10-QPeriod: Q2 FY2022

FLEX LTD. Quarterly Report for Q2 Ended Jul 2, 2021

Filed July 30, 2021For Securities:FLEX

Summary

Flex Ltd. reported strong revenue growth for the first quarter of fiscal year 2022, with net sales increasing by 21% year-over-year to $6.3 billion. This growth was driven by significant increases in both the Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS) segments, up 18% and 30% respectively. The company experienced improved gross profit margins, reaching 7.4% compared to 5.9% in the prior year period, attributed to higher demand, better cost absorption, and a favorable business mix, despite ongoing component shortages and logistics challenges. Financially, the company generated $334 million in cash from operations, a substantial improvement from the prior year's usage of $629 million. The company also repurchased $162 million of its ordinary shares during the quarter. While facing persistent challenges like component shortages impacting the automotive sector and ongoing COVID-19 related operational disruptions, Flex demonstrated resilience and improved profitability, signaling a positive operational trajectory.

Financial Highlights

50 data points
Beta

Revenue

$6.34B

7.4% Gross Margin

Net Income

$206.00M

3.2% Net Margin

EPS (Diluted)

$0.41

Total Assets

$16.19B

Cash & Equivalents

$2.69B

Free Cash Flow

$216.00M

Financial Statements
Beta
Revenue$6.34B
Cost of Revenue$5.87B
Gross Profit$471.00M
SG&A Expenses$201.00M
Operating Income$255.00M
Interest Expense$39.00M
Net Income$206.00M
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)491.00M
Shares Outstanding (Diluted)499.00M

Key Highlights

  • 1Net sales surged 21% year-over-year to $6.3 billion, driven by robust performance in both FAS and FRS segments.
  • 2Gross profit margin improved to 7.4% from 5.9% in the prior year period, indicating better pricing and cost management.
  • 3Operating cash flow significantly improved, turning positive at $334 million compared to a $629 million outflow in the previous year.
  • 4The company repurchased $162.2 million of its ordinary shares, demonstrating a commitment to shareholder returns.
  • 5Despite ongoing component shortages, particularly impacting the Automotive business within FRS, overall segment profitability increased.
  • 6Flex Agility Solutions (FAS) saw strong growth in Consumer Devices and Lifestyle end markets, contributing to an 18% increase in segment sales.
  • 7Flex Reliability Solutions (FRS) experienced a 30% sales increase, largely due to a significant recovery in the Automotive business.

Frequently Asked Questions

The primary driver of Flex Ltd.'s revenue growth was a significant increase in net sales across both its Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS) segments. FAS sales grew 18%, supported by strong performance in Consumer Devices and Lifestyle, while FRS sales increased by 30%, largely due to a recovery in the Automotive business and continued demand in Industrial sectors.

Flex Ltd. saw a notable improvement in profitability. Gross profit margin increased to 7.4% from 5.9% in the prior year's comparable period. This was driven by stronger overall demand leading to better fixed cost absorption, a more favorable business mix, and improved efficiencies, despite facing challenges like component shortages and elevated logistics costs.

The company's cash flow from operations improved dramatically, generating $334 million compared to an outflow of $629 million in the prior year. Flex also actively managed its capital structure and repurchased $162.2 million of its ordinary shares during the quarter. The company believes its current financial condition, including cash and cash equivalents of $2.7 billion, and available credit facilities, are adequate to fund its operations and future commitments.

Key challenges include persistent component shortages, particularly impacting the automotive sector, and ongoing supply chain disruptions exacerbated by the COVID-19 pandemic. The company also faces risks related to global economic uncertainty, potential plant closures or operational restrictions due to COVID-19 waves, and potential legal and regulatory proceedings.