Summary
Flex Ltd. (FLEX) filed its annual report on Form 10-K for the fiscal year ended March 31, 2016, revealing a diversified business model focused on design, engineering, manufacturing, and supply chain solutions for original equipment manufacturers (OEMs) across various sectors including High Reliability Solutions (HRS), Consumer Technologies Group (CTG), Industrial and Emerging Industries (IEI), and Communications & Enterprise Compute (CEC). The company generated $24.4 billion in revenue for fiscal year 2016, a decrease from the prior year, primarily driven by a decline in the CTG segment. Despite the revenue dip, gross profit saw a slight increase due to a richer mix of business from the HRS and IEI segments and improved operational execution. Net income for the year was $444.1 million, a decrease compared to the previous year, impacted by increased stock-based compensation, acquisition-related costs, and a bad debt charge from the SunEdison bankruptcy. Flex continued to focus on strategic acquisitions and investments in higher-margin businesses like automotive and medical sectors, aiming to enhance its end-to-end 'sketch to scale' capabilities. Investors should note the company's significant global presence with over 100 facilities in 30 countries and a substantial portion of manufacturing capacity located in low-cost regions. The company's strategy emphasizes talent, customer focus, market diversification, and leveraging its global operations. While facing competition and risks associated with industry cycles and customer concentration (with Lenovo/Motorola being the only customer exceeding 10% of net sales), Flex remains committed to providing comprehensive supply chain solutions to a broad base of leading technology companies.
Financial Highlights
54 data points| Revenue | $24.42B |
| Cost of Revenue | $22.81B |
| Gross Profit | $1.61B |
| R&D Expenses | $61.00M |
| SG&A Expenses | $954.89M |
| Operating Income | $444.08M |
| Interest Expense | $98.00M |
| Net Income | $444.08M |
| EPS (Basic) | $0.80 |
| EPS (Diluted) | $0.79 |
| Shares Outstanding (Basic) | 557.67M |
| Shares Outstanding (Diluted) | 564.87M |
Key Highlights
- 1Total revenue for fiscal year 2016 was $24.4 billion, a decrease from $26.1 billion in fiscal year 2015, primarily due to softness in the Consumer Technologies Group (CTG) segment.
- 2Gross profit increased by 4.1% to $1.6 billion in fiscal year 2016, leading to an improved gross margin of 6.6% compared to 5.9% in the prior year, driven by a favorable business mix and operational improvements.
- 3Net income for fiscal year 2016 decreased by 26.1% to $444.1 million, impacted by increased stock-based compensation, acquisition costs for MCi and NEXTracker, and a bad debt expense related to SunEdison's bankruptcy.
- 4The company operates across four segments: High Reliability Solutions (HRS), Consumer Technologies Group (CTG), Industrial and Emerging Industries (IEI), and Communications & Enterprise Compute (CEC), with HRS and IEI showing growth.
- 5Flex's strategy includes investing in higher-margin businesses like automotive and medical (HRS) and energy (IEI), aiming to shift its portfolio towards longer product life cycles and improved profitability.
- 6The company's customer base is concentrated, with the ten largest customers accounting for 46% of net sales in fiscal year 2016. Lenovo/Motorola was the only customer exceeding 10% of net sales.
- 7Free cash flow increased to $639.5 million in fiscal year 2016 from $554.3 million in fiscal year 2015, reflecting strong operating cash flows and strategic investments.