Q1 2025 Flex Ltd Earnings Call

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Operator: Good morning, and thank you for standing by. Welcome to Flex's first quarter fiscal year 2025 earnings conference call. Presently, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star 1 on your phone. If you would like to withdraw your question, please press star 2. As a reminder, this call is being recorded. I will now turn the call over to Mr. David Rubin. You may begin.

Unknown Executive: Good morning, and thank you for standing by. Welcome to Flex's first quarter, fiscal year 2025 earnings conference call.

Speaker Change: Good morning and thank you for standing by. Welcome to Flex's first quarter fiscal year 2025 earnings conference call.

Unknown Executive: Presently, all participants are on a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask the question, please press star one on your phone. If you would like to withdraw your question, please press star two.

Speaker Change: Presently, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session.

Speaker Change: If you would like to ask a question, please press star 1 on your phone. If you would like to withdraw your question, please press star 2. As a reminder, this call is being recorded. I will now turn the call over to Mr. David Rubin. You may begin.

Unknown Executive: As a reminder, this call is being recorded.

David Rubin: I will now turn the call over to Mr. David Rubin. You may begin.

David Rubin: Thank you, Daryl. Good morning. Welcome to Flex's first quarter fiscal 2025 earnings conference call. With me today is our chief executive officer, Revathi Advaithi, our chief financial officer, Paul Lundstrom, and our soon-to-be interim CFO, Jaime Martinez. We 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 in the Investor Relations section at Flex.com. This call is being recorded and will be available for replay on our corporate website.

David Rubin: Thank you, Darrell. Good morning and welcome to Flex's first quarter, fiscal 2025 earnings conference call. With me today is our Chief Executive Officer, Revathi Advaithi, our Chief Financial Officer, Paul Lundstrom, and our soon-to-be Interim CFO, Jaime Martinez.

David Rubin: Thank you, Daryl. Good morning and welcome to Flex's first quarter fiscal 2025 earnings conference call. With me today is our Chief Executive Officer, Revathi Advaithi, our Chief Financial Officer, Paul Lundstrom, and our soon-to-be interim CFO , Jaime Martinez. We will give brief remarks, followed by Q&A.

David Rubin: We 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.com. This call is being recorded and will be available for replay on our corporate website.

Speaker Change: 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.com.

David Rubin: As a reminder, today's call contains forward-looking statements that are based on our current expectations and assumptions. These statements involve risks and uncertainties that could cause actual results to differ materially. For a full discussion of these risks and uncertainties, please see the cautionary statements in our presentation, press release, or in the risk factors section in our most recent filings with the SEC. Note that this information is subject to change, and we undertake no obligation to update these forward-looking statements.

Speaker Change: 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 actual results to differ materially.

David Rubin: 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 actual results to differ materially. For a full discussion of these risks and uncertainties, please see the cautionary statements and our presentation. Press release on the risk factor section and our most recent findings with the SEC. Note this information is subject to change, and we undertake the obligation to update these forward-looking statements.

Speaker Change: For a full discussion of these risks and uncertainties, please see the cautionary statements in our presentation, press release, or in the risk factors section in our most recent filings with the SEC. Note this information is subject to change, and we undertake no obligation to update these forward-looking statements.

David Rubin: Please note, unless otherwise stated, all results provided will be in non-GAAP measures, and all growth metrics will be on a year-over-year basis, and the full non-GAAP to GAAP reconciliations can be found in the appendix slides of today's presentation, as well as in the summary financials posted on the Investor Relations website. Now, I'd like to turn the call over to our CEO, Revathi.

David Rubin: Please note, unless otherwise stated, all results provided will be in non-GAAP measures and all growth metrics will be on a year-over-year basis. And the full non-gap to gap reconciliation can be found in the appendix slides. But today's presentation, as well as in the summary financials posted on the investor relations website.

Speaker Change: Please note, unless otherwise stated, all results provided will be in non-GAAP measures and all growth metrics will be on a year-over-year basis, and the full non-GAAP to GAAP reconciliations can be found in the appendix slides of today's presentation, as well as in the summary financials posted on the Investor Relations website.

Revathi Advaithi: Now I'd like to turn the call over to our CEO. Thank you, David. Good morning, and thank you for joining us today. Starting off with our results on slide four. We had a solid Q1 with revenue coming in at 6.3 billion, slightly above prior expectations. In addition, our adjusted operating margin also came in better at 4.8%, and we delivered 51 cents of adjusted EPS. I'll talk about what we're seeing in our key and markets in a moment, but overall I'd say the trends are following our previous expectations. Also, last quarter, we mentioned that Q1 would mark the start of multiple large program ramps across our cloud power and automotive business.

Revathi Advaithi: Thank you, David. Good morning, and thank you for joining us today.

Speaker Change: Now, I'd like to turn the call over to our CEO , Revathi.

Revathi: Thank you David. Good morning and thank you for joining us today. Starting off with our results on slide 4, we had a solid Q1 with revenue coming in at $6.3 billion, slightly above our prior expectations.

Revathi Advaithi: Starting off with our results on slide 4, we had a solid Q1, with revenue coming in at $6.3 billion, slightly above our prior expectations. In addition, our adjusted operating margin also came in better at 4.8%, and we delivered 51 cents of adjusted EPA. I will talk about what we are seeing in our key end markets in a moment, but overall, I would say the trends are following our previous expectations. Also, last quarter, we mentioned that Q1 would mark the start of multiple large program ramps across our cloud power and automotive business. As expected, we made strong progress, and as these programs begin to generate revenue, we expect continued tailwinds in Q2 and through the back half of the fiscal year.

Speaker Change: In addition, our adjusted operating margin also came in better at 4.8% and we delivered 51 cents of adjusted EPS.

Speaker Change: I'll talk about what we're seeing in our key and markets in a moment, but overall, I'd say the trends are following our previous expectations.

Speaker Change: Also, last quarter, we mentioned that Q1 would mark the start of multiple large program ramps across our cloud power and automotive business.

Revathi Advaithi: As expected, we made strong progress, and as these programs begin to generate revenue, we expect continued tailwinds in Q2 and through the back half of the fiscal year. Overall, the macro environment remains very dynamic, and given it was just Q1, we believe it's prudent to maintain our current outlook for the full year. I'm proud of our strong execution this quarter and the positive results. Both are our confidence in achieving our full year guidance.

Speaker Change: As expected, we made strong progress and as these programs begin to generate revenue, we expect continued tailwinds in Q2 and through the back half of the fiscal year.

Revathi Advaithi: Overall, the macro environment remains very dynamic, and given it was just Q1, we believe it's prudent to maintain our current outlook for the full year. I'm proud of our strong execution this quarter, and the positive results bolster our confidence in achieving our full-year guidance. Now turning to slide five, looking at some of our key end markets. The AI transition in the data center continues to drive strong demand for our cloud solutions in our CEC business, as well as demand for our power products in our industrial business.

Speaker Change: Overall, the macro environment remains very dynamic, and given it was just Q1, we believe it's prudent to maintain our current outlook for the full year. I'm proud of our strong execution this quarter, and the positive results bolster our confidence in achieving our full year guidance.

Revathi Advaithi: Now, turning to slide five, looking at some of our key and markets. The AI transition in the data center continues to drive strong demand for our cloud solutions in our CEC business, as well as demand for our power products in our industrial business. As we recall from our recent Investor Day, we offer an end-to-end cloud IT manufacturing solution combined with vertically integrated services. Now, our comprehensive data center power product portfolio. Simpley Putt, our cloud offering, addresses 80% of the data center and is enabling our customers to move faster. Our power products and breadth of services are truly differentiated, which provides value to our customers and is fueling growth for Flex.

Speaker Change: Now turning to slide 5, looking at some of our key end markets.

Speaker Change: The AI transition in the data center continues to drive strong demand for our cloud solutions in our CEC business, as well as demand for our power products in our industrial business.

Revathi Advaithi: As you recall from our recent Investor Day, we offer an end-to-end cloud IT manufacturing solution combined with vertically integrated services in our comprehensive data center power product portfolio. Simply put, our cloud offering addresses 80% of the data center and is enabling our customers to move faster. Our power products and breadth of services are truly differentiated, which provides value to our customers and is fueling growth for Flex. This combination has clearly positioned us well for the AI-driven technology transition happening from grid to chip and from the cloud to the edge.

Speaker Change: As you recall from our recent Investor Day, we offer an end-to-end cloud IT manufacturing solution combined with vertically integrated services in our comprehensive data center power product portfolio.

Speaker Change: Simply put, our cloud offering addresses 80% of the data center and is enabling our customers to move faster.

Speaker Change: Our power products and breadth of services are truly differentiated, which provides value to our customers and is fueling growth for Flex.

Revathi Advaithi: This combination has clearly positioned us well for the AI-driven technology transition, happening from grid to chip and from the cloud to the edge. It's also one of the key aspects of our EMS Plus product plus services long-term strategy.

Speaker Change: This combination has clearly positioned us well for the AI-driven technology transition happening from grid to chip and from the cloud to the edge. It's also one of the key aspects of our EMS plus product plus services long-term strategy.

Revathi Advaithi: It's also one of the key aspects of our EMS plus product plus services long-term strategy. Now moving to the automotive industry, some of the latest industry research has indicated global vehicle unit expectations will soften a bit for the calendar year.

Revathi Advaithi: Now moving to automotive, some of the latest industry research has indicated global vehicle unit expectations will soften a bit for the calendar year. However, we continue to expect to outperform the market based on both new wins and increasing automotive content. Clearly, there are concerns about the pace of EV adoption. However, we will typically be less affected by the recent change in EV sentiment, as the majority of our automotive revenues are agnostic to the power train. Overall, we believe the longer-term transition towards electrification will continue. Additionally, we see increased interest in hybrid technology, which may be an important bridge in this transition.

Speaker Change: Now moving to automotive, some of the latest industry research has indicated global vehicle unit expectations will soften a bit for the calendar year. However, we continue to expect to outperform the market based on both new wins and increasing automotive content.

Revathi Advaithi: However, we continue to expect to outperform the market based on both new wins and increasing automotive content. However, clearly, there are concerns about the pace of EV adoption. However, we will typically be less affected by the recent change in EV sentiment as the majority of our automotive revenue is agnostic to the powertrain. Overall, we believe the longer-term transition towards electrification will continue. Additionally, we see increased interest in hybrid technology, which may be an important bridge in this transition for Flex. Both EV and hybrid offer content gain opportunities as they require additional power systems compared to internal combustion engines.

Speaker Change: Clearly, there are concerns about the pace of EV adoption, however, we will typically be less affected by the recent change in EV sentiment as the majority of our automotive revenue is agnostic to the powertrain.

Speaker Change: Overall, we believe the longer-term transition towards electrification will continue. Additionally, we see increased interest in hybrid technology, which may be an important bridge in this transition.

Revathi Advaithi: For flex, both EV and hybrid offer content gain opportunities as they require additional power systems compared to internal combustion engines. So taking a step back, our combination of advanced compute solutions and power products, many of which are flex IP, for their strength and circumpetitive differentiation.

Speaker Change: for Flex.

Speaker Change: Both EV and hybrid offer content gain opportunities, as they require additional power systems compared to internal combustion engines.

Revathi Advaithi: So taking a step back, our combination of advanced compute solutions and power products, many of which are Flex IP, further strengthens our competitive differentiation. Now looking to digital health, we continue to see strong medical device demand balanced against the continuing soft medical equipment market, which has been the case for several quarters. There are some signs we are approaching a near-term supply-demand equilibrium. However, the timing of the full recovery remains uncertain.

Speaker Change: Taking a step back, our combination of advanced compute solutions and power products, many of which are Flex IP, further strengthens our competitive differentiation.

Revathi Advaithi: Now looking to digital health, we continue to see strong medical device demand balanced against the continuing soft medical equipment market, which has been the case for several quarters. There are some signs we're approaching a near-term supply-demand equilibrium. However, the timing of the full recovery remains uncertain. The important part here is that there are significant technology changes in the health care industry, including increasingly complex devices, combined with shrinking form factors. These changes translate the strong long-term opportunity, and we remain well positioned to serve these markets. Now you can see by a results we're executing very well to a highly dynamic cycle.

Speaker Change: Now looking to digital health, we continue to see strong medical device demand balanced against the continuing soft medical equipment market, which has been the case for several quarters.

Speaker Change: There are some signs we are approaching a near-term supply-demand equilibrium.

Speaker Change: However, the timing of the full recovery remains uncertain.

Revathi Advaithi: The important part here is that there are significant technological changes in the healthcare industry, including increasingly complex devices combined with shrinking form factors. These changes translate to strong long-term opportunities, and we remain well positioned to serve these markets. Now, you can see from our results, we're executing very well through a highly dynamic cycle. We're also taking this time to build our own strong foundation and prepare for the future in key markets with longer-term opportunities. This strategy has delivered record margin expansion, double-digit EPS growth, and strong cash generation. We are very excited about our future.

Speaker Change: The important part here is that there are significant technology changes in the health care industry, including increasingly complex devices combined with shrinking form factors.

Speaker Change: These changes translate to strong long-term opportunities and we remain well positioned to serve these markets.

Speaker Change: Now you can see by our results, we're executing very well through a highly dynamic cycle. We're also taking this time to build our own strong foundation and prepare for the future in key markets with longer term opportunities.

Revathi Advaithi: We're also taking this time to build our own strong foundation and prepare for the future and key markets with longer-term opportunities. This strategy has, and we'll continue to deliver record, margin expansion, double-digit EPS growth, and strong cash generation. We have very excited about our future.

Speaker Change: This strategy has, and will continue to deliver record margin expansion, double-digit EPS growth, and strong cash generation.

Revathi Advaithi: Finally, as you probably saw in our earnings release, Paul Lundstrom will be leaving to pursue a new opportunity with a PE-backed private company. Paul has been a great partner to me and a strong leader for the organization. On behalf of the entire team, we wish him well in the next stage of his journey. Jaime Martinez, SVP and CFO of our reliability group, will step in the interim role as we conduct a thoughtful search for a permanent CFO. With that, I'll pass the call over to Paul and Jaime to take you through our financial update. Paul? Okay, yeah.

Revathi Advaithi: Finally, as you probably saw in our earnings release, Paul Lundstrom will be leaving to pursue a new opportunity with a PE-backed private company. Paul has been a great partner to me and a strong leader for the organization. On behalf of the entire team, we wish him well in the next stage of his journey. Jaime Martinez, SVP and CSO of our reliability group, will step in the interim role as we conduct a thoughtful search for a permanent CSO.

Speaker Change: We are very excited about our future.

Paul R. Lundstrom: Finally, as you probably saw in our earnings release, Paul Lundstrom will be leaving to pursue a new opportunity with a PE-backed private company.

Speaker Change: Paul has been a great partner to me and a strong leader for the organization.

Speaker Change: On behalf of the entire team, we wish him well in the next stage of his journey.

Speaker Change: Jaime Martinez, SVP and CFO of our reliability group will step in the interim role as we conduct a thoughtful search for a permanent CFO .

Paul Lundstrom: With that, I'll pause the call over to Paul and Jaime to take you to our financial update. Paul. Okay, and maybe I'll just break script from just equipment to say, the last four years have been absolutely fantastic. I have really enjoyed being part of this transformation, and of course, being part of the team. I think the culture here at Flex is truly something special. So with that, I'll begin on the first quarter performance on slide seven. First quarter revenue was 6.3 billion. That was up to 2% sequentially and down year on year, as expected. Gross profit totaled 495 million, and gross margin came in at 7.8%, improving 50 basis points year.

Speaker Change: With that, I'll pass the call over to Paul and Jaime to take you through our financial update. Paul? Okay, and hey, maybe I'll just break script from just a quick minute to say

Paul R. Lundstrom: Okay, and hey, maybe I'll just break script for just a quick minute to say The last four years have been absolutely fantastic. I have really enjoyed being part of this business transformation and, of course, being part of the team. I think the culture here at Flex is truly special. So with that, I'll begin with the first quarter performance on slide seven. First quarter revenue was 6.3 billion, which was up 2% sequentially and down year on year, Gross profit totaled $495 million, and gross margin came in at 7.8%, improving 50 basis points year over year.

Paul: The last four years have been absolutely fantastic. I have really enjoyed being part of this business transformation and of course being part of the team. I think the culture here at Flex is truly something special.

Paul: So with that, I'll begin on the first quarter performance on slide 7. First quarter revenue was $6.3 billion. That was up 2% sequentially and down year on year as expected.

Paul: Gross profit totaled $495 million and gross margin came in at 7.8%, improving 50 basis points year-over-year.

Paul Lundstrom: Operating profit was 306 million, with operating margins at 4.8%, also improving 50 basis points year of year, and adjusted earnings per share came in at 51 cents for the quarter, increasing about 9%. If you look at our first quarter segment results on the next slide, reliability revenue was 2.9 billion more favorable than anticipated, led by stronger demand in power and medical devices. Operating income was 147 million, and operating margin was flat at 5% year of year. Margins were in line with typical seasonality. In agility, revenue also came in better than expected at 3.4 billion, led by strength and cloud.

Paul R. Lundstrom: Operating profit was $306 million, with operating margins at 4.8%, also improving 50 basis points year-over-year, and adjusted earnings per share came in at $0.51 for the quarter, increasing about 9%. If you look at our first quarter segment results on the next slide, reliability revenue was $2.9 billion, more favorable than anticipated, led by stronger demand in power and medical devices. Operating income was $147 million, and operating margin was flat at 5% year-over-year. However, margins were in line with typical seasonality.

Paul: Operating profit was $306 million with operating margins at 4.8%, also improving 50 basis points year-over-year. And adjusted earnings per share came in at $0.51 for the quarter, increasing about 9%.

Paul: If you look at our first quarter segment results on the next slide, reliability revenue was $2.9 billion, more favorable than anticipated led by stronger demand in power and medical devices.

Paul: Operating income was $147 million and operating margin was flat at 5% year-over-year. Margins were in line with typical seasonality.

Paul R. Lundstrom: In agility, revenue also came in better than expected at $3.4 billion, led by strength in cloud. agility operating income was $179 million, an increase of 23% year-over-year. Thanks to strong execution, mix, and effective cost management, the team achieved a robust 5.3% operating margin. Moving to cash flow on slide 9, Q1 net capex totaled $108 million for the full fiscal year. We expect to maintain our target of 2% of revenue as we continue to invest in future growth and productivity.

Paul: In agility, revenue also came in better than expected at $3.4 billion, led by strength in cloud. Agility operating income was $179 million, an increase of 23% year over year.

Paul Lundstrom: Agility operating income was 179 million, an increase of 23% year of year. Who strong execution, mix and effective cost management, the team achieved a robust 5.3% operating margin. Moving to cash flow on slide nine, Q1 net cap x total the 108 million. To the full fiscal year, we expect to maintain our target up 2% of revenue as we continue to invest in future growth and productivity. I'm also happy to report net inventory improved again this quarter. We reduce net inventory by 6% sequentially and 21% year of year. We expect continued gradual reductions in inventory in the coming quarters.

Paul: Through strong execution, mix, and effective cost management, the team achieved a robust 5.3% operating margin.

Paul: Moving to cash flow on slide 9. Q1 net capex totaled 108 million.

Paul: For the full fiscal year, we expect to maintain our target of 2% of revenue as we continue to invest in future growth and productivity.

Paul R. Lundstrom: I'm also happy to report Net Inventory improved again this quarter. We reduced Net Inventory by 6% sequentially and 21% year-over-year. We expect continued gradual reductions in inventory in the coming quarter. Pre-cash flow in the quarter was a very strong $232 million. There was little benefit from the timing of cash received late in the quarter, so Q2 may be just a little lighter. However, we remain on track to reach our full-year target of $800 million plus.

Paul: I'm also happy to report net inventory improved again this quarter. We reduced net inventory by 6% sequentially and 21% year-over-year. We expect continued gradual reductions in inventory in the coming quarters.

Paul Lundstrom: Free cash flow in the quarter was a very strong $232 million. There was a little benefit from the timing of cash received late in the quarter, so Q2 may be just a little lighter. However, we remain on track to reach our full year target of 800 million plus. During Q1, we were purchased approximately 15 million shares, totaling about 460 million of buyback. We exited the quarter with cash balances of 2.2 billion, and as we have consistently demonstrated over the last several years, we have and will continue to allocate capital in the best interest of our shareholders.

Paul: Free cash flow in the quarter was a very strong $232 million. There was a little benefit from the timing of cash received late in the quarter, so Q2 may be just a little lighter. However, we remain on track to reach our full year target of $800 million plus.

Paul R. Lundstrom: During Q1, we repurchased approximately 15 million shares, totaling about $460 million in buybacks. We exited the quarter with cash balances of $2.2 billion, and, as we have consistently demonstrated over the last several years, we have and will continue to allocate capital in the best interests of our shareholders.

Paul: During Q1, we repurchased approximately 15 million shares totaling about 460 million of buyback.

Paul: We exited the quarter with cash balances of $2.2 billion, and as we have consistently demonstrated over the last several years, we have and will continue to allocate capital in the best interests of our shareholders.

Jaime Martinez: I'm going to now hand it over to Jaime Martinez, who will walk you through our guides. Okay, Jaime?

Jaime Martinez: I'm going to now hand it over to Jaime Martinez, who will walk you through our guides. Thank you, Paul.

Paul: I'm going to now hand it over to Jaime Martinez, who will walk you through our guides. Jaime?

Jaime Martinez: Please turn to slide 10 for our segment, Outlook for the Fiscal Second For reliability solutions, we expect revenue to be down high single-digit to mid-teen, with trending cloud, data center power, and medical devices, tempered lastly by macro-driven weakness in coriander. For Q2, agility solutions, revenue is expected to be flat to slightly down. This is largely driven by strength in the cloud and setting continuous softness in enterprise IT and non-cloud related networks

Jaime Martinez: Please turn to slide Court, for reliability solutions we expect revenue to be down high single budget to meet things with trending clouds, data center power and medical devices, temporarily by macro driven weakness in court industry. For Q2, agility solutions revenue is expected to be flat to slightly down. This is largely driven by strength in clouds of setting continuous softness in enterprise safety and non-cloud-related network.

Jaime Martinez: Thank you, Paul. Please turn to slide 10 for our segment, Outlook for the Fiscal Second Quarter.

Jaime Martinez: For reliability solutions, we expect revenue to be down high single-digit to mid-teens, with trend in cloud, data center power, and medical devices, tempered largely by macro-driven weakness in core industry.

Speaker Change: For Q2, Agility Solutions, revenue is expected to be flat to slightly down. This is largely driven by strength in cloud of setting continuous softness in enterprise IT and non-cloud related networking.

Jaime Martinez: Moving to slide 11 for our quarterly guide, we expect revenue in the range of $6.2 to $6.8 billion with adjusted operating income between $310 and $315 million. Interest and other expense is estimated to be around $48 million. We expect the tax rate to be around 19% this quarter. All that translates to adjusted EPF between $0.52 and $0.66, based on approximately 411 million weighted average shares outstanding. Looking at our full year guidance, we see the following.

Jaime Martinez: Moving to slide 11 for a quarterly guide us. We expect revenue in the range of 6.2 to 6.8 billion dollars, with adjusted operating income between 310 and 315 million dollars. Interest and all expense is estimated to be around 48 million dollars. We expect the tax rate to be around 19% this quarter. All that translates to adjusted ETF between 52 cents and 60 cents, based on approximately 411 million weighted average shares outstanding.

Speaker Change: Moving to slide 11 for our quarterly guidance.

Speaker Change: We expect revenue in the range of $6.2 to $6.8 billion, with adjusted operating income between $310 and $350 million.

Speaker Change: Interest and other expense is estimated to be around $48 million.

Speaker Change: We expect the tax rate to be around 19% this quarter.

Speaker Change: All that translates to adjusted EPS between $0.52 and $0.60.

Speaker Change: based on approximately 411 million weighted average shares outstanding.

Jaime Martinez: Looking at the full-year guidance on the following slide. As Revitim mentioned, even in 3rd of the year, we're maintaining a full-year guide us. We expect revenue between 25.4 and 26.4 billion dollars, with adjusted operating margin between 5.2 to 5.4%. And adjusted the PS between $2 and 30 cents and $2 and 50 cents.

Jaime Martinez: As Revathi mentioned, given it's early in the year, we're maintaining our full-year guide. We expect revenue between $25.4 and $26.4 billion, with an adjusted operating margin between 5.2 to 5.4% and adjusted EPS between $2.30 and $2.50.

Speaker Change: Looking at our full year guidance on the following slide.

Speaker Change: As Revathi mentioned, even if it's early in the year, we're maintaining our full-year guidance.

Speaker Change: We expect revenue between $25.4 and $26.4 billion, with adjusted operating margin between 5.2 to 5.4%, and adjusted EPS between $2.30 and $2.50.

Revathi Advaithi: With that, I'll turn the call back to Revathi for her final comments. Revathi? Thank you, Jaime.

Revathi Advaithi: With that, I'll turn the call back to Revitim for her final comment.

Revathi Advaithi: Revitim. Thank you, Jaime. Before we start Q&A, I'd like to reiterate our commitment to creating shareholder value, to profitable revenue and EPS growth, margin expansion, and cash generation. We are aligning our EMS plus product plus services strategy with strong macro and secular drivers, focusing on high value and markets with significant growth potential. Our ongoing focus on expanding our technical and advanced manufacturing capabilities creates differentiation and positions us for the same growth and profitability, which will lead to continue value creation for our shareholders.

Speaker Change: With that, I'll turn the call back to Revathi for her final comments.

Revathi Advaithi: Thank you, Jaime. Before we start the Q&A, I'd like to reiterate our commitment to creating shareholder value through profitable revenue and EPS growth, margin expansion, and cash generation. We are aligning our EMS plus product plus services strategy with strong macro and secular drivers, focusing on high-value end markets with significant growth potential. Our ongoing focus on expanding our technical and advanced manufacturing capabilities creates differentiation and positions us for sustained growth and profitability, which will lead to continued value creation for our shareholders. Thank you again for joining us, and I'll turn the call back over to the operator to begin the Q&A.

Revathi: Thank you, Jaime. Before we start Q&A, I'd like to reiterate our commitment to creating shareholder value through profitable revenue and EPS growth, margin expansion, and cash generation.

Revathi: We are aligning our EMS plus product plus services strategy with strong macro and secular drivers focusing on high value end markets with significant growth potential.

Revathi: Our ongoing focus on expanding our technical and advanced manufacturing capabilities creates differentiation and positions us for sustained growth and profitability, which will lead to continued value creation for our shareholders.

Revathi Advaithi: Thank you again for joining us, and I'll turn the call back over to the operator to begin Q&A. Thank you.

Speaker Change: Thank you again for joining us and I'll turn the call back over to the operator to begin Q&A.

Operator: Thank you. We'll now begin the question and answer portion of today's call. If you would like to ask a question, please press star 1 on your phone. As a reminder, we ask that you please limit yourself to one question and one follow-up. One moment, please, for the first question. Our first question comes from the line of Samik Chatterjee with J.P. Morgan. Please proceed with your question.

Unknown Executive: We'll now begin the question-and-answer portion of today's call. If you would like to ask a question, please press star 1 on your phone. As a reminder, we ask that you please limit yourself to one question and one follow-up. One moment, please, for the first question.

Speaker Change: Thank you. We'll now begin the question and answer portion of today's call. If you would like to ask a question, please press star 1 on your phone. As a reminder, we ask that you please limit yourself to one question and one follow-up. One moment, please, for the first question.

Unknown Executive: Our first question is coming from the line of civic chatter with JP Morgan; please proceed with your questions. Thank you for taking my questions and Congress on the strong results. You may be thinking to start with for my first question with just a brief rundown on the segments of your business that are still facing headwinds. Sounds like on the industrial side as well as consumer, you're seeing headwinds still. Maybe if you can share your thoughts on where do you think you are in terms of cycling past some of the truff in terms of revenues there, where is current visibility in terms of seeing improvement in those and markets that you're seeing a bit more creator headwinds and the others, and I have a follow-up.

Speaker Change: Our first questions come from the line of Samik Chatterjee with J.P. Morgan. Please proceed with your questions.

Revathi Advaithi: Hi, thank you for taking my questions and congratulations on the strong results here. Maybe if we could start with, for my first question, with just a brief rundown on the segments of your business that are still facing headwinds. Sounds like on the industrial side as well as the consumer, you're still seeing headwinds. Maybe you can share your thoughts on where you think you are in terms of cycling past some of the trough in terms of revenues there, where the current visibility is in terms of seeing improvement in those end markets that you're seeing a bit greater headwinds than the others, and I have a follow-up. Thank you.

Samik Chatterjee: Hi, thank you for taking my questions and congrats on the strong results here. Maybe if we can start with, for my first question, with just a brief rundown on the segments of your business that are still

Speaker Change: Facing headwinds sounds like on the industrial side as well as consumer you're seeing headwinds still maybe you can share your thoughts on

Speaker Change: Where do you think you are in terms of cycling past some of the trough in terms of revenues there? Where is current visibility in terms of seeing improvement in those end markets that you're seeing a bit more greater headwinds than the others? And I have a follow-up. Thank you

Revathi Advaithi: Okay, I'll start with that. I'd say that the places where we're seeing continued headwinds as you describe them would definitely be in the industrial, particularly the renewable space. I would say that's probably the most important one that I can think of that is still feeling some downside risk. So I would say the industry is indicating that it's bottomed out, and the inventory is consumed, so we should start seeing an uptick there. On the consumer side, I would say we have seen softness, but we are quite stabilized, I would say, in our consumer business overall in terms of revenue. So I feel good about that.

Speaker Change: Okay, I'll start with that. I'd say that the places...

Speaker Change: where

Speaker Change: We're seeing continued headwind as you describe it would be

Speaker Change: Definitely, I would say in the industrial, particularly in the renewable space, I would say that's probably the most, I'd say, important one that I can think of that is still feeling some downside risk.

Speaker Change: I would say the industry is indicating that it's bottomed out and the inventory is consumed so we should start seeing an uptick there.

Speaker Change: On the consumer side, I would say we have seen softness, but

Speaker Change: We are quite stabilized, I would say, in our consumer business overall in terms of revenue. So I feel good about that. And then lastly, I would say the place we see some headwind could be in the telecom space. But

Revathi Advaithi: And then lastly, I would say the place we see some headwinds could be in the telecom space. But so, I'd say if you look at our six end markets, those are the places that I would say there are some headwinds. But then, you know, I'd say overall there's really strong tailwinds for our in our cloud, our data center solution both in the IT space and the power space. Automotive for us still continues to grow pretty strong because we're agnostic to the powertrain. And then health on the devices side, as I said, is really strong. So it's a good offset to each other. So hopefully, that gives you some color.

Speaker Change: So those I'd say if you look at our six end markets, those are the places that I would say there is some headwind.

Speaker Change: But then, you know, I'd say overall there's really strong tailwind in our in our cloud, our data center solution.

Speaker Change: both on the IT space and the power space. Automotive, for us, still continues to grow pretty strong because we're agnostic to the...

Speaker Change: then health, which I mentioned, is really strong on the device side. So different languages are good offsets. So I hope this one gives you some color.

Revathi Advaithi: Yeah, thank you. Thanks for that! And Revathi, one of the questions I've seen from investors come through more recently and likely triggered by some of the actions your company is taking is, are you contemplating any portfolio rationalization in terms of using the opportunity here to look at some of the lower-margin businesses within the portfolio and taking more actions to roll them off? Any thoughts on that front, particularly now that you have a stronger sort of first half to bank on any areas of the portfolio that you would be more focused on to look at improving the margins there?

Speaker Change: Yeah, thank you. Thanks for that. And maybe one of the questions I've seen from investors come through more recently and likely triggered by some of the actions your company is taking is Are you contemplating any portfolio rationalization in terms of using

Speaker Change: The opportunity here to look at some of the lower margin businesses within the portfolio and taking more actions to roll them off any

Speaker Change: Thoughts on that front, particularly now that you have a stronger sort of first half to bank on any areas of the portfolio that you would be more focused on to look at improving the margins there.

Revathi Advaithi: Yeah, I'd say one thing I've said consistently, and I'll stick to that storyline is that within the six business units, our business leaders are paid to keep improving the mix.

Speaker Change: Yeah, I'd say one thing I've said consistently, and I'll stick to that storyline is that within the six business units, our business leaders are paid to keep improving the mix.

Revathi Advaithi: So the focus on you have to go to better end markets and really focus on winning customers who are ready to pay value, and changing your mix within those six business units is something that they do every single day. So that's one thing I would say. And then the second is, you know, we have seen us double down in areas of high growth and better profitability by making clean investments like on the data center side. You saw our portfolio around compute and power and the significance of that.

Speaker Change: Right, so the focus on you have to go to better end markets.

Speaker Change: [inaudible]

Speaker Change: You have seen us double down in areas of high growth and better profitability by making clean investments like on the data center side. You saw our portfolio around compute and power.

Revathi Advaithi: So we have been doubling down investments there both product wise and commercially, the same for services. We talked about a billion dollar service business, and we're making investments in that helps change the mix. So for me, portfolio rationalization in flex at this point is running the six business units better and changing the mix within that portfolio itself, and really driving the high growth areas like data center and automotive. And that's kind of how I'm thinking about portfolio rationalization. So nothing big in the planning here. All right, great.

Speaker Change: and the significance of that. So we have been doubling down investments there both product-wise and commercially. The same on services. We talked about a billion-dollar service business and we're making investments with that helps change the mix.

Speaker Change: So for me, portfolio rationalization in Flex at this point is running the six business units better and changing the mix within that portfolio itself and really driving the high growth areas like data center and automotive.

Speaker Change: And that's kind of how I'm thinking about portfolio rationalization, so nothing big in the planning here. Great. Thank you for taking my questions. Thank you.

Revathi Advaithi: All right, great. Thank you for taking my questions. Thank you.

Operator: Thank you. Our next questions come from the line of Matt Sheerin with Stiefel. Please proceed with your questions.

Speaker Change: Thank you. Our next questions come from the line of Matt Sheerin with Stiefel. Please proceed with your questions.

Revathi Advaithi: Yes, thank you and good morning. Question regarding the strength that you're seeing in the clouds. I know it's coming from both your power business and your traditional business. Could you talk about? I think you had targeted three billion dollars or so in revenue, a billion from power and two billion from the core business. Is that run rate still right? And in terms of the ramp, how many quarters are we talking about in terms of ramping up the customers that you've been talking about?

Matt Sheerin: Yes, thank you and good morning. Question regarding the strength that you're seeing in cloud. I know it's coming from both your power business

Matt Sheerin: and your traditional business. Could you talk about, I think you had targeted $3 billion or so in revenue, $1 billion from power and $2 billion from the core business. Is that run rate still right? And in terms of the ramp?

Speaker Change: How many quarters are we talking about in terms of ramping the customers that you've been talking about?

Revathi Advaithi: Matt, thank you for the question. I'd say that, you know, let's step back and talk about what we said on Investor Day, right? We said for the data center business, our portfolio today between our IT CEC business and our industrial power business is around $3 billion, $1 billion in power, and around $2 billion in the CEC space. And, you know, we feel very good about the growth trajectory we gave longer term at Investor Day.

Speaker Change: Matt, thank you for the question. I'd say that...

Speaker Change: You know, let's step back and talk about what we said in Investor Day, right? We said for the data center business.

Speaker Change: Our portfolio today between our IT CEC business and our industrial power business is around $3 billion. $1 billion in power and around $2 billion in the CEC space.

Revathi Advaithi: I think we said around a 20% ramp building up to kind of the growth rates we discussed and then power eventually becoming a $3 billion business. I would say, as an aggregate, this quarter, we grew more than 60% in that space. As we continue to ramp up, I would say through the year, we have many new programs coming on. I feel good about the 20% growth rate trajectory I gave you guys, which was a kind of a longer-term forecast.

Speaker Change: And, you know, we feel very good about kind of the growth trajectory we gave longer term in the investor day, I think we said around a 20% ramp building up to

Speaker Change: kind of the growth rates we discussed.

Speaker Change: and then Power eventually becoming a $3 billion business. I would say as an aggregate, this quarter, we grew more than 60% in that space.

Speaker Change: As we continue to ramp, I would say through the year, we have many new programs coming on. I feel good about the 20% growth rate trajectory I gave you guys, which was a kind of a more of a longer term forecast. So

Revathi Advaithi: So, I don't know, Matt, if I have a quarter by quarter playbook, but hopefully, our execution, I would say, shows that we will, you know, hit those run rates that we gave you on Investor Day, and we feel very good about that.

Speaker Change: I don't know, Matt, if I have a quarter-by-quarter playbook, but hopefully our execution, I would say, shows that we will, you know, hit those run rates that we gave you in InvestorDay, and we feel very good about that.

Revathi Advaithi: business. And could you talk about cross-selling opportunities and how many of these deals are being won because you're leveraging both of those key skill sets against that opportunity?

Speaker Change: Okay, thank you for that. And clearly a differentiator for you is that power business. And could you talk about cross-selling opportunities and how many of these deals are being won because you're leveraging both?

Revathi Advaithi: And then the other question regarding the cloud is just on inventory. Is some of this business consigned inventory? Because I would have expected your inventory to actually start to build as you're continuing to ramp here. So could you talk about the dynamics of that, please?

Speaker Change: of those key skill sets versus that opportunity. And then the other question regarding cloud is just on inventory. Is some of this business consigned inventory? Because I would have expected your inventory to actually start to build as you're continuing to ramp here. So could you talk about the dynamics of that, please?

Revathi Advaithi: Okay, great, Matt. All good questions here. So let me start on cross selling. You know, one thing I've said that in this overall kind of EMS plus product plus services strategy, where we have done most of our heavy lifting to create the portfolio and create the organization to deliver, we feel really good about the structure that we have created within the organization. You know, we have a Nord Martics that delivers critical power; we have an embedded power group.

Speaker Change: Okay, great, Matt. All good questions here. So let me start on the on the cross-selling.

Speaker Change: You know, one thing I've said that in this overall kind of EMS plus product plus services strategy

Speaker Change: where we have done most of our heavy lifting to create the portfolio and create the organization to deliver that, we feel really good about kind of the structure that we have created. Within the organization, you know, we have Enorg-Martix that delivers critical power. We have an embedded power group and then we have the services group that's delivering that 1 billion of revenue today.

Revathi Advaithi: And then we have the services group that's delivering that 1 billion in revenue today. So what I think we will do is we are seeing cross-selling opportunities across data centers, not just hyperscalers, but also kind of, you know, the colo customers. So we are aligning our organization, or, you know, to make sure that we take full advantage of these cross selling opportunities. So we will continue to drive that alignment, making sure that our organization has the right structure to be able to execute on these cross selling opportunities and is incentivized to focus on these cross selling opportunities.

Speaker Change: So what we will do is we are seeing cross-selling opportunities across data centers, not just hyperscalers.

Speaker Change: but also kind of, you know, the colo customers.

Speaker Change: So we are aligning our organization or, you know, to make sure that we take full advantage of that cross selling opportunities.

Speaker Change: So we will continue to drive that alignment.

Speaker Change: making sure that organization has the right structure to be able to execute on those cross-selling opportunities and is incentivized to focus on those cross-selling opportunities. And so you'll continue to see us drive organizational change.

Revathi Advaithi: And so you'll continue to see us drive organizational change. The last time I did that was four years ago, and it's really worked out well for us in terms of organizational change. So we will focus on cross-selling across the business, and it is an important opportunity. On inventory, I'd say, we have said this in the past about consigned inventory, that those are decisions our customers make, and we then support them in that decision.

Speaker Change: The last time I did that was four years ago and it's really worked out well for us in terms of organizational change. So we will focus on cross-selling across the business and it is an important opportunity.

Speaker Change: On inventory, I'd say, we have said this in the past about consigned inventory, that those are decisions our customers make and when we support them in that decision making. I don't see any significant pluses and minuses that our work

Revathi Advaithi: I don't see any significant pluses and minuses that are worth kind of discussing in terms of overall revenue or inventory impact on this business. But that's kind of part of our normal run rate. If customers want to go in the direction of consigned, we build a model that way. So really, no. Okay. Thanks so much.

Speaker Change: discussing in terms of overall revenue or inventory impact to this business. But that's kind of part of our normal run rate. If customers want to go in the direction of consigned, we build a model that way. So really no change.

Revathi Advaithi: Okay, thanks so much for that, and Paul, best of luck.

Speaker Change: Okay, thanks so much for that. And Paul, best of luck to you.

Operator: Thank you. Our next question has come from the line of George Wang with Barclays. Please proceed with your question.

Paul: Thanks Matt, appreciate it.

Speaker Change: Thank you. Our next questions come from the line of George Wang with Barclays. Please proceed with your questions.

Revathi Advaithi: Oh, hey guys, thanks for taking my question. Firstly, just maybe you can unpack some of the kind of full bolt-on acquisition opportunities on the horizon. You know, previously you talked about, you guys are looking at, you know, potentially kind of power assets, you know, kind of related to anonymous assets that are your own IP, but also kind of value-added services. So, as you saw the hybrid portfolio kind of shifting towards higher-margin business, can you gain a little bit more color just, you know, around those areas, because you are targeting, maybe in the near term or medium term, to further enhance the portfolio?

George Wang: Oh, hey, guys. Thanks for taking my question. Firstly,

George Wang: Just maybe you can unpack some of the kind of bolt-on acquisitions.

Speaker Change: Opportunities on the horizon, you know, previously you talked about, you guys are looking at, you know, potentially kind of power assets, you know, kind of related to an automatics assets, that's your own IP, but also kind of value added services.

Speaker Change: So, as you saw the high-grade portfolio kind of shifting towards higher-margin business, can you gain a little bit more color just, you know, around those areas you are targeting maybe in the near-term or medium-term to further enhance the portfolio?

Revathi Advaithi: Okay, George, let me get to hear from you again. I'll start off on terms of M&A. And, you know, what I said on investor day and, you know, in the follow-up since I talked to you the last time, is that we do see an opportunity to continue to look for bolt-on opportunities, as you've described in the power space. We feel really good about our position in both embedded power and critical power.

Speaker Change: Okay George, let me get to hear from you again. I'll start off on terms of M&A.

George: And, you know, what I said in investor day, and, you know, in the follow up since I've talked to you the last time, is that we do see an opportunity to continue to look for bolt on opportunities, as you've, as you've described in the power space, we feel really good about our position in both embedded power and critical power.

Revathi Advaithi: And we also feel good about the capacity expansion that we're driving there that is required to keep up with the growth that our end markets are seeing. That being said, you know, there are bolt-on things that we can do to accelerate this expansion that we're looking for. But as you guys know, we have executed in a very prudent way on M&A in the past, and we'll continue to focus on it in terms of making sure we have the right assets at the right valuation.

George: And we also feel good about the capacity expansion that we're driving there that is required to keep up with the growth that our end markets are seeing.

George: That being said, you know, there is bolt on things that we can do to accelerate this expansion that we're looking for. But as you guys know, we have executed in a very prudent way to M&A in the past, and we'll continue to focus on it in terms of making sure we have the right assets at the right valuation. And it has to drive the thesis which we're looking for, which is the right margin expansion, and it has to have, you know, great returns for our business. So that's how we think about M&A. So we'll be super selective, but we'll continue to look for the right assets to really finish out our power portfolio wherever we need to that we can't, that we think we may not be able to do.

Revathi Advaithi: And it has to drive the thesis which we're looking for, which is the right margin expansion, and it has to have, you know, great returns for our business. So that's how we think about M&A. So we'll be super selective, but we'll continue to look for the right assets to really finish out our power portfolio wherever we need to, which we think we may not be able to do organically. But really not a huge focus in terms of what we're looking at right now, but if good assets come along, we'll look for them.

George: organically, but really not a huge focus in terms of what we're looking at right now, but if good assets come along.

Revathi Advaithi: I really feel good overall, George, in terms of the second part of your question, in terms of what we're driving accelerated growth in terms of high growth and markets. We feel that it's going well, and you can see that in our results.

George: will look for it. Really feel good overall, George, in terms of the second part of your question in terms of what we're driving accelerated growth in terms of the high growth and markets. We feel that's going well. And you can see that in our results.

Revathi Advaithi: Great. I have a quick follow-up if I can squeeze in quickly.

George: Great. I have a quick follow-up if I can squeeze in quickly. Just I kind of want to hone in on the power assets. You talked about kind of $1 billion revenue now, eventually growing to $3 billion, so that's kind of 3x.

Revathi Advaithi: Just kind of on the whole thing on the power assets, you talked about kind of $1 billion revenue now, eventually growing to $3 billion. So that's kind of 3x the run rate, especially, you know, that's a much higher margin, mid-teens margin that's talked about. I think that's still underappreciated by the investor community. Just curious, as the world is, so the fever pitch around liquid cooling, as we sort of transition to Blackwell, maybe the power becomes even more critical.

Speaker Change: the run rate, especially, you know, that's a much higher margin, you know, kind of mid-teens margin that's talked about. I think that that's still under-appreciated by the investor community. Just curious, as the world is sort of fever pitch around the liquid cooling, as we sort of transition to Blackwell, maybe the power becomes even more sort of critical. So we're probably seeing the critical power, embedded power, can you sort of unpack the driver behind.

Revathi Advaithi: So with your priorities being critical power and embedded power, can you sort of unpack the driver behind sort of such a strong growth kind of eventually growing to $3 billion? And how does the Blackwell sort of architecture change the underlying revenue driver and margin profile for you guys?

Speaker Change: so they you know such a strong growth kind of eventually growing to three billion and how does the Blackwell architecture change the underlying revenue driver and margin profile for you guys?

Revathi Advaithi: George, I'd say whether it's Blackwell or any other proprietary architecture that our customers are driving, you know, we think that the accelerated use of power in this architecture will be really important, right? We're hearing customers go to 80 kilowatt racks, and that is happening.

Speaker Change: George, I'd say whether it's Blackwell or any other proprietary architecture that our customers are

George: are driving, we think that the accelerated use of power in this architecture will be really important. We are hearing customers go to 80 kilowatt racks and that is happening. So that does

Revathi Advaithi: So that will drive the considerable technology and execution expertise required from both our embedded power and our critical power businesses. And, you know, that's why we feel confident about the growth rate we have given you, which is expanding from 1 billion to 3 billion. And I'll always agree with you when you say that we're underappreciated, and we need more value. So I have nothing to disagree with you on that.

George: that will drive considerable technology and execution expertise required from both our embedded power and our critical power businesses.

Speaker Change: And, you know, that's why we feel confident about kind of the growth rate we have given you, which is expanding from 1 billion to 3 billion. And I'll always agree with you when you say that we're underappreciated and we need more value. So I have nothing to disagree with that on that. On the liquid cooling side, I would say, you know, we do participate today in a very clear way with hyperscale customers in terms of liquid cooling solutions.

Revathi Advaithi: On the liquid cooling side, I would say, you know, we participate today in a very clear way with hyperscale customers in terms of liquid cooling solutions, both from a manufacturing and a technology perspective. And the integration of that technology with the embedded power technology will continue to be a key differentiator for us in terms of not just cross selling but cross technology pollination between those businesses. So I really feel good about kind of our investments in power and IT overall in terms of data centers. It's those are good investments, and they're paying off for us.

Speaker Change: both from a manufacturing and a technology perspective. And the integration of that technology with the embedded power technology will continue to be a key differentiator for us in terms of

Speaker Change: Not just cross-selling, but cross-technology pollination between those businesses. So, really feel good about our investments in power and IT overall in terms of data centers. Those are good investments and they're paying off for us.

Revathi Advaithi: Great. Thanks for your answer. I will go back to the queue.

Speaker Change: Great. Thanks for your answer. I will go back to the queue.

Operator: Thank you. Our next questions come from the line of Stephen Fox with Fox Advisors. Please proceed with your question.

Speaker Change: Thank you. Our next questions come from the line of Stephen Fox with Fox Advisors. Please proceed with your questions.

Revathi Advaithi: Hi, good morning. First question, Paul, just to show my appreciation for all you've done for the company. I thought I'd ask you about the buyback. You've done a lot this quarter. What's the thinking on buying back shares going forward, especially since you're already sticking to your $800 million of free cash flow for the year?

Steven Fox: Hi, good morning. First question, Paul, just show my appreciation for all you've done for the company. I thought I'd ask you about the buyback. You've done a lot through this quarter. What's the thinking on buying back shares going forward, especially since you're already sticking to your $800 million of free cash flow for the year?

Paul R. Lundstrom: Yeah, so we continue to think Flex is a great investment. And we, you know, we'll continue to kind of lean in on that. More to come over the next couple of weeks. We have our annual general meeting coming up, and as per our usual process, that's when the board reauthorizes. And so you'll probably get a little bit more color in another couple of weeks.

Paul: Yeah, so we continue to think Flex is a great investment.

Speaker Change: We'll continue to kind of lean in on that. More to come over the next couple of weeks. We have our annual general meeting coming up and as per our usual process, that's when the board reauthorizes. And so you'll probably get a little bit more color in another couple of weeks.

Paul R. Lundstrom: But in the quarter, we bought back about $460 million worth of stock. I think we took 15 million shares out of the count. I was just doing a little bit of a look back last night, Steven, and I think over the last couple of years, we've taken the share count down by about 15%. And so we definitely are a company that puts our money where our mouth is. And I think we've created a lot of value with our buyback program over the last couple of years.

Speaker Change: In the quarter, we bought back about $460 million worth of stock. I think we took 15 million shares out of the count. I was just doing a little bit of a look back last night, Steven, and I think over the last couple of years.

Speaker Change: We've taken share count down by about 15%, and so we definitely are a company that puts our money where our mouth is, and I think we've created a lot of value with our buyback program over the last couple of years.

Revathi Advaithi: Great, thanks, and best of luck going forward. And then Revathi, there's been a lot of politics in the news the last few weeks, to say the least. A lot of different opinions from governments on how they're going to work through tariffs, maybe different other trade issues. How do you look globally at your customers' footprint and ability to handle these changes? Is there still an opportunity for Flex to see more wins, etc., with customers as some of these tariffs maybe get enacted or don't get enacted? Thanks.

Revathi Advaithi: Yeah, Stephen, I would say that that is a big part of our conversation with customers, to proactively look forward and really focus on creating plans for them. Because with every new number that gets thrown around about tariffs, it creates, you know, tremendous chaos in our supply chain. And what we've been really good at in the last four or five years to prove it is this real focus on executing these changes and making sure that our customers are prepared.

Revathi Advaithi: So it's become almost part of our DNA, unfortunately, right? And so, even two days ago, I was with a customer having the same conversation about what our new strategy should be if some of these tariffs get implemented, and how we can help them execute on that strategy. So it's become a really common conversation, I would say, in every C-suite that I participate in. And every time with new news, we are planning a new set of strategies for our customers to make sure their supply chain is well executed and is resilient to create lots of opportunities for us, not the kind of opportunities we'd really want. But I would say this disruption does provide a focus for companies like ours to help our customers really deliver on what they want.

Revathi Advaithi: That's helpful. Thank you.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Ruplu Bhattacharya with the Bank of America. Please proceed with your question.

Speaker Change: Our next questions come from the line of Bruce Lu Bhattacharya with Bank of America. Please proceed with your questions Hi.

Paul R. Lundstrom: Hi, thanks for taking my questions. Paul, it was great working with you and wishing you the best for your next assignment. Maybe I'll start my first question with you. Last quarter, you talked about needing to invest in new program ramps, and that was going to impact fiscal 1Q margins. Was that impact less than you had expected? And I'm wondering if you can give us more details on these new program ramps, specifically for fiscal 25. How much of the revenue growth is coming from these program ramps, and when will they get to steady state?

Speaker Change: Hi, Thanks for taking my questions. Paul It was great working with you and wishing you. The best for your next assignment maybe I'll start My first question with you last quarter, you talked about needing to invest in new program ramps and that was going to impact our fiscal <unk> margins was that impact less than you had expected.

Speaker Change: And I'm wondering if you can give us more details on these new program ramps.

Speaker Change: Pacific leave for fiscal 'twenty five how much of the revenue growth is coming from these program ramps and when do they get to steady state.

Paul R. Lundstrom: Well, first of all, I appreciate the comments, Ruplu. As for the first quarter, recall the conversations that we had about a quarter ago, where we were talking about the sort of the sequential change between between Q4 and Q1. And yes, we were anticipating a number of ramps as we sort of stepped into the first quarter. You saw it with CapEx, which was up sequentially. I mentioned about a quarter ago that with CapEx comes period costs associated with doing all the non-capitalization stuff associated with facilitating and ramp readiness. I would say overall, spending was a little bit less than what we anticipated. You know, Q1 was frankly better than what I had thought.

Speaker Change: Well first of all.

Speaker Change: I appreciate the comments Roberto.

Speaker Change: As for as for the first quarter.

Speaker Change: Call the conversations that we had about a quarter ago, where we were talking about the sort of the sequential change between between Q4 and Q1.

Speaker Change: Yes, we were anticipating a number of ramps as we sort of stepped into a into the first quarter you saw it with our with Capex, which was up sequentially I.

Speaker Change: I had mentioned about a quarter ago that with Capex comes period costs associated with doing all the non capitalized stuff associated with facilities and ramp readiness.

Speaker Change: I would say overall, our spending was a little bit less than what we anticipated Q Q1 was was frankly better than what a better than even.

Speaker Change: What I had thought.

Paul R. Lundstrom: Really strong margin performance, certainly year on year, great to see. As we look ahead, you know, we're going to continue to work the ramps. As Revathi had pointed out earlier, you know, we're going to be sort of moving up with a number of cloud ramps as we go all the way through the year. And so we will be ramping up and down, but I think that's what's leading to the mix and the pretty steady sequential margin expansion that we're expecting as we progress through the year. So I would say all systems go at the moment, and Q1 was definitely an arrow up quarter. Very happy with the performance.

Speaker Change: Really strong margin performance certainly year on year, a great to see as.

Speaker Change: As we look ahead, we're going to continue to work the ramps.

Speaker Change: You had pointed out earlier you know we're gonna be.

Speaker Change: Moving up with a number of cloud ramps as we go all the way through the year and so we will be ramping through the year, but I think that's what's leading to the mix up.

Speaker Change: The pretty steady sequential margin expansion that we're expecting as we progressed through the year. So I would say all systems go with a moment and Q1 was definitely an arrow up quarter very happy with the performance.

Revathi Advaithi: Okay, maybe I'll ask you my follow-up as well, and Revathi can chime in. You know, you reported $414 million and 12 cents above the midpoint of your fiscal 1Q guide, and it looks like you're guiding maybe like $220 million, a penny above the street for fiscal 2Q, and yet you're keeping the full-year revenue and EPS ranges unchanged. So, I mean, the first question is, is there any incremental weakness in the fiscal second half? And, you know, Revathi, if there is any incremental upside, where should we expect that in the fiscal second half?

Speaker Change: Okay, maybe I'll ask you my follow up as well and they can chime in.

Speaker Change: You reported 414 million in <unk> above the midpoint of your fiscal <unk> guide and it looks like Youre guiding for maybe like $220 million, a penny above the street for fiscal <unk> and yet you're keeping the full year revenue and EPS ranges unchanged.

Speaker Change: So I mean, the first question is is there any incremental weakness in the fiscal second half and you know right with you what.

Speaker Change: If there is incremental upside where would where should we expect that in the fiscal second half. Thank you.

Speaker Change: Yeah, I'd say real Blue C.

Revathi Advaithi: I would say Ruplu, this is fiscal Q1 for us. We executed really well both in terms of top line and margin performance and feel really good about the full year. I think our Q2 guidance is in line with what we said at the beginning that we're going to see the year gradually ramp up, and that's how we're performing. So I wouldn't read too much into the guidance; it's early in the year, right, and we feel very good about the full year and how it's playing out right now.

This is fiscal Q1 for us they executed really well both in terms of topline and margin performance.

Speaker Change: And.

Speaker Change: Really good about the full year I think our Q2 guidance is in line with what we said in the beginning that we're going to see the euro gradually Iran. Thin and that's how we are performing so I wouldn't read too much into the guidance. Its early in the year right and we feel very good about kind of full year and how its play.

Speaker Change: Outright now and I would say Q2 again shows continued acceleration from Q1 and that's the main thing I would think about it I would say.

Revathi Advaithi: And I would say Q2 again shows continued acceleration from Q1, and that's the main thing I would think about it. I would say it makes a lot of sense early in the year, even with a 10 cents beat, to really keep full year the way it is. I would say that's the prudent thing to do, and that's what we're planning on. Okay, thank you.

Speaker Change: It makes a lot of sense and early in the year in Q1, even with you know a 10 cents beat is to really keep full year. The way. It is I would say that's the prudent thing to do and that's what we're planning on.

Operator: Okay. Thank you for all the details. I appreciate it.

Speaker Change: Okay. Thank you for all the details appreciate it.

Rich: Thanks Rich.

Operator: Thank you. Our next question has come from the line of Steve Barger with KeyBank Capital Markets. Please proceed with your question.

Speaker Change: Thank you. Our next question will come from the line of Steve Barger with Keybanc capital markets. Please proceed with your questions.

Operator: Hi, good morning. You have Jacob Moore on for Steve.

Speaker Change: Hi, Good morning, you got Jay Kumar on for Steve Thanks for taking my questions.

Revathi Advaithi: Thanks for taking the question. First one for me, one of the core opportunities for Flex for fiscal 25, I think, was and probably still is driving factory improvements and productivity. Can you talk about how progress against that goal has come along over the past 6 or 12 months, the applicable efficiency gained, and how much of that opportunity is left to squeeze out this fiscal year?

Jay Kumar: First one for me one of the core opportunities for flex for fiscal 'twenty five I think was and probably still is driving factory improvements and productivity can.

Jay Kumar: Can you talk to how progress against that goal has come along over the past six or 12 months.

Speaker Change: Viable efficiency and and how much of that opportunities left to squeeze out this fiscal year.

Speaker Change: Yeah I'd say.

Revathi Advaithi: Yeah, I'd say The, you know, this is my, one of my favorite topics for Flex. I would say the, I'll step back and say long-term, lots of factory opportunities, not just because, you know, that there is room to improve for Flex, but if you think about the new technology transformations that's happening from a hardware and a software perspective, those have, will have meaningful impact in terms of driving continuous factory productivity, whether it's in terms of automation or whether it's in terms of AI, manufacturing will see a big impact from that in terms of automation itself.

Speaker Change: You know this is my one of my favorite topics for for Flex I would say the I'll step back and say long term lots of factory opportunities not just because you.

You know that there is room to improve for flex, but if you think about the new technology transformation, that's happening from a hardware and software perspective, those have will have meaningful impact in terms of driving continuous factory productivity, whether it's in terms of automation or whether it's in terms of.

AI manufacturing will see a big impact from that in terms of automation itself I would say in terms of how much our productivity is baked in for the year I think at Investor Day, We showed a little chart that shows that we expect some amount of our <unk>.

Revathi Advaithi: I would say in terms of how much productivity we've baked in for the year, I think at Investor Day we showed a little chart that shows that we expect some amount of our margin improvement to come from, you know, just our mix shift and then some from productivity gains. We don't break that out and give you the specific details of how much, but as a general guidance, I expect our teams to continue to have pretty significant factory productivity focus, and we're executing on that.

Speaker Change: Margin improvement to come from you know just a mix shift and then some from productivity gains we don't break that out and give you. The specific details of how much but as a general guidance I expect our team to continue to have pretty significant factory productivity.

Speaker Change: And we are executing to that so if you look at our margin improvement some of it comes from mix change and some of it comes from factory and I'll expect that to flow through every quarter.

Revathi Advaithi: So if you look at our margin improvement, some of it comes from mix change, and some of it comes from factory, and I'll expect that to flow through every quarter. And that's a very big focus for us. I don't know, would you add anything to it, Paul? Well, first of all, Steve.

Speaker Change: And that's a very big focus for us I don't know if would you add anything to it Paul budget well first of all Steve Nice nice to hear you wanted to call. It's a it's been a long time coming and I'm glad you picked up some coverage.

Revathi Advaithi: First of all, Steve, nice to hear you on the call. It's been a long time coming.

Paul R. Lundstrom: I'm glad you picked up some coverage. But just to add to Revathi's point, think about the year-on-year growth, just from 2024 to 2025. Year-to-year, we'll probably have, at the midpoint of our guide anyway, maybe half a billion dollars less revenue, but operating profit is, again, at the midpoint of our guide, going to be up about $120 million. So that's a fairly significant volume contraction with very nice operating profit growth.

Paul: But just just to add to reverse these point think about the year on year just from 24 to 25.

Speaker Change: Year to year, we'll probably have at the midpoint of our guide anyway, maybe half a billion dollars less revenue, but operating profit is again at the midpoint of our guide going to be up about $120 million. So that's a fairly significant volume contraction with very nice operating profit growth like rabies. He said part of that comes from mix as we continued mixed.

Paul R. Lundstrom: Like Revathi said, part of that comes from mix as we continue to mix into higher value areas. But, of course, a lot of that is just continuing to drive the factory engine and optimize as best we can. And I am with Revathi. I continue to believe there's tremendous opportunity down the road. Look, we've got a huge factory network, and our job is never done. There are always things that we can do to optimize and get better and learn. So I appreciate the question, and it's nice to hear you on the call.

Speaker Change: To higher value areas, but of course, a lot of that is just continuing to drive the factory engine and Optimizes as best we can and in the eye.

Speaker Change: And with rabies I continue to believe there is tremendous opportunity down the road look we've got a huge factory network and our job is never done there's always things that we can do to optimize and get better and worse. So I. Appreciate the question and nice to nice to hear you on the call.

Revathi Advaithi: understood. Thank you.

Understood. Thank you and then second one for me this was a little bit of a follow up to a prior question related to your core business model are there any specific areas that you see additional opportunities to add services and value added products business on top of the traditional Oems relationship I'm thinking about something like the.

Revathi Advaithi: And then, second one for me, this is a little bit of a follow-up to a prior question related to your core business model. Are there any specific areas that you see additional opportunities to add services and value-add products business on top of a traditional EMS relationship? I'm thinking about something like the ecosystem you've set up for ServerX. Could you identify any other areas where you're looking to apply a similar model? Why do you like those areas and the margin effect you think that could represent?

Speaker Change: We set up for server racks could you identify any other areas, where you're looking to apply a similar model why are you like those areas and the margin effect do you think that could represent.

Speaker Change: Yeah, I would say that the value added services is the bucket ties it has big opportunity not just in terms of the kind of the datacenter ecosystem, but it has a big opportunity across all our businesses. So whether it is.

Revathi Advaithi: Yeah, I would say that value-added services, as we bucketize them, have a big opportunity, not just in terms of the kind of the data center ecosystem, but they have a big opportunity across all our businesses. So whether it is, you know, repositioning product for our customers as they bring product into their factories, whether it is the aftermarket of refurbishing or remanufacturing or taking it to waste, you know, end-to-end, being able to deliver the whole value proposition for our customers is really important for us.

Speaker Change: Positioning product for our customers as they bring product into their factories.

Speaker Change: There. It is the aftermarket of refurbishing of Remanufacturing are taking it two ways.

Speaker Change: So and to and really being able to deliver at the whole value proposition for our customers is really important for us. So whether it is in the health solutions business, whether it's an industrial business, our consumer businesses, it's everything from kind of the logistics of it both the forward and reverse.

Speaker Change: Logistics of it so staging of products it could be everything from kind of the the remanufacturing the refurbishment of it or taking it to the east We recently announced a small acquisition of technology acquisition that really helps us do more in that space. So it applies to all the <unk>.

Revathi Advaithi: So whether it is in the health solutions business, whether it's an industrial business or a consumer business, it's everything from kind of the logistics of it, both the forward and the reverse logistics of it. So staging of products, it could be everything from kind of the remanufacturing, the refurbishment of it, or taking it to waste. We recently announced a small acquisition, a technology acquisition that really helps us do more in that space.

Speaker Change: So I would say in the big opportunities for us moving forward outside of <unk>.

Speaker Change: Both consumer and our CEC business is in industrial and health, both large opportunities for expanding services very profitable they talked about being around $1 billion today, and we are putting a lot of organizational horsepower behind growing that and accelerating that.

Revathi Advaithi: So it applies to all the end markets, I would say, and the big opportunities for us moving forward outside of both consumer and our CEC businesses in industrial and health, both large opportunities. So those are some of the big opportunities for expanding services, very profitable. We talked about being around a billion dollars today, and we're putting a lot of organizational horsepower behind growing that and accelerating it.

Speaker Change: Great. Thank you for taking the questions and Paul Congrats and good luck to you Sir.

Revathi Advaithi: Great. Thank you for taking the questions. And Paul, congrats and good luck to you, sir.

Paul: Thanks, Steve I appreciate it.

Operator: Thank you. Our final questions will come from the line of Mark Delaney with Goldman Sachs. Please proceed with your questions.

Speaker Change: Thank you our final question will come from the line of Mark Delaney with Goldman Sachs. Please proceed with your questions.

Revathi Advaithi: Good morning. Thanks for taking my questions. And Paul, thanks so much for all of your help. I'm wishing you the best going forward. My first question is on the competitive landscape within the industry more broadly, and I'd like to double-click a little bit more on to what extent, if at all, some of the weaker eye market conditions that have been seen in areas like telecom, consumer electronics, parts of industrial have resulted in more difficult pricing that Flex is needing to deal with. And if so, does that affect your longer-term margin aspirations at all?

Mark Trevor Delaney: Good morning, Thanks for taking my questions and Paul. Thanks, So much for all of your help and wishing you the best going forward.

Speaker Change: Yeah.

Mark Trevor Delaney: Our first question is on the competitive landscape within the industry more broadly and opened a double click a little bit more on to what extent if at all some of the weaker end market conditions that have been seen in areas like telecom consumer electronics parts of industrial have resulted in more difficult.

Speaker Change: Great pricing.

Fox is needed to deal with and if so does that affect your longer term margin aspirations at all.

Speaker Change: I would say Mark one thing that this kind of you know I would say a recessionary environment or a weaker end market has really shown for the industry itself.

Revathi Advaithi: I would say, Mark, one thing that this kind of, you know, I would say recessionary environment or weaker end market has really shown for the industry itself is the pricing capability and the margin improvement capability that exists in the industry, right? So you've seen over the last kind of four to five years, you know, everyone's moved margins up. You have seen more discipline in terms of overall execution. You have seen the focus on not adding capacity when we didn't need it.

Speaker Change: Is the pricing capability and the margin improvement capability that exists in the industry right. So you've seen over the last.

Speaker Change: Four to five years, you know everyone's moving margins up you've seen more discipline in terms of overall execution you have seen the focus on not adding capacity when you didn't need it and all of that has played out through this downturn because that was always the question how does this industry behave.

Revathi Advaithi: And all that has played out through this downturn because that was always the question: how does this industry behave, you know, in weaker end markets? I would say that the same for us. Pricing has held through because we do see an inflationary environment across the world. So pricing still has to hold true for us, and the focus on really selling value and where we can sell value is very consistent in terms of our operational model. So I would say, if anything, it only consolidates and strengthens our position in terms of longer-term margin guidance.

Speaker Change: You know in weaker end markets I would say that the same for US pricing has held through because we do see an inflationary environment and in in across the world. So pricing still has to hold true for us and the focus on really selling value and where we can sell value is very consistent.

Speaker Change: In terms of our operational model, so I would say if anything it only consolidate and strengthens our position in terms of a longer term margin guidance.

Speaker Change: Thanks for that and then another question on the geopolitical environment Theres been a proposed increase in tariffs from one of the political candidates in the U S. Running for President Fox has already shown an ability to support customers with tariffs and supply chain issues and being responsive in terms of what regions. They wanted manufacturing.

Revathi Advaithi: Thanks for that, Revathi. Another question on the geopolitical environment. There's been a proposed increase in tariffs from one of the political candidates in the U.S. running for president. Flex has already shown an ability to support customers with tariffs and supply chain issues and be responsive in terms of what regions they want to manufacture in. But to the extent there's higher tariffs to import products specifically into the U.S., maybe talk about to what extent Flex could support that and what kind of capacity you have currently in place in the U.S. and if that's something you could support customers with relatively quickly, or would more investments be needed in order to perhaps enable increased domestic manufacturing. Thanks. Yeah, let's see.

Speaker Change: To the extent there is higher tariffs to import products specifically into the U S. Maybe you can talk about to what extent flex could support that and what kind of capacity do you have currently in place in.

Speaker Change: In the U S and if that's something you could support customers with.

Speaker Change: Relatively quickly or with more investments we needed in order to perhaps enable.

Speaker Change: <unk> domestic manufacturing.

Speaker Change: Yeah.

Revathi Advaithi: Yeah, I'd say, Mark, this is a big topic for us with our customers. And unfortunately, this chaos around tariffs creates opportunities for companies like us. And what the last, you know, four, five years has shown is that Flex is really focused on building supply chain resiliency for our customers. And, you know, I mentioned earlier, just a couple days ago, I was with another customer really talking about, you know, accelerating product movement for them as a result of the new tariffs that we've heard about.

Speaker Change: Yeah, I'd say Mark this is a big topic for us with our customers and unfortunately this chaos around tariffs creates opportunities for companies like us and what the last you know four five years has shown us what flex is really focused on is building supply chain resiliency for our cut.

Speaker Change: <unk> and <unk>.

Speaker Change: You know I've mentioned earlier, just a couple of days ago I was with another customer really talking about.

Speaker Change: Accelerating.

Speaker Change: <unk> movement for them as a result of the new tariffs that we've heard about so flex really takes this opportunity they have become really good at this and and and again Thats not you know that's not great I would say for the whole market, but it provides us opportunity because we plan ahead and then some of these you can.

Revathi Advaithi: So Flex really takes this opportunity; we have become really good at it. And, and, and again, that's not, you know, that's not great, I would say, for the whole market, but it provides this opportunity because we plan ahead. And then some of these you can execute faster based on the complexity of products, and some of them could take years to execute, right? So we have been going through this for the last five years.

Speaker Change: Execute faster based on the complexity of products and some of it could take years to execute right. So.

Speaker Change: We have been going through this for the last five years and if anything this adds more to the mix.

Revathi Advaithi: And if anything, this adds more to the mix than anything else, to help our customers really plan for these types of issues. So I'd say, you know, we're really focused on this, and then, hopefully, it just adds to more growth for us. But it is really important to help our customers build resilience.

Speaker Change: Then anything else to help our customers really plan for these types of issues. So I would say.

Speaker Change: We're really focused on this and then hopefully it just adds to more growth for us, but it is really important to help our customers build resiliency.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Revathi Advaithi: Thank you. I will now hand the call back over to CEO for his closing remarks.

CEO: Thank you I will now hand, the call back over to CEO for closing remarks.

Revathi Advaithi: I will now hand the call back over to the CEO for closing remarks. Thank you. Thank you for joining us.

Revathi Advaithi: Thank you. Thank you for joining us. We really look forward to speaking with you again next quarter. On behalf of my entire leadership team, I want to give you a sincere thank you to our customers for their trust and partnership and all our shareholders for your continued support. And lastly, I want to thank our Flex team across the globe for their continued dedication and contributions. Thanks, everyone.

CEO: Thank you. Thank you for joining us we really look forward to speaking with you again next quarter on behalf of my entire leadership team I want to give you a sincere. Thank you to our customers for their trust and partnership and all our shareholders for your continued support and lastly, I want to thank our flex team across the globe for their continued dedication.

Revathi Advaithi: We really look forward to speaking with you again next quarter on behalf of my entire leadership team. I want to give you a sincere thank you to our customers for that custom partnership and all our shareholders for a continued support, and lastly want to thank our Flex team across the globe. We hope for their continued dedication and contributions. Thanks everyone. Thank you.

Speaker Change: Patient and contributions thanks, everyone.

Speaker Change: Thank you. This does conclude today's conference call. Thank you for joining you may now disconnect.

Operator: Thank you. This does conclude today's conference call. Thank you for joining us. You may now disconnect.

Unknown Executive: This does conclude today's conference call. Thank you for joining. You may now disconnect.

Speaker Change: [music].