FLEX - Earnings call transcript Q3 2021

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Operator

Good morning, and welcome to the Flex Third Quarter Fiscal Year 2021 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. At this time, for opening remarks, I would like to turn the call over to Mr. David Rubin, Flex' Vice President of Investor Relations. begin. may you Sir,

David Rubin

Financial Good Earnings welcome today Conference Officer, our Chief Rob. give Both you by today's if presentation Quarter is Flex's section on Investor not remarks, are recorded. followed Fiscal being of Executive and Chief and them, Relations Advaithi; website. XXXX This available Call. Q&A. brief already our Revathi Paul is morning, received call webcast you, Lundstrom. to will and Third our Officer, And Thank With have for flex.com slides me the

today's subject are results and and reminder, assumptions change, no undertake to uncertainties, current update a and call on and is events actual could As and forward-looking contains we differ forward-looking which expectations statements. to risks so obligation based materially. statements, are Also these to subject information our such

and For please SEC. a uncertainties, with see our the discussion the of recent filings full risks most

measures be slides The references website. period. to for CEO. With of Lastly, current non-GAAP our presentation today's that, Investor of in this found on Relations as well section Revathi? like call turn financial over call the the the our to as can the I'd reconciliations GAAP appendix

Revathi Advaithi

and our everybody, time. and safe. morning, for Good today hope you you for do I David. Thanks, to that, us are families fiscal and healthy joining call, earnings earlier QX thank back an and your

an the work our also I want to my I to commitment. results start, NEXTracker world. across for all hard testament a quarter my continued on thank you strong like true of I the to business. before course, Of I'd all provide say and are that third colleagues update colleagues their efforts would our Flex

finding improving finding we right great our the value. portfolio investing the in ways a taking I've previously in continuously disciplined maximize to shareholder evaluate approach As long-term mix, said, opportunities and and positioning,

through alternatives or actively an company separation of the such, now a business full This the transactions. is offering, or sale, partial among spin-off include, business. others, for other pursuing initial this public As may

can share can information As you future. understand, we'll and today, on there's to more in you continue with topic the this much we so only provide

turn Slide X. to Now please

Our XX% X% up billion, up over revenue sequentially year-over-year. was $X.X and

at Our previously of absorption a in new macro-related implemented product a measures. the X.X%. came figure includes in touch This challenges margin adjusted strong austerity continued elimination programs full as well on the of operating I'll minute, the as

EPS was adjusted in of up year. Our $X.XX, $X.XX from QX last

in free generation. at Our quarter came demonstrating in flow $XXX another adjusted cash free cash strong flow million,

Now moving on to the next slide.

very historically results. As quarter. our is seasonal see, strong you Fiscal are QX these strongest can

our as than as we led we this business in program meet and positioned sequential year-over-year. X our units demand. our well is our executed our reliability growing to ramp X This navigated our to ramps environment to the However, reliability better we even segments, revenue growth sequentially improved invest continued for well in as business chronic health of both year-over-year prior and new segment, agility products and delivered In continue with expectation care growth quarter. challenging and as

products. autonomous care America team critical particularly strength in as this continued on all sequentially in electrification improvements Automotive deliver see we to hard progress, very and macro the to a a with very growing they core businesses. industrial. in recovery, and cases. COVID-related resurgence in a make Unfortunately, improved The COVID global our Industrial difficult in been environment, decline future, North from but by slower-than-expected very due a continue stronger-than-anticipated saw has in led regions. is working also We bright to benefited expected

in to power and a a confident tough these of both remain market and very in both well discussed secular there's the absolutely to I want renewables harbor. year-over-year out customer-specific headwind our change these decline point positions. However, last in our comp no to are safe we related as to call, faced as drivers we items as on spaces, solutions due of still a We transient.

the agility performed Our well segment very across board.

to areas as on well capitalize such to important secular our continue and We in to XG in high-end in cloud drivers our long-term as manage as brands premium products lifestyle to business. mix mid- shift

goals really continue well from The driving well productivity to solid meet also We to and spending, strong we improved from achieved the want to home. our we kind and the revenue, take But and spending this demand, eye previously for time profitability to to the on off uptick recovery I'm growing to key related consumer us is in led ball. that holiday work as growth. that right continued proud this to out. learn benefit I out is quarter. a executed teams point This laid very which the which very of no of led focusing the results our while strong also here as

devastating wave. from COVID impact We second latest have the on the the read all headlines

uncertainty the that end everything supply constraints a increasing confluence to events from protect few and been have as people of Malaysia We've semiconductor and saying So This goes number shipping families. but created components of additional one layer number far, transoceanic a in is lockdowns, only their priority regional an heard there led has in to containers. our markets. Brazil, our of to such without it in that about also

challenges. So through these anticipated and far, latest we managed have

to the the to before I've far. of wanted I detail on electronics these we'll our and I out last revolving done ESG-linked January banking call, as new the focus tech billion meeting in ESG I'll currently replace more ranks to come point so to $X you then globally in In discussing and related of ESG the most remarks. partners. industry our wanted some with credit through in is is One on in that, overall, out and manufacturing companies will gas I'm X, recent launched we an turn case, Paul, and Sustainanalytics. the on our However, environment loan, to one key I'll monitor to an number opportunities. Flex proud see We touch ESG to continue was look update XX,XXX evolving continue are incidence almost emissions previous rates. walk work first space to QX I'll situation. rated performance This is forward we XX share call turn efforts Flex, rapidly to on have have to Flex the for where I X-year important an this I at in you really in Again, by potential company targets near-term QX. said sustainability-linked sub and greenhouse who that performance end item over growing improving facility. Flex's to our but top Paul. and more this work call achievement. our broader back assured, before challenges facility the more our ESG over the is the our reduction billion safety detail. $X.XX closed closing results in Rest pricing targets. With linked Paul? indicator specific

Paul Lundstrom

and Okay. good Great. Thank you, morning, everyone. Revathi,

from stronger revenue portfolio. segments the operating Adjusted X. which and to X% in If QX XX quarter-over-quarter top with by headwinds growth to than figure was reliability basis points both income well you was I expected, up year-on-year to agility the $XXX bolstered include as in COVID-XX across was was was expansion. could billion growth $X.X up with line XX% also and volume mix, turn and the and with continues quarter, with of million, XX% some as year-over-year. everyone Flex broad margin efficiency Slide Profit want this please to stronger productivity strength remind gains. up good that costs.

adjusted income a and due a $X.XX. XX%, adjusted those by million adjusted earnings net was net in $XX other lower respectively. result, up On to income basis, to of $XXX was third net million GAAP restructuring million XX% quarter income of $XX net our in a net was and million and income $XX As with GAAP And adjusted million to costs. investment our million share million were the gross income other stock-based amortization net offset quarter, $XX per of partially basis, compensation, on of of $X Year-on-year, $XXX intangible reconcile restructuring gains. net than

year-over-year. reflective outlined of flat targets Adjusted We gross about QX previously for QX close gross X.X%, committed. Slide On in restructuring from was million of continue the our execution $XX track costs $XXX adjusted SG&A to million, total, points X% and quarter. strong up a profit we was and in to adjusted million which between and basis In year still up we record X, XX expect quarter ago to sales. of to is to spending third and Flex had the margin performance also QX, $XXX was as

it growth $XXX will structure margin basis cost billion on the repositioned of margin operating was our Slide to XX X income revenue quarter, leverage adjusted rate. all recovery up, levels $X.X the spring. high a that strong on Reliability regions and we of operating long-term year-on-year, meaningful X% with believe ago. as points to expansion for up up Summing execute in trough going our up revenue was our quarter. from Reliability record initial and has demand met exceeded year-over-year in compared XX% into as continue X% up X expectations led the ongoing sequentially Flex We X.X% provide earnings digits single or global strategy. by QX across improved to seen Automotive was particular, a Americas. industry's from Automotive, substantially last improvements performance the led benefited year all in businesses million

be with double more perhaps and care we expected. As up Solutions to than expected, sales a diagnostics continue Health products, demand, digits Critical in were touch patient programs volume monitoring year-over-year.

year. Lastly, down to industrial prior single compared digits high was the

harbor, headwind offset in related As pressure business. created balance strong was mentioned partially quarter, growth by in a to safe last comp in tough the a renewables, some and of industrial but the customer-specific

related markets. new down Health by enterprise associated critical to was basis year-over-year. single a million $X.X than continued thanks up audio, broader in up Turning adjusted expected, investments was in Agility, operating due appliance up better year-on-year, led IT strength as market. the did headwinds Solutions which product of end in of low transitions end while X% points product year-over-year, for profit quarter-over-quarter muted ramps operating Flex the remain XX% adjusted care, Flex infrastructure, Lifestyle the Solutions. also margin, well CEC $XXX was X.X% line and year-over-year, generated up to Reliability with the floor to automotive with Agility as and standout cloud spending billion Within to digits XX quarter, profitability. and revenue and XX% high

year-on-year, consumer Lastly, from up upticks high consumer spending single and seasonal was demand. benefiting digits devices in

of volume and strong margin, by Agility and X% a generated driven profitability. to operating operating mix. adjusted profit million Turning Flex $XXX Solutions adjusted

Turning to Slide X.

free cash earnings also sequential stronger of growth conversion or about quarter, an the spoken operating For the We've $XXX greater flow, free capital adjusted million flow CapEx. working basis. drove disciplined cash in again XX% and while from adjusted flow in an cash benefited past on targeting favorable

up sequentially, constraints. diligently year-on-year, and in course, in inventory Looking are this seeing others secure we closed GAAP ahead XXX%. cash quarter of to demand. fulfill income, to ago. partners net the with fiscal component cash XX% flow ending up QX a adjusted parts which to closer are on And needed X.Xx, turn with free significant half a March, from in working $X.X X% but flat with achieve non-GAAP likely like We, over supply basis, year resulting conversion was inventory our flow free chain, expect We billion, a of turns roughly we of to

Our net totaled the million. capital $XX expenditures for quarter

goal technology we happy resumed our We higher-value and increasing end CapEx quarter. continue to capabilities markets. manage buyback third strategic supporting of efficiently program in also share the while I'm to the that during our

program said and been disciplined strategy. uncertainty. we remember, central repurchase during we you'll on remain prudent strong have liquidity as cash as preserving on initial had the But since a period our buybacks As focused and consideration of our March our allocation position pause capital of before,

back we decision made the continued to get So the market has into to improve. as visibility

on update billion that and January into X $X.XX was to $X on wanted revolver year, undrawn quick expire of provide entered our this X-year revolver. cash the existing to We facility replacing new set this Speaking in billion XXXX. I a liquidity, of

the to plan, the As facility tech highlighted for moment Flex's long-term the agreement sustainability this tying Overall, was the of gas rates. greenhouse improvements year, quarter. we've a the on thoughts with while get said ago, the structure, be workplace of still the the environment, current we we a balanced rated. that simultaneously guidance, over and emissions reiterate we cost before of support that protect Slide remaining ESG-linked what workforce. into capital must in us reductions investment-grade Revathi first needs, safety business need we call the pleased on I just are and our and XX, key in industry, flexible enables operating incident metrics are and And and couple to to namely safety to our every previously credit On maybe that's dynamic health of in our earnings a revolver last which meet mindful and future want

recent closely do continue as that also guidance a we a situation to share. in the around evolving is I to contemplated will component we have rapidly would add all we news effects Given QX, shortages chain supply This headwind about the see in and those that I'm monitor. constraints, that

information today guidance that is those current impacts available business. to expected Our is our the based on therefore visibility on

be Flex Solutions, low start Within to single support Lifestyle that, work I'll school. guidance. that low to the which up high year-over-year. to with QX, to digits reflecting in high sustained single started be digits expected get me is demand up teens remote year-over-year products let with for is So Agility expected and

muted CEC IT the expected For spend. year-over-year quarter, to balanced infrastructure by to enterprise mid-single up with digits low be critical demand is

Consumer single year. last up be to Devices digits compared Lastly, as expected to low is

Turning Flex Solutions Reliability to segment. our

single $X.X We And to we're QX environment. low low monitoring year-over-year will to quarter be to revenue to digits in revenue the mid-teens tightness up digits mid-single Solutions be in to with potential year-on-year. the mid-single billion. by due to new high ramps. $X expect the up Industrial driven And will up component low Health would from of revenue again, year-on-year. those supply year-over-year digits low double Fourth be disruptions our strong chain will ongoing the automotive carefully to in lastly, sum growth growth XX, products. the outlooks, be On and to our business of given be continued quarterly program digits we industrial up from then range core enterprise expect power billion Slide

tax be to Our adjusted and be range the other, our operating income million, million in we of rate $XXX to we and Interest to million. estimate is $XX expected roughly think $XXX of remain the to shares of in the range guidance EPS on $X.XX quarter average per share, outstanding range. XXX to weighted in should Adjusted $X.XX is million. based XX% in the XX%

QX by guidance excludes amortization of largely will we EPS gains. charges be impact stock-based intangible adjusted expense, Our the expect though restructuring compensation offset and charges, net that onetime restructuring in

share to expect that, a As we to the With Revathi. it in back $X.XX result, GAAP I'll per earnings range $X.XX. of pass

Revathi Advaithi

you, in want extremely Thank Yes. that Paul. execution. reiterate our to I remain I confident our strategy and

higher-value continue products the are grow value partnering that capabilities lives. make as showed of More customers difference all In months can companies with fact, the build we And a the and geographies, realizing this value provide only markets. managing chains, we some to Production in last increase help challenges more design in in and customers. our engineering Flex. and contribute supply expertise are advantages in relying, to technologies people's increasing of complex the to invest will and capabilities, scale multiple over XX in to

behalf support. want thank leadership for shareholders your partnership entire customers I to that, the Q&A. we'll of for our on With start your and team, and our trust continued our Lastly,

Operator

Instructions]. [Operator

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

Matthew Sheerin

you out starting component My reflects first some Revathi, of to customers? own because some just orders the that? outlook outlook? more conservatism What in expectation regarding And coming rescheduling of to quarter. Or is terms question, that your relative from or Is your are said constraints. you March internal see that pushed for of

Revathi Advaithi

from components but seeing not twofold, to I for would Matt, thank we We're having from out coming from the seeing it's demand really as customers any we're this definitely other inability haven't having seen side from seeing are entire customers And deliver starts to push question. suppliers. time, suppliers constrain that then of cancellations the which we you And also some right? supply at say shortages, end-to-end. our customers. order chain

evolving is very basis. situation We a say, are which would shifts, only highly a day-to-day on I seeing

the So every more days, then XX Matt, during to last is know, calls done account. COVID all times. an But into day. situation we've the as done this you that I've our CEO in even best ever-evolving take

in the So that's shows happening it kind industry. the really of effect

about very closely. are So cautious we it somewhat being monitoring it and

Matthew Sheerin

near-term to And what start do and the flow of does inventory. to for for and customers that out from very asking Are related terms inventory, company? quarters? ratios. cash the placing working you requirements in then just We're hear suppliers that your starting And story book-to-bill capital terms maybe components some to distributors in to that strong several of

Revathi Advaithi

to intelligence last really we from demand our I'd in the even the demand some of make be customers, manage then we say well Matt, was it, customers very that, X incoming year somewhat suppliers. learned help have and kind decisions thing do put to on realistic put

are good bullet quarter's every Our is moved they right? supply occur time is inventory that. of through the But Lead effect put need, indication that in seeing what ripples people happens out, now more than and of an so-called last times chain. a get industry, performance the right you kind the creates orders when entire it shortages that effect

system. So could we little bit And into the we happen going more we to see, are we as apply that It's orders look inventory that that a should intelligence the best be do as than of inventory into and in this. to seeing orders should from accept system. our we natural at like we customers think we time what and to put a

about capital have our metrics for We that thinking in working are we considered those QX.

Paul Lundstrom

Yes.

on So there, maybe to Matt. guidance comment just the

do cash what a flow affect of the bit little just potential said pressure in outlook a the the well as on and as because Revathi inventory. the lines on about P&L potential conservatism top headwinds a cost line little of then potentially, and little bit cost So other logistics

and sales, would sheet, all are adversely that's balance in again, affected guidance. contemplated cost say, potentially QX. a little here all bit in So I And the

Operator

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

Mark Delaney

to to asking I speak tech and on pick Flex broader I start, the around the can is positioned think a this Maybe best companies landscape. the roll of plays how X probably macroeconomic Matt was up in questions topic, of Flex chain. supply on And given broad-based that's

As of potentially first you're you constraints, peak gets issues, work the the even the to these looking do at is quarter? and to mitigate As like talking supply think potentially and calendar to of do shipping component March your currently it is be chain to beyond that some expect problem or trying the things quarter? the in you going suppliers worse

Revathi Advaithi

Mark, a to this component, pick that we So so have have half in year. -- right? up, if that diverse know difficult ramp components right? do assess has up. now thing I'd written newspaper about we a broad buy be been industry say shortage, much the view, say, chip many to different, in because projections the very right that we depends industries. I'd about is first of of you're and our more perspective, it some across calendar you every which could on also thinking you you that, second takes is that, today hear So longer the it's

would If you and we more QX, up, ramp of are capacity, to and end hearing towards think those of calendar the getting those assembly test easier about kind ramped into QX. up get are

think, predict. to together, and on it how I I'd come all component is say those really So hard which depends

of evolving I to really hearing So a I say. see talking we today that to suppliers am together what when in supplier QX sometime you'll constantly. hearing hard it's industry, is in full terms from CEOs, is because you're this what to, that late general, just I'm I'm see which on would talking coming it's what and many the assess, is but from Based recovery, all

in that get more be there'll coming think in. the they're weeks we capacity adding view into better I as clarity supplier

Mark Delaney

business NEXTracker in That's company the then, today, to spoke the to in NEXTracker the are on helpful. is any size perhaps my or what you're could it revenue strategic the business the than NEXTracker about the the a different earnings second a that what And Flex question, update run EBITDA, of rate discuss of key to Flex talk with considering on come as about that is terms seeing was I value upside how the you of about decision perhaps may thinking has given last especially And you best described the alternatives how bit And hoping been you call. factors long that maximize the take to that? can shareholder idea asset? to little about and more

Revathi Advaithi

Thanks, think peers is be operating and what pretty is, I'd $X revenue operating quarter, accurate, with to I to which be say last stick Yes. terms told you will we're line of we industry still Mark. of will billion margin in north that one going margins. double-digit in

through or that. shareholders. becomes kind which Obviously, alternatives, decision of give will value So the as in hopefully, our it shareholders want about credit money we in invest And thing we terms disciplined decisions you the will sure say we'll I'd Flex all of we Mark, say important, buybacks go approach, And I long back up M&A, give think see is through will will is where in also. in how no lead Flex options, same this us looking the updates is investors the we move we be we'll particularly chain. our right and our to to for decision for I segment, and in sense And of Those think to process. that we'd clearly makes our term, this Reliability the at. think right? be shareholders clearer making how the of and we higher to do everything strategic what how our best for terms we go for the I'd X all being

already talked we're of you quarter, I'd see we're say quarter, are assessing that to how about And moving we you at it. Last alternatives. fast. looking terms that can we long? In pretty that announcing this we're

also very of sense the we do, urgency a always but there's disciplined. we're in So things

predictions to any can myself I'm I want we line, as will we fast giving tie as I time to but not in because process. a up move this So say would don't

Operator

question of Citigroup. from Your next from line the Jim Suva comes

James Suva

so have it them the I the be has you with be to you Board, questions, any want. But you at your management answer discussions in time or can them two And -- same order whether and that and your I'll senior ask there past, or the of Flex from the X over before entered say, we're months table company really unlocking changed you the on things for considering is that. now more NEXTracker been Flex, something hadn't a value doing known at the and like lot

of set in run have rate there's the automobile. is potential you fair And So And has a Flex at anything of lot you it that really changed for or investors up in or that what going also a things electronics of Because behind rebound wonder, of the doors automotive. there? then having think hidden just other that kind the the my to it some to value? in there's seeing a success about you of seems It look that autos. big is for talked Because share Or is forward, great in also there, of question kind growth changed? is gem. electronification, new go you Are say seems Flex autos? but that I on actually of you gained chapter They in a management there an lot auto? innovation of second like or bringing unlock shareholders a value amount a at are like something

just a if it's of rebound that than rather is near So term? I'm happening simply gaining more share actually just more wondering

Revathi Advaithi

both questions. very Jim, Thanks good

to comment focus are and would handle focused about are make company growth So we during focused very approaching that how say, the was do but let saw over disciplined portfolio currently I'd growth. execute, any do the on on driving I being management, want first think, really were I last agility. can't to how mix and over in is you -- Board good that first how of the sure say sure want about X it's important first. make operational, your thinking launch for the we also of me we and our term? how history, the think that I what for we year, to long you I we right? think of I be I change things so But evaluation that think on one has don't considered in disciplined all been portfolio And about to we're and what kind time, be Jim, reliability

You'll investments see and reliability, more the chain. making about up us moving value talking

You looking also alternatives it. hear for about us talking NEXTracker, at

our I'd running the business very business running we're should say pragmatic we're So think disciplined Board any I being And the leaders and just be business. as in approach.

history, about say what all sure not should So say, think. businesses do, doing but is that good I'd we're I can for today I

how strong It like quarters. of Jim, has the rebound, of very as X have our few been about shortages. today. -- for last business coming is, with you terms X In kind last, the We're people is But back that us most fast struggling auto we're really seen. One things. excited are a auto as business -- has in grown is business years, the obviously, over

the in share, I in heavily electrification for areas which the of want have invest autonomous We and focus us. space, are both electrification to say, We to both our gained very space. would continue

and own to portfolio. in our We invest want have in our space, that own products electrification of make to and that, part continue a bigger to our technology the we

value we our believe space the up we strong growing, that share and do as invest very been that has So move in we'll to continue chain. and is

Operator

from Steven the question line next Fox of comes from Advisors. Your Fox

Steven Fox

could. Two questions, I if

margin more you secondly, reasons math year-over-year then a maybe improvement gave, for the when First targets little of wondering the all, if that Solutions margin you the look I on just a more? basis operating points real was And performance. that. implications the And I business. of X.X% et could XX break or down the little Health And understand sustainable, its cetera? next on year just then on X, is quick we what's bit out

growing double-digit You're year-over-year.

year-over-year program more think a some slowing growth of for should Or Do we ramp big momentum. you that quarters? see that about programs? new continuing these few you of mentioned You as some

Revathi Advaithi

Thanks, have question. take the margin Steven. probably Paul I'll

Paul Lundstrom

Yes, sure.

Steven. question, the appreciate So

continued bit see. in COVID-XX growth. with agility the Solutions. to in and had bit to Agility mix pretty margin continuing headwind. basis say mix drop us So on over about growth we're on we see A as simple as the of in strong. managing math the well. We and to is, in little small tailwinds. line strong was we're little side But theme little of up XXX And reliability of quarter, cost better growth the ramp forward top was and of heard big to would bit Health strong some did is particularly margin sort bit about very doing margins. in that the volume quarter, has typically little side have growth a ramp in something the helpful, talk pleased the script, growth which strong through. very, much productivity did focus strong some I certainly say, business talked continue there. the was investments in business, on years picture very have we you've a We we of, mix pleased couple points was a the Flex, of I which as a what would of next few is I Agility look We But very mix

see to pleased very so that. And

after going of of that I types we're within and that customers segment. think types business the

is in our well. the to I with And that coupled to so mentioned, mix there, lifestyles fruits there the from business, as margin and as starting strong which of us lifestyles, XX% that, year-on-year was up good. quarter, up You're the see helped labors

answer good mix, volume productivity with And some with well. So tailwind really as short be dropping the through pleased would performance. good

with that So very performance. happy

business our terms some care had has that In critical Solutions, 'XX the response. of coming Health and of from COVID COVID in tailwind the fiscal from demand

say ramps. air next expect me, couple down, of programs. be excuse so as quarters, in not, those hopefully, critical some comes pocket Solutions But forward over replaced up quarters, critical the we tailwind -- the over that few next-gen as we into elective ramp won't -- care, look we with Health I down, won't I be the roll the X would starts I as see And comes as and to X, off of hopefully, X, program growth next but we these COVID little robust a that care to bit be quarters. as from an do But of next new

Revathi Advaithi

booked the to that for to that we that But onetime is of years. right not So do COVID ventilators only is also many kind and would now have to thing I'd that add Health we're to continue. seeing a question Health demand we be the out Solutions also from expect Solutions say

have very booking healthy a trend. We

we to our X and businesses. that base So expected that years, grow new at double we will in is for X to least expect the next as business digits, book and see continuing we continue

onetime the just from the think out. year effect ventilators. have is double-digit projected But huge business in to on that I a COVID, we'll be particularly There this demand base that even growth. was well will

our -- that that focused and is on our And productivity Last direction will right? feel for I we're can reliability really developing the working have focuses in margin headed targets, we said just I conclusions on told whether in of but we paying that strategy you is mix. we terms the of dedicated strategy was manage Day, mid-single kind on long-term your efficiency. We own our our you our margin not, long-term we'll like is models aspiration sustainable. and delivery margin Investor are Steve, operating business, I these that you of in for which gave year and or focus right digits. targets growth, say, And agility terms In out, reach

Operator

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

Adam Tindle

light question in just the the comes of in why the I of past, this why potential the your industry mind, mixed. look X makes maybe it? has Revathi, been sense your with evolved. or for just pursued if monetization, your of M&A -- high-level wondering to Selectron somewhat fresh not a the And update at ask NEXTracker has industry been could you example. industry. on -- in M&A view But It's Okay. view success in on

Revathi Advaithi

Yes. own this need new Adam. my doesn't that, and course, would capacity. any is has personal this view, Thanks, I views their everybody space See, that say on of

for this consolidation in not we're So space. looking

productivity right I think will organic our base efficiency mix. at look we just business,

is for electrification M&A In space, terms of clearly which in and technology automotive reliability M&A, the industrial. and we're looking Solutions, higher product Health both and in value, power

part the about. that's thinking So that we'll be

clearly moving forward, going that's are how think strategy M&A And on M&A products and be technology about chain Adam. our to focused moving So will with up the value these we spaces. in X

Adam Tindle

investors should strategic just any clarify, dissynergies there about with And are think NEXTracker to that alternatives? associated Okay.

Revathi Advaithi

you do to? want Paul,

Paul Lundstrom

be Yes, would but small. they

Adam Tindle

have costs, on $XXX of Paul, end the you're still low It of million at like to on sounds ask, the of come. And targets. Okay. the you I SG&A already the topic wanted some the

wondering costs, incremental can buckets, X%? get maybe be come, metric, your of still Just how X%, of much at much helpful. two the color you still kind stay million COVID would of to help how COVID quantify right And cost some if is does is SG&A incurring still it below around that can the $XXX You're view those you embedded? some

Paul Lundstrom

do Yes, happy it. to

you're think don't I much than see going So better X%. to

Maybe, I the in I the boy, out top and certainly tapped is still essentially hold you that line a margin, Can bit growth? most don't X. as best-in-class on going flat there. little costs of get think to it's but SG&A see you industry, productivity part, going and for we're, the some be with X% below

productivity, countries. always world. now In terms XX We different got in that operate we and XXX continue terms watch to facilities of There's as in look, we'll the forward. to restructuring, move of we've more do room around

or or did QX. we or restructuring will million us did million before million. so had We Your committed good what question $XX costs million we to Look, about was in and that another QX, $XXX we're restructuring be QX, so. in $XXX it thinking million on so $XX I'm puts $XX one. million $XX at -- which is right a in

mention probably is, point offset as on from some one make this script. am though kind I QX restructuring expecting the want spend in we of in I Just What to gains.

to So next couple closer to before, there's over X. we're we that as on net-net, restructuring productivity. there, more as forward will be do move net of of focus continue work But going the factory years. gains we'll do I probably to on to think I and mentioned restructuring,

Operator

line Your from next Cross question Research. comes Shannon of the from Cross

Shannon Cross

Steve's front a question. I Maybe supply are some sort where may supply of wondering tight. that across have of to was chain of because sort chain you things to so of across a and bit the in right be sort the of of now, follow-up terms certainly over-earning entire in tech there

customers pricing, back all I'm the thinking if you're the trickles offsetting. sort or aren't And on which Just maybe end costs that, the maybe pushing of are curious if down. way COVID about incremental

But operating there's in, this this past customers get everybody's sort room things that maybe because, an progression we'll we when days of of equal perspective. everything thoughts some you just as the so your your curious as continue more challenge So and bit these margin out margin a will that, from in talk in if just again, I'm to tight. are

Paul Lundstrom

didn't we this ago. and have say from to headwind point, have that our that continue Paul. in a now. I costs right wouldn't I over-earning is year COVID your So to mean, comps stuff we

of we us I the and being ultimate that at we don't of into to it's look are terms You QX, in OEMS. as and that XX feel have right costs of passed coming or now. COVID-related still we like kind And power through of pricing what are on see certainly where mean costs. sort million talking probably thing we're the onto QX logistics, we're expect so here in I

a And of opposite. that. not so would certainly say anything, I If we're it's beneficiary the

our Revathi what kind about talked had we the guidance, I sheet highlighted we talked about balance of contemplated As in side. sales, have

of a cost the On side, elements. there's number

that have like be X,XXX to we use XX-foot constrained. We're in We containers are oversea the used themselves looking container, manifesting chain full at at look $X,XXX containers you things pricing $X,XXX. even a now As are -- and changes, logistics challenges here, to container a it's that X,XXX quarter.

$XX can could annual math. so you million, basis, do million. On that be an And $XX the

big. that's So

to But maybe thoughts. I through So say, be I say Revathi, are my cost I headwind down again, anything, those wouldn't that don't if there's would hope you the but know, we can? short-term pass over-earning, able road. to

Revathi Advaithi

say would I agree. our our and I customers Shannon Yes, very wish over-earning, say are disciplined definitely I'd not. but are disciplined. very suppliers I'd

major comes delivering see volume with shortages. are do our is mentioned, better strategy, say, and lot the then from Like kind are -- chasing, you these I'd chain. say things. those which So improvement of our expediting high value and through of I'd right, Paul and better productivity. supply a logistics say costs flow the things I'd supply mix, margin

in takes, really P&L. Shannon, a disciplined these that think how pass-through see how puts the is we'll question. I manage we But way, and it good

Shannon Cross

future My guess in bodes I spend. question terms just And is well of it for years. second enterprise

from the remain weak. We continue chain, to things very hear supply

then you think into the Or the restart we they're the You quarter? went talk the to what linearity been then some And for And and of and that? weak at pretty shutdown? earlier be quarter? some do has enterprise key back stability whole see to hope. throughout drivers will you any the companies, did in some end least fourth improvement seeing curious, I'm

Paul Lundstrom

on right down it's move mentioned because it's we're we just script, to -- QX. continue the little tough, a in as enterprise I It's just just line, year-on-year, had as was the think top bit and whole to Maybe expecting don't of early that we little really to a office the into I too quarter now. in And people wanting call. I see right into kind don't of enterprise now. a spending We a see had said back CFOs coming jokingly lot invest ago,

continued and back now. they're Given -- just right not in that uncertainty people the office the the fact

TBD. here a forward pent-up half upbeat is and snapback calendar future, our 'XX, into and we're of as a I'm demand we -- move but hoping we a fiscal a the on 'XX, think some that back of the the the what bit and of I see maybe bit So

Operator

comes Paul JPMorgan. of question Coster the from next from line Your

Paul Coster

with scale a I'm Just platform that platform, I your amazing it you've NEXTracker maybe go bit? out sense you had a just quick then strategy customers, your have be start success in feed that to you make follow-up the to own be? of this course, NEXTracker. it will case, in you global same this of available And up. brand with wondering, -- a brand spun clearly initiatives are through great is can not for sort now nurture strategy. your subsequently that And mean, manner this potentially does that to to and but customers, that on make the competing does

Revathi Advaithi

strategy. be industrial say Yes, of each about And think as way unit. business Day our that how business we units, don't Investor think I've the our our business that, able part And business To which perform. that's that units strategy, I I be volume it They value be to our perform. see market. that. that the should to of kind way. multiple in the a and units And in brands NEXTracker like see monetize delivering growing see stand independently share of see is to I a and that's said our then Paul, before productive each in and each shareholders. they I our it in add efficient independent and terms share. I it, to does it become how alone should as I'd of say I'd I'd of Flex, of scale individual available say helps is, then to and our this They that performance needs how this overall take call decide up portfolio is about their terms and of to

I'd to that strategy. change comprehensive So no say

Paul Coster

in a some how change D.C. and Got follow-up. on you. Any then in Change quick administration Flex? global effects may priorities infrastructure of ways. And changing in thoughts that trade

Revathi Advaithi

think, like see me with sustainability measures the I and be say our would one is bringing Biden of Yes. to our I'd personal perspective. China that's the would be hope a in of We'd supportive very administration change from most particularly trade that policy, I say trade, want climate that helps which CEOs a is, NEXTracker. aggressive. personally, terms through, business less like

businesses to trade the trend have and manufacturing our some onshoring on we focus the with We to that because think handle continue. with bringing trend that there better think Flex way things almost all administration great help but on that forward do helpful customers focus the the support a to this moving with IP regard security, in world. industries. in continue also started is every will like that And capability that policy of back well and We to country we is is positioned to very Trump countries, for individual China,

that's building we're positive acceptable themes the in for a and more last of way mutually some continued So hopeful that But more industry the administration on general. on. worked for in

Operator

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

Ruplu Bhattacharya

renewables, can So power you side, and give growth industrial the systems. a On us for you different you have industrial markets? end the have sense rates devices, the relative of capital equipment

is basis, Just which relative growing one which growing X on a slower? faster, is

Paul Lundstrom

Sure, Ruplu.

accelerated think renewable some that mentioned you was created to had that harbor, in policy about tax of due the industry to last buying I headwind So on we earlier calendar QX that favorable side year. think the and safe little specifically, the of QX that was there a bit

performance. pretty bit we say, you core give and mentioned ahead, little I would had customer-specific Power, in us mid-single on think did tough would some headwind that the did flattish. have business, double-digit up a power we and strong bit in of be as QX, look the a one, on we but renewable was say, And I headwind, maybe I up, digits, little of will thoughts side before, that give a range. comp of So

with strong think I growth in the flattish core, single-digit. renewables high side,

Revathi Advaithi

considering year year-over-year all a growth, incredible growth. right? COVID And a positive have full will basis three all is on year, 'XX, will a is Ruplu, which fiscal pretty year, have segments this So three but subsegments for

Ruplu Bhattacharya

that and Okay. that's sense, helpful. makes Yes,

follow-on the basis XX sequentially solution Just on Reliability points margins declined higher for question. revenues.

But have the I you've headwinds? And X.X% is than the the you're still talked automotive product about mean, -- you think not Xs think in should terms in had we margins. bad I do you in lower high you transitions. that past. to of mean, Or Do remarks, quarter? it's think I about prepared the in fourth that improving the situation see going

headwind is on So a or this I long-term whether thoughts more mean, is any this transitional?

Paul Lundstrom

Yes.

no. as Look, that's a drama shortage real I the component So the over this couple question be to would Maybe side. continue item see answer of automotive next plays quick long we to out say watch the tactical term, on going how quarters.

So we'll carefully. that watch

and it is that Solutions But In right a Solutions Health on that some what we were substantial I the we a in on don't of automotive happens. heavily did of products as over headwinds, a investing contract side Health have new if one and Also, were had terms look And of the of think as see headwind, side, transitioning bit -- then, now we're products Health supplier mentioned, that pretty ramp on a of investment related. little blip. -- bit high-quality I a the the look, in but next mentioned, few bit some are that's drag business. expected an years you quarter. the ramp automotive in on the of one, think I little I had side. mentioned, both those you as the next-gen margin about repeating, QX, side, And business, the those the investment was with in we -- Solutions

we COVID-related to up think several the Flex Health bit and the air I few Revathi you'll I some we grow a beyond, health think on is We next care to invest continue love that As grow the as growth has Health see that profile last look if pocket you little business of business. business, again, that mix and at as to offsets of like over the level. But XXXX, quarters, we the margin And going the the over product continue into in the And of years, move Solutions to the that Solutions spending. business profile. I overall had saying nicely. new mentioned growing been 'XX

Revathi Advaithi

support in room term. us the get the share we because profile. well have then, I'd in invest And it ramps to continue to investments is business said, to kind an it's business, room invest, as that, But to that add thing funding And transitions, product long like have unfair that and to up margin it's when the be make able to these want great sets of and you to going Ruplu, reliability. to a from only we we of still

So way it's that a very we're kind of executing how planful of in business.

Operator

there this no And are further time. questions at

Revathi Advaithi

today. excited for future thank joining and I'm the us Great. confident for Okay. very Hey, you in Flex.

and for you QX. safe and forward in performance all you, As and next we you to see I again you of the delivered that look great speaking our quarter. do from guidance remain good health, Thank I everyone. wish can QX to in

Operator

Earnings Flex Fiscal Ladies the Quarter and concludes Third XXXX Conference Call. Year you gentlemen, for this Thank participating.

You may now disconnect.

Flex (FLEX) 28 Jan 212021 Q3 Earnings call transcript