FLEX - Earnings call transcript Q2 2019

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Operator

Good afternoon and welcome to the Flex Second Quarter Fiscal 2019 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'd now 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

thank XXXX joining conference and second for quarter fiscal call. you you, us for Flex's Thank

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

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

Britt. open the our Paul presidents, two to remarks, with questions Doug their Following up Chris, we business Humphries will call as as and well

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

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

like to Executive Mike call Mike? over turn to Officer, our Chief the McNamara. I'd Now,

Michael M. McNamara

Thank you, Kevin.

our been company extremely into and our we have to customers their back have journey. this throughout I the new I having an and as Flex thank call, what we as continue believe year. we and begin years of a serve I for employees reflect moment After CEO, to proud want on my Flex me to incredibly Before our XX to at had an for announcement the of calendar the now journey, want to at leadership as my step end allow retire a the to take board on I I'm powerful amazing time built. years support informed that of, today, that It has privilege built XX is intention to improving and

Let to turn over Michael it Capellas, would of to a like the words. say now Chairman who me few Flex Board,

Michael D. Capellas

of Thank over world, to he Since I On leadership the a past his team in leadership global becoming in and XX employees into behalf like billion you, board, CEO thank today. Mike. years. has built the revenues and Mike dedication around the XXX,XXX our for the with would entire leader Flex $XX XXXX,

will end Heidrick well as with through Mike's for Flex and business miss a best & we consider will of very We the search calendar the Mike wish has the incredible we of assistance remain Struggles, CEO already board, external The of the passion in candidates. his year. will launched as him the CEO retirement. and internal formal

I'll turn it Chris. over Now, to

Christopher E. Collier

Thank you, Michael.

we I'll a well, have guidance. line remainder the to the of operating focus which share which the is respond we a performing most with on our how delivered healthy very recent to of It results. largely CTG noticed, our to As our begin current solid of our plan with you are also results in majority CTG, guidance. be with Flex causing XXXX quarter previous fiscal of will the and will summary to we cover. challenges Outside reduction important

X to summary. for QX income our slide turn please statement Now,

up approximately provided. X% within year we've sales second Our quarter were billion, the and range $X.X guidance versus ago a

midpoint and of year-over-year. grew operating our adjusted guidance $XXX XX% range million, income QX Our was the above

of guidance share in adjusted was resulting which was $XXX of net $X.XX, $X.XX above the our diluted earnings range midpoint million, an $X.XX. to income per Our also adjusted of

quarter adjustments totaling GAAP in $X.XX, net net GAAP a quarter $X.XX. to income of million of adjusted resulted was second $XX due EPS income lower Second than our which several

our turn for highlights. financial X please quarterly Now, to slide

X.X%. to margin business. our gross X% our shifts, gross our saw pressure inside grew unfavorable to reflects $XXX year-over-year CTG While basis decline points million, gross we The most profit XX mix margin notably,

$XXX second operating adjusted our leverage ability business confident We grows. as year-over-year. to the X% to in provide expense maintain gains remain totaled million, drive down SG&A will productivity Our that quarter cost discipline

business adjusted slide million, operating up margin year, the XX coupled results, adjusted came $XXX with XX% an efficiency. income contributed IEI we evolution turn points, we our elements well-balanced we operating of reflecting SG&A have in in CEC All notably, quarterly from Our and of our at our industries of The increased Please our above a and businesses, prior margin strategy. no XX X ended cornerstone Several distribution sales customers by of operating X.X%. our with to XX% across for basis of of group. sales. portfolio the both and to with is customers improved totaling customers expansion top increased to leverage QX achieved business revenue growth and review four year-over-year a groups serve, XX%

XX% billion, the to While and XX% NIKE, achieving and Clearly, our has as year-over-year business: well focused addressing core by impacted company's year-over-year $X.X the growth, mix performance revenues for our business X% major India, results expectation grew be the will rebalancing materially on of to CTG three its CTG. CTG growth. below we only underperformed, components

successful. reach with Regarding recent it solution our are mutually and agreed became we Guadalajara NIKE, have a and to that by with in wind hard manufacturing operation our to NIKE make commercial NIKE unable viable XX, we and have footwear weeks, NIKE XXXX. operation footwear worked Mexico December commercially clear down in In technically to however,

global the of In and the fixed the our of We assets. related are many of impairment estimated connection to $XX wind-down terms our to the and driving implemented recognized as closing operation, are India of striving may details solutions, finalizing costs We leading of primarily exit of created our costs with million affected employees retain the to we operate capture complete with and we repurpose facility. coupled to expanding a diversified to our we have newly opportunity invested in in-country multinationals unique incur that In demand that India, additional wind-down. market. by for are heightened with tariffs portfolio strategy the we a

our We all grew sustain challenges resulting vast constraints we India this December the of constraints focused, in and quarter, of guidance facility and cause bring in year, the we business these to struggled through majority India adjustment our are the fast are the profit booked downward to to both business. the the fiscal September for revised of unable we've business, and profitably In persist spaces the to quarter the our capacity have anticipate support we CTG numerous grow of enough revenue remainder core in on business. additional and been customers capacity While in across year.

and go-to-market selective on accounts control requirements. and well-funded, partnering our of to brands strategy We products are have leading actively revamping are managing be with underperforming multinational that demand categories we regional multiple

we to be quarter, to year-over-year to expect the As we to look due down reasons I already XX% the CTG XX% outlined. December

in we Going contribution pursue. will the in be portfolio forward, we and metering will selective programs be level our CTG's focused on we

will delivering revenue margin We targeted growth to range into X% versus on margin focus back X%. expansion of and getting our

infrastructure a well billion. cloud by XG was this programs. to and support expectations of performer growth data businesses, standout $X.X business as ending as was quarter, momentum to quarter growth rate a with of at network from driven to XX% the XX%, This our CEC launch Our of X% center the year-over-year, compared

customers design solutions, XX% cloud opportunities, which data In improve capabilities and particularly business to year-over-year. center which to and addition, our over grew new continue in leading expand, is

in we CEC confident X% a to wins quarter, the flat guidance to solutions year-over-year, the to saw the billion experience in evidenced long-term we market. of in X% of programs. at by bookings. XG grow growth level the expect strength of quarter For business record China. its automotive our medical again year-over-year we December cloud continues on HRS driven center year-over-year or and consecutive year-over-year XXth December of expect remain We expectations, $X.X grew HRS growth to double-digit end-market growth, by offset our continue XX% business to new data of as new very and most end Revenue plus medical be our in see midpoint helped our of basis, business HRS, weakness, trajectory automotive was our growth. and the notably as its high softness marking towards minus quarter, In of as X%

for this XX% year-over-year to quarter, and automotive. billion in is rose to across medical industrial, X% bookings billion during $X.X energy. of We year-over-year Past year-to-date fiscal and both the in entire IEI home, billion, equipment XXXX, $X.X X% balanced $X offset ramped expectation softness and growth. have capital secured in which line versus our the with helped lifestyle

by X% are lifestyle, Turn and and home our in operating we continued IEI to quarter, led of business by in strength the expecting For to energy. XX% for equipment performance capital by weakness growth revenue group. year-over-year, X offset slide industrial, December

target their pleased to business our this three operating range of in have quarter. We margin groups four are

the do so. with range to me is business Let determined group plans that discussion and in we're that fix to start the this and not have

Our CTG the pressured margin the profit, CTG and underperform, products business inside benefiting this transition adjusted our in business in portfolio. we lower from no NIKE balance the expansion. in year, of an remains million India as remains operating customers X.X%, of range. to persist The and resulting our to both adjusted resulting losses, essentially and flat which targeted with earned Despite the $XX operating below sequentially year-over-year, prior anticipated core year, is for CTG expected are margin capacity challenges in

of below remain this margin range year. we result, the expect a its fiscal As for remainder will target CTG

let's to groups growth guidance turn have Now, discuss whose met our or business expectations. exceeded

from adjusted solutions CEC greater an cost mix, center benefit cloud million, XG-related improved from resulting of in from well greater Our data better XX% generated as the as $XX absorption revenues, profit up programs. our a year, concentration structure of with operating business prior and margin with

a generated demand by range X.X% of range year-over-year greater was absorption IEI target million, from return top X% its the target adjusted revenues revenues, range we to in of operating within primarily up X%. range the programs programs XX% profit multiple priority and margin, semiconductor Consistently ramping margin $XX driven increase reduced operating operating in margin equipment and remain Our new The and operating a business we from target adjusted operating to back inside been home benefits energy. its the improved achieving offset plan from and capital by ramping. has within new lifestyle, this as to

HRS X.X%. which operating million, down of $XX reflects margin business and operating an year-over-year, of modest generated profit X% adjusted was Our a

are certain services ramp and offering, of Our automotive profits earlier. parts to offset revenue products as operating margin pressure continuing of and scale mature, macro programs which see margins as of highlighted and portfolio our a in

to XXXX continue fiscal and multiple team The intently customers vehicle in HRS We autonomous its design to successfully connectivity, businesses, automotive investments booked to business focused and business, as and programs within strong transferring and vehicle range and such our and of many to focused on healthcare. expects levels our on beyond, well as supporting margin revenue expand in engineering well organic HRS target capabilities remain record ramp new as of products remains stay X% across its X%. into our growth

Turning negative lower flow was the $XXX cash X, million as us slide from flow our to million quarter our Free operations intensity flow and quarter. for cash just the let generated business highlights. the flow in cash We review remained of ended elevated, generation in cash for capital generation. a $XX resulting

capital was levels payable. increased the up year, higher primarily from networking which due are $XXX inventory, offset of Our prior by to million accounts

elevating We aggressively next couple now across of our raw revenue, with material returning inventory constraints, levels focused to turn our over historical impacted to the are affects business levels on levels, inventory groups, constraints component given and all inventory by inventory categories. at which pricing. business in our quarters levels challenges near pressure driving trading Our and reduce These levels. record multiple remain activities

on capability of to framed execute and continue capacity expansion out the year. planned We at our start as the

million capital for million. expenditures exceeding totaled by quarter, depreciation Our $XXX $XX the

well and as invest India. We to IEI continue in capacity our CapEx in to as building expanding support out necessary HRS businesses,

to the As with expect higher previously of this we XXXX for late our we business, capacity fiscal clear to sight dissipating year. this have of discussed, in line booked investment in required levels establish and capability

back large build-out dramatically will ourselves our reducing regional in CapEx in forward our below As CapEx will will to XXXX, reduce and our as HRS be India level as largely into we HRS our complete, fiscal see $XXX investments expansion move be done. historical million we levels

capital capital We half and our both the and Returning our program for lower levels to flow this investments. networking flow year, positive share repurchase of priority remains of operating Flex. in as cash in expect cash free shareholders a fiscal to lessens top terms capital back through value intensity generate lower of

X.X million slide review shareholders. our commitment quarter, X balanced value structure. repurchased we to capital We approximately for to continue to million. shares our consistently fulfill Turn In return our to to roughly this $XX

maturities have flexibility balanced calendar to operate continue with business capital support and long structure over with XXXX a until term. our to no the We debt the

short into let get tariffs how our our you me and provide we guidance, update being see Before impacted component shortages. business with on we by a

the basis. Regarding hit to work tariffs have we We and distribution range to of China reality a their industry countries many as in a broad redistribution the world, trade and regional concentration of reduced incentives across of their the expected, around is actions, beginning as support a impact manufacturing own towards anticipate more products. provide with

the chain long-term provider a this beneficiary of should be solutions major in of largest non-China supply one region, As world's shift. every we

Europe. to Eastern a of be the product extent, volume into significant Southeast to U.S. and Asia, the Mexico, Over coming a and India, lesser we moved year, amount expect

actual so supply re-architecting a have chains there product has not an acceleration significant of the product far, of of broad been across categories. there planning in been and While range movements

working current of their in to there impacts will remains tariffs assess We implementation programs, analyze having manufacturing effects on and tariff response. end uncertainty short strategy. well global what and of the the corresponding customers take our market as prospective are In actual and actions and actively to customers as products, their with term, demand businesses the the on

as you allocation, total already and to component inventory now, of constrains short remain are shortages supply currently passive pricing. many revenue and components Turning elevates in which on and know,

an begin shortages dissipate December peak to March to reflected will in secure as ability issue quarter due move continue we to likely this we then, As This forecasted, work and the be quarter, our to supply. into with component to suppliers and our is guidance. additional

range $X.XX operating $X.XX slide weighted as to EPS guidance of third fiscal the be to million is for per stock-based $X.XX XXX intangible of compensation Guidance is Adjusted expense of for be billion X on expected to for Now, million. to in income $X $X.XX the amortization. to range guidance. share billion. to based to $X.X EPS is $XXX million. in QX outstanding Adjusted of for of result shares is the revenue turn GAAP a and to quarter let's range expected $XXX range XXXX in average a

assumes that QX turn within their groups, for operating guidance activities, ranges. will Our all of that to to updated our fiscal business we related NIKE will Please for be X to exit except guidance. QX margin and XXXX as losses operate CTG, similar slide undergo target

hold, to the our this It Given at wanted business today, XXXX to our saw highlighted we $X established dynamics our billion, our industrial smaller incremental nearly that we is was fiscal tune we've took before, businesses. automotive component ramp and we India incremental but as Investor Day. reductions to provide in of pressures well also before the shortages in an notable May update guidance both guidance as

guidance our guidance. XXXX performance fiscal in forecast, of has and impacted for CTG accounts the Our the reduction majority thus,

revenue leave there result ground adjusted for expected expense other call, are operating but of billion, million the The to To in intangible of $XXX adjusted charges. a up, turn full-year of EPS to EPS points of to to on primarily recap. and compensation income to of $X.XX, to a and main $XX $XXX covered is GAAP and stock-based you billion guidance fiscal $X.XX. have slide business want updated million Please lot be we of $X.XX group this XX as is $XX we $X.XX sum amortization it a Our for to range three with.

is business CTG our underperforming. First,

wind the CTG decision are with took to step to facility. margin first NIKE range. our down We Mexico the returning its on focused We

opportunities CTG targeted business our of on profile actively We fit that X%. focus to working to X% margin the remaining are

is of Secondly, improving our schedule. very the remains encouraging. a CEC quarter business This outlook ahead CEC and was strong for

we overall are our their to growth and that, and back to coming operating Thirdly, record call contribute With in over as me forward. go record revenue, the both Kevin. HRS turn margin both and businesses will IEI to are bookings continue let long-term off ranges

Kevin Kessel

Thank Operator, for Chris. questions. ready poll you, we're to

presidents As answer our Doug well to to we Humphries. a as Paul addition Britt, Chris, group questions, reminder, business have here also in as

Operator

Capital first of Amit comes RBC The go Please from Markets. question Daryanani ahead.

open. is line Your

Amit Daryanani

first understand both a maybe have the a of want for do future. And you NIKE two few a with lot. guys you there questions. first months Thanks just luck, Good I the off, what in went relationship ago. up wrong one, of I from guys. Yeah, until afternoon, NIKE confidence Mike, and best to you, because ton think the was

from couple – that prevent happening what So, something think learned dynamic in thing the this what helps NIKE future? has do from things again went Flex are you like that the a and maybe wrong this us of

Christopher E. Collier

would sit our the right operation midst is now. I of we in are shareholders are say partner, say was we a agreement come the in terms We're productive with return, that out I we of a disappointed we negotiating would of What commercial it developing into that Okay, can and agreement we're as disengaging proud say fixing limited with build actively this Flex have where what unable thus, we that NIKE. the can of. where Part system to we to our decision. sustainable were

a (XX:XX) to And our this a just we as that stage think where being was where unique that in an differentiating, shareholders at after important step is can't very thoughtful and it return, where agreement was we back, feature exit. and sustainable and get since we of – to decided I terms think I went NIKE we we we extremely are commercial this sit.

Amit Daryanani

than as from mentioned CTG you the talk right. you forward? of you All if portfolio guys IEI well, could challenges you've even I right, doing the NIKE. PCs the right, better investing I think eight are be go broadly, expected. or in tend HRS, today, segment, keep they CEC had you I BlackBerry guess, just all think business you is Flex why do seven, – when you to about originate really I Because years, in want doing about this doing the to now or last mean,

have to lot bother I and with keep the investing businesses headache? potentially, cow less versus but even be why just as other this to growth So, cash a maybe invest understand, sustainable in which, three in more this seem run lower

Christopher E. Collier

within see Yeah. Certainly, volatility business. There we've that seen we benefits that a of that lot portfolio. with operating with are our

However, a technology benefits scale of overheads adoption. We level. metered that terms very to our as across needs We well our and chain. get as in at be – leverage supply

So, hyper-focused we're and space. be level we to selective we're with in as going with regards going contribution portfolio very partner the that to that it to forward be we move our plays in who

well. and remains on not revenue But been this very, that's are business We put very of we've amplified of across we the making to and HRS business. the and performing focused were a investments rest highlighting, We've point. significant margin focal of IEI we investment level the as inside that

real So, I very selective, metered driving focus more going leverage better and our noted the that approach, lifecycles. much driving see in product very having CTG, I volatility you're think underlying disciplined business well on a that a portfolio, within in margins, greater to with – is sustainable of earnings think our what strong, and operating terms

Kevin Kessel

question, Next please.

Amit Daryanani

Thank Perfect. you.

Operator

question from Please of of next ahead. Sachs. the Your Mark comes Goldman go line Delaney

open. is line Your

Mark Delaney

Thanks the questions. afternoon. for good Yes, taking

can anticipate last this after you is end help I'll the stranded contributing of Do of can continue calendar year? relationship or end maybe to was I anticipate year. end the numbers. you goal First Do costs the updated the fiscal stranded this that losses the year's And the understand having this, of with losses to by say, the I beyond end understand is the costs that that hoping, full-year you that year? question, us NIKE guidance,

Christopher E. Collier

Certainly, Mark.

operation As the end include what there the with that we had we and we losses in we in range, December. will will cease highlighted, to NIKE same losses as we be by QX no – That be stable move of forward. QX, winding down just absorbed the for will guided

that cease business. will We

structured about losses been those how had move in earlier QX. that's in we our year, through we we talked been contemplated the And guided and cycle. as abating So, this as

Mark Delaney

that within for for give will seems get of then, And broadly, like there's Okay. more can a you're a your in the magnitude that potentially a just maybe and sense encompass. us question Flex to you follow-up be considering that the scope much of maybe CTG how disengaging sense revenue It better trying CTG, portfolio. you. on business Thank

Christopher E. Collier

on here in weigh CTG. Doug let I'll Certainly.

Douglas Britt

business, the Hi, the we've Mark. are doing? looking accounts CTG with pruning we're last So overall six engagements you months. loss-making is been How at over actively the what

We products We the levels range. of are on larger that disciplined management business commercial profitability and the ensure revamping achieving the to bring within very a concentrate our our portfolio on have go-to-market. customers we we're broad our is guided that

of that we've been the taking this portfolio the track. pruning taking some lot time. business a in reposition It's we'll some confident It's So, on effort. get business. doing back We're we'll and

Mark Delaney

to and a resolve. more going Okay. several of could – Maybe CTG to take or quarters these of bit ask it a quarters number in issues like some to simply, mean, seems just on I it issues there's

So, within is back to have a the when there we range? CTG in is margin can target mind timing

Christopher E. Collier

some move a this those cash term, CTG. is and in time would we the active we customers We over happen the product portfolio not into year. and significant refining Yeah. We very We'll And that it'll as just our as that of same. engagement of things We're long just now fiscal viable and right does through in We're We're reassessing, the be that of XXXX. we've eliminating streamlining the expect and into, and entering been honing take Doug company. around that really categories, do not in the remaining is really part forward here highlighted. are the assessing Clearly, eliminating businesses do going for take not returning strategic sufficient provide to underperforming. one going multiple identified XXXX. not and improvement flow

Mark Delaney

much. very Thanks Understood.

Operator

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

Your open. line is

Adam Tindle

evening. good and Thanks Okay.

$X.XX reduction remaining Would about just to by of us fiscal XXXX was fiscal light it start, for help annualize you Can the lack down maybe fair would I the any Just XXXX $X.XX taken this? of losses a be does think and quarters. hit think Day NIKE at with the So help two helpful. $X.XX or just EPS you provide buckets be talked in offset? to the about Analyst about today wanted EPS the to some

Christopher E. Collier

Yeah, certainly. we just uncertainty you today, intact. in that sit large Where of environment. appropriate is we you a is what achieve into when we our of about endorse part out it's I getting the think how really there's lot with But tell don't XXXX portfolio back to think terms were of the business at tariff a moving can XXXX, to

back next into It its it range. and where again, move a rather positioning confidence year. and you us margin healthily nice contribution about ourselves centered within contributions of next its points and that business to will will margin of back IEI right It target record be year. coming the off off the see record nicely growing that pleased with healthy growth If for within and well inside we with as some the stay programs margin of bookings it's And underpinning Jump customers itself it's just give likewise, next has bookings into it's and degree range its year. now. it's range, returned CTG. we've where CEC, into we think been into coming HRS, we're really

as it last out a of contributing thought time, pretty there, view have lot a was volatility eliminating our the that lot we that this we uncertainty, carried bridged so, And NIKE of to meaningfully we will growth. obviously, year. And that, be of that loss had

terms plus So, that's year-over-year. in a of

forward. smaller than rest anticipated. balance, going largely a lot It's moving I just had we are we is be get that CTG healthier the on identified move So, And the intact. as say would going of parts

we focused the if step the depressed from a about time. and growing area be going but we're CTG think It's It's to anticipated just take levels rest positioning to it, the it's as is of think itself on. little that back I So intended. and going had that business you

Adam Tindle

and a that could future comment non-traditional best as us questions was up customers, might moving just about I'd can or come intact EMS supposed today level is in industry but customers. Thanks. more of is for more of the maybe move one a is perspective embody still case and just the imagine we development whether maybe And Mike Okay. and towards Can the thesis with if – why you to not reflect strategic relationships one-off how follow-up, endeavors a luck this of NIKE from of an the study? – think tomorrow than

Christopher E. Collier

for Yeah, Mike. answer I'll certainly.

Michael M. McNamara

Chris. ahead, Thanks. Go Yeah.

Christopher E. Collier

and positioned NIKE completely trying was it to revolutionize. something that was was unique a industry in new that we're

of shown playing Doug this done how just meaningful at turn differently We are so. grow to different our many arrangements our not customers engage the elaborate with in we'd ways business. Day, from probably some new different many I And maybe entering Investor Paul over to to into and I where our stray examples and engage capabilities that within ways far to finding spaces. platform on platform, both those we're think our would would we've their and to and competencies

Douglas Britt

Yeah, got have, bring in expansion why Investor platform years the are digitization digitalization the and our these industrial and That's our but chains the it And overall moving happening that's Day, across the in a as is is industrial that we what's this customers we've forward, regionalization happening articulated and solid accelerating. global We've margin with they how strength and their bookings technology. last business. in really see the new five chains of modernize revenue supply over supply you at new pipeline. new markets looking

the are some CEC. structural in shifts business, look CEC what's there occurring at that If in you happening are

of connectivity out at important. I looking position now. They're strong QX build-out We're the way that at That it we've opportunity in we're of beginning We're IP. Investor a is Data the from bookings provides we business. an across the a very approach Day. is seeing sourcing and that partners more cloud strong at security market of they're unique bring at the very that us for acceleration our recorded very looking the have new that we're revamped infrastructure We decisions. our is also puts built it They're bunch us because network that plays. and a network look with. strong back in regionally being And benefiting opportunities the XG changing articulated of can protect regional globally also and customers to

Christopher E. Collier

can that. Paul Maybe add to

Paul J. Humphries

as growth again, strong a differentiating a about devices, platform, expertise this as we're and is going a lot to a leveraging From heard think build new us area HRS in Yeah. our go that. me in the only capability been a and leverage leveraging medical improvement we're complete expertise result capability a past forward contributing competencies growth if solutions us our that space. That value connected medical, shift focus a the able the key platforms. the lot is that We across exist (XX:XX) but digital of see and in perspective, group to expertise automotive. seeing, of that in the And of autonomous automotive out is key XXXX. some devices able – of where in we've to in actually an huge seeing target to about combined seeing result we're service giving Flex again, And for not the markets for as to year that, that you've been connected expertise throughout of that, with medical new for autonomous, of the talk able have delivery to develop the into we to of be we OEMs you health we've

the we examples we've leverage result So see solid value I that we to that. have talked a actual, brings I think strategy, where the platform as about able significant being and growth of think lot a that

Christopher E. Collier

we I Just from some lifecycles, core. markets, move just and recap, underlying greater non-traditional into the can continue of automotive the are where medical, to to not as we our we just benefit as are stray far think from going to margins, and such going these product to industrial, such too

Kevin Kessel

Next question, please.

Operator

Please ahead. next Research. from Cross the comes go Steven of line of Fox Your question

is line Your open.

Steven Fox

Thanks.

Is a capacity India. And on some you're having meeting? execution wondering to that ago, First I bringing planned had constraints – maybe issue could unplanned of the XX it relative is off, on days you're or was this I up an it then, follow-up. you demand in was if having elaborate trouble

Christopher E. Collier

Yeah, some undertaking. we've capacity, in What we're certainly, as than bringing over bring us to terms the bit that's to end of the of very that line being how been capacity exists thoughtful in that that exists India. take of other that terms we that the challenges in support and and being then some come this in and go time year on with have demand that longer the just to had having up Steven. well that we've investment into in measured. amount demand capacity as And necessary the we challenges In a facility capacity, given had going to today. anticipated to significant of is be are online particular, infrastructure facility of levels capacity taking just into need, line to we're very But that back a going to be

Steven Fox

just Thanks. about of any keep What go of assets? of terms all relationship, you then, talk whether the that to of the NIKE developed was some And those ownership it happens or NIKE? IP around with can that Understood. you does in

Christopher E. Collier

Yeah. just as that. disengagement in in pretty with going negotiating to the able terms partner. of be limited Steve, midst right we're of much expand on to We're we're our now not the

going aren't to that. we So, address

Steven Fox

the skills? you fair broad now that technology way things another do everything you that's tear your way or That's look one that all had. another? I in some just or of in you still you based how Is Chris. think enough, you've experiments last down through to sort is that Maybe have have couple real of years just And at gone put quickly, there do the base on applicable of

Christopher E. Collier

Certainly, Steve.

So, we've captured in fair there's manufacturing into our of I that in automation mean, terms that areas good a activities learning other terms of of are and and other transferable of business. amount benefits

that area beyond we're the beyond or I our core there's no stretching broadly look across think if you portfolio, capability. our other really

to measured good, skill that of of of in a broadly, a significant CTG. what I win set But parts deep refinement us from we enabling we expertise building, are approach and think and have one – I think about terms a area more set you're So, is us real that's how really we that's hearing being think new business.

to where that's our focus going be. So, is

Steven Fox

much. Thank you very

Christopher E. Collier

Thanks.

Operator

Paul the Coster from Next line Please question of JPMorgan. ahead. of comes go

open. is line Your

Paul J. Chung

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

of how So on lessons kind as you tradeoff look much learned, given the we expect NIKE revenue growth should deals? more for margin-accretive

Christopher E. Collier

just past and seen revenue the of in think our like of even have XX% such over under of IEI just level that both the there, being and revenue, those to HRS, by this bookings. target you with start expansion terms ranges, of non-traditional of in been both both if of quarter, that inside level that we've we I'd portfolio highlighting, level with So, we've capture areas record as the margin profits record of rate and evolution

that forward, to book business significant think and focus and us our we exactly building you're be. where compete seeing of to very a that's is strong and I going ability as move business win

Paul J. Chung

just a then, spike there. Okay. the had on And nice CEC segment, you

to expect with maybe fiscal margins XXXX? kind trend the range end in you of So of year you. operating higher scale, CEC the Thank do

Christopher E. Collier

utilization, moved give just is now. its growth. the expand. trajectory good benefiting well to to benefiting CEC let mix of shifted from It's business. here developments. given through we're we've that greatly XG It's we're that of cloud a now volumes view profile. my as I'll capacity into as Doug the It's with pleased its very way running returning right I'll the from as greater percentage we're and inside back data margin center greater on business And But

for stated So, range purpose. we our a have

within that you range into would move expand? range entering staying with and to Do anticipate well pleased forward. as we're that think want we I we

Douglas Britt

Dough. is This Yeah.

such all and design yielding. a in good from and very engineering more different drive our we in investments deeper there's the operate in value. benefit And the been with globally. chain developing to a supply and market disruption by this have we position been relationships adding We've based customers locations this Our disruption on occurring we're

the great see team business it's to So, this growing work so hard again. get to

to the for a So, great I'd like congratulate quarter. team

Paul J. Chung

you. Thank

Operator

time is for have and We of that Matt Please ahead. go question, Stifel. Sheerin from more one

Your line is open.

Matthew John Sheerin

fitting for me you thank Yes, in.

shortfall, down another looking at midpoint, at regarding XX% you're year-over-year. revenue the CTG Just question

So, percentage projections revenue ramp to the What is and due of that so. for versus you the deselecting that's to expectations – versus that roughly $XXX unable NIKE issues previously in million or in into revenue had India your quarter?

Christopher E. Collier

Yeah. Hey, from Matt, this in is NIKE of impact from Chris. no NIKE. impact There's that terms – meaningful no

but year-over-year As of as we refinement and erosion thinking a actually business on and majority of CTG, That we of India, implicating that's well highlighting, ramp core a that the core basis alluded revisitation significant an Doug as we're refocus through inside type delayed the to, how from of were inside the has more repurposing, as is that efforts. had guide.

Matthew John Sheerin

a I going we if down visibility – through looking quarter, your to flow to business? in don't that rate should of year-over-year you And March but kind have into a know of seasonality be similar you that in ton the it's assume

Christopher E. Collier

would sustained having I Yeah, say aspects several anticipate that we of continue. these

transformation. be we that fiscal margin I rebalancing CTG portfolio, through be that that under as we in also will guide pressure go of have pressure. as we to reflects already continuing XXXX the and say Our would I terms highlighted, will

Matthew John Sheerin

now I to square And foot in the million capacity facility. believe relative NIKE, was have you that Guadalajara due to that Okay. X like then,

will that Mexico. an if said, looking deploying at, printed would assembly your shifting circuit opportunity, your of et it of places So equipment, terms what to like of traditional be out be customers cetera, you board kind think about China because we in you as revenue capacity

So, we opportunity to about think capacity? that what fill should the

Christopher E. Collier

Yeah, certainly.

in capacity As as negotiations most we in affected repurpose Mexico. the active the NIKE. remarks, We're and prepared working retain striving the of we're hard well employees, to factory as with highlighted in to

is tariff with distribution the China relocating business of of prospective Mexico. around customers to lot That is to away a notice from other think is point discussion the inside other and going heavily providing I current be regions. that we into regional environment seen highlighted

We set way, customers offer would and we'll to and anticipate capability ability an to in have our the largest I seeing. inside footprint partner be Mexico effective of

Matthew John Sheerin

or a in Okay. mentioned costs that there with terms you've mean you incurred follow-up, those could they'll some the of term some some negotiate used that be just And costs? share you Does the of NIKE. settlement of that just quick

Christopher E. Collier

we and Yeah, Matt, We're clearly, the at that. limited in the can negotiating we'll with disengagement in regards we're that. midst going it of terms with of to say leave to what be really them,

Operator

remarks. to the would closing back for call turn I like over now Kessel to Mr.

Kevin Kessel

thank and in. you, dialing you for Thank

This concludes conferences, We will see call. at you our many of Raymond upcoming James. RBC and

Operator

conference call. today's concludes This

disconnect. You may now

Flex (FLEX) 25 Oct 182019 Q2 Earnings call transcript