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Sanmina Corp  (SANM -0.07%)
Q1 2019 Earnings Conference Call
Jan. 28, 2019, 5:00 p.m. ET


Prepared Remarks:


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 speaker's 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.

Paige Bombino -- Vice President, Investor Relations

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 Relation 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 operation 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, risk 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.

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 for 17 years and leaves behind an outstanding record as a corporate leader, finance executive and a 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.

David Anderson -- Chief Financial Officer

Thanks, Michael.

Michael Clarke -- Chief Executive Officer

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


David Anderson -- Chief Financial Officer

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 were down 50 basis points to 3%, largely as a result of our ability to contain our cost while delivering a higher level of sales for the quarter. Operating margin was 3.9%, which was up 80 basis points sequentially at the high end of our outlook and up 120 basis points compared to Q1 of last year. We made progress in Q1 toward our goal of getting our operating margins back to the 4% range as quickly as possible.

Other income and expense of $14.1 million was up $7.2 million when compared with last quarter and up $11.1 million from the first quarter of last year. This sequential and year-over-year increase in OIE (ph) is largely attributed to increased borrowings on our credit facility needed to fund higher levels of inventory that is supporting our customer demand requirements as we work through ongoing supply constraints on certain component parts.

The tax rate for the quarter was 17.5% of pre-tax income, which was slightly better than our expectations of 18% as a result of a slightly more favorable geographic distribution of our profits. We earned $59.2 million in net income with our non-GAAP diluted earnings per share coming in at $0.83, which was above the high end of our outlook for the first quarter.

Non-GAAP diluted earnings per share were up $0.23 or 40.2% from Q4 and up $0.35 or 72.7% from Q1 of last year. This was based on 70.9 million shares outstanding on a fully diluted basis for Q1.

Please turn to slide 5. I will now give you some color around our end market segments for the first quarter. Fiscal 2019 is off to a solid start with each of our end markets achieving double-digit growth on a sequential and year-over-year basis. Communications networks were $779.7 million or 35.6% of Q1's total revenue. This was up 13% sequentially and up 14.9% year-over-year.

Industrial, automotive, defense and medical was $1.18 billion or 54.1% of revenue for the quarter. This was up 18.3% on a sequential basis and up 33.5% compared to the same period a year ago. Growth was solid across all four sub-segments on a sequential and year-over-year basis.

Cloud solutions consists of cloud computing, storage systems, point-of-sale, casino gaming and set-top boxes. This segment was $225.8 million or 10.3% of revenue in the first quarter, up 20.9% sequentially and up 25.3% compared to the same period a year ago. Sequential growth was largely driven by shipments to our new Tier 1 cloud service provider that continued to ramp during the first quarter.

A contributor to the sequential and yearly growth across a number of our end market segments was a slight stabilization of component lead times and our team's ability to partner with our customers and suppliers to satisfy our customers' pent-up demand requirements.

Please turn to slide 6. The integrated manufacturing solutions segment represents printed circuit board assembly and test, the final system assembly and test, as well as direct order fulfillment. As you can see from the graph on the left, the IMS segment revenue was up $239 million from last quarter at $1.79 billion.

Our gross margin was down 10 basis points to 6.2% compared to the prior quarter. The full profit contribution flow-through from the increased revenue growth in the segment was partially offset by the timing of the collectability of certain tariff cost as well as the collectability of other expected cost recoveries from our customers.

On the right is our second segment: Components, Products and Services. Components include printed circuit board fabrication, backplane assemblies, cable assemblies, enclosures, precision machining, and plastic injection molding.

Products include computing and storage products, defense and aerospace products, memory and SSD modules, as well as optical and RF modules. Services include design and engineering as well as logistics and repair services. In aggregate, the revenue for this segment was up $74 million to $456 million with gross margin up 230 basis points from Q4 to 8.9%.

The sequential CPS segment gross margin improvement was mainly attributed to a $12.5 million non-cash out-of-period adjustment booked in the fourth quarter of fiscal 2018, this adjustment related to upfront contract cost within one of our products' businesses that were capitalized in the inventory and had accumulated during fiscal 2016 through the third quarter of 2018.

Please turn to slide 7. Here, we are showing you the quarterly trend in our key non-GAAP P&L metrics. Revenue was up 16.6% from last quarter and up 25.4% over Q1 of last year to $2.19 billion. Gross profit increased 22.2% from last quarter to $151.2 million. Gross margin of 6.9% was up 30 basis points from last quarter.

Our operating profit increased 46% from last quarter to $85.8 million. This led to operating margin of 3.9%, an 80 basis point improvement compared to Q4. We saw an improvement in our operating margins in Q1 in line with our expectations, but this was not in line with the expected contribution margin flow-through on the incremental revenue we shipped in Q1.

We continue to drive toward our goal of getting operating margins back to the 4% range as quickly as possible. Non-GAAP diluted earnings per share grew 40.2% sequentially to $0.83. The 40.2% sequential improvement resulted from the increased volume and cost contained in Q1 as well as a negative impact of the out-of-period adjustment on non-GAAP diluted earnings per share in the fourth quarter of 2018.

Please turn to Slide 8. Our balance sheet remains strong. Our cash and cash equivalents were $409.3 million at the end of the quarter. Cash was down $10.2 million from the previous quarter. Accounts receivable was up $167.3 million. Contract assets were $419 million and inventory was down $319.8 million. We'll talk more about contract assets and the inventory in a moment.

From a liability standpoint, we had a $15.5 million decrease in accounts payable during the quarter. Our short-term debt was up $115 million from last quarter to $708.4 million. Our short-term debt includes the $375 million notes due in June of 2019 that are classified as current on the balance sheet.

On November 30th, we amended our $500 million secured revolving credit facility to provide for a fully committed $375 million secured delayed draw term loan, which can only be used to fully satisfy the Company's 4.375% senior secured notes that are coming due in June of 2019.

The revolving commitments under this amended credit agreement expire on November 30th, 2023. In conjunction with the setting up of this term loan, we have entered into forward interest rate swap agreements that effectively convert our variable interest rate obligations to fixed interest rate obligation through December 1st, 2023.

Through December 29th, 2018, we had entered into interest rate swaps with an aggregate notional amount of $200 million that had an effective interest rate of approximately 4.5%. In the first quarter, we repurchased approximately $7 million worth of common shares. Specifically, we repurchased approximately 273,000 shares at an average share price of $25.68.

We have approximately $101 million available under our Board-authorized repurchase plan that is subject to compliance with our debt covenants. As of the end of the quarter, we had $14 million in long-term debt, and our gross leverage was approximately $2.2 million based on our total debt. Overall, our balance sheet and capital structure remain in great shape.

Please turn to slide 9. Here, we are showing you the quarterly trend in our balance sheet metrics. Cash was consistent with prior quarters in the $400 million range. Cash flow from operations for the quarter was a usage of $78.4 million. Net capital expenditures for the quarter were $36.6 million, which was down from the same quarter of last year and slightly below our expectations for Q1 of this year. We ended the quarter with negative free cash flow of $115 million, which was down compared to the prior quarter and missed our expectations.

Our cash generation for the first quarter was negatively impacted by the continued buildup in our contract assets and the inventory to support our customers' requirements during this supply constrained environment. In the upper-right quadrant, we are showing the trend in the inventory turn and dollars with the first quarter of 2019 shown on the old versus new basis.

As I mentioned on last quarter's call, Sanmina adopted the new revenue recognition standard referred to as ASC 606 on a modified retrospective basis. As I previously indicated, we did not expect the adoption of ASC 606 to materially impact our revenue or earnings per share, which was the case for our first quarter 2019.

However, ASC 606 did have an impact on our balance sheet. With the recording of revenue on an over-time basis for the majority of our non-product revenue stream, we are required to reflect work in progress and finished goods inventory along with the profit element as contract assets, which is essentially unbilled receivables.

As a result, at the end of Q1, we had $419 million of contract assets and $1,054,000,000 of inventories on our balance sheet. For comparative purposes, from an inventory turns perspective, we've provided the inventory turns calculation for Q1 under the old methodology and the new methodology.

As you can see, our inventory dollars under the old methodology were up $69 million sequentially to $1,443,000,000, and our turns were basically flat at 5.6 times. Inventory continues to be a challenge, largely driven by ongoing material shortages on certain commodities, such as resistors, capacitors and discrete semiconductors. While we saw a slight stabilization of lead times during Q1, lead times are still extended compared to a normal market.

As we indicated on our last call, we still anticipate the supply environment will remain constrained at least through the first half of calendar 2019 and possibly throughout 2019. We continue to work with our customers to better understand their demand outlook so that we can plan for the requirements with our suppliers.

Our supply chain organization has done a good job partnering with our customers and suppliers to secure constrained parts to help meet our customers' pent-up demand requirements, which was instrumental in our ability to ship $263 million above the high end of our guidance despite the supply constrained environment.

We will continue to work with our customers and suppliers to maximize the fulfillment of our customers' demand while also working on addressing our elevated inventory levels and the impact on our cash flow. We also expect to continue to make improvements in our operational efficiencies and materials execution in the areas we can control in spite of the supply constrained environment.

In the lower-left quadrant, we're showing cash cycle days, which combines our cycle time for inventory, contract assets, accounts receivable and accounts payable. Overall, based on the old methodology, cash cycle time was basically flat sequentially at 47.1 days, which was largely driven by a reduction in accounts payable days outstanding that was driven by unfavorable supplier payment terms mix and was offset by a reduction in the inventory days, and days sales outstanding was driven by the higher sales volume in Q1.

Finally, pre-tax ROIC increased by 6.6 percentage points to 24.2% from the prior quarter. Compared to the first quarter of last year, pre-tax ROIC improved 9.3 percentage points.

Please turn to slide 10. I will now share with you our outlook for the second quarter of fiscal 2019. Our view is that revenue will be in the range of $1.9 billion to $2 billion. GAAP diluted earnings per share will be between $0.59 to $0.69. This includes estimated stock-based compensation expense of $0.11 per share. On a non-GAAP basis, we expect that gross margin will be in the range of 7.1% to 7.6%. Operating expense should be $67 million to $69 million.

This leads to an operating margin in the range of 3.7% to 4.1%. We expect that other income and expense will be in the range of $10.5 million to $11.5 million, and our tax rate should be around 17.5%. And we expect our fully diluted share count to be around 71.5 million shares, plus or minus 0.5 million shares. When you consider all of this guidance, we believe that we will end up with non-GAAP earnings per share in the range of $0.70 to $0.80.

For your cash flow modeling, we expect that capital expenditures will be around $40 million, while depreciation and amortization will be around $30 million. We expect net capital expenditures for 2019's fiscal year to remain in our most recent historical range of $110 million to $120 million. We expect to generate positive cash flow from operations in Q2 as we continue to drive better materials planning and execution, partnering with our customers in this supply constrained environment that is expected to lead to a reduction in our investment in working capital.

Overall, we delivered solid results in the first quarter of fiscal 2019. Our revenue exceeded our outlook and was up 16.6% sequentially. We were at the high end of our outlook on operating margins at 3.9%, and non-GAAP diluted earnings per share of $0.83 exceeded the top end of our outlook by $0.09.

We don't typically provide full year guidance. However, given the continuing supply constrained environment and our solid result from the first quarter, some of which was driven by pent-up demand, we feel it is important to provide you with our view on fiscal 2019's full year sales growth.

Based on our current pipeline, we are cautiously optimistic that fiscal 2019 revenue will grow in the low teens. We will continue to focus on our operational execution, productivity and cost structure that will help drive us back to the 4% operating margin range as quickly as possible.

I would now like to say a few words about my retirement plans. Deciding to retire is not an easy decision. While I've spent the last 17 years of my life working with and supporting the Sanmina family, it is now time for me to start the next chapter of my life and focus more of my time on my other family. I have thoroughly enjoyed my career at Sanmina.

Sanmina has come a long way since I first joined the Company back in 2002, and it has been a privilege to work alongside such a talented and dedicated Sanmina team over all these years. I thank Jure, Michael, Sanmina's Board and all of Sanmina's employees, both past and present, for all their support during my tenure at Sanmina.

I am fully committed to ensuring an orderly transition to the new CFO, and I am confident that the Sanmina team will continue to create value for its customers, suppliers, employees and shareholders under Michael's and Jure's strong leadership.

I will now turn the call back over to Michael to further comment on our outlook for 2019.

Michael Clarke -- Chief Executive Officer

Thanks, Dave. Thanks. Good job. As Dave mentioned, we delivered solid financial results for the quarter. We had a real good quarter with revenue of $2.3 billion. The team did a great job, leading some of the pent-up demand from our customers for the component supply and then quickly converting them to products and shipments.

Our operational margin was strong, though 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 inventory, but we're aggressively working this down on many fronts. And for sure, we will be happy with an EPS of $0.86 per share with sequential and year-over-year double-digit growth in all our end 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 areas where Sanmina can differentiate from its peers. Operational excellence 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 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 network, which is made up of wireless, network and optical products, was 36% of our total revenue, up 13% sequentially and 15% from the first quarter in the prior year. This exceeded our expectations as we're able to source and procure components needed to build and ship products. Our customer demand remains strong in the communications network area as mobile broadband drives growth, coupled with the rollout of 5G in 2019 and beyond.

We expect this (ph) quarter to be somewhat down based on the typical seasonality plus coming off a very strong first quarter.

Industrial, defense, medical and automotive was 54% of our total revenue, up 18% sequentially and over 33% from the first quarter in the prior year. These markets were all up double-digit over the last quarter. We benefited from programs we won last year that are moving into volume production. We continue to diversify within these markets, and our customers are recognizing our capabilities and the value add we can provide them.

We believe we are well positioned in the right markets for the long term. We expect that the second quarter to be down primarily coming off a strong first quarter. Cloud solutions was 10% of our total revenue, up 20% sequentially and 25% from the first quarter in the prior year. This is up more than we expected as a result of a Tier 1 customer program we started to ship and completed in the quarter. We're not expecting the demand to repeat, so we expect the second quarter to be down.

With all that being said, overall, while we expect to be down sequentially, across all end markets, we are currently operating, however, at a higher run rate and expect to be up on a year-over-year basis.

Operational excellence, as I mentioned in our last call, is a major focus to optimize execution and operational consistency. As you saw from our results in the first quarter, we're able to expand our operating margin by 80 basis points to 3.9%, and we are well on our way to our 4% plus goal. Our global supply chain organization did a fantastic job in creating critical components in the quarter and will continue this fine work.

We have an excellent footprint, global capabilities backed by one IT system, cost-effective manufacturing solutions, which we'll continue to improve on. This has enabled us to have a healthy pipeline with a positive book-to-bill. We are optimistic about our profitable growth in 2019.

Please turn to Slide 13. In summary, Q1 was a great start to fiscal year 2019. We delivered a 3.9% operating margin and we'll continue to build on this. We have a strong demand across all end markets with a healthy pipeline. We have a good outlook for the second quarter, $1.9 billion to $2 billion, and a non-GAAP EPS of $0.70 to $0.80 a share.

And as Dave outlined, we expect fiscal year 2019 to grow in low teens. And we continue to make operational improvements that support our overall financial performance and goals. At this time, I really wish to thank our employees for the great quarter and continued dedication to Sanmina, to our customers for their support and to our shareholders for their continuous confidence in Sanmina.

With this, operator, I would like to open it up, the call for questions.

Questions and Answers:


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

Ruplu Bhattacharya -- Bank of America -- Analyst

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.

David Anderson -- Chief Financial Officer

Thanks, Ruplu.

Ruplu Bhattacharya -- Bank of America -- Analyst

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?

Michael Clarke -- Chief Executive Officer

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 going to the broadband, is going to the optical. And so when we look at it, we just see, generally speaking, that the market is firing on all cylinders nearly on every one of our customers.

Regarding the 5G, we're doing prototypes. We're shipping preproduction, and we'll be there. We're on many of the new programs, and we're going to be there ready. I think it really takes off for full production, and there's various reports when that will come to fruition, but we're there ready for this.

Ruplu Bhattacharya -- Bank of America -- Analyst

Okay, that's helpful. And then my second question is you've guided fiscal '19 revenues to grow stronger than we had expected at low double-digits. In the last couple of years, you've had -- the linearity between first half and second half had 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 half remains and the second half can be stronger than the first half?

David Anderson -- Chief Financial Officer

Yeah. 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. Now 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 had helped us strongly in the first quarter. As far as the rest of the year, we're -- as I 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.

And I don't know, Michael, if you have something to add.

Michael Clarke -- Chief Executive Officer

Well, I think we've just got to get through this quarter and get a better idea and see how that all transpires, but obviously, we feel, what did you call it?

David Anderson -- Chief Financial Officer

Cautiously optimistic.

Michael Clarke -- Chief Executive Officer

Be cautiously optimistic.

Ruplu Bhattacharya -- Bank of America -- Analyst

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.

Michael Clarke -- Chief Executive Officer

Yeah, we don't see much change for this. Obviously, there is some talk because of tariffs and people moving around, but we haven't seen much growth. I think everybody's sort of a little bit, wait and see and see how it goes over the next six months. So we feel pretty happy with where we are now with China.

Ruplu Bhattacharya -- Bank of America -- Analyst

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

David Anderson -- Chief Financial Officer

Thanks Ruplu.

Michael Clarke -- Chief Executive Officer



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

Jim Suva -- Citi -- Analyst

Thank you very much. Your outlook for 2019 again have -- 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? Are you just going to run extra shifts? Or it seems like you have that 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?

Michael Clarke -- Chief Executive Officer

Okay, I think we said it a couple of times, the pent-up demand, we could have -- in early quarters, we could have shipped what we could have shipped if we've got all the components. So there is some pent-up demand. And regards to your question, capacity, we're doing -- we've been spending a lot of time on operational excellence in this company. So we're freeing up capacity. The CapEx that we buy is more efficient. We put in more automation in.

So it's sort of odd to compare to prior years. As we go, we're getting better utilization. We're being more selective of the products that we put in different locations. So before, we were probably not selective of where these products went in. 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 chain.

Jim Suva -- Citi -- Analyst

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? It seems like cloud will be a little more challenged for some onetime purchasing, but what about like industrial, which traditionally has been a lot more stable but you're seeing very strong growth there?

David Anderson -- Chief Financial Officer

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 expected, all of these end market segments we've got here should be up.

Jim Suva -- Citi -- Analyst

Great. Thank you very much for the details.

Michael Clarke -- Chief Executive Officer

You're welcome.


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

Christian Schwab -- Craig-Hallum Capital -- Analyst

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?

Michael Clarke -- Chief Executive Officer

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 was a lot of other projects I think we said in what I spoke about that we had a lot of new prototypes and not that eventually went to production. And so they're hard to quantify, that.

David Anderson -- Chief Financial Officer

Yes, we haven't broken it out 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 parts.

So we haven't gone and just quantified that between the two, but we're trying to give you a sense for what was the predominant thing that we saw.

Michael Clarke -- Chief Executive Officer

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

Christian Schwab -- Craig-Hallum Capital -- Analyst

Oh, yeah, fabulous. Could you give granularity maybe by segment then where the greatest pent-up demand was in the supply chain? Whether it was cloud or industrial or communications? Can you help us with color there? I say that because your communications networks business had $780 million and my model doesn't go back far enough for me to see that number again, that big.

Michael Clarke -- Chief Executive Officer

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

David Anderson -- Chief Financial Officer

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 have been going to volume in the medical and the same thing, as I mentioned, on the earlier part.

We did have the new Tier 1 cloud service provider that we were ramping through Q1 as well. So in terms of the pent-up demand, it's probably communications and...

Michael Clarke -- Chief Executive Officer

And new projects.

Christian Schwab -- Craig-Hallum Capital -- Analyst

Okay, and if I may, last, regarding the cloud server customer. Is that something that you anticipate to kind of have an evenly ramp? Or is that something that follows kind of a typical cloud data center builds, which is very big and then kind of digest and then could be built again? How should we be thinking about that?

Michael Clarke -- Chief Executive Officer

Yes, I think you summarized it well for us. Yes, it's typical cloud. You get a big project and then it goes away, then you get another one, and that sort of syncs (ph) to how it works.

Okay. Perfect. Congratulations on a great quarter and good luck David.

David Anderson -- Chief Financial Officer

Thanks, Christian.

Michael Clarke -- Chief Executive Officer

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.

Mitch Steves -- RBC Capital Markets -- Analyst

Hi guys, thanks for taking my question. I just wanted to kind of clarify the largest segment you guys have. I mean, you guys kind of bundled industrial, medical, defense, auto. Is there any way you can can kind of give us a little bit more of a breakdown on what you guys saw within those four segments in terms of what was growing faster than the others, particularly since it was up 34%?

David Anderson -- Chief Financial Officer

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, we -- as we've said on this call, we've given you some -- through some of the other questions and the prepared remarks, some indication of what's going on in there but we're not, for various reasons, breaking it down any further.

Mitch Steves -- RBC Capital Markets -- Analyst

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

David Anderson -- Chief Financial Officer

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

Michael Clarke -- Chief Executive Officer

Yeah, I think so, yes.

Mitch Steves -- RBC Capital Markets -- Analyst

Got it. Thank you.

Michael Clarke -- Chief Executive Officer

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.

David Anderson -- Chief Financial Officer

Thank you.


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

Duration: 42 minutes

Call participants:

Paige Bombino -- Vice President, Investor Relations

Michael Clarke -- Chief Executive Officer

David Anderson -- Chief Financial Officer

Ruplu Bhattacharya -- Bank of America -- Analyst

Jim Suva -- Citi -- Analyst

Christian Schwab -- Craig-Hallum Capital -- Analyst

Mitch Steves -- RBC Capital Markets -- Analyst

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