Flex Ltd at Goldman Sachs Communacopia & Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : That's very helpful and a lot of things for us to dig into during the discussion today. Michael, one for you. You recently took on a role as Chief Commercial Officer with responsibility for both the reliability and the agility segments. What are the benefits of having oversight of both segments and what are your key priorities?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : On the last earnings call. Flex noted mixed trends by end market with strength in cloud and autos, the softness in core industrials and consumer devices. Is there any update on the broader demand backdrop that you can share?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : And when you think about being able to sustain the profitability and the earnings outlook, even if there is some fluctuation in certain end markets, is there incremental restructuring you're doing or is this more the way the business is evolving? And I think we talked about how maybe EMS companies can charge for unused capacity in ways they couldn't be for more of a partnership approach or you just -- the broader, the broader restructuring of operations to mix between different program areas where their strength and weakness and maybe help me understand how you maintain that target?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : That's helpful. Because you had several program launches expected for the second half of this fiscal year. maybe you can talk about how those are tracking?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Okay. That's helpful. As you think about the longer-term margin objectives you spoke about and target of north of 5% for this year, 6% plus longer term, how far along are you in the journey in terms of the things the company used to do in order to execute on that?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : One of the ways the company has improved margins historically was pruning less profitable businesses. You mentioned the $1.4 billion that you exited at historically, but as your evaluating the market as it stands today, do you think you need to engage in any higher level of product pruning than is typical when you think about this year or the next few years?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Michael, you mentioned products and in particular data center has been one of the areas where you've been able to sell some of these power products at much higher margins, a little bit of a different business model rather than building something for somebody else, you're selling the product to these customers. Maybe talk about how that may evolve going forward? Do you see that becoming a bigger focus either organically or through M&A like in Nordics in the past?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : As you have the 20% target within the data center business, $3 billion of revenue in total. Maybe help us understand how much of your data center business is tied to AI.

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : We think about the companies investing billions of dollars for this facility. There's no, it's not that many that are the key player. So help us understand the breadth of your exposure to some of these major hyperscalers and how broad probably in what position do you think you maybe?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : You mentioned data center has been growing very strongly, no change to that outlook. Maybe you can help investors better understand a little more specifically, if you can how to think about the data center growth for this year? I think the 20% was a five-year take or so some help at all over the next 12 months? And does the slower Blackwell supply ramp affect Flex?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Okay. That's hopeful I want to talk about services. You mentioned a few times already. It's been a theme in the last few earnings calls and at the Investor Day, maybe help us better understand a little bit more what services you're providing, but also how you charge for that was I think in the past services were just given away in the industry, but it sounds like you had an above average margin driver for?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Okay. So I was wondering if there's some other things like private label components and she modeling those are going into the services that bucket, as you guys talked about China, and that's what we put into our value-added services bucket. All those things that I just mentioned, and I know you cited on the last earnings call in the Investor Day, but maybe remind everyone how much revenue you would say comes from services, but also what end markets are those being driven by?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : So for maybe a little more on the automotive end market, it was a $3.8 billion revenue business in fiscal '24. The company expects it to grow 10% over the next five years per your last Investor Day. Help us better understand what's enabling that?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Is there a way to better contextualize how much of your revenue in automotive is tied to next-gen applications like ADAS electrification and compute?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : You mentioned a few things, one that you're generally more powerful and [Inostics] with the products that you're providing. You also mentioned earlier on in this discussion that the automotive market's gotten a little bit weaker than we've seen EVs get pushed. One of the things that a lot of those new EVs had as it was all the next-gen technology, including things like compute and ADAS. So as you're thinking about the auto market for even a little bit slower this year, do they get those new launches getting delayed? Or is it just more slower end demand.

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : It's helpful. And then Michael, you mentioned some engagements with Chinese-based OEMs, but it's the smallest of the regions for Flex. And as you think about potentially converting some of these engagements into programs, would that be doing business in China or more as Chinese OEMs expand internationally, that's best when we could intersect that set of customers.

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : One of the questions I'm looking forward to asking you. It's a piece which we're probably one more on autos, but also tied into on tariffs. You will see tariff for many years now and geopolitical issues and causing a lot of challenges, I think for companies like Flex to work through these supported a lot of your customers. But help us better understand how well positioned you think flexes and especially if there is sort of across-the-board tariffs to bring products in the US, you have the capacity domestically to support that?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : And the question I wanted to ask you around for a broader set of businesses that Flex is engaged in is around power and there's been a lot that Goldman has ran and in a number of goals of different companies around supplying in a power, be it to data centers for AI or for EVs and your company touches a number of those different end markets. So what's your view around readiness for the grid and for power in order to enable all this electrification?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Maybe just sneak one last question and maybe for you, David, how should investors think about buybacks for this year and longer term?

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Well, unfortunately, we're out of time for you both for joining. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 5:10PM, FLEX.OQ - Flex Ltd at Goldman Sachs Communacopia & Technology Conference