ANAHEIM, CA -- M-Flex reported fiscal second-quarter net income of $11.9 million, or $0.47 per diluted share. Net sales increased 17% year-over-year, to $152.8 million.

Net sales in the quarter were $152.8 million, up 17% year-over-year, driven by an increase in our sales to the flex circuit manufacturer's largest customer. Gross margin for the period was 12.2%, up 1,800 basis points from -5.5% in the prior year.

"This is our fourth consecutive profitable quarter under our new operating model, underscoring the benefits of the restructuring that we completed last year," president and CEO Reza Meshgin said. "We have now achieved significant profitability through a complete seasonal business cycle."

About 72% of the quarterly net sales went to M-Flex's largest customer, reportedly Apple. Newer customers made up 26% of net sales, with one customer accounting for 15% of the newer customer net sales in the quarter. About $16 million, or 10% of net sales, in the quarter were for wearables products.  While M-Flex did not break out its assembly sales, typically about 40% of revenues at flex circuit manufacturers come from board assembly. 

"The wearables space is a great opportunity for us. Most of the wearable devices [are] complex, they're thin, light, and that complexity makes them very suitable for applications of flex and flex assemblies."

On a conference call with analysts, Meshgin intimated that the company turned down potential business because of profitability concerns. Referring to a customer disclosed as a "Korean OEM" -- likely Samsung -- Meshgin said M-Flex shipped "a million or two" dollars worth of product, and does not expect a rebound in sales to the customer in near future.

"It's just the type of products that they have, and application of what we are best at in terms of their usage per device, it does not show a near-term opportunity for us."

The firm guided for third quarter net sales of $155 million to $185 million and gross margin of 10% to 12%.

Meshgin said that about 60% of shipments over the next three to six months would be for high-end smartphone devices, with tablets making up another 10% to 15%, but the firm expects a significant increase in wearables toward the December and March quarters.

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