Thanks everyone for joining day two of our Global Technology Conference. My name is Ruplu Bhattacharya, and I'm a director with the equity research team covering IT hardware and electronics manufacturing services. Today, we're honored to have Sanmina Corporation, which is a leading EMS company, and from the company, we have CEO Jure Sola. Jure, as you probably know, founded the company in 1980, and he's, he was CEO from, I think, 1991 to 2017, and then again from 2000 till today, you've been CEO. So he has lots of experience. He's seen lots of business cycles. And then we also have Jon Faust, who joined the company, I think, in January, but he also has lots of industry experience. Prior to this, he was with HP, and prior to that with HP Enterprise, 19 years with the original HP and HP Enterprise. So again, we have lots of talent, lots of experience here, and we hope to have a good discussion. So with that, maybe I'll pass it on to Jon to give the safe harbor statement. Yeah. Thank you, Ruplu. Before we get started, just wanted to refer everybody to our safe harbor statement and our risk factors and our SEC filings, both of which you can find on the Sanmina website in the Investor Relations section. Gentlemen, thank you so much for being here. Jure, thanks, for being here today. Ruplu, it's good to be here, and good morning to everybody. I'm gonna start with an overall general question. Like, where are we in the business cycle? Can you talk about overall outsourcing trends? Which sectors are outsourcing, which are insourcing? Well, first of all, I grew up in this business, you know, when customers were basically manufacturing everything in the house, and they started to outsource, and that's kinda how we built a business around it. Today, if you look at the communication side, that's probably 60+% outsourced. Medical is, I would say, probably around 50. Semiconductor, that's probably around 50, 60, but some of the components of the semiconductors are outsourced to high level of precision machining, and that, that's like 80, 90%. Industrial, that's, you know, that number is probably around 50, but it's also, that area has a lot of upside potential because now you're going with the electromechanical, instead of just the mechanical itself. So there's a lot of opportunities for companies like Sanmina because we offer a lot of the vertical integration from machining, printed circuit boards to system assembly and components assembly. So those are the key area. And then defense and aerospace, that area, you know, if you look at it, it's only outsourced 20%-30%. A lot of our customers still manufacture internally. Where we play in that area is really more around providing some of the key components. So we do a lot of design for them and then do the full system. And automotive is more or less, when it comes to the components that we build, is high percentage outsourced. You know, we don't build a car, but we build a lot of components inside of the car. And we are, you know, focused around the charger and the car itself. So, you know, from my perspective, there's plenty more revenue out there. Sanmina is well diversified, so we don't have, today, I don't think we have one customer over 10%. And we like to keep it that way, and the goal is to grow, take advantage, you know, and convince these customers to outsource more. Right. No, that makes sense. I wanna You know, there are many different end markets that Sanmina touches. I wanna go through each of them, but another high-level question before we get into that: You talked about components. So what's the situation with components or shortages, lead times? How is that trending, and is that impacting your revenues at all? No, definitely material shortages got resolved in the last 12 months. So, you're gonna always have some shortages, but overall, that's behind us. You know, what we went through two years ago, you know, I've been in this business over 40 years. I've never seen anything like it, so that's behind us. I think for us, the lead times on certain components like, we do a fair amount of military boards. So lead times for military boards, these are very high technology boards, have a longer lead time. It can go from, you know, 20-40 weeks. But the good thing about military, they give you forecasts over two, three years. But overall, you know, I would say most of the components today that we can get probably 80% in a quarter. Okay. Okay, I mean, that's a, that's good context. Let's start with the communications end market- Yeah ... because I think this is a competitive advantage for Sanmina. So talk to us about what you're seeing in the networking, optical, wireless space. What, what, what's the trend? Yeah. Well, trend for us, we're well established there. We've been for long time. That's what was one of our core business. If you look at the last five years, 40% of our revenue came from what we call communication and cloud enterprise. The last quarter, that number is, was 33% in total, about half of it for communication networks and other half for cloud. So when you look at what we do in both of these segments is like, we focus on optical networks. We focus on advanced IP routers. We build products that are 100G, 400G, and 800G. So we focus on the latest technology, you know. I don't talk about my customers, but if you look at everyone I've got, these are leading-edge customers in our industry. They also, you know, serve pure telecommunication company. They serve enterprise, but they also service the cloud. So, we're well positioned. And also, Sanmina was in optical module business for a long time. If you look at our optical business, this business for us is about $1.5 billion-$2 billion. So we build systems. We build very complicated systems, but we were building modules for Lumentum / Viavi, what the name of the company? JDSU for a long time, and then they decided to move out of China, so we had operation. So we're building capabilities in some in China, some in North America, such as Canada, and Thailand. So today, we are very capable and we're, you know, driving that, including helping our customers design products. So we're working with our customers at 400G, 800G. We do not compete with our customers, but what we do is we help them design a product and bring it to the market. And we're working on 1.6T with a couple partners right now. We expect that to be to the market in the next 6-12 months. So just focusing on the optical market, I mean, how do you see the market progressing over the next couple of years? I mean, Sanmina has benefited from a strong optical market for the past couple of years, but you think, you know, is there inventory correction happening there, or, how do you see this market growing overall? Well, definitely, there's inventory correction across all industries because of the, what we went through, all these shortages, and most of our customers build more inventory they needed. And so we're going through that right now. And what we've been basically saying, what we've seen, we think that things are getting a little bit better when it comes to the inventory reduction, and we're also starting to see some demand coming back. So I was hope that we see more positive news by end of this year, and then the 2025 will continue to be positive. But it's gonna take a few quarters to we see more upside. In terms of these high-speed switches, are you shipping 400G today or are you shipping 800G? And what's the prognosis like going forward, which technology do you think is coming? Well, we're shipping 400 switches, I mean, IP routers right now, I mean, and 800. But it's, you know, 800 is more new product development, but definitely it's going to our customers. I see. And how broad is Sanmina's reach in optical? I mean, do you have a few customers, or are you pretty much aligned with all of the customers? We're pretty well aligned with all the leaders in that networking side of the business. Okay. Okay, can you talk about the 5G market, the wireless market? How do you see that trending? And maybe also touch on your JV with Reliance. Yeah. With the JV market, I mean, 5G market, it's not a high percentage of our business. We used to do a fair amount in China, but that business kind of went out, outside of China. We do a little bit in China, but, you know, most of the business that we do in 5G will be done, that is being done in here in Mexico, for North American customers, and a little bit in India, but it's a small percentage. Our Reliance, it's been great. You know, the reason we went to that JV partnership to build something in India, it's a, you know, there's a lot of... People are really good. The workers are really great. They're easy to deal with. It's a bureaucracy that it takes time to do it. So we felt that finding the right partner that understands India, because we've been there for 13 years on our own, and we attracted a fair amount of great customers. I think with Reliance, it's been very, very positive. And the way that this deal is done, we are responsible for running this operation. Okay. We're considered like an Indian company. We see a fair amount of business. We're, you know, we're starting to grow the business nicely and both with Reliance and also diversifying the customer base. What India is gonna be for us, and we're building a, hopefully, this India operation, one day it'll be multi-billion dollar division, and is to be a supplier, not just for India market, but also to be a supplier for a global market. Can you talk about what, what is it that you build for them? Like, what is the product that you're building? Well, we're building a. Reliance is getting into certain wireless product. So they got some product there. They're playing around the 5G, they're playing around some internet stuff. So it's, they, the way Reliance works, it's more like, a, we got this huge project now. Most of the business that we work with is through a division called Jio, which is the biggest telecommunications company in the world. Mm. I believe they have over 400 million subscribers. You know, I was actually there, four weeks ago. It's just a campus like you would think it's in Silicon Valley, you know, 35,000 of I don't think anybody was over 35 years old. You know, so a lot of energy. You know, we're really excited what's in front of us. Jon, you want to add anything to that? Yeah, I mean, to Jure's point, to add to his point, India is a super important market to us, right? It's growing tremendously. You've got the government wanting to invest more in manufacturing. So in our space specifically, you know, that's critical. You know, the partnership with Reliance should just help us to accelerate that, right? They're getting into more businesses. They're looking to expand. So, you know, we've been at it for about a year and a half, and it's been trending on expectations even ahead, right? So we're very excited about what it's going to be able to contribute to the business going forward. So can you talk to us about the structure of this JV? I mean, do you consolidate, results from the JV? And how should we think about impact to the revenue and the P&L? Sure. Yeah, so it's 50.1% for Reliance. You know, we're the other half, but we do consolidate the results. We talk about this in our filings. And the way that the mechanics work, so we guide it as an example for Q3, a non-cash net income reduction of about $3 million-$3.5 million, right? So we don't really talk about all the revenue details and specifics, but we do guide that, right, to be able to give some insight into the business. Is this a seasonal business or should we think that that's the rate every quarter? I wouldn't call it I mean, Jure can comment on this too. I wouldn't really call it seasonal so much. It's really about the programs that we're involved with, right? And as we expand into different businesses there and just continue to grow it, right? I mean, we see- Yeah ... a lot of, a lot of growth coming from- Short-term, short term, we expect a growth and definitely long term. Yeah. Okay. India is growing for us. I think it's all about right now carrying certain things out. Okay. So I want to move to the cloud business now. Okay. I want to spend some time on that because, you know, AI and cloud, these are topics that clients care about. So can you talk to us about, first, what are the products that you're making, and what is your target customer set? Yeah. First of all, a lot of our key customers, especially in that what we call communication cloud enterprise, are servicing that cloud. Okay, so you know, our priority is to how do we work with them and give it to them, what they are looking for, and make sure we have like. So what we offer, what we deliver to them, a lot of this stuff that goes in cloud is a high technology printed circuit board, okay? So the boards, racks. We've been supplying racks to some of the hyperscalers for last 10, 15 years. Now that is going more in the cooling racks. We just signed a couple partnership with couple different companies to expand that. We're already assembling, you know, products, very complicated products that requires cooling. But in hyperscale systems in these big racks, we need a lot more cooling, you know. So then we do assembly of the cards that go inside, where we have a storage product that we branded under the Viking Enterprise. So we, you know, we design some of this product, and we also work with NVIDIA, we work with AMD on the new products. We come in with those products that we can sell to other players, and some of our key customers will buy that as an ODM product from us, and then we'll go back into the system. And then we do. We're expanding our. We've been always doing some integration, where we build full systems for some of our key customers in the communication side of the business. And actually, majority of our business is, is fully assembled. But on this part, we're expanding more into the racks and the full system integration and testing and delivering the very similar, our model with around the Viking is very similar to Micro, Super Micro. Technology-wise, we have enough there, so we not can manufacture, but we're building something that will be very similar to what they have. So, just to understand this better, are you guys building, like, the servers and the networking and assembling the whole rack and then shipping the rack? Or are you in shipping individual components? Well, you know, typically in some cases, as I just said, we build a whole rack with all the electronics. We build some of the stuff, we design some of the stuff. Some of the low-end servers, we'll buy that but integrate it, but we'll integrate the full system and ship. In addition to that, we'll ship a la carte. You know, let's say you need a storage product that goes to one of our big customers. We'll build that, and they will ask us to go and deliver that to their site with the rack and everything. So when they get it, they plug and play other parts themselves. So these are the differences, but our capability is to basically give them an end-to-end. And when we think about the cloud business, I think, you know, the segment is communications and cloud. So John, can you tell us, like, what is the percent of revenues of cloud in that segment? And, how do you see those revenues growing over time? Yeah, sure. So I mean, the segment combined is about 35-40%. It's been in that 40% range. Last quarter, it was close to about 35-36. Between the two, comms and cloud, it's about 50/50, roughly speaking, right? Then so as we've been working through the inventory absorption challenges, there's certainly been some pressure on the comms side of the house, some in cloud as well, right? But as we were talking about, say, on the last earnings call, you know, we're starting to see in different end markets, you know, starting to see some things turn the corner. So, you know, big focus for us right now, as Jure was just saying, is, you know, what else can we do for those cloud providers, right? Continuing to expand the customers and the programs that we're working with. And same thing with the, the comms providers. We work very closely with, with all of our customers. They're more like partners. So when you get into these inventory absorption, you know, challenges, you know, we work with them to figure out how best to do that. But at the same time, we're always looking ahead, right? We, you know, we build long-term, forecasts, right? Master demand schedules, if you will, you know, to make sure that we're working closely to figure out how best to do that. So Jure, how broad are you in this market? Like, do you have one large customer, or do you work with multiple, customers for AI systems? And, and is this a North American business, or is this global, or do you have plans to expand the business? Yeah, most of the, most of the stuff to do, that we have around AI is North America for us, okay? There are other parts of the world, especially Europe, and India, that we'll be-- we're talking where our Viking product will be built. The key for us is to build a Viking product in India and deliver to Indian customer or even export out of India. Yeah, you know, we're more than five or six big customers in the AI space. As I said earlier, every key customer that we do in our communication and cloud, does supply products for AI. Okay. And- The key for us is that we plan these new programs, you know, is to grow that business. Got it. You know, I wanna ask two more questions on AI. Some clients are concerned about that it's a very competitive market- Yeah ... and, you know, we've heard from some of the OEMs who are providing servers and storage into this, and concern is on margins. Yeah. How do you see margins in your cloud business? Is this an accretive business? Is it margin dilutive? Over time, how do you think that margin progresses? Yeah, if you go. If you just look at the hyperscaler, now is a AI call. For a long time, if you strictly want to focus on revenue, assemble a bunch of servers, that's a very competitive market. Our model is to provide a lot of the key components that go into these boxes. Okay, as I said earlier, printed circuit boards, mechanical boxes that go in there, racks, cooling racks, special cables, you know, that, that go in there. And then integrate, build what we can internally, for example, such as a Viking product around the storage, but everything else, we will buy it from our customer. I think under that model, when you, when you supply more critical parts, you should be able to deliver a better margin than if you just buy everything and just integrate it. Okay, that makes sense. And then, you know, you used to have a business called Newisys. Maybe that's what's called the- That's Viking. Viking. Yeah, we changed the name. Well, originally, you know, was the plan to spin off this business? How do you think it's integrated into the company now, and how do you see growth in that storage? Yeah, we have actually multiple businesses that one day, if they don't create the value in Sanmina, it can go somewhere else. It's our high technology printed circuit boards, it's our mechanical business, you know, machining business, that's one division. SCI business, which is a defense and aerospace business. And then you mentioned the Viking that we have a lot of hope for Viking to grow, especially in this environment right now, okay? With all the capabilities we have. For us, we just need to win one or two big programs there. And then optical modules. We've been investing fair amount in last two-three years in optical modules. Okay. So we can build a product. When it comes to capabilities, technology, no competitor out there can do it more than we do. I think we do more engineering on top of that. I think it's just as we now continue to expand capacity. So all those can be run as a separate units one day. Got it. But we run them together, and the way we always run Sanmina is that you have a full control, you have a financial team, you got operational team, we have mini P&Ls on a weekly, you know, monthly basis. So these are well-controlled businesses, and that's the area that we've been investing in a lot. And I hope you're gonna see some more better results in the future as the market comes around. Got it. Let's switch to the IMD&A segment, which has many different end markets in it. Yeah. Can you talk about maybe starting with industrial? What is the focus area? What do you do there? Well, definitely, IMD&A is a business that we wanted to for a long time, which includes industrial, medical, when we put in buckets, next bucket is defense and automotive. So when you look at it, it's about 1/3, 1/3, 1/3. Okay, so we're able to diversify that pretty well. What we do in the industrial, what's in there is, for example, the chargers, you know, a lot of the heavy equipment, like in semiconductor lithography, some of our biggest customers that we build. We invested heavily in that area, including clean rooms for that stuff. And just a lot of other electromechanical—as the business is changing, just from pure mechanical to combining mechanical to electronics, industrial side, there's a lot of different industries there, and that business is actually very, very stable for us. On the defense and automotive area, we have pure defense, we have a security area, emergency communication in that area, all safety is in that area. That business is doing well. We expect our defense business to continue we just hired some new management there. We expect that to... We're making some big investments in that side of the business. The medical business rises approximately, let's say, one third of that, it's around 40%, ±. Medical business is very critical to us. Takes a long time to get into these accounts, but once you get in, you are there for many, many, many years. Got it. All these three segments, we expect to continue to drive. We wanna be a lot bigger than a billion-dollar company. That's what we wanna do. There's a lot of emphasis that you come to our offices on a daily basis, that's the whole emphasis. Yeah, we'll get through this year with a very respectable 2023. We're going to transition in 2024 with revenue down, margin still holding pretty well. You know, as we told the street, you know, short term, we forecasting our operating margin to be in a range of 5%-6%, and we think the longer term, as the business comes back and we start shipping that closer to the $9 billion, I think you're gonna see our margins go up, hopefully. There's a lot of discipline in industry. I think the industry is building today, Rupe, a lot tougher products than probably ever before. Mm. We are a lot more critical to these customers than ever before. Okay. It's a partnership. It's not anymore, "Well, let me see if you can give me the best price." You go, "You really have to create the value, both from engineering point of view, capabilities point of view, trust. Mm. Because this business, these products have to work. This is not a consumer product. We don't do any consumer. This is a consumer product where you can just build it, it doesn't work, throw it away. This stuff has to work for many, many years. Got it. That's where we are focused. That makes sense. Let's transition into the finances. Yeah ... financial stuff a little bit. So Jon, you know, when we think about this year, right, I mean, fiscal 2Q was towards the lower end of guidance. I think fiscal 3Q was a little bit weaker than what we had expected or the street had expected. So can you give us your thoughts on first half, second half? How do you see revenues and margins progressing this year? Yeah, sure. So, like you said, you know, came in about $1.835 billion in Q2, guided $1.8-$1.9 in Q3. So midpoint of that, slight sequential improvement, right? And we also talked about as we get into the back half of the calendar year, right, both our fiscal and calendar year, we expect that growth to come. ... A little bit different between that and markets, you know, based on like what everything Yuri was just saying, but definitely seeing, you know, a lot of the patterns from our customers, you know, back to that long-range forecast, right? Where we feel confident and in that. So, you know, the focus right now is just executing on the current quarter, getting that closed, right? And then continuing to win the new programs and expanding our capabilities there. That makes sense. One thing we haven't talked about is there's also this segmentation of IMS and CPS. Can you maybe talk about like, what are the targets for that, those segments? Like, I, I think you disclosed gross margins for each of those segments, but is there also an operating margin target? So how do you, how do you look at those businesses? Yeah. So two segments, like you say. So IMS, and then CPS, which is the components products and services, right? Margin profile for IMS last quarter, we were about 7.7%. That's a little bit lower than what we've been historically. You know, we think that there's still opportunity in there, especially as we return back to growth. So we got a big focus on the mix of the business, back to the programs point, but we see that there's opportunity there. CPS is definitely stabilized, so it's 12.9% last quarter. You know, historically, it's been lower than that, but we're on a good trajectory, and we think that there's upside there as well. And we're also focused on growing CPS as a part of the, you know, bigger mix of the overall company. It's about 80/20 today, 80 on the IMS side, 20 on the CPS side, but as CPS becomes a bigger piece of that, right, we see more margin upside overall. And that's why in the short term, you know, overall operating margin, 5%-6%, but, yeah, we said longer-term, 6%, over 6%. Makes sense. If I can add to that, I think there's a lot of focus and investments going on in last year and continue into what we call components, products, and services. One of the just big project that we are putting together, and we just put it together, it's gonna go over the next eight years. It's around power, but a lot of mechanical goes in there. Mm. And so in order to do that, you have to... The good thing about that business is a lot of times, those mechanical parts don't change very often, but you have to make the right investments ahead of the game. When you're building some of these precision machining photolithography, where you're building products that are 15 ft by 8 ft and 10 ft, you know, requires special equipment, special knowledge. That's the area that we do. I definitely believe our IMS margin should be a lot higher than what they are today. Mm-hmm. and also the CPS. Yeah, I think to just add to Jure's comment, you know, big focus or a big core to our strategy is the vertical integration, right? So if you think about the way that the company operates, like IMS is the core there, but the more that we can integrate CPS into that, right? And we've got a lot of great capabilities, a lot of IP, you know, put that into solutions. So that's why we expect that to grow. And we sell the I'm sorry, and just to add to that, we also sell some of those components to our competitors also, directly. We have no problem if- Is that PCBs or you're saying- Including PCBs, it can be mechanical, for example, the customer needs two sources. We one source, their second source, we will still supply that. We want to supply that- Got it. because we make extra money on that. You know, we've got about two minutes left, and Jon, I wanna ask you, this is probably a higher-level question, but the way I see the thesis on Sanmina is that there's a lot of operating leverage in the model. Part of it is this vertical integration. You're one of the few vertically integrated EMS companies. But can you talk about what are the drivers that will realize that operating margin? What are some of the things that will drive operating margin leverage, and when do you see that happening? Yeah, I mean, a couple of things. So one, one is growth, right? And so we're very much focused on growth. If you think about our capital allocation strategy, you know, we've got multiple priorities, but Jure and I spend a lot of time talking about where to make the right organic investments, so our CapEx spend, also strategic transactions, and we always make sure that those are complementary, right? Not something way outside of our scope. But driving that growth will bring natural operating leverage. You know, a continued focus as well on that vertical integration, that'll be a big part of it, even selling the components, parts of the CPS portfolio to, to outside providers. You know, that, that's key as well. And then just the mindset of Sanmina is just a continued focus on operational efficiencies, right? So if you think about in the manufacturing business, you know, having that mindset and that culture where you're always looking to do something better, you know, that's great. It's good for- Yeah ... our customers, and it's good for us, too. Got it. Maybe we've got one minute left, so let's talk about free cash flow, your expectation for inventory, and just uses of cash. How do you see the business growing? Is there M&A or internal investments? Yeah, so back to the capital allocation strategy. I mean, inventory, you know, still a big area of focus for us, you know, opportunity there. We're at about 4.8 turns, right? But we're continuing to bring that down from the peak back in Q1 of about $1.7 billion. You know, cash flow, we've been doing a great job generating cash. So, you know, every single quarter, every single week, you know, on a regular basis, Jure and I are talking about how best to use that. So you can see in the front half or in the first half of the year, we did a lot of share repurchases, and that was more because we did a lot of capital investments back last fiscal year, so we've got the capacity in place to grow. But right now, you know, our cash balance is great, our leverage ratio is in a good position, so we're really, you know, at this point, positioned well to take advantage of almost any opportunity. As the market starts to come back, you know, we'll be prepared for that. Okay. All right, so we're out of time, and I think we've covered a lot of different things. So Jure, Jon, thank you so much for coming. Really appreciate it. Thank you, Ruplu. Thank you for having us. Thank you.