Good afternoon. And welcome to the Flex First Quarter Fiscal Year 2020 Earnings Conference Call. Today's call is being recorded. And all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Kevin Kessel, Flex's Vice President of Investor Relations. Sir, you may begin.

Thank you. And thank you for joining Flex's first quarter fiscal 2020 conference call. Slides for today's discussion are available on the Investor Relations section of our Website. Joining me on today's call with some introductory remarks will be our Chief Executive Officer, Revathi Advaithi, and our Chief Financial Officer, Chris Collier. Today's call has been webcast and recorded and contains forward-looking statements, which are based on current expectations and assumptions that are subject to risks and uncertainties, and actual results could materially differ. Such information is subject to change and we undertake no obligation to update these forward-looking statements. For a discussion of the risks and uncertainties, see our most recent filings with the SEC, including our current annual and quarterly reports. If this call references non-GAAP financial measures for the current period, they can be found in our appendix slides. Otherwise, they are located on the Investor Relations section of our Website, along with the required reconciliations. Now, I would like to turn the call over to our CEO, Revathi.

Thanks, Kevin. Good afternoon. And thank you for joining us on the call today. I'm pleased to have the opportunity to update you on our progress. While the main purpose of the call is to review our financial results, I also want to provide you with some context about how we're managing our business. We have made significant progress in the past few months, making critical decisions in managing our portfolio. As a result of this, today we are sharing restructuring actions that will accelerate our decision to reduce exposure to higher volatility, lower margin products within our business. Our strategy is simple and continues to be to win more design-led business, which will improve our mix towards higher margin and less volatile business segments. I want to take this opportunity to thank our customers for their trust and our employees for their commitment to delivering results. We have great employees and attractive assets, and that gives me confidence in the path we're taking. I will talk in more detail regarding our progress in the quarter and our forward-looking plans. But first, let's review our first quarter financial results. Let's turn to Slide 3. I'm pleased with our financial performance this quarter as revenue, operating income, and EPS were all within their respective guidance ranges. We have solid results delivering $0.27 in adjusted EPS, adjusted operating margin of 3.4%, and free cash flow of $114 million. Year-over-year revenue growth in both IEI and Health Solutions was led by the successful ramp-up of new programs secured through the prior year bookings. We saw slower than expected revenue in CEC and automotive. CEC was impacted by softness in a few telecom and networking customers, as well as the geopolitical issues in China. CTG was within the expected range as we continue to manage the mix in this segment. Three out of four business groups achieved operating margins within their targeted range. We are also pleased with our free cash flow performance in Q1, and this represented a significant swing from the prior year. We attribute this change primarily to more disciplined execution. And Chris will provide more details on the financial results. Let's go to Slide 4. I want to talk about our approach to managing the business moving forward. During this quarter, along with visits to many of our customers as well as major sites, I have done deep dives on our business groups, our sites, and our technology centers. The feedback has confirmed the initial assessment that we have a tremendous opportunity to leverage our global capability, and we have to be focused on how we manage the business to deliver consistent results. Like I said in the last quarter, we are concentrating on four key areas; managing the portfolio, driving disciplined execution, pursuing design-led manufacturing or sketch-to-scale opportunities, and emphasizing free cash flow generation and prudent capital allocation. This will enable us to accelerate our business strategy and improve our financial returns for the long term. Now going to Slide 5. In the four areas of focus we have chosen, we have made remarkable progress in the short term. A key priority is managing our portfolio mix, which will enable us to improve overall profitability, as well as the consistency of our execution. During Q1, there was well publicized action by the U.S. government and significant geopolitical uncertainty that impacted our customer Huawei. These actions, which were beyond our control, led to a reduction in demand for products we assemble for them in China. As a result of this, we're scaling down our Huawei dedicated operations in China. Flex and Huawei have had a longstanding and successful partnership. We have worked with them to find an agreeable solution. This change is unfortunate. However, China is and will remain a very important center of production and market for Flex. We have a significant presence, including tens of thousands of employees in China. We remain fully committed to our valued customers and employees in China. In addition to this action, we have also decided to reduce our exposure to high volatility, short cycle, low margin businesses in other regions, like India. These decisions, when combined, will impact roughly $300 million to $400 million of quarterly revenue and align with our overall strategy to focus on more sustainable and less volatile product categories. It will also improve our gross margin and operating margin, enabling us to be a more focused and profitable company. These actions are reflected in our forward-looking guidance. I want to reiterate that these actions do not impact the scale and diversity of our footprint. Our global footprint, including our significant presence in China, India, and the rest of the world is a key differentiator for Flex and enables us to deliver value to our diverse customers. While these are sizable portfolio changes, changing the mix is also important within the segments. We have a very focused effort to improve the performance of our CTG business by reducing high volatility low margin businesses, as well as underperforming and inconsistent businesses. For the quarter, we achieved a 2% operating margin in CTG and we will continue to assess this portfolio to prune businesses that do not meet our criteria. Next, let me address my favorite topic, which is a focus on disciplined and sustainable execution, and this involves the entire enterprise. We're reviewing key processes and programs, which include contracts, incentives, and cost management. Progress has been made in areas such as variance management and program ramp efficiency. For example, in HRS alone, we are currently managing over 200 programs with multibillion dollar annual future revenue. A recent example is a program in our Health Solutions business where we moved three families of medical devices from a customer factory to one of our Mexico facilities. The team achieved the 20-plus milestone on schedule and produced four times the expected volume in the committed timeframe. This type of program launch improves our expected gross margin materially. As you're aware, getting these programs ramped right is critical for us, not only from a customer credibility perspective but also to ensure that we don't have financial variances across our factories. We're also driving governance discipline across our organizations. For example, one of the major changes we have implemented is to align our incentives to drive behavior in our focus areas. Now on the design-led efforts side, we know that this is the best way to build customer affinity and deliver greater value to our customers. In return, this improves their financial performance. Now, when I think of design-led manufacturing or sketch-to-scale, I think of the strategic customer partnership where we co-create a product that leverages Flex's portfolio of capabilities from design, supply chain, complex manufacturing to aftermarket services. One example from this quarter that I'm particularly excited about, given my background, is a power supply with an integrated battery solution. Our global team works with the customer to define the specifications, design a solution, and bring the product to market in high volume. This solution is just one example demonstrating how we are leveraging our expertise to provide value and achieve significant returns. Our goal is to identify more design and engineering-led engagements as these opportunities can capture accretive operating margins, nearly double that of traditional EMS business. By achieving the right portfolio mix, creating a track record of disciplined execution, and driving higher margin design engagements, we will deliver higher levels of financial performance, including greater and more sustainable free cash flow. We have improved our process and discipline for CapEx management across our enterprise, aligning to our portfolio objectives and improving our returns. For example, this past quarter, our CapEx investments were $123 million, which was the lowest level in seven quarters. This disciplined investment is critical for improving long-term free cash flow generation. So as you can see, we have made substantial progress in a short amount of time in these four areas and our results reflect this effort. Now turning to Slide 6. I wanted to share with you our framework on how we manage the portfolio going forward. We will ensure that we are making decisions that align with our strategy. We evaluate the portfolio through disciplined criteria that cover a wide range of parameters. An example of our criteria is industry opportunity. For example, we will not consider an opportunity in another industry that is too far afield from our core business capabilities where we do not have expertise. We will ensure the business that we win, or keep in our portfolio meets the financial thresholds for margin, free cash flow, and return on invested capital. Every business is managing its software criteria to evaluate new opportunities and ensure they are executing with discipline. Turning to Slide 7. I want to share my perspective on capital allocation and a framework for managing it. Our goal is to make capital decisions wisely, which provide future growth by reinvesting organically in our businesses, repurchasing stock to offset share dilution, and continuing to take opportunities to return cash through share repurchase in line with our prior commitments. At the end of the day, our goal is to maintain a healthy investment-grade balance sheet. Overall, I'm really proud of our results. We will continue to make progress across our four areas of focus; managing the portfolio, achieving disciplined execution, pursuing design-led manufacturing, and emphasizing free cash flow generation and capital allocation. I believe we're building momentum. And the changes we are making will result in long-term value creation for our shareholders. I will now turn the call over to Chris who will go through the numbers in more detail. I'll then come back with some concluding commentary before Q&A.

Thank you, Revathi. Please turn to Slide 9 for our Q1 income statement summary. Our first quarter revenue was $6.2 billion, down 3% versus a year ago and within our guidance range. Our Q1 adjusted operating income was $208 million, which was within our guidance range and up 11% year-over-year. Our adjusted net income was $138 million, resulting in adjusted earnings per share of $0.27, which was at the midpoint of our guidance range of $0.25 to $0.29. First quarter GAAP net income of $45 million was lower than our adjusted net income, primarily due to $15 million of stock-based compensation, $15 million in net intangible amortization, and $56 million in restructuring and asset impairment charges, as we undertook actions to reduce our exposure to high volatility, short cycle products and restructured targeted operations. Now please turn to Slide 10 for quarterly financial highlights. Our adjusted gross profit of $404 million was down slightly year-over-year, while our adjusted gross margin remained stable at 6.5%. Our first quarter adjusted SG&A expense declined 13% year-over-year to $196 million. This performance reinforces our intention to continue to operate with strong cost discipline as we focus on driving productivity improvements and balancing investments into design and engineering capability with the objective of delivering sustainable operating earnings leverage. Our improved cost discipline and business mix are translating into greater profitability. Our quarterly adjusted operating income came in at $208 million, which is up 11% from the prior year. Our year-over-year operating margin expanded 50 basis points to 3.4%. Please turn to Slide 11 for our first quarter business group performance. I'll begin with our highest margin business, High Reliability Solutions, or HRS, which is comprised of automotive and health solutions. HRS revenue was $1.2 billion, down 3% year-over-year and just below our guided range of flat to up low-single-digits. HRS's adjusted operating margin was 7.4%. First quarter revenue in our automotive business declined 8% from the prior year as it continues to be impacted by market softness, most notably in China, which has directly affected our largest automotive customers. This quarter, we continue to ramp multiple new programs across a diverse set of products, such as connectivity, DC-DC converters, and Smart Gateway Modules. However, they were not enough to offset the macro weakness. Looking forward, we remain confident with our market positioning as evidenced by securing strong bookings across a broad set of automotive customers and products this past quarter. Health solutions had a good quarter, growing revenue 4% year-over-year, marking its eighth consecutive quarter of year-over-year growth. Its growth has been driven by a broad set of new customers and programs in drug delivery, diagnostics, and medical devices, which have all benefited from our prior year investments in design, engineering, and automation. It is also worth noting that Frost & Sullivan just named Flex Health Solutions as its 2019 Global Company of the Year. This regarded external award and endorsement serves as another proof point of the value and capabilities that our Flex Health Solutions team brings to its customers in the marketplace. Next, revenue from our Industrial and Emerging Industries, or IEI business, was exceptionally strong at just over $1.6 billion, reflecting an increase of 13% year-over-year and exceeding our expectations. Driving the strong Q1 sales was a continued ramping of new customers and programs across the portfolio, most notably inside of home and lifestyle, as well as energy which more than offset the continued softness in semiconductor capital equipment. IEI continues to capture strong bookings from some of the world's largest diversified industrial companies, which positions us well for long-term growth. The strong quarterly revenue enabled IEI to grow its adjusted operating profit to $95 million. Its adjusted operating margin was very strong at 5.8%, up substantially from 3.6% in Q1 of the prior year. IEI's profitability continues to benefit from solid operational execution on the businesses that it is ramping and from greater levels of design and engineering-led engagements. Revenue from communications and enterprise compute, or CEC, was $1.9 billion, declining 5% year-over-year. This performance fell short of its flat to up mid single-digits guidance. CEC's adjusted operating margin was also below our expectations, coming in at 1.4%, down almost 100 basis points from the prior year. Our Q1 revenue decline in CEC was impacted by reduced demand for certain customers due primarily to two factors; one, the significant geopolitical uncertainties that impacted certain customers in China, that Revathi highlighted earlier; and two, accelerated telecom and networking declines late in our quarter due to reduced forecasted shipment volumes. The reduction in customers' demand as a result of the geopolitical challenges negatively impacted our operating income by creating elevated levels of unabsorbed manufacturing overhead and stranded costs. In our consumer technology group, or CTG business, revenue was $1.5 billion, down 16% year-over-year and within our expectation for the group to be down 15 to 25%. CTG's adjusted operating margin was 2%. Our Q1 performance reflected our continued repositioning of the CTG portfolio as we continue to rationalize and prune underperforming accounts to improve the mix of this business. As we've highlighted, we are committed to being more selective and focusing on more sustainable and less volatile customers and products in order to drive the right margin and return. This quarter, three of our four business groups achieved operating margins within their targeted ranges. And we remain committed to achieving our targeted ranges for all business groups. Turning to Slide 12, let's review cash flow generation highlights. As we highlighted last quarter, we expected a return to consistent positive adjusted operating cash flow and free cash flow generation in fiscal 2020. Our first quarter performance displayed solid cash flow execution. This quarter, we generated $237 million in adjusted cash flow from operations and $114 million in free cash flow. This resulted in a Q1 free cash flow conversion of 83%, which is approaching historical levels. Our capital expenditures totaled $123 million for the quarter, its lowest level in seven quarters, but still modestly higher than depreciation. We continue to invest in the CapEx necessary to support the underlying higher-margin long-term programs in our IEI and HRS businesses. As we look forward into future quarters of fiscal 2020, we expect that our CapEx will continue to closely align with our annual depreciation level, thereby benefiting free cash flow. We remain firmly committed to our goal of consistently generating positive adjusted operating cash flow and free cash flow as we move forward. Lastly, we remain focused on delivering shareholder return during the quarter as we repurchased roughly 5 million shares for $52 million. Please turn to Slide 13 for our second quarter guidance. Revenue is expected to be in the range of $6.1 billion to $6.5 billion, based on the following business group year-over-year revenue expectations; HRS revenue is expected to be down low-single-digits to up low-single-digits, as we anticipate the auto demand environment to remain muted and reflect the impact of normal seasonal summer shutdowns; we continue to see stable demand growth in our Health Solutions business. We expect ongoing strength in IEI with it growing mid to high-single-digits, benefiting from new programs ramping in home and lifestyle and energy, which is more than offsetting continued expected weakness in semiconductor capital equipment. CEC's revenue is expected to be down 5% to 10%, reflecting continued softness in end market demand in our telecom and networking offerings, coupled with distinct reductions in customer demand in China. For CTG, we expect revenues to be down 15% to 25%, reflecting continued pruning of our consumer portfolio and targeted reductions to high volatile products in China and India. Our adjusted operating income is expected to be in the range of $220 million to $250 million. Interest and other expenses are estimated to be $50 million to $55 million. We expect our tax rate in the quarter to remain in the mid-range of 10% to 15%. Adjusted EPS guidance is for a range of $0.29 to $0.33 per share based on weighted average shares outstanding of $518 million. Our adjusted EPS guidance excludes the impact of stock-based compensation expense, intangible amortization, and the impact from restructuring and other charges. As Revathi explained, we are accelerating our strategic decision to reduce exposure to high volatile products and aligning our operating costs. In connection with these actions, we may be incurring restructuring and other charges in a range of $145 million to $265 million. The timing and impact of such items are dependent on future events that are uncertain. However, we expect to complete all the associated actions in fiscal 2020 with most of it happening in our second quarter. As a result, we expect a GAAP loss per share in the range of $0.05 to $0.25. With that, let me turn it back over to Revathi for some closing comments before we open the call to Q&A.

Thank you, Chris. We remain comfortable with the prior fiscal 2020 consensus adjusted EPS range that spans from $1.20 to $1.30 as we communicated in April. Our teams are focused on meeting our commitments. They've taken thoughtful but swift action on our portfolio that will make us more focused and will put us on the path to improving operating margins. We're committed to vastly improving our free cash flow conversion. As I have said, our stated goal is to drive sustainable disciplined execution that delivers a consistent track record you can have confidence in. I would now like to have the operator open the line for questions.

Your first question comes from Matt Sheerin with Stifel. Your line is now open.

Just the first question relative to the deselecting and walking away from the high velocity low-margin business, that $1 billion or so annual revenue run rate. As you get through this quarter, will that be it or as you go through the next few quarters? Will you still be looking at various segments? And will we see more of that or is the plan to get the portfolio in the shape that you want by the next quarter or so and then move on from there?

What I'd say is we have taken some big actions this quarter addressing parts of our portfolio that we think are obvious and need to be corrected moving forward. With that, I would say that we're making decisions for the long term. So we may continue to prune a few things in CTG and CEC, as we have talked about before. But that pruning will continue and that should be part of running our business in a disciplined fashion. So I would say we're positioned well for long-term growth at this point. We are more focused and we're focused around the right areas that we want to grow in. And I see us leveraging this opportunity and building our business from here.

And then within the CEC business and the margins below target. Chris, you talked about getting all divisions into their targeted ranges for CEC given the headwinds that you are still seeing on the demand from. Are we talking a couple of quarters or so before you get there? Is any time frame you could put on that?

What I would highlight is if you were to exclude the impact in this past quarter of the unabsorbed manufacturing and the stranded costs. CEC at its core would have been inside the target range. But as we think about as we move forward here, we would anticipate that these activities will be largely behind us as we get through this next quarter. And we're very confident and comfortable with the book of business we're operating within CEC that it does return to that target margin range.

And Matt, the only thing I'll add is, you can see with three of our businesses being in the operating margin ranges that we have talked about. We're really pushing hard to make our business more focused and more profitable. So our focus on CEC will be the same thing is to work through these customer restructuring actions that we're taking, and we've absorbed some significant impact from it in Q1. We expect that we'll start pushing into the target margin ranges as we get through the rest of the year.

Your next question is from Steven Fox with Cross Research. Your line is open.

Two questions, please. First of all, when I look at the year-over-year sales decline, you still were able to increase your profit. So I was wondering if you could talk about maybe what the incremental margins of the business look like, whether those have improved? Or are there some other things that you called out in terms of how you were able to achieve such good operating leverage? And then secondly, I was wondering if you could provide some color on exactly what the charges you're looking at are for and how much will be in cash? Thank you.

Let me start with the first one. And I'd say definitely the mix of the business helped drive overall margins. You can see that with IEI having such strong growth and HRS continuing to be strong for the overall portfolio, mix definitely helped. And the second is we really have good cost discipline across the business, which for a business like ours is important that as you have revenue volatility, you have to have cost discipline that goes with it. So this all goes to the theme that I've been talking to you about last quarter and this quarter is that we have to be disciplined in all aspects of the business. You're seeing that play out and us keeping our EPS commitment even with revenue changes. So I think that's really, really important that you're seeing in terms of overall mix and then cost discipline helping us deliver our Q1 commitments. And then on the restructuring, I'll have Chris give you some color on it.

So we're very thoughtful and very disciplined with these decisions here. Near-term actions are underway. As you saw, we had some of those charges inside of our Q1. And as I said in the prepared remarks, the bulk of these charges will be captured in our activities and execution inside of Q2. What we're doing is addressing the operating cost structures. We're going to be working through managing the normal restructuring activities that will be including people costs, some impairment charges associated with assets. And if you think about the cash aspect for that, I would say it's a little less than half of the range that we have set up, both on the low and at the high. So those actions are underway; we'd anticipate being able to execute during this quarter. We've unfortunately done this before and we're focused here, and we're going to be very thoughtful and disciplined with these decisions and actions moving forward.

And just one quick follow-up on all of that. How do you avoid keeping all of the product pruning into a vacuum? In other words, I would imagine you're exiting certain programs while you're trying to stick with some more attractive programs at the same customer? How is that going to play out within the customer base a little more competitively, or are there any concerns we should think of there? Thank you.

No, I'd say, Steven, the way I think about it is at the end of the day, every customer relationship that we have has to be a win-win for both the customer and for us. I think customers understand that and our commercial teams are doing a great job of making sure that that story is clear within our organization and to our customers. I think long-term customer partnerships are built on that basis. So I don't have any concerns about that looking forward. I think this is just the way good businesses run. And we just have to do a better job of making sure that we understand our manufacturing and technology capabilities help us win, and that will be the best for the customers as well, focusing on those areas. I think all our examples in Q1 are really good examples to show that we're well on our way in that direction.

Your next question is from Mark Delaney with Goldman Sachs. Your line is now open.

First question's on margins. And if my math's right, I believe implied EBIT margin guidance for next quarter is about 3.7%, or just over 3.7%, which would be I think one of the best percentages that have been put up sometime just based on these macro challenges you talked about. So maybe just help bridge from the roughly 3.4% you did this quarter to 3.7%. What are some of the factors in particular helping the margin expansion for the next quarter?

If you do integrate the guidance ranges that we set, you will see solid margin expansion on a year-over-year basis, both in terms of gross margin ultimately into operating margin. I think you quantified it correctly. On the midpoint of it you were right around that 3.7%, which is a very strong performance for us. That's largely on the efforts of improving the mix of business, some of the strength that you're seeing across the IEI portfolio and the contributions inside of HRS, as well as the consistent sustained cost discipline around SG&A that provides leverage. So the mix improvements, engaging more design and engineering-led programs that are now reflective inside of our revenue streams, a favorable mix shift, and the discipline around our SG&A, all contributed to that favorable performance.

And Mark, that's been the thesis of our story. If you do a good job managing our mix, we minimize the variances in our factories, because we're disciplined, we manage cost. And all that should result in margin movement for this business. In my view, this will provide long-term customer affinity and growth, and our Q2 guidance shows us heading in that direction.

And my follow-up question also on margins, but over the longer term. And I think on Slide 6, there is a comment and Revathi spoke somewhat about this in your prepared remarks. But you talked about operating margins mid-single digits or higher. Can you elaborate a little bit more on what you mean by that? Is that for the company overall? Or is that on a segment-by-segment basis and the timing to achieve that mid-single-digit or higher EBIT margins that are referred to on Slide 6? Thanks.

I believe that every successful business needs to establish clear guidelines and criteria for our commercial and operational teams when determining which types of business to pursue. This isn't about looking at an average or a total figure. Our aim is to concentrate on securing commercial programs and encouraging our teams to target mid-single-digit operating margins as a benchmark for sound business practices. This focus will ultimately result in a shift in our business mix and enhance our margins. It's important to note that this approach will vary between segments and customers, and there will be many nuances involved. However, we maintain this guidance and criteria across all segments and types of business, encompassing a range of possibilities.

Your next question comes from Ruplu Bhattacharya with Bank of America. Your line is now open.

Congratulations on the strong margin performance despite the challenging macroeconomic environment. My first question is about IEI. You are already at the high end of the guidance range. Within this portfolio, there are various end markets. Do you believe there are specific end markets where Flex has a greater competitive advantage that you would like to emphasize? Can you share your insights on the semiconductor capital equipment market and how we should consider margin progression in this sector moving forward?

Ruplu, thanks and thanks for the comments on margin. Obviously, the work of our team is showing here. I would say on IEI, yes, there are different sub-segments that makeup this business, energy, semi cap, home, and lifestyle. Many sub-segments within this core industrial business. Our view is that actually most parts of this business are fairly strong, both from a growth perspective and an operating margin and income improvement perspective. At this point, what we have baked into our thinking is that capital equipment continues to be a challenge. We don't see visibility yet or a sign of recovery on that. So our forward-looking view on it really encompasses that. So growth is coming from all the other sub-segments. In terms of operating margin ranges, it's too early to call anything on that right now. But our goal for the teams as they continue to move the mix, and they continue to have good design-led wins, we should see that move higher toward what we have set for them. So we think that it's heading in the right direction. At some point, it'll be the right time to look at the margin ranges. But at this point, we're comfortable with where we are.

My second question on CEC. Maybe can you just give us an overall color of what you saw in the various end markets routing, switching, optical? And is it just that one customer where you're trying to disengage from that is driving the margin performance? Should we see an uptick going in the next couple of quarters?

Let me start with it and Chris can jump in. We definitely saw the customers that we specifically mentioned and called out in our prepared remarks. Other than that, we saw declines in our telecom and networking businesses that we discussed and particularly inside a few large customers and their customer pools that didn't happen at the end of the quarter. So that's where overall we saw our pluses and minuses, and it came across a various set of customers. So I think that's the overall view on CEC. Chris, any more color to add to that?

No, just like we highlighted in the prepared remarks, and I don't know your question. In this past quarter, we had to absorb significant unabsorbed manufacturing costs and stranded costs. If you exclude that impact, we would have been at the low end of the range. In addition, I'd just say the loss contribution from lower total revenues pressures margins and profit, so that's kind of the reflection on CEC's margin profile.

Your next question is from Steve Milunovich with Wolfe Research. Your line is open.

I have two questions. First, what are your plans for your cloud business? I understand that your competitors have around a billion dollars in cloud revenue growing at a double-digit rate, claiming they're gaining market share from the ODMs that supply the hyperscalers and other cloud companies. Can you share any information about your revenue and margin contributions in this area, and is it a focus for you? Second, have there been any management changes since you've taken on this role?

Let me start with the first part. I would say that we have a very strong cloud business across our portfolio. Our focus on the CEC segment in terms of wins is to be able to, not just focus on large customers and win large volume, but really to ensure that we move the mix. But I would say our cloud business is strong. We feel like we have a large market share. There is constant innovation in that business. I talked to you about thinking like what we're doing regarding the power supply. So our focus on cloud is not just to grow our contract manufacturing side of the business but to really focus on design-led engagement for that business. So I'm not going to comment on competitors. I would say we are very confident in terms of that our cloud market share is strong and our growth in cloud is coming across a wide range of customers and not just focused on a few big customers. And then in terms of new hires, we have done a really good job of hiring new people, just talking about cloud. We announced hiring a strong candidate from Intel with a strong track record in running their cloud business. So we expect he will bring a lot of technology background to this and really help in terms of growing this business with the right technology platforms, the right architecture. We're already seeing the results of this. In addition to that, my big focus is always talent, because a good strong business is all about talent, and talent management and talent development. So in line with that thinking, we also brought in a new CHRO. So those are the two big changes we have made and several others across the business, but those are the big ones to share.

Your next question is from Paul Coster with JPMorgan. Your line is open.

This is Paul Chung on behalf of Coster, thanks for taking my question. So in the past, Flex has been more about volume, delivering margin in targeted ranges. But the focus on margins is driving nice products here despite some revenue headwind. So do you expect more of the firm to evolve into this more high mix, lower volume firm over time and in turn bridge or overall margin targets? Or should we expect business as usual as long as it hits your margin ranges for your respective segments?

Paul, I'm definitely not going to help you raise our margin ranges at this point in time. I would say our actions have to speak for themselves. Right, but going in line with your question, I would say, this is my fundamental way of running a business. I think this doesn't apply just to Flex or to contract manufacturing, or this space in general, that growth for the sake of growth is never great. So growth that really adds some capability, whether in terms of people, product, or margins, is fundamentally important. So driving that discipline for me is the way any business runs, not just how Flex should run, it's a history of how all businesses should run. And that's the only way you have sustainable growth and margin conversion in the long term. So bringing that discipline to Flex to me is the starting point of how this business runs and hopefully how this industry runs, which I think is long overdue. So I would say that either eventually if we do this right and we continue to take these types of actions that we're taking, you should see a healthier business that is more sustainable with the right kind of growth and right kind of incremental margin on that growth that's what you should see from us going forward. So to me, this is just the fundamentals of how every business should run. And hopefully, we are putting ourselves on track to be achieving that.

And then just a follow-up on IEI. Is there more design and engineering opportunity that is specific to this segment relative to others that's driving that higher margin there? Or do you see other segments where you can apply more of the design and engineering higher margin services to those segments? Thank you.

Paul, I would say that I have tremendous opportunity, because if you look at the portfolio within IEI and how to diversify that customer base is. Most customers in that customer base want more from their suppliers, and they want more platform help in terms of technology and products. Our team is great at doing that. So I definitely see the potential to do more of that in IEI. But I also see the potential for collaborating across our businesses in terms of taking that technology and that capability across our business. For example, I talked in my prepared remarks about the integrated battery in the power supply, that's something that applies across all segments, right. We should be able to position that kind of capability across all segments. And today, we haven't done as good a job of that. I see potential for that also moving forward. So if we can do well with increasing our design litigation but also cross collaborate across the segments, I think we build a stronger portfolio moving forward.

Your next question is from Adam Tindle with Raymond James. Your line is open.

Okay, thanks for taking the questions and good evening. Revathi, you came out on the March quarter call and talked about being comfortable with the $1.20 to $1.30 EPS range for fiscal '20. I think you're obviously reiterating that today. There has been a lot of changes in the outside environment, obviously, an internal restructuring program, I think it's incremental or wasn't contemplated since then. So the question is, EPS is obviously being reiterated or the same. But maybe you could just talk through what has changed in terms of the composition of EPS since the last call? Thanks.

I would say, Adam, if you look at the composition of EPS for us, the mix definitely plays a role, right. And so if you're growing in the right segments that helps significantly and that's an obvious one. So things like stronger growth in IEI does help our overall story, continued growth in health solutions. So mix plays a definite role in terms of the composition of EPS. The other thing I said this in my last quarter call is this idea of being disciplined about how you execute, how you manage variances in the factory, how you manage program ramps, how do you prevent leakage, is also important. The more we can do to take those things out of the equation helps improve our overall gross margin and enhance operating margin. The composition of how things change is basically mix and overall managing our variances much better and having fundamentally good cost management. As you know, we sometimes don't control our revenue. We have a lot of pushes and pulls, and things can be dynamic in a business like ours. So doing those things well, which is having the right mix, good management of variances, and strong cost management, are all fundamentals in how we need to manage this business. I think that's what you're seeing in our guidance.

Maybe just as a follow-up on the restructuring program, I understand the themes to be in obviously lower margin areas that you're moving away from. But just hoping for, number one, more details into that decision? Just to play devil's advocate, I would think scale would be an important characteristic in those areas to still make a good return on capital. You have scale as a competitive advantage. So why exit or move away from them and focus on more lower volume areas where the competitive advantage of scale is arguably less relevant? And secondly any contemplation on monetizing that versus simply restructuring it. Is there any possibility of divesting or selling or somehow monetizing that? Thank you.

What I would say is that first, let me start with saying that these decisions are never easy. So there's obviously a lot of thought involved in these decisions that we have taken. Some of these discussions, particularly the one that we talked about in China, are somewhat beyond our control as governments make decisions and our customers make decisions on what they want their supply base to look like. I would say for me, if I think about scale, scale is an advantage for sure. But the right type of scale is important. So having scale in high revenue but also high volatile short cycle business means that you are really moving the business up and down from a revenue perspective quarter-over-quarter significantly. And then you are working on laser-thin margins, there's not much to maneuver in terms of managing those businesses. They are extremely short cycle. Product life cycle is usually not too long. So in those cases, scale has a very short cycle advantage really. It doesn't have sustainable long-term value. I think history has shown that. A lot of history in this business has proven that that is the case. So big ramps, big ups, and downs happen constantly, and I don't think we are in a position to do that well. And other people may be able to do that, but in the case of Flex, we don't think that's something that we should focus on. This doesn't mean that we're walking away from scale. We have very large customers across other parts of our business, which may not be highly volatile and short cycle. That type of scale is okay and we're perfectly comfortable with that. That's how we view the segment profile looking forward.

We explored various options and took a thoughtful, disciplined approach to determine the best way to serve our shareholders. We know what actions are necessary and will be selective in allocating capacity and capital. Our focus will be on higher margin, longer product life cycle businesses that allow us to operate in a more stable and predictable manner.

Our last question comes from Jim Suva with Citi. Your line is open.

This is Tim Young calling on behalf of Jim Suva. Thanks for taking my questions. Can you talk about your growth strategy in the near to mid-term? I think you have mentioned you're focused on execution and margin improvement, and the portfolio management and your performance has shown your progress on this front. But your HRS and IEI have had a couple of quarters performing below your 10% growth target. And it sounds like you are reducing CapEx as well. So I wonder if you can provide some color on how should we think about your growth opportunity going forward.

Tim, great question. Let me clarify this. Our growth is very important to us. It's never a question that growth is not important to us, it's the right kind of growth. If you refer to my slide discussing our progress today, I clearly mentioned the emphasis on growing in the industrial space and capturing new technology trends. I talk about design-led wins across our businesses. In CEC, focusing on design-led wins. I'd just correct you a little bit and say that I had a very strong growth quarter, and HRS's aggregate was muted by automotive, but health solutions had a very strong growth quarter. So if you peel back the onion, there's a very strong focus on growth. That's not the case at all that we're not looking for growth. We're seeking the right type of growth where we and the customers can win together. We can provide long-term customer affinity and relationships that are sustainable and that's what we're looking for. Examples of IEI and health solutions having growth really shows that we're on the right trajectory in terms of managing our overall business from a growth perspective.

Can you provide insight into the revenue mix following your restructuring of CTG? Specifically, what is the size of this segment as a percentage of total revenue expected over the next five years, or what is your targeted growth for this revenue mix? Thank you.

Tim, it’s too early really to say what happens in the next five years. The changes we're making really impact CEC and CTG today both. Our hope would be that what happens is that HRS and IEI become bigger parts of our portfolio. We're hopeful that the right sub-segments within CTG and CEC continue to grow, because there isn't an overall segment issue this is fundamentally portions within a segment. This is not unique to Flex; every business has portions where the spread of growth and margin is significant, and you have to move that spread in the right direction in terms of growth and margin. It's too early to comment about what happens in five years. I think our decisions, actions we've taken, and the performance we're delivering in Q1 and committing to in Q2 really show where we're heading. So hopefully that answers your question, Tim.

This concludes the Q&A period. And I'll now turn it back over to Flex for any closing remarks.

Thank you, everyone for joining us. I just want to close by saying, we had a really strong Q1 and we delivered solid adjusted EPS and free cash flow. We're taking thoughtful but swift actions in our portfolio and also driving discipline across all facets of our business. With these actions, we're confident that we're on the right path to deliver consistent and long-term shareholder value. Thanks again for joining us.

This concludes today's conference call. You may now disconnect.