FLEX - Earnings call transcript Q1 2020

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Operator

Good afternoon. And welcome to the Flex First Quarter Fiscal Year 2020 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.

opening call introductions, over for to would time the turn to this remarks I and like At Mr. Kevin Investor Kessel, Relations. of Flex's Vice President begin. Sir, may you

Kevin Kessel

Thank on the quarter Relations Flex's section Slides you. Website. for Investor today's XXXX our for available conference call. And first are discussion of you thank fiscal joining

and call forward-looking some Today's remarks Advaithi Financial and which Chris Collier. will differ. our me materially on and and our Chief Joining current Chief contains with results actual subject assumptions on be has recorded being are based that webcast call could today's uncertainties, statements, to Revathi introductory and Executive Officer, expectations and risks Officer, are

we information no statements. update obligation subject to forward-looking change Such is and undertake these to

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

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

Revathi Advaithi

to progress. I'm thank Kevin. the you today. Thanks, joining the pleased update our opportunity us to And for on call have on Good you afternoon.

we're the how also managing our the our want While main some call I about of business. review financial to with result, purpose is to context provide you

critical months, have in progress made few the our making decisions We portfolio. a of lot managing past in

our business. decision As margin within volatility reduce higher a actions exposure lower sharing restructuring that will result this to accelerate our are of today, we products to

trust business, volatile our towards our delivering with I employee their opportunity to results. Our to business to take thank for higher to margin for strategy which is design be continues their less customers lead mix our and segments. to this and want commitment and win improve will simple more

detail review first regarding and our plans. in taking. quarter the will our confidence results. more and employees first, financial the and progress that go have I our We let's talk quarter attractive we're path in in great assets, forward gives me But

I'm turn Let's income to within guidance our and all this ranges. with their quarter pleased revenue, Slide respective financial operating EPS, X. as were performance

adjusted $X.XX solid cash $XXX have in programs results both up adjusted delivering new lead Year-over-year X.X% successful and EPS, the were bookings. free ramp in revenue of margin million. flow and of prior year operating IEI by of health solutions secured through the We growth

geopolitical expected within was out continue range. as groups than range within We mix slower segment. revenue customers, softness automotive. few achieved the by in four targeted of well saw as and issues impacted the a networking China. manage their CEC as in in operating margins Three CTG this CEC telecom to and we was expected business in the

this cash our the a primarily more from flow also And free big pleased in We results. in details disciplined QX, this with change year. prior swing are Chris represented to and provide performance more will We financial execution. attribute

to forward. the to Let's talk Slide I our want go managing X. business, about moving approach to

customers business we have capability, leverage that be as global the our feedback consistent as we our we have our deep assessment have how on deliver our our a During to manage the confirmed opportunity on of has tremendous done initial well and and focused to dives to to The results. this groups, centers. sites, visits with sites along technology major quarter, many I business

This sketch business led returns accelerate will to the the financial manufacturing managing four execution, or are for us in last capital quarter, to perusing design portfolio, and enable and areas; concentrating the and said long-term. emphasizing free I prudent improve opportunities flow our scale driving Like cash strategy disciplined on generation we key allocation. our

much of short-term. as well progress focus Slide managing profitability, us Now In A to overall priority our improve of have portfolio as key four areas consistency enable which made in mix, to X. have will a we the the going our we is chosen, execution.

significant a China. certainty in under which Huawei. in control, scaling operations them impacted actions, Huawei customer for During U.S. result These QX, that as there action China. our the well was this, down were by reduction we for beyond our government lead geopolitical publicized products assemble a and to our demand we're And dedicated in of

Flex and longstanding successful have partnership. had and a Huawei

unfortunate. with have an worked This change agreeable them We solution. to find is

will center market and of is and important China production remain However, very for Flex. a

a employees of including and to of tens presence, our China. remain We We committed valued have significant in China. customers fully thousands employees in

action, volatility, decisions, high places and more These sustainable when reduce In roughly impact decided million we this addition to align of will also revenue to short overall margin on cycle, businesses low like product India. million combined, less to have quarterly categories. focus to other $XXX volatile our our $XXX strategy to exposure with in and

margin, company. in impact more us profitable be to enabling and improve want a these actions not that forward-looking will I do gross operating and scale actions of and are diversity These It to footprint. focused guidance. our reiterate also the reflected our margin our

value in Our for and of to key the presence a our world the including China, our and us diverse global differentiator enables rest India, to Flex, is customers. footprint, significant deliver

mix segments. changing are the also important big the portfolio While within these is changes,

of low our a volatility the high performance to as by businesses, CTG underperforming have margin reducing business very businesses. We inconsistent and improve well focused effort as

that assess margin portfolio CTG our meet we'll For this continue X% operating in the criteria. we prune and quarter, businesses to achieved do not to

We're cost management. in the and let areas as such include Next, address sustainable focus and topic, contracts, entire has ramp Progress incentives program on management this my which programs, variance is involves processes and me which favorite execution, and enterprise. key being made efficiency. reviewing and disciplined

annual our is we business over programs revenue. times in in three the type facilities. of margin achieved This For on and timeframe. Mexico one our the to medical example, produced milestone program volume HRS A The of recent XX-plus of our program the devices customer from a we dollar gross moved expected Solutions alone, expected in example future team materially. committed are launch improves managing XXX with a Health multibillion where currently families factory four schedule

As you're ramped credibility our us, variances we getting critical but to our financial customer We're perspective sure also organizations. only for don't aware, also have factories. is programs governance that across across right a from make these discipline driving not

of in example, one change incentives to to areas. the have align our For drive major done our is you things behavior and focus

know on greater customer performance. improves value Now return, is in we that best their the customers. and our financial build way efforts this deliver lead affinity And design this to the side, to

I customer partnership where the or leverages that chain, a think strategic scale, we manufacturing think of sketch I co-create Flex's when from portfolio Now, of to capabilities led design services. supply manufacturing complex aftermarket design, to product of

I'm quarter particularly my this about with excited from is solution. power example background supply given a an integrated One that battery

solution to the Now our design the to volume. customer a in with and global bring product define specifications, team high market works the

just This we and example, value are achieve to returns. how solution is one expertise demonstrating significant leveraging our provide

is design can these traditional and nearly goal identify capture of business. as engagements accretive engineering more opportunities lead EMS Our to margins, double operating that

performance, higher will track creating deliver right execution higher of including more By flow. financial record greater driving cash and mix, disciplined portfolio free design we and sustainable margin of a engagements, achieving levels the

discipline process returns. our our CapEx improved improving our and across have and to aligning enterprise, management our objectives for We portfolio

quarter. which the was this disciplined was critical $XXX cash lowest investments seven free investment past million, long-term for our quarter, example, This in flow For level CapEx generation. is improving

this are So lot areas showing these in can and we a a you results four in see, made amount our as have effort. short progress of of time

Now the evaluate criteria turning to of Slide we share of X. to we range with wide An with discipline will going is manage industry portfolio criteria forward. And now example that I align frame portfolio we ensure through our making cover our that you parameters. opportunity. the We how that strategy. wanted are on our work a decisions

an consider afield For too we example, that business do our expertise. another have industry is from we far opportunity where in will capabilities core not not

keep managing We flow criteria its free new threshold ensure invested financial ensure business for and evaluate discipline. the software with on capital. return that Every to win, are meets our will portfolio or executing in is business they margin, the cash and opportunities we

allocation share managing on for X. Slide want capital work frame I a to Turning to and it. my perspective

balance wisely, Our growth businesses, future return of and in prior cash grade share through offset capital in decisions the share repurchasing investment our to end commitments. healthy opportunities which goal sheet. to our stock dilution by a provide repurchase reinvesting goal with day, is organically to make maintain line continuing to is to our the At take

results. Overall, I'm proud with our really

will result building will continue for flow achieving free I portfolio, disciplined the believe of value our across generation changes long-term to emphasizing momentum. pursuing manufacturing shareholders. We our the focus; areas led cash allocation. managing we're four making and execution, are the we And design capital make creation and in progress

to come back in I the Q&A. Chris then who will go with concluding commentary more over now before turn some through will the I'll detail. call And numbers

Chris Collier

Thank you, X statement to income summary. Revathi. QX turn for Please our Slide

billion, quarter $X.X ago Our guidance revenue first down within X% year range. and versus was our a

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

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

amortization was and undertook stock and primarily First impairment income, of and $XX cycle targeted products restructuring to actions million reduce our based to quarter as of asset volatility, GAAP we in lower million net to compensation, $XX million exposure than short intangible million restructured net $XX income operations. net high charges, due adjusted $XX our in

turn Slide financial to Now quarterly please highlights. XX for

million adjusted year-over-year, adjusted profit X.X%. $XXX Our remained margin of our while was at stable slightly gross down gross

declined investments This improvements driving quarter with the sustainable of capability continue design and a year-over-year cost with intention discipline XX% and earnings operate expense productivity adjusted first we reinforces million. on to objective delivering to focus engineering as to operating our Our strong balancing SG&A into leverage. $XXX performance

discipline into mix profitability. improved Our greater are translating cost business and

from in adjusted million, which operating the up Our prior quarterly is income year. XX% at came $XXX

margin year-over-year operating X.X%. XX expanded points to Our basis

for reliability down $X.X XX low-single-digits. I'll Slide year-over-year billion, our X.X%. and range to with of business begin up solutions, high adjusted quarter business, and which solutions. revenue margin is to our comprised below highest turn flat HRS, of HRS guided X% just was Please or margin group our health automotive first operating performance. was HRS's

directly softness, in year to in our prior China, customers. which revenue it X% be declined automotive has from business the our quarter affected automotive market notably as First impacted largest by most continues

quarter a and DC-DC continue This Smart new such as multiple Modules. diverse to we Gateway across products, set programs of connectivity, converters, ramp

enough the were they to However, weakness. not macro offset

with have securing year-over-year, across marking automotive revenue and this its good a confident of products by all of been year-over-year remain has growing market X% past by quarter, and in medical had we broad evidenced consecutive a in automation. programs set from forward, growth and positioning solutions driven which a Looking quarter. prior benefited Health Its broad drug customers and growth. as quarter diagnostics engineering of customers set design, our eight strong our devices, delivery, investments bookings year new

Health another worth as & to value the global the serves regarded noting proof its just and is year. Solutions Sullivan that brings in also It named Health marketplace. our of the company external Frost its of Solutions capabilities award endorsement team and Flux This point XXXX as Flex customers that

customers strong from Driving exceptionally just QX equipment. was exceeding continued which industrial notably, more emerging Next, of of expectations. the in and continued cap lifestyle, the billion, revenue as our than our Most as offset $X.X and softness well the a over energy industries, semi IEI portfolio. ramping inside business, an XX% increase year-over-year or and strong reflecting new and sales programs of at home was across

adjusted QX it strong continues companies, IEI prior that strong the greater to world's benefit which at The $XX was profit the quarterly to operating margin bookings operating very industrial and is growth. design to on long-term revenue in from some profitability for strong X.X% substantially of continues from largest led positions operational from from solid enabled ramping, diversified capture engagements. X.X%, million. its IEI's of levels year. well of execution up to the engineering Its and businesses us adjusted grow IEI

the up short of at Revenue compute, or from X% was prior This our flat declining to year. performance X.X%, year-over-year. coming from mid operating also $X.X adjusted its margin enterprise down single-digits fell was XXX basis guidance. CECs almost communications expectations, CEC, billion, below and points in

overhead the decline factors; quarter to customers grant revenue our creating The shipment was China, CEC operating and in in late as customers manufacturing by highlighted primarily poles. that earlier; one, declines challenges costs. that stranded negatively reduced reduced levels telecom certain networking result forecasted due in a the of elevated uncertainties impacted unabsorbed to Revathi geopolitical QX income two, for accelerated geopolitical and certain and due impacted Our in two reduction of our impacted customers by significant demand

margin group, the to billion, was be within technology business, expectation CTG to X%. for operating down consumer XX%. $X.X or our XX% down XX revenue and CTG's was our year-over-year In group adjusted

of performance and to prune Our as the continue underperforming rationalize mix the QX reflected our to this continued business. accounts portfolio improve repositioning CTG of we

committed are margin order we focusing on more less and right highlighted, we've products and being to volatile selective As more sustainable customers the to drive return. in and and

of This And operating achieved business groups. quarter, to targeted ranges. we margins for four their our remain business ranges group our three committed all within achieving targeted

Turning cash review to generation Slide let's XX, highlights. flow

XXXX. last expected positive in generation cash flow consistent cash to adjusted we quarter, flow return As and a we highlighted fiscal operating free

Our cash first quarter performance display execution. solid flow

resulted a of which This adjusting operations levels. in This free cash quarter, flow cash $XXX generated conversion flow $XXX and in million is flow. free approaching historical QX XX%, from cash we in million

Our quarters, but in quarter, modestly than $XXX totaled the million lowest seven higher expenditures capital for still depreciation. level its

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

As We of we depreciation move adjusted into benefiting quarters flow. committed to look our flow level, cash cash firmly positive and we consistently to as fiscal forward. flow remain our our XXXX, CapEx continue will goal expect of thereby that closely forward annual with align we free cash operating generating free future

Lastly, remain $XX X the delivering during as we million. million shares on shareholder return we quarter roughly repurchased focused for

low-single-digits; see we stable demand on Slide environment reflect shutdowns; our business. up the and be we range quarter group $X.X growth to second Please year-over-year low-single-digits remain revenue to to Health to impact continue of demand turn expected based HRS $X.X is down is expected the XX as business the billion, be seasonal anticipate auto to Solutions million expectations; our muted in following the guidance. summer to Revenue in to normal revenue of for

strength which home and lifestyle with equipment. it than ongoing in high-single-digits, energy, capital new from growing in to IEI We weakness expect and benefiting mid semiconductor more offsetting expected continued ramping in programs is

XX%, in reductions expected is our demand X% to revenue in end reflecting networking CEC's continued coupled with to and offerings, telecom distinct in in China. down be market customer demand softness

down consumer to and XX%, volatile we our to continued CTG, expect to XX% revenues targeted For in and be India. China products high reflecting portfolio pruning reductions of

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

of tax We is on based the in expect million. share range to XX%. the mid rate XX% $X.XX $XXX remain in shares to quarter EPS to weighted of our Adjusted outstanding guidance $X.XX for of a average per range

Our of and adjusted charges. amortization impact expense, from other the and impact stock EPS intangible compensation guidance restructuring based excludes the

are strategic we our high As costs. Revathi exposure and operating our to explained, to align accelerating reduce products volatile decision

restructuring are impact uncertain. million timing these future in be events with and incurring that dependent on other The a of we connection In $XXX items range actions, may are $XXX of and million. charges such to

a actions associated the all complete our in in to bulk expect second happen quarter. fiscal we to However, XXXX with

we per GAAP in share to loss As $X.XX $X.XX. the expect a range a result,

back for some With that, call me Revathi to turn over before Q&A. closing it we comments open let to the

Revathi Advaithi

remain Thank XXXX you, Chris. in range from to comfortable with $X.XX adjusted prior as span consensus the We EPS $X.XX we that April. communicated fiscal

will and action Our We're will meeting margins. that vastly on improving They've conversion. teams make us the free pact on flow more taken operating on focused put our thoughtful swift improving but our to our focused to portfolio cash are commitments. committed us

consistent that can said, you disciplined As confidence goal have execution to is record I our drive delivers a stated track have sustainable in.

questions. to line like the the for now operator would I have open

Operator

first Matt Stifel. comes Your with Sheerin instructions] from [Operator question

now open. is line Your

Matt Sheerin

walking annual the high $X deselecting or the business, low-margin that and to from away run the question so rate. Just revenue velocity first billion relative

the Will through As shape by to looking this of you the from And portfolio quarter the so want get we there? that move plan through the will quarters. get you segments? next as quarter, or the next see still go you or in that will be at or is be that then it on various you and few more

Revathi Advaithi

some is and would moving that quarter we're With parts be big What we long-term. say we are decisions making for to our actions of portfolio forward. this corrected, addressing I that obvious I'd need taken think have say that,

continue that prune CTG we our may be in we But fashion. things CEC, a about pruning have will few a to and as running So before. that should and of talked business in continue part disciplined

at point. So this I positioned would growth long-term well say for we're

that and around right business We from leveraging this want are focused more areas to in. we're grow the opportunity our focused And and see building here. I we us

Matt Sheerin

you margins or you put and for Is talked could from. quarters given demand within time all about the targeted the get a their Chris, the divisions on And CEC ranges you on then are CEC that below there? couple seeing target. frame before business the so headwinds of Are talking getting into that? we still any you

Chris Collier

is here, we very with quarter. us I the CEC these quarter unabsorbed exclude would be core inside the if return What that been it think you within we would the book and But target about forward its impact CEC does behind anticipate this this range. get in that as next standard we we range. costs. the of and we're largely through target comfortable at were of operating And highlight move into we're business manufacturing as that as confident the will would have activities to margin past

Revathi Advaithi

margin hard have businesses you We're business with our being the our more and add pushing Matt, the about. And three in see focused really is, more operating make we ranges can to talked only thing of I'll profitable. that

is actions target the we'll expect big customer impact start the in of to thing will year. and we've work focus it restructuring So And pushing into as our for we're taking, through margin CEC some that ranges, same QX. we get we that the rest through the absorbed on be these

Operator

question is Your Fox Research. Cross from Steven next with

open. is line Your

Steven Fox

please. questions, Two

First decline, the able you look still were profit. of all, year-over-year sales your increase at when I to

was wondering such exactly could are And color some incremental in how So look you. wondering of charges operating provide if will the cash? leverage? what I improved? other that business looking were the have called at Or you're whether what of achieve there're if was you and could like, for in talk secondly, much margins the then you terms how to on some I you able out maybe Thank good be about those you things

Revathi Advaithi

with business And say overall I'd mix driver first one. start me the the definitely Let margins. of the help

that IEI You HRS you can strong and And business cost a revenue is have really which with across as the see that have portfolio, volatility, business, to it. strong for ours having the mix we second with goes definitely continuing such to growth discipline be like helped. cost good that discipline you is have important for the overall have

to theme that commitment been and revenue that goes business. is disciplined that, and And EPS changes. you're even I've play in have with to keeping quarter aspects last us all seeing So all you the of quarter this this to our the we talking be about to

I'll you I think helping So that's us then restructuring, cost QX commitments. then terms it. our that and on in on of the really, color discipline have really Chris seeing And give mix some important you're deliver overall

Chris Collier

very we're these are and Near-term So disciplined underway. decisions very here. thoughtful with actions

our be said managing captured structures. QX. charges in assets. including be costs, working remarks, execution operating through prepared as going bulk impairment we're these inside to normal of be people inside and we charges associated of of some restructuring that'll cost we're I is As activities we're will addressing And our What charges in doing you activities the with the QX. the had saw, the those some of And

little low of it's cash aspect at that, And have for would both half the say, the and if about the you range I high. the less think we set up, that than a on

focused to to these and very So done forward. execute and before those We've we we're going disciplined here, thoughtful as with decisions and actions move are unfortunately be able and underway, quarter. we'd be this this we're actions anticipate during

Steven Fox

should keeping avoid you're other exiting within on pruning words, some little the you. one just How I at of you're And with customer you going imagine attractive stick base that concerns vacuum? In more trying there programs of to where that. the customer? play quick would more certain do all product follow-up to same is we any competitively, Thank all into think of is a programs or the there? out How

Revathi Advaithi

it has say, the I'd I win-win us. Steven, way a relationship day, at about the to is of the think the be customer for for both every customer have No, and end we that

I sure within clear commercial that think making customers of great a organization understand teams our that our doing our are and that and story to job customers. is

partnerships basis. long-term I customer are that built on think

I have about looking concerns So that don't forward. any

better just of and is just do have those businesses the and the this help just manufacturing think sure best will capabilities and customers there win, our for we focus And I the run. technology job on good understand us areas. way that making we a to be also

our direction. QX really our think all that well are examples in that we're in good to I way examples in show

Operator

Your Delaney next from Sachs. with question is Goldman Mark

line open. now is Your

Mark Delaney

just margins. macro on put over challenges of margin that quarter believe in have based which math's my if the EBIT you would X.X%, talked been think about percentages up be sometime X.X%, just question's I on best for First I one or these right, guidance about. implied is next And

the So What the from to particular bridge this margin some are factors maybe quarter? X.X% helping expansion quarter did roughly help X.X%. of the in just you next for

Chris Collier

you integrate solid basis, margin see will guidance terms a ranges quantified on margin set, I into do it in margin. you think And gross correctly. If operating expansion of you that year-over-year we ultimately the both

it you midpoint right performance the On strong us. around very a were for X.X%, which that of is

mix the well of you're discipline SG&A efforts sustained seeing leverage. of provides the portfolio of some And the cost improving around the of that as HRS, and that IEI consistent largely the that's across as inside strength business, the on contributions

discipline and are favorable So our the inside all performance. around our to engaging contributed mix favorable now streams, revenue shift reflective improvements, the led that more, engineering that mix a SG&A, and of programs design

Revathi Advaithi

that's the of thesis Mark, our And story. been

movement our mix, and minimize a managing all in my you we're in And this affinity us view long-term that do our margin and good And because disciplined, If variances cost. in guidance our factories, provide for manage in heading result business. should QX we the show customer growth we job direction. that

Mark Delaney

elaborate up a little but and on mean X? longer I that? spoke margins, about But or think on bit term. on single that on timing that in and overall? X, single is And segment you segment this Revathi are digits mid talked a also to over Slide question your And higher. more that about you the on margins remarks. I'm EBIT Is there are referred margins Or that operating a Slide Thanks. to somewhat is what by mid company follow the my by digits prepared the higher comment for Can basis you achieve

Revathi Advaithi

what on I business, operational every of on teams and that guidelines teams and Mark, -- business criteria know, deciding think our good to is for as has set good commercial win. you types to

teams to this or lead not single is average. be good our goal an to us a is look And improvement that and But margins going So our for on eventually wining a this business. as programs to incentivizing aggregate and operating business. mix focused mid is for shift digit to being margin commercial for

segment, that. this across But And we Obviously, segments, this criteria board. -- of is be and across all is of this will answer up. vary within every ranges guidance between and a span across will And every within is there this that customers. type makes the lot there a of this not business. type of have new So

Operator

Your next question Bhattacharya Bank from America. comes Ruplu of with

now line open. Your is

Ruplu Bhattacharya

performance is strong weak Congrats the first IEI. macro. question on My margin the on despite

you Can end Within us margin where there're a in at forward? of -- higher want stress semi range. on look going this think about there different portfolio you think competitive more? we thoughts should advantage progression You're cap Do and your give business, to end at how where this that guidance you the markets markets. has Flex are end high already the certain

Revathi Advaithi

thanks energy, Ruplu, works home this the Obviously, makeup say here. yes, semi different cap, on is thanks comments that the IEI, team and of for lifestyle. would business, sub-segments margin. our I on there's and showing

base growth within core actually are and margin that, perspective. business is So income sub and this of strong, perspective parts business. segments this most both industrial improvement from many our a fairly Overall, an operating view

to have At that baked side visibility this of a we challenge. point, yet equipment into see be don't thinking recovery we that. a our or is And continues what capital on a

So our into forward builds that view looking on it really it.

is growth all sub from coming the segments. So other obviously

In call now. too terms of operating margin early ranges, right on that to anything obviously,

But have have design teams they see for mix, move the our them. in the the we and to as they direction continue wins, goal for higher to good higher move continue we lead should that set that

comfortable with margin we the in direction. at point, So ranges. right this where it's heading we the at point, think are. at we're that And right some it'll the be look But time to

Ruplu Bhattacharya

trying couple an we on see CEC. quarters? customer performance? going should the Maybe markets the just driving in of And uptick routing, that the one it to My can ends saw in give that switching, of what overall is just question optical? margin And second you is next from you you're disengage us an color various where

Revathi Advaithi

happen end jump networking quarter. didn't we side and we Let me We our pools the and of in start the in. Chris that saw telecom out customers that and customer large few other in declines it specifically the prepared and with than And businesses definitely we particularly and a saw customers remarks. can our at mentioned said called that and that,

our a overall that's pluses So across we and and where various it minuses, saw came customers. set of

color CEC. to the add so to Chris, overall anymore view And that? on think I that's

Chris Collier

your been have of know prepared And the and you manufacturing, end don't I if No, in we manufacturing impact, to quarter, remarks, costs. the absorb at past exclude range. significant low like just we stranded and would highlighted costs the we In question. that this unabsorbed had

addition, In loss margins lower the just from contribution pressures I'd say total revenues profit. and

So that's on profile. CEC's reflection the margin kind of

Operator

Steve next is question with Milunovich Wolfe Your Research. from

is line open. Your

Steve Milunovich

you billion cloud your dollars the intentions ODMs and claiming to Number contribution, taking what your margin in what question share emphasis you've about talk I they're is -- that at revenue cloud other Can cloud believe a there? then Two been you? any, for of second growing And have folks. the [Jabil], management hyperscalars one, revenue all you your questions. if double-digits, the since from selling about an that or changes, and business? has and you are have made made any is

Revathi Advaithi

our able part. to, is just we in customers I have of would focus we Let mix. move say that terms start first I very not portfolio. the volume, is really segment to business wins business across cloud the But cloud me win large our with strong. to the would a And say our focus that large and strong sure on be on make but CEC

feel we our we're what business. thinking market I -- doing in And is in innovation you large talked like like there business. around share cloud are the constant We supply. power have that to about

just So our our design contract business. manufacturing is focus not engagement the for on grow of led that cloud focus side really on business that

would across growth focused that on to confident very of not on cloud going a is and market in cloud our wide customers, share and in coming comment strong of a competitors. big few But not say are customers. we I'm our I range So terms is just

done then just a running people, a track in hiring strong We we [Regine] business. from cloud of new Intel about with in job have of announced terms new their good hires, record And really cloud. hiring talking

And of platforms, this. technology lot business we're this, this technology right the a really terms results background of architecture. to help of already seeing the bring growing will [Regine] expect the with and we in So right

talent good is and about and And addition business then a my all to focus in always talent because management is big strong development. that, talent, talent,

we also thinking, that brought with CHRO. in line new in a So

are those are made several across share. changes the others those big ones, and but ones the we to business, two So have the big

Operator

Your question Paul with next Coster from is JPMorgan.

Your now line is open.

Paul Chung

This for Chung Coster, is my Paul thanks for question. on taking

So has despite the volume, here about is nice past, more in Flex targeted driving margins margin the focus on of headwind. in some But ranges. products been delivering revenue

usual as time long for respective should firm of in mix bridge segments? evolve business it expect more more expect this you margin margin ranges targets? do Or So or over volume lower as your as high hits your firm we to the overall and into turn

Revathi Advaithi

our and point our have would Paul, not speak my any question, I for in right. at business. with say you run fundamentals how would going say, itself, this But to you line going to I raise I'm definitely margin time. is this in ranges your help actions

or of this growth doesn't apply this Flex to think the just never for I or is sake manufacturing, to great. in general contract growth that space

word is terms fundamentally adds margins, growth in product, whether capability, important. of So some people, really

of how sustainable businesses for just run, should discipline run. that's how is you long-term. that growth way a the any driving not business margin way and runs, Flex only all history So me have conversion the And should it's the sustainable in

point how to is So a long business which starting this and how bringing runs that is industry runs, to discipline overdue. I think of me this hopefully Flex

right more us kind say So should either we sustainable with that that right of kind incremental taking, I would types the growth that's that to you see margin going actions business do from eventually, this see forward. these we're and healthier growth of of is we on what right a you that should and if take continue

the So achieving are on of hopefully, just how every to fundamentals ourselves to business we run. this track is be me, that. And should putting

Paul Chung

you. IEI. up others follow segments special driving this on engineering Is other the Or a and segment higher there apply higher of there? relative just where margin opportunity Thank margin then see more to is do can and you engineering services those you that to more design that's design to And segments? that

Revathi Advaithi

say have because help would customer team terms more And in platform IEI doing in that if and they diversify customers customer suppliers. I the from Most tremendous technology to opportunity, that And portfolio is. how within is want of I at look products. base our at more want base Paul, and that. their that you great

So that IEI. that But I I the in to collaborating terms across the of and taking definitely our in business. do capability see more also see our businesses potential of for potential that technology across

that for in battery potential I that's moving right. prepared in supply, today, job segments. see that of to capability integrated that I applies about that. segments, the power good We the And across we all a all something kind also should done forward. across example, able be talked as For And haven't of position my remarks

forward. the I do increasing So with segments, build well cross across if we moving a think our design collaborate also litigation can but portfolio, stronger we more

Operator

with Your next James. Raymond Adam is Tindle from question

open. is Your line

Adam Tindle

Okay, XXX Revathi, comfortable quarter talked March on thanks with for the and came questions about for the good evening. and fiscal EPS range you taking being out call to XXX 'XX.

wasn't I restructuring contemplated incremental a to been think of you're changes since obviously then. the reiterating program, outside think it's environment, I There internal or that an has today. due obviously, lot

terms the is just question reiterated could has same. maybe So But is, the or being through Thanks. since last EPS what talk in changed of of call? EPS composition you the the obviously

Revathi Advaithi

I a would look mix definitely say, EPS of Adam, composition role, for if plays right. you at us,

that you're that's And in the growing so and segments one. right obvious significantly an helps if

stronger IEI solutions. continued things overall So our growth does story, in like help in health growth

of the this thing So of being last also this do execute, disciplined I how of prevent plays in brands, is the my variances how you I say important. mix idea manage how how call EPS. would terms role you programs said factory, a in composition other is And definite leakage, you you in manage quarter about

more do margin. and helps the terms of can equation improvement gross of overall in operating things the enhance those that So take margin out of we to

our change So much of having I'd and things variance managing say fundamentally composition is management. better basically cost how and good mix overall

sometimes As you know, we don't our control revenue.

in lot have things pulls, dynamic business and of like pushes ours. we and So a a are

in how cost what in guidance. you're right having is seeing management which variances, we of think to all the I management, well, things a those our need strong having having this doing manage business. So that's are mix, good And fundamentals

Adam Tindle

on play a an away the I number areas margin to good devil's on as be details still just into important to restructuring understand Just obviously decision? you're moving just program, from. themes scale characteristic return areas follow-up in a But I make to be those the one, that in think lower capital. hoping for, more that would Maybe advocate, would

competitive scale as have advantage. a You

where monetizing restructuring from of arguably on less areas Thank contemplation So lower them more monetizing versus focus Is you. or that? volume there selling simply scale somehow that away move on possibility and any And why it. or divesting exit or the secondly competitive any advantage relevant? of

Revathi Advaithi

saying What decisions say I are start would let that these me never easy. first, with that, is

have has So of taken. there into thought gone obviously lot these a we that decisions

an talked Some think me, want of scale about decisions in in terms the what But the for beyond governments about for I Chine, customers would supply at. say discussion, control are scale, that we to they scale important. their these if make as sure. base is look particularly I our of right somewhat one decisions our advantage is make of and type

margins, the And but having cycle So scale in you down revenue then business up cycle. you a to are cycle really and short not really those high And terms of moving Product are also significantly. working quarter-over-quarter revenue much high thin is businesses. in volatile managing they business means extremely laser too from on there's long. life prospective that not maneuver are short

is proven So in that a this business has It a has very And sustainable long-term. history really. scale -- in advantage think those the I that it's of cases, short not cycle doesn't case. lot

people to down position So time. that well. I And do and don't that may big something big case. that's that could this we're from above Flex, away in and I think the at But ramps, should mean And scale. doesn't be on. be constantly ups think all of we say would walking that case the other we And we don't are happens that focus the

parts business, may We of short have cycle. very not volatile large customers which and our be highly across other

is So with we this and scale segment that. perfectly And that's okay that we're view comfortable profile how looking of type forward.

Chris Collier

We extend to just looked different a options. little bit. at And many

could in -- all for the I best our to looked to options we that way shareholders. a give us highlighted we we take approach those and you this So mean, at those you and execute assess thoughtful disciplined

and through identified we life towards what enable higher to capacity fashion. went tilting longer going to that we've earmarking operate process, a we us margin in much we capital, portfolio we're that in very cycle be and we the move do. really as businesses stable need so predictive forward to selective think And of And those product more terms and

Operator

with question comes Suva last Citi. Our from Jim

Your line is open.

Tim Young

Can questions. Thanks This Young about Suva. your calling my Tim the for taking is behalf talk strategy in of you on to near mid-term. growth Jim

as mentioned on target. had of are margin XX% have you your IEI progress and like and on performing growth well. quarters has it CapEx your sounds have below and think improvement, your front. you're focused And I and HRS shown performance portfolio the couple But management your you execution reducing

can going how growth your think if color I forward. wonder some opportunity, about you So we provide on should

Revathi Advaithi

Tim, question. great

tell very this. us. me Let our growth important you to is

to talk kind that clearly progress question of new not technology the design industrial about slide wins. trends. businesses. you a important never right about if it's And capturing mentioned space, I my focusing is led it's So I growth. emphasis CEC, wins our on led grow across today, growth to the to where about I the us, design refer on talk In

really little very a had say and had just And growth then but strong muted aggregate very solutions strong bit correct a would you was quarter. okay I and that growth health was And I HRS's a by quarter. automotive right,

growth. looking case onion, -- is I that strong all a it's So think not the there's growth. for back very at And the not that peel we're if the you on focus not

type that term win the that's having I on and growth would provide can right growth that we customers can managing growth looking is shows solutions And examples what for. trajectory and overall say and And we're we of together. IEI I'd business of relationship really our sustainable looking of say we're customer we're perspective. in from that right terms the long-term affinity long the for where and a health

Tim Young

be years, little the you you. of target revenue your mix? follow-up, so segment help a a -- us percentage next revenue mix. go of questions say quick the you restructuring the or size CTG revenue Thank as on may five the understand With bit. the for A in Can your and total we

Revathi Advaithi

Tim, we're years. I too impact the CTG say say CEC changes the five that to that would really today making early in what and really both. next happens

not that an sub what there's that within be continue CEC issue parts that HRS of hope segment happens would portions overall and would is this hope become because portfolio. to grow, right our our and segment. is the segments fundamentally Our CTG within bigger also a And IEI be

spread portions of right growth have of And margin this has to terms spread and and Flex, every every growth move in unique you in business business There's significant the where and is the to direction is that margin. not that. of

in comment too we're where our But committing we to taken and So what have and I QX heading. and in decisions happens to years. about in five really delivering QX shows I'd said actions performance we're early think the

hopefully So question, Tim. answers your that

Operator

for to This I'll concludes And closing any back Flex period. over now it turn the Q&A remarks.

Revathi Advaithi

free close also Thank had really thoughtful taking us. delivered adjusted we swift driving we and you, everyone portfolio We're our flow. actions solid all strong for saying, EPS but facets our I and discipline by QX a in cash to and want joining just across of business.

right these to on joining deliver the for long-term With consistent and that path us. the again value. confident actions, we're Thanks we're shareholder

Operator

This concludes today's call. conference

You may disconnect. now

Flex (FLEX) 25 Jul 192020 Q1 Earnings call transcript