01—Abstract
Summary
Summary of the 10-Q filed July 30, 2021. Cited figures are marked; the original filing is the authoritative source.
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 billiona.
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 millionb in cash from operations, a substantial improvement from the prior year's usage of $629 million.
The company also repurchased $162 millionc 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.
02—Key points
Key Highlights
- Net sales surged 21% year-over-year to $6.3 billion, driven by robust performance in both FAS and FRS segments.
- Gross profit margin improved to 7.4% from 5.9% in the prior year period, indicating better pricing and cost management.
- Operating cash flow significantly improved, turning positive at $334 million compared to a $629 million outflow in the previous year.
- The company repurchased $162.2 million of its ordinary shares, demonstrating a commitment to shareholder returns.
- Despite ongoing component shortages, particularly impacting the Automotive business within FRS, overall segment profitability increased.
- Flex Agility Solutions (FAS) saw strong growth in Consumer Devices and Lifestyle end markets, contributing to an 18% increase in segment sales.
- Flex Reliability Solutions (FRS) experienced a 30% sales increase, largely due to a significant recovery in the Automotive business.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2022, Flex Ltd. kept $0.03.
- Revenue$6.34B100.0%
- Cost of revenue−$5.87B92.6%
- Gross profit$471.0M7.4%
- Operating costs−$216.0M3.4%
- Operating income$255.0M4.0%
- Interest, other & tax−$49.0M0.8%
- Net income$206.0M3.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2022filed July 30, 2021Financial Statements
Q2 FY2022 against Q2 FY2021
| Line item | Q2 FY2022Q2 FY2021 | Change |
|---|---|---|
| Revenue | $6.34B$5.99B | +6.0% |
| Cost of Revenue | $5.87B$5.57B | +5.5% |
| Gross Profit | $471.00M$395.00M | +19.2% |
| SG&A Expenses | $201.00M$193.00M | +4.1% |
| Operating Income | $255.00M$175.00M | +45.7% |
| Interest Expense | $39.00M$38.00M | +2.6% |
| Net Income | $206.00M$113.00M | +82.3% |
| EPS (Basic) | $0.42$0.23 | +82.6% |
| EPS (Diluted) | $0.41$0.22 | +86.4% |
| Shares Outstanding (Basic) | 491.00M501.00M | −2.0% |
| Shares Outstanding (Diluted) | 499.00M504.00M | −1.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of Flex Ltd.'s revenue growth in the first quarter of fiscal year 2022?
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.
How did the company's profitability change compared to the previous year?
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.
What is the company's cash flow situation and what actions are being taken regarding cash management?
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.
What are the main challenges or risks facing Flex Ltd. currently?
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.
06—Continue