FLEX - Earnings call transcript Q1 2022

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Operator

Good afternoon, and welcome to the Flex First Quarter Fiscal Year 2022 Earnings Conference Call. Today’s call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to turn the call over to Mr. David Rubin, Flex’s Vice President of Investor Relations. begin. may you Sir,

David Rubin

Financial Good earnings welcome today conference Officer, our Chief Rebecca. give Both you by today’s if presentations quarter is Flex’s section on Investor not remarks are recorded. followed fiscal being of Executive and Chief and them, Relations Advaithi; website. ’XX This available call. Q&A. brief already our Revathi Paul is morning received call webcast you, Lundstrom. to will and first 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

period. and the For please for SEC. call a section as references uncertainties, non-GAAP with on of well be today’s appendix see of presentation slides Relations our current GAAP the discussion measures the of recent filings found in website. This The as full financial our the Investor reconciliations can risks most the

common that draft The made market Securities public accordance initial We stock. quarter with to Lastly, A discussed Rule confidentially in offering timing Class last as review its conditions other under and to we with Securities Nextracker of and on US and the registration to are a announcement the its offering subject public we announced the proposed April Act. relating we Flex’s initial this XXX process. and SEC’s on submitted the statement on XX, S-X previously business with regard Form Commission Exchange

time evaluate a market we will to and remain do so. at condition We we continue the look to the committed give to transaction and right

any to time. the or at CEO, Following Revathi. like further SEC additional that, the on filing With our we turn call not answer over this Nextracker questions statements I’d make will regulations, to

Revathi Advaithi

you thank on everyone call. morning QX Good earnings David. for and our today joining you Thank us

to all for staying off Of have results. start I world colleagues course focused Flex to on again my a out and solid delivering across shout the by giving once

slide better sequentially X seasonality achieved $X.X typical we financials, XX% and of little X% a billion, over up to to review turn than up a year. let's So, our revenue year

total quarter logistics ex-Nextracker challenging and in X.X% a our operating the adjusted Our Flex to supply at Similar core related costs margin last absorption margin and operating operating environment. was came adjusted Flex X.X%. contribution margin, of includes to components

also level was FYI EPS adjusted up but of in the from $X.XX year, in $X.XX Our QX $X.XX pre-COVID of up from of last QX XXXX.

Our $XXX adjusted came very at in free flow cash strong million.

and moving a chain the to I'd the enterprise near the issue strong supply see next again the and team this slide, a well of challenge you quarter. term. across demand Global to say add and as can on extremely very remains executed remain layer Now logistics uncertainty

to provide we experience, However, through the visibility and system by and with decades the all strong, navigate is agility. chain best XX,XXX supported world supply tools course of people of which environment professionals, an army continue of almost class to and expertly

for a our customers. real Flex advantage this is Now competitive and for

quarter improvements last Our two of the with first was proof the you The my global the of Flex. in full unrivaled. results, ability quickly across XXXX is at especially look over the is to quarter organization calendar to changes course And the when have adapt years. we June made

record after two was Our X.X%, previous which two at quarters. adjusted it X.X%. and time that years, operating is Fast forward is margin

it and X.X%. at If margins was you see you'll our gross margins, look June X.X% this similar improvements. When I gross quarter our joined, quarter was

goals. very a are term executing our we on our longer at operating we're term So level. and of near well simply proud I'm better how

additional We're on customers. to We for ecosystem on of higher our key in before, expanding vehicle customers and continue pipeline to our electric testament the the more footprint is our bookings such we're sustainable the as winning partners. relationships with imaging care, areas and land, throughout deeper diabetes quality expand of shift and production medical current talked elevate a clear resilient businesses. about we've with to regionalized as our winning our businesses The all well with agile demand and this outsourcing a need new circular suppliers, cloud is of approaches, with and requirement the relationship for durable next very performance a all segments. as value for steady both and chain. ADAS and and renewables. across leading premium goods continuous supply to of The our a drivers more now the And are and for higher wave This goals

Now, turn results Paul? in more our we've call we're made that, certainly why with to then not done. good remarks. walk come I'll some the With closing progress back Paul to over you through I'll and detail

Paul Lundstrom

highest growth of Flex Revathi, everyone. points X% our margin here QX two $XXX years at was the margin operating XXX with $X.X well. in saw X. to on was operating compared we've as QX and QX than And I'm which to year-over-year sales we to Thanks, Adjusted year basis revenue seasonality. was million, quarter, comparisons, XX% X.X% income morning, material, seen year-on-year margin and Obviously I'll and better expansion. XX% but COVID ago up the good slide Okay. lapping we're the typical sequentially billion rate, was Flex. note, rate up the profit quarter,

There the through growth constant productivity profit volume, of significantly headwinds quarter. mix improvements from gains. and Our for in our came on in business some the higher drop were continued push our

shortages earnings offset in of to a were $XX net compensation up disruptions, to was XXX%, business our to another. On income quarter first did credit see the our up Adjusted tax cost quarter. adjusted those income component respectively. $X.XX. and net share COVID-XX income $XX pressure slide affect X. $XXX in and Reconciling million, and $XX million partially lower XX% an million GAAP, stock-based industry-wide on million €XXX with than net GAAP continue primarily was amortization, intangible of net We Year-on-year adjusted logistics per by and due million net

Our and calendar year-over-year, basis was X.X% adjusted a quarter SG&A June of last profit of XXX margin also spending at ago to point XXXX total sales, up in our points was than slightly X% $XXX compared what year $XXX million, year, sales. million, first adjusted down gross but quarter $XXX higher million execution saw X.X% in below full the in to up gross expansion, solid $XX adjusted from targeted pre-COVID but at we with range a million of of year-on-year came

income and in we seeing I I'll op Flex XXXX. year-on-year was June X.X% led to normalization, revenue shutdowns. this to within These growing better logistics three a the saw up the slide chronic X% say last than and better and continued both million with credit against up up space, it double said rate. XX% in chain easier the and the recovery year Flex strong Solutions solid headwinds. quarter it offset the year in Reliability care to in with comp X, returns industry's strength $X.X with for On year-on-year last and aided Health again industry billion quarter revenue of was top by in performance business component quarter, pre-COVID execution saw from year-on-year, strong a the year-on-year. revenue cost procedures quarter, organization what the units supply operating challenging expected of were year-over-year levels. XXX% are we global in continued the adjusted care solid that double for Automotive very digit execution the reliability was reliability as results course, were in environment. quarter, for of and ago, elective coupled the quarter, agility to up a strength all than calendar QX $XXX line improving critical shortages of both margin So we despite

We continue Health longer outlook the to space. lends to Solutions win strong in and term our confidence that in

industrial for prior year-on-year, a significantly Flex in led renewables. and two-year grew Industrial the without with up Lastly, both up by to Nextracker. continues but year, as compared XX% the be well strength spot Industrial period bright to core for and

million Looking the points current margin but operating higher environment. generated by basis year-on-year costs rate. created adjusted and improved Margins at XX $XXX adjusted due by X.X% supply and by a tempered profits, the logistics inefficiencies op were reliability of profit -- to business chain create inefficiency

As you with see in quarter in cost the as footnote, temporary. Nextracker margins view the were down we headwinds logistics

Agility, current up presence. remained proposition, as driven networks customer strong to Moving up in year-over-year. to learn and had CEC through strong was XG centers and from workloads $X.X billion customers with to as changing to data the XX% cloud rollouts our by COVID recall year their Within new infrastructure increase last flat year-over and home. strengthened year XX% but as and was year-on-year adapt revenue created Agility, segment quickly manufacturing regional ramps, of by broaden value Lifestyle an well looking work expansions, was

benefited continued XX%, year-over-year. Consumer in X-X% Lastly, that's from markets, and and consumer recovery Devices spending developing grew

COVID $XXX X% the the recovery. This rate adjusted a operating a generated Agility for is operating profitability, to beyond and segment Turning adjusted of million well margin third profit quarter. consecutive

historically pre-COVID Agility Looking our rates at business to to operated handle. levels, margin back with

new to as driven for severely me, COVID, flow substantially was that say, expansion cylinders. well business million and shutdowns compared adjusted our winds continued nice firing as continued production. margins, year-on-year On operating global Agility margin prior renewals was to Last and free accretive would slide by model. see the cost push on is the X, of $XXX from I quarter, very year, discipline in a Agility by year, automotive Agility cash up affected which margin all for excuse in -- So was traction the management business. that expansion Agility the

with X.X up in X.X year the We $X.X free be on ahead with last line billion, cash inventory of in with QX inventory pressure a resulting of quarter, full basis flow closed expect down still but $X Looking to XXXX, from XXXX, adjusted ago. some a turns roughly albeit turns from to we X.X in year QX.

in supply we do we it pressure, expect in We capital as component continued see to shortages manageable continue through and although the QX. move chain QX, working was

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

last of to responsibly and As investing a strategic committed expectation XXXX we CapEx quarter X% I mentioned remain of for sales reasonable roughly growth. in is

repurchases X was quarter, on amounted million, repurchase on share our shares. XXX which in buyback, to Lastly stepped million the we share up spending program

XX, of and If That but our Revathi upbeat as we said, headwind underlying remain strong. year. you could demand remain to a headwinds, on you'll to logistics waves in QX, and signals shortages side as component of is there, as COVID-XX minutes, couple persistent all slide expect in we're from of hear the and the demand turn a well

we to single-digits high segment our reliability QX, year-on-year. to solutions Looking low ahead expect grow to

be will likely As earlier, I but the base. supply side the a constraints mentioned bit demand by tempered strong, is in

be year-over-year, We high mid automotive component to production OEM revenue expect up shortages to disruptions. single-digit and teens despite continuing

solutions Looking peak back our quarter from QX like products to year. care health last demand critical with strong ventilators. for was

Moving fully to gaming significant our of continue we saw last strong into consequently and we in mid this we're QX areas. year, come. see year-over-year, normalization we expect single-digits a our and renewables, continue Please to to seeing for of we're of up year-on-year. high years pipeline, remember, In other strong very be kiosks bump related seeing should in to revenue demand the single-digits in decline mid number now to critical Industrial normalization to QX growth teens metering year, period. care, mid expect on robust business a in the product and as COVID Based

Looking year-over-year CEC. should XX% multiple platforms continued half should the to strong should CEC to Long-term XX% and solid similar up be continued Lifestyle Agility low with but high Consumer is with to to in that year-over-year flat demand new growth wins. QX but clear be -- in revenue is over single-digits, continued to expected business devices Solutions in with year-over-year. liability year-over-year. pressure single-digits from be across quarter, flat expected the build. with growth low up grow at Agility. second to QX

with X.X Slide roughly billion be Flex revenue of XXX X.X and to the billion, XX to expect should million adjusted million. XX XXX to to operating Overall, in income between Turning other million. we QX Interest range be

end higher We expect to at our guidance XX% rate range. our in quarter XX% the tax the to remain of

on EPS share, million. the adjusted $X.XX to based outstanding expect XXX shares $X.XX be average We per to range of of weighted in

guidance EPS compensation expense stock-based excludes impact amortization. adjusted of intangible net Our and the

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

Revathi Advaithi

Thank you, Paul.

fiscal prudently Now Slide wanted to outlook as Last turning XXXX. as give you for we our visibility XX. we much could to quarter and provide

As we'll some the overcome, be and soon Paul there are worst of important said, it's to all remember hopefully to it. through still that challenges but uncertainties

our revenue the billion to up to range guidance we're based $X.XX range our X.X% profit X.X%, full operating increasing situation, EPS current range XX.X and to XX.X on $X.XX. Now our to to year billion, to

colleagues on work. behalf thank entire team, my the commitment for of hard Now, their want to and leadership their I

course, for to I'd trust for like Of call and the start customers our the With and shareholders Q&A. the your that support. over partnership and suppliers to turn our

Operator

first [Operator Instructions] question of Sheerin And your from with line comes the Stifel. Matt

Matt Sheerin

as thank your you. I of quarter, some Are sequentially, margin some which in talked pressure the down Yes, implied the you maybe utilization side? costs, and on but as ask price seeing it wanted well with the September certainly that is still Good that reasons about to levels fixed up healthcare both for morning. about you is the lower guidance year-over-year. businesses

Paul Lundstrom

Yeah build. bit is, it ship, to mentioned, about from little just of set a there QX talked I as at what is to down components you QX, margins our we We like we know, you're remarks of QX, in guidance say prepared can We're so that I'll you're absolutely into right, because spot pressure certainly some CEC three said, on here move available from the pressure bit can the guess the in that sequentially. side we businesses. as would is, demand X.X% Matt, in be get doing there. a about in for I you midpoint everything both clear

the as little on side, namely – there pressure guidance. shortages of automotive agility the again, component of the clear and is a one in on business know, but a business. is the whole build does to then we with our that and in create the little you that's bit And CEC side, reliability and industry a inefficiency have that the So struggling bit in midpoint

good think point to we to continues good that's owners for at mentioned, think last very – several and year-on-year X.X. be I – if I to that's pretty and, as you a particularly important that still And outstanding Flex it'll pretty nail think I very performance compared years, be and can our up performance important, here,

Revathi Advaithi

through upbeat QX you. And, very flag we're Matt, previously they've we've us chain the terms and margin logistics, always being I'll year positive would you And we're be company remind tricky still I guidance. just midpoint, managed how looks you from of at looks that the we're how about as QX supply and the prudent But for highest somewhat operating for how that seeing. terms can in We're given and at we will what QX also. be bullish of managed record think guide very in have the very and see we our that's how

Matt Sheerin

in it. things, be your with that customers, it or going but just forward compensated, in Got about I you're issues still also also there quarter-on-quarter. of terms to just What's Thank And capital the getting supply deposits you. the ask whether relative you're other so wanted It that was working meeting up goals. with seeing. strategy inventories, working

Paul Lundstrom

Yes.

Sorry.

Revathi Advaithi

that. one Matt, absolutely flow our I'll is we're cash so is, saying, just strong. That's you why start by doing see

We compensated we'll that. in that inventory are do we're getting to for and the putting system continue

that's open very have an are chain coordination on. teams. discipline commercial going wide supply amazing between We industry our to teams very, our and And it's right; extreme customers this about this, constraint

room more to quarters. things in there to improve So stable our a little to what we're the inventory, in future advances that seeing translating as seeing terms also in these think no get bit But customers. we continue issues we're of getting from inventory, is

to try supply but down, the So our is chain. us, inventory get for across just not still goal to

Matt Sheerin

much. very Thanks

Operator

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

Ruplu Bhattacharya

Hi. questions. you have both Thank I for on questions, taking two my margins.

costs mentioned I cost First one, think bottom challenges margins? way we logistics that that XX, impacted you how the high. to Because, slide freight that remain of you higher much seeing you're impact should things a that on I that to you hearing, is are And what What you mean, freight Nextracker, the in some expect were there quantify on was gives from QX. mentioned Nextracker confidence?

just on your if can -- logistics just costs. give on So you more thoughts color us

Revathi Advaithi

Ruplu. to absolutely, this. Yes, Happy through go

tell than company of that, industry. Flex, the in the how I'll hedging of is, chain to part really on the very and terms having as Nextracker, you right matured also First supply kind different is of has but of they pass the customers rest practices, costs

judgment we world-class as significant and the Nextracker of inflation, company can cloud commodities managing is contract pretty seamless that through most you as the let wouldn't I’d a passed how through has pass it been. and environment as given already through how runs I the chain see, say, operates has that. offset, because and really of supply and they're how manage So commodity inflation talked And they commodity been about, incredible, quite and operates. that's

just On logistics, the price. lap a the bit priced contracts. that the the contracts renegotiating increases, very run why soon we managing quite that customers is, we're existing we overcoming with the very And even has side freight then new terms way, of in to because are of it reason of into comfortable through by existing in with it's contracts, and

very the a issue That's why being through So costs even inflated, logistics of and lap the very temporary, in quickly if that we how next the the will that flush remain this comfortable through we're thing, as temporary contracts, short term that we see we'll very quarters pass couple is system. and

Ruplu Bhattacharya

on Revathi, that the sense. ask my then maybe different a I'll all details for thanks you it. makes follow-up. Got Maybe, Yes, as that, question

cycle Thank life look in at your acquisitions longer looking this the what markets are it and make you on what and growth, focused are you expanding. you and just be if on inorganic cycle, and does looking at thinking strategies for markets. to thoughts you are the growth would end your you. point sense outlined At You've about

Revathi Advaithi

terms rates say, in Yes really of first the our the side deliver make Ruplu I Every we always see, quality to I've in think I the the pipeline well growing we're whether and every and the going through of is company ever, bottom that our sure in ours hitting organic want business only kind and including core you consistent that all thing it's that, we're business and right. the strong, the its well most said say you I'd is have right? line important own, on to done but and doing every bookings as I bookings would and growth of of our are is not seeing, for segments segment terms is organically, be the – cylinders, see can coming best can top on that's really for line we what of are

segments I organically, room feel the and business value, also big. growth segments in doing So so there's the for much on And is are feel drive we extremely there's like just I continue that us but right. to participate room grow organically strategy deliver you that we're that well our to seeing focus to is and so where continued N tremendous because case, a the

doing on really lifestyle see the delivering because is that growth. in which right really well it's You segments and which can well, focusing segment, doing is our agility,

our to quarter. our to and that's doing is right pipeline a come perspective, a creative around which levels XX%, If expecting even ROIC you and levels, we from we're in, this growth margin to look bookings at overall now right, the how are

invest been cash well. is So segments would we the say organically to that company and in. really I our best and really That has we said, all being want win this ever position in organically to want

supply in, whether more think our do right do buyback terms we focus I'd do everywhere, valuable our is terms cash strong we balance trading need right have terms that know, fantastic we And, to And, we now, and that low that's buybacks with think of so invest acquisitions. really very chain of tremendous on optionality bookings. of right we how that. So that. our our is our invest say in right. undervalued continue stock in in it's strategy. we at in organic we'll do our to making very because optionality company, that, we focus incredible we strong, even our all of continue room constraints technologies flow pipeline, on this you invest more to we things is really between stock how – that have capital buybacks now in we and to our manage because to is to a sure The Organically on like fantastic, tremendous we in, we'll use growth stock or great We is want And if news invest will. growing and so

news have Ruplu, we everywhere. So I think the options good

Ruplu Bhattacharya

Okay, and execution thanks strong the for on details congrats quarter. the all in the

Paul Lundstrom

Thanks, Ruplu.

Operator

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

Mark Delaney

taking Thanks hoping was the over very despite margins, the particular I intermediate very and question. to for a and around challenges think mean, that's buys. temporary to through I high, out you of these record in much start is logistics margins of and component pointed sustainability Agility as some the margins longer good on term

through your forward margin of is the utilization temporarily of mix, are and we're some and of its thinking sustainable term how of the perhaps cyclical business? offsets that any takes asset So are some structural need more there to this that around is I but potential talk that? structuring potential mindful in anything think maybe as we or are perhaps the that we be that be operations, the parts like longer of new more to the of to puts we that are need could company terms mindful are and going running that about homeowners that

Revathi Advaithi

is somebody it the mean No QX, previous right. at right, asked, you our one look saying, by start guidance, that question Mark from margin if I'll for

right, chasing, chain that asked Matt that, think we’ve expediting inefficiencies particularly into for and I terms current of built situation, issues. there's in supply our

X.X%, continue to how full-year look from right, improve year you to see a the going now to through. our going pretty So, that's guide, guidance terms away at midpoint a come margins, and we in we're significant at obviously, are at of right if history for those see there provide go we the say terms can chain we these from we’re thoughtful today, supply quite how of think perspective, that a margin about is our these of are from gets you as how perspective guidance, a think things I'd And in inefficiencies better. we first

if I'd our a we that and upside factory. do So really productivity than efficiency about to productivity like and say there's else. more business way across be on I'd and And I terms -- I continue room better better. using if class Flex in good things manufacturing anything, journey system in will there to at we're that be and importantly, will our continue to and of and we're of long-term Flex that that and that. more is anything how But company, expect is, lean anything this getting more think think the terms kind look of just started at efficiencies we're world

you very of kind than in mix growth, focused room, I if making our on through, mix the at growth of efficiency, more we're So our margin, driving right, But even sure footprint that our the the managing better. is pipeline. if there's growth, will anything better right of through I'd and that say flowing what's look and and just say, productivity be would our all terms more

have has be we years about has gross margin from only journey say what terms that, started, anything I'd better X.X% from just see where I'd thinking can operating here, to focus I and from if say ago it's, at to So X.X% say, still is, our goes in you point get Mark to margin. that of like have right I'd we that nothing said it here I were, couple have you down to on to

say to to I'd to So this. the continue tremendous room upside drive

Mark Delaney

when you you Any Thanks. helpful. year. the more I share component next supply into and the my differences alleviated, to see of semiconductor half details shortages when need? for able what supply Flex’s perhaps environment improving you that year to other expectations constrained was some very begin and Thanks. and hopefully can in the of, are and hoping supply second are markets the back end how question, on this markets on some most are calendar details could any component get of be could provide about And That's to they which terms currently these various

Revathi Advaithi

Yeah.

haven't the we're this before say read that, heard all a there's and other from seen of I'd going that to quarter you us, earnings Mark, got quarters think ago had calls I couple I'm and forms thought QX nothing of predicted our start that done their chip the we test right? that you particular would had companies in, So the and be just challenging is add we most that what terms probably of particularly on entering which would in intelligence based how of had lead-times assembly in we coming heard from and capacity capacity. we

coming a we challenged test quarter ago of that recovery us be of to future think the in see called that to we time you and this should some quarters. most I'd some So, will say long the say the starts in as kind had start capacity

say we segment. is, see every hearing kind I'll is board. are of this across issue the You One across that

some And say overall, chain is supply the to some volume out. the have a companies markets. scale of chip and see quarter probably and and be moves of of it the will through medical end quarter are of volumes this much that's in terms say longer how that's of have I'd like is kind thinking and level where right, compared bottoming this auto, of segments lower stabilize there'll of next I kind and right tech next right, will year. and better year? gets kind and Some I'd where end we because because tail, forward industrial comments, CC think Paul But quicker, industrial, say. their and start we're we to But those in I'd one pointed pushes his and the kind associated through out it markets continue tech had with but pulls as of those see we constraints moving think this more then

think through we'll to have work I that. just

Mark Delaney

Thank you.

Operator

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

Shannon Cross

you. much. exiting I or was and with as then how talk as in hoping bit you just looking general, a theory a they're Thank out COVID conversations customers China your you other very with of regard moving we're follow-up. have could they're been how outsourcing? geographies about in Thank And thinking at how going, about to

Revathi Advaithi

you Asia bookings our through. And of is the around Thanks think America. right? resilient, Shannon. pipeline our say around and focused that's making make with whether to you more the more can driving some conversations what I'd pretty driving pandemic are And any today come that part is pipeline we've thinking seen more be the and customers about end that say customer. do it's very Europe, at already supply to ever supply But look or the And before. actions that our what drives our regionalization, customers whether are of on translated end now are focus on the their trade the already decision that than of if our I'd could what's they conversations regionalization chain seeing world, significant. different North chain Shannon bringing to drive customer issues closer those we're

which amount tremendous supply we're world product chain We I'd that by these some the is going that seeing. of say on, across trends are driven launches have resiliency of

the our on of tremendous level be pipeline really conversation a with I'd the program right now the and focus bookings are say customers actions driving amount into from across gone has record at is our organization. actions So, our going this and params to

conversation one So, across sectors. not I'd to -- on. all and is couldn't sector that I going say that is where point

Shannon Cross

to working bit you. maybe a know quite anything components? you. I the doing there it Thank about to and need more was about anything reversion quarter. a strong you you're getting the On we this within could mean some or capital. that driving Is Paul various is And historical basis, that thank mentioned prepayments Okay, then there anything talk And worry else this? is you

Paul Lundstrom

Yeah.

move to the cap QX, we'll upside, even half bit compliments the programs of essentially to to That flow free have the for as good receipts our million, that which were hanging for are bit to was the some anything QX, I year. QX drive last quarter, of our little pay we in XXX flow, within you rolling flow inventory cash management in good little Lot focus on free that. think have back don't on cash And perhaps the guidance in probably pressure with go that Pretty on as strong came in capital at working line we said, the there's and over. So very working performance. incentive designed capital bills into appreciate and because you flow of of has pressure the And surprised think persist performance, pleased I a full with QX, a cash will the in kind as into quite performance, year, cash working inventory QX. business, with quarter.

bit, would little I no a QX. say, pressure change overall, there, perhaps, a So in of bit

Shannon Cross

Great, thank you.

Operator

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

Steven Fox

make to around want some just I the math all, of of supply understand first questions, the Couple assumptions. sure, I morning. chain Good Hi.

So limiting And all are other that are should $XX at I follow-up. your sales flat is is or And quarter-over-quarter, it then, to ability to down million, million, related is the and $XX roughly customer speaking, consider. forecasts? mid-point there we to upside supply had your profits stuff a if chain

Paul Lundstrom

around Steven say chain. supply one I'd is, it's all

whether components, the find to assembly. can say at customers kind all components suppliers is limit doesn't we And other think final I that's I of other ability terms This I can brainier. question giving of demand whether all, their in know suppliers to no our just find with -- a upside, supplier their think come I not you right. find a can of think would but

and will around chain, say, manage we So all of how kind of all the that clear I'd that and kind say. supply I'd drive upside,

Revathi Advaithi

Yeah. And I add. just

year-on-year, I despite at challenges as the up that midpoint minutes the but we're of ago best and op think chain. mentioned That points, X.X% the couple Revathi seen seeing guide the XX in margin was QX we've be the even basis in would supply a well, and QX

the So operating really performance it good still is but team. pressure, by strict

Paul Lundstrom

else do. mean, would what rely us, doing the and based last on things they incredible, right. can And nobody look I the that is chain in that, our sourcing you Steve terms if say can quarter finding dual and do customers team supply that, things do like can the I just things of on components our they

we've And, solid few but, through QX just So, quarters. job I'm comfortable plan, pretty the that for a very know, managing an that. amazing game got next not you we'll do all through of

Steven Fox

Great.

now. second got question. I it a think as I then And

means new to color don't know cetera? around programs. anything on assume engineering having recent like the But what for, on kind you the name win what healthcare your, can want you the winning programs that. us or that exactly to of what mentioned I success how you et or customers Thanks. kinds during front give You sense you're in the of I you are quarter? you a mean continue quarter that side Any

Revathi Advaithi

a terms kind that credibility year of able we with already with such in we've from big And terms and there for fill also bookings Yeah. driving we're the really significant incredible right what hearing Because our the as know area even an hey, I'd tremendously capacity pipeline your started. and was we're player in of a around way industry short design say, we're in ramping medical increase was commercial care of delivered what of knew to a we're time and to such this to going own capability, focus solutions what, up. COVID that, you health just last in COVID in customers you and been in and that of devices. as our kind Solutions be us something terms that's up do customers to of we capability terms grow anything for business changed consistently Health seeing,

critical we're Everything the that diabetes wins area. today. in seeing one with kind run in it in we've They suppliers talked in that in our So imaging. around care, of care, programs were is continuously sector. in several space largest that We're of every seeing we're like we've seeing about

was of programs four those large them right now. picked our key our winning, were all around. in most very, very all So up even And areas of around are ramping Health actually focused Solutions and

all ramping up Health in these how cylinders, Solutions all of bookings are in segment and the we picking of programs. So then the pipeline, terms terms really

Steven Fox

Great, that's you. really helpful. Thank

Revathi Advaithi

Steve. Thanks

Operator

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

Adam Tindle

you. pushed to time look as now, ever, ask it's When metrics, while lows, can your What lastly, more should gross restructuring is Thank efficient, efficient, first, the look that opportunity to structure think this I your you GP more more target basis look you structure? does to the I talked at right you so SG&A an get healthy. and operational model being I ultimate at Okay. expect And revenue about is on like? to OpEx growth opportunity. Revathi, than wanted operating all and the get I is your more range margin specifically, how the what pursue do we is below

Revathi Advaithi

our that in margin with Yes, right sure is gross improving Adam, of gross making mix reminding the in XXX right done driving right I’ll couple factories. in by and margin is start driving like that has grown first productivity that job an you but we've last the so kind years, efficiency thing incredible points, basis of our the also the terms of

course job went the productivity but like little there where the improvements optimization. see efficiency in want but margin, For do too. continue efficiency, productivity business don't across these is our because where our efficiency, our if portfolio is driving see But of an gross continue be kind office the puts OpEx potential would any be drive and drive We right, a through in We last think we'll forward. of to we we say our to whether when cycle, adjusted that's changed is should business yours OpEx period gross efficiency, back mix that and revenue cycle all business of of and we because we'll think correction I major to to footprint continue we it'll there's bit through our we couple things or we me tremendous restructuring. think margin that's moving improvements of OpEx our incredible through any efficiency through in takes, through, managed through our

Adam Tindle

which click double I margin, ramp about Okay. looks guidance, Paul. back margin the implied And half. to the maybe Just revenue the just is low wanted It's as healthy. it the follow-up compare of the profit first and in back half a really operating a back contribution on if I in for that's like versus envelope, half double-digit

half little be in the with really level that of year QX should help that sound auto since back us a contribution maybe you QX, of drive Thank talked tailwinds ramp confident. a of headwind think I bit about an you. coming that's that of key this guys in the the and buckets you

Paul Lundstrom

Yes, that. happy do to

just it the our back I start timeframe full – include were worst year just challenge and it out, We facilities the back the and chain think, March to is headwinds is it's and our supply I and as half improves within Revathi thinking April – that gradually that maybe does in within – go timeframe, stops chain environment of the April, QX, as this terms had confident challenges, its So with stops leads QX supply starts move that we create in pointed and probably and and into trough, guidance. probably would and we about feel in QX, cost at as our to inefficiencies.

– less I am that QX as of back through and That move the we confident have with, given But improve to are be right coupled – improve expected dropping be start as of that rate QX have to the We all of would think as I didn't supply over this guess starting that, I would little half. middle tough, we'll we in, we that be year. the full QX. QX I'll consistent changed. QX sort moved expectation, that figured program worse things chain a and into would there slowly that be we would inefficiency. ramps moving – QX we'll to be X.X% hasn't bit challenges and wouldn't place be gradually – for things be would but we new in in And If for we'll as and say QX that the view fortunately, I what is, was margin think the I X.X%

Adam Tindle

Okay.

Just quick… a

Revathi Advaithi

we've And that to in new we've because chain for be guidance we've that's help stronger to some got more we're then had in work winds point of the out business we'll confident said supply that Adam see have quite some return half. we'll components We're of that, – mix, – that, I'd us is thing we've next it'll coming going availability up help CC auto being to we is see going be got our tremendous year – going behind to again. wins I'll in – better fiscal of also we're also a our is a in just But, that whole we're strong, half, the second pretty record our midpoint putting good – we issues but cycle. say, terms also that year are, but us, second

Adam Tindle

still waiting Right. quick on waiting next that And on SEC conditions, clarification on review now the tracker review? just is you're you are Thanks. a complete process and market SEC

Paul Lundstrom

process we're the process we're on comment with the the can't in – really We than Yeah. SEC. other

we'll So, when – that when – you'll changes know. situation

Operator

Paul from JPMorgan. line with Okay. [Operator question of Chung comes Your the next Instructions]

Paul Chung

hearing you the of Not side, costs, we're lot so shortages higher on really hurting on of pressure. freight customer know, kind diversification. surprising have those and a and limited Hi. taking for OEMs of Thanks my product questions, kind

accelerating any see, a to looking lot do of given and the helpful. pricing and up. starting I'll customer get some, follow and, could you logistics that there would the if you offload are urgency, power you manufacturing So interests examples to be have

Revathi Advaithi

their Yeah, Paul. conversations about and, on I'd chain. be definitely customers customer we're hearing how they thinking what should more say from supply

whether associated or them it, of It's be the outdated second whether freight that with for terms that it. with needs how associated associated with risks is to or the help coming itself it's across In sourced. they logistics, and in do components board, us through plan it's tooling, about think having and

it inventory product it not if point new it's a In that and just right, that about and a a and different because components it conversation, to tooling outdated having be view. of right. sources focused tech conversations, design could could is because be world, developing one – these their available an conversation, on of source and it's All auto, the new second whole to closer outdated probably needs needs

for want every customer bit solution quite to us, know question are exists is our help to single us. think customers that Paul very them that customer for power can you a all because they this you be supply would see a absolutely clear, And value design don't conversation the So And pricing and of and making again. each experience with it's right we're finding expertise business having and these. sure they I say issues I in the that, chain the from situation base

and redesign suppliers like help provide a worth using right Flex make them to that the that again. them sure So lot situation this in nobody solution they to is because wants be

segment they’re are can And of of examples not when lifestyle our price where bring the you say, give, So then from where in very, closer to be then availability willing very point customers terms fixed offset, important in customer and able are that the our make very I'd as clear right, yes in I to pay product being that consumer only, product is – absolutely. happen, know, I'd examples, views also to the them. to full in driven, lifecycle to very them you which say, but the is to the they returns give

to I and we're Europe to segment located that let that is for the can in for example how point or in full in me? seeing Asia to to I So and it's across to in almost hey the this customers a board. North but say, So, that be lifecycle Flex really lifecycle do or America, drive Paul, an on you solution give I segment them of full super could views important closer want solution, every want

Paul Chung

mentioned very free cash its with helpful. up kind you in Thanks, would be ’XX. follow fiscal free Great. And of on a year line I cash just flow. mean, then

expecting be and and be could cash guidance you you higher, be free would expected as Thank QX higher cap to no flow and your you. helpful are I as whatnot mentioned cap well? revenues of backs to your headwinds kind and If Now weren't some working know on conversion you margins expand there? well?

Paul Lundstrom

problem. Yep, no

cash free I way particular as a is mentioned, think, by about as line if the -- fluid shortages a that of move free But the continues last good for the chain bit back of And flow year QX. in pressure very to What is the say year with free we environment have flow situation. a would update certainly guidance. year a flow I us. cash the which that, outlook little it improves cash supply So, we be this through will and in component we'll was generation half in with I

in I think at prudent point this at time. guidance is this

good of us In you invest I strategic placeholder I'd in sales and CapEx don't about to any for growth guys probably CapEx, prudently business a terms and think it in allows X% for the to mentioned us before way. constrains is

Paul Chung

it. Appreciate Great. Thanks.

Operator

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

Jim Suva

that in around resins, those entire subside steel, or plastics Thank familiar shipping you. in quarters. about there's subside the China airplanes freight specifically have recently expect next Revathi are we're costs the you and you and about or or some Asia of rallied think about to more you talking it you transitory kind going and from the component of talking of freight that are all are also the copper, world, expediting or ones containers be the Paul, you or those cost, like couple mentioned also very aluminum And the about to and shortages semiconductors. costs, costs whether

Revathi Advaithi

is are the say And the of going in increases price through in to you a passing the those of would Jim and component would time. semiconductor itself terms space stick know, commodity say that for pass-through, I to. that, period we're what I -- component are So side those being the

another as Jim goes it you very know through this well. cycle So

terms In is biggest pass-through rallying, are use that in business. of basically our particularly We tracker but our contract. they steel, our commodities of ability, through our yes, like that next like-for-like

negotiations. through terms that right don't because that customer we that. headwind So I would carry of of in process same say, it'll recovers, any go And if

is an place quarters would the through next couple business tracker takes where the contract headwinds. and only it only the say I to probably that So freight in work also

markets. I'm if easily I'd quickly all so I can they're through think end that in terms forward but and is that's stays call say sure we how we're today, And pricing, these sticking. passing across look say you and about, what as that not I of segments Jim, inflation I pricing that, very all all long said can happens as in can

Jim Suva

for Great. Thank so much greatly appreciated. the details you and It's clarifications.

Paul Lundstrom

Thanks, Jim.

Operator

And with Christian your Capital. next question comes from Schwab Craig-Hallum

Christian Schwab

Guys, congratulations on another great quarter.

challenging a out Regarding and quarters the your a different chain over highlighted supply partner, environment many ability guys’ of examples to that. few trusted to last very you prove in be,

in As as you given we a to partnership as get kind to we this that with fiscal outgrow you'll look that, you're kind as of customers example top-line. think, mid-term, your -- the do of, positioned year, be to guys industry beyond essence that the far mid-term, of

Revathi Advaithi

if right? right strong mean I even of that, the question industry no the kind quarter Yes, focus this in say see on think, bookings. to I'd is rest our compared pipeline you very, I you about say with bookings fantastic, have would our say, absolutely been very even there's I'd our no our overall as even rate the that can doubts very of is growth about strong. I midterm. have correct, the right

to that terms partner a the I'm that for our to very in feel strong. trusted extremely in sub we And us being end is are comfortable our and to very because grow to say very, grow able we about grow really customers know coming in So our bullish segments of would ability they are good want mid-term markets, them. execute I with well, them grow, it. in we

right growth I where our say looks forward. would So very now, no question focus about moving from we are that. bullish

Christian Schwab

No Fantastic. Thanks. questions. other

Paul Lundstrom

Thanks, Christian.

Operator

any comments? Do no are closing questions there time. And further this at have you

Revathi Advaithi

just joining No, and, everyone healthy. Thank and safe I'll you. be thanks for say

Operator

Thank you call. concludes for This conference today's participating.

You may bye. now disconnect. Good

Flex (FLEX) 29 Jul 212022 Q1 Earnings call transcript