Good afternoon and welcome to the Flextronics First Quarter Fiscal Year 2016 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 and introductions, I would like to turn the call over to Mr. Kevin Kessel, Flextronics' Vice President of Investor Relations. Sir, you may begin.

Thank you and welcome to our call to discuss the results of our fiscal 2016 first quarter ended June 26 2015. We have published slides for today's discussion that can be found on the Investor Relations section of our new website. Joining me today is our Chief Executive Officer, Mike McNamara; and our Chief Financial Officer, Chris Collier. Today's call is being webcast live 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, these measures are located on the Investor Relations section of our website, along with the required reconciliation to the most-comparable GAAP financial measures. With that, I will pass the call to Chris. Chris?

Thank you, Kevin. And to all joining us today, we appreciate your time and interest in Flextronics. I'd like to first start by framing out this recent quarter. As seen in our earnings release earlier today, we continue to evolve our portfolio of products and solutions and remained focused on operating with discipline regardless of the macro environment. We launched key new sales and operating initiatives and took further steps towards driving a richer product mix. Our results this quarter reflect our continued progress on fulfilling our financial commitments. We generated strong cash flows and through our smart, consistent and sound capital deployment, we are returning value to our shareholders. Please turn to slide three for income statement highlights from our first quarter. Revenue was just under $5.6 billion in the first quarter, which was slightly below the low end of our guidance range of $5.6 billion to $6.2 billion, reflecting a weak demand, particularly in our Integrated Network Solutions, or INS, business and in our Consumer Technology Group, or CTG business, specifically related to smartphones. Our revenue decreased 16% or $1.1 billion on a year-over-year basis and decreased $386 million basis or 6% on a sequential basis. Mike will expand on our revenue and the overall demand environment shortly. Our first quarter adjusted operating income was $159 million, which was within our guidance range of $150 million to $190 million; however reflected a decline of $24 million year-over-year due to the reduction in quarterly revenue of over $1 billion. Adjusted net income was $134 million, decreasing $14 million year-over-year. Our adjusted earnings per diluted share for the first quarter was $0.23, which was at the midpoint of our adjusted EPS guidance range of $0.20 to $0.26. Now turn to slide four for our trended quarterly financial highlights. Our first…

Your first question comes from the line of Jim Suva with Citi. Your line is open.

Thank you and congratulations to your team. Just a quick clarification. The MCi acquisition is now included into your outlook. I'm correct; is that right?

Yes, that is correct.

And what's the contribution year-over-year or quarter-over-quarter that we should think about that were now included so we can think about organic versus what acquisition brought in?

Yeah. So, back at our Investor Day, Jim, we laid out a framework that defined kind of where MCi was. Think about it what we defined was the LTM sales for that business was roughly $200 million and it was – we were saying is growing around 20%. We closed that transaction during this quarter. So, you can understand that that will be a contributor to some of that incremental growth in that segment for us. We also highlighted at the Investor Day that it's an accretive from a margin profile in that it also would be EPS accretive greater than $0.01 a quarter upon full integration. So, if you think about those attributes I think you can frame out what would be organic versus inorganic for the company for September quarter.

Perfect. And then my follow-up on the softness you cited in smartphones. Is your view that's the market or is it that your OEM there is looking at in-sourcing newer models and this is just a concern of a continual underperformance or work-down as the new models may be in-sourced away from Flextronics? Michael M. McNamara - Chief Executive Officer & Director: Yeah, I think – well, I think that the number-one driver of the demand that we'll be seeing in smartphones is really a function of the marketplace and how strongly they're selling through. And I think that's both on the Motorola side and on the Lenovo side. So, the cumulative capacity that's going to be driven and needed for our customer, Lenovo, as it goes forward, is going to kind of dictate how much they outsource, how much they in-source and what the balance is. And I think that's probably very accurate for a China answer. Alternatively, once it gets to be in Brazil – as you know, we have a pretty big presence in Brazil with Lenovo. Once it gets in the Brazil, it's really more a function of the Brazilian marketplace, the individual competitiveness of the phones in that marketplace, because our customer doesn't really have capacity in those regions – in that region. So, I think it's really a – overall, it's dependent on the total volume needed from our customers and then, as a result, the geographic balance and the balance within their own factories.

Great. Thank you very much.

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

Thanks a lot. Good evening, guys. Two questions from me. One, Mike, I was wondering if you could just talk about there was a lot of articles intra-quarter on the Alcatel-Lucent site acquisition that you guys did. What is the scope of that acquisition? And when you talk about this business being up high-single digits, adding close to $200 million in next quarter sequentially, how much of that is program ramps or asset acquisitions like this versus organic trends? Michael M. McNamara - Chief Executive Officer & Director: Well, Amit, I always kind of look at this as being really organic growth and I know you don't really think about it that way. But if we go book $200 million of business, we have to buy inventory and we have to buy equipment. And maybe it goes in an existing facility, maybe we need more. So, I actually view this as kind of an organic transaction. So, this is roughly a $200 million transaction, as you said. It will begin this quarter and it will be part of that ramp up. And you can probably do the math as we think about a high-single-digit target for INS's business group this time. So, this is the only facility transaction that we're doing this quarter. We have about four to five major ramps that we would consider to be multi-hundred-million-dollar ramps that are actually hitting that have been booked over the last even 12 months to 18 months. They're hitting at different times, but they – the first one really is this Alcatel-Lucent transaction. It has already started this month and we'll see more of this growth of these transactions over the next six months. So, what's driving our – our bullishness around the growth rate in this particular region is – or in this particular segment is built around these new programs, and not necessarily the market recovery. So, kind of view these as layering in on top of those. And that's one of the reasons we have a pretty good – that's why we have pretty good forecast. And additionally, we're pretty excited about the confidence we're going to pick up in optical, because we view this as being one of the premier capabilities in optical in the world today.

Got it. That's really helpful. And then, I guess, just to follow up, Chris, for you. The free cash flow generation in Q1 seems extremely impressive. Especially, if I go back and look historically, Q1 tends to be one of the softer, if not negative, free cash flow quarters for you guys. So, just I realize you've a five-year target that you're working toward. But given the strength you had in fiscal Q1 at least, could that suggest that you might be better than average for fiscal 2016 from a free cash flow generation since you're starting off such a high base?

Yeah, I go back to – we're fundamentally structured for solid free cash flow generation. Looking back, in the last three years, we generated just shy of $2 billion. How we envision fiscal 2016 is very similar. We're going to have continued earnings improvement, which is a benefit. We're going to operate with discipline around working capital and we should maintain CapEx at or below depreciation levels. Putting it all together, you should see something very similar how we've been transacting historically. We came off to a good start and we're still believing that we're on track for that $3 billion-plus in five years. Next quarter, there's a lot of things that move around. Next quarter, we'll be cash flow positive again, free cash flow as well as operating cash flow positive. And I think you should see that sustain itself throughout this year. We will succumb to timing on some of these periods, but when you look back at an annual basis, you should see ourselves up in that $500 million-plus type of target range consistently.

Thanks a lot for your time, guys. Michael M. McNamara - Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open. Mark T. Delaney - Goldman Sachs & Co.: Good afternoon and thanks very much for taking the question. To start, just a couple of follow-up housekeeping questions on a couple of the earlier topics. First, on MCi, could you just clarify exactly when that closed so we can figure out how much of a quarterly impact, we should be assuming, is coming into in September? And then, also on the Alcatel transaction, Mike, you said $200 million transaction. Was that the purchase price for the facilities or annualized revenue? I apologize I didn't totally understand what you were referring to there.

Hi, Mark. Let me start with the MCi. So, MCi closed earlier this month, so in this first – this will be the first quarter. So, we'll probably get near to our full integration during this period. But you'll really see the impact completely fulfill itself in the December quarter. But that was closed earlier in July. Then the other question was...? Michael M. McNamara - Chief Executive Officer & Director: On Alcatel-Lucent, what I was talking about, Mark, the $200 million was kind of like the annual revenue that we're expecting out of the transaction, just so you can get an idea of what to layer in. Mark T. Delaney - Goldman Sachs & Co.: Okay. Understood. Very helpful. Thank you for that. And then, for a follow-up question on CTG, the weakness that the company was talking about in smartphones, Lenovo has been pretty open about needing to accelerate some of the cost savings from Motorola and looking to execute upon that this year. And can you just update us all on what your expectations are about your ability to keep the business in China? And then what exactly is assumed within your guidance for the September quarter related to that? Michael M. McNamara - Chief Executive Officer & Director: Yeah, I think – well, first of all, the guidance, obviously, reflects everything that we know about their current demand, their current operating strategies, our current products that we're building today. So, it's the sum of all information, I would say. But, once again, as I think about our demand in China, it's going to really revolve around three things. So, it's going to depend on the Motorola sell-through, which is predominantly what we're building in China for Lenovo. It's going to revolve around the Lenovo sell-through, because…

Mark, just to be clear, again, I think one of the things you and I and others have talked about is the risk profile that we had defined for the investors back before and nothing has changed in our view. Remember, the risk profile that we had established for that China potential exit centered around a $0.02 to $0.03 type of an impact to Flextronics. We didn't anticipate meaningful restructuring charges. The underlying inventory and assets can quickly and efficiently be converted into cash. We have relatively low levels of investment in the assets underneath that machinery and equipment, all of which can be easily deployed. So, again, nothing's materially changed at all in our view around that risk profile. Mark T. Delaney - Goldman Sachs & Co.: That's very helpful. And just one last question on the assumed or the implied gross margin guidance for the September quarter. Just working through the math, it looks like at the midpoint, the implied gross margin guidance is between 6.3% and 6.4%, which is comparable to what you did this quarter, even though consumer mix actually increases again next quarter. Maybe you can just help us understand a little bit more what's driving the gross margin strength in this upcoming quarter despite some of the mix headwinds that you may be seeing?

Certainly, Mark. Yeah, we are pretty excited going back-to-back quarters here at 6.4%. And you're right, if you look at the midpoint, if you do certain modeling of our guidance, you'll see it right around that 6.4% again next quarter, that's despite the significant ramp or uplift in terms of revenue, especially the contribution from CTG. One of the things we've highlighted before is that we continue to believe that we're fundamentally structured to have much greater earnings power. Some of that has also been through us working through various operational inefficiencies that have existed. You'll see some of that evidencing itself next quarter as we continue to make progress and drive on those improvement plans. So, you think about the mix shifts that happen, plus an improving operational execution and it kind of lands you to that same range. Mark T. Delaney - Goldman Sachs & Co.: Thanks very much.

Your next question comes from the line of Brian Alexander with Raymond James. Your line is open. Brian G. Alexander - Raymond James & Associates, Inc.: Okay. Thank you. I want to go back to the revenue outlook. I think the last two quarters you've come in around 4% to 6% below the midpoint of your guidance. And for the September quarter, you're guiding for a pretty healthy recovery in all of your businesses well above seasonality, if there really is such a thing anymore. So, I guess, number one, what kind of visibility do you have to support the snapback? And number two, what are your underlying end market assumptions? It sounds like all the growth, or at least most of it, is Flex specific program ramps. But what are your underlying end market assumptions? Are you expecting recoveries or just ongoing weakness in some of the areas that have been weak? That would be helpful. Thanks. Michael M. McNamara - Chief Executive Officer & Director: Yeah. Well, the one thing I'd like to remind the last two quarters I can summarize it by two things again. One is INS weakness and the other one is smartphone demand. So, what you get outside of those two very specific items, we're actually on target with the rest of our things. So, we're actually not finding the economy anything more difficult to understand or predict with the exception of those two. I think as it relates to Motorola or Lenovo or smartphone demand, we've actually taken our demand down to where we think it is the right place to be. We continue to get more feedback from the marketplace, from the customer. We think it's the right place. So, this has been our highest-risk area and just the fact that it's…

Brian, I'd just add, back about 60 days ago at our Investor Day, both of those businesses spent time trying to define the activities that were in play last year that actually give us the confidence around the double-digit growth. For instance, at IEI, we had 44 new accounts that were booked last year and we actually booked $1.6 billion in new manufacturing wins last year. So, that's an attribute that gives us a confidence in that IEI strength. As well as in HRS, Paul Humphries did a good job of defining all the broad wins across automotives and medical, where we're ramping 60-plus new programs. And we had new relationships with global OEMs and, again, another $1.8 billion in lifetime revenue and bookings last year. So, we're pretty confident in the organic capabilities of those businesses to grow. And we really don't need M&A to get there, but that's always going to be an accelerator. There's a lot of ways we're competing in the marketplace in those businesses to win. And you've been seeing it, we've been growing those businesses healthy double digits last couple of years and think we have a very strong competitive position and we are in front in terms of our engagement model. Brian G. Alexander - Raymond James & Associates, Inc.: Okay. Thanks a lot, guys.

Welcome.

Your next question comes from the line of Sherri Scribner with Deutsche Bank. Your line is open.

Hi. Thank you. I think there's a little static on my line. But I wanted to ask about the IEI margins. You guys are below target there based on program ramps and some investments you're making. How long do those program ramps impact margins in the investments? When do you think you can get those margins back into the targeted range?

Hi, Sherri. So, yeah, we actually closed this past quarter with IEI at around $29 million of a contribution and 2.6%. And those programs are a bit more complicated than we had anticipated. And so this has been in place for a couple of quarters now and has been impacting us. We actually are very confident in our ability to have set in place corrective actions to get more granular. We've revamped parts of management that are operating that. We've improved workforce planning activities and we've been driving yield improvements, which in turn will lower expedite fees and other ancillary costs that have been burdening that business. So, we actually are confident in our ability to get this business to its target margin range. And you'll see that stepping forward next quarter.

Okay. Great. Michael M. McNamara - Chief Executive Officer & Director: I think, Sherri, you'll find a pretty significant pick up into – well into the 3% ranges next quarter.

Okay. Great. And then, Mike, I think last quarter you talked about the potential to have revenue flat this year. It seems like with the miss now, it's going to be a bit of a hole to dig out of, as we move through the year. What is your thinking in terms of growth for fiscal 2016 now? Thanks. Michael M. McNamara - Chief Executive Officer & Director: Well, I think there's – our Q1 has created a reasonably big hole that we have to dig out of. Alternatively, I talked about the four or five different programs that are going to kick in. Some of those programs are going to offset natural kind of attrition, if you will. I think you'll see the INS revenue pick up pretty significantly this next quarter, as I mentioned, high-single digits. I think we're going to have some also significant increases the quarter after that. But I think we're going to be chasing it all the way to the end to get close to a breakeven. And as you know, last year I hoped to get to breakeven. I consider breakeven in INS business to be a victory. And we'll be chasing it. Again this year, we've got a big hole, but we also have a lot of very concrete bookings that sit on top of the existing core business that will absolutely contribute. So, we're hopeful, but it's going to be a challenge to get to 0%. But you'll see that revenue on a quarterly basis move up pretty nicely.

Thank you. Michael M. McNamara - Chief Executive Officer & Director: You're welcome.

Your next question comes from the line of Matt Sheerin with Stifel. Your line is open. Matt J. Sheerin - Stifel, Nicolaus & Co., Inc.: Yes. Thanks. Just wanted to ask another question regarding the Consumer Technology Group, strong guidance. You talked about growth opportunities pretty much in every area, except for smartphones, so just wanted to clarify your expectations for the smartphone portion of that. And given that the product mix has changed for you in that space, what should we be thinking about as seasonality for the December quarter, which typically has been a strong quarter for you? Michael M. McNamara - Chief Executive Officer & Director: So, I think if you think about it in two different bundles, there's a smartphone business and there's a CTG business. And if you think about how we're trying to balance our CTG portfolio is that the CTG business tends to work on things that are more next generation, more IoT related, things like wearables and connected homes and digital health. And many of those actually are also seasonal. So, we would expect that portion of the CTG business to perform nicely, actually, across the balance of the next two quarters in a very, very typical seasonal kind of nature. So, those – and I think, as I mentioned in my remarks earlier, they actually overachieved their target for this last June quarter. So, their revenue and their profile of business and the diversification that they're achieving and the investments they're putting in to have a better kind of – consumer kind of business is working really well. Now, if we think about the consumer business – I mean, if you think about the smartphone business portion of the computer business, it's going to be – it's already come down quite…

Your next question comes from the line of Shawn Harrison with Longbow Research. Your line is open.

Hi. Good afternoon. I guess, two follow-up questions on some prior topics. But with the IEI business, stepping up into the high-3%s it sounded like this quarter, do you believe exiting the year you'll be at the low end of the target EBIT margin range for the IEI business?

Hi, Shawn. This is Chris. Yeah, I don't know. What I wanted to define for you was that we clearly have action plans in place and confident on our ability to move that business to its target margins. I didn't say high-3%s next quarter. We're going to continue to make progress. You'll see up into the 3%s and you're going to continue to see that improve. We actually have been at this changing around some of the underlying operational activities, which will drive the yield improvements, which will reduce some of the ancillary costs that we're having to absorb there. So, with some of the growth in that business, with improved operational execution, we are going to continue to move that towards that target margin range and we have not come off that range as our target margin.

Okay. And then, as a follow-up on the MCi integration, SG&A stepping up because of that, does SG&A decline a little bit into the December quarter or we just flatten out here going forward at this kind of dollar range?

Yeah. Not getting too far ahead, I would think that you should be thinking about it as kind of flattening out. You'll see a step up for the incremental costs from not only the selling and general administrative functions in that business, but also the research and development and engineering efforts that are in there. So, that steps up. If you think about it, there's a step from where we're at today at $195 million up and part of it's going to be as revenues go up and where we get back to some of the investments, you'll see us roughly at core at around, say, $203 million. And then you add another $7 million or so for MCi and you're at the $210 million type of range. So, looking back historically, the core is operating just as it had been last December, last March.

And then one brief follow-up, if I may. Significant new wins here in INS. Is the environment out there that after you ramp these wins there's opportunities like that as we progress into calendar 2016 for additional large wins like that to drive incremental growth? Michael M. McNamara - Chief Executive Officer & Director: Yeah, I think it's hard to see a set of wins like we had. One of the things that Caroline Dowling, who runs this segment for us, said at Analyst Day is that she had record bookings last year. Sometimes these take a long time to mature. I don't know that we're going to see the same kind of nice four to five programs in multi-hundred-million dollars that we can layer on again this year. I'm still of the belief that if you can hit literally just flat growth or flat performance on a revenue basis year-on-year, it's actually beating the market. So, I think that's more what you should think about. I mean, this is going to be our goal is to try to hit a flat growth rate. And so, I wouldn't think you'd be able to – so I would not plan on revenue growth going into the future.

Thanks a lot, Mike. Michael M. McNamara - Chief Executive Officer & Director: Yeah.

Operator, we have time for one more question.

Your final question comes from the line of Osten Bernardez with Cross Research. Your line is open.

Hi. Thanks for taking my questions. I just wanted to learn a little bit more about these new investments that you highlighted earlier to help support growth within your HRS and IEI business. I'm assuming these are investing in more people. Could you sort of highlight whether you're adding any kind of new skills or is this just a matter of capacity from a design and engineering standpoint? Michael M. McNamara - Chief Executive Officer & Director: Yeah. The MCi is a good example. I mean, why did we do the MCi acquisition? One, it was – it has higher margin, it has longer product life cycles, it has a stronger growth profile than the rest of Flextronics. I mean, all these are very, very positive. One of the comments I made is that they have a very strong actuator and – sensors and actuator kind of business that we think we can apply across the rest of Flex. So, when we think about adding on new skills and capabilities, we're always looking to expand our capabilities and expand our sketch-to-scale kind of product and engineering offering, if you will. So, that's not going to change. We're focused, in particular, on in the HRS area for these acquisitions, because this is the place, which has longer product life cycles and more stable earnings and a more – and it's yielding a more predictable Flextronics. I think the fact that we actually went down to $5.5 billion in revenue, yet we held free cash flow ROIC and hit earnings per share targets, is really a testament to the resiliency of the model that we're bringing forward. And this has been the objective of what we're trying to accomplish with the HRS business is to be able to bring that forward. You can see we're hitting about a 6.6% operating margin. So, the only way we're going to get that is to continually expand the capabilities, to look for more opportunities to create a richer engineering offering for those customers. And you're seeing that with MCi as a great example of it. But that's not the only place we're looking for. Anywhere we can expand those capabilities and provide a richer offering to the customers, we're doing that. And that's how we're moving that business forward with a good growth rate. It's how we're being able to deliver the operating margin improvement and the operating margin result, as you see. And like I said, it's creating a resiliency of the overall business model. I mean, to go on down to $5.5 billion in revenue and yet still be able to generate the free cash flow and the ROIC and hit the earnings per share target is, I think, the proof point of that.

Okay. And just lastly from me. With respect to the new program wins you're expecting to drive sequential growth going forward for INS, you noted that you view these as incremental to your core business. So, can you sort of give some examples of what we should be expecting from the types of programs there? I'm assuming this is beyond converged infrastructure programs given the size of the growth that we're expecting here? Michael M. McNamara - Chief Executive Officer & Director: Yeah, that's correct. Most of these programs are programs that are – what you'd kind of consider more core programs. A good example is just what we're doing with Alcatel-Lucent and basically just taking over that optical business. So, we would consider this more of a core business. It's not really part of the converged infrastructure initiative, which tend to be – are going to tend to be smaller wins with, hopefully, higher growth rates. So, we are currently exhibiting higher growth rates. But to get these big multi-hundred-million-dollar wins and we're typically seeing just opportunities to work with the customers to really be able to add some value and take out nice chunks of business that we could do a good job on.

Thanks.

Okay. Thank you very much for joining us today on our call. We really appreciate it. We know that there are a lot of earnings going on today, so thank you for spending the time. This concludes our conference call.

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