Good afternoon, and welcome to Flex Second Quarter Fiscal Year 2017 Earnings Conference Call. Today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. At this time for opening remarks and instructions, I'd like to turn the call over to Mr. Kevin Kessel, Flex's Vice President of Investor Relations. Sir, you may begin.

Thank you and welcome to Flex's conference call to discuss the results of our second quarter of fiscal 2017 ended September 30, 2016. We have published slides for today's discussion that can be found on the Investor Relations section of our website. Joining me today is our Chief Executive Officer, Mike McNamara; and our Chief Financial Officer, Chris Collier. Today's call is being 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 Securities and Exchange Commission, 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 slide, otherwise these measures are located on the Investor Relations section of our website along with the required reconciliation to the most comparable GAAP financial measures. Before I hand the call over to Chris, I want to point out that commonly referred to acronyms for each of our four business groups along with their definitions are mentioned at the bottom of our disclosure slide. With that, I'll pass the call to our CFO, Chris Collier. Chris?

Thank you for your interest in Flex and for joining us today. Please turn to slide 2 for our second quarter income statement highlights. We are pleased to report that our performance was in line with our guidance on almost all of our major financial indicators. Our revenue totaled $6 billion, which was at the midpoint of our guidance range, as three of our four business groups met or exceeded our expectations. As guided, revenue declined year-over-year by approximately $300 million, which is entirely reflective of the impact of exiting on Lenovo Motorola China operations, a process that concluded in our June 2016 quarter. Our second quarter adjusted operating income was $197 million, which was above the midpoint of our guidance range of $180 million to $210 million. Adjusted net income was $152 million. Our adjusted earnings per diluted share for the second quarter was $0.28, which was at the midpoint of our range of $0.26 to $0.30, and up 4% or $0.1 year-over-year. Our second quarter GAAP income before income taxes was $15 million. GAAP net loss was roughly $3 million and GAAP EPS was $0.00, primarily as a result of recognizing a non-cash impairment charge of $93 million or $0.17. Let me provide some additional details after this charge right now. The SunEdison Chapter 11 bankruptcy in April resulted in us taking a bad debt reserve charge of $61 million back in our March quarter, which amounted to our entire outstanding receivables balance. We also retained various exposures for inventory and assets from our SunEdison relationship. That we had anticipated being able to mitigate by selling the solar panel inventory directly into the market. I would note that a 100% of the inventory and assets used in this relationship were contractually covered by SunEdison. Beginning in the March…

Thanks, Chris. Please turn to slide 8 for our fiscal 2017 Q2 business highlights. Let me start by highlighting that our second quarter performance displays our continued focus on driving value creating activities. This includes the continued emphasis on driving our structural mix change to higher margin businesses, generating sustainable free cash flow and consistently returning value back to shareholders in the form of our stock buyback program. We just reported our 12th straight quarter of year-over-year adjusted operating margin expansion driven by traction we are developing from our Sketch-to-Scale strategy and our continuous portfolio evolution. This creates a more balanced portfolio that has longer product lifecycles, more predictability and increased earnings stability. We delivered this performance against a global backdrop where growth remains challenging. This quarter saw total sales from our automotive, medical, industrial, and energy businesses amounting to over $2.2 billion or 37% of sales. Our HRS business again led the way with its 27th consecutive quarter of year-over-year growth. Our portfolio evolution is also reflecting in the changes we have been making in our CTG customer composition and the technology content in products. We are excited about the addition of both to our portfolio as we close on the strategic partnership transaction late in Q2 and look to meaningfully expand with this great brand. NIKE also firmly remains on track as we continue to collaborate on driving automation and manufacturing advancement with them. In NIKE's most recent annual report dated July of this year, CEO, Mark Parker, said that NIKE was "partnering with innovators who help and accelerate systematic (sic) [Systemic] change at scale". With Flex NIKE is driving the modernization of footwear manufacturing process across its supply chain. This quote particularly encapsulates the strategic partnership we have. Our teams again remain extremely engaged as we drive…

The first question comes from the line of Stephen Milunovich from UBS. Your line is open.

Thank you. Good afternoon. So the slowdown in HRS and it could be down, I guess, year-over-year in the December quarter, and IEI as well, what do you view as the long-term growth rates for those businesses, and has that changed at all based on the some of these short-term volatile situations?

Hi, Stephen. I think from the IEI standpoint, we don't necessarily see that there's a slowdown. We see it more as a disruption with SunEdison and part of that disruption, I guess it did carry on to a slowdown in the marketplace as they had quite a bit – they had 2 gigawatts of projects underway. They had a big pipeline of like $8 billion and a lot of other factors and they're contributing to a little bit of a slowdown. The ITC extension in the United States and as well some of the changes in the feed-in tariffs in China. So we don't see that as being significant long term because the macro, according to, solar is very high. The rest of the industrial business continues to move along at a fairly reasonable pace. So we actually think we'll have a couple of quarters slowdown here in IEI and then we expect it to recover. So, in summary, we actually expect – even with the SunEdison problem, we actually expect that business to grow very close to our target of the 10%. In HRS, we are seeing a slowdown in some of the businesses. We also had a little bit of a push out in one of our medical programs, which we're a little bit disappointed in. So auto is slowing a little bit, but still probably growing close to 10%, medical is probably a little bit slower. But as a bundle, that HRS group is probably going to grow more towards the mid single-digits for the year. But in terms of structurally coming off of our long-term targets of having those two groups together drive to a 10% growth rate, we still think those are intact.

Okay. And within CTG do you still expect Bose could be a top 10 customer in fiscal 2018? And how quickly you expect NIKE to ramp?

Yes, so 2018 for Bose will definitely be a top 10 customer. So I think that's well on its way and we don't anticipate any disruptions or delays with that program, with that customer or with their revenue ramps. NIKE, I think I would frame NIKE this way. We've been working at reinventing manufacturing or reinventing how manufacturing happens with shoes. It's a pretty significant change. We've been under a lot of design automation changes and invention over the last – really over the last two years. We'll see FY 2018 as pretty much of a ramp year as we move more towards volume and then we'll see FY 2019 as being pretty high volume year. So think about 2016 and 2017 as being invention and re-creation of how manufacturing happens. FY 2018 as a ramp year, which will still have some profitability challenges as a result, of course, and FY 2019 being a full revenue where we'll expect to make very good progress around profitability.

Great, thank you.

Your next question comes from the line of Amit Daryanani from RBC Financial Markets. Your line is open.

Thanks. Good afternoon, guys. I have two questions as well. I guess maybe to start with on the Bose side, could you just talk about – maybe I missed this, but how much of the Bose revenues are built into the CTG model or your revenue model guide for December quarter? And is the Bose – the revenues you get, are they running in line to your CTG margins or do you need to improve the utilization of those two sides to get there?

Hey, Amit, this is Chris. So we closed Bose late in Q2, so we're going to get the full benefit of it in this current quarter. In the prepared remarks, we highlighted that Bose is contributing mostly to the gains that we've guided to in CTG for the December quarter. There's some modest growth in the rest of the business of CTG, but predominantly the 10% to 15% up is driven by Bose. The revenue run rate – it's going to be a top 10 customer next year. The revenue run rate is not going to be linear. It's going to have some seasonality. As it relates to the profitability, it's not going to be accretive out of the gate to the margins. It's accretive, it's profitable, but it's not going to be accretive to margins as we go through integration and other activities with the two new factories. But that's something that takes a course over the next couple of quarters and we are super confident about our ability to bring that online, grow that into a very meaningful customer this coming year and have it contributing very nicely to the margin profile of CTG and to Flex. Now we're excited about it. It brings to auto certified factories, real new technologies, some expansive engineering talent and knowledge. So there's a lot of elements to it that we're excited about. And again, with CTG, our focus continues to be around improving the margin and profitability of that business not necessarily focused on the revenue growth. So as we state, moving into a richer mix and we're doing it through these new brands, and new technologies, and new products.

Got it. And then, I guess just on the SunEdison dynamic, it sounds like you're still holding some level of solar panel inventory on your balance sheet. So can you just talk about how much of it do you have now and would you expect to exit 100% of it by the end of the December quarter?

Yes. So in the prepared remarks, we highlighted that we took a charge during the quarter and we mitigated until that point roughly half of our exposure. After the charge, we have a little less than $50 million of module inventory in our shop and we have identified – we actually have PO's in place right now securing the sales of that and we anticipate having all of that out of the system sold by the end of our fiscal year.

Got it. Thank you very much.

Welcome.

Your next question comes from the line of Adam Tindle from Raymond James. Your line is open. Adam Tindle - Raymond James & Associates, Inc.: Okay. Thank you. You mentioned that you're still committed to the 4% to 6% operating margin in IEI and expect to achieve this by the end of the fiscal year. Could you help us with what needs to happen for this to be achieved? Is there any expectation of solar panel market values improving embedded in this?

Yes, so the 4% to 6% we actually think continues to be intact if SunEdison did go upside down, we would probably already be there, quite frankly. So that's thrown a wrench into things. So we're going to take a couple of quarter hit in terms of order delay in terms of getting to that target margin range. We would expect to move that into the range by the March quarter. And it doesn't actually matter much what the module pricing does because we feel that we've sufficiently mitigated the current exposure of that Chris talks about with the $48 million, and after that, we're not really in the module business. So we don't have any additional exposure associated with that. So we're heavily focused at selling solutions. We're heavily focused at driving trackers at improving the energy harvest to smart and connected solutions, but we kind of view modules as a commodity business. And you can see how significantly that has impacted the marketplace over this last quarter. And we are not in that business, with one exception, which is we would obviously build modules for on an EMS basis. But in terms of being in the business and owning that exposure, it's not something that we're into and we're more interested in energy solutions.

And the only thing I'd add to that is, as we continue the progress through the back end of this year, we have multiple new programs that have been ramping inside of our lifestyle, inside of industrial, inside of industrial home that are also going to prove benefits to – beneficial to the company's growth and profitability into IEI. And as we talked about in our prepared remarks, our NEXTracker business, we've more than doubled the number of customers and we have more than doubled the number of geographies that we're serving now. And we have the leading share in terms of that tracking solution and we see that continuing to be a very robust offering. So we're going to get some of this solar module pricing pressure behind us this past quarter. You're going to see a stepping up into higher profitability in Q3. And as I said in the prepared remarks, we have line of sight to getting inside that 4% to 6% range in our Q4 this year based on those various elements. Adam Tindle - Raymond James & Associates, Inc.: Okay. And maybe just one quick follow-up on HRS, Mike, you mentioned slowing there in terms of the growth rate. With that in mind, how should we think about margin? Is there a certain level of HRS revenue that you need to sustain margins at 8%?

Well, we already, as you know, just below the 8%. I mean, I would focus you on being in that margin range. We have a range for a reason, not an absolutely 8%, but at this level of revenue, we're able to achieve those margin. So I would say we don't actually need more revenue in order to move that margin or even to maintain that margin. I think – but I would caution you that we're trying to build to a range, not just necessarily 8%. And again, I think the slowing is pretty temporary. We don't – as we think about looking into next year, we have pretty good visibility into what this order stream looks like. We know which programs we have booked. So, we're still pretty bullish that maybe we've got just a temporary slowdown here and we had one major medical program that just got pushed out in terms of timing. It's not going to go way. It just – it moved about two quarters and that'll come back to us this next quarter in a significant – it'll have significant revenue implications for medical. So we think we're on the right trajectory. Our capabilities keep expanding. Our bookings are very high. Picking up two more automotive facilities, certified facilities with Bose is going to be also interesting in terms of driving some more automotive businesses into the organization on a different technology, which is obviously unfound. And so we're still reasonably bullish. It's hard to get every single quarter growing up 10%, but we still believe that the targets that we've laid out are intact on a long-term basis.

And the only thing I'd add to that is, as we highlighted in our Investor Day this past year, we're coming off our best booking year ever in both medical and in automotive. And those bookings don't manifest themselves in revenue really quickly, takes several quarters for them to start coming in. So as we look out, we have a lot of confidence in the continued growth rates. We're seeing some positives with some challenges in the near-term, but the thing about our medical business, we have drug delivery, diabetes care, ophthalmology, digital imaging. We have greatly expanded our capability and our offering, and the same goes for automotive. So when you think about us operating a $4 billion annual business, we actually have a perfectly positioned footprint and capability set to continue to grow. And we actually believe strongly that we can continue to see that same level of growth. And that's why we believe that 2020 vision remains intact. Adam Tindle - Raymond James & Associates, Inc.: Understood. Thank you.

You're welcome.

The next question comes from the line of Mark Delaney from Goldman Sachs. Your line is open. Mark Delaney - Goldman Sachs & Co.: Yes. Good afternoon and thanks very much for taking the questions. First question's on margin. The CTG margins in particular were up nicely this quarter. I know you talked about the Bose impact coming in slightly lower next quarter, but if you exclude that new piece of business, can you talk about how sustainable some of the improvements are that you're seeing within the CTG business?

Certainly, Mark. Yeah. CTG as expected had some really solid growth sequentially. And so the $55 million reflects more than doubling from Q1 and we shot up past the top end of the range. There's a lot of things that are contributing to that. We continue to be focused around the mix of the business and how to structurally to set that business up. If you look at how we guide next quarter, you're going to see us again up above that top end of that range and it's because of the mix of the business, our ability to manage these new strategic customers very well. We have a bit of pressure on the margin profile only in the couple of quarters because of integrating in Bose. But if you think about the book of business that we have and where we've been moving, whether it's in fashion and apparel, into the connected home, all these areas where we've been moving off some of the higher volume consumer programs that we used to be driven – driving in CTG, they're affording us to get into a richer engagement model with our customers. And as a result, we'd be able to provide more meaningful design and lead with innovation and often partner with them throughout early parts of their product lifecycle, enabling us to secure greater margin and value add. And so as that mix shift continues to happen, we keep getting more and more confident. And that's why we increased the range back in our Analyst Day from 2% to 3% to 2 to 4% for that CTG business. And you're seeing ourselves migrate up through that each period. So as you look to the back end of this year, you're going to see us staying up inside that range and continue to diversify the underlying portfolio.

And I'd add one other thing, Mark, just in terms of the sustainability of that margin up into that range is that we're still ramping NIKE. This is not contributing in any way to the operating profit. In fact, it's negative at this point. And as that moves to volume production that I talked about towards the end of FY 2018, we're going to see a lot of margin accretion on the back of that program. So we'll no longer be absorbing those losses from those start-up costs on that program. And it'll largely move into a very structural increase in terms of margins on the back of that moving into volume production. So there's an additional driver out there not only has it gone into the 3.3% this quarter, but hopefully into the middle of the bracket there between 2% and 4%. But we've got another margin driver coming, which is called NIKE, and right now we're absorbing losses. Mark Delaney - Goldman Sachs & Co.: And, Chris, just to make sure I understand, when you said you expect it stay in the range for the rest of this fiscal year, that's inclusive of any sort of Bose integration expenses.

Yes. Mark Delaney - Goldman Sachs & Co.: Okay. And can you help us, for my next question, just hoping to better understand how you guys are think about SG&A dollars in the December quarter. I mean, even if SG&A was to be down, gross margin percentage by my math is actually going to be up quite nicely and actually probably close to record high gross margins despite what is a much higher mix of consumer. So it seems like there's a lot of good things going on to the underlying gross profitability of the company. If you could just help us understand what some of those drivers may be, that would be helpful?

Thank you for that highlight and I tried to put that emphasis in the prepared remarks where we talked about gross margin this past quarter was up 60 basis points to 69 basis points. And again, this coming quarter here, if you look at how we set up on the midpoint here, you're going to see a nice healthy 40 basis points or so increase again year-over-year in terms of gross margin. And again, it goes to the evolving portfolio, greater concentration of the higher margin business, a lot of what we just talked about, the mix shift that's happening within the CTG business and we're continuously finding ways to drive greater engineering and design led engagements for the company. But you see us moving healthily higher, a nice solid seven handle on the gross profit. And you'll see SG&A kind of staying right around where it's at, right around the $220 million range as you look to next quarter. And as you think about that in terms of the company and managing SG&A year-over-year, over two-thirds of the increase from a year ago is driven by the acquisitions that we've made. So the company's been doing a really solid job of making certain that we can invest correctly into the design and engineering as we continue to increase R&D, which is a component piece of SG&A, and to leverage off and get efficiency and productivity out of the core SG&A base. How you should think about the performance overall is exactly how you framed it, seeing the a 7% plus gross margin and structurally sustaining around a $220 million SG&A as we move forward. Mark Delaney - Goldman Sachs & Co.: Thank you.

The next question comes from the line of Jim Suva from Citi. Your line is open.

Thank you very much. I believe you had mentioned, you're absorbing some losses on NIKE as you ramp that, which is understandable given the ramp. But does it get even more burdensome, say, for the next – I don't know, two, four, six quarters, or when do we switch over to profitability?

Well, I think, Jim, once it hits volume production is when we're going to see it largely switch. So, as I mentioned, we're still in innovation and creation stage at this point. We're actually building some capacity that's going to be coming online soon. And then we'll begin start to ramp, but during a ramp we're not going to reach full profitability. So it'll get better and better every quarter. But I think you think about that going over the course of FY 2018. And then I think once you get to FY 2019, it'll get better. It'll get profitable. So I think what you ought to think about is that we're in a loss position today, and over the course of the next six quarters, we'll move progressively into a positive operating profit scenario.

Great. Thank you. And then as a quick follow-up, you guys – if I remember right, you had inventory write-down this quarter, but in last quarter I think you had an accounts receivable write-down due to SunEdison. My question is, if my memory right and if so why weren't those all done at the same time? Did you keep producing inventory and product after that or why wasn't it just all kind of mopped up and cleaned up last quarter?

Certainly, Jim. So in the prepared remarks, I also highlighted that exact fact that the SunEdison Chapter 11 took place in April. And in our March quarter, we took a bad debt reserve charge of $61 million, which was reserving against the entire outstanding receivable balance. At that time, we also had inventory and other assets associated with that relationship, which as I noted were 100% covered by SunEdison. We have been selling into the marketplace those associated panels and utilizing the underlying assets. And during the period, and we also had purchase orders. We had a book of business that was significantly greater than the inventory levels that we were carrying on hand back in May and June. But what has transpired over the course of these last several months has been an unprecedented erosion in the solar panel pricing. To give it context, in April and May you saw pricing near $0.60 per watt; and in August that got down into more closely to $0.35, $0.40 and has gone south from there in September for a whole host of different reasons that Mike has talked about in his prepared remarks. So we didn't' build any more product during this. We just found ourselves challenged in the marketplace in selling through the inventory that we had. And so what has happened.

Got you.

And so at the time of the first charge, your question is why we didn't take that same impact, we didn't anticipate having to. We had a market that had a value and a demand that supported our business. Now, we don't.

And you have to remember, this bankruptcy occurred April 20 and our earnings were like five days later. We had to react very quickly. We immediately took 100% of the AR. And, like Chris said, we just got to work selling the inventory. It was a multi-hundred-million-dollar inventory balance and we had POs in hand for all of it with no financial implications. And then basically the market started seeing that the panel pricing was starting to come down and started canceling the purchase orders. We had about a 60% cancellation rate. So of that multi hundred million dollars that we had, we sold off half of it and had no financial damage whatsoever. And then, as we got into this quarter, like Chris said, there was this huge drop in the price per panel and we got stuck with that. So it's unfortunate, but we reacted quickly. We got the license to sell panels even though they were SunEdison inventory and had SunEdison name on it. We got the license from them immediately to go get this inventory out of here. We began moving on it and we moved actually pretty quickly, but it kind of fell apart at the very end. And as a result, we're stuck with what we have in terms of a revaluation of that inventory.

Yeah. That makes a lot of sense. And is there any impact on NEXTracker from this, whether it be, for example, negative or positive, that prices go down for panel, so people put in more of the actuators or are they just completely unrelated to each other?

Near-term, it's pretty good negative. I mean, one of the problems we have with SunEdison is, we were their first supplier. We were their largest supplier. They were giving us all the business. We had a great relationship and there were the fastest growing energy provider out there. So we were kind of a victim of our own success here. NEXTracker had close to 40%, 50% of its business from SunEdison when they went into the bankruptcy. So what we did is, NEXTracker just did that killer job of repositioning that demand very, very rapidly. So over the course of, I'd say, the last nine months, maybe even last six months, they've tripled the amount of customers they have and they've doubled amount of countries. I think Chris mentioned this earlier. So they've actually completely recovered after just two quarters and it's actually an amazing bit of work by that team. It shows kind of the experience of the team and ability to understand what the problem is and get right after it. And it's why we always said is, we're going to end up – over the course of the year, our solar business is going to be a growth business even though we lose another one customer, both in NEXTracker and in the IEI energy business. So it is actually – it's difficult to go through the charge, of course, but the response was actually pretty remarkable. And I think our team did a pretty killer job. We'll have this back to a growth business and hopefully with the margins above the IEI range by the end of this year, by the end of our fiscal year. And it's why the IEI margins itself, well, we expect to actually move into the target range. I mean largely it's on the back of recovering off of the solar damage in two quarters flat.

Great. Thank you so much.

And it's probably long-term – one other thing, Jim, sorry, for such a long answer, but as far as long-term implications, what you're seeing is virtually every solar field going up now is using trackers. We actually have the number one market position in trackers in the world. We believe it's the highest technology. We've augmented that technology by – with an acquisition that we did recently, and which is to give us a predictive modeling solution, predictive modeling software, using machine learnings technology so that we can optimize further the energy harvest out of those systems that use our tracker. And as the prices go down in modules, it's going to make the likelihood of having a return on investment for those people putting up solar farm to be even higher and being better. So we would expect acceleration in the implementation of solar on the back of lower and lower cost. So we view from a macro standpoint this as usually positive. So we just got to run through these couple of quarters and then we'll be back. And we're pretty excited about positioning in the thing. And we're super happy not to be positioned with what we consider to be a commodity position in the marketplace, which is modules and cells for that matter.

Great. Thanks so much for the details. Thank you.

You're welcome.

The next question comes from the line of Herve Francois from B. Riley. Your line is open. Herve Daniel Francois - B. Riley & Co. LLC: Hi. Good evening, guys. Can you talk about – you said it before at your Analyst Day earlier this year, I do know if there's been an update, but like the percent of your customers currently receiving – I guess kind of benefiting from your overall Sketch-to-Scale services.

I'm sorry. The question was what percent of our customers are benefiting from Sketch-to-Scale, is that right? Herve Daniel Francois - B. Riley & Co. LLC: Yeah. I think you've put out a percentage at the Analyst Day. I just want to know if that percentage has changed much since there's been obviously some movement within these – the variety end markets that you serve.

Yeah, I think FY 2016, we were looking at like a 21%, maybe – yeah, 21%, and in FY 2013, we were down around 7%. The key thing is what does that look like going forward, we have to continue to drive confidence and capability and investment, which we're doing actively by the way. We're kind of forecasting a 35% range in FY 2020. So we expect – I don't have any better data than that today. As we go through our three year planning process over the course of the next couple of months, we'll update that of course and see what it looks like. And we'll make sure we report out to you guys in our May Analyst Day what that new number looks like. So you can expect to get almost like a report card of what the results were for FY 2017 and what we then expect FY 2020 to look like relative to what we told you last time. But right now, it's well on track. We think the strategy is a fabulous one. We're investing a lot of strategy to make sure it happens. We think it actually moves the margins of the company as we're seeing the margins in the company move. And I think it's well on track. Herve Daniel Francois - B. Riley & Co. LLC: Got it. Thanks very much. And is Bose as a customer, as you guys really start to ramp with them, are they a customer that's going to be benefiting from your entire Sketch-to-Scale services?

Yes, they will. So we're already involved in a number of different projects where we're actually culminating with them, with the design team. As part of the transaction we did with Bose, we actually moved a significant portion of engineering across to our team to help support that whole Sketch-to-Scale initiative with Bose. So they are very much aligned. It's a large part of the business proposition to start with. It's not just about a factory. It's about bringing on the engineering talent and co-collaborating with their engineers and our engineers together in a very structured way. So we're very much part of the Sketch-to-Scale transition that we're going through. Herve Daniel Francois - B. Riley & Co. LLC: Got it. And then just one last one for me. Last quarter, you talked about how – I think you're going to begin ramping with some new program wins in wearables, did that occur in your most recent quarter here?

So new program wins with this wearable. So I don't know how many programs we have in wearables today, but it's a lot. I don't know which ones specifically we're talking to. I'm sorry about that. But we probably add two, three different wearable customers every single quarter that we add to our portfolio. So I don't know which ones specifically you're referring to, but we continue to make a lot of progress. We continue to do more and more product categories and really excited about some of the capabilities and technologies. You might be referring to MAS Holdings, which is a company out of Sri Lanka that does a significant amount of fabric. And we announced a strategic relationship with MAS Holdings where we would integrate electronics and technology into what their capabilities are, which are fabrics. So that's something that we announced just about three or four months ago, but that's also well on track as we think about integrating some of our electronic technologies into fabrics. So, again, good, strong technology, lot of – a bunch of customers that we add virtually every quarter and we're seeing a lot more different applications in the industry for wearables.

Operator, I see we're here at the top of the hour. We'll go ahead and take one last question. Thanks, guys.

And that question will come from the line of Paul Coster from JPMorgan. Your line is open.

Thanks for squeezing me in. Hi. This is Paul Chung on for Paul Coster. Thanks for taking my question. So just on the NIKE opportunity, are you having discussions with other major players in the space? Are they kind of waiting on the sidelines to see if this partnership is successful? How big do you think the opportunity is beyond NIKE in terms of annual revenues and margin contributions? Thank you.

Yes. So, as it relates to shoes, we're only working with NIKE. We're actually doing a pretty significant reinvention. It's all hands on deck to go make that reinvention of how manufacturing happens with NIKE shoes. We don't have the ability or the appetite to kind of expand that into other customer, so we're exclusive with NIKE. They have like 60% of the market, so pretty good spot to be. That being said, there's a lot of wearable, so that's shoes. But there's many different fabrics and wearable technologies that we're working on there. I just mentioned one of the last question from Francois, and many other different product categories and things that we are working on. But as it relates to shoes, we're just going to stay focused on NIKE and I think it'll provide a tremendous growth and an element of stable growth for many, many years for us.

And we've clearly highlighted in the past in discussions that this is a business that is going to be $1 billion plus business for us. They will be top 10 customer for us in the next couple of years. And again, as Mike said, who better than to be with the iconic brand leader such as NIKE. So we're going to continue to give you guys updates as to the progress we make with this, but again, this is a year of investment, a year of innovation as we continue to explore this relationship and move it forward. But nothing has changed in terms of our excitement about what this brings to our portfolio as we move into our future.

So with that, I'm going to – I mean, let's end this session. I want to thank everybody for their questions and their interest in Flex. Certainly, Flex is evolving our Sketch-to-Scale strategy and remains firmly on track as we just discussed. This quarter was our 12th straight quarter of year-over-year adjusted operating margin growth. Our portfolio diversification has never been better with our lowest concentration of top 10 customers. Our free cash flow continues to grow on a sustainable basis and it remains a superb enabler of our consistent capital return program to shareholders. So we remain structurally and strategically positioned to deliver meaningful earnings and margin power. And with that, we'd like to end the call and thanks everybody for their attendance.

Thank you. Good bye.

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