FLEX - Earnings call transcript Q2 2020

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Operator

Good afternoon, and welcome to the Flex Second Quarter Fiscal Year 2020 Earnings Conference Call. Today's call is being recorded, and all lines have been placed on mute to present any background noise. Slides for today's discussion are available on the Investor Relations section of the flex.com Web site.

As a reminder, today's call contains forward-looking statements based on current expectations and assumptions, and these statements are subject to risks and uncertainties that could cause the actual results to materially different. Such information is subject to change, and the company undertakes no obligation to update these forward-looking statements.

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

remarks Officer; there today's call be After are and Executive Chris on Chief Officer. Collier, us session. With the question-and-answer Advaithi, speaker's will a Financial Chief Revathi

Please I to will now Revathi Advaithi, turn ahead. the call the over Chief Executive go Officer.

Revathi Advaithi

Hey, call Hey, afternoon today. you thank the thank you. everyone, joining and on good us for

second forward. our As year, the excited I'm quarter we've about really the share and we how the reached talk point move of fiscal to for midway progress

really I of this on journey delivering shift can our set six margins showing that free mix we adjusted be appropriate this cash that to this done. months, and reflect While improving I'm our while results happy portfolio quarter levels are about a last flow.

in Our step QX, performance, right direction. like is another second quarter the

of Of further who Flex on great hard have really by want and start this legacy our employees nearly worked the company. to course, thanking I XXX,XXX build off

thank I So to the want team. Flex

with financial that pleased period this performance. with activities start that really been been very for three. we've strong done I'm a slide lot has exciting Let's is transformational of This through. capped Flex, and really have dynamic been has a and we this managing off What

flow areas Industrial significant of of operating mix growth benefits and an operate We business. an realized and of talk $X.X conversion metrics. and we this our mix. cash cash and our this resulting adjusted So delivered Energy. change $XXX gains We margin underlying million in right like you adjusted where core $X.XX, and We let conversion our levels, we achieved historical to of billion, our generation adjusted performance financial displays showing committed, the and targeting in strategy X.X%, is free portfolio and EPS to in of me that's reflects free through returning adjusted our where revenue flow are

to let's done on a started in building we what this four. quarter. lot quarter go first So, We've slide

an our our executing teams to execution disciplined segments focused have on efforts. Firstly, growth back Huawei. have China, we reaching in and job an getting strategy time, reducing same as settlement At amicable India sustainable, [ph] on done core exposure insist exceptional and mix our been the and with our enhancing we've

new few now. right of to and this many wins want that global are capabilities. and I share quarter, business past there particular And a those with highlight some had technology We've wins our in leadership you

manufactured transfers, the we space, and datacenter deployed catalogues is customer's This that to first going one customer, solution example of of is and a our CEC designed So storage design-led solution within design-led network. across where media have stores, be with media and wins in we the is this win one a datacenter. several the

Europe and in and position outside increase electrification autonomous penetration China, in wins America. and with to North significant expands continue We that geographic design-led our our of

a in major manufacturer. new automotive integrated connectivity drug continuous a point-of-care the in led space significant a to diabetes market our We continue we our area, the and automotive solutions secure monitoring design-led device solidified in module diagnostics for connectivity then delivery. and health in lead have And And drug many win. addition, know-how our win wins to for in an North glucose communication major American with

a in Additionally, bodes trend market seeing well we outsourcing are are by us really encouraged for the in we customer space. reinforce this increases that that

manufacturing collaboration to and all design design manufacturing our to their and these across capabilities, strong meaningful we're along experience with deep in examples, challenges. customer But solutions our leveraging provide

winning So, I six mix, months businesses, consistently four when disciplined committed things; Managing in execution, we of our design-led to driving flow. doing free talked April, cash all to more first you ago, and driving

because areas but we delivering it free levels been, clear was really in cash matters. reason those challenge our was with right industry, so not growth, that the the Now, is flow doing of typically incremental growth EPS the chose four margin consistently and and has

that four this elements our period off. is So, executing and performance across we're paying these really work our demonstrates

powerful move four approach that the We priorities drive and right shareholder believe Flex with forward. this lot will have story combining of of the positive we created these we growth type profitable for create momentum Now, will value. a be disciplined as will

a you with want these talked our I optimizing our We've improving accomplished on a thoughts areas, a we and in going mix about continue share optimize. take So lot and to some few strategy lot and our minutes will execution, have to forward. refine and to

that our energy us telling solutions XG particularly as well sector, we have in automotive, and in are and power Customers and industry technology health in XG. outpaced as the innovation,

technology important, So and position. to our plan is maintain leadership we very leadership

goal do The to other of Our news like technology know we'll driving commercial have And and we to is efficient business. and focus the on segment's we or really high operationally, win agile demands. volume and how optimize scale simplify none our And the ensure factories the to model. the plans these is to longer our mix lower meet model this growth that well. pedigree great high right to a lifecycle that type

and end-to-end moving models engineering are customer service with business individual segments plan differentiated to forward is on tailored to meet Our emphasis which operations manufacturing run needs.

year right fiscal QX, approach. our big with 'XX step we've our Flex in quarter, enthusiastic this I'm in taken further path we'll that strategy about is of really looking this excited our the an very Of possible. we're day we're is course, and taking, working. to forward all hosting the and this the analyst and at on passionate core performance makes our always investor expand culture where direction pleased plan I'm that and of another

you in more financial results through will then call detail, I'd turn over I'll like Chris closing remarks. and some back the with to our come to who walk Chris?

Chris Collier

statement's you, six to Thank quarter turn second summary. income our Please Revathi. slide for

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

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

resulting adjusted of $XXX net Our share was range, earnings was adjusted and midpoint in of guidance per million, the year-over-year. our an income $X.XX, up which X% at

stock-based charges. loss primarily net million net GAAP income, million, million than quarter intangible $XX million lower other restructuring in amortization, compensation, our in net and Second was to and was $XXX due of and $XX $XXX adjusted net

million to reduce, these our streamline, highly actions it bulk India, million a to structures. operating We undertook to and incurred targeted strategic to for previously we our range As decision volatile which cost of China and the our to align second in we reduce exposure accelerated $XXX products we charges, and got quarter. of $XXX in

please seven financial highlights. Now to quarterly for slide turn

gross of to adjusted our quarter, from X.X%, healthy our year-over-year This and business points operational million, profit down year–over-year margin X% adjusted efficiencies. gross improving to a improved was $XXX while reflecting benefiting mix our XX basis

We manage continue to cost a strong the discipline. enterprise with

million support further reposition and as expense capabilities. Our design we extend declined second to and quarter adjusted XX% year-over-year engineering even our spending invest and to SG&A $XXX

thereby sustainable operating and margin strong is operational into expected Our range, impact percentage to our discipline profitability. improving The combined X.X% improving business leverage. remain cost translates X% operating execution, of and a revenue of SG&A providing in to the as mix,

was million, income the from Our was quarterly $XXX adjusted X% operating which up prior.

operating Our which our quarter straight XX year-over-year basis by reflects points margin margin X.X%, year-over-year expanded fifth to expansion. of

performance. turn slide business to quarter group Please second eight for a

well actions technology our our we During reliability for business restructuring as or expected emerging our as reflected revenue guidance. end cycle from high our consumer reduced certain the and exceeded pressure met quarter, markets. prior weakness solutions, short as industrial group the in and high volatility, low margin industries Revenues proactively

of demand it a portfolio which declining growth HRS than Health was as for environment. X% X%, revenue minor solutions as subset continues navigates new push or slower slowdown experienced was billion, its combined X% in to down this ramp timing a business quarter. small temporary weaker outs was it and across resulted Auto up $X.X year-over-year. a products, forecasted

semi to billion benefited and and year-over-year $X.X from strong performances XX% as revenue and customers equipment muted. grew energy group even cap from IEI lifestyle programs, and Our home remains

anticipated from low made will our good margin, that exposure to targeted these the progress and high reflecting we We've businesses. and fiscal the by our rationalization year. of on activities as cycle lessen declined the volatility reduction short we complete end prior to year lessen CTG $X.X anticipate this billion, XX% as revenue repositioning portfolio

XX% to decline billion. revenue CEC Lastly, $X.X year-over-year

term near impact telecom with networking of some seeing and reduced As the underperformance and The the CapEx. our largest market customers signaling and in and a from is our we're encompasses was result customer's Huawei the reduction telecom from customers. forecasts The broad, of settlement. with and our demand consistent indicators certain of slowing

of in Turning the adjusted were X% into to resulted was the than deliver pleased revenue. in our reflecting X.X% margin quarter, on a operating even the XXXX. to margin, revenue Profitability solid HRS to profits lighter and both decision and adjusted uplift it we profitability, operating expected investment operating bring program, conscious our production of ramp scale accelerate Health fiscal an to largest ever in full into which should as Solutions moves

pressured. benefit X.X% programs X.X% in is for resulted operating quarter. from profit is and CC record adjusted strong to design a margin CTG a very with and leverage operating operating and ramping from remain strong margins operational which engineering IEI and content, continue adjusted adjusted the greater X.X%

our commercial deliver strategy, cornerstone we our our order transition operational to expansion and that to of reiterate we the portfolio reposition are want discipline and and As margin We structure. in efficiencies operating remains profitability. enterprise driving

flow Turning to our cash us let slide generation highlights. nine, review

displayed cash to consistent in quarter execution, performance free positive cash our Our to XXXX. second generation fiscal adjusted expectation solid flow return flow with

of We operate inside targeted to capital, discipline our of range which remains continue revenue. networking X% with to X%

one believe In can to optimize. in within area of management we We confident this further range. manage our remains focus inventory ability where particular, business and the an are we

ended worth down XX year-over-year. we quarter, inventory, of with days XX% or two $X.X days or billion This

across to expect improve planning we to We enterprise. continue our demand better management activities the further as drive inventory

$XX than was our level capital for million quarter. expenditure years, the its depreciation three net Our quarter, over totaled lowest the for and in lower

well that products, global year's We now are supporting are and built prior a benefiting infrastructure technologies, investments operating programs. out and from new

ability where is it leverage and existing needed, Another system installed our optimally global capacity, to assets. redeploy us different among is enables businesses, which strength to of sites our

for in quarter. to continue We expenditures capital businesses. decrease that IEI to in support to the the contributed we profitable long factors to lifecycle Even and these growth. invested necessary higher invest margin we while the remain our long-term sufficiently confident together, CapEx HRS support have Taken programs

the flow. thereby second-half benefiting XXXX, we adjusted with align will fiscal our depreciation cash closely of annual As our expect to we CapEx enter continue level, that free

in $XXX generated cash million free quarter, adjusted a we This flow.

cash flow flow is cash of $XXX free adjusted in Our XX%. an last free conversion the months XX generation adjusted million results for

make We progress and in with to continue free levels. with to discipline cash flow conversion generate line strive to operate historical

million repurchase Lastly, delivering the roughly during million focused $XX and we million months. over shareholder on as the XXX return, repurchase last shares remain for XX quarter, X we we

markets. expansion certain our revenue and modest demand due low be for to billion Please $X of volatility be XX, actions turn flat cycle, a in digits, demand quarter to anticipate to end targeted auto Health stable $X.X billion expected with of reduce the is HRS new our continued short guidance. ramping low in impacts single slide margin to our our the up programs, to range coupled business. Revenue to as reflects high weakness expected we third to is and Solutions in business

XX% third comparison for networking the had And to ramp a customer resulting products the reflecting energy. revenue CEC's due demand portfolio. targeted distinct We expect to market in reflecting difficult expected our a offerings we year. home end strength pruning in to top growth expect to on demand, XX% be lifestyle be highly of to to in down softness and and in as down from is ongoing actions the our volatile reductions XX% CTG, quarter with reductions XX%, in telecom revenue peak IEI, of we continued in and business distinct last to year-over-year XX% XX% as we continue consumer

in be expansion. margin operating million to million, continued expected range adjusted to of is $XXX which reflects income the operating adjusted Our $XXX

Interest $XX to to million $XX and estimated other range expense be in million. is the of

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

and amortization, align EPS restructuring of costs. adjusted as other moved excludes Our the compensation intangible bulk the completed We've to impact operating of targeted stock-based guidance the our net restructuring other from impacts and we've our expense, charges. swiftly actions

quarters. incur over the will estimated we that the expect charges remaining We remaining

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

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

Revathi Advaithi

range. range to had $X.XX, an we you, comfortable Chris. and remain in of EPS We April, Hey, communicated thank that with $X.XX

we operating margins. Our teams but portfolio on focused our thoughtful on that meeting a on really our us actions to swift improving put have have have commitments, and path taken

We have demonstrated strong cash conversion. free flow

have going areas our focus forward. and our to enables growth really four helped Our us performance, expand disciplined efforts around this stabilize

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

Operator

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

Your line open. is

Mark Delaney

Yes. dimensions. Good and seeing that the reported thanks wanted and to a better China, job nice flow margin afternoon, question, that taking cash expansion different for in just understand the very the maybe the and couple the much is free company today. from and situation company on I

in you companies not be about guidance if Flex stands more U.S. more some for business it's conditions broadly, may difficulty winding down of important with And long-term. for still it been there's it's certain in talk business the the an I that? may Can any You Flex about could where talk talked region you with in China a of challenging seeing just And P&L understand China more trade doing or bit know war. Huawei. but I potential Flex region? already, the as about about pressure the part the

Revathi Advaithi

is you that the really question. off, to forward. our comments see moving around then flow We progress continue thank for expansion. Mark, Hey, you'll believe and thanks margin and our the work cash execution on do for And paying

on and Huawei. Mark, China me Now, let with start Huawei,

the China, really I we've As that a still have a put settlement overall reached prepared we right strong and focusing stabilizing have China. behind us really my said good with And now. of remarks, in terms Huawei our in of very but position done situation in teams board situation our growing in our of really the terms with And business. rest Huawei, job have across a of

is footprint still So our strong.

We region. have that the position feel a we in in fairly strong comfortable a And significant presence forward. we're moving

chain to in the happens following in after in a they terms to world. overall -- with terms are customers supply want positioned with well go go in and are see And customers of our conflicts, in fit wherever Now, what of we trade as our they us we in but And our through and the we're strong. of great continuing terms position chain, supply actions in moving of position our right now presence in did. bullish terms remains China build moving there going We're we to fairly forward.

about good we right are feel really we where So with China now.

Mark Delaney

follow-up headwind. my segment. And helpful. That's has a on is the been Auto HRS question

good talked be programs able been and about company wins in I able double think of about takes and five. in medical all business to towards even growth pick and revenue site high from single just some HRS or of had and digits, talk and is up potential you the growth products the auto. company flat with and backlog to guiding the has that what to HRS to goals back been some some puts historically to your Maybe up for revenue some grow the benefitting

there just maybe help improved within So be HRS. of growth Thank timeframe should us you. was about thinking kind a understand we for

Revathi Advaithi

both the have the particularly kind and Okay, Hey, have in very in forward-looking health our very feel thanks, automotive like we solutions. automotive and health we segments talked in in strong bullish in Mark. electrification and solutions. the the we bookings side. both about in spaces HRS about past And autonomous of segment, automotive of And

issues. feel as we're in will any that in Structurally, to bookings that that growth, and share But the really kind is and bookings growth has to all market and faced of automotive you we market seen driving of we terms see of that of electrification So with effects about for market in the challenges, returning continue positioned, segment we autonomous, gaining are growth. area. track we're and it. really our growth shows have and our both paying sector, well we'd we that, fact market we're some reflect the off as so in will share strongly know, But the we'll

solutions, it's decline decision $XX made conscious very day that. are real a we if with some and of a In ramps health in terms of some there program solutions. customer the some but because we health the it's really million we ramp a we At small. and X% quarter had puts particularly numbers end some up the that programs takes, that do And we move-out, to saw large have could

us be that. see afforded cushion customers quarter This the able and these to do ramp to to us wanted programs,

health new ramping should automotive effects good But both growth, HRS very we'll are I early to and sector bookings a expect bookings solutions record about still one, feel bullish so we're this start overall, to on through in medical our to seeing this we stronger upswing about a and of off to growth. that. our where I of pay we sector automotive and in feeling see of would to for say pushing starts in And year-to-date, automotive mid really next the of position terms return And bookings. So as single-digit sector. year

Operator

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

open. is line Your

Paul Coster

thanks Yes, taking my question. for

to the just a everyone's operating now see expansion. a guarantee, to about expand. performance key for there's thought, mean over metrics you that have Can bit I impact, instance. continue year? evolving how could the will talk company's us you little the no I imagine imagine would margin year at a expansion mix margins next sophisticated to I now slightly array more the of I a because of -- think, applauding be from year from sort measured But you margin want metrics, by Revathi, moment

Revathi Advaithi

been Yes, improve and margins margin expansion, the time. because mix and minute do we I'll the in manage has operating EPS just a on same Yes, savor and deliver this trick at the sector thanks, how take Paul. comment

with So in know. guidance we current of we with are that sure driving have for agree our that, has continue you we're this as on making year to future you that. can has well. on and Driving segments drive then is quarter And for But us been this growth. challenge to absolutely profitable that that growth never and the we're you focus that track I growth focusing see all and do segment, the to been large-scale important. But really do our it on profitable

we're really And feel in design driving developed, drive push mix growth the higher right expansion We wins that that type the real with for of our a margin we good seeing. plans have on segment change the the value for us. segments

has So we areas do also my prepared first four want our to we segments. so segments, these growth six fantastic in and but on in the about, you moving as is disciplined And I a great across told a remarks, technology on don't. forward, for very real we're pushing measured strategy was both. Flex our focus know on strategy. question talked we do not to key be the I of is heritage the months growth this the And this, But a pedigree disciplined on how

of So we we're should do. the back confident make getting growth make positions be I everybody us the our to that that done would a to Paul, have say of really really feeling forwards. take the very is well type sure happen. to for advantage thing of for ability getting that mix to important that, growth for us It's moving to And not back right growth. hard us changes

Paul Coster

the even testing of evolve slowing business since earnings have Flex or recessionary you've sure will Do position. business and in this now environment… been a I'm your still been you how some you've economy sense a in stress

Revathi Advaithi

have terms be you to environment. generation. cash to performance, slowing I happens countercyclical the has revenue well to performance away, of in and of terms say Yes, be then very have course terms declined. continue kind what overall in very to we important other in our as recessionary a of done that history in of seen economy Paul, margin Usually we've think this the way, even or few but take space think of in our thing EPS a all And we I will the months managing past of would

from we So to focus in overall and really the I have even the I expect say profile, on SG&A in our is also making would recessionary terms really do would sure our team right both cost how standpoint, a gross manage a focus costs. we of to margin environment that what

tell even history last well to our that says think great our on a but impacted few our cash, margin have that I continue should recessionary So, in performance we are done revenues environment. if managing we'll months do

Operator

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

line open. Your is

Steven Fox

the Hi, and walking sort self missed this, of good afternoon. rates if excluding of I'm was was curious from sort that? then sorry looked growth terms could Huawei how And much if a of you would disengaging I the of what I away detail from and follow-up. have decline inflicted but year-over-year in had business like I

Revathi Advaithi

impact continue range moving we Yes, said our same given, last in have disengagement the the to expecting to of impact would that QX that with stick see. And that we're forward. have quarter, in right, $XXX our cyclicality predicted results million the of guidance to and seen we that's we quarter. that hey, this we a be high Steven. $XXX from our And million We've kind businesses had

Steven Fox

in you're so that range That Okay, right now? was…

Revathi Advaithi

correct. that's Yes,

Steven Fox

some some more then you IEI? like there, you. core can a you are types programs growth in some the you're you and categories that mentioned was that within of broad bigger of categories. give if in how successful markets drive that of on. detail can I what having terms And of Thank new mentioned are most broad wondering are picture IEI, was those wondering just the you're focused I Great. us on of sort further

Revathi Advaithi

is diversified so two. on the is are itself, as side way which me And -- categories it's have the providers we that And so mix, of strong the small. a higher in touch go-to-market of margins. about products, EMS business focused it's reported segment industrial on customer, focused, a technology the major me lifecycles But the in Yes, space. space IEI is Steven, in a today. let most really just There of you two. three longer of developed that talk more know, two more right, is also so It's One probably lot industrials. smaller better really let penetration the but

driving program our strategy good really and And diverse win of feel very pushing mechanical base terms we're in space. lot in commercial capability be to industrial about in itself. that. That's there's of done a So of a we strongly really that way really because penetration that all terms It's to a can in controls. a also segment, and not we're more but vertically electronics segment integrated electronics, the just that

growth area is for that and So that where good feel big drive continuing about forward. where are we're today that going we we we're one to

is the I would say, The space. on energy second,

the products more terms a we business, presence but the of expansion space, just have, really the basic penetration our in of solar not energy with our with have We very really that itself. portfolio in driving strong optimizes software NEXTracker with performance and we're segment an that

And we about strongly feel that so also. very

strongly growth are So, industrial and we since space, can base a to both really to would two say driving, out I'd in that that. penetrated in and highly feel energy, not say performance drive pick good and those it's we're I really the continue we very

Operator

comes question Bhattacharya the America. next your And from line Bank of of Ruplu from

open. Your line is

Ruplu Bhattacharya

like and the less high margin And picture X% in them operating and X% X% you've got margin. X.X% case four Two front get segments that other be two of level X% then us. best have a Hi, you can X% segments question, and off to you've have to margin that just for than start X%. got with they can thank questions. of taking my in Revathi, to

that two the business. enough revenue of lower those but a CEC you business the pruning transform that you and higher segments the business margins terms the and event longer-term into just lower margin in should is in or expand think you're programs by not underperforming So doing some into in do think of that keep

Revathi Advaithi

strong sound disturbance. We have very a

margin, but away, went you margin. -- question, that that I I your think have higher are Okay, segments two and question your are have understood lower segments that two was

forward? that like but view these in is mid bit a I'll talk four in this of about there we're is to going interdependency that our So, around portfolio what what's So, Day our take to you, segments, here on advantage Ruplu we'd moving QX, a tell is Investor of. quite lot

about CEC to also business, think but the our of if important it businesses. platform us scale, us that's gives gives it technology tremendous So, rest our you

So of our engineering got technology know-how that entire and we built CEC autonomous business. strategies off the the from

has I and on to are this the at diversity want on, but mix and a those we're one to efficiency of people in talk leaders think for of focused efficiency required I we other focus tell drive business, drive goal and how creative point growth these manage we portfolio my more remarks, moving the and higher change those big of always is each how can in more and the of can questions and more one what change be CEC have other model that be in that selective in consumer, out that to on all So, is growth time that as the four in segments, can real looking space. are creative, say segments, spaces. design I in a in of figure sure operational both said the would really two, prepared you lots And, margin I'm also the to will is an thing that be course, share operationally trick that in in is and in for Ruplu, to mix we of our we wins that margin and two, we solving our operational about four a mix market type high we can you four right really forward of and how to in high-scale are how and and a important scale, segments. business deliver technology is do,

right? that So, us. works is in our we can the diversity the the and even portfolio has downs us mix, that delivered really segments portfolio our the operating what overall growth. our quarter, But but and as has EPS see of across of ups an we overall, every today for and And margin yes, growth have some simple is this diversity portfolio helped think results strong answer you

portfolio. is get come think that more core from leverages terms capabilities of rest to our Investor but of the we that So, we technology our CEC in our business some there Day,

Operator

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

is open. line Your

Michael Sanchez

mind rest would thank the framing year, at nature how This Suva, how is Michael in we demand? XG question Sanchez guys, a Thank and Hi, the would actually and one you is about My you. India for general Jim about things? more look the second should think of two to it's you. looking And the we be is Citi. should first that ramping,

Revathi Advaithi

Yes.

let with few One me ramping, strong over been fairly about players. Michael. about terms top the of has presence. is kind very talk we last positioned well the lot are talked in XG believe months. XG So a European a have both of XG technology, We we And two

going And And, any terms faster, in slow. than of large and been infrastructure as Europe in and out it going are on to of little because has Asia America North itself we geography. have have impact XG suppliers the telecom from and all are ramped been geographies terms a other. ramping cyclicality. think you is that faster XG some all we based has we the ramping seen, is come players In spotty. announcements rollout same has itself them. of large some -- is bit to somewhat have telecom it's seeing terms rollout that the There movement have of up the

a positioned, me, It's it's with say does XG well going timing. to of to are when not all of or not. So question And I just question the happen would it providers. happen, a we it's whether major

base products. where cyclical In India terms how it Michael, higher of itself, ramped was our our the India on have particularly have significantly from about that down we we we dependency more talked were, Business before, from

big really products focused in changing on seeing movement more we're and pipeline the really kind for focus Our better margin really manufacturing capabilities we higher is push growing India, India strong for a some that's makes of India. mix, on of a and the but have

scale very is this that we quarter, because had of been ramping right strong this on it and timing kind with really business and the before very, thoughtful taking we down have that but our we about the in up we we pipeline working ramped of are presence developed we've this have. we have perfect a and So, position advantage

Michael Sanchez

Okay. Thank you, Revathi.

Revathi Advaithi

Michael. Thanks,

Operator

from And line Adam of a your comes Raymond from question James. next Tindle

Your line open. is

Madison Suhr

on Adam, Good for my afternoon. for Madison This thanks taking and is question.

business. And I you're you a operating nearly gave about a of margin design the focus doing. on traditional lead talked the engagements engineering But as can of can of metrics examples you rates profile types these know EMS do You've it'd backlog? on win pipeline, touch work on whether good lot growth be you the or engagements? be some of how doubled these and of about engagements, around the types think the

Revathi Advaithi

pipeline, the focus a So we're right and because Madison, up in of at we this looking our one-off, Day design think about if really of we're bookings one-off smaller about you engagements lead our tends -- because these type portion of be when on you more just give the right Investor that talk to and can examples have is, it showing do is we more scale from your to that QX, engagements mix. only thing I how it we'll it's mid really

a is drive Our type engagement. platform to really goal

design In and are terms really very, and you of lead And HRS customers. across can scale it very IEI our wins both multiple different.

show can today, you and revenue. IEIs for see bookings on design HRS If different shorter to years kind couple in working of lead in I a of you your the of the terms conversion in really to whole performance revenues. faster a overall we is you'll takes cycle station are guess up your have at of that that wins it look wins terms today ballgame, like period it our design clearly show

of based to have detail and And forward-looking Investor on it should on this kind our how of but and So Day very we'll more segment, we really we lot I'll when more talk see about metrics expand mix. a different in up really show do you then. focus our

Madison Suhr

think moving very can Okay, a on flow to generating free follow-up been you've flow great. flow, cash disciplined a then, full-year? to CapEx we cash so positive there You've that. here. just about commitment forward, the cash And on for obviously I'll talked Chris about a way is so be looking free forward for

that then just you you the Thanks. So million can allocation And historically? do you level $XXX could if think priorities of capital surpass of roughly we've seen remind us this? in lieu

Chris Collier

Sure.

by Capital the free last look is we are start months, in driving our highlighted get depreciation, doing that is $XXX well highlighted quarter, be today you roughly of we've even levers inside but other there's uplift. something if What with the And much managing operating over room cash you better profitability. depreciation provides that discipline good a our of free cash of on this bringing well would been as costs, below generation getting back and what earnings we've back as Management that great XX and And flow. lever terms and better, inventory been doing down nice that is to extend very Networking at, call getting in over CapEx with we we've the earnings continues better. I we're So it to with we is thinking saw in terms conversion generated line over greater to million flow the that cycle are we we big rate. XX% discipline our through then predictability,

flow and are historical goal free levels get flow cash our a conversion. free conversion, is those to to XX%, to of cash So akin like back

straight fair we're of a absorbing portfolio had costs, structure. is, is I also restructuring making now amount thing flow real cost this necessary that, the of And activity quarters other four we go good think we're and as that as the reposition the restructuring healthy we year free progress. optimize through we We've conversion. cash

over $XXX well that -- that's And million absorbing year. of this current cash we're

of supporting, we've historically our going disciplined you a So, just past terms in terms flow with free to look as free in in the And very free our to operating repurchase, be the months, that forward. XX of flow us. over been that to going return we're so following it's yet making going condition this key been a of of extending right flow that operate of a just the cash aspect, if financial remains view, deliver prudent sound, same it and commitment disciplined back through range. leads conversion share, company, in And you over shareholders historical also providing And us our progress structure capital fulfilling very we've XX% to a capital look into repurchase. long-term cash taking for cash feature for forward, that think going and

we in of don't You terms -- don't requirements have M&A. many

As support a have solid we capabilities we growth our markets. really global have to core today, out well target built system

financial a ability I share flexible -- we an our continue with to balance shareholder to can and So and fulfill here have think operate condition return.

Operator

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

Your line is open.

Christian Schwab

My to question. Hey, quarter. to your forecast comment great. with shipments, want shipments with top on My volatile taking during between knew question And customers, we high low going if for Thanks cycle margin revenue was quarter. of do forecast XX for whether difference do businesses. this question my there it were has and these the be some to exit has understand, of if or material I you is we to a short top XX that,

Revathi Advaithi

answer Chris remarks. Yes, that, -- in the his said in prepared I'll Christian.

where able So in our that than we overall terms in hit kind we happen. business. the revenue was and about We at quarter the like in CEC improve different or the the had well, up is our in we what same talked telecom time. of say sector, all diversity of about difference But to shift CEC and actually ended cycle revenue impacted we of the I'd portfolio and thought major with number in the margin EPS out played would definitely slowdown forecast saw our good that what's overall that of change really short even our really still were then

and there taking our of really portfolio still our how telecom advantage EPS in So what on and terms focus execution margin was and movement managing and as improvement. yes, mix and played out CEC, delivering diversity we're of the of we're but how

Christian Schwab

one know does guess for guys that any all general-purpose I Great, collapsed, have it shift wasn't better than long the So is that lead that reason -- ago. times question, you right? were I this times And semiconductor weeks. MLCC explains longer we company's large allocation. an week. eight XX no we're conference have weeks, which chips a think The And, at call now

guess generate And lot for a semi world down comfortable with at typical to that of be themselves. of part back to least And suggests have would XX who be getting my or to there's cash seems feel to checks that as to times back the agree minus, could levels. they lead some that a bounce are aggregation companies going is our very of it normalize to So, that is or you themselves on going correction drawing inventories demand on. is plus me

Revathi Advaithi

I manageable whole result CEC. it's situation really well-known in terms times in definitely lead board. time from the different would the what where revenue telecom us, and that lead for in change mean we across a and But like more we're you are seen framework so the of Yes, down, were last a in say was in of year we're issue space said, a we've I that a MLCC definitely particularly I Christian chips. is think

the drove not really that that. seeing major from CEC. that were change kind not revenue constraint We're fact has of of So And our lead in impact supply really away. the the gone chip time lack and MLCC overall any seeing change

focus. different In very overall, segments, supply versus really CEC is CTG and HRS that then right? terms us. different, components not issue Our revenue constraint we is are our chain each of a is chains behind the for different IEI think And very supply of

working due to shrinkage revenue really So lead that the the isn't then, its and value and was way through the in overall we significantly telecom revenue think time shifting impacting chain. shift quarter from us customer

Operator

reopening question. Ruplu your America. follow-up we from Bank go with ahead line difficulties, Bhattacharya's are Due to of technical Ruplu, please

open. is line Your

Ruplu Bhattacharya

IEI, Hi. and On margin X.X% Thank last X.X%. improvement, year now taking quarter follow-up. you the substantial you've for a had

about we you in And Thank can general, you. Revathi, XXX you opportunity there? So margin how how think do expand segment? help think is improvement you that should came operating points basis more me in for bridge that to margins and there

Revathi Advaithi

that two seeing as helps three And and sectors the and So, our higher definitely conversion growth industrial, are lifestyle definitely growth all across things business, from IEI at strong, in have margins an we're margin. IEI. converting One absorption of standpoint improves right is our both really Ruplu, our business and general and our and overall all energy, home based are and in level. then so that happening is again our

a How is I are like of and improving before, see continuing this as in really also that, we confines within this it our the both terms what industrial good that business so said to growth, segment. all players about is continue much but comes we'll being terms portfolio think is back of Like margin that the a that to of is in online. our that improve. and result We and room for would terms point, know, the should EMS overall drive constrained so, there we'll feel that from better continued stronger that right. in of, so and good and to heading see I semis to want continue - is our at within as overall. obviously growth In -- you that are it really also the margins see feel where we space the see really is we I improvement margins penetration, And mix absorption that for in forward expectation improvement I improvement. space, energy And in to moving then as of penetration is space, fairly

Operator

time. no further are there this at questions And

Revathi Advaithi

really really margin margin We're expansion profitable questions thank recent the good that of in time We in of the of you cash all also and mix, work been really performance. quarters. from from and the you we good flow in on the terms our a us. our lot feel we but same as in see see Hey, performance hard operating us joining asked performance. cash for flow forward-looking terms how terms benefits which focus of has to all growth, is from our you operating managing return doing impacting revenue keep at can all And that

ago, taking our that quarter long-term we're about about So us. is and we're and for strategy all really you path company, Investor talk Day excited on to more joining and really which set looking months you execution, then thank we're so delivering we disciplined forward in fourth and our talking all really of for set the to forward you, of the up to where this to mid you and six

Operator

participating. today's gentlemen, concludes this Thank for conference and Ladies you call.

disconnect. now may You

Flex (FLEX) 24 Oct 192020 Q2 Earnings call transcript