Sanmina Corporation (NASDAQ:SANM) is a leading global provider of integrated manufacturing solutions, components, products, and repair, logistics, and after-market services. With a rich history spanning over four decades, Sanmina has established itself as a trusted partner for some of the world's most renowned original equipment manufacturers (OEMs) across diverse industries, including industrial, medical, defense and aerospace, automotive, and communications networks and cloud infrastructure.

Company Background

Founded in 1980 and headquartered in San Jose, California, Sanmina has grown to become a diversified electronics manufacturing services (EMS) company with a global footprint. The company's success is rooted in its ability to provide end-to-end manufacturing solutions, leveraging its expertise in vertically integrated manufacturing, advanced technologies, and a focus on operational excellence. Sanmina started as a small printed circuit board manufacturer but has significantly expanded its capabilities and service offerings through both organic growth and strategic acquisitions over the years.

In the 1990s, Sanmina expanded beyond circuit board manufacturing into higher-level assembly and testing services, as well as design and engineering services. This expansion allowed the company to provide more comprehensive solutions to its OEM customers. A significant milestone in Sanmina's growth came in 2000 when it merged with SCI Systems, substantially expanding its global manufacturing footprint and customer base.

Throughout the 2000s and 2010s, Sanmina continued to diversify its portfolio through acquisitions in areas such as advanced printed circuit boards, backplanes, cable assemblies, precision machined parts, memory solutions, storage platforms, and cloud-based manufacturing software. This strategic diversification enabled Sanmina to serve a broader range of end markets and strengthen its position as a comprehensive solutions provider.

Business Model and Segments

Sanmina's business model is structured around two main segments: Integrated Manufacturing Solutions (IMS) and Components, Products and Services (CPS). The IMS segment, which accounted for 80% of the company's total revenue in the most recent fiscal year, offers a wide range of services, including printed circuit board assembly and test, high-level assembly and test, and direct-order fulfillment. The CPS segment, on the other hand, encompasses the company's component manufacturing capabilities, such as advanced printed circuit boards, backplanes and backplane assemblies, cable assemblies, and precision machined parts, as well as its proprietary product offerings, including data storage solutions, RF and microelectronic designs, and cloud-based manufacturing execution software.

In the first quarter of fiscal 2025, the IMS segment contributed approximately $1.62 billion, or 80%, of the company's total net sales of $2.01 billion. The CPS segment contributed $395.23 million, or 20%, of total net sales. Gross profit for the IMS segment was $127.97 million, while the CPS segment generated $52.13 million in gross profit. This reflects the IMS segment's larger scale and relatively lower gross margins compared to the more specialized CPS offerings, which typically have higher margins.

Customer Base

One of Sanmina's key strengths lies in its diversified customer base, with no single customer accounting for more than 10% of its total revenue. This diversification helps mitigate the company's exposure to any one particular industry or customer, providing a level of stability and resilience in the face of market fluctuations. In the most recent fiscal year, Sanmina's top 10 customers accounted for approximately 50% of its total revenue.

Financials

Financially, Sanmina has demonstrated a solid track record of performance. In the fiscal year ended September 28, 2024, the company reported revenue of $7.57 billion and net income of $222.54 million, or $3.91 per diluted share. The company's operating cash flow for the same period was $340.22 million, with free cash flow of $228.99 million.

For the first quarter of fiscal 2025, Sanmina reported revenue of $2.01 billion, representing a 7.0% year-over-year growth, driven by expansion in the communications networks and cloud infrastructure end markets. Net income for the quarter stood at $65.00 million. The company's performance either met or exceeded all of its outlook commitments for the quarter.

Liquidity

As of the end of fiscal 2024, Sanmina had a strong balance sheet, with $625.86 million in cash and cash equivalents and a low net debt position. The company's debt-to-equity ratio was 0.14. By the end of the first quarter of fiscal 2025, cash and cash equivalents had increased to $642 million. Sanmina maintains an $800 million revolving credit facility, of which $791 million was available as of the end of Q1 2025. The company's current ratio was 2.06 and quick ratio was 1.30 as of the same period, indicating strong short-term liquidity.

Geographic Performance

Sanmina generates the majority of its revenue internationally. In the first quarter of fiscal 2025, 37% of revenue came from the Americas, 35% from Asia-Pacific (APAC), and 12% from Europe, Middle East, and Africa (EMEA).

Future Growth Prospects

Looking ahead, Sanmina is well-positioned to capitalize on the growing demand for integrated manufacturing solutions and advanced electronics across its target industries. The company has made strategic investments in research and development, as well as in expanding its capabilities in areas such as high-performance networks, cloud infrastructure, and data storage solutions. These initiatives are aimed at diversifying Sanmina's product and service offerings, further enhancing its value proposition to customers.

Furthermore, Sanmina has been actively managing its operational efficiency and cost structure, implementing measures to optimize its manufacturing footprint and supply chain. These efforts, combined with the company's focus on high-margin, higher-complexity solutions, have contributed to its ability to maintain healthy profitability and cash flow generation.

For fiscal year 2025, Sanmina is forecasting revenue growth in the high-single digits, with earnings per share expected to grow at a faster rate than revenue. In the short term, the company expects its operating margin to remain stable at 5% to 6%, with a long-term target of 6% or higher.

Industry Trends and Opportunities

In terms of industry trends, Sanmina is well-positioned to benefit from the ongoing shift towards outsourced manufacturing, as OEMs continue to recognize the value of partnering with experienced EMS providers like Sanmina. The growing complexity of electronic products, the need for faster time-to-market, and the increasing pressure to optimize costs and capital expenditures are all factors that are driving the demand for Sanmina's comprehensive manufacturing solutions.

Additionally, the company's exposure to high-growth markets, such as cloud infrastructure, 5G networks, and electric vehicles, presents promising opportunities for Sanmina to further diversify its revenue streams and capitalize on emerging technological trends.

Challenges and Resilience

While Sanmina faces industry-wide challenges, such as supply chain disruptions, labor shortages, and geopolitical tensions, the company has demonstrated its ability to navigate these headwinds and maintain a strong competitive position. The company's vertically integrated manufacturing capabilities, global footprint, and continuous investments in automation and digital transformation have been instrumental in its resilience.

Sanmina operates in a highly competitive EMS industry, facing competition from major global providers as well as smaller regional and product-specific competitors. To maintain its competitive edge, the company focuses on providing end-to-end manufacturing solutions and has been investing in growing its higher-margin Components, Products and Services (CPS) business.

Conclusion

In conclusion, Sanmina's diversified business model, strong financial position, and strategic focus on high-growth markets position the company well for future success. As a leading provider of integrated manufacturing solutions, Sanmina is poised to capitalize on the ongoing trends in the electronics manufacturing industry and deliver sustainable growth and value for its shareholders. With a solid outlook for fiscal 2025 and a commitment to generating strong cash flow, Sanmina continues to demonstrate its ability to adapt to market changes and maintain its position as a key player in the global EMS industry.