Flex : Fourth Quarter 2024 Q4 2024 Transcript (2024)

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Corrected Transcript

01-May-2024

Flex Ltd. (FLEX)

Investor Day - Q4 2024

CORPORATE PARTICIPANTS

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MANAGEMENT DISCUSSION SECTION

David A. Rubin

Vice President-Investor Relations, Flex Ltd.

Good morning and welcome to our Fourth Quarter Fiscal 2024 Earnings Call along with our Virtual Investor Day. I'm David Rubin, Vice President of Investor Relations.

Running through this morning's agenda, first, I'll take you through our Q4 and fiscal 2024 results. Then our CEO, Revathi Advaithi, will provide an update on our strategy, our progress and our plans for the next several years. She'll be joined by Michael Hartung, President of our Agility segment; and Becky Sidelinger, President of our Reliability segment, who will take you through some interesting examples, showcasing our differentiation in our cloud and automotive businesses. Next, our CFO, Paul Lundstrom, will present on our financial framework and our outlook.

Lastly, we'll have some time for Q&A. Please note all questions need to be submitted through the Q&A chat function at the bottom of the event platform on your screen. You can submit questions any time during the event, and we will answer as many as we can as time allows.

Before we start, I need to briefly run through a few housekeeping items, slides for today's call, as well as a copy of the earnings press release and summary financials are available on the Investor Relations section at flex.com. This call is being recorded and will be available for replay on the corporate website.

Today's call contains forward-looking statements, which are based on our current expectations and assumptions. These statements involve risks and uncertainties that could cause actual results to differ materially. For a full discussion of these risks and uncertainties, please see the cautionary statements in our presentation, press release, or in the Risk Factors section in our most recent filings with the SEC.

Note, this information is subject to change and we undertake no obligation to update these forward-looking statements. And please note, unless otherwise stated, all results provided will be non-GAAP measures and our growth metrics will be on a year-over-year basis. The full non-GAAP to GAAP reconciliations can be found in the appendix slides of today's presentation, as well as in the summary financials posted on our Investor Relations website.

Lastly, as stated in our earnings press release, Nextracker was reclassified to discontinued ops. So it is now excluded from our results, including the full fiscal year 2024 results, which show today, and therefore, not comparable to previous Street estimates. Additionally, we recast our prior results through fiscal 2022 to reflect discontinued ops and provide enhanced historical transparency into Flex performance.

With that, I'll jump into our Q4 results. We had a solid Q4 as we continued to execute well in a dynamic environment. Fourth quarter total revenue was $6.2 billion, down 12%. However, gross profit improved to $532 million, with a gross margin coming in at 8.6%, an increase of 160 basis points from the prior year. And operating margin was a record 5.4%, up 120 basis points from the prior year and up 50 basis points from Q3 on favorable mix/cost action initiatives.

Adjusted earnings per share came in at $0.57 for the quarter, increasing 30%. GAAP earnings per share came in at $0.93. The larger-than-usual difference to non-GAAP EPS is primarily due to a one-timenon-cash tax benefit related to the recording of tax loss carry-forwards, which we now believe will be utilized in the future. Additionally, there was a one-timenon-cash accrual related to the future tax consequences of distributing earnings from our Chinese subsidiaries up to our parent entity for the use within the organization.

Turning to our quarterly segment results. Reliability revenue was $2.9 billion, with very strong demand in cloud power solutions and solid demand in auto and medical devices. Operating income came in at $171 million, and operating margin improved again, both sequentially and year-over-year to 5.8%. In Agility, revenue came in at $3.2 billion as we delivered on very strong AI-driven cloud demand and operating income increased 6% to $181 million, and the team delivered another segment record with a strong 5.6% operating margin.

Looking at our full-year results now, and as a reminder, the full-year results you see here reflect Flex-only for the entire year as we've moved Nextracker to discontinued operations. Revenue for the year was $26.4 billion, down 7% from the prior year. Gross profit totaled $2.1 billion and gross margin improved to 7.8%, up 70 basis points year-over-year.

Operating income for fiscal year 2024 totaled $1.3 billion, up 3%, with a record annual 4.8% Flex operating margin. For the full year, EPS came to $2.15, up 11% despite the revenue headwinds. GAAP EPS came in at a $1.98, primarily due to the previously mentioned tax-relatednon-cash onetime benefits. I'll also point out we completed our Nextracker tax-free spend this last quarter. And as you can see on this slide, we generate substantial value through multiple phases of this transaction.

At the bottom of this slide, we provide revenue performance by business unit for the full year. Reliability revenue was $12.5 billion, with operating margin finishing at a record annual rate of 5.3%. Within Reliability, automotive revenue was up 6%, primarily driven by new ramps and content growth. Health solutions was up 3% with strong medical device demand muted by an industry slowdown in life sciences and hospital-related CapEx spending.

Industrial was down 8% with very strong datacenter power demand, offset by general slowing in industrial CapEx and weaker residential solar. Overall, the strong margin results are coming from continued ramps and higher value programs, the resolution to previous supply chain-related disruptions and strong execution on cost controls.

Agility segment revenue came in at $13.9 billion, delivering a record annual operating margin of 4.8%. This strong margin reflects our strategy to focus on shifting to profitable business, expanding verticalization in value-added services, as well as strong cost management, given macro-related slowing in certain markets.

Within Agility, CEC was down 7% with strong new cloud ramps offset by slowing in other parts of enterprise IT and telco spending. Consumer devices revenue was down 24%, reflective of consumer end-market weakness. And finally, lifestyle revenue was down 17%, also reflective of current consumer spending trends in high-end durable goods.

Moving to cash flow. Net inventory came down again this quarter by 6% sequentially and 16% year-over-year, and we expect continued reductions in inventory in the coming quarters. Q4 net CapEx came in at $77 million and $505 million for the full year on target at 2% of revenue. Free cash flow in the quarter was very strong, reaching $602 million, and for the full year, free cash flow was $821 million. This is well above our target of $600 million for the year, which originally had assumed a combined Flex and Nextracker for the full year.

In the quarter, we returned $517 million to shareholders through share repurchases, and for the fiscal year, we returned $1.3 billion, which is a record in annual cash returns to our investors.

Overall, we continue to execute on our strategy through the cycle. This is reflected in our performance, in our ability to deliver strong margin expansion and EPS growth.

So that about wraps up our results for the quarter and for fiscal year 2024. Now we will move on to our Virtual Investor Day event.

So to kick things off, we'll start with a short video followed by our Chief Executive Officer, Revathi Advaithi.

[Video Presentation] (00:08:16-00:10:33)

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Revathi Advaithi

Chief Executive Officer & Director, Flex Ltd.

Good morning and thank you for joining us today for a virtual event. I want to say a few words about our Q4 and fiscal year 2024 results. I'm very pleased with our performance. Given the dynamic environment we experienced this past year, although year-over-year revenue was down, we still delivered strong margin expansion and EPS growth in both Q4 and in the full year.

Our results show that we can navigate effectively through the cycle and deliver increased value to our stakeholders. I am very proud of how our team delivered throughout the year, but I also want to thank our customers for their continued trust and partnership. In addition to our Q4 and fiscal year 2024 earnings today, we announced that as part of a planned succession, Michael Capellas, our Board Chairman, has chosen not to stand for re-election at our next annual shareholder meeting in August. Michael has served on Flex's board for ten years and has been chairman since 2017. He played a key role in building Flex's reputation and driving our success. I want to personally thank Michael for his unwavering commitment and service, and we wish him all the very best. Bill Watkins will succeed Michael as Chairman. Bill is a very experienced board member and will provide continuity in board leadership. I would like to welcome Bill to his new role.

Now looking ahead, let's get into the details of what's next. So if you're new to Flex, we are one of the world's largest contract manufacturing and supply chain partners. Through a global footprint of manufacturing, design and service locations, we serve a broad base of leading brands across diversified markets. From manufacturing electronics to a fully integrated product, we offer solutions to meet our customers' unique needs and help them better manage their entire product lifecycle. We focus on large diverse markets where we have plenty of room to grow, where the macro and the secular trends are in our favor, and where we can differentiate to generate profitable growth. But today, we'll discuss how our combination of manufacturing capabilities, our cross-industry

expertise, our products and services create points of differentiation and contributes to our success in key markets. Of course, we will also discuss our financial framework and how we'll continue to generate shareholder value.

Now going on to the next slide. At our last Investor Day in March of 2022, we spoke about macro and secular trends that were fueling demand for higher levels of outsourcing. In turn, this demand is driving growth and margin expansion for Flex and the overall EMS industry. We specifically reviewed three major inflections within the markets we serve that provided additional opportunities for Flex. Since our last Investor Day, our cloud business grew at about a 40% growth rate. Now, that is twice the rate we originally expected. This growth has been fueled by generative AI and our customer's recognizing our unique value proposition for the data center.

Our next-gen mobility business grew slightly over the expected 50% growth rate as the vehicles continue to integrate more advanced technology and content regardless of the powertrain. Medical device growth was above our 15% expected growth rate as new digital technologies and smaller form factors are improving patients' lives in areas such as chronic care treatment. Health solutions overall was closer to 6% due to the temporary macro impact on life sciences and hospital equipment spending. Still, we remain very confident about the long-term opportunity for our health solutions business.

Now stepping back and looking at how we've performed through the cycle since launching our Flex Forward strategy. We delivered mid-single-digit revenue growth. We expanded our adjusted operating margin from 3.7% to 4.8%, and we grew EPS at a 20% growth rate. All this creating significant value for our shareholders. Going on to the next slide as a reminder, digitization, regionalization and sustainability are some of the high level trends we discussed in our last meeting. The digitization of everything trend is about brands wanting to create smarter products, of course, by integrating more technology, ultimately offering customers more advanced features.

Regionalization, of course, is a topic all by itself. But the short version is that today it's table stakes. Companies have to build resiliency into supply chains and have multiple regional locations to speed their time to market, improve their customer experience and then, of course, even to reduce your greenhouse gas emissions. Now, while there's been a lot of discussion about sustainability, we continue to see growing interest in renewable energy and in improving the visibility and transparency of supply chains. Now we've added technology trends of artificial intelligence, which of course adds further complexity. Consider what effect AI could have on future products and industries. Now we're seeing tremendous change. And of course, it's just the beginning.

The important part here is that all of these long-term trends are dramatically increasing complexity at all levels of the value chain. They have led to fundamental changes in the EMS industry, driving the need for more capable global outsourcing partners with the expertise, the breadth and scale to support evolving products across multiple markets. We are one of the few companies that can actually help customers navigate this increase in complexity, build resiliency, and deliver on improving customer experience on a global scale. And the Flex strategy goes beyond just electronics manufacturing. It's about providing a fully integrated suite of manufacturing services to support our customer's product lifecycle. And we leverage our expertise across the industries we serve to give our customers the benefit of our collective knowledge to achieve a competitive advantage. This strategy means that we are more than just the sum of the parts as we create synergies that generate strong competitive barriers, increase customer affinity, and, of course, deliver profitable growth.

Now manufacturing services is our foundation. We're always focused on increasing our capabilities. Of course, we are driving greater efficiencies and we're ensuring we have the optimal global footprint. On this foundation, we're expanding our services, our vertical integration capabilities to serve more of our customer needs, and we're increasing our addressable market. And then to improve agility and efficiency, we're implementing our flexible automation platform that you can quickly reconfigure and reuse and deploy across all our programs. And our

global network of integrated manufacturing and service locations, of course, increases resiliency and time to market. Now, you put all this together, our initiatives and investments in automation, the capabilities and the systems, they all achieve tremendous productivity gains. And that drives our margins, of course, and helps us prepare for the future.

Okay. So one of the themes you will hear about today is our differentiation in power and in compute. We've invested here because we saw fundamental changes in compute and the associated power requirements driven by the long-term technology transitions. What we did was we build extensive cross industry expertise and we're applying it to create capabilities and products and in multiple end markets, including cloud and automotive. And we're already in the market with Flex designed or co-designed solutions. So for example, Flex is the only EMS player that has a comprehensive data center power product portfolio. It extends all the way from the embedded products which function at the board and the rack level to our unique data center critical power offering with our Anord Mardix products. So you will hear more about our differentiation and cloud and in automotive from Michael and Becky in just a minute. We are very bullish on this opportunity.

Looking just at data center and automotive, we believe power and compute-based revenue will account for 40% of the total revenue for Flex by fiscal year 2029, so in the next five years. We believe the long-term opportunity for Flex is significant. The macro and the secular trends of course are in our favor. The markets we serve are large and there's just plenty of room to grow. Our suite of end-to-end services is creating tremendous customer stickiness, and it's expanding our available market.

And then our differentiated products and technologies and our capabilities are all giving us above market growth in targeted end markets. This combination is our winning formula for growth. As we continue to add more value to our customers, we are confident that we'll deliver increased revenue and margin performance for the years to come. So we're going to bring this discussion to life.

Our segment presidents are joining us today to walk you through examples of our end-to-end capabilities, our technologies and products. We'll start with Michael Hartung and he will show how our cloud data center offering and how we're truly differentiated in the marketplace. Michael has over two decades of experience in contract manufacturing and is the President of our Agility segment, which includes communications, enterprise and cloud, our consumer devices business and our lifestyle business unit.

And then Michael will be followed by Becky Sidelinger who'll show you how the cross-platform expertise in complex compute and power systems differentiates Flex in the automotive industry. Becky joined us couple of years ago and she has two decades of experience in industrial manufacturing and is the President of our Reliability segment, which, as you know, includes Automotive, Health Solutions and our Industrial business unit.

Now, I'll turn it over to Michael. Michael Hartung?

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Michael Hartung

President-Agility Solutions Segment, Flex Ltd.

Thank you, Revathi. At our last Investor Day, we introduced you to our cloud capabilities. We talked about manufacturing services for data center racks, which fall under the CEC business unit, as well as embedded power products and critical power products, which fall under the Industrial business unit. We also said we grow our cloud business by about 20% per year for the next two years. I'm pleased to report today that our cloud business grew by twice the expected rate to about $3 billion in fiscal 2024. Looking back, we clearly executed on the strategy, gained market share with new and existing customers, and continued to innovate across our cloud focused product and service offering.

As you can imagine, we are really excited about the leadership role we're playing, the innovations we've developed, the compelling value proposition we've created, and the new opportunities we've unlocked. By now, we're all familiar with the massive growth of the cloud market, driven largely by advancements in generative AI, the continued adoption of cloud-based services, and the growing demands for data center power.

For a company focused on the data center like Flex, the implications are profound for our cloud business. This isn't a mere shift in technological trends. It's a pivotal moment opening a wealth of new opportunities. Flex has a comprehensive offering for the data center infrastructure market that includes both manufacturing services and power products. Our manufacturing services are focused on the mass deployment of vertically integrated data center racks at global scale from our cloud focused factories. This suite of services includes design, production, vertical integration, value added fulfillment and circular economy solutions. They help our cloud customers manage the complete product lifecycle of a fully integrated data center rack.

Although we're known for our manufacturing business, we also have two product businesses that utilize Flex proprietary technology to address escalating power consumption in the data center. Our embedded power business provides a broad range of products that help optimize power consumption at the board level and rack level. Our critical power business provides an array of power products that are tailored to improve energy efficiency and performance in the data center facility. Together, products and services provide grid to chip solutions that cover 80% of the available data center content and address some of the most challenging questions in the cloud market, such as manufacturing scale, heat generation, power consumption at the board, rack and facility levels.

One challenge in the cloud market is how to deploy data center infrastructure globally at a rate that keeps pace with the market's insatiable appetite for advanced computing that enables AI. Our foundational manufacturing services strategy is simply to combine as many services as possible into each opportunity. This approach helps our customers to create more resilient, sustainable and lower cost supply chains. It helps Flex create more durable customer relationships, increase market share, and supports margin expansion.

We've built on this foundation with a strategy that is curated for the cloud. This strategy enables our customers to launch data center servers, switches and rack products on time with quality and on budget, by calibrating product designs to the Flex production system in our cloud-focused factories. The core of our operations is built on a 50- year legacy of manufacturing excellence. Leveraging this heritage, our cloud-focused factories utilize customized advanced manufacturing, automation and test solutions that optimize the entire product flow of data center rack manufacturing.

Another point of distinction in our service offering is our ability to vertically integrate the data center rack. We fabricate sheet metal frames and enclosures. We design and manufacture one phase and two phase liquid cooling systems. And we incorporate our own private label component products. And there's more. Beyond simply shipping the rack to our customers [indiscernible] (00:26:29), our global services business provides value added fulfillment and circular economy solutions. This is another differentiator for Flex.

Our value added fulfillment capability enables us to consolidate manufacturing in lower cost areas to optimize cost, and regionalized distribution close to the data center to shorten lead times. Our circular economy solutions enable us to take back products from the data center for repair, refurbishment or recycling to help our customers achieve their sustainability goals by reducing the amount of products that go into landfills.

Given the macro trends driving regionalization and the evolving needs of our customers, our global services business is becoming an increasingly important part of our cloud solution and our overall flex value proposition. In fact, our global services business is already operating at global scale in 25 sites and 18 countries, and is growing above the corporate rate. It's important to reinforce that our complete suite of manufacturing services is included within our traditional EMS umbrella. They have been tailored for the cloud and our cloud-focused factories. And while each of these services is differentiated on its own, it's the breadth of manufacturing services that are already operating at global scale in every major theatre of operation that is truly unique to Flex.

Another key challenge datacenters are facing is the increasing demand for power density. A generative AI datacenter rack has a significantly higher number of CPUs and GPUs, which increases the power requirements on a typical rack from 16 kilowatts to 20 kilowatts today to potentially 250 kilowatts per rack clusters in the not-too- distant future. This increased power consumption requires innovative power solutions.

Flex is differentiated in the embedded power space through a combination of IP, engineered solutions at the board and rack level, and strategic relationships with our ecosystem partners. Our power shelf products are already acknowledged by our customers for market leading efficiency and we're working closely with market leaders to develop next generation solutions. Our capacitive energy storage solutions address power spiking related to GPU compute by combining leading battery management systems with a patented solution based on lithium capacitors. This innovative solution allows for several million charging cycles versus more limited charging capacity of a traditional cell technology.

Our power modules provide a broad range of scalable, board mounted DC to DC solutions that regulate power consumption of a CPU, GPU and custom processors. All of these embedded power products help data center customers solve the growing power density requirements. They enable greater efficiency, reduce latency and space and speed, time to market. At the facility level, data centers are faced with the challenge of satisfying increased power and uptime requirements, while balancing build times and construction costs.

Our product portfolio addresses critical power requirements and includes low voltage switchgear, PDUs and busways. Our end-to-end engineered solution includes customized design and dedicated project management from manufacturing through installation and service. Our power pods provide turnkey critical power solutions in a box, and serve as an alternative to traditional construction. They reduce complexity, deliver overall cost reductions, and ultimately accelerate power deployment. Through our world-class offering of products and solutions, we are powering data center customers through the AI revolution.

As we've pointed out, Flex covers 80% of the current data center content by providing manufacturing solutions for the rack, embedded power products at the board and rack level, and critical power products at the data center facility itself. The expected growth in racks and data centers, combined with the projected increases in power consumption, driven by accelerated computing, will require more integrated solutions. Flex is well positioned across the manufacturing and power spectrum to enable an end-to-end solution for the data center of the future.

Bringing it all together, we believe our cloud business will grow at 20% growth rate over the next few years, because Flex is uniquely positioned in the cloud data center market. Our comprehensive suite of manufacturing services that support the full product lifecycle, combined with our differentiated embedded power and critical power products, is unmatched in our industry.

Now, I will turn it over to my colleague Becky Sidelinger, who will provide more insight into how our cross-industry capabilities in compute and power are fueling our growth in the automotive industry.

Rebecca S. Sidelinger

President-Reliability Solutions, Flex Ltd.

Thank you, Michael, and welcome. Automotive is another great example where our cross industry expertise in advanced compute and power systems is driving new business wins and growth. In 2022, we spoke about the next-gen mobility aspect of our business, but to fully understand our opportunity in automotive, we need to look at both the drivers of the industry and the composition of our business. The automotive industry is seeing significant disruption, and it goes beyond just electric vehicles. Clearly, the adoption of electric vehicle and hybrid powertrains requires more complex power systems.

With our expertise in power electronics, we support both EV and hybrid platforms, including with products of our own design. And we expect both of these platforms to remain long-term drivers of our business growth.

Regardless of the powertrain choice between electric vehicle, hybrid or internal combustion engines, technology transitions and driver assist, safety and autonomy are increasing the electronics content per vehicle. And here is where it all gets interesting. All of these technologies are radically increasing the demand for real time compute power in the vehicle. This is driving consolidation of vehicle electronic control units, or ECUs, to streamline complexity, integrate vehicle systems, decouple hardware from software, and greatly enhance computational capabilities. We've all heard the term software-defined vehicle. The truth is it takes a lot of hardware to run that software.

You may have heard that cars are becoming more and more like edge data centers on wheel. This is not hyperbole. Our latest generation auto compute platform is liquid cooled with GPU powered servers in multi-blade rack configurations leveraging globally reusable building blocks. So, you see this is very similar to what Michael spoke about in cloud, where we offer an end-to-end solution to help cloud service providers meet the growing needs of the AI-driven data center. Now, you can see how our automotive business truly overlaps with our work in the cloud.

Of course, in the case of automotive applications, we have the additional complexity that everything must be designed and manufactured to automotive grade to survive in harsh environmental conditions. All of this increasing technology complexity is also changing the supply chain dynamics and creating opportunities for Flex to become an even more trusted partner. In addition to supporting Tier 1 auto suppliers, we are partnering directly with many of the leading auto OEMs. We also manage one of the largest and most complex supply chain networks on the planet, including our longstanding relationships with chipmakers, such as NVIDIA, STMicro, and TI. This is why we were able to help auto OEMs navigate the supply chain crises much better than they could on their own.

So, let's take a look at the three revenue categories that make up our total automotive business. I'll start first with compute. Compute platforms is the largest piece of the business accounting for just over 50% of our portfolio. These systems include control units, cyber secure gateways, and increasingly up-integrated domain and central computers. And it's important to note that the strong growth in these advanced technologies is agnostic to the powertrain. So, I want to be very clear about what this means. Whether the platform is an internal combustion engine, an electric vehicle or a hybrid, Flex is at the center of compute technology.

Power electronics is the fastest growing of our three pillars at over a 20% compounded growth rate. This group includes all the power electronic systems that drive EV and hybrid powertrains such as power inverters, converters, onboard chargers and battery management technologies, and many of these products are Flex designs. The balance of our automotive business houses specialty wiring, advanced actuators and lighting technology, and again, these products are agnostic to the powertrain.

We're providing more than just hardware manufacturing, from joint and full product design to much broader collaborative engagements. Automakers are investing in their own software and design capability, and our ability to support their broader ecosystem requirements with a flexible business model is a differentiator for Flex. On that point, we also differentiate from EMS companies with our design capability and we differentiate from full-service Tier 1 suppliers with our open and flexible business model, working with OEMs to design, jointly design or manufacture our customers' designs.

So, let's talk about how our design expertise is enabling growth. A great example is our partnership with NVIDIA on their DRIVE Orin system-on-a-chip that was announced in 2022 and highlighted at their recent GTC Developers Conference. We worked in advance with NVIDIA to design a hardware platform around this chipset, and then made it available to customers for their own application software development. This then led to multiple production programs based on a common platform building block, specifically focused on advanced driver assist. This is a great example of our role in the compute ecosystem using a Flex hardware design paired with an application software for complete solution.

Another example is in the EV power electronics space, where we have invested in design capability for DC/DC and onboard chargers. Our 800-volthigh-voltage designs have been selected for multiple production programs based on our superior performance and cost. This design was developed with the latest silicon carbide technology and was featured at the Consumer Electronics Show in cooperation with STMicro. In this case, our role in the ecosystem is to provide a complete product solution, including both hardware and software. That technology that supports better dynamics while improving safety and autonomy will continue to evolve and continue to add further complexity to design and engineering, manufacturing and supply chain, and this trend benefits Flex as we work directly with auto OEMs to solve these challenges and move up the stack.

Our automotive business is very well diversified across geographies and OEMs. We continue to expand with new platforms. We are seeing steady increases in electronics content per vehicle and we expect all of this to drive growth well above the global light vehicle production forecast of roughly 2%. We expect our overall automotive business to grow at a high-single to low-double-digit CAGR over the next several years.

Today, Revathi, Michael and I spoke about longer-term technology transitions driving increasing compute and power requirements in multiple industries, and this certainly will fuel growth for our automotive business. This opportunity goes beyond just the electric vehicle transition. As you can see, we expect increasing demand for more advanced power and compute solutions to drive business growth through 2029.

With that, I'll turn it over to Paul. Paul?

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Paul R. Lundstrom

Chief Financial Officer, Flex Ltd.

Thank you, Becky. Good morning, everyone. We've talked about the trends driving the industry, our focus areas for higher value growth and how we are capitalizing on these opportunities through our differentiation. I will talk about the positive implications to our longer-term financial framework, but first I want to take a step back. The strategy we set five years ago was to go after and win the right kind of growth, expand our services, and build on our operational excellence. Ultimately, this strategy is about solving complexity to drive new wins and build deeper relationships with our customers.

We expected this approach to create shareholder value through profitable growth, margin expansion, and lead to greater financial resiliency through the cycles. This has been tested multiple times over the last several years and

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