Flex Ltd.

Thank you for standing by. Welcome to FLEX's third quarter fiscal year 2026 earnings conference call. Presently, all participants are in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star 1 on your telephone. If you'd 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 Mrs. Michelle Simmons. You may begin.

Thank you, Rob. Good morning, and thank you for joining us today for FLEX's third quarter. above our guidance across all metrics. Revenue came in at $7.1 billion, up 8% versus last year, and adjusting operating margin was 6.5%. That was yet another quarter above 6%. We reported adjusted EPS of $0.87, up 13%, and that was another record for Flex. So this performance reflects the strength of our differentiated business model. Let's start with data center first. As you all know, there's tremendous complexity in the data center deployment, and the market needs an ecosystem of integrated products, capabilities, technologies, and services. Flex's holistic approach is resonating with customers, enabling them to build at this scale speed and quality demanded by the AI era, while drawing on Flex's more than five decades of experience navigating major technology shifts across industries. The growth we're seeing in data centers is being driven by rapidly expanding compute and AI workloads, and those demands are here to stay. As customers continue to scale, complexity increases. Every design choice has downstream implications across the ecosystem and requires a systems-level approach. This is where Flex is uniquely positioned to help. Our data center portfolio is built around three tightly connected capabilities. That is computer integration, cooling, and power. At the same time, scaling IT infrastructure adds additional layers of complexity. To scale effectively, power cooling and IT infrastructure must be designed to move together and adapt as technologies and workloads evolve. While many companies address individual elements of this ecosystem, very few can integrate all three in a cohesive and end-to-end way. This quarter, we reinforced that leadership through several milestones. We announced the development of modular data center systems with NVIDIA to reimagine deployment for speed and scale, as well as a partnership with LG to advance thermal management solutions designed for gigawatt-scale data centers. We also deployed our advanced rack-level vertically integrated liquid cooling solution at the Equinix co-innovation facility, demonstrating these capabilities in real-world environments. In addition, we introduced a new AI infrastructure platform, the first globally manufactured data center platform to integrate power, cooling, compute, and services into modular design. And this is capable of accelerating deployment timelines by up to 30%. These milestones demonstrate what sets Flex apart, our ability to understand the interdependencies and translate that insight into a comprehensive, differentiated offering that helps customers move faster, scale with confidence, and stay ahead in a rapidly evolving industry. While our data center business growth reflects where the industry is headed, that momentum extends across our diversified portfolio. Flex remains a trusted global manufacturing partner across a wide range of industries as we continue to move into higher value, more complex product categories, that also help drive margin improvement. Beyond data centers, we continue to see robust momentum across our diversified end markets, each benefiting from long-term secular trends. In health solutions, demand for medical devices remains strong, and we saw an improvement in the medical equipment category. In core industrial, we're seeing demand in productivity-driven areas like warehouse automation and robotics. along with strength and select semiconductor related capital equipment programs. Another area of strength not reflected in data center is high performance networking and satellite communication products serving next generation network and infrastructure platforms. So we're pleased to see that AI is driving momentum in our portfolio outside of what we include in data centers. Looking ahead, We believe in the strategic choices we have made to support both near and long-term success for Flex and our customers. We continue to expand and optimize our global footprint while investing in advanced technologies and capabilities that help customers manage complexities at scale across industries and geographies. The challenges our customers face are increasingly interconnected, whether supporting highly regulated healthcare devices, large scale data center deployment, next generation mobility platforms, or cutting edge consumer technologies, success today demands speed, flexibility, and resilience. Flex is well positioned to adapt as markets evolve, technologies mature, and customer requirements continue to change. We see ourselves as a strategic enabler, helping leading brands navigate complexity, improve performance, and scale with confidence in a fast-moving world. Now I'll turn the call over to Kevin to walk through the details of our financials.

Thank you, Revathy. And good morning, everyone. I'll now review our third quarter performance, which reflects disciplined execution and continued progress against our strategic priorities. I'll start with our key financials on slide eight. Third quarter revenue came in at $7.1 billion, up 8% year over year, driven by continued strong performance and data center and improving momentum in our industrial and health solutions businesses. Adjusted gross profit totaled $690 million, and adjusted gross margin improved to 9.8%, up 50 basis points year over year. Adjusted operating profit was $460 million, with adjusted operating margins at 6.5%. up 40 basis points year-over-year, a record for flex. The margin improvement reflects disciplined cost management and our deliberate shift towards higher value products and services. Finally, adjusted earnings per share for the quarter increased 13% year-over-year to 87 cents per share, underscoring strength in our execution. Turning to our quarterly segment results on the next slide, Reliability revenue accelerated this quarter, totaling $3.2 billion, up 10% year over year. Power continues to drive strong growth alongside core industrial and health solutions. Adjusted operating income improved to $233 million, and adjusted operating margin was 7.2%, up 50 basis points year over year, driven by power and core industrial. Agility revenue totaled $3.8 billion, up 6% from the previous year. Data center-related end markets continue to drive strong growth, but were partially offset by softness in our consumer-related end markets. Adjusted operating income was $239 million, and adjusted operating margin for the segment was 6.3%, unchanged from a strong quarter in Q3 last year. Moving to cash flow on slide 10. Cash flow in the quarter was $275 million, showing robust conversion driven by efficient working capital management. Inventory was up 5% sequentially and up 5% year-over-year. Inventory net of working capital advances was 56 days, flat from the prior year. Net CapEx totaled $145 million, or approximately 2% of revenue. And we repurchased around $200 million of stock in the quarter, which was approximately 3.3 million shares. Our capital allocation priorities remain unchanged. We are committed to maintaining our investment grade balance sheet funding strategic investments to support organic growth and pursuing accretive M&A opportunities while returning capital to shareholders through opportunistic share repurchases. Turning to our full year guidance on slide 11, for reliability solutions, we expect revenue to be up mid single digits driven by strong data center power demand and solid growth in core industrial and health solutions. For agility solutions, we expect revenue to be up mid single digits driven by continued strength in cloud, offset by softness in demand in consumer devices and lifestyle. Finishing with our guidance for the fourth quarter on slide 13, we expect to exit the year with very good momentum. We anticipate reliability solutions revenue to be up low double digits to mid-teens, driven by continued strength in power and further growth in core industrial and health solutions. We expect Agility Solutions revenue to be up low to mid single digits as cloud and networking growth is offset by softer demand for consumer devices and lifestyle. As we enter the last quarter of our fiscal year, we are pleased to see our team's hard work translate into meaningful progress against our strategy. Our discipline execution and focus on portfolio management is reflected in our full year results. For the fiscal year, we now expect the following. Revenue. to be between $27.2 billion and $27.5 billion, which is $350 million higher at the midpoint versus our prior guide. Adjusted operating margin of approximately 6.3%. Adjusted EPS between $3.21 and $3.27 per share. A midpoint increase of 11 cents per share. And finally, we anticipate further strong cash generation and maintain our guidance of 80% plus free cash flow conversion for the year. Moving to our segment outlook for the year, for total flex, for total flex, we expect revenue to be between 6.75 billion and 7.05 billion with adjusted operating income of 445 million to 475 million. We expect an adjusted tax rate of 21%. And finally, we anticipate adjusted EPS to be between 83 cents and 89 cents per share on approximately 375 million weighted average shares. As we close FY26, we remain focused on discipline execution. Margin expansion driven by our product and services mix underscores the resiliency of our model and with our improving revenue momentum positions us for continued profitable growth in FY27. With that, I'll now turn the call over to the operator to begin Q&A.