based on the forecasts from our customers and takes into account market uncertainty due to tariffs and the current geopolitical landscape.
Jerry Sola: Our third quarter outlook is as follows.
Jerry Sola: We expect revenue between $1.9 billion to $5 billion to $2.0 billion to $5 billion, which at the midpoint of $1 97, $5 billion puts us up seven 3% compared to the same period, a year ago and up seven 5% on a year to date basis.
Jerry Sola: non-GAAP gross margin of eight 6% to 9.0% dependent on mix.
Jerry Sola: Operating expenses of $62 million to $66 million.
Jerry Sola: non-GAAP operating margin of five 4% to five 8%.
Jerry Sola: We expect other income and expense to be a net expense of approximately $6 million.
Jerry Sola: Yes.
Jerry Sola: A tax rate of 20% to 22% consistent with last quarter.
Jerry Sola: We estimate an approximate $4 $5 million noncash reduction to our net income to reflect our India JV partner's equity interest.
Jerry Sola: non-GAAP EPS in the range of $1.35 to $1 45 based on approximately 55 million fully diluted shares outstanding.
Jerry Sola: At the mid point of $1 40 that would put us up 12% compared to the same period, a year ago, and 10, 4% on a year to date basis.
Jerry Sola: Capital expenditures to be around $50 million, and finally depreciation of approximately $30 million.
Jerry Sola: In summary, while considerable uncertainty around tariffs remains at this time, we believe we are well positioned to navigate the current market environment and we expect revenue to grow between 6.0% an 8.0% on a full year basis.
Arie: With that let me turn the call over to Arie.
Arie: Thank you John Ladies and gentlemen, let me add few more comments about our results for the second quarter and the rest of the fiscal year 2020 five.
Arie: Now please turn to slide 13.
Arie: As you heard from John our team delivered a solid execution and excellent service to our customer despite being in a very dynamic environment.
Arie: Revenue gross margin operating margin and non-GAAP EPS will either met or exceeded all of our.
Arie: Our outlook.
Arie: I can also tell you that our customers' inventories continue to come down.
Arie: As we are starting to see more opportunities in the pipeline.
Arie: Yeah.
Arie: Even in this geopolitical environment, our customers are still positive about future opportunities and our growth.
Arie: To talk more about it please turn to slide 14.
Arie: Well, let's look at the revenue by end markets for the second quarter Industrial energy Medical Defense Aerospace and automotive came in at 1.251 billion.
Arie: <unk> grew approximately 2.1% year over year.
Arie: Percentage of their revenue in this segment was 63% overall.
Arie: For communication that for St cloud infrastructure.
Arie: It delivered a 733 million for the quarter that was very strong up 23% year over year.
Arie: That consists of 37% of our revenue.
Arie: For the second quarter total revenue of 1.984 billion, we delivered another solid quarter.
Arie: Eight 1% year over year.
Arie: Top 10 customers for the quarter was 51% of our revenue.
Arie: Bookings.
Arie: Book to Bill came around one to one.
Arie: As we continue to see solid I call it stable demand.
Arie: As you can see we're well diversified company, we continued to see positive trends for the fiscal year 'twenty five and beyond.
Arie: As I mentioned industrial medical.
Arie: Defense Aerospace and automotive you're 60%, 63% about revenue. So let me talk about more details in each of these segments industrial and energy is approximately 43% of our revenue we see solid customer base, we have solid customer base.
Arie: Great opportunity set around energy power controls and management system strong demand from safety equipment.
Arie: And we see exciting new projects in our pipeline.
Arie: Medical is approximately 20% about right now we see stable demand driven by medical devices around digital health.
Arie: We do have strong customer base here that is well diversified within the market and we're starting to see positive trends for the future.
Arie: Yeah.
Arie: For defense and aerospace automotive and transportation that segment for US is around 20% of our revenue we continue to see solid demand from critical defense projects, including Sanmina defense products.
Arie: We're growing and expanding advanced printed circuit board fabrication business for this segment.
Arie: We're also expanding precision mechanical system for defense and aerospace business and we are well positioned in this market.
Arie: Put automotive short term is challenging market.
Arie: But I can tell you that this segment, but on the whole customer base.
Arie: Double digits year over year for the second quarter.
Arie: So what we see for this segment, we expect to see stable growth short term.
Arie: And solid market opportunities longer term.
Arie: Communication networks and cloud infrastructure.
Arie: It's approximately 37% of our revenue we see positive trends.
Arie: For high speed high density high performance in that book.
Arie: So continue to see solid demand for high performance routers and switches optical net for assistance optical advanced packaging and enterprise storage.
Arie: Driven boat.
Arie: By cloud and service providers.
Arie: Cloud providers require a large scale net force and Sanmina is well positioned for this segment.
Arie: Hey, Yeah requirements continue to evolve at a rapid pace and is driving technology advancement, we are expanding our capabilities to meet present and future demand.
Arie: Our goal is to provide industry, leading capabilities from design to full system end to end solution for the data center and cloud infrastructure.
Arie: Well, what we do today, we produce high technology printed circuit boards for this segment were assembled.
Arie: These boards subsystems and full systems, we provide mechanical rocks and enclosures.
Arie: We're expanding our liquid cooling rock systems.
Arie: We continue to manufacturer Cooley manifold for rocks.
Arie: We continue to manufacture bus bars for rocks.
Arie: We also have an ODM products around our servers and storage systems.
Arie: We delivered custom memory.
Arie: Custom optical modules.
Arie: And I can tell you we are expanding organically to fail to full system integration and test.
Arie: Also I can tell you that we will continue to invest in this key market to die future to drive future growth. Please turn to slide 15.
Arie: Yeah.
Arie: Let me add few more comments about physical year to 25 outlook.
Arie: While we continue to manage through a very dynamic environment, we remain focused on operational execution customer satisfaction cost management and consistently delivering value to our customers.
Arie: With that said I am very pleased with our performance for the first six months of their fiscal year 'twenty five.
Arie: Revenue was up seven 6% compared to the same period a year ago.
Arie: We are growing non-GAAP, EPS and generating strong cash flow as you heard from John.
Arie: Based on our results for the first six months and our outlook for the third quarter.
Arie: At the midpoint this puts us on track to deliver nice growth in your fiscal year 'twenty five.
Arie: We expect to see growth to come from new and existing programs and we're adding new customers with the higher margin opportunities.
Arie: Short term operating margin will be stable at a range of 5% to 6% and long term for our business model, we expect to deliver operating margin of six plus percent.
Arie: Again for fiscal year 'twenty five we remain focused on our strategy investing in our faster growing and higher margin end markets. Please turn to slide 16.
Arie: Yeah.
Arie: Now, let me talk to you about our favor favorite topic, it's called tariffs with tariffs uncertainty remains.
Arie: As you know tariff situation is not unique to send Mena.
Arie: But as the geopolitical situation continues to evolve.
Arie: Our ability to be agile and responsive will be key to our customers' success.
Arie: We have well established materials supply chain and trade compliance theme with seasoned professionals dedicated to navigate this complex trade requirements.
Arie: We are taking proactive approach and actively working with our customers to support their involving needs.
Arie: And our single IP system is that child and responsive to our customer requirements.
Arie: As a reminder, while tariffs may have an impact on our customers' demand any changes in tariff costs are passed through our customers.
Arie: To meet.
Arie: Estimated needs in this environment, our global regional footprint is strategically aligned to provide global solution.
Arie: We have industry, leading established capacity in the United States.
Arie: Please turn to slide 17 to talk more about our global structure.
Arie: As you can see on this map Sanmina has a global regional manufacturing footprint I believe it is the industry, leading lean and flexible.
Arie: As our customers evaluate where do they want the products manufactured.
Arie: So I mean that has capacity in the United States and in other geographies to provide local solution.
Arie: As you can see it's well diversified by the regions again very strong in North America, specifically, the United States.
Arie: Our global and regional manufacturing footprint, agile and responsive I D systems, and our strong balance sheet are key competitive advantages for us and are supporting our customary in times like these.
Arie: Please turn to slide 18.
Arie: Yeah.
Arie: In summary, ladies and gentlemen, our manufacturing footprint is well aligned with our customer requirements. We.
Arie: We are focused on the key markets to drive profitable growth.
Arie: We continue to generate cash to fund their business.
Arie: Using a disciplined or or I approach.
Arie: We remain focused on fundamentals and future financial performance.
Arie: So I mean, it continues to be a partner of choice with our top customers and market leaders.
Arie: Yeah.
Arie: We will continue to execute on our strategy is evident in the progress we have made in our financial results.
Arie: Again in this dynamic environment, we are on the track to grow revenue expand margins and grow EPS and generate strong cash flow and physical years, 2020 five.
Arie: Ladies and gentlemen, now I would like to say thank you to all.
Arie: For your time and your support.
Arie: Operator, we're now ready to open the lines for question and answers. Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
Arie: 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 should.
Arie: Should you wish the decline from the polling process. Please press star followed by the number to you.
Arie: If you are using a speaker phone make sure to lift your handset before pressing any case.
Arie: Yeah.
Arie: Your first question comes from the line of <unk> from Bank of America. Your line is now open.
Speaker Change: Thank you.
Speaker Change: Thanks for taking my questions.
Speaker Change: First starting on terrorist did you see any pull forward of demand in fiscal <unk>, our head of the potential tariff increases and have any of your customers to ask you to move manufacturing around to different regions.
Speaker Change: First of all.
Speaker Change: Personally I you know I don't have that really data to say there was anything major moved around during the quarter because our customers are confused just as much as I am and I'm sure you ought to what's going on but yeah. We had a lot of discussion with our customers what are the options.
Speaker Change: If their status you know basically come real.
Speaker Change: But the good things you know we now have some time here to figure it out as I mentioned I think from US I mean, its point of view, we have a great global footprint to serve our service our customer locally and then offer them a global a global support to minimize the impact of them as I said is that if you know it can be very high.
Ann: Hi, Ann.
Ann: This can impact the our customers are not just for short term, but the long term. So we're very sensitive to this we're working with our customers and we have what are your scenario is something changed but I can tell you overall nothing major really is being changed in the last 90 days.
Speaker Change: Okay. Okay. So as a follow up it looks like when I look at what you said about fiscal 'twenty five revenues growing I think Jon talked about a 7% year on year growth at the midpoint I think you said, 6% to 8%. So just using that then that would imply like around 6% year on year growth for fiscal.
Speaker Change: For Q using the midpoint of your guidance for fiscal <unk> are you seeing any slowdown in demand in fiscal second half of 'twenty, five or or any thoughts on have you seen any change in customer buying behavior or are you just being prudent in the guidance.
Speaker Change: I think we're more prudent right now and you know in our guidance, what we see with all these.
Speaker Change: Dynamics that are happening in today's environment, all of the demand and the programs that are coming up.
Speaker Change: Very exciting so longer term.
Speaker Change: Unless something really falls off fall off the cliff.
Speaker Change: And geopolitical issues I think we are well positioned to continue to see the growth.
Speaker Change: We also had a one program a little fluid.
Speaker Change: Major programs that got pushed out for a design is going to come back on our board at the end of September early October.
Speaker Change: But you know that happens all the time. So we still are very optimistic about our fourth quarter, but in this environment, it's one quarter at a time, but well.
Speaker Change: <unk> put a year you know we're going to have a good year and I think as we look at it on 46 47, there's a lot of exciting opportunities and that's one of the reasons. We are continuing to invest more now for the future and expanding installed in the region, especially India for data Center.
Speaker Change: Oh, so putting more capacity for the data center here in North America. So both on a on a full system and at the component level from a printed circuit boards mechanical rocks and et cetera.
Speaker Change: Okay. That's helpful. If I can ask a question on inventory it looks like gross inventory dollars were up 9% sequentially, what drove that and how should we think about working capital trend in cash flow and uses of cash for the rest of the year.
Speaker Change: Turning it over to my CFO It is better numbers than I am so yeah. Thanks. Thanks for the question <unk>.
Speaker Change: So we really look at it on a net basis. So the gross inventory net of customer advances and if you look at that you know on a year over year basis, we improved quite a bit now that was to the compare last year when we're working through inventory absorption.
Speaker Change: Now if you think ahead to the Q3 on a sequential basis, a little bit of movement, there, but it really is starting to build.
Speaker Change: Our inventory stockpiles to support the future growth. So we see that as positive, but what we're really focused on this quarter is just that year over year improvement and continuing to see that progress now going forward as I mentioned in my prepared remarks, we said that there's still room to improve.
Speaker Change: Inventory I quoted are net inventory turns of five nine times, we've said in the past you know around six or so is a good good place to be so we're pretty pleased with the five nine but we still think there is some progress but to your point about new programs coming on board as we see that you know well put the necessary inventory in place.
Speaker Change: To support that growth.
Speaker Change: Okay. Okay. That's helpful. If I can squeeze one more in.
Speaker Change: In the communications end market, Judy I think you talked a little bit about demand can you help us rank quarter, like which was strong which was weak in terms of optical versus routing switching versus wireless how are you seeing demand trending because you know networking was going through an inventory correction are you seeing anything positive in and how are you seeing.
Speaker Change: These three things optical routing and wireless coming back.
Speaker Change: First of all on inventory is as I mentioned in my prepared statement inventories are definitely coming down almost closer than normal we have a few customers that still have some inventory in the pipeline, but I can see the light end of the tunnel and talking to them that that's disappearing, Florida communication as you know it was very strong.
Speaker Change: For this quarter, you know year over year of 20% up.
Speaker Change: I will say that Oh, you know high end rowdy.
Speaker Change: Routers switches there was pretty strong also optical net force was strong you know coming back optical packaging and you know you know across the board. It was a very good quarter as I look at the future I see that to continue to be strong at least for the you know what.
Speaker Change: I said at least for at least next couple of quarters and then you know what we will see one quarter at a time, but definitely we see upside driven by a boat the service sector and also the debt.
Speaker Change: Data centers.
Speaker Change: Okay. Thank you for all the details I appreciate it.
Speaker Change: Thanks for your support.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Steven Fox from Fox Advisors. Please go ahead Hello, Steve.
Steven Fox: Hi, Good afternoon, guys I guess first of all I was wondering if you can go back to the prepared remarks, where you mentioned that some second half investments in capacity.
Speaker Change: And technology in India U S and Mexico can you just sort of expand on that what that.
Speaker Change: That comment is related to what you're doing more specifically and then I had a follow up well let me let me add a few more points to that and then John you can comment on you know where we are really focused if you look at India, We think theres a lot of opportunity for growth.
Speaker Change: Our joint venture in India is doing well you know I would say, it's working perfectly to what we imagine when we put this thing together you know sanmina is fully responsible running this thing.
Speaker Change: You know the alliance is basically our investment investor partner for US, we see a lot of growth in India. In next couple of years, you know, Florida made in India and also for exports out of India and then we see a lot of interest actually if you look at the surveys from our customers, where we see more survey then.
Speaker Change: Anywhere else any other plants around the world is India.
Speaker Change: A lot of interest there.
Speaker Change: We have a hunter acre campus.
Speaker Change: We have I don't know about seven or 800000 square feet of manufacturing space and we are expanding that.
Speaker Change: Mainly around.
Speaker Change: Data center demand that we feel we're going to see in next 12 months 18 months. The fact, the facility should be ready sometimes in October November timeframe, and then we'll go from there.
Speaker Change: So we're doing the same thing, especially in Mexico, and then also in North America, but also on top of the E. Commerce expansion, we also doing especially in high technology printer circuit boards, we're adding more capacity here in North America, and we also add in Fairmont mechanical capacity, John the only thing I think you covered it.
Speaker Change: Well here I mean, just just add Steve to Terry's comments, it's both capacity and capabilities.
Speaker Change: You know, where we're building up our capabilities in that space too to take on more complex programs.
Speaker Change: And really at the end of the day, we had a pretty broad range on capex.
Speaker Change: To date, so far this year of 1% to 2%. So we thought with these investments coming up in the second half it would be prudent to to narrow that down and give a little bit clearer guidance, which is why I said about 2% of revenue.
Speaker Change: That's all Super helpful. And then I was just curious.
Speaker Change: You've mentioned for the last few quarters now how are you looking to do more rack integration you, obviously have a lot of the pieces to.
To that puzzle how how do you how can you sort of can you give us one give us an update on how you're progressing there and like how do you how do you.
Speaker Change: Sort of penetrate with cloud guys in a in a bigger way and what seems to be coming up pretty competitive market. Thanks, very much yeah, Steve put it. So you know we do have a ODM products around the server storage systems and we have all in design group and you know I've been around a long time, so we have our core capabilities.
Speaker Change: We able to really drive our mechanical business up where you know around the rocks and cooling Iraq's monopoles and things like that that business is doing really well and I wish I had more capacity there right now and be honest with you.
Speaker Change: As we are getting.
Getting more into the as you look at our typical EMS business you know, we do full system today.
Speaker Change: You know from basically new product full system and in distribution. The one area that we we've been looking at it the last a year or so is this expansion into the data center for computing and so on since we're already doing a lot of our networking business.
Speaker Change: <unk> optical business I think next step for us they still do more integration on this computing and for data center, and we setting that up we already doing some but but we are really expanding to drive organically to their full system integration and test.
Speaker Change: And that seems like a promising for us and we'll see what it goes.
Speaker Change: Great. That's all very helpful. Thank you.
Steve: Thanks, Steve.
Steve: 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.
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Speaker Change: Your next question comes from the line of Anja Soderstrom from Sidoti. Please go ahead.
Anja Söderström: Hi, and thank you for taking my questions.
Anja Söderström: Hello, how are you Sir.
Speaker Change: Oh gosh.
Anja Söderström: And so.
Anja Söderström: So you can imagine from your customer can wait and see what area are those mainly and how is the competitor there and competitive environments enough need to windows.
Anja Söderström: Could you repeat that you mean repeat the question I'm, sorry, I lost you there for a second.
Anja Söderström: So you mentioned you added some new customer wins in the quarter.
Speaker Change: And one area Randolph millions, it's across the board I think as I said, we I think our energy business continues to do well.
Speaker Change: Yeah, we I think computing communication airports and cloud infrastructure, that's continued to do well.
Speaker Change: And on defense, we have some new programs, including some medical programs that are coming up we do know some expansion in the in Europe for medical products and we expect it to grow for us in general terms.
Speaker Change: Pipeline is very solid.
Speaker Change: And you know across the board.
Speaker Change: Okay. Thank you and how is the competitive process for you to win those.
Speaker Change: Well first of all.
Speaker Change: You know, we would like to compete based on our technology.
Speaker Change: Acknowledging that we supply to our customer quality.
Speaker Change: Quality of the product flexibility speed to the market. So summing up we believe we are very competitive when you look at the total AR technology that you'll get in total our total cost and security of supply.
Speaker Change: That's what we are known for and that's what really the value that we are investing bodies that we we want to be able to get our customers can depend on us.
Speaker Change: Anytime 24, seven anywhere around the world and and we've earned the reputation of that by being customer centric and you know building the partnership by providing the right solutions technology and performance.
Speaker Change: Okay. Thank you.
Speaker Change: In terms of the terrorists.
Speaker Change: And the rent that they would kick in.
Speaker Change: We'd like to move their production around how what is your capacity utilization that worldwide.
Speaker Change: Well first of all.
Speaker Change: You know we've been expanding capacity, we can take on today it depends on our mix and in which plant.
But I can I can ship additional 30% based on just adding are adding people and few piece equipment here and there but also that we are adding capacity for some of the new capability and new technology, John anything else. Yeah, I think just to add to that on your like I was saying in my prepared remarks like the <unk>.
John: Key in this type of market environment is to be agile and that we believe we've got a competitive advantage in just because of our breadth of capabilities across various different end markets. The the geographic distribution in all of our capacity that you already covered in his slides and just the proactive customer outreach, that's what we've been looking to do.
John: You know over the last several months as tariffs and all of those conversations have been taking place is just making sure that we're staying connected with our customers and offering them the flexibility and the options depending on whatever they'd like to do.
John: And I see thank you.
John: Oh, sorry, I know and I said that you know as we do these things we have a longer term plan is that how do we you know how do we monetize these investments and so on and that's.
John: That's one of the we're excited about the long term growth for Sanmina and also investing in some of these technology components and around AI I think will allowed us to deliver at our you know our goal of operating margin better than 6% and accomplish the goals that we want to accomplish in next two three years as we talked about.
John: How do we get this business from eight $9 billion to $12 billion run rate plus so that's the plan and that's why we are 100% focused on but again as John said, it's that flexibility that we offer by providing the right technology and given that especially in this environment given that global visibility to our customers.
John: One of the key competitive advantages we have.
John: Okay, great. Thank you don't suffer and myself for me.
John: Thank God.
John: Okay.
John: Okay.
John: There are no further questions at this time I would like to turn the call over to Mr. Yuri Solar for closing comments. Sir. Please go ahead. Thank you operator first of all I want to thank you all for participating on this call are if we didn't answer all your questions or if you have additional questions. Please contact us and I'm looking forward to talking to you in.
John: Most importantly, we'll talk again in 90 days from now.
John: Bye bye thank you.
John: This concludes today's conference call. Thank you very much for your participation you may now disconnect.
John: Okay.
John: [noise].