Sanmina Corporation (NASDAQ:SANM) Q4 2025 Earnings Call Transcript

Sanmina Corporation (NASDAQ:SANM) Q4 2025 Earnings Call Transcript November 4, 2025

Operator: Good afternoon, ladies and gentlemen, and welcome to the Sanmina’s Fourth Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Monday, November 3, 2025. I would now like to turn the conference over to Paige Melching, Senior Vice President of Investor Communications. Please go ahead.

Paige Bombino: Thank you, John. Good afternoon, ladies and gentlemen, and welcome to Sanmina’s Fourth Quarter and 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. Joining me on today’s call is Jure Sola, Chairman and Chief Executive Officer.

Jure Sola: Good afternoon, ladies and gentlemen.

Paige Bombino: And Jon Faust, Executive Vice President and Chief Financial Officer.

Jonathan Faust: Good afternoon.

Paige Bombino: 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 in the slides provided on our website. Please turn to Slide 3 of the presentation and take note of our safe harbor statement. 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. We caution you that such statements are just projections. The company’s actual results could differ materially from those projections in these statements as a result of factors set forth in the safe harbor statement. 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 the earnings release, the earnings presentation, this conference call or our Investor Relations section of the website, whether as a result of new information, future events or otherwise, unless otherwise required by law.

Included in our press release and slides issued today, we have provided you with statements of operations for the fourth quarter and fiscal year ended September 27, 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 the press release and slides posted on the website. In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, noncash stock-based compensation expense, amortization expenses and other unusual or infrequent items. Any comments we make on this call as it relates 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 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. Please turn to Slide #4. First, I would like to take this opportunity to recognize Sanmina’s leadership team and our employees for doing a great job. So to you, Sanmina’s team, thank you for your dedication, hard work and delivering excellent service to our customers. Ladies and gentlemen, I can tell you that I’m very pleased with our performance for fiscal year 2025. Revenue came in at $8.13 billion, growth of 7.4% year-over-year. Non-GAAP operating margin came in at 5.7%. We’re able to expand these margins by 30 basis points year-over-year. Non-GAAP EPS came in at $6.04. That’s growth of 14.4% year-over-year.

We also delivered very strong cash flow from operations of $621 million. And for the fourth quarter fiscal year 2025, we delivered solid revenue of $2.1 billion and non-GAAP EPS of $1.67 per share. Now let’s go to our agenda for today’s call. We have Jon, our CFO, to review details of results for you. I will follow with additional comments about Sanmina results and future goals. Then Jon and I will open for question and answers. And now I’d like to turn this call over to Jon. Jon?

Jonathan Faust: Great. Thank you, Jure, and good afternoon, ladies and gentlemen. We appreciate your participation in today’s earnings call. Before I discuss our financial results, I would like to thank the entire Sanmina team for their hard work and dedication and for executing a strong close to the fiscal year. The team has demonstrated exceptional focus and agility in meeting our customers’ evolving needs all year long. Jure and I, along with the entire Sanmina management team, commend these efforts, which have resulted in strong fourth quarter and fiscal 2025 performance. Now please turn to Slide 6, where I’ll speak to the financial highlights. We’re very pleased to report that our fourth quarter results either met or exceeded our previously communicated outlook.

To be specific, our non-GAAP gross margin of 9.4% and our non-GAAP diluted earnings per share of $1.67 both exceeded our outlook. Furthermore, our revenue of $2.1 billion and our non-GAAP operating margin of 6.0% were both at the high end of our outlook. These strong quarterly results as well as our performance throughout the year contributed to our ability to achieve fiscal 2025 results in line with our expectations, as Jure mentioned at the beginning of the call. Now please turn to Slide 7, where I’ll speak to our P&L performance for the fourth quarter. As previously noted, we generated revenue of $2.1 billion, which represents an increase of 3.9% year-over-year. This growth was primarily driven by broad-based demand across the majority of our end markets with particular strength in the communication networks and cloud and AI end markets, which Jure will speak to in more detail in his prepared remarks.

Non-GAAP gross profit was $196 million, representing 9.4% of revenue and a 70 basis point improvement versus the same period a year ago. This expansion in our gross margin was a result of favorable product mix and ongoing operational efficiencies. Non-GAAP operating expenses totaled $70 million, slightly above our outlook, reflecting our continued strategic investments aimed at driving future growth. Non-GAAP operating income was $126 million or 6.0% of revenue, representing a 70 basis point improvement versus the same period a year ago. This improvement was driven by a combination of revenue growth, favorable mix and disciplined execution. Non-GAAP other income and expense resulted in a net expense of $5.1 million, slightly above our outlook, largely due to foreign currency.

And finally, non-GAAP diluted earnings per share was $1.67 based on approximately 54.9 million shares outstanding, representing a 16.7% increase compared to the same period a year ago. Now please turn to Slide 8, where I’ll speak to our segment results. IMS revenue came in at $1.68 billion, up 3.3% year-over-year. This was driven by growth across most end markets with particular strength in the communication networks and cloud and AI end markets. IMS non-GAAP gross margin was 7.8%, up 50 basis points versus the same period a year ago. CPS revenue came in at $448 million, up 7.3% year-over-year. And CPS non-GAAP gross margin was 14.5%, up 90 basis points versus the same period a year ago. The strong performance in CPS was driven by revenue growth, favorable mix and ongoing operational efficiencies.

While we’re pleased with the performance of both the IMS and CPS businesses this quarter, we have not yet reached our full potential. We recognize the ongoing opportunity for further improvement in both revenue growth and margin expansion, which will remain key focus areas going forward. Now please turn to Slide 9, where I’ll speak to our P&L performance for fiscal 2025 as compared to the same period a year ago. At the beginning of the year, when we provided our outlook for fiscal 2025, we said we expected revenue to grow high single digits, that non-GAAP diluted earnings per share would grow faster than revenue and that we generate strong cash flow. And I’m pleased to report that we delivered on all of those commitments. In fiscal 2025, we executed to our plan, and we continue to see positive trends as we move into fiscal 2026.

Revenue for the 12 months increased by 7.4% year-over-year. This growth was driven by solid performance across the majority of our end markets with notable strength in the communication networks and cloud and AI end markets. Non-GAAP gross profit was $744 million or 9.2% of revenue, up 50 basis points compared to the prior year. Non-GAAP operating income was $465 million or 5.7% of revenue, up 30 basis points compared to the prior year. These improvements were the result of revenue growth, favorable product mix and strong operational execution. Non-GAAP diluted earnings per share was $6.04, which equates to an increase of 14.4% year-over-year. Now please turn to Slide 10, where I’ll speak to the balance sheet highlights. For many years, Sanmina has had one of the strongest balance sheets in the industry, and we continue to add to that strong foundation this quarter.

Cash and cash equivalents were $926 million. At quarter end, we had no outstanding borrowings on our $800 million revolver, leaving us with substantial liquidity of approximately $1.8 billion. We ended the quarter with inventory net of customer advances of $1.1 billion, representing a 12.1% decrease in absolute dollar terms versus the same period a year ago. Inventory turns, net of customer advances improved to 6.7x for the quarter as compared to 5.7x in the same period a year ago. Our non-GAAP pretax ROIC for the quarter was 28.3%, well above our weighted average cost of capital and a sizable improvement from 23.0% in the same period a year ago. The company continued to be in a net cash position at the end of the quarter, and our gross leverage ratio was 0.32x.

This robust financial profile enables us to effectively execute on our strategic initiatives while still navigating macroeconomic uncertainties. Now please turn to Slide 11, where I’ll speak to the cash flow highlights. Thanks to the disciplined working capital management of the Sanmina team, cash flow from operations for the fourth quarter was $199 million and came in very strong for the fiscal year at $621 million. Net capital expenditures for the quarter were $62 million and totaled $142 million for the fiscal year or 1.8% of revenue. This is in line with historic levels of CapEx spending, which typically ranges between 1% to 2% of revenue. As we move forward into the new year, we remain committed to making strategic investments in the capabilities and technologies necessary to strengthen our market position and support our long-term financial goals.

To that end, we anticipate ongoing targeted investments in both capacity and technologies across our operations in the U.S., India and Mexico. Free cash flow for the quarter was $137 million and $478 million for the full fiscal year. We repurchased 1.44 million shares for $113.7 million for the year. And as of September 27, 2025, we had $239 million remaining under our authorized share repurchase program. Our strong cash flow performance has provided us with the financial flexibility to allow for continued investments in the business while also returning capital to shareholders, all within a disciplined and balanced capital allocation framework. Now please turn to Slide 13, where I’ll speak to the transaction details around the ZT Systems acquisition.

This is an exciting time for Sanmina as the acquisition of ZT Systems is truly transformative. It increases our scale, expands our capabilities and enables us to capitalize on the significant growth opportunities in the cloud and AI end market. On this slide, I’m comparing the original transaction details to our latest estimates as of the closing date, some of which are still pending a 90-day working capital true-up process. First, as a result of the hard work and dedication of all the teams involved, we were able to close the transaction earlier than expected. Second, pending the working capital true-up process I mentioned earlier and assuming a full earn-out of the contingent consideration, we estimate the closing purchase price to be $2.05 billion, which is based on $1.05 billion of net working capital.

The lower net working capital dollar amount is primarily the result of production seasonality given the earlier-than-anticipated closing date as well as disciplined inventory management. Third, as we discussed in May, the purchase price reflects a premium of $300 million to the book value of the acquired net working capital and property, plant and equipment with $150 million of this premium in cash and $150 million in Sanmina equity. At closing, AMD received approximately 1.15 million shares based on a share price of $130.32 calculated based on the volume weighted average price for the 5 trading days prior to closing. We believe that having AMD as a shareholder will only further align our interest, especially as it relates to our new strategic partnership.

Lastly, as referenced earlier, there is also a contingent consideration of up to $450 million, which is based on the financial performance of the business over the next 3 years. Now please turn to Slide 14, where I’ll speak to our strong balance sheet and liquidity position. As a result of our industry-leading balance sheet, we were able to secure the necessary financing for this transaction on attractive terms. This puts us in a position to capitalize on future opportunities, both for ZT Systems and for the legacy Sanmina business. We secured a Term Loan A of $2.0 billion, of which $600 million is a delayed draw and a Term Loan B of $800 million. With these funds, we repaid Sanmina’s existing Term Loan A and at closing, we have $2.2 billion of funded debt.

As a reminder, we are targeting a net leverage ratio of 1.0x to 2.0x over time with the goal of achieving an investment-grade rating. At the end of the fourth quarter, stand-alone Sanmina had $926 million of cash and cash equivalents. As a part of the new financing structure, we also increased our revolver from $800 million to $1.5 billion. The combination of cash, our revolver and the delayed draw on our Term Loan A gives us a significant amount of liquidity to support the growth of both ZT Systems and the legacy Sanmina business. Also, I want to emphasize our commitment to maintaining a healthy balance sheet, which means carefully managing the liquidity needed to invest in the business and capitalize on the strategic opportunities that further excel our position in the market with strong fiscal policies and controls.

Now please turn to Slide 15, where I’ll cover our first quarter 2026 outlook. Our guidance is based on current customer forecasts, 2 months of the ZT Systems acquisition and ongoing market uncertainties stemming from tariffs and the geopolitical landscape. Our first quarter outlook is as follows. We expect revenue between $2.9 billion to $3.2 billion. We expect legacy Sanmina revenue to be in the range of $2.05 billion to $2.15 billion, which at the midpoint reflects 4.7% growth versus the same period a year ago. We expect ZT Systems to be in the range of $850 million to $1.05 billion for the 2 months after closing, pending final accounting policy alignment. At the midpoint of $3.05 billion for the total company, that reflects 52% growth versus the same period a year ago.

Non-GAAP operating margin of 5.6% to 6.1%. We expect other income and expense to be a net expense of approximately $23 million; an effective tax rate of 21% to 23%, which is up slightly from legacy Sanmina due to the U.S.-based earnings pickup from ZT Systems. We estimate an approximate $4 million noncash reduction to our net income to reflect our India joint venture partners’ equity interest. Non-GAAP diluted earnings per share in the range of $1.95 to $2.25 based on approximately 56 million fully diluted shares outstanding. At the midpoint of $2.10, that represents a 46.3% increase versus the same period a year ago. Capital expenditures are expected to be around $85 million as we continue to invest strategically to support our future growth expectations.

And finally, depreciation of approximately $45 million. In summary, we’re very pleased with our Q4 and fiscal 2025 performance as we’ve made great progress towards our financial goals. Also, now that we’ve completed the ZT Systems acquisition, we’re very excited about our growth potential, both in that part of the business and the legacy Sanmina business, too. And with that, let me turn the call back over to Jure.

Jure Sola: Thank you, Jon. Ladies and gentlemen, let me add more comments about the results for fiscal year 2025 and also talk to you what we are planning to do for fiscal year 2026 and beyond. As you know, Sanmina completed acquisition of ZT Systems data center AI infrastructure business from AMD last week. So before I talk about our results, I would like to take this opportunity to welcome ZT Systems team to Sanmina’s family. As we said, together, now we are a stronger company. And I can tell you, this is an exciting time for all of us. Please turn to Slide 17. As you heard from Jon, we delivered strong results for the fourth quarter, revenue, non-GAAP operating margin at the high end of our outlook, and non-GAAP gross margin and non-GAAP diluted EPS exceeded our outlook.

Fiscal year 2025 was a good year for Sanmina. Most importantly is that we positioned our company for a better and stronger future. In summary, our consistent execution is driving financial performance. Please turn to Slide 18. Let me talk to you about revenue by end market for the fourth quarter of fiscal year ’25. Industrial, energy, medical, defense, aerospace and automotive segments have been very consistent segment for us. For the quarter, that was 59% of our revenue and for the year, that was 62%. For the year, we saw the growth 2.2% year-over-year. Communication networks and cloud and AI infrastructure, overall, we had a strong demand with — that was 41% of our quarterly revenue. And for the year, that was 38%, and we saw great growth of 17% year-over-year.

For fiscal year ’25, top 10 customers represented 51.7% of our revenue. As you can see, we are well diversified and no customers over 10%. Overall, bookings were solid. Book-to-bill came around 1:1. We see very positive trends for the future. To tell you more about it, please turn to Slide 19. As we look at our end markets, we see positive trends. For Industrial and Energy, we have strong customer base and new projects in the pipeline that should drive the growth in fiscal year ’26. For medical, we are well diversified within the market itself, and we expect to see nice growth in fiscal year ’26. For defense and aerospace, we continue to see solid demand. This segment continues to do well from technology components segment to a full system assembly.

Automotive and Transportation, short term, we see some softness in the market, but we do have a great customer base and some good new opportunities, and we expect to see some growth in fiscal year ’26. For Communication Networks and Cloud and AI infrastructure, overall, we saw strong demand for high-performance switches and enterprise storage. We’re also growing our optical advanced packaging. And we have a strong pipeline for second half of calendar year ’26 and calendar year ’27. For cloud and AI infrastructure, we feel good about the future. New programs will drive the growth for calendar year ’26 and beyond. Please turn to Slide 20. Now let me talk to you a little bit more about Sanmina AI and ZT Systems. This strategic acquisition from AMD complements Sanmina’s advanced cloud AI technology and gives us the ability to do full system integration at scale.

Our strategy is to provide industry-leading capabilities from design to full system end-to-end solutions for cloud, AI infrastructure end markets. As you can see in this slide, what Sanmina brings to the table, combining with ZT is providing to end-to-end. We get involved early stage of product design. We are expanding this group, and we’re transferring a fair amount of engineering individuals to our Viking enterprise that will support the ZT going forward. We provide high-technology printed circuit boards. We provide high-technology board assembly and test. We provide mechanical racks and enclosures, both custom and open compute. We provide liquid cooling, both with our partners and ourselves. We provide server and storage, both from a joint development with our customers to ODM, custom memory, custom optical modules all the way to the full system.

And you can see why ZT Systems aligns very well with Sanmina’s strategic growth priorities. And as Jon said, we will continue to invest in this key end market. Please turn to Slide 21. Let me talk to you right now about priorities for ’26 actually today. Number one is focus on our customers. Part of our strategy is always to focus on our customers and build around customer needs. We have a strong long-term partnership with many market leaders already. We’re expanding our customer base in these key markets. And our technology is continued to be competitive advantage as we’ve been investing and we’ll continue to invest in our key technologies. Number two is to how we’re going to execute on ZT Systems opportunities. As we said, we believe there’s a lot of great opportunities in front of us.

First of all, we’re keeping the same management team at ZT that will be led by our founder, Frank Zhang. He’s been running this operation for 30 years plus. We learned a lot about the management, and we believe — with additional help from our President and Chief Operating Officer, Mike Landy, I believe we have a #1 team in our company to really lead this organization going forward. We expect very smooth integration of ZT Systems with Sanmina. And as we both said, Jon and I, we have large opportunities for ZT Systems right in front of us to build on. And number three for us is to drive the profitable growth. It’s easy to get the growth, but driving the right segments to allow us to improve the — to have a customer that’s going to be with us for many, many years, but also to improve the margin.

We are optimizing our capital structure to drive the growth in the next 2 to 3 years, ’26 through ’28. ZT Systems’, as John said, current annual run rate revenue is about $5 billion to $6 billion. Last quarter, we told you that within next 3 years, we would double Sanmina’s revenue to around $16 billion. Now we see opportunity to do it sooner with the next 2 years. As I mentioned, we are focused on margin expansion by delivering competitive advantage for our customers. Short term, we’re forecasting margin to be in the range of 5.6% to 6.1% plus. Longer term, we expect to expand our margin and our goal to be in a range of 6% to 7% plus. In a simple English, our strategy is to build a bigger and stronger company for the future. Please turn to Slide 22.

In summary, we finished the fiscal year 2025 with a strong momentum. We are focused on executing on transformation from position of strength. For growth, we expect legacy Sanmina business to continue to grow high single digits. And we expect solid growth in cloud and AI end market in the second half of calendar year ’26 and continue through calendar year ’27 and beyond. Our capabilities in cloud and AI will bring solutions from concept to development with quality, speed and flexibility at scale. This is competitive advantage for Sanmina. Also, Sanmina has efficient manufacturing footprint. It is aligned to support customers’ global production requirements, and we have strong U.S.A. presence in place. Overall, great opportunities to drive profitable growth.

So ladies and gentlemen, now I would like to thank you all for your time and support. Operator, we’re now ready to open the lines for question and answers. Thank you again.

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Ruplu Bhattacharya from Bank of America.

Ruplu Bhattacharya: Jure, congrats on closing the ZT Systems acquisition. Just to confirm, did you say that it’s still at a $5 billion to $6 billion annual run rate? And one of the slides says that it’s at corporate average margins. You’re guiding margins — operating margin to 5.9%. Should we assume that the ZT Systems business is also in that range of high 5%, so around 5.9% operating margin. So can you just first confirm the revenue and operating margins for the ZT Systems?

Jure Sola: Well, first of all, thank you for the compliment. I’m very excited about the ZT acquisitions. We’ve got to know the team at ZT. We got excellent people there and it fits to our culture. So we’re really excited in front of us. Maybe I’ll turn it over to Jon when it comes to the margins, but we are very optimistic. Go ahead.

Jonathan Faust: Yes. Ruplu, on the first point about the revenue. So we did want to give some color on ZT Systems for that 2 months, and we guided a range of $850 million to $1.05 billion. You take that midpoint to $950 million for the 2 months and annualize it, puts you at about $5.7 billion. So check the box. We said that we closed in that $5 billion to $6 billion run rate on an annual basis, and we did that. And then to your second question on the margin profile, like as it shows on the slide, we expect ZT, we guided on a combined basis, but said that ZT is in line with Sanmina. So yes, the short answer to the question is we expect both sides of the business to be within that 5.6% to 6.1% range.

Ruplu Bhattacharya: Okay. Great. For my next question, can I ask on the legacy business? If we look at the guide Jon, for the first quarter, $2.05 billion to $2.15 billion. So it’s growing like mid-single digits at this point in the first quarter. But I think one of the slides later on talks about the legacy business grows high single digits. Is that — are you expecting high single-digit growth for the legacy business ex ZT in fiscal ’26? And what drives — if so, what drives that acceleration in the second half for the legacy business?

Jonathan Faust: Yes, that’s exactly right, Ruplu. We disclosed ZT a week ago, so we didn’t want to touch too much on a full year basis for that, but we’ll come back in January in our next earnings call and give some more specifics. But at least for the legacy Sanmina business, very similar to how we guided fiscal year 2025. We expect ’26 to be — have revenue growth in that high single-digit range. To your point, the midpoint would be just shy of 5%, so in the mid-single-digit range, but we expect that to accelerate. And that’s based on all the opportunities that Jure spoke to on the end market slide. We see a lot of opportunity ahead. In the first quarter here, it will be more in that midrange. But as we continue on throughout the year, particularly into the back half or the second half of the fiscal year, we expect that to accelerate.

Jure Sola: Yes. If I can add, Ruplu, to that, definitely, we’re seeing more positive activities as we go into next year around industrial, energy, medical. Defense continue to be stable. We are expanding our component capabilities there. Our military circuit boards are doing well, very profitable business. Automotive only short term is slightly down, but we do have some new programs that will offset that. Communication networks and cloud AI infrastructure without ZT. ZT we’re really looking at the integration infrastructure. But if you look at the AI, what Sanmina provides, including our capabilities around the storage ODM, circuit boards, mechanical racks, that part of the business is very active right now, and we expect it to grow more than we did last year.

So overall, we feel very strong with Sanmina legacy business. And also, we’ve been — as we said last year, our goal is how do we take this business back to the $9 billion, $10 billion, $11 billion, $12 billion run rate. That’s our still plan. So the key for Sanmina is to be a diversified company, not just to depend on one segment of the market or not. So we’re excited about the growth. We’re excited about what we can build around AI with the ZT. And I said earlier, ZT fits like a glove. Most important, we have great management in there. We’re going to be investing — well, first of all, AMD invested a fair amount of money in the last year plus, and we’ll continue to do that. And we have some of the best capabilities for new technology that is coming out end of this year in the future.

So overall, Ruplu, I think there’s a lot of upside. It’s all about how well do we execute.

Ruplu Bhattacharya: Okay. If we put all of what you said together, so if the legacy business grows high single digits, that would be about $8.9 billion in fiscal ’26. And then ZT is $5.7 billion at the midpoint, like Jon said. So total for fiscal ’26 looks like the implied guidance is about $14.5 billion or $14.6 billion. Did you say then that looking forward, the comment that you made, Jure, on the $16 billion 1 year ahead of time. So are we essentially saying that, that $14.5 billion in fiscal ’26 can then grow to $16 billion, so about 10% year-on-year growth between fiscal ’26 and fiscal ’27. Was that the comment?

Jure Sola: Okay. First of all, I’m very optimistic what’s in front of us, okay? That’s number one. Number two, we’re going to give you a lot more — as Jon said, we’re going to give you a lot more details in January because we just — as you know, for legal reasons, we couldn’t get all the details about forecast and so on and so on. So we’ll share a lot more with you in January. But looking what’s in front of us, we basically said about 6 months ago or 3 months ago, we think we can double the size of Sanmina within 3 years. What we see in front of us with legacy business, plus what we believe that we can grow around ZT plus AI opportunities that are in the pipeline that we can accomplish that hopefully, in the next 2 years. So that’s all I’m saying.

Ruplu Bhattacharya: Right. And the 2 years would put it at calendar ’27 for the $16 billion?

Jure Sola: Yes.

Ruplu Bhattacharya: But maybe one last question.

Jure Sola: But Ruplu, let me just say, trust me, we’re going to give you a lot more information in January.

Ruplu Bhattacharya: Okay. Understood. Let me just ask one more quick question on working capital because you’re taking on working capital. Jon, how should we think about cash conversion cycle and free cash flow going forward?

Jonathan Faust: Yes. I mean, first of all, I’m very pleased with how we performed in Q4 and all fiscal year ’25, right? Jure and I both talked about that cash flow from operations for the full year being at $621 million, which you don’t see very often when you’re driving growth. We drove revenue growth of 7%. So our cash conversion cycle exiting Q4 is back in the 50s, which is a good place to be. That’s where we wanted to get to. Now we still see some room for improvement. And I’m talking about the legacy business right now. We still see the opportunity to generate cash from that perspective. And for ZT, it will really depend. As Jure was saying, at this point, we’re just guiding Q1 because we just closed the transaction last week.

Now depending on growth and working capital needs, that might become a draw on cash. But we think we’re in a good position right now. So bottom line being legacy business, continue to expect to generate cash flow from operations. And ZT, more to come on what we think for the full year and what that will mean from a cash perspective.

Operator: Your next question comes from the line of Steven Fox from Fox Advisors.

Steven Fox: A couple of questions for me. So without putting numbers around it, I was just curious how you think about the opportunity to rebuild the accelerated compute arm of ZT. There’s been, I guess, public questions about the ability to do that relative to competition. There was some hint here, but I was just wondering how we should think about how long that takes to sort of get going and how broad you can be with the opportunity? And then I had a follow-up, please.

Jure Sola: Yes. First of all, as I said, I’m very excited about the talent that we got through in the ZT acquisitions. This is a very strong team. The founder is going to stay with us to help us take this business to the next level. He’s excited. I’m excited. We’re putting a great team around it. We’re going to invest in it. We are also taking our Viking Enterprise group and moving that over to support ZT as you know, ZT is an ODM operations. And we’re also transferring a fair amount — we have an engineering services group. We’re going to transfer a big portion of that into the Viking to build the Viking team bigger. so that we have a stronger engineering team. And we are hiring to really drive our ODM business at a high level.

So Sanmina has a lot of technology and the goal here for us to provide and basically connect the 2 together from a system architecture, electrical mechanical design, providing, as you know, especially in AI, there’s a demand for a lot of high-technology circuit boards. We believe we can add value there through assembly of the subsystems through mechanical design around the liquid cooling. We’re using partners and some of our own rock enclosures, both customs and open compute. You know a lot about the Viking storage. We also have a Viking technology around custom memory, custom optical modules. And we believe bus bars, we believe all of these things will help us improve the margin for our communication and AI business. So a lot of work in front of us, but good things don’t happen easy, Steve.

Steven Fox: Yes. Absolutely not. I guess just to interpret what you said, though, Jure, is that you’re implying that you need to pull the full system solution from soups and nuts together first before you can then sort of go after the accelerated compute business again? Is that fair to say?

Jure Sola: No, no, no. We’re going to go after — first of all, we have a great partner with AMD through NPI. So we enter that part right away. And we are expanding our engineering team to work with AMD and other platforms immediately. Yes, we have to — as you know, ZT had a big engineering team, and we expect to build that whatever is necessary to be able to support our customer requirements.

Steven Fox: That’s helpful. And then just on the cash flows in the transaction, just to be clear, Jon, the $2 billion purchase price, is that close to what the final number would be? Or could it balloon back to $3 billion? And then when we think about cash flows, it sounded like you can grow cash flows on legacy Sanmina. And then depending on growth, we’ll see if you need to invest in working capital on the ZT business. Am I reading all that right? If you can provide some color there?

Jonathan Faust: Yes, you got that correct, Steve. So on the first point, I don’t think the number will move too much. So it’s subject to a 90-day true-up process. And that’s because we’re closing in the middle of the quarter, we worked on some estimates. So we’ll have to work through that to reconcile it, but I wouldn’t expect it to move materially. So that’s — it should be pretty close to where we land. And then as far as future cash flow generation, yes, on the legacy side of the business, still some opportunity to generate cash even though we’ll be growing. This year, we made huge progress in inventory this past year, I mean, in fiscal 2025. And that’s how we were able to generate the $621 million. There’s not as much opportunity as that anymore, but we still think we can generate cash.

And then ZT, yes, still early days, just closed a week ago. We’ll see how the trajectory of the business continues, particularly as we get into the back half, and that could become a use of cash. But more — as we guide each quarter, we’ll provide more specifics on that.

Operator: [Operator Instructions] Your next question comes from the line of Anja Soderstrom from Sidoti.

Anja Soderstrom: Congrats on closing that the ZT Systems acquisition so early. You mentioned you see a lot of AI opportunity in the pipeline for ZT Systems. What do you see potential beyond what you currently have in the book?

Jure Sola: Could you repeat the question, Anja?

Anja Soderstrom: Yes. You see a lot of AI opportunity in the pipeline for the ZT systems. What kind of opportunities do you see there?

Jure Sola: Okay. Well, first of all, we’ve been building our capability to support data center AI all the way from high-technology boards to assembly, mechanical, liquid cooling, ODM, JDM and so on, both in custom memory and custom optical modules, we’ve been expanding that. ZT brings to us is a complete, what I would call strategic acquisition that complements Sanmina’s advanced cloud AI technology that gives us the ability to full system integration at scale. We have that today. So when you really look at the ZT today specifically, there’s great opportunities in our pipeline that will allow us to really grow in ’26, ’27, ’28. I mean, let’s focus on the next 3 years. Who knows what’s going to happen 5 years from now. But at least next 3 years, we see a lot of opportunities that based on our capabilities today, we can compete in this segment with anybody.

And especially, as I said earlier, I think the key for us is to make sure that we execute on these opportunities. And I have a very high confidence because we have a strong leadership in there. We’re basically letting them go ahead and take it to the next level. We took one of our top managers from Sanmina that ran all our IMS business for the last 25 years to basically help us together with the founder to take this to the next level. So opportunities are great. A lot of work in front of us, but we are excited. We think we can build something big, something good that’s going to be good for our employees, for our investors, and we’ll be able to provide some great capabilities for our customers and give them a competitive advantage.

Anja Soderstrom: Okay. And then how do you expect this to affect your Indian joint venture?

Jure Sola: Actually, it can complement India joint venture. There’s a lot of opportunities in India when it comes to the cloud AI growth. We are working with our partners in India right now for opportunities that are happening in India. We have a new factory that we are building right now that we will have — we will — how do I say, expand our AI capabilities. We’re investing right now, and that will come online early next year, and it’s going to be very positive.

Anja Soderstrom: Okay. And then it seems like auto was a bit challenging for you. What do you see there? And you were also talking about new opportunities there that could help you drive growth there.

Jure Sola: Yes. Automotive — overall for us, automotive was pretty strong beginning of the year and slowed down a little bit end of the year. But overall, it’s pretty good. We have some new programs that we won in the last 60, 90 days for end of the ’26, ’27 and beyond. So overall, we are pretty optimistic, and we’re well positioned with a couple of very critical customers.

Operator: We don’t have any other questions at this time. Please continue, sir.

Jure Sola: Operator, is there any other questions?

Operator: We don’t have any other questions at this time.

Jure Sola: Well, first of all, I’d like to thank everybody on this call. If there is any questions, please let us know. Otherwise, we’re looking forward to talking to you in 90 days from now. Thanks a lot for your support. Bye-bye.

Jonathan Faust: Thank you.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.