01—Abstract
Summary
Summary of the 10-Q filed October 30, 2017. Cited figures are marked; the original filing is the authoritative source.
Flex Ltd. reported strong revenue growth for the quarter and six months ended September 29, 2017, with net sales increasing by 4%a and 3% respectively, year-over-year.
This growth was primarily driven by the Industrial & Emerging Industries (IEI) and High Reliability Solutions (HRS) segments, offsetting a decline in the Communications & Enterprise Compute (CEC) segment. The company's gross profit saw a significant increase, largely due to the absence of charges related to solar panel inventory and business exits that impacted the prior year's results. Net income also showed a substantial improvement, shifting from a net loss in the prior year's comparable period to a solid profit.
Operationally, Flex achieved a significant gain from the deconsolidation of its investment in Elementum, which boosted net income. The company also continued its share repurchase program, demonstrating a commitment to returning value to shareholders.
Despite some segment-specific headwinds, Flex's diversified business model and strategic focus on higher-margin segments position it for continued performance. Investors should monitor the performance of the CEC segment and the successful integration of recent acquisitions.
02—Key points
Key Highlights
- Net sales increased by 4% to $6.3 billion for the three-month period and by 3% to $12.3 billion for the six-month period ended September 29, 2017, compared to the prior year.
- Gross profit increased by $80 million to $393 million for the three-month period and by $81 million to $800 million for the six-month period, with gross margin improving to 6.3% and 6.5% respectively.
- Net income dramatically improved to $205 million for the three-month period and $330 million for the six-month period, a significant turnaround from a net loss in the prior year's comparable periods.
- The company recognized a substantial non-cash gain of $151.6 million from the deconsolidation of its investment in Elementum, contributing significantly to the 'Other charges (income), net' line item.
- Operating cash flow was $281 million for the six-month period, though this was lower than the prior year's $544 million, impacted by changes in working capital and a gain from deconsolidation.
- Flex continued its share repurchase program, buying back approximately 4.4 million shares for $71.1 million in the three-month period and 8.9 million shares for $145.0 million in the six-month period.
- Acquisition of AGM was completed in April 2017 for $213.7 million, expanding capabilities in the automotive market and adding $75.3 million in goodwill.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed October 30, 2017Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $6.27B$5.88B | +6.7% |
| Cost of Revenue | $5.88B$5.69B | +3.2% |
| Gross Profit | $393.32M$406.00M | −3.1% |
| SG&A Expenses | $274.15M$243.94M | +12.4% |
| Interest Expense | $29.60M$26.50M | +11.7% |
| Net Income | $205.09M$105.73M | +94.0% |
| EPS (Basic) | $0.39$0.19 | +105.3% |
| EPS (Diluted) | $0.38$0.19 | +100.0% |
| Shares Outstanding (Basic) | 531.31M544.05M | −2.3% |
| Shares Outstanding (Diluted) | 536.02M544.05M | −1.5% |
05—Questions
Frequently Asked Questions
What is the overall financial performance of Flex Ltd. for the reported periods?
Flex Ltd. demonstrated strong top-line growth with net sales increasing by 4% and 3% for the three and six-month periods ended September 29, 2017, respectively. Gross profit also improved significantly due to higher sales and the absence of certain prior-year charges. Most notably, the company achieved substantial net income, a significant turnaround from the net loss reported in the comparable periods of the prior year.
Which business segments are driving the company's growth, and are there any areas of concern?
Growth is primarily driven by the Industrial & Emerging Industries (IEI) and High Reliability Solutions (HRS) segments, which saw increased sales. The Consumer Technologies Group (CTG) also experienced growth. However, the Communications & Enterprise Compute (CEC) segment experienced a decline in sales, mainly due to lower performance in its telecom and networking businesses, which is an area to monitor.
What significant non-operational events impacted the company's net income?
A major event was the deconsolidation of its investment in Elementum, which resulted in a significant non-cash gain of $151.6 million. This gain substantially boosted the company's net income for the period. Additionally, a gain of $38.7 million was recognized from the disposition of Wink.
How is the company managing its capital and shareholder returns?
Flex continues to actively manage its capital, evidenced by its share repurchase program. During the reported periods, the company repurchased a significant number of its ordinary shares. Additionally, it has a substantial amount of share repurchase authorization remaining, indicating a commitment to returning capital to shareholders.
06—Continue