10-QPeriod: Q3 FY2021

FLEX LTD. Quarterly Report for Q3 Ended Dec 31, 2020

Filed January 29, 2021For Securities:FLEX

Summary

Flex Ltd. reported a solid third quarter for fiscal year 2021, with net sales reaching $6.72 billion, a 4% increase year-over-year. This growth was primarily driven by the Flex Agility Solutions (FAS) segment, which saw a 5.6% increase in net sales, benefiting from strong performance in Lifestyle and Consumer Devices. The Flex Reliability Solutions (FRS) segment also contributed with a 2.0% increase, bolstered by demand in Health Solutions and Automotive. For the nine-month period, net sales were $17.86 billion, a 5% decrease compared to the prior year, largely due to a significant drop in the Consumer Devices business within FAS, impacted by COVID-19 and strategic shifts. However, the FRS segment demonstrated resilience with a 2.4% increase, driven by Health Solutions and Industrial businesses. The company's gross profit margin improved by 50 basis points year-over-year for the quarter, reaching 7.2%, and by 130 basis points for the nine-month period, reaching 6.5%. This improvement reflects effective cost management and operational efficiencies, particularly in FAS. Despite ongoing challenges from COVID-19 and component shortages, Flex maintains adequate liquidity and is strategically repositioning its business segments for future growth.

Financial Highlights

51 data points
Beta

Revenue

$6.72B

7.1% Gross Margin

Net Income

$208.00M

3.1% Net Margin

EPS (Diluted)

$0.41

Total Assets

$15.67B

Cash & Equivalents

$2.61B

Free Cash Flow

$272.00M

Financial Statements
Beta
Revenue$6.72B
Cost of Revenue$6.24B
Gross Profit$479.00M
SG&A Expenses$223.00M
Operating Income$240.00M
Interest Expense$40.00M
Net Income$208.00M
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)500.00M
Shares Outstanding (Diluted)508.00M

Key Highlights

  • 1Net sales for the three months ended December 31, 2020, increased by 4% to $6.72 billion compared to the prior year.
  • 2The Flex Agility Solutions (FAS) segment showed a 5.6% increase in net sales for the quarter, driven by strong performance in Lifestyle and Consumer Devices.
  • 3Gross profit margin improved to 7.2% for the quarter and 6.5% for the nine-month period, indicating effective cost management and operational efficiencies.
  • 4The company reported a net income of $208 million for the three-month period, a significant increase from $111 million in the prior year, and diluted EPS of $0.41.
  • 5For the nine-month period, net sales decreased by 5% to $17.86 billion, primarily due to declines in the Consumer Devices business within FAS.
  • 6Flex is strategically realigning its business into two reportable segments: Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS).
  • 7The company maintained a strong liquidity position with $2.6 billion in cash and cash equivalents as of December 31, 2020.

Frequently Asked Questions

Flex Ltd. reported a net sales of $6.72 billion for the three months ended December 31, 2020, representing a 4% increase compared to the same period in the prior year. Net income was $208 million, resulting in diluted earnings per share of $0.41. This performance was driven by growth in both the Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS) segments, along with improved gross margins.

The company reorganized into two segments: Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS). For the quarter, FAS net sales increased by 5.6% and FRS net sales increased by 2.0%. This segmental reporting provides a clearer view of performance within different end markets. Gross margins improved in FAS due to strong demand in specific markets and operational efficiencies.

Flex acknowledges that COVID-19 has materially impacted its business, including factory disruptions and increased operational costs, with over $140 million in costs incurred for the nine-month period. While demand has improved, component shortages, particularly in semiconductors, are expected to persist. The company is actively managing these challenges through supply chain collaboration and operational adjustments.

Flex reported $3.8 billion in borrowings and $2.6 billion in cash and cash equivalents as of December 31, 2020. The company repaid a $433 million term loan and issued new notes, strengthening its debt maturity profile. They also entered into a new $2.0 billion revolving credit facility in January 2021, replacing the previous one, demonstrating proactive management of liquidity and capital resources.