AUSTIN,
Texas, July 26, 2023 /PRNewswire/ -- Flex
(NASDAQ: FLEX) today announced results for its first quarter ended
June 30, 2023.
First Quarter Fiscal Year 2024 Highlights:
- Net Sales: $7.3 billion
- GAAP Operating Income: $291
million
- Adjusted Operating Income: $377
million
- GAAP Net Income attributable to Flex Ltd: $186 million
- Adjusted Net Income attributable to Flex Ltd: $258 million
- GAAP Earnings Per Share: $0.41
- Adjusted Earnings Per Share: $0.57
An explanation and reconciliation of non-GAAP financial measures
to GAAP financial measures is presented in Schedules II and V
attached to this press release.
"Our results this quarter demonstrate the strength of our
diverse portfolio from a product, customer, and geographic
perspective," said Revathi Advaithi, CEO of Flex. "The many
long-term secular trends and the solid foundation of our business
give us confidence that we'll continue to effectively navigate a
dynamic macro-environment, drive growth, and deliver value."
Second Quarter Fiscal 2024 Guidance
- Revenue: $7.3 billion to
$7.7 billion
- GAAP Operating Income: $316
million to $346 million
- Adjusted Operating Income: $370
million to $400 million
- GAAP EPS: $0.44 to $0.49
- Adjusted EPS: $0.55 to
$0.60 which includes $0.08 for stock-based compensation expense,
$0.04 for net intangible
amortization, offset by ($0.01) for
noncontrolling interest share of subsidiary's non-GAAP
adjustments.
Fiscal Year 2024 Guidance Updated
- Revenue: $30.5 billion to
$31.5 billion
- GAAP EPS: $1.87 to $2.07
- Adjusted EPS: $2.35 to
$2.55 which includes $0.34 for stock-based compensation expense,
$0.13 for net intangible
amortization, and $0.04 for net
restructuring charges, offset by ($0.03) noncontrolling interest share of
subsidiary's non-GAAP adjustments.
Webcast and Conference Call
The Flex management team will host a conference call today at
1:30 PM (PT) / 4:30 PM (ET), to review first quarter fiscal 2024
results. A live webcast of the event and slides will be available
on the Flex Investor Relations website at
http://investors.flex.com. An audio replay and transcript will also
be available after the event on the Flex Investor Relations
website.
About Flex
Flex (Reg. No. 199002645H) is the diversified manufacturing
partner of choice that helps market-leading brands design, build
and deliver innovative products that improve the world. Through the
collective strength of a global workforce across approximately 30
countries with responsible, sustainable operations, Flex delivers
advanced manufacturing solutions and operates one of the most
trusted global supply chains, supporting the entire product
lifecycle with fulfillment, after-market and circular economy
solutions for diverse industries.
Contacts
Investors & Analysts
David Rubin
Vice President, Investor Relations
(408) 577-4632
David.Rubin@flex.com
Media & Press
Mark Plungy
Director, Corporate Integrated Communications
(408) 442-1691
Mark.Plungy@flex.com
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of U.S. securities laws, including: statements related
to future expected revenues and earnings per share. These
forward-looking statements involve risks and uncertainties that
could cause the actual results to differ materially from those
anticipated by these forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking
statements. These risks include: that we may not achieve our
expected future operating results, including margins; the effects
that the current and future macroeconomic environment, including
inflation, slower growth or recession, higher interest rates, and
currency exchange rate fluctuations, could have on our business and
demand for our products; the impact of component shortages,
fluctuations in the pricing or availability of raw materials, labor
and energy, and logistical constraints, including their impact on
our revenues and margins; uncertainties and risks relating to our
ability to achieve some or all of the intended or anticipated
benefits of Nextracker being a separate, publicly-traded company,
which could negatively impact our business, financial condition and
results of operations; risks associated with acquisitions and
divestitures, including the possibility that we may not fully
realize their projected benefits; geopolitical risk, including the
termination and renegotiation of international trade agreements and
trade policies, including the impact of tariffs and related
regulatory actions; the war in Ukraine and escalating geopolitical tensions
as a result of Russia's invasion
of Ukraine, including the
imposition of economic sanctions on Russia which could lead to disruption,
instability, and volatility in global markets and negatively impact
our operations and financial performance; the effects that current
and future credit and market conditions could have on the liquidity
and financial condition of our customers and suppliers, including
any impact on their ability to meet their contractual obligations
to us and our ability to pass through costs to our customers; the
challenges of effectively managing our operations, including our
ability to control costs and manage changes in our operations;
hiring and retaining key personnel; litigation and regulatory
investigations and proceedings; our compliance with legal and
regulatory requirements; changes in laws, regulations, or policies
that may impact our business, including those related to climate
change; the possibility that benefits of the Company's
restructuring actions may not materialize as expected; that the
expected revenue and margins from recently launched programs may
not be realized; our dependence on industries that continually
produce technologically advanced products with short product life
cycles; the short-term nature of our customers' commitments and
rapid changes in demand may cause supply chain issues, excess and
obsolete inventory, and other issues which adversely affect our
operating results; our dependence on a small number of customers;
our industry is extremely competitive; we may be exposed to
financially troubled customers or suppliers; the success of certain
of our activities depends on our ability to protect our
intellectual property rights and we may be exposed to claims of
infringement or breach of license agreements; a breach of our IT or
physical security systems, or violation of data privacy laws, may
cause us to incur significant legal and financial exposure and
disrupt our operations; physical and operational risks from natural
disasters, severe weather events, or climate change; our ability to
meet environmental, social and governance expectations or standards
or achieve sustainability goals; we may be exposed to product
liability and product warranty liability; that recently proposed
changes or future changes in tax laws in certain jurisdictions
where we operate could materially impact our tax expense; and the
impact and effects on our business, results of operations and
financial condition of the COVID-19 pandemic or another public
health issue or catastrophic event.
Additional information concerning these, and other risks is
described under "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our
annual report on Form 10-K for the fiscal year ended March 31, 2023 and in subsequent quarterly
reports on Form 10-Q. The forward-looking statements in this press
release are based on current expectations and Flex assumes no
obligation to update these forward-looking statements. Our share
repurchase program does not obligate the Company to repurchase a
specific number of shares and may be suspended or terminated at any
time without prior notice.
SCHEDULE
I
|
|
FLEX
|
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (2)
|
(In millions, except
per share amounts)
|
|
|
|
|
|
|
|
Three-Month Periods
Ended
|
|
|
June 30,
2023
|
|
July 1,
2022
|
GAAP:
|
|
|
|
|
Net sales
|
$
7,336
|
|
$
7,347
|
|
Cost of
sales
|
6,732
|
|
6,812
|
|
Restructuring
charges
|
17
|
|
—
|
|
Gross
profit
|
587
|
|
535
|
|
Selling, general and
administrative expenses
|
270
|
|
241
|
|
Restructuring
charges
|
6
|
|
—
|
|
Intangible
amortization
|
20
|
|
22
|
|
Operating
income
|
291
|
|
272
|
|
Interest,
net
|
41
|
|
49
|
|
Other charges (income),
net
|
11
|
|
(9)
|
|
Income before income
taxes
|
239
|
|
232
|
|
Provision for income
taxes
|
28
|
|
37
|
|
Net income
|
211
|
|
195
|
|
Net income attributable
to noncontrolling interest and
redeemable noncontrolling interest
|
25
|
|
6
|
|
Net income
attributable to Flex Ltd.
|
$
186
|
|
$
189
|
|
|
|
|
|
Diluted earnings per
share attributable to the shareholders of Flex Ltd:
|
|
GAAP
|
$
0.41
|
|
$
0.40
|
|
Non-GAAP
|
$
0.57
|
|
$
0.54
|
|
|
|
|
|
|
Diluted shares used in
computing per share amounts
|
455
|
|
468
|
|
|
|
|
|
|
See Schedule II for the
reconciliation of GAAP to non-GAAP financial measures. See the
accompanying notes on Schedule V attached to this press
release.
|
SCHEDULE
II
|
|
FLEX
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(1)(2)
|
(In millions, except
per share amounts) *
|
|
|
|
|
|
|
|
Three-Month Periods
Ended
|
|
|
June 30,
2023
|
|
July 1,
2022
|
|
|
|
|
|
GAAP operating
income
|
$
291
|
|
$
272
|
|
Intangible
amortization
|
20
|
|
22
|
|
Stock-based
compensation expense
|
41
|
|
26
|
|
Restructuring
charges
|
23
|
|
—
|
|
Legal and
other
|
2
|
|
10
|
Non-GAAP operating
income
|
$
377
|
|
$
330
|
|
|
|
|
|
GAAP provision for
income taxes
|
$
28
|
|
$
37
|
|
Intangible amortization
benefit
|
3
|
|
3
|
|
Other tax related
adjustments
|
10
|
|
(4)
|
Non-GAAP provision
for income taxes
|
$
41
|
|
$
37
|
|
|
|
|
|
GAAP net income
attributable to Flex Ltd.
|
$
186
|
|
$
189
|
|
Intangible
amortization
|
20
|
|
22
|
|
Stock-based
compensation expense
|
41
|
|
26
|
|
Restructuring
charges
|
23
|
|
—
|
|
Legal and
other
|
2
|
|
10
|
|
Interest and other,
net
|
1
|
|
1
|
|
Paid-in-kind and
pre-IPO dividends paid to redeemable
noncontrolling interest
|
—
|
|
6
|
|
Noncontrolling interest
share of subsidiary's non-GAAP
adjustments
|
(2)
|
|
—
|
|
Adjustments for
taxes
|
(13)
|
|
1
|
Non-GAAP net
income
|
$
258
|
|
$
255
|
Diluted earnings per
share attributable to the shareholders of Flex Ltd:
|
|
GAAP
|
$
0.41
|
|
$
0.40
|
|
Non-GAAP
|
$
0.57
|
|
$
0.54
|
|
|
|
|
|
|
See the accompanying
notes on Schedule V attached to this press release.
|
|
*Amounts may not sum
due to rounding
|
SCHEDULE
III
|
|
FLEX
|
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (2)
|
(In
millions)
|
|
|
|
|
|
|
|
As of June 30,
2023
|
|
As of March 31,
2023
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
2,660
|
|
$
3,294
|
|
Accounts receivable,
net of allowance for doubtful accounts
|
3,764
|
|
3,739
|
|
Contract
assets
|
588
|
|
541
|
|
Inventories
|
7,526
|
|
7,530
|
|
Other current
assets
|
1,002
|
|
917
|
Total current
assets
|
15,540
|
|
16,021
|
|
|
|
|
Property and equipment,
net
|
2,363
|
|
2,349
|
Operating lease
right-of-use assets, net
|
624
|
|
608
|
Goodwill
|
1,344
|
|
1,343
|
Other intangible
assets, net
|
299
|
|
316
|
Other assets
|
766
|
|
758
|
Total assets
|
$
20,936
|
|
$
21,395
|
|
|
|
|
|
LIABILITIES,
NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
Bank borrowings and
current portion of long-term debt
|
$
151
|
|
$
150
|
|
Accounts
payable
|
5,890
|
|
5,930
|
|
Accrued
payroll
|
474
|
|
522
|
|
Deferred revenue and
customer working capital advances
|
3,038
|
|
3,143
|
|
Other current
liabilities
|
1,085
|
|
1,110
|
Total current
liabilities
|
10,638
|
|
10,855
|
|
|
|
|
|
Long-term debt, net of
current portion
|
3,444
|
|
3,691
|
Operating lease
liabilities, non-current
|
514
|
|
506
|
Other
liabilities
|
554
|
|
637
|
Total
liabilities
|
15,150
|
|
15,689
|
Total Flex Ltd.
shareholders' equity
|
5,406
|
|
5,351
|
Noncontrolling
interest
|
380
|
|
355
|
Total shareholders'
equity
|
5,786
|
|
5,706
|
Total liabilities,
noncontrolling interests, and shareholders'
equity
|
$
20,936
|
|
$
21,395
|
|
|
|
|
|
|
See the accompanying
notes on Schedule V attached to this press release.
|
SCHEDULE
IV
|
|
FLEX
|
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
millions)
|
|
|
|
|
|
|
|
Three-Month Periods
Ended
|
|
|
June 30,
2023
|
|
July 1,
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
$
211
|
|
$
195
|
|
Depreciation,
amortization and other impairment charges
|
133
|
|
124
|
|
Changes in working
capital and other, net
|
(338)
|
|
(281)
|
|
Net cash provided by
operating activities
|
6
|
|
38
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
Purchases of property
and equipment
|
(167)
|
|
(107)
|
|
Proceeds from the
disposition of property and equipment
|
11
|
|
16
|
|
Other investing
activities, net
|
1
|
|
2
|
|
Net cash used in
investing activities
|
(155)
|
|
(89)
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from bank
borrowings and long-term debt
|
2
|
|
—
|
|
Repayments of bank
borrowings and long-term debt
|
(243)
|
|
(35)
|
|
Payments for
repurchases of ordinary shares
|
(197)
|
|
(181)
|
|
Other financing
activities, net
|
(48)
|
|
6
|
|
Net cash used in
financing activities
|
(486)
|
|
(210)
|
|
|
|
|
|
Effect of exchange
rates on cash and cash equivalents
|
1
|
|
(56)
|
|
Net decrease in cash
and cash equivalents
|
(634)
|
|
(317)
|
|
Cash and cash
equivalents, beginning of period
|
3,294
|
|
2,964
|
|
Cash and cash
equivalents, end of period
|
$
2,660
|
|
$
2,647
|
SCHEDULE V
FLEX AND SUBSIDIARIES
NOTES TO
SCHEDULES I, II, and III
(1) To supplement Flex's unaudited selected financial data
presented consistent with U.S. Generally Accepted Accounting
Principles ("GAAP"), the Company discloses certain non-GAAP
financial measures that exclude certain charges and gains,
including non-GAAP operating income, non-GAAP net income and
non-GAAP net income per diluted share. These supplemental measures
exclude certain legal and other charges, restructuring charges,
customer-related asset impairments (recoveries), stock-based
compensation expense, intangible amortization, other discrete
events as applicable and the related tax effects. These non-GAAP
measures are not in accordance with or an alternative for GAAP and
may be different from non-GAAP measures used by other companies. We
believe that these non-GAAP measures have limitations in that they
do not reflect all of the amounts associated with Flex's results of
operations as determined in accordance with GAAP and that these
measures should only be used to evaluate Flex's results of
operations in conjunction with the corresponding GAAP measures. The
presentation of this additional information is not meant to be
considered in isolation or as a substitute for the most directly
comparable GAAP measures. We compensate for the limitations of
non-GAAP financial measures by relying upon GAAP results to gain a
complete picture of the Company's performance.
In calculating non-GAAP financial measures, we exclude certain
items to facilitate a review of the comparability of the Company's
operating performance on a period-to-period basis because such
items are not, in our view, related to the Company's ongoing
operational performance. We use non-GAAP measures to evaluate the
operating performance of our business, for comparison with
forecasts and strategic plans, for calculating return on
investment, and for benchmarking performance externally against
competitors. In addition, management's incentive compensation is
determined using certain non-GAAP measures. Also, when evaluating
potential acquisitions, we exclude certain of the items described
below from consideration of the target's performance and valuation.
Since we find these measures to be useful, we believe that
investors benefit from seeing results "through the eyes" of
management in addition to seeing GAAP results. We believe that
these non-GAAP measures, when read in conjunction with the
Company's GAAP financials, provide useful information to investors
by offering:
- the ability to make more meaningful period-to-period
comparisons of the Company's ongoing operating results;
- the ability to better identify trends in the Company's
underlying business and perform related trend analysis;
- a better understanding of how management plans and measures the
Company's underlying business; and
- an easier way to compare the Company's operating results
against analyst financial models and operating results of
competitors that supplement their GAAP results with non-GAAP
financial measures.
The following are explanations of each of the adjustments that
we incorporate into non-GAAP measures, as well as the reasons for
excluding each of these individual items in the reconciliations of
these non-GAAP financial measures:
Stock-based compensation expense consists
of non-cash charges for the estimated fair value of unvested
restricted share unit and stock option awards granted to employees
and assumed in business acquisitions. The Company believes that the
exclusion of these charges provides for more accurate comparisons
of its operating results to peer companies due to the varying
available valuation methodologies, subjective assumptions and the
variety of award types. In addition, the Company believes it is
useful to investors to understand the specific impact stock-based
compensation expense has on its operating results.
Intangible amortization consists
primarily of non-cash charges that can be impacted by, among other
things, the timing and magnitude of acquisitions. The Company
considers its operating results without these charges when
evaluating its ongoing performance and forecasting its earnings
trends, and therefore excludes such charges when presenting
non-GAAP financial measures. The Company believes that the
assessment of its operations excluding these costs is relevant to
its assessment of internal operations and comparisons to the
performance of its competitors.
Restructuring charges include
severance charges at existing sites and corporate SG&A
functions as well as asset impairment, and other charges related to
the closures and consolidations of certain operating sites and
targeted activities to restructure the business. These costs may
vary in size based on the Company's initiatives, are not directly
related to ongoing or core business results, and do not reflect
expected future operating expenses. These costs are excluded by the
Company's management in assessing current operating performance and
forecasting its earnings trends and are therefore excluded by the
Company from its non-GAAP measures.
During the three-month period ended June 30, 2023, the Company recognized
approximately $23 million of
restructuring charges, most of which related to employee severance.
No such charges were recognized for the three-month period ended
July 1, 2022.
Legal and other consist primarily of
costs not directly related to core business results and may include
matters relating to commercial disputes, government regulatory and
compliance, intellectual property, antitrust, tax, employment or
shareholder issues, product liability claims and other issues on a
global basis as well as acquisition related costs and customer
related asset impairments (recoveries). During the first quarter of
fiscal year 2024 and 2023, the Company accrued for certain loss
contingencies where losses were considered probable and estimable.
These costs are excluded by the Company's management in assessing
current operating performance and forecasting its earnings trends
and are therefore excluded by the Company from its non-GAAP
measures.
Interest and other, net consists of
various other types of items that are not directly related to
ongoing or core business results, such as the gain or losses
related to certain divestitures, currency translation reserve
write-offs upon liquidation of certain legal entities, debt
extinguishment costs and impairment charges or gains associated
with certain non-core investments. The Company excludes these items
because they are not related to the Company's ongoing operating
performance or do not affect core operations. Excluding these
amounts provides investors with a basis to compare Company
performance against the performance of other companies without this
variability.
Paid-in-kind and pre-IPO dividends paid to
redeemable noncontrolling interest relates to dividends
paid to TPG Rise Flash, L.P. ("TPG Rise"). Prior to the Nextracker
IPO, pro-rated 5% annual preferred dividends were paid-in-kind to
TPG Rise totaling $6 million for the
first quarter of fiscal year 2023. No such charges were recorded in
fiscal year 2024.
Noncontrolling interest share of subsidiary's
non-GAAP adjustments represents the share of non-GAAP
adjustments attributable to noncontrolling interest. During the
three-month period ended June 30,
2023, ($2) million of the
after-tax Nextracker stock-based compensation expense was
attributable to noncontrolling interests.
Adjustment for taxes relates to the tax
effects of the various adjustments that we incorporate into
non-GAAP measures in order to provide a more meaningful measure on
non-GAAP net income and certain adjustments related to
non-recurring settlements of tax contingencies or other
non-recurring tax charges, when applicable. During the three-month
period ended June 30, 2023, and
July 1, 2022, the Company recognized
a ($13) million and $1 million respectively, related to tax effects
of the various adjustments that are incorporated into Non-GAAP
measures under tax benefits on restructuring and other.
(2) Noncontrolling interests have been included on the
consolidated balance sheets as components of redeemable
noncontrolling interest and total shareholders' equity. As a result
of the Nextracker's February 13, 2023
IPO, the redeemable noncontrolling interest are not applicable for
the period ending June 30, 2023. The
amount of consolidated net income attributable to Flex Ltd. and to
the noncontrolling interest and redeemable noncontrolling interest
are presented in the consolidated statements of operations. In the
fourth quarter of fiscal year 2023, Nextracker Inc. completed the
Nextracker IPO through a series of reorganization transactions that
resulted in Nextracker Inc. having an umbrella partnership C
corporation ("Up-C") structure and the conversion of redeemable
noncontrolling interest to noncontrolling interest.
Upon the IPO, Flex recorded a noncontrolling interest within
shareholders equity, reflecting the portion of Nextracker that is
not owned by Flex. On a subsequent measurement basis, the carrying
value of this noncontrolling interest is adjusted for earnings
attributable to the noncontrolling interest.
As of June 30, 2023 and
March 31, 2023, the carrying value of
noncontrolling interest were $380
million and $355 million,
respectively. Net Income attributable to noncontrolling interest
and redeemable noncontrolling interest was $25 million and $6
million for the first quarter of fiscal year 2024 and 2023,
respectively.
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SOURCE Flex