Q1 2024 Flex Ltd Earnings Call
Good afternoon, and thank you for attending by.
Welcome to <unk> first quarter fiscal 2024 earnings conference call.
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Rodriguez Peterson's remarks, there will be a question and answer session if.
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I'll now turn the call over to Mr. David <unk> you may begin.
Thank you Jenny good afternoon, and welcome to <unk> first quarter fiscal 2024 earnings Conference call with me today is our Chief Executive Officer Ray with the advice and our Chief Financial Officer, Paul Lundstrom, Both will give brief remarks, followed by Q&A slides for today's call as well as a copy of the earnings press release and summary.
Financials are available on the Investor Relations section at Flex Dot com.
This call is being recorded and will be available for replay on our corporate website. As a reminder, today's call contains forward looking statements, which are based on our current expectations and assumptions. These statements involve risks and uncertainties that could cause our actual results to differ materially.
A full discussion of these risks and uncertainties. Please see the cautionary statements in our presentation and press release or in the risk factors section in our most recent filings with the SEC that this information is subject to change and we undertake no obligation to update update these forward looking statements.
Lastly, please note unless otherwise stated all results provided will be non-GAAP measures and all growth metrics will be on a year over year basis. The full non-GAAP to GAAP reconciliations can be found in the appendix slide of today's presentation as well as a summary financials posted again on our Investor Relations website.
Now I'd like to turn the call over to our CEO revenue. Thank you David Good afternoon, and thank you for joining us today as we move into our new fiscal year, we continue to make progress in our long term strategy and deliver consistent results starting with our fiscal Q1 results on slide four.
Overall it was another solid quarter revenue came in at $7 3 billion, which is flat with last year's exceptionally strong Q1, adjusted operating margin came in at five 1% and we delivered 57 of adjusted EPS.
On July 3rd we completed a follow on offering for next tracker, we still own about 51% of the company, but this marks yet another significant step forward now turning to slide five.
Now looking at core flex fundamentals, we continue to navigate the dynamic macro environment with trends in the current quarter relatively in line with our expectations consumer facing markets remained soft from several factors, including higher interest rates and lingering post COVID-19 spending normalization in a few areas.
As we indicated last quarter, we also experienced some slowing in enterprise.
But so far it is performing to our prior expectations and we continue to monitor demand indicators.
On the other hand, we also faced a difficult comp this year in CEC. After a good 30% last year. However.
However, we continue to see strength in most of our secular driven markets and Thats one of the benefits of having a well diversified portfolio.
There's a lot of hype around AI right now maybe I can help separate a little fact from fiction at least for what it means to US we all know that the compute and power requirements of generative AI are highly intensive. This has led to changing technical requirements in the data center from a manufacturing perspective, these changing needs are creating new opportunities.
I should say however, this has been the trend for a little while now and it is already driving some of our business.
In the CEC, we've talked about share gains driven by our bespoke cloud offering based on our unique design vertically integrated manufacturing and value added fulfillment solutions.
That is what help drive triple digit growth in our cloud business last year.
Same capabilities have led to additional wins, including one ramping in the back half of this year.
With our expertise in power, we have developed a new power module solution, which for example is suited to the needs of the more intensive GPU based computing and we're seeing strong customer adoption here.
And of course changes in the cloud core design changes to critical power configurations, and Thats whats driving additional conversions.
It's safe to say cloud technical needs will change as applications evolve over time, we have a highly adaptable platform operating at scale. So we continue to be well positioned to capture these opportunities.
Now switching gears, a little bit health care trends remain intact elective procedure demand is strong in hospital Capex. This study we're experiencing some slowing in medical equipment related to life Sciences, but this appears largely a result of normalization after an extended period of exceptionally strong demand for testing <unk>.
From the pandemic.
Now looking at the automotive space, our EV and Adas customer demand remains strong technology transitions are driven by important long term trends and we have built a business based on customer and geographic diversity.
As our automotive business makes its way towards 4 billion in revenue they were adding about value on multiple levels to drive deeper and higher valued engagement.
Our nextgen mobility bookings continue to grow.
That's building on our momentum from record bookings from the last fiscal year.
All of this comes from our proven design and engineering capabilities, our multi disciplined technology expertise and decades of experience at experience with the unique demands of the automotive industry.
Now another important secular trend from which we're all benefiting as the global renewable energy transition. We're currently ramping both micro inverter and EV fast charging to production in the U S. And these are just two examples of how well we're positioned to help enable the global shift to renewable energy.
Last year, our renewables related hardware revenue was just over $1 2 billion within our $6 5 billion industrial business unit.
We expect renewables to grow again, this year with improving long term prospects as the rules and benefits of diarrhea finalized and fully understood.
Again, having a diversified portfolio from a product customer and geographic perspective is an important attribute to managing through the cycles and delivering consistent results over time.
We continue to believe the fundamentals of outsourced manufacturing are strong and we remain very optimistic about our future.
Our focus on providing a wide range of manufacturing capabilities and services, where our customers need them across the globe is our competitive advantage.
By leveraging our core capabilities and capitalizing on the long term secular growth drivers, we will continue to drive value creation in the years to come.
With that I'll turn it over to Paul to take you through our financials.
Thank you everybody I'll.
I'll begin with our first quarter performance on slide seven.
First quarter revenue was $7 3 billion flat year over year against a difficult comp and with some macro related slowing rep.
Revenue was down 2% sequentially, which is in line with typical seasonality.
Gross profit totaled $614 million and gross margin came in at eight 4%.
Operating profit was $377 million with operating margins at five 1%, improving 60 basis points year over year.
Earnings per share came in at 57 cents for the quarter that was up 6% and includes six cents of headwinds from next tracker Noncontrolling interest.
Turning to our first quarter segment results on the next slide reliability revenue increased 11% to $3 3 billion. The gross the growth was driven by continued momentum with a strong secular trends such as Nextgen mobility.
Renewables and cloud critical power.
Operating income was $165 million up 12% and operating margin for this segment improved sequentially to 5% as production volumes increased on ramping programs and as we navigated labor inflation and lingering semiconductor disruptions.
And agility revenue was $3 6 billion down 10% as expected due to a combination of tough comps continued weakness in consumer end markets and some softness in parts of enterprise I T.
Operating income was $146 million down, 14%, but focused execution and strong cost management helped maintain operating margins at four 1%.
Finally next tracker revenue came in at $480 million up 21% year over year.
Operating income at next tracker was $82 million more than double what it was last year delivering a solid 17.2% operating margin.
Moving to cash flow on slide nine inventory improvements continued into Q1 with total net inventory decreasing slightly in the quarter. We're seeing signs of recovery. However, we continue to expect inventory will be slow to unwind.
Q1, net capex totaled $156 million on target at 2% of revenue.
We expect similar total investment levels for the full fiscal 'twenty 'twenty four as we continue to invest in future growth as well as technologies, such as advanced automation and machine learning solutions.
These investments are important to drive continued optimization and agility with increasingly complex products and changing labor markets.
Free cash flow was an outflow of $150 million driven by the timing of our business along with reductions in working capital advances and increased investments in capex.
As previously indicated we expect cash to be back half weighted to progressively improve through FY 'twenty four and we continue to expect free cash flow to be 600 million or more.
In line with our capital allocation priorities, we bought back $197 million worth of stock in the quarter.
On that note I'll quickly remind everyone that the next track or follow on offering closed on July 3rd after our quarter end. So while we received net proceeds of $495 million. It was not included in our final cash balance for this quarter.
Although we continue to maintain a strong cash position and as I mentioned last quarter, we have no intention of carrying this level of cash indefinitely.
As we've consistently demonstrated over the last several years.
And they have we have and will continue to allocate capital in the best interest of our shareholders.
Please turn to slide 10 for our segment outlook for the fiscal second quarter.
For our liability solutions, we expect flat to up mid single digit revenue growth for this segment.
And continued growth in our end markets, albeit at a more moderate pace.
Revenue and agility is expected to be down mid single to low double digits with weakness in the consumer end markets affecting both lifestyle and consumer devices.
CEC will be impacted by comms infrastructure and enterprise I T is spending adjustments ahead of our plan to cloud ramps in the back half of the year.
So far the deceleration is consistent with our projections.
Onto slide 11 for a quarterly guidance.
We expect revenue in the range of 7.3 to $7 7 billion with adjusted operating income between 370 and $400 million into.
Interest and other is estimated to be around $52 million, we expect the tax rate to be around 13% for the quarter and all that translate to adjusted EPS between 55 and 60.
Based on approximately 453 million weighted average shares outstanding this.
This guidance includes the impact of approximately six to seven cents of Noncontrolling interest expense, resulting from the next tracker IPO.
Looking at our full year guidance on the following slide we currently expect full year full year revenue between 30, and a half and 31 and a half billion with adjusted operating margin now between five and five 2% and adjusted EPS between $2 35, and $2 55 a share.
This includes the impact of approximately 23 to 26 cents and Noncontrolling interest expense, which is up six to seven cents from our prior guidance, resulting from the next track or follow on offering and our ownership going from 61% to 51%.
Before we begin Q&A I'd like to emphasize our conviction in our strategy and our portfolio.
The world faces continued macro and geopolitical uncertainty, our well rounded and diversified portfolio and customer base significantly mitigates exposure.
The inherent strength of our business gives us confidence and we continue to see solid momentum in the underlying drivers of our business.
With that I'll turn it back to Jenny to begin Q&A.
Thank you we will now begin the question and answer portion of today's call. If you would like to ask a question. Please press star one on your phone.
Passing reminder, we ask that you. Please limit yourself to one question and one follow up question. One moment. Please for the first question.
The first question is from Mark Delaney from Goldman Sachs. Please ask your question.
Margins reached the highest level in many years at five 1% next tracker of course is an important factor in that given the strength that you reported there, but I think you also saw some sequential improvement in reliability, maybe you can help us understand a bit better how do you hear anything about margins by segment as the year progresses I think.
<unk>.
Steady at these sorts of levels implied in guidance, but any puts and takes we should be considering by segment as it relates to margins.
Yes, Mark So first I'm glad you asked the question margins were much much better sequentially and we were very happy to see that maybe just kind of take you through the different segments. So first of all next tracker as you know.
You look back a year ago Q1 margins for next tracker, where their trough margins for that year as they were still coming out of that all of that repricing of backlog and getting through the logistics and steel challenges that they had a couple of years back. So they are lapping an easy comp, but I'll also say really strong execution from the <unk> team in the quarter.
At North of 17% margins. So that was really really good to see you.
You look at the other two segments sequentially.
Agility really good.
Look volume was down a little bit, but if you look at where volume came down within agility part of that was double digit declines in the lifestyle business as I think everyone knows that tends to be the richer margin business unit within agility and so if I look at their decrementals on lower volume I think they did a fantastic.
Mystic job managing that so so thrilled to see that and then if you look at reliability. The reliability story over the last six to nine months has been.
Doing what we can to accelerate a number of very important nextgen programs, you saw 4% margins in Q3, and Q4 of last year and a huge improvement in reliability as we moved here into into Q1 on $51 million of incremental sales profit drop through at <unk>.
45%, which is very strong incremental margins.
I can't say enough about the execution of that team this quarter very happy to see it.
That's helpful context.
You're thinking about the higher level opportunities that you spoke to you mentioned some of the secular changes underway in areas such as electrification and AI.
When you look at what flex may need in order to properly address those opportunities over the next several years. How are you thinking about the company's capabilities and would you consider using some of the cash on hand for M&A and maybe acquisitions akin to what you did with <unk> and add even some product.
Type capabilities. Thanks.
Yeah Mark.
I'd say as both electrification and AI as it relates to both cloud and CEC in our power business are both important to us.
We have been investing in our electrification and our EV business in automotive for a while and you have seen the results of it in the bookings that came in last year and how we are continuing to perform but the overall growth of that business. This year. So we feel really good and our investments that we've made design investments that creates a platform opportunity.
For EV customers to use when they want to use our platforms. So we can do that that as a full design house or we can do that as the joint manufacturing with them. If they want to give us their own design for us to contract manufacturers. So electrification as a whole we feel really good about our position there.
Will there be opportunities for tuck in acquisitions I would say there always is.
At this time, our focus on the use of cash is really around buybacks, but we always look for nice technology add ins. If it's possible and then we would love if it came in as the returns that in or dead for us.
But we don't have significant gaps for electrification automotive portfolio to do it really well so we feel good about that.
I'd say on AI.
From the CEC perspective, the most important thing that customers are expecting from us and we have a big platform ramp that's happening in the second half of this year for a for a cloud customer.
A customer that is around this particular issue is that you have to be able to scale fast you have to have very complex fully vertically integrated capability.
And Thats what customers are looking for from the CEC side, then that flex is very good at doing from the power side, we have developed on our embedded power products. That's in the industrial business product that is very specific for a GPU power needs and those products are already launched with one customer and we are looking.
To launch that with other customers that we have very strong growth potential.
I don't see a lot of acquisition needs, there, but I'd say, yes, I mean from a technology perspective, if there's any plug and capability for both of these areas. We will look at it but at this point, we do think our best use of cash will be in buybacks.
Thank you.
Thank you. Your next question is from <unk>.
From Bank of America. Please ask your question.
Hi, Thanks for taking my questions.
First one on margins compared to your guidance for <unk>, I mean margins came in much better, especially especially in reliability looks.
It looks like you're taking up the full year by 10 bps.
Five.
1%.
The EPS guidance range remains the same is that all because of the higher noncontrolling interest from next tracker.
And on the agility side.
Maybe $100 million lower revenues your margins declined sequentially.
Like 400 or 500 bps.
Sorry, 40, 50 bps. So can you think that that will sustain at a lower level throughout the year because youre guiding.
Lifestyle and consumer devices to be weaker.
Yes, so good questions appreciate it.
So first of all just on your NCI comment in EPS, you're right. We took up the margin rate things things look really good in Q1 like you said it was an across the board beat we did better in agility reliability and next tracker in terms of margin performance. So that was very nice to see and you heard my comments to Mark just on the sequential <unk>.
The NCI answer absolutely year that Youre thinking about the right way as you know our stake went from 61% down to 51% and so theres, a little bit more minority interest headwind or NCI headwind.
And we called that out in the prepared remarks. So that's you're right. That's how to think about it in terms of agility decrementals, Here's what I would say sequentially for agility. They they had soft revenue was for the things that we had sort of been telegraphing to everyone over the last couple of quarters softer consumer end markets.
But on on 10% lower revenue there decremental margins were only about 17%, which is pretty good considering where we're seeing the volume declines its in the lifestyle segment and in consumer devices lifestyle of the three business units within agility that tends to be the the better margin business and so when you have.
Topline pressure it does convert that said really strong execution by the team to sort of.
Mitigate the softer volume and it was things like cost reduction and pulling all the levers we need to pull to continue to have strong margins and I was thrilled to see margins still north of 4% in the quarter. Despite the lower volumes and even at a time like this when there's so much instability in terms of how end markets are moving it's related to.
Margin performance like this and we've always talked about how agility performs in a down market and so this is fantastic to see how well they're performing from a margin standpoint in a time like this so we feel good about the year, we're still in the first quarter our fiscal Q1.
So it's a good time to whole guy that hold the full year. The way. We think it is I think it's a prudent thing to do.
But feel good overall in terms of where margins have come in.
Okay. Thanks for the details there.
Let me ask you a follow on question on auto IC return on invested capital.
What do you target.
What's your target range for that metric looks like over the last couple of quarters its been trending in the in the 20% low 20%, including goodwill.
And how do you see that trending over the next couple of quarters or years.
What are some of the things that you can do to potentially.
Potentially improve that thanks.
Yes, we target north of 20%.
And ROIC is one of those funny things right. If you target, 40% Youre, leaving investments on the table that that could be accretive to our overall investors and so.
I would rather not hard peg a number but rather just say our job is to maintain solid ROIC C. So that our investors so that all of our investors benefit and that would be certainly north of 20%.
Okay. Thank you for all the details appreciate it.
I appreciate it.
Thank you and the next one is from Sonic Chatterji from Jpmorgan. Please ask your question.
Hi, Thanks for letting me ask a couple of questions on the call.
If I can start with one really on the revenue side.
Certain end markets that you.
Seeing a bit more headwind consumers.
I know you just said.
And largely in line with what do you expect even on the enterprise side, but.
If I look at sort of related.
Census was it looks like youre sort of expecting a more backend loaded than where consensus was and I'm. Just curious like when you think about a bit more of a back end loaded deal.
Is that really driven by the visibility you have and maybe their engagement with the cloud customer that you talked about or are there any other sort of segments you would call out where there is a bit more activity in the back half that we had.
Maybe your consensus isn't depreciating in relation to how you get to that full year number then I have a follow up thank you.
Yeah, So I'll make I'll start and then Paul will probably have something to add first is I think it's pretty usual for us to have second half revenue will be higher than the first half so that's pretty common for us.
And then fiscal 'twenty three it was a it was definitely an unusual yeah right, where it was very strong.
First half so there.
Comps improve in the back half of the I would say that if you look at fiscal 'twenty. Two second half was up 7% or the first half and you know so we have had similar trends before that you see and so we expect more normalization I would say this year than what we saw last year and then if you look at the second.
Half what I feel really good about is what's driving the volume increase for US is our expectation in some new bookings that we have in cloud in power that will drive the second half acceleration reliability already has a strong first half will have a strong second half.
Also we don't anticipate much improvement in the consumer markets and so we'll lap some difficult comps. So I would say overall you know it makes sense for us to think the year will pan out the way we have and then what we're trying to forecast in a very in a dynamic macro environment, we've usually very.
Prudent in our end market forecast and have been fairly accurate in the last five years in terms, even with such a dynamic environment. So and then lastly, I would say you know very importantly is that volumes move around but we are also very confident in our EPS target. So I don't know Paul if you'll add anything to that no that's clear other than to say.
Welcome Sam Ache nice to hear from you.
Okay. Thank you and maybe just for my follow up.
You've talked about the opportunity with these cloud customers.
Any engagements I'm more curious if you see an opportunity to maybe take the margin profile a bit higher on these engagements.
<unk> sort of traditional run rate business that you have with them how does the competitive landscape look like what are you even sort of what are the sort of decision making points that youre, putting up with them and is there an opportunity to sort of get a premium in some relation to drive a higher margin mix on that thank you.
Yeah to some make what flex has done consistently over the last five years in almost all end markets that we participate in is really focused on working with customers, where we can provide right solutions that move our margin profile up and you've seen that play out in the last five years.
Is AI, what we like I said in my comments in the beginning what's really important is how quickly can you scale are you capable of handling complex products and we're talking scale, we're talking about significant scale in a short amount of time.
Are you capable of complexity of.
Slide Beth can you brainstorm with the customer in terms of making improvements to that product because a lot of it is new product going into the market. So from the CEC side. Those are the main things that customers are looking for is a partner who will be very consistent has high technology capability.
And we do command a price premium for those kinds of things. So that definitely helps in terms of our overall mix and margin and then on the embedded power side on the.
So on the industrial side those are the designs that we own we command a premium on those products. There's not many suppliers out there who are capable of developing that and where with some very premier customers already with our products that we'd been qualifying for the last year and those will come in at a very.
<unk> premium to our base products. So I would say, yes, I mean, we have shown consistently that we participate in end markets only if we like the margin profile. We don't go for the next shiny bicycle.
So I would say I would be the same thing and we feel quite confident that it will meet the margin profiles, we're looking for no bicycles nobody.
Thank you thanks for the responses.
Okay.
Thank you. Your next question is from Matt Sheerin from Stifel. Please ask your question.
Yes, thanks, and good afternoon.
Question, Paul on your comments around inventory.
Which continues to be fairly bloated.
Revenue I mean on a.
Dollar basis, certainly in the days basis, you talked about that unwind unwind being relatively slow is that because there's still some.
Hard to get parts.
<unk> elevated lead times are customers asking you to keep inventory on hand, how do we think about this playing out over the next few quarters.
Yes, I mean.
I.
I don't love the word bloated, but but inventory will be will be gradual to unwind I think we've been carrying levels of inventory that we've needed to support to support our end customers and in many cases, you look back you know 18 months ago, our customers wanted to carry more buffer stock you know and with the plan that that would be.
Short term and I think short term sort of blended into medium term, but expectation continues that inventory will unwind. If you look at sort of the dynamics of a free cash flow as you know we've had significant support over the last year or two from working capital advances that's customers basically, giving us cash to carry those higher inventory levels and so what's going to happen.
Here over the next several quarters as Youll see inventory levels gradually come down you'll also see working capital advanced levels gradually come down so those two.
<unk> sides of the balance sheet items will slowly start to pull back and what I think will happen is because we're carrying more inventory than we are advances over time, you'll you'll see cash flow improve as I look to the full year no change on our cash outlook, we still feel confident in the 600 million plus of free cash.
<unk> no change there I would say everything is.
At least at the moment, we're kind of surprise free.
Got it okay. Thanks for that and then just as my follow up just regarding next tracker and the remaining 51% stake.
Is that you have in that what should we think about kind of the exit strategy and how that plays out.
Matt we've been very consistent in what we've said over the next tracker and were followed through you know you can see that with.
The last event that took place with our follow on and I would say you know we've always said next tracker will do better as a Standalone company and we will continue to execute in that direction. So no change on that.
Okay.
Okay. Thank you.
Thanks, Matt.
At Stifel.
Yes.
Thank you and once again, ladies and gentleman that is star one should you wish to ask a question.
Our next question is from Steven Fox from Fox Advisors. Please ask your question.
Hi, good afternoon, two questions if I could first of all.
Paul You mentioned, a 45% incremental margins on our reliability business can you break that down a little bit further give us what's normal versus maybe what was a little more episodic and then I had a follow up.
Sure so reliability here's the here's the quick math sales were up 51% profit was up 20, excuse me, 51% I wish.
Sales were up 51 million operating profit was up 23.
So that's the 45% drop through that I referred to so Q3, and Q4 were tough we made a lot of investments in.
In that reliability business as we were preparing to accelerate a number of these next generation program ramps.
That meant we had some stranded resources, we had some stranded labor we were hiring sort of ahead of the curve and so as as volume comes in all of those resources become fully utilized it just has a huge effect on on your Incrementals. So I think that was a lot of it.
And I would say it was it was essentially across the board we're ramping in the in the industrial business for a number of reliability excuse me renewable energy programs, we've got a bunch of stuff going on in automotive right now they did much better sequentially as well the health solutions business was up quarter over quarter. So I would say across the board.
Business by business.
Strong performance and much better than what we saw in the back half of last year.
Great. That's helpful. And then just during the the Capex commentary you mentioned investments I assume this is internal investments in automation and AI or machine learning can you just talk about how you're making decisions on where to invest there.
Are those companies or those customer sponsored or those things that are just meant to generally expand your capabilities. How do we think about what kind of return you get on those investments. Thank you.
Yeah, I would say, it's a mix of both.
We're definitely making investments in factory automation and machine learning related to improving our factory automation or our planning processes or things like that so.
Definitely making investments on that I think you know whether you think about you.
You know kind of improving your quality inspection capable D.
As an example, right and that helps the customer improve their overall.
Quality performance, but also help to flex from a productivity standpoint. So you know there are many examples like that where you will use to deploy a machine vision.
Capability that can self learn and correct itself with time. So these kinds of things would either be funded by a self funded by the customer to drive productivity and better quality performance I'd say some of the investments are for us some of the investments are customer driven but.
Also from a product design perspective, those mainly come in our.
Power business, that's in industrial that's more for the degenerative space, but most of it is for kind of factory automation I would say deployments, that's what we're driving and our belief is that it drives productivity for the business.
Great. That's very helpful. Thank you.
Thanks Steven.
And your last question is from Shannon Cross from Credit Suisse. Please ask your question.
Thank you very much I was wondering if you could talk about within industrial you know I saw you recently announced the opening of the facility with Enphase and Columbia South Carolina.
And you know and that was pointed to it in terms of being at least somewhat funded are supported by the IRA. So I'm just wondering how youre thinking about some of this government stimulus money, that's coming through and how we'll see it you know sort of manifest itself within flexes results over the next couple of years and then I have a follow up thanks.
Yeah, I would say from.
A perspective that looks at driving growth in the U S for renewables energy for us the biggest impact Shannon will be growth that is funded by our customers that is mainly focus on U S. Manufacturing. So enphase is a classic example of that that.
You know, we're quickly seeing customers pivots to U S manufacturing capability.
To take advantage of things like I already I would say from a margin standpoint, how that helps in the long run and how those incentives really play out I think theres still work to be done there.
But the view is that there is a growth opportunity for our customers and us that we all should be really taking advantage of an enphase and other customers and then what those space that we're ramping up for all fit into a into that environment. So we do see overall growth in our U S manufacturing as it results to Iras.
Our infrastructure.
<unk> seen several announcements related to that.
Great and then Paul maybe if we could talk a little bit about cash cash balance share repurchase timing you bought back $197 million of stock last quarter.
Should we think about the pace of share repurchase how are you thinking about that.
What do you think your sort of cash balances that you need to to run the business I understand free cash flow is more backend loaded this year, but I think you had some excess cash coming into.
The next tracker sale and then obviously you've got those proceeds and then youre going to generate cash. So just wondering how you're thinking about it in terms of return to shareholders. Thank you.
Yes. So we were we were pleased to be able to step up repo and in the first quarter compared to what we did in Q4 Q4 was sort of a challenge because of the locked up because the next tracker and really couldn't trade and so getting 200 million or so done in the first quarter by the <unk>.
<unk> at an average price in the 'twenty, two something or other 22 plus.
I'm really happy with that that's great for shareholders.
Looking at our valuation and you kind of do the sum of the parts and giving full credit for next tracker.
It does seem that core flexes undervalued relative to MFS and so as long as we see disconnects like that we think it makes sense to be in the market.
I'm.
Not going to give like a hard peg number on what specifically we're going to do here in Q2, but I will say, we're going to continue to be in the market and you ask a good question Shannon on on cash in <unk>, and what's sort of necessary I would say if you look several years ago. The peak to trough cash use would say you know maybe you need a billion five.
That's probably up a little bit over the last few years.
Even things like inventory and just other challenging supply chain situations, but if you think about where we ended Q1.
Which excludes 500 million from the follow on so take 2627, plus another $500 million you know what.
We're well north of $3 billion.
We have excess cash and as ray with he pointed out maybe 2020 minutes ago.
Our number one priority is is share repo right now we think it's it's accretive to the investors and makes good sense as a capital allocation option.
Great. Thank you.
Thanks Shannon.
Thank you no more questions at this time.
Yes, Sir.
Okay. Thank you and on behalf of the entire flex leadership team I want to give you a sense of I want to give a sincere. Thank you to all our customers for their trust and partnership and of course to our shareholders for your continued support and then I wanted to thank our flex team across the globe for their hard work and dedication and thank you everyone.
Yeah.
Thank you ladies and gentlemen, this concludes today's conference team.
Team across the globe for their hard work and dedication. Thank you everyone.
Yeah.