Okay, great. Thank you, everybody, for joining us. My name is Mark Delaney, and I cover Flex for Goldman Sachs. I'm very pleased to have Revathi Advaithi, the CEO of Flex, with us today. Thanks for joining me. Thanks, Mark. As many of you know, Flex is one of the largest manufacturing companies in the world, with about $30 billion of annual revenue. Flex reports in two segments that are, are about similar in size. The Agility Solutions segment serves end markets, including communications, enterprise and cloud, lifestyle and consumer devices. And then also the Reliability Solutions segment serves end markets such as automotive, medical, and industrial. I thought, Revathi, to start, you could speak to some of your key priorities and your focus items currently. Yeah, I think, Mark, I think top of mind for everyone, of course, is what's happening in terms of end markets, right? We have six very distinct end markets within our two businesses that we participate in. So just keeping an eye on, you know, how those end markets are doing, how we react to that. And we have very six distinct end markets. So consumer is behaving in a certain way, automotive is behaving in a different way. So top of mind, of course, is for us, making sure that, you know, we are agile in terms of our responses. We are reacting to market requirements and needs really quickly. So that's, that's a top-of-mind, key priority. And then the second is, you know, even as those changes are happening, we have a lot of key new programs that are kinda, you know, going through their ramping processes across our businesses. So making sure that those are, you know, well-established and well running, is top of mind for us. They're particularly big in terms of our automotive and industrial businesses, which are complex programs to ramp. And then lastly, I would say keeping our eye on, in between all of this and the technology trends that are happening, whether it is, in the renewable space or everything that's happening in cloud. Making sure that, you know, we're committed to the things we said we would do in the renewable space and in the EV space, so keeping our eye on that and making sure those priorities are continuing. I'd say those three are top of mind for us, and you know, that's kind of the direction we're heading in right now. Maybe we can dig into some of those- Mm-hmm. - end market trends in a little bit more detail, starting with the Reliability Solutions market. Can you remind us what the key drivers are for Flex in those areas, and what you're seeing in areas like automotive, health solutions, and industrial? Yeah. So all three, I'd say automotive, a lot. I mean, you, you're reading everything in terms of what's happening with automotive markets. We have a good balance of, you know, new growth coming in terms of our EV platforms, our existing business in terms of the traditional ICE business. So, EV is seeing strong growth, resulting, you know, from the new bookings we've had and the ramp that you're seeing in terms of electric vehicles globally. We call that Next Gen Mobility. So I'd say those end markets also catching up from the supply chain crisis a little bit because, you know, that was a harder time in terms of shortages. So automotive business, I would say, is still running strong. Healthcare has been, you know, depends on which part of healthcare. We've said in the past, outside of kind of big hospital investments, we have seen healthcare continue to be fairly robust in terms of growth, particularly in the areas we are, which is medical devices like CGM equipment. You know, healthcare has been fairly, I would say, consistent in these kind of volatile markets. Industrial, which has a wide array of products within it, you know, it has everything from renewables to traditional power products. I'd say it depends on those end markets. Renewables, if you're in the home renewables space, those are more challenged. If you're in the utility renewables space, it's doing fairly well. If you're in power products, I would say investments are very strong across the U.S. So industrial is a mixed bag based on which particular end market you're focused on. So I'd say, each one is behaving independently in terms of, you know, in these types of environment, which you'd expect. On the topic of automotive, you mentioned Next Gen Mobility and electric vehicles, also ADAS applications. Can you remind us how much of your automotive revenue is coming from those sorts of areas, and how you see that progressing over time? So our base business in automotive is still mainly from ICE applications. But the reminder I'd give is, even within the ICE applications, we don't do anything in the traditional kinda transmission, power products, and things like that, that is in the traditional ICE products. So even within ICE, we are in an electronic space, in the infotainment ADAS space. So most of our business, I would say, while it's still with ICE, our new businesses are mainly ramping up in the kinda EV Next Gen Mobility space. So we haven't publicly split that number, but I would say we're in a majority ICE, but mainly in the electronic space, which is where you wanna be. We don't see any reduction in that, only continued growth, and then we're shifting our new bookings more into the traditional Next Gen Mobility, in the new Next Gen Mobility spaces. Yeah. Have you been able to quantify or put a rough range around how much more content there may be on an electric vehicle relative to an ICE vehicle? Yeah, I'd say, you know, those numbers get thrown around quite a bit, and I'd say I haven't seen consistent apples to apples comparison on this, so whatever number I give you is gonna be different from what anybody else says. I think what we have traditionally said, that is in the ICE business, maybe it's around more $300 per vehicle content for us. And then in the new Next Gen Mobility will be north of a $1,000 and increasing. But I'd say it's hard to put an apples to apples comparison to that. But $1,000 is a fairly conservative number in terms of content per vehicle, I'd say. Okay. One of the other interesting growth vectors within Reliability has been renewables. You talked a little bit about trends between utility and residential types of programs. I do think some of the inverter companies have recently seen some weakness, so maybe that's what you're alluding to. But could you talk a little bit more on what you're seeing within the inverter business? Yeah. So renewables, as you know, we all know that, you know, renewables is in the right space in terms of long-term macro and the growth trends associated with it, right? So anybody who's been following renewables for the last 10 years know that the tipping points of what makes sense for renewable investments is finally reached, and things like IRA and all, of course, help it a lot. And I think what we're seeing in terms of residential investments on renewables is probably a lot to do with interest rates. Of course, I think that, you know, higher interest rates means it's harder for homeowners to invest in renewables. And so I think as a result of that, you see some slowness in terms of the residential inverter business. But I would say it's a lot more than just that. The utility grade, I would say renewables is going fairly well. Power products is going fairly well, even in renewables, because you have to keep investing for efficiency. And we make inverters, we make storage, so a lot of homeowners are adding storage. So I'd say I'm very bullish about the renewables segment overall, and things like IRA does help. But, you know, who knows, you know, what the focus of homeowners are right now, as interest rates are pretty high, right? So, we feel very good about the long-term trajectory of kind of residential solar as a whole. Yeah, and I think, if I'm remembering correctly, renewables had eclipsed $1 billion of annual revenue, even excluding Nextracker. Yeah, that's right. And you know, we said that a couple of years ago or a year ago, whenever we did our last Investor Day, is that renewables is the right long-term, you know, trajectory for Flex to invest in. And it has turned out to be the right area of growth for us, and we feel very bullish about kinda renewables as a whole. And not only do we have, you know, inverters, but we also have all the charging stations and all that associated with it, is also in our renewables business. And so much infrastructure investment is going on in terms of charging stations. You know, we feel good about the growth of that business, too. That's. That has been a really nice driver to see as an analyst over the last several years. Another growing business for you has been cloud, and touches both the Reliability and the agility segment. Maybe remind investors how big cloud is for Flex and where you participate. So in our CEC business, which is the largest business for Flex, it's around 30% of Flex's revenue. You know, our enterprise segment is still the largest within that, then comes our communication segment, and then last is our cloud business within that, but it is the fastest growing within that segment. So we haven't directly shared the breakout of each of those, but cloud is the largest growing part of the CEC business. Of course, with cloud, every time there is capacity investment, there is pause as you digest it, then, you know, there's more capacity investment. And I'm sure we're not gonna end this conversation without talking about, you know, GenAI somewhere. You know, that is definitely driving new investments in cloud, and, you know, which we're quite happy to participate and be the beneficiary of that. You took my next question, which was on AI. Yeah, maybe talk a little bit more around what you do within AI, you know, the different products and capabilities that Flex maybe offers, and, you know, any revenue step up on an AI rack relative to a traditional workload that you may be able to share. I will start by defining in cloud again. It is not an apples to apples comparison to what Flex does versus other EMS companies do. So it is a different portfolio. So we have two parts of our portfolio in cloud. The first is what we do in our CEC business, which is providing more integrated cloud solutions. So taking a rack, fully populating it, fine-tuning it for what the customer needs, and delivering it as a fully ready product for the cloud customer. So that's one part of what we do. And then the second part sits in our industrial business, where we do two things. We design and build embedded power modules for the cloud business. And then we also, through our Anord acquisition, participate in facilities power for cloud businesses. So we have three very distinct parts of a solution for our cloud business. And most EMS customers will do the first one in terms of, you know, some rack solutions, but not the second part, which is more the power side. So I would step back and say, so it's hard to give you a comparison of content in cloud, but the biggest difference we're seeing right now is the consumption of two things. One is the consumption of power in what is required for GPU compute is pretty significant. And so when we have custom designed embedded power modules that go into the GPU compute racks, which obviously are doing well and will continue to grow and do well. There's a lot of power requirements to run the integrated rack solution. From our critical power side, you know, capacities are only constrained. The more we can add, you know, facilities power to cloud solutions, it'll be helpful. I would say on the integrated rack solution, which is part of CEC, the complexity of the boards are changing, which is required for, you know, for the GPU compute intensity. Again, you know, the scale of building these integrated rack solutions and providing that at scale to customers, hyperscale customers who are participating in Gen AI, is a significant part of what we do. All of those, you know, are seeing through some significant growth, as expected, and, you know, we'll continue to benefit from that. Mentioned in the opening response about being focused on program ramps as one of the key things that's top of mind for you. I believe you've got a pretty meaningful cloud program starting to ramp in the second half of this year. Operationally, do you think the company is ready to support that? Oh, yeah, absolutely. And then maybe talk about the breadth of Flex's exposure to hyperscale, and whether you're penetrated pretty broadly across the main cloud service providers, or do you think it's a little bit more, you know, a little bit more targeted and narrow in breadth at this point? I'd say it's fairly distributed. I think what I like about how we are in the cloud business is we are fairly distributed across hyperscale customers. That being said, some more than the others, so there's room for growth. And also geographically, I would say we're fairly well distributed, so I like both elements of it. But we're mainly focused on hyperscale. You know, we don't do a lot of colo and things like that. Okay. One of the discussions I've had with investors is around how will AI impact not just hyperscale, but perhaps enterprise as well, and will traditional enterprise data centers do some of the same sorts of investments? I'm curious, are you seeing any investment and interest from your enterprise accounts within CEC in these sorts of AI racks? Yeah, not yet. I do think that eventually comes. You know, scaling for these GenAI power-hungry data centers is not an easy thing to do. That is going to require a different skill set, even from our enterprise customers, to make that happen. We do think that happens eventually, but I don't think we're ready for that yet. Yeah, I think with all of the complexity and innovation you can bring to these sorts of workloads, you know, related to AI, I imagine that's a margin opportunity as well. But, but can you talk about, you know, how margins may be, you know, are impacted by some of these, you know, solutions as you, you know, maybe can address these things- Yeah - in cloud with AI? I would say the biggest margin opportunities for us in cloud is two things. One is, definitely in our power business, right? Like I said, in our embedded power business, we design, and co-design with our customers. So it's a Flex solution that is then designed specifically for a particular, you know, end, chip design. So we work specifically with that. So the margin profiles on that are different. And as that continues to ramp up significantly, you'll see that, help us. And then, of course, our Anord business, which is in facilities power, has a different margin profile altogether. And, again, as I said before, in that capacity is our limitation, so we'll have to add more capacity and continue to ramp up for these power-hungry, you know, GenAI data centers that we'll continue to see build up. And that's our margin opportunity, I said, but Flex has always been focused on when we do complex things, we want to make sure we get paid for it. So an integrated rack solution, large scale, very power hungry, very complex distribution boards populated and fine-tuned to an end customer. So if our commercial teams were doing their job right, they should be getting margin opportunities for that too. Well, I think the margin and expansion the company's reported over the last few years would suggest they've been doing their jobs pretty well. Maybe we could shift gears to Agility Solutions. I think on the last earnings call, Flex, very similar to a number of companies in the tech industry, has reported some weakness in some of the consumer and enterprise comps, infrastructure, sorts of end markets. Can Can you maybe talk about what you're seeing there and perhaps when you think revenue trends could bottom in those end markets? So in our Agility business, I mentioned in the beginning, there are three major components to our business units there. Our CEC business, which is the cloud communication enterprise business, and then the other two, Lifestyle and Consumer Devices, are more focused on the consumer end markets. And in that, we have been, you know, saying this for I think the last year or even longer, that those businesses, you know, have been declining for a while. I, I do not like to call bottom because I just have never been right. So you might as well, you know, look at it in the hindsight and then, you know, and then comment on it. But what we have seen in those businesses is the impact of, you know, interest rates. We've seen the impact of, who knows, maybe, you know, like all of us, we're investing more in travels and services, you know, than in, hardware products. So we definitely have seen the impact of that. I don't know if it's bottomed or not, but I feel like, you know, we're seeing fairly stability in that from where we were a year ago. So I feel kind of good about the end consumer markets and how we have managed that. So, and then CEC, we talked a lot about, right? I think there is some conversation about inventory digestion and all our tech customers, and you're seeing that being talked about a lot in this conference, too. And, you know, I think the predictions has been based on each customer. Communications has been a little different. You know, the networking, you know, companies have talked about digestion for the next kind of six to 12 months. You know, cloud's in a different place. So I'd say each one is talking about inventory digestion in a different way. We definitely see the impact of that. But I wouldn't, you know, be brave enough to call, you know, where all that is heading. I'd say what is important to us, and I've said this in my last, what is gonna be five years here very soon, as Flex's CEO, is the agility business is all about being able to react and do well in terms of for overall operating margins, to how the end customer moves. And we have shown our ability to do that. The whole operating model of this company was built around: Be sure to react well to agility's ups and downs. And what we have seen is that we have done really, really well. And so our focus is react to your customer's need, be agile about it, make sure you maintain and keep improving your operating margins for that business, and I think that has gone fairly well. Yeah. That's, that's helpful. Maybe shifting gears a bit to the business, more holistically, thinking about North America. There's been a lot of investment and media reports around pretty significant shifts in manufacturing profiles, companies wanting to do a lot more in North America. Some of it's spurred by the CHIPS Act and the IRA. How does that impact Flex? You know, I'd say, you know, I've been working for the last, what, 30+ years. Not dating myself here, but what the trend shift going from, you know, decades of globalization to where we are today, which is have a regionalized supply chain closer to home, make sure there's resiliency in your supply chain, have more control over it, is a true phenomenon. You know, I never thought in my career I would see the reversal of what we've taken years to build up. A good example is Flex's growth in North America. If you think about U.S. and Mexico, has been north of 30% last year. That is pretty significant, right? So, when was the last time you would see those kinds of numbers? That is driven mainly by customers wanting a footprint and the ability to, you know, manage a supply chain closer to your end-end consumer. And so we're definitely the beneficiaries of it. I would say, but it's not just a North American phenomenon. For example, even our Malaysia, you know, grew by 30%, right? So, so we're seeing that even in Southeast Asia. Europe had pretty decent growth last year for us. So it was all about de-risking from certain parts of the world in terms of seeing building supply chain resiliency. I don't think this phenomenon, you know, changes anytime soon. It's obviously spurred by things like IRA, but the base of it is built by this innate need to create supply chain resiliency. As long as that conversation is still sitting within C-suites across America, people have long memories. Nobody's gonna want to repeat what happened in the last couple of years. I'd say companies like Flex will definitely benefit from it, because what customers want is a global company that can do the same thing for them in three parts of the world and do it really well. There are very few companies that can do that. Yeah, I think, you know, maybe another benefit, too, of being closer to where some of your customers and suppliers are, you know, helps with some of the emissions reduction targets. I know you guys have done a lot of work on that as, you know, as well, a lot of your customers with their sustainability reports. Yeah. I mean, I always say that we don't do sustainability because it's like a cool thing to do. We just believe it's the right thing to do, and it's a passion for our you know for our employees. We just published our sustainability report, I think yesterday, so if anybody has some nighttime reading, I would love for you to read it. But it matters. You know, Flex is a large company with a big manufacturing footprint, and if people like us can't focus on what needs to be done for sustainability, then it's not right in terms of where our goals you know can take us. So we've done a lot. It does help, I would say, in terms of having a more balanced footprint, but you really see it eventually in terms of freight reduction and those kinds of things that'll build out eventually, is where you'll see it. I'd be remiss if I didn't bring up Nextracker, and that the business has done very well since it was acquired by Flex many years ago. In July, Flex sold down its percentage to 51%. Can you talk about how you think about your exit strategy? I think you've said you think it should be a standalone company. So anything you can share on your thought process with that? So, you know, we've been very consistent with our views on Nextracker, and I would say we've done really well with managing, you know, what we do with that business. When we, you know, sold down our latest tranche and we filed an S-1, we said we have a private letter with the IRS, which is looking for their feedback on a tax-free spin, you know, for the remaining portion of the business. And, you know, we have to work through that. We have to work through the same with the Singapore government, right? So, and then we have to work through some SEC issues. So we just have to work through all those elements to get to what we have said is the end goal, which is for Nextracker to be an independent company. So once we do all of that, you know, it's in the hands of the boards to make the board to make the final decision. But we have been very, very consistent, and I would say we have done very well in terms of managing the Nextracker, you know, business overall. Some of the acquisitions the company has done, that we've spoken about, Nextracker, Anord Mardix, those aren't just assembly businesses, those are full products that you can sell to customers. How should investors think about the progression of your business? And do you think Flex will do more on a full solutions and product basis going forward? I'd say in the end markets we're interested in, you know, I said this a couple years ago, so in Next Gen Mobility, which we're very interested in, in renewables, which we have talked about, we're very interested in. In those types of end markets, if a full product helps the overall solution for that end customer, then yes, we will do it. When we bought Anord, you know, we bought a facilities power business because we knew that hyperscale cloud growth was gonna be really important. So we said, you know, in Next-Gen Mobility, renewables, cloud is important, and we knew that all of these are gonna be power-hungry products, right? So when a company like Anord came up with a great valuation, that made sense for Flex, and it fit the cloud story we were looking for in completing that portfolio, we went and bought that. So it'll have to fit that thesis. I think all of you know by now that I'm quite prudent in my approach of how we do things. So if it fits that thesis of fitting in those three businesses and completes our portfolio, yes. Maybe we could talk on supply chain, and we touched a little bit on this already in some of the regionalization trends. But maybe just in terms of your own ability to procure the parts that you need, are there still shortages that Flex is contending with? If so, what areas, and how do you see that evolving in the coming quarters and years? Yeah. So, you know, people are talking about that the chip shortage is all gone and things like that. Yes, in a large portion of what you see in terms of the smaller size, you know, chips, I would say in kind of 45 and higher, it's still there in terms of some level of shortages, just because those investments are still catching up. So we still do see fits and starts in our—particularly in our automotive and our industrial business. And, you know, we expect that continues, for a bit. But it, it doesn't, you know, show up in the news as much because those are a smaller part of kind of the overall economy and things like that. We see still starts and stops in automotive and industrial as a result of kind of the, you know, the larger size kind of investments still still slowly ramping up. There's a commitment to do it, but it's still taking time. I think Flex has had more inventory on hand than it ran with historically, in large part because of the supply chain shortages and some inefficiencies with respecting complete kitting, and then I suppose inflation is maybe a role as well. How How does that trend in the future, and can you start reducing inventory over time, or is this the new normal for your inventory levels? Absolutely not the new normal. We have been very clear about this, that, you know, these inventories were bought on behalf of our customers for a certain reason. And we'll continue to see that come down, not only just as shortages get better, but typically even as, you know, end markets come down, you know, we see some reverse cyclicality in terms of our cash flow and how that generates. So we'll see inventory wind down as a result of it. And so we absolutely see that happening. And you know, we've committed to an 80% cash flow conversion, and we feel like, you know, inventory reduction is part of that. And so I feel very comfortable that that will continue to wind down. Talk a little bit around margins. I'm hoping to speak a little bit more on that topic. The company has a 5.0% - 5.2% adjusted EBIT margin target for this fiscal year. Maybe talk to some of the puts and takes around EBIT margins for fiscal 2024. Yeah, so fiscal 2024 EBIT margins, you know, one was, again, we said is dependent on, you know, our end market growth, you know, Reliability is growing a little faster, though Agility margins are pretty good these days. So I can't comment, you know, in terms of a mix shift or anything like that. But, well, some of this was mix change that we expect to see. Some of it was definitely focused on kinda, you know, pricing due to inflation and things like that, that we were recovering. We feel comfortable about the EBIT margin. You know, I think even if, you know, we see kind of puts and takes in terms of the top line, I think what we have shown the ability to do is manage, you know, economic ups and downs really well. We feel quite good with the terms of our EBIT target and, you know, our ability to hit that. I've been following this industry long enough to remember when EBIT margins and Agility segments ran more like 2% - 3%, not mid-single digits. How do you think these sort of Agility margins are sustainable? Absolutely. Absolutely. Because this is not about the industry, this is about how you run a business. The ability to continue to make mix shift, I think, is super important, and every business needs to do that. Doesn't matter which industry we're in. We have shown the discipline, and the industry has followed, so I think it continues. The second is, there's so much still to do in terms of factory automation and everything associated with that, that the productivity benefits... long tail there. So between those two, I would say absolutely. One of the drivers of your earnings has been higher margins, and the company had articulated at its last Investor Day for fiscal 2025, excluding Nextracker, a target for $265 of earnings. Is that still achievable, or have some of the macro factors and you know, headwinds in certain markets made it more difficult to get to that kind of a level? That's definitely still achievable. But like you said, you know, there's so much that has happened since the time we gave that information, right? A supply chain crisis, more COVID, a war, and then now a recessionary environment. But even with all that, I think we do a really good job of how we manage the business. Our mix shift has helped. I'd say how we generate productivity has been really good. And so I feel good about that target that we have given, and I think that would be, you know, quite a good thing for us to hit that number, considering we said that two years ago, and I think we're headed in the right direction. Yeah. We have time for a couple more questions. I wanted to give folks in the audience the opportunity if they have any questions. Yes, maybe we've got a mic coming, if you don't mind waiting since we're webcasting. Good morning. Good morning. I have two, if you don't mind. First, on the enterprise data center side, I was curious if you guys have sized that opportunity, given compute demands and the power constraints in North America, more specifically, the U.S. and Western Europe. Seems like the rip-and-replace opportunity for existing enterprise data centers is underappreciated, and will need those more sophisticated solutions that you had highlighted earlier. And then to maybe piggyback on one of Mark's questions on near and reshoring, just maybe if there are any inorganic growth opportunities you're looking at, there are certainly quite a number of private platforms in the U.S. that have blue-chip customers that would complement your existing healthcare, and industrial business, particularly on the robotic side, but also offer some newer growth vectors that are low volume, but high margin, like aerospace and defense. Mm-hmm. I was just curious if you had any updates there. Yeah. Thanks, Eric. So on the first one, I would say, we aren't ready to kind of give any, you know, numbers in terms of sizing the enterprise opportunity, but I would totally agree with you that it is—it, it has to be significant. But even hyperscale customers are still struggling to, you know, size and, and, you know, the growth opportunities associated with AI, right? And you're seeing a lot of, difficulty in terms of finding the right power base and things like that to even scale up what we see for, for cloud customers. But definitely enterprise, in the long run, has to be pretty significant because we see it even for our own investments within companies like Flex, right? I think the biggest constraint will be power, and, you know, figuring out how to deal with that constraint will be big on our mind. So we are thinking about kind of what does this mean to future footprint? How does it look like? What are the places that will be the most power efficient? But we haven't sized it yet to be able to, at least publicly talk about it. I would say in the second part... What was the second question? Inorganic growth. Oh, inorganic opportunities. We have said before that we, we've looked and continue to look quite a bit in terms of health solutions. We don't like the multiples there, and so we struggle to make it work. We do feel areas where there is opportunities for miniaturization and things like that are big for us. And so if we find the right fit in terms of valuation, we'll continue to look at that. On industrial, the same way. We feel there is clearly opportunities for us, but it has to fit the right multiple. But both of those segments are big interests. We're very active. We talk to a lot of people, but it has to just fit our valuation model, so. Well, we're gonna have to end it there, unfortunately. Revathi, thanks so much for joining us. Thanks, Mark. Thanks for having me.