Flex(US:FLEX)2020-05-08 05:53Financial Data and Key Metrics Changes - Revenue for Q4 2020 was $5.5 billion, down 12% year-over-year due to COVID-19 and planned portfolio changes [16][18] - Adjusted operating margin was 3.8%, despite absorbing $52 million in COVID-19 related costs [16][20] - Adjusted EPS for Q4 was $0.28, reflecting a 5% year-over-year increase [19] - Full year revenue for fiscal 2020 was $24.2 billion, down 7.6% year-over-year, with an adjusted operating margin of 3.7%, the highest since 2001 [17][19] Business Line Data and Key Metrics Changes - HRS revenue was $1.1 billion, down 6% year-over-year, impacted by an 8% decline in automotive and a 2% decline in health solutions [23] - II revenue grew 23% year-over-year to $1.9 billion, driven by strong growth in renewable energy solutions [23] - CEC revenue declined 23% year-over-year to $1.5 billion due to production disruptions [24] - CTG revenue fell 37% year-over-year to $1 billion, affected by supply chain constraints and portfolio reductions [24] Market Data and Key Metrics Changes - Component shortages peaked on February 22, but have since improved, with shortages now only in a few situations [13] - China sites are fully operational, while some sites in other regions remain shut down due to COVID-19 outbreaks [14] - Automotive facilities were shut down in line with customer facility closures, expected to continue through May [14] Company Strategy and Development Direction - The company is focusing on a diversified portfolio and targeted growth applications, emphasizing agility and reliability in operations [39][40] - A commitment to long-term strategy remains, with a focus on technology differentiation and adapting to new supply chain demands [39][40] - The company is leveraging its operational radar to anticipate and balance supply and demand needs [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of bookings, particularly in health solutions and automotive, despite recent slowdowns [44] - The company anticipates a sequential decline in enterprise revenue in the range of high single to low double digits due to ongoing disruptions [35] - Management expects strong growth in health solutions, driven by increased demand for critical care products, despite challenges in elective procedures [33][52] Other Important Information - The company suspended share buybacks to preserve cash during the pandemic [15][28] - Adjusted free cash flow for Q4 was $134 million, marking the sixth consecutive quarter of positive cash flow [26] - The company has a strong liquidity position with ample access to cash and no near-term debt maturities [29] Q&A Session Summary Question: Bookings trends in March and April - Bookings were lower in the last quarter compared to prior quarters, with strong bookings in health solutions but slowness in other segments [44] Question: Long-term margin expectations - Management expects to return to targeted operating margin levels despite increased COVID-related costs in the next quarter [46] Question: Cash flow expectations and inventory management - The company has generated over $100 million in free cash flow for six consecutive quarters and is actively managing inventory levels [50] Question: Impact of COVID on medical and elective surgery demand - Growth in health solutions is expected to be strong, net of reductions in elective surgeries, with a quick rebound anticipated [52] Question: Production experiences in various regions - Production in Malaysia and India has faced challenges, but operations are expected to ramp back up [56] Question: 5G ramp expectations - 5G investments are strong in China, while Europe and North America are currently on pause [62] Question: Portfolio pruning in CTG and CEC - Most portfolio corrections have been addressed, with ongoing efforts to improve business mix [74]