01—Abstract
Summary
Summary of the 10-Q filed February 6, 2019. Cited figures are marked; the original filing is the authoritative source.
Flex Ltd. reported revenue of $6.94 billiona for the three-month period ended December 31, 2018, a 3% increase year-over-year, and $20.08 billion for the nine-month period, a 6% increase year-over-year.
The company experienced a net loss of $45.17 millionb in the third quarter of fiscal year 2019, compared to a net income of $118.33 million in the prior year's comparable quarter. This decline was primarily driven by significant restructuring charges ($60.4 million) and a substantial impairment charge on an investment ($70.1 million). Despite the quarterly loss, the company saw revenue growth across its Communications & Enterprise Compute (CEC) and Industrial & Emerging Industries (IEI) segments, driven by cloud and data center solutions, 5G infrastructure, and new industrial programs.
However, the Consumer Technologies Group (CTG) and High Reliability Solutions (HRS) segments saw revenue declines. The company also noted a change in its cash flow reporting due to the adoption of ASU 2016-15, reclassifying significant receivables from operating to investing activities, which impacted the presentation of cash from operations. The company continues to navigate a challenging market environment and is undertaking strategic actions to optimize its portfolio and improve profitability.
02—Key points
Key Highlights
- Net sales increased by 3% to $6.94 billion for the three months ended December 31, 2018, and by 6% to $20.08 billion for the nine months ended December 31, 2018.
- The company reported a net loss of $45.17 million for the three months ended December 31, 2018, a significant drop from a net income of $118.33 million in the prior year's quarter.
- Restructuring charges of $60.4 million and an investment impairment charge of $70.1 million were significant contributors to the quarterly loss.
- Revenue growth was observed in the Communications & Enterprise Compute (CEC) and Industrial & Emerging Industries (IEI) segments, while Consumer Technologies Group (CTG) and High Reliability Solutions (HRS) experienced declines.
- The adoption of ASU 2016-15 led to a reclassification of cash collections on deferred purchase price from operating activities to investing activities.
- The company completed the wind-down of its NIKE operations in Mexico and is strategically managing underperforming accounts.
- As of December 31, 2018, the company had $1.5 billion in cash and cash equivalents and approximately $2.9 billion in bank and other borrowings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed February 6, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $6.92B$6.75B | +2.5% |
| Cost of Revenue | $6.51B$6.31B | +3.2% |
| Gross Profit | $357.32M$446.33M | −19.9% |
| SG&A Expenses | $237.56M$247.37M | −4.0% |
| Interest Expense | $38.83M$32.10M | +21.0% |
| Net Income | -$45.17M$118.33M | −138.2% |
| EPS (Basic) | $-0.09$0.22 | −140.9% |
| EPS (Diluted) | $-0.09$0.22 | −140.9% |
| Shares Outstanding (Basic) | 524.88M528.40M | −0.7% |
| Shares Outstanding (Diluted) | 524.88M534.35M | −1.8% |
05—Questions
Frequently Asked Questions
What is the primary reason for the net loss in the most recent quarter?
The net loss of $45.17 million for the three months ended December 31, 2018, was primarily due to significant restructuring charges totaling $60.4 million and a $70.1 million impairment charge on an investment in an unrelated third-party venture-backed company. These one-time or significant charges weighed heavily on the quarter's profitability.
How did the company's revenue performance vary across its business segments?
Revenue saw growth in the Communications & Enterprise Compute (CEC) segment, driven by cloud and data center solutions and 5G infrastructure, and in the Industrial & Emerging Industries (IEI) segment due to new industrial and home/lifestyle programs. However, the Consumer Technologies Group (CTG) and High Reliability Solutions (HRS) segments experienced revenue declines, with CTG impacted by underperforming legacy consumer businesses and HRS facing softness in automotive.
Has there been any change in how the company reports its cash flows from operations?
Yes, due to the adoption of ASU 2016-15, the company now classifies cash collections on deferred purchase price from its asset-backed securitization programs as cash flows from investing activities, whereas they were previously classified as operating activities. This change impacts the reported figures for net cash used in operating activities.
What is the company doing to address profitability and optimize its business portfolio?
Flex is undertaking several strategic actions, including managing underperforming accounts, particularly within the Consumer Technologies Group (CTG), and completing the wind-down of operations like its NIKE business in Mexico. The company is also focusing on growth areas like CEC and IEI and investing in higher-margin businesses. The adoption of new accounting standards and internal control remediation efforts are also ongoing.
06—Continue