Flex Ltd. (NASDAQ:FLEX) Q3 2023 Earnings Call Transcript

Jim Suva: Thank you very much. This is more of a strategic bigger picture question. Revathi, as you load more onshoring facilities, whether it be Guadalajara or North America or South America or Europe (ph) facilities, and you build on a cost-plus model, now that those factories are better utilized, plus the labor rate is a little bit higher, which you passed to the end customer, doesn’t this also help out your long-term operating margin goals to be accretive also? I just wanted to make sure or maybe it doesn’t work that way.

Revathi Advaithi: I would say, first, Jim, that I think the areas you’ve picked out are all the right ones, that we have said Mexico, parts of the U.S., are definitely our biggest growth trajectories, some in Malaysia, Southeast Asia. So, those are all the right areas that we’re growing. The way I think about it, I mean, you see this in the liability now, right, when we start to execute these programs, there’s always some challenges with it, because they are big complex programs. And what you see particularly in Mexico and U.S. is very few people can execute these type of complex programs and we are choosing to take those on. So, you see that execution pressure, which challenges some of our Reliability margins as you see now.

But as you say, as those programs mature, and we get to a more efficient model, I won’t call it just a cost-plus model, but a more efficient model that we work within our customers, we do expect that to be tailwind for margins. And that’s why I keep answering the question of the 5% as it’s something that we feel good about, right? There’s a lot of different ways this industry is monetizing and expanding margins, and that is definitely one of them. So, I agree with you.

Jim Suva: Great. Thank you so much for the clarification and details, and congratulations to you and all your teams.

Paul Lundstrom: Thanks, Jim.

Revathi Advaithi: Okay. So, thank you, everyone. I just want to close by saying that on behalf of the Flex leadership team, a sincere thanks to our customers and to all our shareholders for their support, and, of course, to the Flex team across the world. Your hard work makes this possible. We wouldn’t be here today without you all. So, thank you so much, and see you soon. Bye.

Operator: This concludes today’s conference call. Thank you for joining. You may now disconnect.