01—Abstract
Summary
Summary of the 10-Q filed July 27, 2016. Cited figures are marked; the original filing is the authoritative source.
Flex Ltd. (FLEX) reported its first-quarter fiscal year 2017 results, showing a notable increase in net sales to $5.88 billiona, up 5.6% year-over-year, driven by growth in its Communications & Enterprise Compute (CEC), High Reliability Solutions (HRS), and Industrial & Emerging Industries (IEI) segments.
This top-line growth was partially offset by a decline in the Consumer Technologies Group (CTG) segment, largely due to reduced demand from a major customer in the smartphone business. The company also demonstrated improved profitability, with gross profit increasing to $406.0 millionb and a gross margin of 6.9%, up from 6.3% in the prior year.
This improvement was attributed to a richer business mix, with a greater concentration of higher-margin HRS and IEI businesses, alongside enhanced operational efficiencies. Despite an increase in SG&A expenses due to acquisitions and investments, the company's net income for the quarter was $105.7 millionc, resulting in diluted earnings per share of $0.19.
02—Key points
Key Highlights
- Net sales increased by 5.6% to $5.88 billion for the three-month period ended July 1, 2016, compared to $5.57 billion for the same period in the prior year.
- Gross profit increased by $53.7 million to $406.0 million, with gross margin improving by 60 basis points to 6.9%, driven by a more favorable business mix and operational efficiencies.
- The High Reliability Solutions (HRS) segment showed strong performance with an 160 basis point increase in margin to 8.2%, driven by new program launches and higher value-added engagements.
- Selling, General, and Administrative (SG&A) expenses increased by $30.1 million to $239.5 million, primarily due to costs associated with recent acquisitions (MCi and NEXTracker) and increased investments in design and engineering.
- The company repurchased $91.0 million worth of its ordinary shares during the quarter, continuing its share repurchase program.
- Cash provided by operating activities was $263.9 million, though free cash flow decreased to $120.6 million from $225.4 million in the prior year's comparable period due to higher capital expenditures.
- Total assets grew slightly to $12.51 billion as of July 1, 2016, from $12.38 billion as of March 31, 2016, with a significant portion of assets held by foreign subsidiaries.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed July 27, 2016Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $5.88B$6.32B | −7.0% |
| Cost of Revenue | $5.69B$5.92B | −3.8% |
| Gross Profit | $406.00M$396.92M | +2.3% |
| SG&A Expenses | $243.94M$216.80M | +12.5% |
| Interest Expense | $26.50M$25.10M | +5.6% |
| Net Income | $105.73M$122.98M | −14.0% |
| EPS (Basic) | $0.19$0.22 | −13.6% |
| EPS (Diluted) | $0.19$0.22 | −13.6% |
| Shares Outstanding (Basic) | 544.05M563.33M | −3.4% |
| Shares Outstanding (Diluted) | 544.05M569.65M | −4.5% |
05—Questions
Frequently Asked Questions
How did Flex's revenue perform in the first quarter of fiscal year 2017?
Flex reported net sales of $5.88 billion for the three-month period ended July 1, 2016, representing a 5.6% increase compared to $5.57 billion in the same period of the prior year. This growth was primarily driven by the CEC, HRS, and IEI segments, offsetting a decline in the CTG segment.
What is the current profitability trend for Flex based on this filing?
The company demonstrated improved profitability with gross profit rising to $406.0 million and gross margin improving to 6.9% from 6.3% year-over-year. This improvement was attributed to a shift towards higher-margin business segments like HRS and IEI, along with better operational efficiency.
How is Flex managing its cash flow and capital resources?
Flex generated $263.9 million in cash from operations. However, free cash flow was $120.6 million, down from $225.4 million in the prior year, primarily due to increased capital expenditures for expanding capabilities in automotive and medical businesses. The company continues to hold a substantial amount of cash, with over half held by foreign subsidiaries.
What are the main drivers for the increase in SG&A expenses?
Selling, General, and Administrative (SG&A) expenses increased due to several factors, including higher stock-based compensation, incremental costs associated with recent acquisitions such as MCi and NEXTracker, and ongoing investments in design and engineering resources.
06—Continue