Flex Ltd.

Thank you for standing by. Welcome to FLEX's third quarter fiscal 2025 earnings conference call. Presently, all participants are in listen-only mode. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, please press star two. We ask you to please ask one question and one follow-up, then return to the queue. As a reminder, this call is being recorded. I'll now turn the call over to Mr. David Rubin. You may begin.

Thank you, Kevin. Good morning, and welcome to Flex's third quarter fiscal 2025 earnings conference call. With me today is our Chief Executive Officer, Revati Advaiti, our new Chief Financial Officer, Kevin Crum, and our recent Interim Chief Financial Officer, Jaime Martinez. We'll 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. 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 statement 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. Please note, unless otherwise stated, all results provided will be non-GAAP measures and all growth metrics will be on a year-on-year basis. 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, Revati.

Thank you, David. Good morning and thank you for joining us today. So let us begin with results on slide four. We had a very strong Q3 delivering another record quarterly operating margin and EPS. Revenue came in at 6.6 billion with operating margins at 6.1% and EPS of 77 cents. Now, this is the first quarter we achieved operating margin above 6%, and not to jump ahead, we expect a sixth handle again in Q4. There could still be some fluctuations in the quarters ahead as we work through the current dynamics, but clearly we're performing at incrementally higher levels. It's important to point out this consistent margin improvement comes from strong execution on our strategy to improve mix and efficiency in every business unit across Flex. and that is exactly what drove another quarter of record margin performance. Pointing out a few other highlights in the quarter, we closed on a previously announced JetCool and Crown Systems acquisitions, both adding key technologies to our data center portfolio. JetCool expands our direct-to-chip liquid cooling capabilities, and Crown System adds to our data center critical power capabilities, as well as expanding our opportunities in grid modernization. We're also very excited to join the S&P mid-cap 400. Now turning to slide five. Before I discuss the trends in the quarter, I want to acknowledge that there has been a lot of noise this week. It's early, and I think there's plenty for people to sift through in the coming days. In a minute, you'll hear how our data center business grew 45% year over year this quarter, and we expect similar growth to continue next quarter. But the why is important here. Our opportunity comes from the major underlying technology transition towards increasingly dense compute. And this is driven by more than just AI. So even if you take the most pessimistic view from this week's headlines, we're still headed down this road. This transition will still drive increasing power needs from the chip level and echoing throughout the data center. Also remember, we have consistently said we expect a multi-year data center CAGR closer to 20%. That's because we have seen these cycles before in the previous data center markets. Lastly, the truth is there's been a lot of noise over the last five years, and yet we have continued to deliver. This is because we've improved the mix across our entire portfolio, becoming a more efficient company and executed better through the cycles. So whatever headlines comes tomorrow, we'll continue to focus on this strategy. Now moving on, the trends in Q3 were largely as expected, with some additional strength coming from data center, from health solutions, and consumer-related markets. This quarter, our data center business grew a robust 45% year-over-year, despite increasingly difficult comms. We continue to see sustained demand in our hyperscale cloud integration programs and our power portfolio, resulting from AI-driven cloud expansion. We're seeing hyperscalers place greater emphasis on tailored solutions and looking for more help from fewer suppliers. Through our EMS plus products plus services strategy, Flex is the only provider whose cloud offering encompasses fully integrated racks, vertical services, and a power products portfolio that spans all the way from the grid to chip. This comprehensive offering is a true differentiator, and you can see from our growth it's resonating with our customers. As I mentioned before, we saw very strong medical device demand in Q3. To give some perspective, we have exceptional capabilities in FDA-regulated medical technology design and advanced manufacturing at scale. Looking out, we see a diverse set of longer-term opportunities in the med tech space. of course this includes medical devices but also the med equipment markets as well as drug delivery technologies where we had a recent win with our glp-1 injectors now medtech ramps take time but the contracts tend to be long-lived so our strategy is about building the pipeline for future growth as we previously mentioned we're seeing softer near-term trends in automotive Still, the longer-term trends towards advanced compute and powertrain modernization remains intact, and we have demonstrated we have market-leading technology and capabilities in both of these areas. So, as these trends progress, we are confident we will enable our Auto OEM customers to succeed in these important technology transitions. Now, reflecting on the portfolio overall, diversification is an important part of our strategy. Cycles come and go, but we have evolved to better create and capture opportunities in all of our end markets. I also want to briefly address some of the questions we're getting around tariffs. We are frequently asked, does more manufacturing shift to the U.S., or does it continue to expand across multiple geographies? Only time will tell, but the reality is that the global manufacturing environment has been in flux for a few years now. Remember, we have helped our customers navigate through tariffs 1.0, and then COVID, then the supply chain crisis, and an ugly list of other major geopolitical events. Stepping back, Flex is clearly one of the preeminent global manufacturing partners. We have been both a facilitator and beneficiary of regionalization trends set in motion by these previous events. We have established massive supply chains and a diversified global footprint. This includes one of the largest footprints in North America with significant capabilities in the U.S. Now for flex, tariffs are a pass-through cost, and that is how it played out in the last round. I'd just add there can sometimes be a lag in recovery timing, but it hasn't been a big issue. That's not to say there are no risks, such as potential broader macro impact on slowing volumes, It is a very dynamic environment and something that we're monitoring closely. The resiliency and adaptability are embedded in our core competency. And as we have in the past, we're ready to help our customers adapt their manufacturing and supply chain strategies, however the landscape evolves. Lastly, I want to thank Jaime Martinez for stepping in as our interim CFO. Jaime, you did an excellent job managing this transition, and I look forward to your future contributions at Flex. Along with that, I'm excited to welcome our new CFO, Kevin Crum. Kevin brings very strong financial experience across multiple industries that align with our longer-term strategy. He joined us a few weeks ago, but I'm sure he's ready for all the tough questions. So I'll turn the call over to Kevin, who will take you through our financial results and guidance.