01—Abstract
Summary
Summary of the 10-K filed May 21, 2019. Cited figures are marked; the original filing is the authoritative source.
Flex Ltd. reported fiscal year 2019 net sales of $26.2 billiona, a 3% increase from the prior year, driven primarily by growth in its Communications & Enterprise Compute (CEC) and Industrial and Emerging Industries (IEI) segments.
However, net income saw a significant decrease of 78% to $93 millionb, largely due to increased restructuring charges, charges related to distressed customers, and investment impairments. The company continues to navigate a complex operating environment, marked by evolving technology trends and a diverse customer base across its four segments: High Reliability Solutions (HRS), Industrial and Emerging Industries (IEI), Communications & Enterprise Compute (CEC), and Consumer Technologies Group (CTG). Despite the dip in profitability, Flex remains a global leader in its Sketch-to-Scale® services, offering design, engineering, manufacturing, and supply chain solutions.
The company emphasizes its global scale, extensive design capabilities, and focus on high-growth industries like healthcare and automotive as key competitive strengths. Management is actively managing its portfolio, including optimizing underperforming accounts and investing in areas with longer product life cycles and higher margins.
02—Key points
Key Highlights
- Net sales reached $26.2 billion in fiscal year 2019, a 3% increase year-over-year, reflecting growth in the CEC and IEI segments.
- Net income declined significantly by 78% to $93 million, impacted by $113 million in restructuring charges and nearly $200 million in investment impairments.
- Gross profit decreased by 5% to $1.5 billion, with gross margin narrowing to 5.8% due to higher charges and unfavorable revenue mix, particularly a decline in higher-margin automotive products.
- The company is strategically shifting its portfolio towards higher-margin businesses like HRS and IEI, while actively managing underperforming accounts within the CTG segment.
- Flex maintains a strong global operational footprint with over 100 facilities across approximately 35 countries, supported by a workforce of around 200,000 employees.
- The company repurchased approximately $189 million of its ordinary shares during fiscal year 2019 under its share repurchase program.
- Despite a challenging year for profitability, Flex continues to invest in design and engineering capabilities and expand capacity in key growth areas.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed May 21, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $26.21B$25.44B | +3.0% |
| Cost of Revenue | $24.59B$23.78B | +3.4% |
| Gross Profit | $1.52B$1.60B | −4.9% |
| SG&A Expenses | $953.00M$1.02B | −6.5% |
| Interest Expense | $146.00M$123.10M | +18.6% |
| Net Income | $93.00M$428.53M | −78.3% |
| EPS (Basic) | $0.18$0.81 | −77.8% |
| EPS (Diluted) | $0.18$0.80 | −77.5% |
| Shares Outstanding (Basic) | 527.00M529.78M | −0.5% |
| Shares Outstanding (Diluted) | 530.00M536.60M | −1.2% |
05—Questions
Frequently Asked Questions
What were Flex's main financial performance indicators for fiscal year 2019?
In fiscal year 2019, Flex reported net sales of $26.2 billion, an increase of 3% from the prior year. However, net income significantly decreased by 78% to $93 million due to increased restructuring charges and investment impairments. Gross profit also declined by 5% to $1.5 billion.
What are the key drivers behind Flex's net income decline?
The substantial decrease in net income was primarily attributed to higher restructuring charges ($113 million), increased charges related to distressed customers ($47 million), and significant investment impairments totaling $193 million, which included write-downs in non-core investments and Elementum.
How is Flex strategically positioning its business segments?
Flex is focusing on its High Reliability Solutions (HRS) and Industrial and Emerging Industries (IEI) segments, which are characterized by longer product life cycles and higher operating margins. The company is actively managing underperforming accounts within its Consumer Technologies Group (CTG) segment and refining its go-to-market strategy.
What is Flex's competitive advantage and outlook?
Flex highlights its 'Sketch-to-Scale®' offering, global scale, extensive design and engineering capabilities, and focus on high-growth markets as key competitive strengths. The company aims to leverage these advantages to capitalize on long-term growth prospects for outsourcing advanced manufacturing and design services.
06—Continue