Sanmina Corp

NASDAQ:SANM

Earnings Call Analysis

Sanmina sees revenue growth amidst market stabilization

In the third quarter, Sanmina reported a revenue of $1.84 billion, marking a sequential increase of 0.4%, largely driven by an 8.3% rise in the communications networks and cloud infrastructure markets【6:0†source】【6:4†source】. Margins were slightly down, with non-GAAP gross margin at 8.5% and operating margin at 5.3%【6:0†source】. For Q4, Sanmina expects revenue between $1.9 billion and $2 billion and non-GAAP EPS between $1.30 and $1.40【6:2†source】【6:7†source】. The company anticipates fiscal year 2025 to be a growth year, particularly in end markets like cloud infrastructure, defense, and aerospace【6:4†source】【6:2†source】.

A Solid Quarter Amidst Challenges

In the third quarter of fiscal 2024, Sanmina Corporation reported a revenue of $1.84 billion, meeting its earlier guidance of between $1.8 billion and $1.9 billion. This represents a modest sequential growth of 0.4%. The revenue bump was primarily driven by a notable increase of 8.3% in the communications networks and cloud infrastructure segment, which offset declines in the industrial and automotive markets. The results indicate that while Sanmina is navigating market challenges, it is also finding areas of growth.

Margins and Profitability Metrics

Sanmina's non-GAAP gross margin stood at 8.5%, just below the midpoint of its forecast range. This marks a decline of 40 basis points sequentially and 10 basis points year-over-year. As for operating income, the non-GAAP operating margin was reported at 5.3%, aligning with the company's short-term target of 5% to 6%. Non-GAAP earnings per share (EPS) also met expectations at $1.25, based on approximately 57 million shares outstanding.

Segment Performance Insights

Breaking down the performance by segment, the Integrated Manufacturing Services (IMS) revenue was approximately $1.48 billion, which reflects a sequential increase of 1.1%. However, the Custom Product Solutions (CPS) revenue fell to $388 million, a drop of 2.5% sequentially, mainly due to delays in two programs that affected delivery timelines. These delays also impacted the CPS gross margins, which were down 140 basis points sequentially to 11.5%. Optimistically, CPS margins are expected to rebound in future quarters as the issues have been resolved.

Strong Financial Position

At the end of Q3, Sanmina reported cash and cash equivalents totaling $658 million, with no outstanding borrowings on its $800 million credit facility, leaving a strong liquidity position of approximately $1.5 billion. The company highlighted its focus on cash flow management, with cash flow from operations reported at $90 million for the quarter. This brings the year-to-date total to $288 million, marking a year-over-year improvement of $130 million.

Future Guidance and Expectations

Looking ahead to Q4, Sanmina has increased its revenue guidance to a range of $1.9 billion to $2.0 billion, indicating a 6% sequential increase at midpoint. The company expects non-GAAP gross margins to range from 8.3% to 8.8% and operating margins between 5.3% and 5.7%. Non-GAAP EPS is projected to be between $1.30 and $1.40 based on approximately 56 million shares outstanding. Management expressed confidence in returning to growth in fiscal year 2025, bolstered by stabilization in customer demand and continued investments in high-growth sectors.

End Market Diversification and Strategy

Sanmina has been strategically investing in faster-growing markets - specifically cloud infrastructure, defense and aerospace, and digital health. While the company continues to face softness particularly in automotive and industrial sectors, they have seen positive trends in demand for communication networks and cloud applications related to AI upgrades. The diversified customer base, which accounted for approximately 49.7% of revenue from the top ten customers, plays a crucial role in mitigating risks.

Conclusion: Cautiously Optimistic Outlook

In summary, Sanmina has shown resilience amidst a challenging environment, maintaining its financial stability while adapting to market shifts. The fourth quarter guidance reflects a cautiously optimistic outlook, expecting stabilization and growth in demand. While near-term challenges persist, the groundwork laid in high-margin sectors and the emphasis on cash flow management position Sanmina for potential growth in the coming year, making it a company to watch closely.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Sanmina Corporation Third Quarter Fiscal 2024 Earnings Conference Call. This call is being recorded on Monday, July 29, 2024. And I would now like to turn the conference over to Paige Melching. Please go ahead.

[Paige Bombino, executive]

Thank you, Anna. Good afternoon, ladies and gentlemen, and welcome to Sanmina's third quarter fiscal 2024 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, executive]

Good afternoon.

[Paige Bombino, executive]

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

[Jonathan Faust, executive]

Good afternoon.

[Paige Bombino, executive]

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 our presentation and take note of our safe harbor statement. During this conference call, we may make projections or other forward-looking statements regarding 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 projected 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 this earnings release, the earnings presentation, the conference call or the Investor Relations section of our website, whether as a result of new information, future events or otherwise, unless otherwise required by law.

Included in our press release and slides issued today, we have provided you with statements of operations for the third quarter ended June 29, 2024, 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, noncash stock-based compensation expense, amortization expense 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 would also like to let investors know that Samina will be participating in the Jefferies Semiconductor IT Hardware and Communications Conference at the end of August and Citi's 2024 Global TMC Conference at the beginning of September.

I'd now like to turn the call over to Jure.

[Jure Sola, executive]

Thanks, Paige. Good afternoon, ladies and gentlemen, and welcome, and thank you all for being here with us today.

First, I would like to take this opportunity to recognize Sanmina leadership team and our employees for doing a great job. So to you Sanmina's team, thank you for your dedication and delivering excellent service to our customers, and let's keep it up.

Now let's go to our agenda for today's call. We have Jon, our CFO, to review details of our results for you. I will follow up additional comments about Sanmina results and future goals, and Jon and I will open for question and answers. And now I'd like to turn this call over to Jon. Jon?

[Jonathan Faust, executive]

Great. Thank you, Jure, and good afternoon, ladies and gentlemen, and thank you for joining us here today.

Before we go through the financial results, I want to thank the entire Sanmina team for their hard work and dedication and for delivering results in line with our outlook.

Now please turn to Slide 5 to discuss the P&L highlights. Third quarter revenue was $1.84 billion, in line with our outlook of $1.8 billion to $1.9 billion, and up 0.4% sequentially. We are beginning to see customer inventory absorption improve as the communications networks and cloud infrastructure end market grew 8.3% sequentially, partially offset by declines in the industrial and automotive end markets.

Non-GAAP gross margin was 8.5%, just short of the midpoint of our outlook and down 40 basis points sequentially and 10 basis points compared to the same period last year, driven by unfavorable mix, which I will comment on in more detail on the next slide.

Non-GAAP operating expenses were $60.2 million, within the guided range. Non-GAAP operating margin was at the low end of our outlook at 5.3%, down 10 basis points sequentially and 40 basis points compared to the same period last year, driven by the lower gross margin that I referenced earlier.

Our operating margin continues to be in line with the 5% to 6% short-term target range that we have previously communicated.

Non-GAAP other income and expense was $7.7 million, favorable to our guidance of approximately $12 million. This was driven by our strong cash flow results as we generated higher interest income and incurred less interest expense.

Non-GAAP earnings per share came in at $1.25 based on approximately 57 million shares outstanding on a fully diluted basis and in line with our outlook.

Now please turn to Slide 6 to discuss the segment results. IMS revenue came in at $1.48 billion, up 1.1% sequentially, driven by growth in the communications networks and cloud infrastructure end market. IMS non-GAAP gross margin was down 10 basis points sequentially to 7.6% due primarily to unfavorable mix.

CPS revenue came in at $388 million, down 2.5% sequentially, driven mostly by short-term delays in 2 programs, which has since been resolved and will ship in the fourth quarter. CPS non-GAAP gross margin was down 140 basis points sequentially to 11.5% due primarily to the delay in the 2 programs that I just mentioned. We expect CPS non-GAAP gross margin to return to recent levels in the coming quarter.

Now please turn to Slide 7 to discuss the balance sheet highlights. Sanmina has a very strong balance sheet, which is a competitive advantage for the company, and we continue to manage it well. Cash and cash equivalents were $658 million. At the end of the quarter, we had no outstanding borrowings on our $800 million revolver, leaving us with substantial liquidity of approximately $1.5 billion.

We ended the third quarter with inventory of $1.3 billion and turns at 4.9x, which was a slight sequential improvement. As a reminder, we purchased inventory based on commitments from our customers, but we believe there is an opportunity to reduce our inventory levels even further. So that as well as increasing our inventory turns will remain priorities going forward.

Our non-GAAP pretax ROIC was 21.1% for the quarter, well above our weighted average cost of capital. We continue to have one of the strongest balance sheets in the industry with low leverage of 0.48x, which allows us to both navigate complex market environments and capitalize on long-term opportunities.

Now please turn to Slide 8, where I'll talk about cash flow and capital allocation highlights. As I have mentioned before, cash flow is a key focus area of Sanmina, and I'm pleased that we have delivered another strong quarter of cash flow performance. Cash flow from operations was $90 million for the quarter, which brings the year-to-date total to $288 million and is a $130 million improvement on a year-over-year basis.

Capital expenditures were $23 million for the quarter, adding up to $87 million for the year. As a reminder, last year, we made significant capital investments across multiple geographies and strategic end markets to position the company for future growth and new opportunities.

Free cash flow was $67 million for the quarter and now stands at $202 million on a year-to-date basis, which is up $196 million year-over-year.

During the quarter, we repurchased 845,000 shares for approximately $55 million, which adds up to a total of 3 million shares for approximately $162 million for the year so far. As of June 29, we had approximately $118 million left on our Board authorized plan, and we continue to repurchase shares on an opportunity basis.

Our strong cash flow performance gives us the flexibility to continue to invest in the business while also returning cash to shareholders over time as a part of a disciplined approach to capital allocation.

To conclude on the Q3 actual results, overall, it was a solid quarter as we delivered on what we said we would.

Now please turn to Slide 9, where I'll cover our outlook for the fourth quarter, which is based on what we are seeing in the market and the forecast from our customers, which are starting to trend upwards. Our outlook is as follows: revenue between $1.9 billion to $2.0 billion, which is up 6% sequentially on a midpoint basis. Now while we're not providing guidance beyond the fourth quarter, we are seeing times of stabilization and demand improvement as we look out into FY '25.

Non-GAAP gross margin of 8.3% to 8.8%, consistent with prior quarters and dependent on mix. Operating expenses of $60 million to $64 million, in line with normal levels. As our revenue starts to increase, we expect to achieve operating leverage as we have driven efficiencies in our cost structure and don't expect to make material spending increases.

Non-GAAP operating margin of 5.3% to 5.7%. We expect other income and expense to be approximately $10 million, which is in line with recent levels driven by strong cash management.

A tax rate of 17% to 18%. And to account for our India joint venture partner's interest, we estimate an approximate $3 million to $3.5 million noncash reduction to our net income.

Non-GAAP EPS in the range of $1.30 to $1.40 based on approximately 56 million fully diluted shares outstanding.

Capital expenditures to be around $30 million as we continue to invest in future opportunities and further strengthen our capabilities.

And finally, depreciation of approximately $30 million.

In summary, based on the demand signals from our customers and our fourth quarter outlook, we now expect to return to growth. We have the right set of customers and capabilities to be successful, and I'm excited about the opportunities ahead.

And with that, let me turn the call back over to Jure.

[Jure Sola, executive]

Thank you, Jon. Ladies and gentlemen, let me add a few more comments about our third quarter. And I'll also review our end markets and outlook for the fourth quarter. And I'll make a few more comments about the next year or fiscal year 2025.

Please turn to Slide 11. For the third quarter, we delivered good results, as you heard from Jon, in line with our outlook. In our focus markets, we had a nice growth in communication networks, cloud infrastructure market as we continue to see softness in automotive and industrial during the quarter. I can also tell you that we are working very closely with our customers as they are slowly burning through their inventory. We're starting to see better forecasts from some of our customers. And in this environment, Sanmina team continues to demonstrate resilience by delivering solid financial results. Overall, we are seeing stabilization in some end markets. To talk more about it, please turn to Slide 12.

As you heard from Jon, revenue for the third quarter was $1.84 billion, within our guidance. Revenue was slightly up quarter-over-quarter. Industrial, medical, defense and aerospace and automotive were 64% of our revenue. That was down 3.6% quarter-over-quarter. But for communication networks, cloud infrastructure, that was 36% of our revenue. Here, we had a nice improvement in demand, and that was up 8.3% quarter-over-quarter.

For third quarter, top 10 customers represented 49.7% of our revenue. And I can tell you that Sanmina is a well-diversified company. Regarding bookings, we had a strong bookings in the last 6 months. Book-to-bill over the last 2 quarters was 1.1:1. Mainly newer products are driving better bookings.

Please turn to Slide 13. Let me make a few more comments about our end markets. I can tell you that Sanmina has been investing in faster-growing and higher-margin end markets in the last 1 year, 1.5 years, which is cloud infrastructure, defense and aerospace, medical, automotive, industrial energy, high-density performance networks. In cloud infrastructure, core AI applications are continuing to see more opportunities driven by upgrades to cloud networks to meet AI profit for the future.

In defense and aerospace, we continue to see solid demand. We're adding more capacity in our high-technology printed circuit board fabrication business and for defense systems build. Here, mainly new programs wins should continue to drive the growth.

Our medical market is driven by digital health around medical devices in medical. We have a strong base of customers with positive trends long term driven by new opportunities in the pipeline.

In automotive, we focus around electrical vehicle, car connectivity, advanced driver assistance systems, electrical chargers. I can tell you that Sanmina is well positioned with the new projects to drive the growth for us in this segment.

In industrial and energy markets, we have solid customer base with new projects in a pipeline, good opportunities around energy generation and storage of energy, power controls and management, factory automation, and for semiconductor infrastructure, we are focused around lithography products.

AI architecture is driving opportunities for high-density, high-performance IP routing, computing and storage. And we continue to expand our optical business around advanced packaging, focused on 400 gig and 800 gig and 1.6 terabytes in development. For these markets, we see positive trends for the future.

Please turn to Slide 14. In summary, for the third quarter, our team executed well by delivering revenue of $1.84 billion, in line with our outlook. Non-GAAP operating margin at 5.3% and non-GAAP diluted EPS of $1.25, in line with our outlook. And as Jon said, we delivered a solid cash for the quarter. For the fourth quarter, visibility is getting better. For the revenue, as you heard earlier from Jon, we are guiding up $1.9 billion to $2 billion in revenue and non-GAAP diluted EPS, $1.30 to $1.40.

I am personally excited about long-term growth for Sanmina. Fiscal year '24 has been transitional year for us. We are navigating these market dynamics very well and position Sanmina for a better future. We expect that fiscal year '25 will be a growth year for our end markets. We are focused on optimizing capital structure to drive the growth in the next 2 to 3 years. That's basically '25 to '27 and beyond.

Short term, operating margin should be stable in a range of 5% to 6%. Long term, we're making improvements to drive operating margin up to 6-plus percent, driven by investments we made in our Integrated Manufacturing Solutions group and Technology Components group and products around AI, enterprise, cloud infrastructure.

In summary, our focus is to drive profitable growth in heavy regulated markets where we have competitive advantage. Again, I'm excited about our opportunities in front of us.

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.

[Operator]

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

[Ruplu Bhattacharya, analyst]

I was wondering, Jure, can you give us more details on the communications end market? What are you seeing specifically within optical, within wireless and networking? What did you see in the third quarter? And what are your expectations for the fourth quarter that you're guiding?

[Jure Sola, executive]

Well, as we said in our prepared statement, Ruplu, communication networks, cloud infrastructure grew approximately 8% plus quarter-over-quarter. We expect this market to continue to move in the right direction. Again, as I said, I think it's been driven by our high-performance network, routing IP router switches, some optical packaging systems, some of these are new programs. And also, we're starting to see pickup from some of the existing customers that they're working their inventory down, not at the level that they wanted yet and not the level that we would like to see it, but it's moving in the right direction. And some of the new programs that we're able to ship that basically last quarter, there were some challenges around getting the material and test equipment. I think we've mentioned that in our second quarter that started to move in the right direction, and we should see that to continue to move in the right direction in the fourth quarter.

[Ruplu Bhattacharya, analyst]

So maybe let's build on that point that you just mentioned. I think you talked about 2 programs that got pushed out in CPS. What caused that push out? How much was the dollar impact? And can you tell us you can market that those programs were in?

[Jure Sola, executive]

Jon, do you want to talk about it?

[Jonathan Faust, executive]

Yes. So just to touch on, so like we had said in the prepared remarks, we expect both to ship in Q4. The issues have been resolved. It's really just working with our customers. I think that aren't about Components Product group in this core.

[Ruplu Bhattacharya, analyst]

The CPS program.

[Jonathan Faust, executive]

Correct. Yes, exactly. So those who pushed out, we expect them in Q4. From a dollar perspective, Ruplu, if it was not for that, we would have been at the overall Sanmina level, a little bit above the midpoint of our revenue guide and the same for EPS. But on both fronts, the issues have been resolved, and then we expect to see the numbers in our Q4 results.

[Ruplu Bhattacharya, analyst]

And Jon, just to clarify, the sequential decline in CPS margins, was that all because of just those 2 programs? Or did you have any other impacts or any other issues impacting margins?

[Jonathan Faust, executive]

Like always, we have some puts and takes. But if you look over the last couple of quarters, we were at about 13%, right? This last quarter, we were at 11.5%. And those 2 programs combined, Ruplu, we're above the point for that impact, a little bit over. So we would have been down just slightly overall in CPS, but the majority of the impact was related to those 2 programs.

[Ruplu Bhattacharya, analyst]

Okay. Got it. Maybe for the last one, or if I can ask a little bit more detail on the IMDA segment. There are 4 different end markets there. What are you expecting for each of those end markets in the fourth quarter? How do you expect revenues to trend in the fourth quarter for these end markets?

[Jure Sola, executive]

As I said in my prepared statement, we had some softness in automotive and industrial. For automotive, at this time, we expect also the softness to continue. On industrial, I'm more optimistic. There's a lot of good programs around the energy. We'll see how we shift those out. I think opportunities are there. Medical, I would say it's flat down, we're still having an impact what happened during the COVID because we had a very strong demand there. But I like where we are in the medical side of the business with existing customers and also some of the new programs with existing and new customers that are coming up, so that is good. On defense and aerospace, we're in good position there. Demand is strong. And as I said earlier, we're also expanding and we've been investing fair amount into our circuit board fabrication for military boards, high-technology military boards, demand that is strong for us and also including system assembly. So expect that business to continue to move in the right direction.

So overall, I would say, if I had to guess today, flat, maybe slightly up.

[Operator]

And your next question comes from the line of Steven Fox from Fox Advisors.

[Steven Fox, analyst]

I have 2 questions as well. Maybe just, Jon, can you start off with talking about inventories a little bit more on your own balance sheet. You guys already have like, I would say, best-in-class inventory turns, but it sounds like you think you can do better. Can you just sort of give us a sense for how much better you could do, what's driving that? And then I have a follow-up.

[Jonathan Faust, executive]

So in terms of inventory, like I mentioned, we're at 4.9 turns overall, and from a GOI perspective, that is about 75 days. And if you go back into our history, a couple of years back, we think we can get back into the mid-60s. So we definitely think that there's opportunity there. And from a turns perspective, we're driving more towards a number like 6, right? So we did make some progress. If you look at quarter-over-quarter, sequentially, inventory dollars on an absolute basis was pretty much flat but made some progress, but more room to go on that front. So that's what we're driving from a cash conversion cycle perspective.

[Steven Fox, analyst]

And just to be clear, is that based on your own improving internal capabilities, better efficiencies? Or is that like as demand recovers, mix recovers, how much of that is like under your control?

[Jonathan Faust, executive]

Yes. It's both, Steve, at the end of the day. So certainly, customers are still working through inventory absorption, like I was mentioning at the beginning of the call, and that's a little bit different by end markets. We are seeing some improving and getting back to kind of normalized levels, but we think there's some room on that front. Then for us, we're always looking to drive efficiencies, right? So I think there's some on both sides.

[Steven Fox, analyst]

That's helpful. And then Jure, can you talk a little bit more about the book-to-bill, so 1.1 for 2 quarters in a row, you mentioned new products. Can you talk about on what's driving it? And like how much of the bookings is maybe longer term and how much maybe turns into revenues in the next few quarters?

[Jure Sola, executive]

Yes. As I said, Steve, yes, bookings for the last couple of quarters were pretty strong, 1.1:1, mainly driven by new programs. And the way we look at the bookings is really the bookings that are released to build now in the next typically 2 to 3, 4 quarters maximum, we don't put in bookings orders that are not released to be built. So that is clear. So for example, in military, we might get a contract, but there is, let's say, over 5 years, I'm just throwing out examples, Steve, $100 million. But first year is only $20 million, and that's released on a quarterly basis. We will only count bookings for what's released. We do not count for the projects that are booked but not released to build. So that's pretty clear. So what all the stuff that I'm talking about is really released to be built. And also, we started to see with our existing customers as they're developing the new programs they've been working on in the last year, 1.5 years. Those are starting to come out, and that's also helping the bookings.

So let me just go back. And overall, I know we've been going to this inventory correction. And some of our customers being affected by it. But I can tell you, things are starting to improve. I can't tell you for sure everything is going to be perfect for next 4, 5 quarters, but definitely, all the signs are moving in the right direction. And most of our customers are more optimistic about the future as they're starting to work their inventory more, I would say, next couple of quarters or rest of this calendar year than I've seen it, let's say, 6 months ago or so. So those are positive trends. And then we've got a lot of good opportunities in our pipeline that's going to drive our growth in the next couple of years, the stuff that we've been working on.

So as Jon mentioned in his prepared statement, we've been investing fair amount. So we are set up to do a lot more than what we are shipping today even, so a lot of focus internally is to grow. Good thing is that we didn't lose any customers. If anything, we've been winning some programs or [ in some ] lot of cases, the customer had multiple sources we believe we're gaining there. So a lot of positive things, but we like to wait a little bit more before we can say everything is green.

[Operator]

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

[Christian Schwab, analyst]

Last quarter, you guys talked about inventory headwinds, email and things bottoming. And now we're kind of still being impacted by pushouts and it kind of sounds like we're a little bit more guarded exactly what the customer inventories broadly across the entire business, kind of impacting the business maybe for multiple more quarters. Last quarter, I think you guys talked about an opportunity to exit this fiscal year and return to strong growth in '25. What should we be thinking about as far as a top line growth range for next fiscal year given the pushes and strong bookings momentum, nice new design wins, but ebbs and flows of real visibility from the end customer regarding demand and inventory may be remaining not crystal clear.

[Jure Sola, executive]

Yes. So Christian, let me take that one on. First of all, the last quarter, I would say that our forecast to shipments were pretty stable. When we're talking about pushouts on these small projects in our components product group, we're talking about $10 million, $15 million in revenue and a more profitable business, so it affects you a little bit, but nothing major. I would say the inventory maybe is coming down at a slower rate than what I personally thought beginning of this fiscal year. I thought the second half demand will be stronger and the inventory will be burned out at a faster rate. So inventories continue to be burned down, but it's been burned down at a slower rate. What we're saying today is that demand we're guiding up for this fourth quarter, as you heard from us $1.9 billion to $2 billion. So it's definitely a right step in the right direction. And as we both Jon and I said, if you look at the customer forecast and his ability, that's moving on a positive side. For '25 and then I'll turn it over to Jon, and he can give you his comments. We definitely feel very comfortable based on all the key customers that we have, the key markets that we focus that we will have a positive growth in '25 from the markets that we follow. So we're ready to make a commitment that we expect today to grow in '25. But we're not ready to tell you today how much we really want to go through this quarter into the fiscal year '25, so that sometimes in the first quarter of '25, I think that will be a smarter thing for us to tell you at that time what we're going to do. But we are optimistic. I like what's in front of us. I like the new programs that we won, some of the new programs that just basically we just talked about it, what drove our communication up was mainly new program. and that's going to help us this quarter, next quarter and hopefully longer and some of the new programs that we have coming up. So that's my commitment today, but I can tell you again that we believe what we see today is that the '25 will be a growth year, but I'm not ready to tell you percentage today till about 90 days from now. Jon?

[Jonathan Faust, executive]

Yes, just to add to what Jure was saying, Christian, and the level set on some of the numbers. So if you think about our Q3 guide, so we came in just shy of the midpoint. We had guided to $1.8 billion to $1.9 billion, would have been a midpoint of $1.85 billion. If not for those 2 programs that I mentioned before, like when I was answering Ruplu's question, we would have been slightly above that and be about a 1% sequential improvement. If you think about the Q4 guide of $1.9 billion to $2 billion revenue, the midpoint of that would be about a 6% sequential increase, right? So we do expect to be getting on the correct trajectory from that perspective. And inventory-wise, when we started this fiscal year, we are at $1.7 billion. We're now down to about [indiscernible], and we've improved our turns as well. And like I was mentioning just a little bit ago, we think that there's more opportunity to work through that inventory on the customer side and then certainly efficiencies that we're going to be driving too to get turns back up. So as we look ahead, we definitely see Q4 as that return to growth. we're going to start to make that progress into the next fiscal year.

[Jure Sola, executive]

Operator, it looks like we don't have any further questions. I would like to thank everyone for joining us today, and we look forward to speaking with you again in a few months to discuss our fourth quarter and fiscal year 2025. Thank you very much.

[Jonathan Faust, executive]

Thank you.

[Jure Sola, executive]

Bye-bye.

[Operator]

This concludes today's call. Thank you for participating. You may all disconnect.