Good afternoon, and welcome to the Flex First Quarter Fiscal Year 2022 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, I would like to turn the call over to Mr. David Rubin, Flex’s Vice President of Investor Relations. Sir, you may begin.

Thank you, Rebecca. Good morning and welcome to Flex’s first quarter fiscal ’22 earnings conference call. With me today is our Chief Executive Officer, Revathi Advaithi; and our Chief Financial Officer, Paul Lundstrom. Both will give brief remarks followed by Q&A. This call is being webcast and recorded. And if you have not already received them, slides for today’s presentations are available on the Investor Relations section of our flex.com website. As a reminder, today’s call contains forward-looking statements, which are based on our current expectations and assumptions, and are subject to risks and uncertainties, so actual events and results could differ materially. Also, such information is subject to change and we undertake no obligation to update these forward-looking statements. For a full discussion of the risks and uncertainties, please see our most recent filings with the SEC. This call references non-GAAP financial measures for the current period. The GAAP reconciliations can be found in the appendix slides of today’s presentation as well as on the Investor Relations section of our website. Lastly, with regard to Flex’s Nextracker business as we previously discussed on last quarter on April 28, we announced that we confidentially submitted a draft registration statement on Form S-1 with the US Securities and Exchange Commission relating to the proposed initial public offering of its Class A common stock. The initial public offering and its timing are subject to market and other conditions and the SEC’s review process. We made this announcement in accordance with Rule 135 under the Securities Act. We continue to look at the market condition and we will evaluate the right time to give a transaction and we remain committed to do so. Following SEC regulations, we will not make any further statements or answer additional questions on the Nextracker filing at this time. With that, I’d like to turn the call over to our CEO, Revathi.

Thank you David. Good morning everyone and thank you for joining us today on our Q1 earnings call. Of course I have to start off by giving a shout out to all my Flex colleagues across the world for once again staying focused and delivering on solid results. So, let's turn to slide 3 to review our financials, we achieved a revenue of $6.3 billion, up 1% sequentially a little better than typical seasonality and up 23% year over year. Our total Flex adjusted operating margin came in at 4.6% and core Flex operating margin, ex-Nextracker contribution was 4.4%. Similar to last quarter our adjusted operating margin includes the absorption of costs related to a challenging components supply and logistics environment. Our adjusted EPS was $0.46 up from $0.23 in Q1 of last year, but also up from the pre-COVID level of $0.27 in Q1 of FYI 2020. Our adjusted free cash flow came in very strong at $219 million. Now moving on to the next slide, I'd say demand across the enterprise remains very strong and as you can see the team executed extremely well again this quarter. Global supply chain and logistics issue remain a challenge and add a layer of uncertainty to the near term. However, we continue to expertly navigate through the environment with an army of supply chain professionals, which is almost 10,000 people strong, and of course decades of experience, all supported by world class system and tools to provide the best visibility and agility. Now this is a real competitive advantage for Flex and for our customers. Our ability to quickly adapt to global changes is unrivaled. And the proof of course is in the results, especially when you look at the improvements we have made across the organization over the last two…

Okay. Thanks, Revathi, and good morning, everyone. I'm on slide 6. Flex revenue was $6.3 billion in the quarter, which was up 23% year-over-year and 1% sequentially better than our typical Q4 to Q1 seasonality. Adjusted operating income was up 78% year-on-year to $290 million, with 140 basis points of margin expansion. Obviously we're lapping COVID year comparisons, but I'll note, we saw material, sales and profit growth compared to the quarter, two years ago as well. And the 4.6% operating margin rate was the highest Q1 margin rate, we've seen here at Flex. Our profit growth came from drop through on significantly higher volume, continued improvements in the mix of our business and our constant push for productivity gains. There were some headwinds in the quarter. We continue to see COVID-19 disruptions, an industry-wide component shortages and cost pressure on logistics did affect our business in the quarter. Adjusted net income was €230 million, with adjusted earnings per share of $0.46. Year-on-year those were up 98% and 100%, respectively. Reconciling to GAAP, first quarter GAAP net income up $260 million was $24 million lower than our adjusted net income primarily due to $20 million of stock-based compensation and $13 million in net intangible amortization, partially offset by a net credit and tax another. On slide 7. Our first quarter adjusted gross profit was $476 million, up $158 million year-over-year, execution was solid with 130 basis points of adjusted gross margin expansion, compared to last year, but also a full point higher than what we saw pre-COVID in the June quarter calendar 2019 in total adjusted SG&A spending came in at $186 million, up $31 million from a year ago but at 2.9% of sales, down year-on-year and slightly below our targeted range of 3% to 3.2% of sales. So…

Thank you, Paul. Now turning to Slide 12. Last quarter we wanted to provide you as much visibility as we prudently could and give our outlook for fiscal 2022. As Paul said, it's important to remember that there are still challenges and some uncertainties to overcome, but hopefully we'll all be soon through the worst of it. Now based on the current situation, we're increasing our full year revenue guidance range to 25.5 billion to 26.5 billion, our operating profit range to 4.5% to 4.7%, and our EPS range up to $1.70 to $1.85. Now, on behalf of the entire leadership team, I want to thank my colleagues for their commitment and their hard work. Of course, our customers and suppliers for the trust and partnership and our shareholders for your support. With that I'd like to turn the call over to start the Q&A.

[Operator Instructions] And your first question comes from the line of Matt Sheerin with Stifel.

Yes, thank you. Good morning. I wanted to ask about the margin guidance for the September quarter, which is implied down sequentially, but still certainly up year-over-year. Are you seeing that pressure in both businesses and is it some of the reasons that you talked about with your fixed price costs, as well as maybe some lower utilization levels on the healthcare side?

Yeah you're spot on Matt, you know, as we move from Q1 into Q2, just like you said, 4.6% margins here in Q1, at the midpoint of our guidance set for three that would be down a bit sequentially. I guess what I'll say is, you're absolutely right, a little bit of pressure in both businesses. We talked about it in the prepared remarks there about some pressure in CEC from clear to build. We're doing everything we can to get components available so that we can ship, because as I mentioned, the demand side is, is certainly there. So a little pressure in on the agility side, namely in the CEC business. And then on the reliability side, as you know, we have the automotive business in there and that one is – the whole industry is struggling a bit with clear to build and component shortages and that does create a little bit of inefficiency but again, that's the midpoint of our guidance. I think that's – I think it'll be a pretty good – pretty good performance if we can nail that at 4.3. And as you mentioned, and I think very important, very important point to our owners here, that's still up year-on-year and, and continues to be outstanding performance for Flex particularly compared to last several years,

And, Matt, I'll remind you at that midpoint, Q2 will still be the highest record for us in terms of operating margin for the guide they've given you. And we're very upbeat and as you can see from how we have previously managed the company and how we've managed through supply chain logistics, we always flag that Q2 would be somewhat tricky and I think that's what we're seeing. But we're very positive and very bullish about how the year looks at how Q2 looks also. We're just being prudent in terms of our guidance.

Got it. Thank you. And I just wanted to also ask just about inventories, relative with the supply issues that you're seeing. It was up quarter-on-quarter. What's the strategy there going forward in terms of working with customers, but also getting compensated, whether it be in deposits or other things, so that you're still meeting your working capital goals.

Yes. Sorry.

Matt, I'll just start by saying, one is, we're absolutely doing that. That's why you see our cash flow is so strong. We are getting compensated for inventory that we're putting in the system and we'll continue to do that. We have extreme discipline about this amazing coordination between our supply chain teams and our commercial teams. And customers are very, very open to this, right; it's an industry wide constraint that's going on. So we're seeing no issues in terms of translating what we're seeing in inventory, to getting advances from our customers. But we also think that there is room to continue to improve inventory, as these things get a little bit more stable in the future quarters. So our goal is to still try to get inventory down, not just for us, but across the supply chain.

Thanks very much.

Your next question comes from the line of Ruplu Bhattacharya with Bank of America.

Hi. Thank you for taking my questions. I have two questions, both on margins. First one, you mentioned higher freight cost impacted Nextracker, is there a way to quantify how much that impact was on Nextracker margins? And on the slide 10, I think you mentioned that you expect logistics challenges to bottom in Q2. What are some of the things that you're seeing that gives you that confidence? Because, I mean, from what we were hearing, freight costs should remain high. So just -- if you can just give us more color on your thoughts on logistics costs.

Yes, absolutely, Ruplu. Happy to go through this. First is, I'll tell you that, Nextracker, as part of Flex, has really matured in terms of the supply chain company and having the right kind of hedging practices, but also how they pass on costs to customers is very different than the rest of the industry. So I wouldn't let that cloud the judgment of how Nextracker runs and operates. I’d say, it really operates as a world-class supply chain company managing through that. And as you can see, most of the commodity inflation, as we talked about, has already been offset, because they're passed through and how they manage contract pass through and commodities is quite seamless and that's pretty incredible, given the environment and how significant commodity inflation has been. On the side of logistics, the reason why we're very comfortable that we lap that very soon is, because it just has to run through the existing contracts and then it's priced into new contracts. And by the way, even in existing contracts, we are overcoming quite a bit of the freight increases, with managing with customers in terms of renegotiating price. So we see the logistics issue as being temporary, even if the costs remain inflated, how we pass that through and contracts, we'll flush through the system. That's why this is a very short term temporary thing, and we're very comfortable that will lap that very quickly in the next couple of quarters

Got it. Yes, Revathi, thanks for all the details on that, that makes sense. Maybe, maybe I'll ask you a different question then as my follow-up. You've outlined your growth strategies and you are focused on the longer life cycle and markets. At this point in the cycle, does it make sense to look at inorganic growth, your thoughts on just looking at acquisitions and what are you looking for if you are and what end markets would you be thinking about expanding. Thank you.

Yes I would say, first is I'd say the most important thing Ruplu for – for I think every company including ours is to make sure we deliver really well in terms of the core and the organic side of the business and as you can see, we really are hitting on all cylinders, right? Every business is going organically, our growth rates are strong, our pipeline and bookings have done the best ever, and you can see that in terms of not only the quality of the bookings coming through but the segments that we're growing in is consistent and I've always said that, I want every segment to be doing well on its own, whether it's top line our bottom line and that's kind of what we're seeing, right. So organically, I feel like the business is doing extremely well but I also feel that there's tremendous room for us to continue to grow organically and drive a continued growth strategy in the segments we participate because our N segments are so big. And there's so much room to just focus on where you deliver value, and we're seeing that that is the case, right. You can see that in our lifestyle segment, which is doing really well, agility, which is doing really well because it's focusing on the right segments and delivering growth. If you look at how we are doing overall even from a bookings and pipeline perspective, we're expecting our growth to come in, that's a creative to the margin levels and to our ROIC levels, which is around 20%, right, right now this quarter. So really we want to win and all segments organically and we want to invest organically really well. That being said, I would say our cash position is in the best that this company has ever been in. So that's fantastic, right because even with all constraints of supply chain and things like that, our cash flow is incredible in terms of how we really manage this company, so we have tremendous optionality on how we use that. And, whether we focus on buybacks because I'd say our stock is really trading at a low right now, we think it's very valuable right now to continue to invest in, in our stock so we'll balance that between – do we do more buybacks or do we invest in organic acquisitions. The fantastic news is optionality everywhere, right. Organically growing very strong, tremendous room in terms of our pipeline, our bookings. We want to invest more capital in terms of our growth strategy. And, you know, we think that our stock is undervalued and we need to focus on making sure that our buyback is strong and we'll continue to do that. And if we have great technologies to invest in, we will. So I think the good news Ruplu, we have options everywhere.

Okay, thanks for all the details and congrats on the strong execution in the quarter.

Thanks, Ruplu.

Our next question comes from the line of Mark Delaney with Goldman Sachs.

Thanks very much for taking the question. I was hoping to start on margins and think through the sustainability of margins over the intermediate to longer term margins, as you pointed out a record high, I mean, Agility in particular is very good and that's despite some of these temporary challenges around logistics and component buys. So maybe we could talk through some of the puts and takes to that? I think perhaps some parts of this that are more structural and sustainable around the mix, and how the company is structuring its operations, but are there any potential offsets that we need to be mindful of going forward that are perhaps more cyclical homeowners that are that are temporarily new in terms of your asset utilization is running or anything like that that we need to be mindful of as we're thinking about the longer term margin potential of the business?

No Mark I'll start by saying, one is if you look at our margin guidance, right, for Q2, it mean from the previous question that somebody asked, right. I think Matt asked that there's inefficiencies we’ve built into that, right, in terms of our current situation, particularly for chasing, expediting and supply chain issues. So, obviously, those are going to go away and we're going to continue to improve margins, if you look at our guidance for the year right now at a midpoint at 4.6%, that's a pretty significant guide, right, in terms of how we see the full-year come through. And as you can see from our history of how we think about these things we’re quite thoughtful in terms of how we provide these guidance, I'd say first is from a margin perspective inefficiencies are there today, from a supply chain perspective, we think that gets better. So if anything there is upside more than anything else. But I think more importantly, the way I think about long-term is, we're a manufacturing company, and we're kind of just started on this journey that we're getting really good at in terms of how we look at productivity and efficiencies across our factory. And I'd say that if anything, there's more room to continue to do that better and better. I'd expect that Flex will be -- in terms of lean and productivity and efficiency and using things like our Flex business system will continue to be world class and that. So if anything I'd say there's more room, just in terms of margin, driving more productivity and efficiency, managing our footprint better. But what's even better than all that will be I would say, if you look at our growth and the mix of our growth, right, we're very focused on the right kind of growth, and making sure that the mix is flowing through, through our pipeline. So I'd say, Mark I have nothing to point to that you have to be thinking about in terms of that, goes down from here if anything I'd say it's, what we have to focus on is, I'd say our journey has just started, it has still only get better from here, you can see that right from where we were, like I said couple years ago at 3.4% to 4.6% gross margin and operating margin. So I'd say the tremendous room to continue to drive upside to this.

That's very helpful. Thanks. And for my second question, I was hoping you could provide some more details on what Flex’s expectations are on the component supply environment to the back half of this calendar year and into next year. Any details you can share about how you see the supply hopefully improving when some of these semiconductor and other component shortages are alleviated, and any differences in terms of, which markets are perhaps currently most constrained and when various end markets could begin to be able to get the supply that they need? Thanks.

Yeah. So Mark, I'd say that, there's nothing I'm going to add that you haven't read and seen and heard from all the other earnings calls that you got before us, right? I think we had predicted just a couple of quarters ago that we thought this particular quarter we're entering which is Q2 would be probably the most challenging and we had done that based on our intelligence of lead-times what we had heard from chip companies in terms of how their capacity would start coming in, particularly in the forms of assembly and test capacity. So, I'd say we had called us a long time ago to say that we think that this quarter will be the most challenged and you should start to see some recovery as kind of some of the test capacity starts coming in in the future quarters. You are kind of hearing that across the board. One is I'll say is, we see this issue across every segment. Some like medical and auto, I'd say kind of gets better quicker, one is because their volumes are much lower compared to tech and industrial, and as Paul pointed out in his comments, right, CC had constraints this quarter and we think tech and industrial will have kind of a longer tail, but that's more because of the scale of those segments right and how the end markets in terms of the supply chain and the chip companies have volume associated with those end markets. But overall, right, I'd say this quarter is probably where we see some level of bottoming out. And then we start to see it stabilize kind of moving forward and that's kind of where we're thinking this moves I'd say. But will it continue through next year? I think there'll be some pushes and pulls through next year. I think we'll just have to work through that.

Thank you.

Your next question comes from the line of Shannon Cross with Cross Research.

Thank you very much. I was hoping you could talk a bit about how your conversations with customers have been going, as we're in theory exiting COVID with regard to how they're thinking about moving out of China or other geographies and just in general, how they're looking at outsourcing? And then as a follow-up. Thank you.

Thanks Shannon. I'd say our conversations with our customers are very focused on what can they do to make their supply chain more resilient, right? And whether you think about trade issues that drive regionalization, are now the pandemic drives different thinking around bringing the supply chain closer to the end customer. And the end customer could be any part of the world, whether it's Europe, Asia or North America. I'd say our customers are driving more conversations and more decision making around that today than we've ever seen before. But what that is translated to already Shannon is that our pipeline of bookings if you look at the focus on regionalization and what's driving some of our pipeline that's pretty significant. And we're seeing those actions already come through. We have tremendous amount of product launches that are going on, I'd say across the world which is driven by some of these supply chain resiliency trends that we're seeing. So, I'd say the focus from our customers really is the conversation has gone into actions and the actions are driving our pipeline and bookings to be at this record level right now with a tremendous amount of program params going on across our organization. So, I'd say -- and that is across all sectors. I couldn't point to one sector where that conversation is not going on.

Okay, thank you. And then Paul maybe you could talk a bit more about working capital. On a historical basis, it was quite strong this quarter. Is there anything we need to worry about reversion to the mean or anything within the various components? And I know you mentioned getting some prepayments and is there anything else that you're doing that is driving this? Thank you.

Yeah. So appreciate the compliments on working cap in the quarter. Pretty good performance, very good performance, cash flow, 219 million, we were quite pleased with that. And perhaps even a little bit surprised to the upside, has some inventory pressure in Q1, I think that will persist as we go into Q2, and we'll probably have a little bit of free cash flow pressure in Q2, because as inventory receipts came in at the back half of the Q1 quarter, you have to pay the bills for that as you move into Q2. That said, for the full year, kind of hanging on to our free cash flow guidance which was essentially in line with last year. And I don't think there's anything rolling over. Lot of focus on working capital management with within the business, our incentive programs are designed to drive strong working capital and cash flow performance. So I would say, overall, a bit, no change there, perhaps, a little bit of pressure in Q2.

Great, thank you.

Your next question comes from the line of Steven Fox with Fox Advisors. Q – Steven Fox: Hi. Good morning. Couple questions, first of all, I just want to make sure, I understand the math around some of the supply chain assumptions. So if sales are flat quarter-over-quarter, roughly speaking, and your profits are down at the mid-point $20 million, is that $20 million, all related to supply chain or is there other stuff we should consider. And is it limiting your ability to upside to customer forecasts? And then, I had a follow-up.

I'd say Steven one is, it's all around supply chain. I think that's kind of a no brainier. And I think doesn't limit our ability at all, in terms of upside, I think I would say with demand right. This is all a question of not just whether we can find the components, but whether you know suppliers can find their other supplier -- customers can find other suppliers giving their components to come to final assembly. So I'd say, all around supply chain, and kind of how we manage that and clear that will kind of drive all the upside, I'd say. A – Revathi Advaithi: Yeah. And I just add. I think Revathi was even mentioned a couple minutes ago as well, but at the midpoint of the guide and 4.3% op margin in Q2 That would be the best Q2 we've seen and up 20 basis points, year-on-year, despite the challenges that we're seeing in the supply chain. So it is pressure, but still strict really good performance by the operating team.

And Steve I would say that, if you look based on the last quarter our supply chain team is just incredible, right. I mean, the things they can do the what our customers rely on us, in terms of finding components and dual sourcing and doing things like that, they can do things that nobody else can do. So, I'm pretty comfortable that we've got a very solid game plan, not just for Q2 but, you know, through the next few quarters. And, we'll do an amazing job managing through all of that. Q – Steven Fox: Great. I think I got it now. And then as a second question. You mentioned on the healthcare side that you continue to win during the quarter I assume you mean new programs. I know you don't want to name customers or anything like that. But can you give us a sense for, what that exactly means in the recent quarter? Any color around how your, what kind of programs you are winning or what kinds of success you're having on the engineering front et cetera? Thanks. A – Revathi Advaithi: Yeah. I'd say, in terms of health solutions we've been driving this kind of focus around pipeline and bookings even just as COVID started. Because we knew that there was an incredible area for us to grow and our capability was something we're consistently hearing from customers that, hey, you know what, as anything you do to increase capacity in terms of your own commercial design capability, we're going to be able to fill that up. And that's kind of what we're seeing, right with the Health Solutions business and what we delivered last year with customers in terms of ramping up for COVID care in such a short time really tremendously also changed our credibility and the industry in a big way and we're already such a significant player in terms of medical devices. So our wins with that we're seeing is in every sector. We're seeing it in in critical care, we're seeing in like we've talked continuously about kind of diabetes care, we've run several programs in that area. They were one of the largest suppliers in that space today. Everything around imaging. So all our key was picked in our four areas around Health Solutions and all of those were winning, very, very focused large programs around. And actually most of them are even ramping up right now. So the Health Solutions segment really picking in terms of all cylinders, in terms of the pipeline, bookings and then how we are ramping up all these programs. Q – Steven Fox: Great, that's really helpful. Thank you.

Thanks Steve.

Your next question comes from the line of Adam Tindle with Raymond James.

Okay. Thank you. Revathi, you talked about the opportunity to get more efficient, and I look at the metrics, your SG&A revenue is below your target range while your gross margin is healthy. When I look on an OpEx to GP basis I think it's at all time lows, so the operational model is being pushed more than ever, right now, and I wanted to ask first, how specifically, you can get more efficient, should we expect more restructuring opportunity. What is the ultimate operating structure look like? And lastly, what does this do to growth as you pursue that structure?

Yes, Adam, I’ll start by reminding you that the first thing is that our gross margin has grown like 100 basis points, right in the last couple of years, so we've done an incredible job in terms of making sure that gross margin is improving with driving the right kind of mix but also driving the right productivity and efficiency in our factories. For me OpEx efficiency, we went through, of course the correction period when we changed our revenue a little bit and adjusted our portfolio the last couple of yours but we want to continue to drive OpEx efficiency, across our business and whether that's in our back office or things like that because we do an incredible job of driving OpEx efficiency too. But our potential is in our gross margin, right, that's where we'll continue to drive improvements because we think there's tremendous productivity efficiency through footprint optimization. We don't see kind of any major restructuring. We think all of these should be managed through the business cycle if there is any it'll be puts in takes, I would say through our business cycle, but gross margin is where we think through mix and through productivity efficiency, we'll continue to see improvements moving forward.

Okay. And maybe as a follow-up for Paul. I just wanted to double click on the margin ramp that's implied in back half guidance, Just the back of the envelope, it looks like if I compare revenue and operating profit in the back half versus the first half. It's about a low double-digit contribution margin, which is really healthy. I think you talked about an auto ramp that's coming that should be a little bit of a headwind in Q3 and Q4, maybe help us with the buckets of the key tailwinds that drive that level of contribution in the back half of this year since you guys sound really confident. Thank you.

Yes, happy to do that. So I think, as Revathi had pointed out, probably the trough, in terms of supply chain challenges, and that would include cost headwinds is – it's probably at its worst in Q2, and it gradually improves as we move into Q3 and Q4, and the challenge with this supply chain environment is it does create stops and start within our – stops and starts within our facilities and that just – that leads to inefficiencies. We feel confident in the back half and I maybe just go back to the April, April timeframe, March timeframe as we were thinking about our full year guidance. We expected that Q2 supply chain challenges would be – would be there and we – we figured that Q1 would be tough, Q2 would be a little bit worse but things would gradually start to improve as we moved into Q3 and Q4. And what I'll say is, fortunately, that view hasn't changed. If this was moving all over the place and we didn't have that sort of consistent expectation, I guess I wouldn't be as confident as I am in the back half. But given that things are slowly starting to improve as we move through Q3 and Q4 we'll have less of that inefficiency. That coupled with, new program ramps dropping in, I think we'll be – I think we'll be right in the middle of that, 4.5% to 4.7% margin rate for the – for the full year.

Okay. Just a quick…

And then we've got – Adam I'll just point out that in the second half, we've got CC is going to be stronger because we'll have better components availability we've had tremendous new wins in that business that's going to help the whole return to work is going to help that, also – we've also said that auto winds are, we'll see more some of that coming up in our next fiscal year cycle. But, we're – we're quite confident that, in terms of second half. We're – we're putting some supply chain issues behind us, but we also see mix, being a good thing but we – our midpoint of our guidance is pretty strong, I'd say, it'll be a record year for us again.

Right. And a quick clarification on next tracker is that SEC review process complete and you're now just waiting on market conditions, are you still waiting on the SEC review? Thanks.

Yeah. We really can't comment on the process other than we're – we're in the process with the SEC. So, when – when that situation changes we'll – you'll know.

Okay. [Operator Instructions] Your next question comes from the line of Paul Chung with JPMorgan.

Hi. Thanks for taking my questions, so you know, on the customer side, we're hearing a lot of pressure. Not surprising on shortages and higher freight costs, kind of really hurting those OEMs and have kind of limited product diversification. So are you starting to see, accelerating customer interests looking to offload a lot of the logistics and manufacturing and, do you have any pricing power there given the urgency, and if you could get some, examples that would be helpful. I'll follow up.

Yeah, Paul. I'd say what we're hearing definitely from customers and, more customer conversations on how they should be thinking about their supply chain. In terms of having us help them think about the risks associated with it, and how do they plan for it. It's coming through across the board, whether it's associated with freight and logistics, or whether it's associated with components itself that is in outdated tooling, or that needs to be second sourced. All of these conversations, because it's not one conversation, right, if it's an auto, it probably is about outdated tooling and outdated components that needs to – that needs a new design and a new source right. In the tech world, it could be a whole different conversation, because it could be focused on just developing second sources and having inventory and product available closer to their point of view. So every single business and customer base is having this conversation with us. And for us, it's all a question of making sure we're finding the right solution for each customer and that they value our expertise and experience quite a bit to help them design these. And Paul I would say that, you know pricing power absolutely exists because I think you can see from the supply chain issues that customers are very clear, they don't want to be in the situation again. So using suppliers like Flex to help them redesign that and make sure that they provide them the right solution is worth a lot because nobody wants to be in this situation again. So I'd say, yes absolutely. And then in terms of examples, I'd say, you know, I can give you examples in the – in our lifestyle segment which is very consumer driven, where our customers are very, very clear that from not only, the product availability being closer to the point of views is very important to them and as they are willing to give, pay the price to make that happen, but then also full lifecycle offset, right, where they’re able to bring in product to be fixed when the customer returns them. So a full lifecycle solution for that segment is super important and we're seeing customers really drive to that to say, hey let them located in Europe or in Asia or in North America, I want to full lifecycle solution, I want to be closer to the point of views and how can Flex do that for me? So, but I could give you an example in almost every segment on this Paul, it's across the board.

Great. Thanks, its very helpful. And then just a follow up on free cash flow. I mean, you mentioned free cash would be kind of in line with fiscal year ’21. Now your revenues and margins are expected to be higher, weren't you kind of expecting no free cash flow and conversion to be higher as well? If you could expand there? I know you mentioned some Q2 headwinds on working cap and whatnot and your cap backs guidance would be helpful as well? Thank you.

Yep, no problem. So, as I mentioned, we will have a little bit of a free cash flow pressure in Q2. What I would say about the supply chain environment component shortages in particular is that, it is and continues to be a fluid situation. And with the -- if the outlook improves as we move through the back half of this year we'll certainly update that guidance. But I think, free cash flow in line with last year which by the way was a very good free cash flow generation year for us. I think is prudent guidance at this at this point in time. In terms of CapEx, I'd mentioned before CapEx to sales about 2% is probably a good placeholder for you guys and allows us to prudently invest in strategic growth for the business and I don't think it constrains us in any way.

Thanks. Great. Appreciate it.

Your next question comes from the line of Jim Suva with Citigroup. Q – Jim Suva: Thank you. Revathi and Paul, you mentioned that there's some transitory costs, we're all very familiar of the shortages in semiconductors. And also the expediting costs or freight shipping cost, whether it be containers or airplanes from China or Asia or around the entire world, are you specifically talking about the ones about freight and you think that those are going to subside or are you talking about more about also the component costs like steel, copper, resins, plastics and aluminum have recently rallied and you expect those to kind of subside in the next couple of quarters.

So I would say Jim -- what I would say in terms of the commodity and the component side is that, in the semiconductor space itself the component price increases that are being pass-through, you know, we're passing those through to. And those are going to stick for a period of time. So it goes through another cycle Jim as you know this very well. In terms of commodities like steel, yes, they are rallying, but our ability, particularly our biggest use of that is in our next tracker business. We basically pass-through that like-for-like through our contract. So we don't carry any headwind because of that. And if that recovers, I would say, it'll go through that same process right in terms of customer negotiations. So I would say freight is probably the only place and that also an only in the next tracker business where it takes couple quarters to work through the contract headwinds. And so I'd say that that's what happens in terms of pricing, but if you look forward and think about, how long inflation stays across all these end markets. Jim, I'm not sure I can call that, very easily today, I said all I can say is that we're passing through pricing as quickly as we can in all segments and they're sticking.

Great. Thank you so much for the details and clarifications. It's greatly appreciated.

Thanks, Jim.

And your next question comes from Christian Schwab with Craig-Hallum Capital.

Guys, congratulations on another great quarter. Regarding your guys’ ability to prove out over the last few quarters in a challenging environment to be, a very trusted supply chain partner, and you highlighted many different examples of that. As we look to the mid-term, beyond this fiscal year, do you guys think, given that, kind of, example of partnership with your customers that you're -- you'll be positioned to in essence outgrow the industry as we get to that kind of mid-term, as far as a top-line.

Yes, I would say, absolutely I'd say correct, there's no question about that, right? I mean even if you think, this quarter as you can see our overall growth rate right even compared to the rest of the industry is very, very strong. I'd say in the midterm. I have no doubts about that our pipeline is very strong our bookings have been fantastic, even with our focus on the right kind of bookings. So I would say in the mid-term our ability to grow and grow in our end markets, in our sub segments we want to grow, is extremely strong. I'm very bullish about it. And feel very, very comfortable that customers are coming to us because they know that we execute well, we really are a good trusted partner for them in terms of being able to grow with them. So no question about that. I would say our growth focus from where we are right now, looks very bullish moving forward.

Fantastic. No other questions. Thanks.

Thanks, Christian.

And there are no further questions at this time. Do you have any closing comments?

No, I'll just say thanks everyone for joining and, be safe and healthy. Thank you.

Thank you for participating. This concludes today's conference call. You may now disconnect. Good bye.