Good afternoon, and welcome to the Flex Second Quarter Fiscal Year 2020 Earnings Conference Call. Today's call is being recorded, and all lines have been placed on mute to present any background noise. Slides for today's discussion are available on the Investor Relations section of the flex.com website. As a reminder, today's call contains forward-looking statements based on current expectations and assumptions, and these statements are subject to risks and uncertainties that could cause the actual results to materially differ. Such information is subject to change, and the company undertakes no obligation to update these forward-looking statements. For a discussion of the risks and uncertainties, see Flex's most recent filings with the SEC, including current annual and quarterly reports. If this call references non-GAAP financial measures for the current period, those measures can be found in the appendix slides; otherwise, they are located on the Investor Relations section of the Flex website, along with the required reconciliations. With us on today's call are Revathi Advaithi, Chief Executive Officer; and Chris Collier, Chief Financial Officer. After the speaker's remarks there will be a question-and-answer session. I will now turn the call over to Revathi Advaithi, the Chief Executive Officer. Please go ahead.

Hey, thank you. Good afternoon everyone, and thank you for joining us on the call today. As we've reached the midway point of our fiscal year, I'm really excited to share the progress for the second quarter and talk about how we move forward. While I reflect on the last six months, we set about a journey to shift our portfolio mix while improving margins and delivering appropriate levels of adjusted free cash flow. I'm really happy that our results this quarter are showing that this can be done. Our second quarter performance, like Q1, is another step in the right direction. Of course, I want to start off by thanking our nearly 200,000 Flex employees who have worked really hard to further build on the legacy of this great company. So I want to thank the Flex team. Let's start with slide three. This has been a very dynamic and exciting period for Flex, and we have done a lot of transformational activities that we've been managing through. What I'm really pleased with is that this has been capped off with this really strong financial performance. So let me talk you through the financial metrics. We achieved revenue of $6.1 billion, and this reflects our underlying mix change strategy and displays growth in core areas like Industrial and Energy. We realized an adjusted operating margin of 3.7%, showing significant gains in our conversion and benefits from our portfolio mix. We delivered adjusted EPS of $0.31, and this is right where we committed, and our adjusted free cash flow generation of $187 million resulted in an adjusted free cash flow conversion that's returning to historical performance levels, and where we are targeting to operate our business. So, let's go to slide four. We've done a lot this quarter building on what we started in the first quarter. Firstly, our teams have done an exceptional job executing on our mix strategy as we have been reducing exposure in India and China, and reaching an amicable settlement with Huawei. At the same time, we've focused on our core growth segments and getting back to enhancing our sustainable, disciplined execution efforts. We've had many new business wins this past quarter, and there are a few wins in particular that highlight our technology leadership and global capabilities. And I want to share some of those with you right now. So the first example is one of a design-led win in our CEC space, where we designed and manufactured a storage media solution that transfers, stores, and catalogues media within the data center. This solution is one of several design-led wins we have with this customer, and is going to be deployed across the customer's data center network. We continue to increase our geographic penetration with significant design-led wins in Europe and China, and that expands our position in autonomous and electrification outside of North America. And in addition, our communication and connectivity know-how have led to a new major win in the automotive space for an integrated connectivity module for a major North American automotive manufacturer. And then in our health solutions area, we continue to secure many design-led wins in point-of-care drug diagnostics and drug delivery. We solidified our lead in the diabetes market with a significant continuous glucose monitoring device win. Additionally, we are encouraged by the increases in customer outsourcing we are seeing that reinforce a market trend that really bodes well for us in this space. But in all these examples, we're leveraging our deep experience across design and manufacturing capabilities, along with our strong customer collaboration to provide meaningful solutions to their manufacturing and design challenges. So, in April, six months ago, when I first talked to all of you, we committed to doing four things; Managing our mix, driving disciplined execution, winning more design-led businesses, and consistently driving free cash flow. Now, the reason we chose those four areas was because it was clear that growth is not the challenge in our industry, but delivering incremental margin with EPS growth, and the right levels of free cash flow typically has been, and doing so consistently really matters. So, our performance this period across these four elements really demonstrates that we're executing, and our work is paying off. Now, combining these four priorities with the right type of profitable growth will be the powerful story as we move forward. We believe this disciplined approach that we have created will create a lot of positive momentum for Flex and will drive shareholder value. So I want to take a few minutes to share with you some thoughts on our strategy going forward. We've talked a lot about optimizing our mix and improving our execution, and we have accomplished a lot in these areas, and will continue to refine and optimize. Customers are telling us that we have outpaced the industry in technology innovation, particularly in health solutions and automotive, in our energy and power sector, as well as 4G and 5G. So technology leadership is very important, and we plan to maintain our leadership position. Our goal is to ensure that our commercial plans and the segment's focus on driving growth and technology to win the right type of business. And operationally, we'll simplify and optimize our factories to the high scale efficient agile model or the high mix lower volume longer lifecycle model. The great news is that we know how to do this really well. And we have a pedigree like none other to meet these demands. Our plan moving forward is to run end-to-end business segments with emphasis on differentiated engineering and operations manufacturing service models which are tailored to meet individual customer needs. Of course, at the core of our strategy is always the enthusiastic and passionate Flex culture that makes all of this possible. I'm very excited about this path that we're taking, and we're looking forward to hosting an investor and analyst day in fiscal year '20 Q4, where we'll further expand on our approach. I'm really pleased with our performance this quarter; we've taken another big step in the right direction and our plan is working. I'd like to turn the call over to Chris, who will walk you through our financial results in more detail, and then I'll come back with some closing remarks. Chris?

Thank you, Revathi. Please turn to slide six for our second quarter income statement's summary. Our second quarter revenue was $6.1 billion, down 9% versus a year ago, and at the low end of our guidance range. Our Q2 adjusted operating income was $227 million, which was within our guidance range, and up 2% year-over-year. Our adjusted net income was $158 million, resulting in an adjusted earnings per share of $0.31, which was at the midpoint of our guidance range, and up 7% year-over-year. Second quarter GAAP net loss was $117 million, and was lower than our adjusted net income, primarily due to $19 million of stock-based compensation, $14 million in net intangible amortization, and $226 million in net restructuring and other charges. As we accelerated our strategic decision to reduce exposure to highly volatile products in China and India, and we undertook targeted actions to reduce, streamline, and align our operating cost structures. We previously guided to a range of $145 million to $265 million for these charges, the bulk of which we incurred in our second quarter. Now please turn to slide seven for quarterly financial highlights. This quarter, while our adjusted gross profit was down 5% year-over-year to $414 million, our adjusted gross margin improved a healthy 30 basis points year-over-year to 6.8%, reflecting our improving mix of business, benefiting from operational efficiencies. We continue to manage the enterprise with a strong cost discipline. Our second quarter adjusted SG&A expense declined 11% year-over-year to $186 million even as we further invest and reposition spending to support and extend our design and engineering capabilities. Our SG&A as a percentage of revenue is expected to remain in the 3% to 3.2% range, thereby providing sustainable operating leverage. The combined impact of our improving business mix, operational execution, and strong cost discipline translates into improving operating margin and profitability. Our quarterly adjusted operating income was $227 million, which was up 2% from the prior. Our year-over-year operating margin expanded by 30 basis points to 3.7%, which reflects our fifth straight quarter of year-over-year margin expansion. Please turn to slide eight for a second quarter business group performance. During the quarter, our revenue reflected expected pressure from our restructuring actions as we proactively reduced our high volatility, short cycle low margin business as well as weakness in certain end markets. Revenues for high reliability solutions, industrial and emerging industries, and the consumer technology group met or exceeded our prior guidance. HRS revenue was $1.2 billion, declining 2% year-over-year. Health solutions was down 5% as it experienced minor timing push-outs or weaker than forecasted demand for a small subset of products, which combined resulted in a temporary slowdown this quarter. Auto was up 1%, as it continues to ramp new business across its portfolio and navigates a slower growth environment. Our IEI group grew revenue 14% year-over-year to $1.8 billion and benefited from strong performances from home and lifestyle and energy customers and programs, even as semi cap equipment remains muted. CTG declined 21% from the prior year to $1.4 billion, reflecting anticipated revenue reduction as we lessen our exposure to high volatility and low margin, short cycle businesses. We've made good progress on our repositioning and anticipate that these activities will lessen as we complete the targeted portfolio rationalization by the end of this fiscal year. Lastly, CEC revenue declined 19% year-over-year to $1.7 billion as a result of reduced demand from certain telecom and networking customers and the impact from our Huawei settlement. The underperformance was broad and encompassed some of our largest customers. The reduction in our customers' forecasts is consistent with the indicators we're seeing from the market and signaling a near-term slowing of telecom CapEx. Turning to profitability, we were pleased to deliver a 3.7% adjusted operating margin in the quarter, even on the lighter than expected revenue. Profitability of HRS was solid and resulted in a 7% adjusted operating margin, reflecting our conscious decision to accelerate investment into the ramp of our largest ever Health Solutions program, which should bring an uplift to both revenue and operating profits as it moves into full-scale production in fiscal 2021. IEI continued to benefit from strong operational leverage and from ramping programs with greater design and engineering content, which resulted in a record adjusted operating profit and a very strong 6.2% adjusted operating margin for the quarter. CC is 1.8% and CTG is 1.9%. Adjusted operating margins remain pressured as we transition our portfolio and reposition our operating structure. We want to reiterate that enterprise margin expansion remains the cornerstone of our strategy, and we are driving commercial discipline and operational efficiencies in order to deliver profitability. Turning to slide nine, let us review our cash flow generation highlights. Our second quarter performance displayed solid cash flow execution, consistent with our expectation to return to positive adjusted free cash flow generation in fiscal 2020. We continue to operate with disciplined working capital, which remains inside our targeted range of 6% to 8% of revenue. We are confident in our ability to manage the business within this range. In particular, inventory management remains an area of focus and one where we believe we can further optimize. This quarter, we ended with $3.7 billion or 60 days' worth of inventory, down 16% or two days year-over-year. We expect to further improve our inventory management as we continue to drive better demand planning activities across the enterprise. Our net capital expenditure totaled $95 million for the quarter, its lowest level in over three years, and was lower than our depreciation for the quarter. We are operating a well-built-out global infrastructure and benefiting from prior year's investments that are now supporting new technologies, products, and programs. Another strength of our global system is our ability to redeploy installed capacity, where it is needed, among different sites and businesses, which enables us to optimally leverage existing assets. Taken together, these factors contributed to decreased capital expenditures for the quarter. Even while we continue to invest in the CapEx necessary to support our higher-margin long lifecycle programs in IEI and HRS businesses. We remain confident that we have sufficiently invested to support the profitable long-term growth. As we enter the second half of fiscal 2020, we expect that our CapEx will continue to closely align with our annual depreciation level, thereby benefiting adjusted free cash flow. This quarter, we generated $187 million in adjusted free cash flow. Our adjusted free cash flow generation for the last 12 months is $548 million, resulting in an adjusted free cash flow conversion of 89%. We continue to make progress to operate with discipline and strive to generate free cash flow conversion in line with historical levels. Lastly, we remain focused on delivering shareholder return, as we repurchased roughly 6 million shares for $60 million during the quarter, and we repurchased $241 million over the last 12 months. Please turn to slide 10 for our third quarter guidance. Revenue is expected to be in the range of $6 billion to $6.3 billion and reflects the impacts of our targeted actions to reduce our high volatility, short cycle, low margin business and continued weakness in certain end markets. HRS revenue is expected to be flat to up low single digits, as we anticipate modest auto demand expansion due to ramping new programs, coupled with stable demand in our Health Solutions business. We expect ongoing strength in IEI, with 10% to 15% growth as we continue to ramp business in home and lifestyle and energy. CEC's revenue is expected to be down 20% to 25%, reflecting the distinct reductions in customer demand, continued softness in end market demand in our telecom and networking offerings on top of a difficult year-over-year comparison as we had a peak third quarter last year. And for CTG, we expect revenue to be down 25% to 30% reflecting the targeted reductions in highly volatile products due to distinct actions resulting from the pruning of our consumer portfolio. Our adjusted operating income is expected to be in the range of $230 million to $255 million, which reflects continued adjusted operating margin expansion. Interest and other expense is estimated to be in the range of $45 million to $50 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 $0.32 to $0.36 per share based on weighted average shares outstanding of 512 million. Our adjusted EPS guidance excludes the impact of stock-based compensation expense, net intangible amortization, and the impacts from restructuring and other charges. We've completed the bulk of our targeted restructuring and other actions as we've swiftly moved to align our operating costs. We expect that we will incur the remaining estimated charges over the remaining quarters. As a result, we expect GAAP earnings per share in the range of $0.21 to $0.25.

Hey, thank you, Chris. We had communicated an EPS range of $1.20 to $1.30 in April, and we remain comfortable with that range. Our teams have really focused on meeting our commitments, and we have taken thoughtful but swift actions on our portfolio that have put us on a path to improving operating margins. We have demonstrated strong free cash flow conversion. Our four focus areas have helped stabilize our performance, and this enables us to really expand our efforts around disciplined growth going forward. I would now like to have the operator open the line for questions.

And your first question comes from Mark Delaney from Goldman Sachs. Your line is open.

Yes. Good afternoon, and thanks very much for taking the question, and nice job on the free cash flow and margin expansion that the company reported today. I just wanted to better understand the situation that the company is seeing in China, and maybe from a couple different dimensions. You talked about winding down the business with Huawei. I understand it's in the P&L guidance already, but if you could just talk a bit more about where Flex stands with that? And more broadly, there's been some pressure for it about the potential difficulty of certain U.S. companies doing business in China as part of the trade war. And I know it's still an important region for Flex long-term. Can you talk about any more challenging conditions Flex may or may not be seeing in the China region?

Hey, Mark, thank you for the question. And then thanks for the comments on our cash flow and margin expansion. We really do believe our work around execution is paying off, and you'll continue to see that progress moving forward. Now, on China and Huawei, Mark, let me start with Huawei. As I said in my prepared remarks, we've really reached a settlement with Huawei and have put that situation behind us right now. And in terms of overall China, we still have a very strong position in China. And our teams have done a really good job of stabilizing our situation with Huawei, but really focusing across the board in terms of growing the rest of our business. So our footprint is still strong. We have a significant presence in the region. And we feel fairly comfortable that we're in a strong position moving forward. Now, in terms of overall supply chain and what happens with trade conflicts, we are well positioned with our customers to go wherever they want us to go in terms of the world. And we are following our customers as they see fit in terms of moving supply chain, but our position in China remains strong. We're in a great position right now after going through the actions we did. And we're fairly bullish in terms of continuing to build our presence there and moving forward. So we really feel good about where we are with China right now.

That's helpful. And my follow-up question is on the HRS segment. Auto has been a headwind. I think the company has been benefiting from some products site goals and guiding all of HRS up flat to five. Maybe just talk about some of the puts and takes to HRS revenue growth and the potential for that revenue growth to be able to pick up back towards what had been historically your business with the company is able to grow high single or even double digits, and you talked about some good backlog and some programs wins in medical and in auto. So maybe just kind of help us understand was there a timeframe we should be thinking about for improved growth within HRS. Thank you.

Okay, thanks, Mark. Hey, we feel very bullish about our HRS segment, both in automotive and in health solutions. And we have talked in the past about the strong bookings we have in both the segments of automotive and health solutions. And particularly in very forward-looking spaces like autonomous and electrification in the automotive side. So the automotive sector, as all of you know, has faced some market challenges, and we have seen the effects of it. But the fact that we are kind of returning to growth in that segment really shows that we our bookings are paying off and we're gaining market share as we're driving for growth. Structurally, we're well positioned, both in electrification and autonomous, and so we'd really feel strongly about that, that we will continue to see growth, and we'll track with market in terms of any market issues. But our bookings will reflect share growth in the area. In terms of health solutions, we saw a quarter that we had some puts and takes, particularly with some program ramps and some customer move-out, but the numbers are really small. At the end of the day it's $20 million if it's a 5% decline in health solutions. And we made a real conscious decision there to ramp up some very large programs that we have because we could do that. This quarter afforded us the cushion to be able to ramp these programs, and customers wanted to see us do that. So we feel very good about where we are pushing for ramping of both automotive and health solutions in terms of new bookings. And overall, I expect HRS to return to growth; one, as the automotive sector starts to upswing we'll see the effects of that. But our bookings in medical and automotive should start to pay off I would say through early next year to a stronger mid-single-digit growth. And we're still seeing record bookings on a year-to-date, so feeling really bullish about this sector and our position in this sector.

And your next question comes from the line of Paul Coster from JPMorgan. Your line is open.

Thank you for taking my question. Revathi, while everyone is currently praising the margin expansion, I anticipate that a year from now, you may want to assess the operating margin growth using a more refined set of metrics. There’s no assurance that margins will keep expanding, as factors like mix could have an effect. Could you share your thoughts on how you envision the key performance metrics of the company evolving over the next year?

Yes, thanks, Paul. Yes, I'll take a minute and just savor the comment on operating margin expansion because the trick in this sector has been how do we manage mix and improve margins and deliver EPS at the same time. So this year for us has really been focusing on that. And then you can see that with our current quarter and our future guidance that we're on track to do that, and do it well. But I absolutely agree with you that we have to focus on the segments we are in and continue to drive profitable growth. Driving large-scale growth has never been the challenge for this segment, as all of you know. But making sure that we're driving profitable growth is important. We feel really good on the segment plans we have developed, the design wins that we're seeing, and our real push for driving a mix change with the right type of growth in the segments that drive higher value margin expansion for us. So we do want to be measured on both. And as I told you in my prepared remarks, our focus in the first six months was on the four areas I talked about, but moving forward, we're also pushing for a very disciplined growth strategy across our segments. And the real key is the disciplined growth strategy. But Flex has a great heritage and a fantastic pedigree in technology in these segments, so we know how to do this; this is not a question of we don't. So for us getting back to growth is not a hard thing to do. It's really important for us to make sure that we're getting back to growth for the right type of growth. And the mix changes we have done really positions us well to take advantage of that, Paul, moving forwards. I would say that everybody should be feeling very confident of our ability to make that happen.

I'm sure you've been still stress testing your business since you've been in this position. Do you have some sense of how the Flex business and earnings now will evolve in a slowing economy or even a recessionary environment…

Yes, I think all of you have seen the history in terms of kind of what happens to this space in a slowing economy or a recessionary environment. Usually we're very countercyclical in terms of cash generation. And then of course we will continue to be that way, but I think the other important thing to take away, Paul, would be to say we have done very well in the past few months in terms of managing our overall margin performance and our EPS performance even as revenue has declined. So I would say even in a recessionary environment what I would really expect the team to do is to really focus on how we manage our cost profile, both from a gross margin standpoint, and also making sure that we have the right focus in terms of our overall SG&A costs. So, I think our history says that we have done great on cash, but our last few months should tell that we'll continue to do well even managing our margin performance if revenues are impacted in a recessionary environment.

And your next question comes from the line of Steven Fox from Cross Research. Your line is open.

Hi, good afternoon. I'm sorry if I missed this, but I was curious if you could sort of detail how much of the year-over-year decline was sort of self-inflicted in terms of walking away from business and disengaging from Huawei and what the growth rates would have looked like excluding that? And then I had a follow-up.

Yes, hey, Steven. We've said we had predicted last quarter, right, that our disengagement from kind of this high cyclicality businesses would be the impact of $300 million to $400 million a quarter. And we continue to stick with that range that we have given. That's the impact that we're expecting to see. And we have seen the same in our Q2 results and in our guidance moving forward.

Okay, so you're in that range right now? That was…

Yes, that's correct.

Great. And then just a bigger picture on IEI, you mentioned some of the core markets that you're focused on. I was wondering like those are sort of broad categories. I was wondering if you can give us some more detail in terms of what types of new programs you're having that are most successful there, and how you can drive further growth in some of the broad categories that are mentioned within IEI? Thank you.

Yes, Steven, let me address two key areas within the IEI segment as it's currently reported. First, there's the industrial side of the business, which primarily targets diversified industrials. The presence of EMS providers in this sector is quite limited, and we have developed a robust go-to-market strategy here. Although we're dealing with smaller customers, this segment tends to have longer product lifecycles, a greater focus on technology, and better margins. We are actively pursuing growth in our industrial programs and are optimistic about our potential for deeper market penetration in this diverse segment, which combines electronics and mechanical capabilities up to the controls level. The second area is the energy sector, where we have a strong foothold, particularly with our NEXTracker business. We're not only focusing on enhancing basic products but also on increasing software integration that optimizes solar performance. Overall, I am pleased with our performance in both the industrial and energy sectors, and I believe that due to the low market penetration in these areas, we have significant opportunities for continued growth.

And your next question comes from the line of Ruplu Bhattacharya from Bank of America. Your line is open.

Hi, thank you for taking my questions. Revathi, just to start off with a high-level picture question, you've got four segments in front of us. Two of them have operating margins less than 2% and in the best case they can get to like 3.5% and 4%. And then you've got two other segments that have 5% to 7% margin that can be 7% and 8% margin. So do you think the pruning that you're doing in terms of underperforming programs is enough or you think that that should expand into some of the lower margins in the CEC business and in the longer-term by event keep those two segments and not just transform the business into a higher margin but lower revenue business?

We have a strong sound disturbance, but I believe I understood your question about our two lower-margin segments and two higher-margin segments. Our focus on the portfolio going forward will be discussed at our Investor Day in mid Q4. There's significant interdependency among our four segments that we aim to leverage. The CEC business provides us scale and a vital technology platform beneficial to our other operations. Our autonomous strategies are based on the engineering and technology expertise we gained from the CEC business. While the diversity of our portfolio may raise questions, our goal is to establish market share leadership in all four segments and foster appropriate growth in each, particularly in the higher-margin areas. In CEC and consumer, we aim to adjust the mix and concentrate on more innovative, design-focused wins while being selective. Additionally, operational efficiency is crucial for managing a business that combines high scale with a diverse mix, and we are addressing how to balance efficiency and innovation to drive margin growth across the segments. In summary, every portfolio has its mix, but we believe the current diversity of our portfolio benefits us, as reflected in our results this quarter. The strength of our diverse portfolio has enabled us to achieve solid operating margin growth and EPS growth, and we're excited to share more at our Investor Day about the core technology capabilities from our CEC business that enhance our entire portfolio.

And your next question comes from the line of Jim Suva from Citigroup. Your line is open.

Hi, guys, thank you. This is actually Michael Sanchez for Jim Suva, Citi. My one question is more general in nature and it's that looking to the rest of the year, would you mind framing how we should look at two things? And the first is 5G ramping, and the second would be how we should think about India demand? Thank you.

Sure, let me address both points, Michael. Regarding 5G, there has been significant discussion about it recently. We believe we are in a strong position concerning 5G technology, comparable to the top two players in Europe, and we maintain a solid presence. The ramp-up in telecom and 5G has been uneven, with Europe and Asia progressing slowly, while North America has seen a quicker ramp-up. We expect any major infrastructure rollout to exhibit cyclical behavior. As evidenced by the announcements from major telecom companies, the rollout is geographically dependent, with certain areas advancing faster than others. This affects us as we supply to all of them, making it a matter of timing rather than whether it will happen. When it does occur, we are well-prepared with all the leading 5G providers. As for India, we've previously discussed that we've significantly reduced our dependency on more cyclical products in our India business. Our aim is to grow in India while modifying our product mix, focusing on higher-margin offerings. We’re observing a substantial push for some manufacturing capabilities to relocate to India. Our timing is ideal since we have already built considerable scale and presence before this quarter's ramp-down, and we are now working on increasing our operations with a strong pipeline while being very strategic about our business approach to take advantage of our current position.

Okay. Thank you, Revathi.

And your next question comes from a line of Adam Tindle from Raymond James. Your line is open.

Good afternoon. This is Madison on for Adam, and thanks for taking my question. You've talked about a focus on design and engineering lead engagements as the operating margin can be nearly doubled traditional EMS business. I know you gave a lot of good examples on the work you're doing. But can you touch on some of the metrics around these types of engagements, whether it'd be the pipeline, win rates or backlog? And how do you think about the growth profile of these types of engagements?

So Madison, we'll talk more about this when we do our Investor Day in mid Q4, because I think we really have to focus on showing you the right type of engagements that we're looking at from our bookings pipeline, and really give you more examples of how these can scale up, right? Because the thing about design lead engagements is, is it just one-off and if it's only one-off, it tends to be a smaller portion of your mix. Our goal is to really drive a platform type engagement. In terms of our design lead wins, you can scale it across multiple customers. And IEI and HRS are both really very, very different. If you look at IEIs performance today, you can clearly show that the design lead wins are shorter cycle; you'll see it faster in terms of your bookings and your conversion to revenue. HRS is a whole different ballgame; like the design wins that we have working on today really takes kind of a couple of years in terms of incubation period for it to show up in our overall revenues. So very different based on segment, but I'll really talk to you more about it when we do our Investor Day and really focus on kind of forward-looking metrics of how we should see this expand and show up in our mix. And we'll have a lot more detail then.

Okay, great. I'll be looking forward to that. And then, just a follow-up for Chris on cash flow, so you've talked about a commitment to generating positive free cash flow moving forward, so is there a way we can think about free cash flow for the full-year? You've obviously been very disciplined on CapEx here. So do you think you can surpass the roughly $600 million level that we've seen historically? And then if you could just remind us of capital allocation priorities in lieu of this? Thanks.

Certainly. I would begin by considering the factors influencing our free cash flow. Over the past year, we've generated approximately $548 million, achieving an 89% conversion rate for free cash flow. We have been disciplined in managing capital expenditures, aligning them closely with depreciation, and as shown this quarter, even exceeding depreciation, which contributes positively. Our management of working capital has been effective, although we noted today that there is significant potential for improvement within our inventory. Additionally, our profitability is supported by disciplined cost management, leading to enhancements in our earnings cycle and generation. Our objective is to return to historical free cash flow conversion levels, targeting around 90%. We're making solid progress, having achieved four consecutive quarters of strong free cash flow conversion. This year, we are also facing considerable restructuring costs, exceeding $125 million, as we restructure and optimize our portfolio and cost structure. Looking ahead, we aim to maintain momentum in reaching historical free cash flow ranges, which is integral to our disciplined approach to capital return. We are committed to using our free cash flow to ensure solid financial health for the company while also delivering on our long-term promise to shareholders through share repurchases. We have consistently converted over 50% of our free cash flow to share buybacks, and we aim to continue that trend. Our capital structure will remain prudent moving forward, as we do not have significant M&A needs given our established global system and strong capabilities to support core growth markets. This positions us to maintain a balanced and flexible financial condition, while continuing to deliver returns to our shareholders.

And your next question comes from the line of Christian Schwab from Craig-Hallum Capital. Your line is open.

Hey, great. Thanks for taking my question. My question has to do with revenue for this quarter. And I understand, we knew we were going to exit some of these low margin high volatile short cycle businesses. My question has to do with forecast of shipments, if you want to comment on that, whether it be your top 10 or top 20 customers, if there was a material difference between forecast and shipments during the quarter.

Yes, Christian. I'll address that. The significant change in our forecast was mainly due to a shift in our CEC business. We experienced a slowdown in the telecom sector during the quarter, which affected CEC revenue differently than we had anticipated. However, despite this change in the short cycles, the overall diversity of our portfolio worked in our favor, allowing us to meet our EPS targets and improve our margins simultaneously. So, while there was some disruption in the telecom and CEC areas, what was crucial was our ability to manage the mix, leverage the diversity of our portfolio, and maintain our focus on execution, which enabled us to achieve our EPS and margin improvements.

Great, I suppose the reason for that question is you all know better than anyone that lead times for general-purpose shifts have drastically decreased. Not too long ago, the lead times were 26 weeks, and now we’re down to eight weeks. This likely explains what a major semiconductor company mentioned in their conference call this week. Additionally, MLCC chips are no longer under allocation. Our research indicates that many companies are feeling confident enough to reduce their inventories to generate cash. It appears we are witnessing a typical correction in the semiconductor industry as lead times return to more normalized levels. I would guess they need to bounce back to around 12 weeks, would you agree that this is part of the demand aggregation taking place?

Yes, so what I would say Christian is that we've definitely seen I think like you said, it's a well-known issue that lead times are down, and particularly in MLCC chips. I mean we're definitely in a whole different situation from where we were last year, and we're in a more manageable framework in terms of lead time across the board. But for us, the revenue change was really a result of the telecom space in CEC. So that really drove our overall kind of revenue change in CEC. We're not seeing any major impact from the lead time change and the lack of the fact that supply constraint has gone away. And MLCC chip we're really not seeing that. In terms of a revenue constraint overall, we think that issue is behind us. And then the supply chain is really different for each of our segments, right? Our HRS versus CTG and CEC supply chains are different, IEI is very different not very components-focused. So revenue shift in the quarter was due to telecom, and then we think that the overall lead time shrinkage really isn't impacting us significantly from shifting revenue and working its way through the customer value chain.

Due to technical difficulties, we are reopening Ruplu Bhattacharya's line from Bank of America. Ruplu, please go ahead with your follow-up question. Your line is open.

Hi, thank you for taking the follow-up. On IEI, you've had substantial margin improvement, a 4.2% last year quarter and now 6.2%. So Revathi, can you help me bridge how that 200 basis points improvement came and do you think there is more opportunity for you to expand margins there? And in general, how should we think about operating margin in that segment? Thank you.

In IEI, we are experiencing strong overall growth, which positively impacts absorption and conversion, subsequently enhancing our margin. We're also seeing consistent growth across all sectors of IEI, including industrial, energy, and home and lifestyle, all of which generally have higher margins and are converting effectively. Furthermore, our portfolio mix is improving. Moving forward, I hope to see continued margin improvements. In both the industrial and energy sectors, there is significant potential for EMS players to increase their market penetration. We feel optimistic that as we achieve stronger growth, we will see better absorption and margin enhancement. This is all taking place in a semiconductor space that remains relatively constrained, but we anticipate that returning to normal will also contribute to improvements. Ultimately, what I seek from that business is ongoing growth, and we are confident about the direction of margins in that segment.

And there are no further questions at this time.

Hey, thank you all for joining us. And as you can see from all the questions that you asked, is also really good performance from us in terms of operating margin and cash flow performance. We're really doing a lot of hard work in terms of managing our mix, which has been impacting our revenue in the recent quarters. We feel really good in terms of our forward-looking focus on how we return to profitable growth, but at the same time keep the benefits that we see from operating margin expansion and cash flow performance. So we're really delivering on the path we set forward six months ago, which is about disciplined execution, and then we're really looking forward to talking to all of you at our Investor Day in the mid-fourth quarter and talk to you more about our long-term strategy and where we're taking this company, so really excited to set that up for all of you, and thank you for joining us.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.