10-QPeriod: Q3 FY2022

FLEX LTD. Quarterly Report for Q3 Ended Oct 1, 2021

Filed October 29, 2021For Securities:FLEX

Summary

Flex Ltd. reported a solid financial performance for the second quarter and first half of fiscal year 2022, ending October 1, 2021. Net sales increased by 4% to $6.2 billion for the quarter and by 13% to $12.6 billion for the six-month period compared to the prior year. This growth was driven by strong performance in both the Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS) segments, with notable strength in Lifestyle, Consumer Devices, Industrial, and Automotive end markets. Profitability saw significant improvement, with gross profit increasing and gross margin expanding to 7.5% for the quarter and 7.4% for the six-month period, up from 6.6% and 6.3% respectively. Operating income also showed a substantial increase. A key contributor to the improved "Interest and other, net" line item was a $149 million gain related to a Brazilian tax credit. The company also continued its share repurchase program, demonstrating a commitment to returning value to shareholders.

Financial Highlights

51 data points
Beta

Revenue

$6.62B

7.4% Gross Margin

Net Income

$227.00M

3.4% Net Margin

EPS (Diluted)

$0.48

Total Assets

$18.18B

Cash & Equivalents

$2.57B

Free Cash Flow

$115.00M

Financial Statements
Beta
Revenue$6.62B
Cost of Revenue$6.13B
Gross Profit$491.00M
SG&A Expenses$225.00M
Operating Income$251.00M
Interest Expense$38.00M
Net Income$227.00M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)469.00M
Shares Outstanding (Diluted)474.00M

Key Highlights

  • 1Net sales increased by 4% to $6.2 billion for the three months ended October 1, 2021, and by 13% to $12.6 billion for the six months ended October 1, 2021, compared to the prior year periods.
  • 2Gross profit margin improved to 7.5% for the quarter and 7.4% for the six-month period, up from 6.6% and 6.3% respectively in the prior year.
  • 3Strong segment performance, with Flex Agility Solutions (FAS) net sales up 4% (quarterly) and 10% (year-to-date), and Flex Reliability Solutions (FRS) net sales up 5% (quarterly) and 16% (year-to-date).
  • 4Recognized a $149 million gain from a Brazilian tax credit, significantly boosting the 'Interest and other, net' line item.
  • 5Total shareholders' equity increased to $3,514 million as of October 1, 2021, from $3,436 million as of March 31, 2021.
  • 6The company repurchased approximately $328 million of its ordinary shares during the three-month period and $490 million during the six-month period ended October 1, 2021.
  • 7Continued focus on supply chain management amidst global component shortages and logistical constraints, with increased inventory levels and working capital pressure.

Frequently Asked Questions

Revenue growth was primarily driven by strong demand in the Lifestyle and Consumer Devices businesses within the Flex Agility Solutions (FAS) segment, and robust performance in the Industrial and Automotive businesses within the Flex Reliability Solutions (FRS) segment. New product ramps, customer expansions, and recovery in consumer spending also contributed to the increase.

The company continued to experience impacts from component shortages and logistical constraints, leading to increased inventory levels and working capital pressure. While these factors presented headwinds, the company saw improved fixed cost absorption and better overall business mix, which helped to offset some of the negative impacts and improve gross margins compared to the prior year.

Flex recognized a $149 million gain in 'Interest and other, net' related to the approval of a 'Credit Habilitation' request by Brazilian tax authorities. This gain is non-cash and will be used to offset certain current and future tax obligations, significantly boosting the period's net income.

Flex is continuing to evaluate alternatives for its Nextracker business, which may include a separation through an initial public offering (IPO), sale, spin-off, or other transaction. A draft registration statement for a potential IPO was confidentially submitted to the SEC.