Corrected Transcript 09-Aug-2017 Flex Ltd. (FLEX) J.P. Morgan Auto Conference Total Pages: 14 1-877-FACTSET www.callstreet.com Copyright © 2001-2017 FactSet CallStreet, LLC Flex Ltd. (FLEX) Corrected Transcript J.P. Morgan Auto Conference 09-Aug-2017 CORPORATE PARTICIPANTS Chris Obey President- Automotive, Flex Ltd. Nicole Stevenson Vice President Business Strategy & Marketing, Flex Ltd. ................................................................................................................................................................................................................................ OTHER PARTICIPANTS Paul Coster Analyst, JPMorgan Securities LLC ................................................................................................................................................................................................................................ MANAGEMENT DISCUSSION SECTION Paul Coster Analyst, JPMorgan Securities LLC Okay. Good afternoon everyone. My name is Paul Coster. I cover Applied & Emerging Tech and also Alternative Energy at JPMorgan. And it's really interesting because we're seeing an awful lot of activity in the cusp zone, that's represented by the auto industry. A lot of tech companies that I cover, suddenly, really excited about the auto industry, and one of them is Flex, formerly known as Flextronics, in case some of you remember that name. And I'm very pleased to introduce two people to you today, Nicole Stevenson, who is Head of Strategy for the Auto segment of Flex, which by the way is a $21 billion revenue run rate company; and Chris Obey, who is the President of the Auto segment. Over to you Chris, welcome. ................................................................................................................................................................................................................................ Chris Obey President- Automotive, Flex Ltd. Okay. Well thank you, and thank you for attending. What I'd like to do is, the Auto segment is just a portion of Flex, so we're going to start off with a quick overview of Flex as a company, and how we use those assets to speed up our time to market for automotive. But first, we're going to play just a quick video to give you an idea of Flex. [Video Presentation] (1:36-3:50) So, I hope you enjoyed that. See if I can advance [ph] the screen (3:57). So the unique thing about Flex is that we operate at scale in 12 different industries. [ph] I guess that didn't work well (4:03). Let's talk about global scale and reach instead. So, Flex is a $24 billion company, 100 sites, 200,000 employees, a ton of design engineers, 50 2 1-877-FACTSET www.callstreet.com Copyright © 2001-2017 FactSet CallStreet, LLC Flex Ltd. (FLEX) Corrected Transcript J.P. Morgan Auto Conference 09-Aug-2017 million square feet of manufacturing space, and we launch about 12,000 products a year in all of our groups. So, big infrastructure at all of Flex. So, we operate across 12 different industries. You can see we've got a $2 billion medical business; a $3 billion automotive business; industrial; home appliance; capital equipment; energy; networking; enterprise compute; wearables; connected; mobile. So, when we put our automotive hats on, we think of automotive as, boy, the technology is really changing and you are on the road to autonomy, connected vehicles are really big, but the industries are changing, the technology is changing in all these different industries. And what's exciting for us in automotive is that we get to see what's happening in these different groups. So Flex is a Silicon Valley based company, and so more technology focused. And our Automotive team is comprised of automotive professionals. We're located in Detroit, Michigan. Our top team has about 470 years of automotive experience. And so what we've done is, instead of being a Detroit company going to Silicon Valley looking for technology, we're more of a Silicon Valley technology company coming to Detroit. So, we'll talk later on about how that affects our strategy and how we can use the technologies from these different industries to bring new technology to automotive at speed and at scale. So, basically this cross industry insights allow us to take new technologies that we see. We see just about everything that happens in Silicon Valley. And we have a team out there that goes through what's happening in the different industries and tries to identify opportunities to take into automotive, develop the components, identify the proper technologies, and then commercialize them into scalable production. This is just the Flex platform. We operate on three basic principles; speed, scope and scale. So real-time information, end-to-end solutions, and then this big physical infrastructure, that is all over the world. So, if you look at the industry for Flex, it's really changed and we've evolved the model. If you go back like to 1995, Flex did a lot of contract manufacturing. Actually it was just the server industry like outsourcing circuit boards. So, everybody was just making circuit boards [indiscernible] (6:45) on a build-to-print basis. If you go down to 2005, it became like a labor arbitrage, where all of the manufacturing then moved to China. So, cost became a big issue. And a lot of companies moved over to Asia to reduce the cost. And if we look at like what we did in 2015, we call ourselves Sketch-to-Scale, so this is like build – this is like design work. And in Automotive, our design group is about – we're about 65% design related and 35% like build-to-print. But the rest of Flex is now really focusing on what we can do to own the designs. And what this has done over the years is, we were asset-light and low cost, then we had Electronics Manufacturing Services, and then, finally, Sketch-to-Scale, and this is what I talked about earlier in terms of how it's evolved. So really, when you're doing like build-to-print work, you're really in a cost-based discussion with purchasing; with a short lead time and just taken a product, taken the print, and doing a manufacturing. And when we move the company to Sketch-to-Scale, you're really talking about revenue strategy and you're talking to the CEO, the CTO or the COO's with a longer lead time to plan and develop new products. And this is like the focus of our company. So, when we look at how we're accelerating from build-to-print and Sketch-to-Scale, if we go back to 2013, you can see that about 7% of our business was actually design related. It's currently about 23%, and our target is to have it to be 40%, with Automotive leading the way. So, we think that the future, we're going to see a lot of convergence of different industries into automotive. So, we can already see technologies coming from Silicon Valley and/or consumer products and going into cars. 3 1-877-FACTSET www.callstreet.com Copyright © 2001-2017 FactSet CallStreet, LLC Flex Ltd. (FLEX) Corrected Transcript J.P. Morgan Auto Conference 09-Aug-2017 So, when you talk about doing updates over-the-air or vehicle-to-infrastructure, vehicle-to-vehicle, we talk about augmented reality in cars, connecting the car to the home and connecting the car to people, as well as autonomous and connected cars. A lot of these different industries that we operate in, we see converging into the automotive space. And I think everybody in this room knows that. And we think we're uniquely positioned to connect the dots. We look at the car as the center of our universe. We operate with investments in vehicle-to-vehicle, into vehicle-to-infrastructure; we're involved in wearables, where we're taking functions from key fobs and putting them on to wearable devices. In our consumer group, we build about 80% of the world's sports wearables. Our smart homes, we have a whole connected living platform that we connect to the car, so we give our customers the opportunity to connect to their homes. We have a large digital health group, where there is more and more updates and more and more activity going on with your health, that's going to be going over the Internet. So, privacy is a big concern there. So we've got a lot of – we've got a $2 billion medical business. And then, mobility and cloud is really an area that's new to us. So, in Automotive, we'll talk a little bit about some of the projects we have in autonomy and in cloud services. So with that, I'll turn it over to Nicole to go through some of our automotive offerings. ................................................................................................................................................................................................................................ Nicole Stevenson Vice President Business Strategy & Marketing, Flex Ltd. Thank you, Chris. So just a little quick overview of the Automotive segment. Today, I think Chris kind of mentioned it before we're just about a $3 billion business, up from about $800 million about five years ago. We have over 14,000 employees, again huge growth, and over 30 sites in over 15 countries. We're headquartered in the Detroit region, and we have a lot of design centers around the region as well. So, just to give you a view of where some of these are, again, we have over – about 20 auto approved production sites globally, and nine auto focus design centers, so wherever the customer needs us to be, is where we are. And on top of that, we have this massive innovation system that we're able to leverage in our Flex Automotive Group. There's five innovations centers and some key hubs such as San Jose, obviously is our largest. We've got one in Israel. We have one in San Francisco, Boston, and also in Shanghai. And then, we also have 25 full design centers working across all those 12 industries that Chris mentioned earlier.