FLEX - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon and welcome to the Flex Third Quarter Fiscal 2018 Earnings Conference Call. Today’s call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Kevin Kessel, Flex's Vice President of Investor Relations and Corporate Communications. begin. may you Sir,

Kevin Kessel

welcome Flex's and XXXX quarter conference call. to you, third the fiscal Thank

the today's our slides be published have We for the Relations Flex.com. found discussion. Investor section at of website on can They

me CFO, Collier. our today's McNamara, Chris is CEO, our Joining Mike on and call

Following remarks, open call to up their the will questions. we

are recorded, and current let statements which forward-looking no and me begin, today's forward-looking expectations we these could Such contains assumptions everyone that materially statements. risks we to call obligation information to based and on subject is actual results Before is update remind undertake being uncertainties, change, and that webcast to and differ. are and subject

current references they can For for section risks most slide. of our uncertainties, a period, filings our required non-GAAP the of along are reports. current the in found IR see and Otherwise, the on If reconciliations. this and they financial annual located quarterly with including measures call with Appendix our discussion our be recent the website SEC the

and San the turn It pass the take I save and XXXX call for to May Chris, in I our along for XX, and schedule place date Analyst over is Francisco. Investor Day. wanted to will Before

the calendars over So that Chris? by pass us details to would out I Collier. and mark shortly. our Chris of on call it to down your to like With more CFO, expect be emailed the way,

Christopher Collier

us you today. joining thank and for afternoon Good

We our income will quarter start Slide statement on X with summary. XXXX third fiscal

continued our Quarterly the up approximately portfolio and All their versus in or business year-ago billion, all reflecting provided guidance groups of line our in key range. structural with met financial XX% exceeded and third evolution, our we Our back commitment. $X.X results above four sales were sales respective metrics October guidance ranges. capital return were broadly quarter growth,

$XXX $XXX and operating adjusted million Our net high-end income income third in of diluted range. over of range, our share which guidance was the was adjusted middle guidance earnings $X.XX, of per towards million, our was adjusted resulting which quarter was the in

net GAAP intangible due These of from to EPS and $XXX and on million $XX of non-core impairment our in net lower $X EPS impact adjusted resulting quarter million Third to of GAAP stock-based million adjustments $X.XX. had than income compensation net million our amortization, amounted third quarter expense, income $XX of is $X.XX adjusted investments.

to Slide turn financial for Now X quarterly our highlights.

quarter our have was expansion new significant revenue This from Sketch-to-Scale fourth the with businesses our growth, and our strong in been shift quarterly bookings capturing portfolio and year-over-year we markets. And wins. quarter demand consecutive new our of reflecting business into

quarter was third X.X%. million $XXX Our profit margin gross our and adjusted totaled adjusted

As revenue are in our of ramping layer evident programs with highlighted new balance Flex. of in a Nike the for along reflected continued last fourth to year, our in we is growth the new this and programs of and revenue strategic a with foundational this partnership contribute several strong our guidance. long-term quarter third quarter quarter, through new development These

investment costs $XXX of quarter, third it In under-absorbed being the adjusted investment cost up levels year-over-year. and higher in expense our grew gross dollars in amounted SG&A adjusted margins which due our our depressed near-term costs. to Although, overhead the profit our year-over-year. was to X% high Despite carried, million,

to our of Although, X.X%. declined sales, percentage net point a as sequentially it XX basis

innovation As our of system and is SG&A increase SG&A, design and a component incremental through global capabilities. design we reflective further invest in of in the R&D our footprint our expansion expense cost of as a our reminder, and engineering is engineering

almost our the required entirely which of the year new support for and modestly and was Our prior than quarterly income businesses investment our increased at to in million, came to operating attributed $XXX lower Sketch-to-Scale levels vision.

is which up X.X%, operating sequentially. adjusted basis nearly was points XX Our margin

As which our pressured Company our well investment, our invested as topline, elevated we levels continue investment X performance was year profitability to Return reflecting on cost future of that by our business to our above to XX%, operating begin from our capital we for growth. position benefit away for from heavier profile. Turn our remaining of strengthening move capital group. and Slide

As expected, in while as margin operating to our $XX hit profit. business our million CEC returned targeted operating X.X%, generated it adjusted range adjusted it

investments customer as in lower overhead These pressured transform costs portfolio cloud reference to CEC to platforms. revenue with capabilities year-over-year. due continue and levels probability our expand absorption elevated CEC coupled engineering We our with datacenter and targeted lower

generated resulting aided was in as rising from which the over sequential transitioned dollars was business operating our in [clients] adjusted operating Revenue X% strategic $XX XX%. with X%. targeted healthy. Nike The this profits The sequential in to of profit, profit margin improvements. Our a operational saw adjusted million a partnership of driving in just growth quarter shy reduced X.X%, operating improvement our an strong business operating in new CTG of manufacturing during reflected third facility to range

had CTG contribution margin new programs. was pressured from as ramping margin However, lower operating we

business customers diversified X.X% continues successfully adjusted $XX demand ramping adjusted margin, achieving The expected. range IEI creates across million, it experience Sketch-to-Scale generated a operating as its X% new markets. a which large X% to Our programs. targeted And record business operating of to of inside several profit our strong

industrial growth trend innovation sustain and strong to in digitizing and rapidly position expect IEI We a capitalizes market. on design a the strong

target capabilities and while million, and design expanding adjusted profit, operating and $XXX to a margin value operates to partner. its truly engineering Lastly, record consistently our another generated manufacturing delivered continued business operating design and we X.X%. range, invest inside This it actively business be shifting to quarterly as margin which to equated HRS healthily its

and to Turning let Slide us our capital. cash flow X, review net working

enables continue our grow solid us We cash which to invest, generate operate, flow, to business. operating and

flows consecutive million. saw $XXX which million, quarter $XXX quarter of our operations at from we from flow This operations over marked cash cash XXth

a from year-ago. million $XXX over increased levels inventory Our

in support higher program recurring levels positioning growth we wraps. multiple As our revenue large to for

challenging a buyer. in operating supply – While

our billion the customer $XXX management from X.X during to enough of believe and that fulfill of prior increased our net prospective roughly mix inventory capital year a net and of Overall, year-ago. times networking our sales up capital $X.X strong and in business We to unable period over working current over X% inventory of X%. demand a remain percentage achieve our X.X% as targeted returns amounted result sales. range will to Our the X.X our million times, to within to

capital expenditures $XXX our depreciation exceeding $XX million. by million, quarter, This over totaled

consciously As allocation into to win to Sketch-to-Scale portfolio. to and and our capture as accelerate we we our invest invest expand of to investment pre-positioned to higher as platform increased CapEx, levels capital our customers deeper in business. continue automation evolve in our We've with and capacity more capability investments we’ve

capital this our networking our flow million capacity cash modestly have greater supporting technology product secure investment cash instances businesses, in in IEI to earmarked to $XX investments generation advance long negative pressured us levels as quarter. resulting being We capability, lifecycles, other new as technology expenditure or of from increased support in and expanding many have continue and to These underlying These capital the of our well are business levels ramps. to free HRS reported initiatives. flow

free our range million. Now currently of for expecting be the $XXX year, flow in cash are we to a

to fulfill We or our to commitment value continue shareholders. our return consist to

This Please structure. capital million. to X we turn review to for our Slide roughly quarter, repurchased $XX X shares approximately million

credit remain Our metrics healthy.

until we XXXX calendar over near-term the have debt year We no and liquidity. $X in maturities have billion

the We long-term. with to continue facility have our capital business balanced and the structure to operate a we strength support and over

and we XXXX emphasize to the call capital capture I’d over I and that growth strategy, Sketch-to-Scale to position to to actions to our portfolio continuing profitable Mike, Before evolution softly continue meaningful our like fulfill vision. future while to take deliberate turn to and allocate support

over Now Mike. to the call turn I'll

Michael McNamara

Chris. you, Thank

Our quarter of advancement growth the revenue evolution. displayed continued third portfolio our and acceleration

Sketch-to-Scale of records leverage year-over-year illustrate year-over-year until of and to revenue meet continue quarter by of Both business quarterly straight platform further units momentum of performance HRS the our strategy. with growth. our fronts new XX% our for and this targets. their unique ranges growth was positives groups A guidance investments surpassed to X, business XXXX set Slide XX% of of accelerating our momentum. the high-end We respectively. This four Please All revenue our IEI QX both in fiscal midpoint to fueled gain fourth our number QX highlights. turn and revenue on

to basis groups four ended of within As pace a on three The XXXX growth aided in be is range. last improvement strong and their and posted percentage up our a groups revenue increased target quarter, result, performance, margin margin adjusted operating business as solidly all points from our strengthening business year. fiscal improving sequential margin XX

an structural theme important Our evolution in remained QX. portfolio

both they profit achieved Both are also operating to the while in sales Together, our operating and to of on set Our lead adjusted HRS businesses engagements XX% XXXX, XX% XX% and capabilities. profit quarter. and Sketch-to-Scale and profit materially expanding growth. revenue totaled pace and accelerating grow revenue improving fiscal dollar the above both of Individually combined and IEI continued as new for records. revenue they go-to-market businesses operating way the their adjusted dollars the

continued customers solution. and advantage cross-industry of scale is momentum Our recognize integrated our receptivity being fueled from by that take and

CES but and of improve differentiated, design to high Sketch-to-Scale groups customer record their of remain leading focus is are are huge change into interest industries and where intends, with The very in our ways Vegas Sketch-to-Scale with expertise interest vertical continue which year, new customer complimentary opportunities. pace deep our in a The partner platforms we many leveraging success. expand for and was capabilities and in Las we We customers to in our all evidenced our our our level had well adjacent and reference markets, and finding and business for by are numerous of enable business offerings. new which to solutions products this four innovation were represented and disruption solutions

that manufacturing motor solutions, HRS vehicle complex with by the autonomous For recent is integrated key program led and which chain differentiation. becoming engineering the supply in data Combining a broader create of skill set example, knowledge HRS center, CEC’s great significant car. experience CEC’s leverage marketplace

that excited investments platform. opportunities and continue to of we very Additionally, breadth be our our the leverage of

this YX example, continues wins construction customer supply for joint announce Also relationships in venture transforming these meaningful process, which rapidly For the momentum to major our China, to revenues. building digitizing and customer and on focused Formula and United chain perform business. successfully the by help Germany, our designs foundation which grow the is expand States through industry

and developing lead manufacturing also in automation specifically broadly value long-term partnership in Nike with strategic to investments our and creation. expected meaningful are are Our to

ability verticals revenue business by We about group to that our leverage will to into Slide Please excited for we details. growth. our in meaningful provide platform review to turn be future new as continue business X

three in Our in all groups. growth across board business third quarter the and saw a groups sequential growth four year-over-year

strong remains balanced. diversification Our and

concentration ago. Our top a revenue from year XX% XX% XX customer sales improved to

CEC billion. customers was sequentially in converged at opportunities, to legacy solution business up capabilities our which to to X% versus and challenged, revenue to XX% infrastructure continue is XX% data new which particularly design remain year-over-year. Our expand, now Once rose X% and improve $X it’s markets X% center decline. year-over-year Total business cloud and kicked leading for and over expectation

is new Additionally, health. autonomous digital and instrumental markets, in earlier CEC like vehicles mentioned as

of CTG data had of For the March and as billion products. quarter up year-over-year flat center expect sustained we to CTG guidance legacy cloud to businesses, end growth be in year-over-year above was revenue $X.X XX%. X% up the and reductions by of strong converged high reduction XX% revenue offsetting range XX% to the traditional driven and our a quarter, growth

of the move in into move during successful in strategic growth third audio partnership connected further reduce Nike products. mobile line manufacturing and expectations. with with operating This A improved enhanced our living, a facility our was efficiency, help As it new quarter. a result with losses

moving project our are QX breakeven unchanged. level the objectives towards Our exiting remains this

to that markets. content, guiding and the higher as IEI up Sketch-to-Scale equipment products. strong and mix its from which continued by expand For CTG year-over-year, new influencing seasonality XX% year. capturing and and program in to programs about benefiting and capital We to experience higher to previous growth of our X% led business remain quarter, energy, bookings normal with to revenues expanding $X.X to XX% be leads across and across offerings. seasonality strategically and CTG’s are we March engagements, new growth added XX%, technology expansion value and home moderate shaping consumer we realizing the billion, up committed launches record end successful continues lifestyle, XX% more with revenues diverse IEI strong strong a year-over-year of above expectation revenue

by new growth revenue expect to strong year-over-year, XX% IEI For across ramps the we categories. program March continued quarter, up to we led XX% all

Our to by continue solid driven production. growth been ramp XXXX in year-over-year fiscal and has significant bookings

XXXX. IEI rate and record will revenue grew high affirmed this year-over-year for expectations basis, guidance XX% its as straight In end growth and at expand of for HRS's growth to a for targeted quarters XX% quarter, revenue and billion, QX programs for fiscal XX group. XX% year-over-year meaningfully exceed on that we Our medical introduce our to March revenue up $X.X the strong, growth up to to XX% remain both expect automotive growth XX% year-over-year and quarter, existing both XX% medical we with programs new automotive. at HRS

HRS growth and our increasing writing content to allow and Our automotive content automotive continues us car. connectivity leave to electronic to the needs expand

HRS Similar stream. for its this more IEI, value manufacturing is business applies year. XX% revenue meaningful HRS Our target increasingly achieve will providing QX engagements, capturing true our growth design in turn creates also guidance revenue innovation and which it recurring to is add for

our quarter on Let's guidance Slide X. March to turn

world consistently fiscal a final it changed investment this we've us. and to is investment down minimum be in of strategy fiscal us systems reduced by At The continuously three four our restructuring perfectly. future at model functions incredible our marketplace year have million. objective has is with targeting focused As responsive more we our that optimization quarterly in our future. and and speed same company the year-end. a Most complete move The an agile higher, to to Flex plan over at be continuously effectiveness of a and had XXXX the last been for one ahead connecting the responsive we year the faster opportunities last investments Flex. $XX we our revenue more build that mentioned never into is anticipate make charge will breaking accelerating the the to time, have plan, position quarters, corporate as and on will is our that result to important adapt will The

adjusted on XXXX our are have We strong focused profit adjusted and will and operating revenue, in executing XXXX fiscal vision EPS. growth

For billion, per charges. operating be range the to to to range $X.X for million compensation of call in March guidance range million. $XXX million, a of GAAP amortization, shares income in $X.XX expected to range restructuring share as expected result to the to on open revenue the $X.XX the as Operator? earnings expect in intangible a adjusted With $X.X be we EPS weighted-average like $XXX share quarter, of per $XXX based is outstanding of stock-based to expense, that, XX% a XX% up I’d of and for Q&A. adjusted

Operator

Your first UBS. is Instructions] from Milunovich question from Steven [Operator

Steven Milunovich

afternoon. Good you. Thank

growth You've XXXX. little bit talked a strong in fiscal about

Analyst at little given talked Nike can three-year potential year you Day? I a $X think the your takeaway the fiscal Board do you reviewed you’re plus that do with the outlook, $X.XX the upside Does that you still that believe XXXX, and you the about to to behind in due this investment?

Michael McNamara

spend Steve, details. laid any at Day, talking we a kind XXXX Day, plan We a about XXXX, really year same kind Investor I laid at was the plan Yes. of Investor earlier. of don’t or want even out which out last to

one initiatives We that we XXXX we’re be beginning at are that get those it’s a targets point. number those plan. we're have raise still driving plans. the of XXXX to towards to as going of that And to driving to head this is the

really expect thing and finish Company focused growth year in at being profit, which or up this for our year. most investment the earnings So really, stay revenue I pivoting our operating important we finish XXXX. And our think up is year it delivering, we into

from are give that I want focused built, hit. in going right and start So to those I don’t that, start targets that’s see you're as number that affirm that It’s we very, just very QX, to the – beginning think that on. of remain we going the the we’re –

Christopher Collier

the different with company in continues encompass to the Steve, maybe all achieved pieces underway, would our the vision in businesses that see and initiatives, evolution discipline that the of the that has in I’ll the focus many in XXXX these add strategic I extreme our our beyond. just that reflected around and and is is each you mean operate – to of of as margin some as itself, evidence us growth ranges as target on new you're to of that growth achieving as portfolio. big well the starting see well examples many constructed be

always execution more to to as we and do think in of but we’re I going capture we're So trying continue and as on we're we our greater more further Flex. in journey detail and the caller] along a display key to evidence – improve expand the steps that [highest May,

Steven Milunovich

on could free that That's maybe what about of where the it capital Do year, cash in Chris, both near-term? into and you feel flow? you're going coming this the making? that's you're below about the back you working is but talk of a terms talk from investments of kind like a a great. get expected really CapEx the to standpoint materially going think in bit us I most

Christopher Collier

Certainly, range also while a where you're the look, $XXX seeing actually year, guide for but upsize from to and we say within we started you if seeing million. that growth. we’re networking the set I us That's down fund staying growth, out to And capital. mean had we're year, targeted our roughly

support investment demands. seeing $XXX customer over You’re to ramping preposition into well and a inventory million these of

lion in to are HRS. of of and $XXX evidenced past areas hearing and going our a CapEx million us investment, share quarter, IEI You also that in this growth

see book for the in the four us is of of we’re in capability the us, technology years. You pre-staging we where investments in seeing again, $XXX front seeing rate run you’re of quarterly million harder and and of step probably that highest business some of the in are terms that light capacity

see capital you're depreciation So going outstrip this year working million near investment north of of to us $XX our XXX. plus

just that as as we go natural lot, You take the we're that’s keep levers which the math. and generation that meaningfully flow But we fundamental three our the earnings the intact, guide for cash structure hyper is focused growing. a set, forward, a contribution,

elevated combine to of XXXX over half second and look and this of XX% quarter, and XXXX, depreciation. nearly the capital stream first so see up fourth into new then guidance you over million that's that into the we XXXX. see at a XXXX as do second that we’ve CapEx working of investing the We revenue if of our continue level and our you as good lever, half $XX to management flow fiscal for discipline cash is Just half. for thoughtfully grow midpoint our We the in modulating over enter XXXX into and that, actually

So those help greater displaying three significantly a flow that cash we’re things us start to fundamentally combined structure generation will deliver.

Steven Milunovich

Thanks.

Operator

question is James. Raymond next Tindle Your from Adam from

Adam Tindle

to Okay, start to the thanks seems growing. afternoon. now? Mike, some drove precipice the better, the what Results inline were on and with wanted of restructuring exciting just you're It good or decision I is stuff. initiate like revenue

that targeting you're particular a to outside of there segment trying that just corporate? So the is timing and understand just Thanks. general

Michael McNamara

Yes.

we're an FY So have just clear a you to said improving have what XXXX. revenues sight of having accelerated Adam, and actually line

now. we do actually So want exactly it’s it why to

offensive to capability in and look the do to We're future, get take and make amount quickly high. and the out out it more investing doing to World ideas happening make restructuring, intelligence, for have platform sure we have this the opportunities. change them of an certainly of actually we we economy opposed investing jobs company to in our really really move and we how we about we agile and good in very even doing look called stress. it and that and our that’s the as the that do the we world given make faster almost I available advantage So enabled it restructuring. opportunities us a restructuring we're whole And any our people we're of Because, think to And offensive are at about marketplace defensive opportunity restructuring not set think want whole of age opportunity, Connected across we into of in to of that actually changes being as the successful. high. that for is the the that not a We're system we extremely is that that past, is and us strong able

So as revenues. it’s view really and very time very, we're at I a growing kind change done when of a proactive doing right in well

we So it and we such, I create else, particular advantage And to Investor across quite that vertical that is deep accomplish. effectively think fact really a way industries this have far And is to able industries for anything though as is the focused actually components if many and kind different our the what trying as that you I any in all those together past competitive segment leverage to there vertical put and like we components. so cross listen thing deep really is solutions be on in if we're about or bit. of customers can Days presentations our

So as – that or Company want you we're kind want trying it. easier to sure silos can with the we call to or Indian whatever solutions whatever of less restructuring, look cross-industry or position actually carriers orders make achieve to we at that our we

toward us faster to we more and this better think that agile it So make out we solution customers of moving this. cross-industry would we're and is our or as positioned for even come even going

Adam Tindle

on a has in XXXX year-over-year you've talk in would helpful, this, Beyond now, basis for can profit at growth? eluded grow seem Thanks. to prepared Chris, beyond the how have about declined rate a That's the little and year-over-year you. remarks, pretty three bit a we CAGRs profit this point Can talked chance Okay. dollars about think in turning Thank a Mike. fiscal March. past? dollars the year-over-year like about follow-up. it quarters based just basis a And but and accelerated guidance that dollar you as this little just a will implies operating grow on to your profit bit you on a but

Christopher Collier

you mean QX of I out dollar you yes Certainly, our point our several We for we set distinct up be as are and us QX year-over-year just year-over-year. if see modestly concentration look, does business some operating and margin greater IEI off We guide have in meaningful HRS growth a levers to the midpoint richer as well forward. a to of we as for expansion mix continuously to profit in moving have strategically and CTG. been move as within ourselves moving

you'll to I is of be from benefiting level some showing growing. think what is we're XXXX growth topline and displaying going expansion. see In in that's we've that reemerging. fiscal been Certainly quarter each year-over-year accelerated

focused to positioned around carry. that’s and revenues been and provide initiatives the there. greater So in ourselves going disciplined leverage in will as by having has and future more step I'd back, reflect the led which other we've hyper and Sketch-to-Scale you of company been some penetration. invest about we if where very strategic in a earnings greater that been result of And engineering driving say meaningful margin our that's design And technology content offerings, on

So in instances, and seeing creating from initiatives shift development scaling and into ramping these and you're of a also several expanding. a

about This is So we're excited evolution difficult. position. the

but is our have that evidential discipline proof as lot a and trajectory is different show firm. pretty we thoughtful there I think that be We of very go, to points

Operator

Amit from from is question next Your RBC Capital Markets. Daryanani

Amit Daryanani

wondering through at are nice am comfort December can see questions IEI I segment to taking well. with. you as the and a for question guys How sense calendar double-digit improvement the growth the just off the quarter. work get my to margin of the should towards the the end for X.X%, XXXX. HRS confidence guys. think maybe maybe we to you I me in for hit to growth have way you sustain example in to segment from and what this It’s double-digit Thanks you extent have you Two guess start if of takes segment? that that about higher expansion? ranges X%, range good start margin maybe trying You're X%

Christopher Collier

Thanks. Amit. Hi,

and for improvement operating profits steady been certainly this margin seeing we've So business. in

Just really guide from you XXXX step moving to through back XXXX, this X.X% us all even from X%-ish. to of take year the midpoint XXXX and you the XXXX in you if to X% to to for X.X% see range of closing

it’s So it and the investments about seeing very thoughtful some into business in around business on and We’ve technical so goes focused on really back investments it’s growth. improvement that structure, resources you’re been application steady we’ve fueling to of doing, [indiscernible] accelerating been market, how on. how engineering selling and been terms that's development, positioning of the efforts,

We've a of So be business the has this of investments this to of up really really a run advance out revenue in nice end done X% job X%. posting growth. put range there to

We range for have a a purpose.

you function driving you'll healthy nice see to that stays I the contribution steps has while you’ll we margin that event, growth. a earnings, And mixed very just moving company about a talk us and it that’s think that think I as will the certainly higher. range be but see of go forward, see inside this incremental as we

Amit Daryanani

about just quarter. past in how track XXXX, spot, do missed still maybe And Thank March think think that you it. on and would then you. this if and Nike Is breakeven the achieving apologize essentially about that the be and about if Got the by contribution as perhaps ramp, calendar talked confidence about and Nike you’ve around you from ramp the could the revenue helpful? but I margin you follow-up, I the just could talk

Michael McNamara

that’s our end Yes. that. to cross we halfway the year, a We of We've by to our have line been We at into of XXXX, that mature sight margin the year still to hope this over get calendar target. still breakeven to expecting targets. we thought ramp actually

levels that before, HRS with or to be can we see ramping or have CTG of into what like margin. going we’d I continue said year think we what into more – is XXXX calendar kind actually

what the that years little too, challenging run think we would've that The have we too clearly is revenue the thing two that than line are and just rate a achieve. we margin probably driving of sight ago. is bit profile more or we're these So one-year go a that’s expect slower thought I we will

We actually things to So there to customer have explain to go-to-market time to make all processes it our that those work. a way really regional with they with they is manufacturing go-to-market the several between align weapon, processes companies. the thing to start rethink and the our takes through as lot the actually design how

said, going of freight last But to anticipated. I'm margins, So train that along be as we to I kind bit a I in quarter think still kind being slower I and revenue mode. than be is same of to same we're think refer a going that little the think targets what and I

it's to just time of this that's I changed it's decade to and in about timing think a thinking the going that that, how opportunity. think going to think a of I and process, the momentum, think I hasn’t lot but and frame our to build initiative start kind long I and also out take is

Amit Daryanani

you. Thank Perfect.

Operator

Your next Suva question Citi. is from Jim from

James Suva

expense and CapEx point the the or more run little help you you congratulations think? just relationship equalize I Nike have But that and planned, that mentioned at last more or the two bit views would and put it's two very more or than kind a what Thanks was the you of quarter how you’ve or taking CapEx some than slower much can slower those or on expand more have results. your us relationship kind all quarter ago. needed response maybe revenue believe in yet So Mike, or time something? needed expanding bridge that of Chris revenues or is said last it expansion year the more can rate there on I

Michael McNamara

multiple responsive, of is respond in in. technology there more only were we're are coming that in marketplace on to and Yes, put initiatives, not is but that being that out shoes and basis the also terms well terms some customization place is building multiple difference, we the multiple actually to in new processes, – expansion shoes, shoes some of electronics the and regional buying a program around of regional we participating we doing and just

is that CapEx the the for CapEx function terms But volume an expansion getting clearly that require. automation percentage increasing. of going of of and things looking large we’re we're to to at process kind that So each of needs of a more in we're the be them. is going the amount

actually in I unusual don't increase So in CapEx. anticipate

I a of for actually paid quite frankly. already CapEx lot the think we’ve

was bit we’ve down next little a already it as of funded it. think lot I year, a

So time, and I I into more more a buy and think over – time. CapEx at looking that processes, don't more same think the at more Nike, but don't opportunities see I increases I think

Christopher Collier

to corrected if statement had have but they made way this that. that. don't framing Jim, look made and this. have Yes, around overall had and will for I quarter, been we've operating allocation said incremental parcel to Chris. we is I part stand to the back a or believe I out It’s last I what capital CapEx been

there's engaging said, nothing on as differently than expansive So Mike we’re other opportunities. with them

James Suva

Okay, was great. for follow-up Then my this Chris. and is probably

a was quarter was your year-ago. you a this all opening was was a color charge that couldn't of mentioned think it of some what give kind and was What of and you that to in or this in about? referring something I clarity tell quarter can if comments I that for impairment

Christopher Collier

were to quarter. certainly. gains non-core excluded are we’ve modest Yes, that or similarly It and investment element a entities those several how small well underlying when non-strategic then impaired, gain on the ago, made to even we it investments we took which they and we as link realized exercises were somewhere charge, several years as those to was last say we excluded

our element non-core from a not we’ve it excluded framework. really it's since So

James Suva

Okay. or Was we expect P&L portfolio altogether to now some half that write-off year of impairments their a continue? they should your write-off and out just just

Christopher Collier

Now complete they write-off. are

James Suva

thank you. good congratulations results. you. Thank Again Great, on

Christopher Collier

you. Thank

Operator

Coster question is JPMorgan. Paul from Your from next

Paul Coster

thanks. Yes,

grind why margins it getting over will of will operating on see is that XX so program, of So sort we’ll happen? a of course and at bunch there the and whole improvement at spike the some about what's investment step the faced time point. ramping that in and next function comes be that characterize months? will to the the a the Or sense such absorption rates more is Is this then same little

Michael McNamara

make quicker I some a better mix. of going some a in the portfolio have improvement got result to mix back a about so to SG&A portfolio We're of Yes, increasing which leader. continuously us the we is little we of and revenues, on corporate talked better that targeted built in think structure as bit place, activities

all to margin got to of So changes a going are I think that structural operating lead you've number different of which improvement.

So I don't a know function system. that to be step it's big going because businesses the into

and should operating we the we and into we’re forward. them expand a people of to lot But working, moving system, start, year big margins. believe will don't that and XXX,XXX display that this end levers multiple we it come right drive at that have going margins We takes it’s move a

[indiscernible]. think So it’s to be but I just it’s step – going not going to function; be

Paul Coster

proliferation there The Sketch-to-Scale? you pricing you where devices capacity then it. power to business Got of from terms out in the follow-up enabled And the impression Internet alone? industry verticals. you're a Is Are now any question. turning various away? point you going Have got CS. domain Sketch-to-Scale getting of is in Are actually a in

Michael McNamara

Yes.

of power. turn don't there's I the pricing a up, it in design huge and very We have standpoint, everywhere with standpoint terms we we have have don't system manufacturing. and we to good people broad do is matters are about opportunity, yet. We I From think put X,XXX opportunities engineering if it like From a we've we pricing think a design way able when resources a standpoint, actually have power big XXX,XXX think out. engineers. it that are that to I away. to close capable mean to right literally obviously pretty a presence got way a manufacturing find we

moves - connected to world we into evolve of everything business think model right very customers the our as is it that – think about as data I as often of and the move the is the and way the data more to we actually Connected is creating The our we moving device help take device management we did World. the any models. into more and of itself, responsibility business the because value, can and add actually using for data

power, So the to margin. think more years, next know, to over the continue just yielding transition, I it our lot prefer I relationship percentages to Sketch-to-Scale recognizes yield a value as And more that transition it's will you to higher you and the a last toward the that, it and think about customer we’re call customer little pricing adding going and few it's years. couple continue as to

roll So that We be margin will we've got positive full standpoint. pipeline will opportunities a through it think through that. a of

going our it’s little lot power, going value to and I'm our add more So say we a to make to customers to more pricing to customers going and say like are more. it I’m not going a we're recognize

Paul Coster

Thank you.

Michael McNamara

You are welcome.

Operator

Your is question next from Cross from Steven Fox Research.

Steven Fox

please. afternoon. questions Two Hi, good

expectations that with relative off or changed you're your investments that more more. curious to was more I regard to to need there First marketplace this picking that you secular up and in are more that trends having now, is company-by-company you're internally then the to anything is invest the success making are where around invest specifics causing

If that follow-up. you had can a and I would provide a little helpful be color

Michael McNamara

Yes.

have is Intelligence, actually capture more the Age case and secular if have and products. to the needs these and in every be is connected toward I there's meet and to So think more system technology trend connect of every the is of the order in of actually data products moving everything major to some products, of used future about more

secular So across trend that's industries. I think goes that all a

era Sketch-to-Scale we we're Intelligence. many the we at years in think I identified started moving redefining and industry that into Age as ago very the started that and effectively of the

how as but we've around and now double-digit years automotive. eight many the long, we in is very, heavily other always we've thought, automotive heavily growth invested and area of been a many, trends We be years. know that is should investing for in things place had very you One that where like even though

of as effectively lot it’s know because automobile a is different there there automation, that call you is mobility, we industry. and opportunities connected, in amount the potential that there automobile is electrification, the is industry So and of huge within high disruption pretty there is there's

very invested So we actively here.

I So future – that anticipated I well. know think very don't the we've

of years I quite transition that a positioned think the OEMs the did company even before frankly. we over much

the choice. like one I What do about the in age. happen I target. now So mentioned we infrastructure of YX, think the of light evolution on about where new building actually an of industry will right think it’s intelligence we're things we as thinking how

lot that effectively different industries but and our pretty to gives then the us so amount how locations different many of we think about So different in have, so real continue to read read have data a I a in customers and world, points we’re many we reading to order edge [indiscernible]. the of and engagements

invested happy area, so pretty with I in think been we right the So effectively and we’ve that.

Steven Fox

more my of if cetera? to I Great. around HRS, the to That's second curious was some comments quarter color et those you tying Thanks. because helpful. especially contributed little could And actually in give the just completed growth question, a auto bit what

Michael McNamara

hard It’s to thing. nice have be – growth. Yes. are to double-digit one to again, just going it attribute we Once

of you if look very investment have broad-based we very, a guidance, think It’s set midpoint products tremendous amount a XX%. of and the Sketch-to-Scale over of at are I the that we well we're already. after

and as and and those for actually in percentage. India it's to automobile That’s regions. continue a more China more grow actually growing helping We customers actually

technology quite business, where the so to backups, going terms the So the in automobile, in on to try if future, it technology actually investing don't start been that’s and I’d of automotive focused we which you're of you to actually say, actually need where growth, it’s in terms is broad-based have we've only the the the position. growth

Flex got opportunity because function in for a and we autonomous couple going of the it’s even the we years connected as be kicking is start to automotive. I want And like real are not a apply step when there set real cars couple is and it's our kicking improvement go add in, and just of So this that's expect would with started thing company one and in a maybe solution to might thing, a of even in accelerate, whole years, a but when things. one cross-industry

it into accelerate. actually So Flex for I – certainly might be that or opportunity don't XXXX's, expect to is going but next two, in we think the automotive that year I get as

Steven Fox

much. so Thanks helpful. very That’s Great.

Operator

Mark from from Goldman is Delaney question next Sachs. Your

Timothy Sweetnam

Mark. Sweetnam results, good on This and the on for the Congratulations taking Hi. you is question. Timothy thank for

reflects in type prepared those on the majority recorded million strategic impact volume reflects about investments of Can the to mentioned comments they the you stake sheet question. previous about importance You YX longer-term? in may And have what of and Elementum and balance briefly in talk Elementum. averages financial the $XXX the

Michael McNamara

– just building is Yes. Well individual success to of create going book opportunity and it’s terms chain a a database and lot significant be grow the each capital of that's company. Elementum based us those to on for company in it to software, appreciation. to of supply rapidly a ability is is solutions, revenue continue

IT that anything platform Anything but able we build So again certainly but that work that Flex you and would capital the investors is Elementum, sources age across it for the look of really as that on a opportunity be we use the builds. Elementum big digitize bring is once we to where well, out construction see platform, for platform biggest IT across kick industry On to more capital as where slighting an platform appreciation go like travels then going building it’s it’s the we from a in Elementum. a execution, digitizing the actually back the interesting the of through way so that have all appreciation that, design, be – IT that actually for software to its construction for way YX, we modern kind future. and of to to all

a with there's Flex. volume of tremendous amount associated So

software to So growth yield expect just investment the different we YX Flex itself. capital second terms I is business of products, on of would those two the appreciation terms as YX one ways, source in in and

of in opportunity back so does a huge that a think visibility. some we us – for So lot that the that kind have it’s year are of incubating and we

Timothy Sweetnam

impact you financials might then if may NAFTA question, Thank a the term? helpful. can isn’t the business impact and from your talk the for What perspective, about both your a regulatory That’s solar And and and tariffs Flex, follow-up to longer mean in renewed. you. just short it trade how

Christopher Collier

and out Obviously, with prices that on that the underlying then going up key solar margin is will will I’ll takeaway came point the and on market. they first impact have start tariffs. be U.S. really the the just the some

business. see driving to business you of energy there things dominated which our one U.S. course then of of of Brazil when less a years of diversifying locations from really last the XX job other third done – leadership our talked than into over about diversify Australia. of India, to last And One global presence been months, ability the really has the away ago a multitude we've now couple a we with the the good Mexico really U.S. to to heavily team that from exemplary

that you seeing penetration about modest we're when be roughly really when impacting I think in impact. have good and global will There you some some our will be So think the XX% only U.S. positioning there

actually the given the We’re actually seeing orders upsize And modules quicker goes strong solution create at in investments. to these terms has in yield cost return a here projects an with greater total tracking have on can growth solution, that in and to a that real better those solution opportunity those it energy benefit higher project tracking performance of harvest and globally. the as the our efficiencies throughput to tracking then it relates the

for global rate. our adoption solutions tracking opportunity our an there's have greater leading frankly quite even So tracking

that So like position that digest announcement our needs recent level, news markets however that kind we tariffs of high on thinking to the on the and about these globally. tariffs and

Timothy Sweetnam

impact of just on then NAFTA And as thanks. helpful, well? That’s the potential

Michael McNamara

be. there one We I are if if things move from moves pass if And by turns incremental associated don't out back to think Flex, tariffs annuity it and through customer out cost is any revenue we costs however, then of those to turn the and different have of it with those the going know or that’s locations U.S. to

I compare U.S. help go to it let’s move we customers think to our from the

kind effect oversight of to goes an actually the anticipate our world don't we the trade product to tariff studied we So is as that NAFTA. a of subject much as lot of base

move more NAFTA. small there So a it. which left, to want is customers is But percentage

with saw would were that operations either different beautifully trilled largest in we like able with now fortune manufacture states tradition and U.S. United States We’re in to be that electronics designer manufacturing in we’re or

have can business our actually customers around actually for everybody proposition We out company proposition that's our around customers to that of core in come them why our change to to set be we core with But Flex. the can is able value all business set our they world. So world. built the

Timothy Sweetnam

That’s very Thank helpful. you.

Christopher Collier

Operator, I question. think we have for final one

Operator

from last Matt from The Stifel. question Sheerin is

Matthew Sheerin

Yes, thanks in. for filling me

but the as does the beyond to drivers obviously business? Nike margins are Nike key you're couple thinking about be margin CTG, a to drivers improve grow other talked into you questions, and about quarters catalysts should Mike and about? those we What thinking of you the Just other is one know are or continue you that look some one we see there, obviously be should improvement. several should I where What the opportunity,

Michael McNamara

mentioned coffee that electronic from you of are as there think one if indications consumer I are cup the any speaker both CTG that but don't solutions it They're move inundated asset kind good kind one, about products, all actually you The towards the think that use on way – Yes, to and consumers the the that that way by go through are with to of and everything. put devices well be theme thing. trying anything connected lights will built. mobility to know any one of and is I connected can we're driven just voice

cross the after we is but device into because smart marketplace, and enable that ability of technologies of connected. technology get technologies connected both our it’s big the So that device be have process and to kind smart objective that building section some content know-how couple Nike and accelerate any their enable actually be a underlying able and very a to to like become that connected them of core there's to broad blocks help themes very,

category, about just we cross-section I it penetrate things. broad any would product as those So but a think one wouldn’t of

Matthew Sheerin

And business, Okay. than and little you you. the business better are CEC bit communications in computing year-over-year. line then down a the still Thank on expected, actually but

some you or offset and that your incremental seeing wins new seeing of particularly seen Some parts of to competitors weakness that? you too of some the communications. other have Are program in optical

Michael McNamara

– some the – at datacenter. as is, we're that the think investing building to growth mentioned about we XX% for And into can growth have will solution, Sketch-to-Scale of probably XX% I products we're Chris go that Well, pretty category. on solutions what we year, offset actively kind had earlier, product so using and we've it's a that have a

a it. that's driver So growth within

our we – down more targeting structurally trying category opposed wins, to this we're expect not year X% product about to good and end being that challenged in focused going somewhere. down we're come ability important is I the going be products is we reality right to are the and solution X% And on. structurally XX%. that with think up up products to actually for and the range XX%, to what's hope to We're it’s where it's are be future the as target, the So create to little get as challenged. a still some to very a know but you actually remains And to we're bit future

is there in challenges that business, it certainly associated my with been So but for around now years some like view. has three

many is data So there so there.

Matthew Sheerin

Fair lot. a Thanks Okay. enough. of Q&A End

Kevin Kessel

Great.

wrap So up to things? you we want as think I a that say here, few certainly Mike

Michael McNamara

Kevin. Thanks Yes.

that I and three outlook. like think and say, would Flex. me we about QX let your closing, in in Just reiterate our how interest we support defined our appreciate to And things the QX really

of quarter quarter a as the and our momentum. The our QX consecutive continues growth, revenue gain marked guidance to some fourth applied first year-over-year is growth. fifth QX consecutive strategy

reduce this ability in increases is evolution proves investing track, portfolio seasonality, which and second, on we're The and future. our firmly evolution a last, and its predictability, margins. And

markets cash over our to time. And strategically create shareholder us consistent add ability significant invest Our the in important flow generation to affords will us this solutions new that new pursue enables platform. value and

to about in excited we're looking continue from and where to So be drive future. forward are successful to we able

Kevin Kessel

second May wanted in, and I call. concludes reminder so Day year. Investor the be this to XX for Great, the thank Analyst also dialing This everybody will and

Operator

This concludes today's conference call.

disconnect. You may now

Flex (FLEX) 25 Jan 182018 Q3 Earnings call transcript