Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Sanmina Corporation's First Quarter Fiscal 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator instructions] Thank you. Ms. Paige Bombino, Vice President of Investor Relations, you may begin your conference.

Thank you, Rob. Good afternoon, ladies and gentlemen and welcome to Sanmina's first quarter fiscal 2019 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. 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. During this conference call, we may make projections or other forward-looking statements regarding the future events or future financial performance of the company. We caution you that such statements are just projections. The company's actual results of operations may differ significantly as a result of various factors, including adverse changes to the key markets we target, significant uncertainties that can cause our future sales and net income to be variable, reliance on a small number of customers for a substantial portion of sales, risks arising from international operations, and other factors set forth in the Company's annual and quarterly reports filed with the Securities and Exchange Commission. You'll note in our press release and slides issued today that we have provided you with statements of operations for the quarter ended December 29, 2018, 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 our website. In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, non-cash stock-based compensation expense, amortization expense, and certain other infrequent or unusual items to the extent material. 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, tax, net income, and earnings per share, we are referring to our non-GAAP information. I would now like to turn the call over to Michael Clarke, Chief Executive Officer.

Thank you, Paige and good afternoon everyone. Thank you for joining the call today. With me on the call is Dave Anderson, our CFO. Before we get into the financial results for the quarter, I'd like to comment on announcement of Dave Anderson's plan to retire. Dave plans to retire on March 27, 2020 to spend more time with his family. Dave will remain as CFO until a successor has been appointed and will stay with the company to facilitate a smooth transition. He has been instrumental to Sanmina 17 years and leaves behind an outstanding record as a corporate leader, finance executive and mentor. He has played a significant role in driving financial and operational improvements across the organization with unwavering integrity and commitment to strong financial controls. On behalf of the Board of Directors, the executive team, I wish to thank Dave for his contribution to the company. Thank you Dave.

Thanks, Michael.

We have retained an executive search firm to find a new CFO otherwise it is business as usual and we will update you on the progress. I will now turn the call over to Dave to through our financial results, then I will provide an update on the business and our end markets followed by Q&A. Dave?

Thanks again, Michael and thanks for the kind words. I greatly appreciate them. Please turn to Slide 3. Overall our first quarter revenue and non-GAAP diluted earnings per share exceeded our expectations. Revenue exceeded the high-end of our outlook by $263 million ending at $2.19 billion. Revenue was up 16.6% sequentially and up 25.4% from the first quarter of last year. Non-GAAP diluted earnings per share at $0.83 exceeded the high-end of our outlook by $0.09 and was up 40.2% sequentially and 72.7% over the first quarter of last year. I will discuss our end market revenue, non-GAAP margin and non-GAAP diluted earnings per share performance in more detail in a few minutes. Please turn to Slide 4. From a GAAP perspective we reported net income of $38 million which resulted in diluted earnings per share of $0.54 for the first quarter. This was up $0.53 sequentially and $2.70 from Q1 of last year. The $0.53 sequential increase in GAAP diluted earnings per share resulted largely from a $30.6 million non-cash goodwill impairment charge that was recorded in the fourth quarter of 2018 and negatively impacted GAAP diluted earnings per share in the fourth quarter by $0.43. The $2.70 year-over-year improvement in GAAP diluted earnings per share was mainly driven by a non-cash tax charge in the first quarter of last year of $2.27 per share related to the U.S. Tax Cuts and Jobs Act. My remaining comments will focus on the non-GAAP financials for the first quarter of fiscal 2019. At $151.2 million gross profit was up $27.4 million from the prior quarter. Gross margin came in at 6.9% which was 30 basis points higher than our final reported Q4 financials. Operating expenses were flat sequentially for the quarter at $65.4 million. As a percentage of sales operating expenses…

Thanks Dave. Good job. As Dave mentioned, we delivered solid financial results for the quarter. We had a real good quarter with revenue of $2.19 [ph] billion. The team did a great job in relieving some of the pent up demand from my customers for the components supply and then quickly converting them to products and shipments. Our operation margin was strong, but we have still work to do to get it to our goal of 4% plus. We have all hands on deck to make this happen. I'm a little disappointed on the [indiscernible] but we’re aggressively working this down on many fronts. And for sure we are really happy with an EPS of $0.86 per share sequential and year-over-year double digit growth in all other markets. Going forward, I'm excited about the opportunities ahead of us. We are focused on growth markets with higher complexity and higher value-added products. These are the areas where Sanmina can differentiate from its peers. Operational excellent remains a priority for us. It translates into profitability and cash generation. Our pipeline is strong and we continue to foster our relationships with our customers and participate on exciting programs driving growth and stable stability in the future. Please turn to Slide 12. David provided some comments about the overall outlook for the company. Now I'd like to provide some more additional color around the end markets and that gives us some confidence in our ability to achieve our second quarter outlook and growth in fiscal year 2019. Communications Networks, which is made up of wireless network and optical products was 36% of our total revenue over 13% sequentially and 15% from the first quarter in the prior year. This exceeded our expectations as we were able to source and procure components needed to build…

[Operator Instructions] And your first question comes from the line of Ruplu Bhattacharya from Bank of America. Your line is open.

Hi, thanks for taking my questions and congrats on the quarter and on the strong guide and also Dave congrats on a long and successful career at Sanmina.

Thank you, Ruplu.

So Michael, my first question is just talking about the Communications segment, can you give us your thoughts heading into the March quarter, maybe on the relative strength of wireless versus optical versus networking and you guys are strong in 5G build, so can you just talk about what you're seeing in terms of opportunities in 5G?.

Yes for sure. Well first of all generally speaking, as I said on the call is that a lot of the drive is being done by wireless broadband and when you start dissecting the market up, the wireless is linked to the broadband, is linked to the optical. And, so when we look at it, we just see generally speaking, that the market is firing on all cylinders, every one of our customers. We've got in the 5G, we're doing prototypes, we're shifting preproduction and we'll be there. We're on many of the new programs and we're going to be there ready as it really takes off for full production and those various reports when that will come to fruition but we are ready for this.

Okay, that's helpful. And then my second question is, you've guided fiscal 2019 revenues to grow stronger than we had expected at low double digits. In the last couple of years you've have had the linearity between first half and second half has been such that the second half has been stronger than the first half. First quarter for you was strong and you're guiding 2Q as strong as well, do you think that linearity between first half, second remains and the second half can be stronger than the first half?

Yes, I'll take that one Ruplu. So I think as we said through the call here is that in the first quarter of this year we did see a significant pent up demand that we were able to satisfy. I know that you know that we've been talking about this over a number of quarters that there is this demand requirement. We've had a strong pipeline that we've been able to satisfy with the - by being able to get some of the supply constraints satisfied in terms of parts that our team did, so that helped us strongly in the in the first quarter. As far as the rest of the year, we're – as we mentioned cautiously optimistic about getting into the low teens for the full year and so we're kind of looking at it at this point that way because we still see supply constrained environment has not totally put us, as I would say in golfing terms, out of the woods yet, but I'd say that's where we are now. I don't know Michael if you want to?

I think we've just got to get through this quarter and get a better idea and see how that, how it transpires, but obviously we feel what did you - we are cautiously optimistic.

Okay, that's helpful again. And then my last question is, can you give us your general thoughts on China, how levered are you, I think 20% of revenue comes from China, but I mean, are you seeing any slowdown there or just your general thoughts on the economy there and your opportunities in the Chinese marketplace? Thanks.

Yes, we don't see much change for us. Obviously there is some talk because of tariffs and people moving around, but we haven't seen much goal [ph]. I think everybody is sort of a little bit wait and see and see how it goes over the next six months. We feel pretty happy with where we are with China.

Okay, great. Thank you so much for taking my questions.

Thank you, Ruplu.

Thanks.

And your next question comes from the line of Jim Suva from Citi. Your line is open.

Thank you very much. Your outlook for 2019, again I think you said low teens growth, it's been looking back in history really not that strong. So first of all, do you have the capacity for it or you're just going to run extra shifts or it seems like you have a CapEx which is pretty normal, how should we think about that? And then I guess more fundamentally, what really kicked in here to facilitate such growth, is it the 5G build out, is it optical, what really kicked in to allow this growth really to see multiple quarters of growth beyond what we just experienced this quarter?

Okay, I think we said a couple times the pent up demand. We could have - in earlier quarters we could have shipped what we could've shipped if we'd have got all the components, so there is some pent up demand. With regards to your question capacity, we've been spending a lot time on operational excellence in this company, so we clean up capacity. The CapEx that we buy is more efficient. We put in more automation and so it's sort of hard to compare to prior years. As we go we're getting better utilization. We've been more selective of the products that we put in different locations. So before we would have, before we were probably not selective of where these products went and now we are. So all in all we think we're in a good position for this year to fulfill any sort of demand our customers throw at us, subject to getting all the components as we say. Going back to what I said earlier, our team we were ahead of the game a little bit I think. Our team started really drilling down getting commitments from suppliers and I think we've seen some benefits to that in our global supply demand team.

Great and then last question, on your revenue by end market slide, Slide number 5 that's some very good detail about your year-over-year growth. When we look ahead realizing that sequentially coming off such a strong quarter all the markets you forecasted to be down, which of those should be kind of up year-over-year, how should we think about, it seems like cloud will be a little more challenged from some one time purchasing but what about like Industrial which traditionally has been a lot more stable but you're seeing very strong growth there?

Yes, I think the way we're looking at this with our guidance Jim, on the low teens is that if things play out as we expect that pretty much all of these end market segments we've got here should be up.

Great, thank you very much for the details.

You're welcome.

Thanks.

And your next question comes from the line of Christian Schwab from Craig-Hallum Capital. Your line is open.

Hey congratulations guys on a great start Mike. My question is it relates to the pent up demand that we saw in the most recent quarter, is there any way to quantify what a modest loosening of some of the components led to in revenue, I mean was it measured in hundreds of millions?

Well, I didn't really look at it that way. I would say the quarter was good not only because of the pent up demand. There were a lot of other projects I think we said in what I spoke about that we had a lot of new prototypes and not new eventually went to production its sort of hard to quantify that.

Yes, we haven't broken it specifically. We know by customer where we were being - where the pent up demand was coming from because we've been working with initially the supply base and then actually in tandem with the customers to get the part. So we haven't gone and just quantified that between the two, but it was - we're trying to give you a sense for what was the predominant thing that we saw.

That being said, it was still you know even with the pent up demand, it was still a good quarter and even without that.

Yes, fabulous. Could you give granularity maybe by segment then where you, where the greatest pent up demand was in the supply chain, whether it was cloud or industrial or communications can you help us color there. I say that because your [indiscernible] that $780 billion. In my model doesn't go back far enough for me to see that number again.

I think, I mean again we haven't looked at it that way, but I would say probably communications probably was one what we had the more pent up demand and that would probably make some sense if you think about it.

Well, that was one area. We also did have it also in our industrial piece, but we were also ramping some programs as Michael mentioned that went to volume in medical or been going to volume in the medical. And the same thing as I mentioned on the earlier part, we did have the new Tier I cloud service provider that we were ramping through Q1 as well. So in terms of the pent up demand it's probably Communications and most…

Yes, new projects.

Regarding the cloud server customer is that something that you anticipate to kind of haven't been evenly ramp or is that something that follows kind of typical cloud, data center builds which is very big and then kind of digest [ph] and then could be built again, how should we be thinking about that?.

Yes, I think you summarized it well for us. Yes, at typical cloud you get a big project and then goes away then you get another one and that sort of seems to how it works.

Okay, perfect, congratulations. Great quarter and good luck David.

Thanks Christian.

And we've got time for one more question.

And your final question comes from the line of Mitch Steves from RBC Capital Markets. Your line is open.

Thank you, guys for taking my question. I just wanted to kind of clarify the largest segment you guys have and you guys kind of bundle industrial, medical, defense, auto, is there any way to kind of give us a little bit more of a breakdown of what you guys saw within those 4 segments in terms of what was growing faster and the others particularly since it was up 34%?

Yes, we don't - as you know Mitch, we don't break that down specifically any further than what we've provided you here. I mean, as we've said on this call, we've given you some - through some of the other questions in the prepared remarks, some indication of what's going on in there, but we're not for various reasons breaking it down any further.

Okay and then in terms of the commentary of everything being up, is it fair to assume that all four of those top markets are also going to be up year-over-year?

Yes, we - right now we would expect indications are that they would be up given what - given how strong our first quarter was.

Yes, I think so yes.

Got it. Thank you.

Thank you and welcome. Okay, folks thank you everybody for joining the call today and we look forward to speaking I guess in another three months and hopefully enjoy that call as well. Thanks a lot.

Thank you.

This concludes today's conference call. You may now disconnect.