FLEX - Earnings call transcript Q1 2019

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Operator

Good afternoon, and welcome to the Flex Fourth Quarter Fiscal Year 2019 Earnings Conference Call. Today's call is being recorded and all lines have been placed on mute to present 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. begin. may you Sir,

Kevin Kessel

website. thank conference joining discussion call. Investor our on and fiscal are fourth year-end the flex.com of section XXXX Slides Relations you you, Flex's for quarter available Thank for today's

be Joining me on Collier. Chief Executive statements call and with Today's our call Revathi and and Officer, actual webcast which based our and and current uncertainties, to contains and risks remarks Advaithi; recorded information some Officer, that Financial Chief introductory Such today's will assumptions Chris we obligation to has being change subject could on update statements. are results is these are expectations no to different. materially forward-looking and subject undertake forward-looking

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

our would to the like turn Advaithi. Revathi call to over I Revathi? Now CEO,

Revathi Advaithi

first Thank call. for Thanks us, my I’m you, to all of today on Kevin. join joining you excited everyone earnings

help employees. has I joined I basics things we objectives globe that and and two our I’ve and our focus thoughts me off and a saying I meeting last future. fundamentally to back improve way margins helped to been to the important about towards to has formulate busy our around need would us as get flow. couple This cash leading will my and talk of started. been by to improve forward. free a Let sustainable and customers are talking move passion validated like since has travelling It our months the on manufacturing months start core. platform for of Flex that execution my couple to The manufacturing. that in This we our

our goals. is and short medium our term first The and culture second the

is Let extremely learned about with they I’ve what employees we're that culture, our and me passionate start what about Flex do.

that uniquely we shared Our needs. their me meet work customers most with Flex focus have customer important culture hard and the to is

excites this our other The speed culture the teams very I've that portfolio. are of organization. the agility open to But of is entrepreneurial and diverse me product also and true a The across innovation and part change. process seen

globe excellence reception. have core and room a focus together. on to operational is welcomed journey teams factories take to I of and do term, business and In and with to Flex, lots improve to our consistently I Flex about core is business execution a Our me have many fixed capital. thank initial short see drive excitement My we our our minute there to of margins. great on drive differently the to on cost to down core sustainable that see we will working around warm in What managing productivity our our and improve. ready improve are discipline the view for wanted the our basic and opportunity is around the discipline, laser medium my business focus processes. but opportunities enthusiastic collogues cost future for tremendous I

center to range our autonomous vehicle, continue potential we customer like wide network of chain a that solutions. devices, front, industrial XG technologies our leverage in growth manufacturing the infrastructure IOT, medical and base On global and data connected see the supply has expertise in and

positions one uniquely Flex also manufacturing regional as the market and global key of of leaders. breadth Our

display will its past core on drive and growth will more areas months clearly important, we portfolio. us growth discipline value fits our Now and focusing will and but the be In our become and customers. we assess for is we grow of that in where couple selective have margin rigorously improvement, to

Now, verticals of as customer across a a advantage set diversified base. segments, great have of many look capabilities at we and our we the business

However, the quality we services. core more must how largest of unit remains PEC we growth our our business improve be and selective servicing about harness opportunities technology these and customers. disciplined

evolve to coming and continue rollout, product the towards emerging improve We drive like and portfolio and solutions trends innovations. the market center data to fourth cloud XG margins

HRS the stable to process to business or Our life drive segment focus product me. invest cycles. product will and mix, Innovation how continue really excites potential critical in grow and the this critical from this to business on this this will for is we we longer be more sustainable our changing business on remains to growth. benefit

Our we're and investment in bookings strong business. in HRS off seeing are this paying

us Now more allow to content. advantage complex take has similar IEI design higher to that of configurations HRS,

As actively and growth to our most I absolutely overall I well, We're mix know, customers of being understand of the for business. categories. this CTG greatest with in and business there's growth. this positioned I'm committed profitable in segment managing to finding for structurally the selective right product clearly CTG has committed you created volatility business the and believe areas very segment.

focused shareholders. portfolio model support eliminate sustainable to executing return providing organic towards risk with creation, the business long-term It returns. reposition a appropriate growth, on to our customers. this will to adjusted value capital nonperforming and we're due Overall, while operate We intent business and will of is taking our be

sustainable reflect would the overall around annual but little flow. XXXX, later, be, for a the reestablishing like the of first me So results to review year. cash briefly I will marks quarter company's few free performance. this consistently and execution about the short-term margins that this fiscal Since end on the let I the generate disciplines bit more in will talk key will mantra improve a priorities

we we to and During adjusted EPS $XX.X to several not X.X% by continue we improve to through as $X.XX XX% organizational also but went which experienced in business way strength rationalizing stabilizing year in we HRS of go-to-market consistent our in have results, and X.X% and we adjusted process to year was in fiscal the began XG, operations dollars from strong updates in margin expanded revenues combined changes both business our investments, return fully by Mexico. That be and billion, that operating driven in in million X% million we million, Last a grew of our PEC it we our business X.X% CTG We or on adjusted and both business, and our achieved to and cloud exiting the higher income only must India $XXX data and $X.XX. to We telecom, footwear $XXX communicate. results operating center Increased increase more XG Capitalizing IEI growth. both helped totaling including XXXX prior changes, had revamped said, action and bookings or $XX groups billion. to margin positive today. $X.X a in volatile, acknowledge strategy highly

half We we free the also generation second year. And strong investment flow to returned cash the streamlined in our of fiscal portfolio.

forward, four can Going expect you are things here that from us.

around cash margins Firstly, generating drive flow. customer free performance, improving disciplined we will execution and sustainable

will manage selective higher in segments, our our we on. categories in and by investing mix the product Secondly, focus margin markets we while being

lastly, full led a strong we to free scale supply pursue allocation. relationships. to engagements return cash create to flow will And value and leads as design with define manufacturing shareholders which for discipline sketch return we generation, that to chain for opportunities capital Thirdly,

some quarter to come on the Q&A. the commentary with financials. it And to turn to like I'd expand then I'll back Chris fourth before concluding over Now Chris?

Christopher Collier

Please Revathi. income summary. slide three turn statement for you, QX to Thank our

$X.X Our fourth our end low revenue a range. versus and was quarter guidance X% ago, year billion, of down the towards

were within business the our groups all albeit their of While four on some guidance ranges, end. revenue lower

million, $XXX range, which guidance operating and Our was was QX within X% adjusted year-over-year. up income our

adjusted or several and This amortization, $X.XX per resulted non-cash income net portfolio, net million. a to EPS $X.XX, our charges share. intangible fourth non-recurring was streamlined loss $X.XX. a impairment per $X.XX $XXX $XXX of $XX net We million charge due was Our income than compensation, which adjusted of guidance $X.XX. which our stock-based range Fourth quarter resulting diluted million, of in investment for was million loss GAAP totaling within earnings adjusted in quarter lower of of in resulted our share GAAP to $XXX adjustments

most pruning align to been non-cash impairment We have certain in reposition of business, well restructuring we eliminating we as also optimize $XX notably to our This forward company continue and and as were with charges as targeted our go it to million million, business, accounts, within activities where take underperforming resulted non-core in rationalizing of CTG $XX nature. actions strategies. which

lower to The which gross quarterly million, $XXX points HRS were gross due margin to please business decreased Now XX while our various most of financial adjusted gross pressure slide adjusted our margin highlights. to revenue. is basis X.X%. turn reflective shifts, inside to automotive profit declined four notable Year-over-year, for

the our SG&A declined seen our within discipline refining transitory CEC been stronger Operating some past leverage. and XX% engineering has and operating expense, inefficiencies operational driving big results experienced remain with a in while improvements objective the million. cost quarter ramped we by to of year-over-year delivering We and we our two with focused our be design $XXX as productivity investments can further sustainable programs new capability, balancing on into which structure, focus the quarters earnings adjusted a cost business. fourth Additionally,

I'll profitable our turn is five expansion X.X%. Our with begin points quarterly business reflects $XXX adjusted fourth prior of in operating group of down X.X% HRS up basis year, came business, from XX our X% Please reliability million, total margin which is margin prior performance. a income HRS's at high comprised health quarter slide in automotive year-over-year was the and for guidance, the of was most to to year. solutions. $X.X our revenue X% QX year-over-year. which HRS, Consistent or operating adjusted solutions X.X% with versus and billion,

our continued resulting has market revenues largest declining customers, notably from last year. to be by directly impacted most in XX% China, automotive business softness, which QX automotive impacted in Our

are and module have X% which included services, recognize Despite a connectivity we XXXX, scale, a customers design of ended in in XXXX in meaningful us revenue positions recent headwinds contract confident value and We've diagnostics global was $X.X automotive believe and diversified and for electrification, delivery, single secular declined health for associated across level which and and XX% bookings drug increasing QX America, as design XXXX,we products past the and Fiscal in Fiscal begin prior year, domain expertise, to Europe XXXX medical move that we up a pleased at will to led this fiscal trend also the year-over-year led the if mark year positioned revenue in a in these with autonomous grown we in solutions, programs growth of as quarter we on autonomous this business, benefited manufacturing are the bookings billion. contracts. year our the bring investments and features. We our compute consistently which show us every have level growth manufacturing capture customers we $X Asia, all that year largest and from devices For faced with And design, well well revenues record automation engineering our North record and to macro securing we billion. we forward. areas. to remain new

revenue, growth QX Next, for capture digits. that down diversified largest anticipated world's flat strong its both to continues and was from million. lowered profit positioned weakness and and greater at just to execution margin billion, revenue X% grew levels equipment, to from benefit for a And the to is prior from X% from significantly its industrial engagements. of are bookings revenue by X.X%, adjusted strong in was energy. various driven IEI or the as of of year. industries was adjusted companies. decline industrial IEI was which businesses the substantially lower capital by down IEI $XX and semiconductor high-single on new Despite of the ramping $X.X business in structurally expectations emerging operating year-over-year, operating The led design solid was end continue QX it X.X% our some IEI down our up

quarter this year-over-year, For revenue communications third and of consecutive growth. enterprise making compute, up X% billion, was the or year-over-year $X CEC revenue

year-over-year XX% coming fell in performance of down end operating our from to expectations prior XX of this at the adjusted However, growth. year. the below expectations margin CEC’s revenue X.X% was basis also points lower on X%

both build in the QX edge Our participation programs computing network and scale XG in was revenue increased infrastructure and growth driven our out. from XG hyper

adjusted CTG from the our technology of than business to us weaker our forecasted X.X%. customers or was networking, several to year-over-year, billion, within the experience demand high-single X% which our in was of CTG’s In and margin $X.X pushed lower down expectations. consumer be digits. end we operating our for flat expectation down revenue to group group However,

prune and rationalize mix and of portfolio CTG to manage accounts, our underperforming reposition as to continue We business. continue the this we

categories. We with will in CTG customers product continue more our selective to be

as CTG’s to addition, remain we during fiscal XXXX, under our portfolio near-term rationalization pressure. we expect In continue profitability

Fiscal execution six, us our saw half the to and Turning XXXX between of different let second slide first flow year. the generation. the completely review cash half cash flow

As back year, to and flow flow capital lessened. return of our solid the expected and a operating fiscal this as back highlighted intensity we our generation we cash in QX positive earnings, half improved in free earnings adjusted cash

to we XX%. a quarter free cash million resulted flow This second second our $XXX from than cash million million $XXX half. cash $XXX half cash in higher first be adjusted flow. generated brought conversion flow operations free in in generation and half of the This flow This free

levels. historical free conversion and Our which cash towards returning improving flow XX%, was QX is is

the $XXX Our million capital expenditures quarter. totaled for

necessary long-term underlying to in our the the and HRS We support programs CapEx continue IEI invest businesses. margin to higher in

While sizable regional investments capacity. out and India and build $XXX the fiscal into XXXX of net [ph] reflected million our CapEx capability totaled

we free adjusted forward operating cash committed to remain closely our to via cash share It will cash our consistently We free we our flow As align as cash shareholders be generating free repurchases. than we look flow. into XX% returning that except to CapEx our XXXX and forward. our move to greater providing Thereby goal flow positive improvement depreciation more levels. flow of is annual with

repurchased $XX seven now During capital shares our Turn fourth million. roughly slide review million we our quarter, balanced X.X structure. to to for

guidance. relatively balanced maturities low with based revenue Please following in that year-over-year be cost group range and our year growth expected business XXXX our a cash staggered the turn for eight with $X.X objectives. We billion, debt to structure and with with on $X.X debt. of a access supports operate $X.X the to fiscal to slide Revenues the quarter average billion billion first of ended to continue of of We liquidity long-term expectations. business capital to

in as to Solutions flat we demand and up to environment growth For to digits, low-single solid Health be our HRS muted to auto see revenue the remain expected continue is we demand anticipate business.

XX% mid-to-high programs CEC’s in We in several to new XG to demand spend, experience expect rising is portfolio flat [indiscernible] we home and center we to our offset up growth. business to digits with expected data and And down effects in demand and lifestyles trends of consumer our up [indiscernible] to we revenues cloud improvement continue mid-single equipments. the solution and be as be CTG in ramping expect XX% by IEI XG [indiscernible] and to our reflecting to weak revenue see single for digital, our be rationalization and sustained capital customers.

$XXX $XX operating in million adjusted expected $XX expense is million, $XXX other is income interest estimated range be be to to million the Our to to million. of approximately and

closing turn way improving let our and shares flow it weighted on the for $XXX after focused XX% balanced, diversified continue outstanding rate compel to business. based productivity, more in remain intangible per a open of is well to to greater remain to compensation in Adjusted to to that, We discipline in first mid-range to businesses the expense, some operate and tax over range and me range our EPS is average reflecting share do the comments, portfolio impact the and be $X.XX the $X.XX EPS cash stock-based for on of expected leverage we consistent With guidance margin $X.XX of $X.XX, and drive GAAP to our expect execution the Revathi quarter We of in of free Q&A. call XX%. amortization. million. to to we back before

Revathi Advaithi

Chris. you, Thank

for commit there me guidance today that and detailed to things to a only XXXX I'd providing expectations. few views point, a it's and XXXX are fiscal soon QX we to While too at my like reinforce are this guidance about

I'm Firstly, XXXX comfortable through $X.XX from a at EPS consensus that my sits and reviews with team, $X.XX $X.XX. stands range my currently executive fiscal a to with adjusted

those exceeding and meeting on focused are teams Our or levels.

Next, get generation levels vastly flow flow our to consistent, and cash in and returning we back committed historical to that have result free conversion. improved cash will to free structured a

a intent do drive we sustainable attractive business potential and our record shareholder and full my establish consistent realize have and is briefly, to that can have To awareness more track to the of improve confidence that it a you to summarize performance of consistency in. the heightened have we returns in the our Lastly, future.

I. We're working As improve I is in view already experience. The and pursuing energized like capital, open the lots customer the will said to so of to medium before, and do drive With preliminary we so that, short ready my operator costs fixed enhancing for and that and is the team fashion, have am line to against the a productivity highly prioritized actions questions. this improvement. I'd have to room that while term

Operator

question And first comes Mark from Delaney your Goldman of from Instructions] the [Operator line Sachs.

Your line is open.

Mark Delaney

Thanks detailed so thanks a comment afternoon. of and sustainable start the of all good for Yes, margins goal more could if And, initial was having impressions appreciated to there Revathi, thoughts I Flex. forward. your hoping plans taking a the and about of I much mix going question. for business about improving and the

on there a programs. on. try that I be And is mentioned One more things more types the the you a selective bit there to the achieve have in programs of know of some is been taking to being disciplined that Flex and bit improvement efforts

in like more you're maybe well. come, particular CTG there the but to evaluating as be areas there business, As still sounds may it other in

And I business? as size of about if of proven that think improving programs on those the am details potential so, may understanding the you be correctly? so mix Thanks. that And more any

Revathi Advaithi

programs are we're that that it opportunities and of they've plan were for consistent growth the in decision accepting profile fit look don't ongoing that a for we looking but then and at how last making couple that. profitable time, only on that's to we and that opportunities very And drive that say I’d we we're question. that CTG is we that I how walk that been direction. in ready this from focused our means the evaluating at do that them. on away months and can't we that pie business growth even certain for growth. And this for, you are you basis of thank an Mark,

at fit to evaluating as looking the for in hard business this it's grow. And that point time, sense the So to at make me we're parts frankly size we for we're others can’t ongoing doesn't portfolio, and of we our this customers but as the part think are the that's that of create we the ourselves portfolio. value way evaluating it. And and where for

to of want time this growth we're doing. evaluating what number, and process and the size opportunity don't in it very I So point that's disciplined you a at give but every

Mark Delaney

And are as being and And costs. along you up follow margins Revathi helpful. and you the same focused remarks this Chris, running you. talked well margins Thank you're in would about as potential network? what contemplating That's on is be more of more lines or you your evaluating both you're that SG&A that and the on how helpful. is may mean, additional details Any about factory very cuts

Revathi Advaithi

that for our important gross say margins. I’d to is Mark improve us

the built and how to on the our do that run driving sustainability of business We that. mix have managing is we factories fundamentally in our

last cost improvements SG&A So has that have have we is in said That year. to significant important the of that half the pretty program said, us. a and in that taken on past the being Chris implemented

is to that. the business. we're with the to driving to of revenue continue plan SG&A And manage levels Our consistent

this. anything to more sustainable is longer Chris that the add? way to So about think term

Christopher Collier

we action And I distinct X.X% we you to drive revenue. increase. into down We I be our going back correctly, laser of meaningful now on X%, revenues to of that get it that structure hit in leverage No, brought are to terms we're the operating. focused real think sustaining mean, to cost have as

Operator

comes Coster question next your line JP Morgan. of And Paul from from the

line Your open. is

Paul Chung

on Coster. my Chung Thanks This Thank. taking question. Paul for for Hi, is

overall auto seeing that of been has HRS, there there. on start weak opportunities the is segment? but up you sense particular there? highest and about We it a get dragging first will on kind that growth reallocating to talk just margin trends to see resources growth, So you where want capacity get know kind you of kind you're as can mentioned you be can It reaching are revenue whether just verticals? the see And your

Revathi Advaithi

for question thanks that Paul. Yes, so

are think, HRS, both believe. my said auto very also as important and I those opening medical segments growing remarks, I expected slower automotive had both strong XXXX. in That that. I thesis year said look comments of to together and those being at opening effect businesses we we've and for important. had you and costs bookings saw fundamentally the if very in into that for that are us I put my than in the the a growing businesses And underlying a those markets in businesses was said, year we going

the However, even strongly positioned, well the overall taking we portfolio with managed margin advantage position. extremely trends. have that, very is healthy solutions macro Health very of with all

that We growth. innovation that's driving and have design good innovation process,

helped So market. half overall that built to digit if for automotive at for in of it versus in and flat But growing growth business, our business. softness is some above bookings in we given growth of healthy in the terms we've QX second health the that outlook you profile look that the with low-single solutions see auto our on year

business of of that excited I'm that how that and a So portfolio like and that’s business is us growth for it really and is moving a and profile with out, us to outlook more forward. opportunities in fills capital strong see stronger kind but spend technology the growth various manage

Paul Chung

my follow-up And CTG. you. Got on then

How CTG you at corner? rearview just we below remain the but you portfolio, X.X%. Thanks. the kind Nike now, I are of to hit So, in are target causing of calling And kind with levels, do know operating were other around when that variables X%? any margins turn to Nike other color? what expect of of to kind some margins same kind before

Revathi Advaithi

is work done. not So CTG on Paul, I’d our say

portfolio is Chris that comments think, manage that I I mine to in of in that and the have to business. his we said that continue said

product then we have to the we reposition customers, have business. historically, We to And seen the which have have to manage what manage non-performing volatility we portfolio. of also the is

So comments his done there Chris and is before the work in really made that. not that

we to taken in in is how and we the then get continue margins It's our account that. is have it's have focused expectation outlook. last will committed margins in and talked to that that do. into We to trying this XXXX that But Chris, else movements revenue but on range the months, and on we're that's business. of for all driving what range to about anything definitely few and year. continuing managing back improve in CTG? that laser get to a not my And see we’ll that happen and level some going that our expectation we my team business basically we're it have XXXX it into And that to to expectation the

Christopher Collier

very well. it you covered think I No,

months. was year been reflective underway. rationalizing said I and guidance, portfolio portfolio selective flows. actively just where focus, our both think discipline going on we It's say as it been the be and six look capital to the to QX still in of we've over that's And from marking impact you capacity you rationalization a the last the we're incredibly

that of softness we we as have certain some the customers. seeing in consumer some As are well

Paul Chung

you. Thank

Operator

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

open. Your line is

Steven Fox

I like in where impressions Revathi, improvements would comments your please. in terms all could to emphasize I the you if on Flex. questions Two appreciated of afternoon. early Good

if One think ramping bring the on that that the I your to I downs could and had particular new of with then get programs anything Flex process is ramping had Is And curious more to make the of in there business that I in predictable? expectations. areas ups can question. that in to up industry change was new follow has The you programs. view you a sort

Revathi Advaithi

businesses disciplined and in the -- many, program Steven, us requires many say being think, because many my ramped all well. commentary, I whole being to I'd I we business in execution word the my times through that do various have repeated manufacturing view

sure between process all focus and about expectation. consistency expectation the making beginning customer driving the on our is of it having So it improvement is planning and really there laser in that and

and the comes organized incredible what that’s planning down it there make in it we will and make for processes than is an do these So goes will we and that that’s has will core execute The well me Flex be to to, to issue our focus clean, laser planning ramps don’t well sure be that disciplined teams ramp really I it execution. are have predictability anything on do is and down and what more to consistently. to has And think successful. we that

is really we’ll around to that, to going is when process do disciplined execution sure processes, ramping business talk Steven, make down around have that this important that’s am So I what that of organized overall part key about that talking we're up, forward. we I that ramping an about and successful sure will make

Steven Fox

off cap give full reiterating sort is appreciate can is traditional you're comments, auto is now guidance Great, for just given I of that you those and your pruning then some And not year, [inaudible] you're equipment consumer weaker semi weaker signing offsets that areas. or providing us understanding positive formal if the of networking some it’s helpful. weaker, sort

So what numbers? Thanks. of in would the be those to maintain sort order positives to weaknesses offset census

Revathi Advaithi

I think [Technical Difficulty].

strong portfolio. said auto have is year our the health we the of would basis expect the stronger half a softer in portfolio on our on strong, market we at have starting won but you second be we going profile, to we bookings market projects also that being solutions where booking that with have we a even based So overall expect if our could overall look

continues overall, has in strong be portfolio that’s to through in growth also industrial growing expect We to and XXXX. back well then, continue even year to that and see you the well. And managing to it that trend and and come going that

quite So if there to say in that few are slow the would being growth bit I you offsets of overall auto a little a thesis for a and of period offset that. general optimizing CTG

Steven Fox

you Thank very helpful. Great, much. that’s very all

Revathi Advaithi

Thanks, Steven.

Operator

next Your line Tindle Raymond Adam of James. from question comes the from

line Your now open. is

Adam Tindle

me Okay, think for that if not the wanted operating get will to prepared we thanks I you margin that XXXX. just good just I’m remain on clarify, to what to it fiscal And that afternoon. to I pressured start wrong, X% but touch so back get could range range X% to expect thought should that had remarks the maybe and and to changed? if in you hear previously would I correct CTG

Christopher Collier

the to portfolio continuous The we’re emerging to going in prepared XXXX that it you're targeted to the call The that while said is actually comment referring remarks through anticipate from the we be we our would where repositioning range. pressure. under last highlighted remain

So to is business, margin in to that and just move get forward which us year define throughout we're we're in intent target take selecting back that to not as repositioning. the work a would going plan range. the to say trying do lay is margin through and And that entering of going into let to to are we target to thoughtful right period partners commitment be year our this in we here our it action show into I what the range. of and and that front evidence we're continue how very it’s being that out move forward now improvement, time

Revathi Advaithi

mix to volatility our the range it it in saying manage down, at our goal we Adam it objective have the target margin the XXXX. and is in will And this some the intent. But in quarters as we're get to our some volatility predict is that margin ups you what it that’s but have may but and final simply the customers' time it’s seeing portfolio, as said it and

Adam Tindle

as follow a you just cons into maybe different got could seeking remaining alternatives leg sure IEI give adding a thought pros the a and and view stool? strategic using just of down us and up eyes mean, on chance CTG IEI HRS double Thanks. to that process? that considered a a things, if that and third if could you’ve or and I'm Okay. fresh HRS you Revathi, lot and reevaluate here in set to And of just CEC versus you businesses on touch maybe I to

Revathi Advaithi

And ones focus margins and make as be look meet now. we'll doing. view thank our all for we’ll that to can time, fact absolutely. well, that portfolio with or we real as any is really from business Adam, criteria. And that, too we in early that tremendous a in that. on for this move we now. Adam, to are to me But committed really results and we margins that. is of improve appreciate we some me that, for or comment are for constraints you'll it's CEC the will too where which said, And me to mix change improving on. on portfolio do to too businesses around comments in laser set at movement drive with we of certain that operate in I sure you at those see on my point way on it's major And portfolio But just we evaluate early business do I focused the the that's forward and have will early both to and right that. focus what tell definitely focused you right that basically CTG. are meet as reflect they I'm fundamentally will But My some that don't just that financial built you teams on shift portfolio this

Adam Tindle

opportunity. Fair enough, the congrats on

Revathi Advaithi

Thanks, Adam.

Operator

Your Matt next question Sheerin Stifel. from of from comes the line

is Your line open.

Matthew Sheerin

that you segment, the down CEC thanks build on regarding enterprise strength that more segment of some the for a networking, Is customers, the there is XG that little there you side areas cloud. networking Could is and multiple you about bit signs more and the from taking drill XG, weakness is by in and inventory or demand? offset Yes, weakness, saw. A talked that question in of on specifically question. underlying that where issues other or

Revathi Advaithi

jump and Doug Matt, into. going Chris free to sitting that, I So him and comment have with on here me I’m feel to have

Douglas Britt

Yes, great..

network. the shared tail XG and end it quarter, cloud, of towards what business forecast, the building the some the up been fiscal the the And And into is experiencing is quarter, of growth. was the we're to XG, our then essentially nice softness wireless end the we're business as terms next of the infrastructure, of year. of terms in the the networking that's that portion that But we've fell. specific As our we we doing experienced enterprise networking enterprise in tail com towards rolling really data

Matthew Sheerin

Okay, that's…

Revathi Advaithi

the For saw. as range you

Matthew Sheerin

about, it. know as programs guess been other what you into fiscal well, are I you've the the get X.X% you some back transitioning range X.X% talked as and margins I for that expectations the And pretty costs, the some into Got and there that to to were year? margins below mean, just portfolio range I the get managing the target. the

Revathi Advaithi

Yes, to into on is margin for absolutely range. sure also get Matt back the CEC it target our focus

paid and is to on don't the one other. sure we that the We go getting or CEC we to that the do XXXX. focus in target we margin And same driving is back making have in for profitably, in thing continue go innovation is range we're have go that product right expectation to the that business the this get for and it we and segment the

Matthew Sheerin

it Okay. And hearing the component modestly cash capital I can, up not the flow looks supply more if you're environment question and lot on We're quick like just it I constraints focusing free than year-on-year. working inventories regarding a were of lot a is a yet. the and was. inventory, know certainly efficient about just

and going working about talk capital inventory reduce to you opportunity could the So forward?

Revathi Advaithi

Yes.

that's is And our improving view to sustainable there's a are Chris already launched warehouse room we it an managing And you on to processes this about a we in inventory and There's say that business. business where my can for SNOP we demand not opportunities think process that do business about planning initial I’ll inventory in hand any process this we've when our it no way just continue first in see over differently capital facilities, the Again, also. the everything [ph] second of to room our going ship is see business that's QX I’d go or to in improving some that tremendous there that And to on half. to in things today. in our be manufacturing and team sales volatile can to processes. and So working make than fundamental other there’s terms definitely already this if way, improvement. you QX. and planning this in better that. decline out. that And to run from it you operation do capture And then take Matt, overall of levels can inventory to comments started

So will focus on lots is my I there's working of making and that terms the based capital of assessment, initial say in room improvement.

Matthew Sheerin

I there don't know ask. anything to

Revathi Advaithi

Matt. Thanks, Great.

Operator

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

line open. is Your

Timothy Young

this the Hi, Jim color behalf taking Suva. calling so on for thanks of and Tim for far. question is the Young, Thanks

guidance year-over-year for CTG steeper a implies decline quarter. Your June

be You business. mentioned you will selective more CTG continue in to

does wonder CTG mean how revenue have year-over-year we segment. I think should level for follow I So that year then double-digit that for up. about full And declines a

Revathi Advaithi

Yes, my Chris's in expect that very been comments managing from I’ll opening we're and about And very the that proactively we've forthright in Tim business in some start by opening saying we and and this results managing how business. we're comments. open

the of customers our of customers part is seeing because portfolio removing are some QX managing is So some to and impact market. of us business that and from part we due

is little you a for bit mix a of there in that there see QX. So

and volatile see year. that year, to some be through downs Going growth and will you will the I do ups the overall think that

where be too like to early in think I we expect QX. have decline ends year don't comment as to digit the in it on full I double up.

I better because second of the comps, of that the through it my flatten are they expectation half think will year. out some so But the level out lot in a is whole just year.

Timothy Young

on demand and in comment and Thank Thanks. regional specifically you. Europe visibility your And Asia? then can you

Revathi Advaithi

question, repeat the understand can question? the didn’t I you

Timothy Young

specifically demand in visibilities in Asia. Europe different Your regions, and

Christopher Collier

I with than think in visibility regards Yes, there's to months different you. today that's when we demand any that ago anything three a region was to noteworthiness don't particular talked it

Timothy Young

Got it, thanks.

Operator

from next Craig-Hallum Christian of comes Your from the Schwab question line Capital.

Your line open. is

Christian Schwab

sure of background hard. correctly. taking But comfort with questions. for company, focus want And as that somebody usually contract in thanks improving the I rocket what my new it's me necessarily make things. a I understand from manufacturing it well is Congratulations a a little in manufacturing on seems to In also essence, yields, and it the faster kind the it I'm you lots improving of not of XXXX. typically the Great, increases to operations up just set chain, as is job, hearing on the everything organizational science over everything of supply the see cetera. cheapest product products, tuning is XXXX? maybe to improve out et cetera, biggest footprint are, Is development, best kind that new market guys new versus disrupting yields time labor, as course tuning et everything what increasing which satisfaction, for customer the skill where opportunity

Revathi Advaithi

flow across The portfolio, I cash across at few I X us. margin have around improvement on that the through rigor drive tremendous major Christian, what and is factories same discipline an operating to is you is room just and rolling And But and those operate and tuning our drive out we factors the the I things are. businesses Flex, business just time, Jokes those of I’d we we what have ongoing mean, should And for our some decided those there's come organization. to themes because some consistent factories process and priority we is at that or either we're say have key what can the see you in it working to XX room find that organization and that work happens basis. will for really lot drive that not aside how in on And in that those. business. have work a see terms way how an tuning, operate. like entrepreneurship there I of

And not I projects and that's hundreds and about little taking the it. think add kind just way hundreds of not up. it's So those of

to I to really driving cash priorities big and I what key confident think XX are margin organization that across about opportunities vertically X and flow we're and improvement. the And do. all that for pretty both those feel trying horizontally find that's attempting and to

Christian Schwab

the you that to kind a were think changes for those of improve timeframe of the company? it of there lines, that in Along in that operating whether Is have fiscal year the kind is something is that those the just will -- thank And is all successful step reasonable successful XX what is was you for company or to some believe something successful of as change that. of of margins of XXXX. or you see to that team an for happen could point soon X slowly, more you structure implementing as ladder then those kind of inflection we

Revathi Advaithi

that think how to sustainable improvement, flow for cash Christian, we improvement margin show have about drive is right. then this I that will sustainable me

think you productivity because a So, I improvement. that certain goal victory is there organizations cash can drive declare end most point improvement margin a consistent strong year-over-year and at us here an like don't time flow in will

I we'll done you'll should And and XXXX, that But that this organizations and continue start as have both then longer too seeing for enough that, seeing improvement well. true, forward. to moving to expectation in start tell And to my don't anything or opportunities this because hold it's but cash business I XXXX, my to in a many over able game XXXX like be here, do too consistent the to see there's So like me is in results an drive that early cycle. this what want looks of expectation that early that to flow. this is call done consistently end margin and that. margin

early an do. period that's over expect think not too calling this So a long inflection And of time. point, sustain I I to to

Christian Schwab

No Great, questions. thank other you.

Operator

this at call back to turn over There closing time. Kessel for Kevin are questions remarks. further will I no the some

Kevin Kessel

us. it's again earnings. know busy of very We who you day to Thank a joined everybody

interest and on appreciate participation call. So we your really the

of many I'm of sure call. at some will seeing be This concludes months you conferences. next Thank over upcoming you. the few We the the

Operator

call. conference today's concludes This

disconnect. now You may

Flex (FLEX) 30 Apr 192019 Q1 Earnings call transcript