earnings announcement: april 27, 2017 · •q4 fy17 was $34m •fy17 was $113m •fy18 quarterly...

Results for Q4 Fiscal 2017

Earnings Announcement: April 27, 2017

(Quarter Ending March 31, 2017)

1

Risks and Non-GAAP DisclosuresThis presentation contains forward-looking statements, which are based on current expectations and assumptions that are subject to risks and uncertainties and actual results could materially differ. Such information is subject to change and we undertake no obligation to update these forward-looking statements. For a discussion of the risks and uncertainties, see our most recent filings with the Securities and Exchange Commission, including our current, annual and quarterly reports.

Please refer to the appendix section of this presentation for current period reconciliation of the Non-GAAP financial measures to the most directly comparable GAAP measures.

If this presentation references historical non-GAAP financial measures, these measures are located on the “Investor Relations” section of our website, www.flex.com along with the required reconciliation to the most comparable GAAP financial measures.

The following business group acronyms will be used throughout this presentation:

Communications & Enterprise ComputeTelecom, Networking, Server & Storage, Storage & Security Appliance, Converged Infrastructure, Software Defined Product Solutions.

Consumer Technologies GroupWearables, Fashion, Connected Living, Gaming, Mobile, PCs/Printers.

Industrial & Emerging IndustriesSemiconductor & Capital Equipment, Office Solutions, Household Industrial & Lifestyle, Industrial Automation & Kiosks, Energy & Metering, Lighting.

HRS High Reliability SolutionsMedical: Consumer Health, Digital Health, Disposables, Drug Delivery, Diagnostics, Life Sciences & Imaging Equipment.Automotive: Vehicle Electronics, Connectivity, Clean Technologies.

IEI CEC CTG

http://www.flextronics.com/

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Q4 FY2017 Income Statement Highlights

Prior Yr Current Qtr

($M, except per share amounts) March 31, 2016 March 31, 2017

Net sales $5,773 $5,863

Adjusted operating income 200 205

Adjusted net income 161 156

Adjusted EPS $0.29 $0.29

GAAP income before income taxes 69 99

GAAP net income 61 87

GAAP EPS $0.11 $0.16

Q4 FY2017 Results vs. GuidanceNet sales of $5.9B at the high end of guidance $5.5 - $5.9B

Adjusted operating income of $205M above the mid-point of guidance $185 - $215M

Adjusted EPS of $0.29 at the mid-point of guidance $0.27 - $0.31

5,773 5,877 6,009 6,115 5,863

7.1%6.9% 6.9%

7.1% 7.1%

Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Adj. Gross Margin

Revenue & Adjusted Gross Margin($M)

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Quarterly Financial Highlights

22% 22%20% 20% 20%


Return on Invested Capital1

(ROIC %)

$0.29 $0.27 $0.28

$0.34

$0.29


Adjusted Earnings Per Share (EPS)

Adjusted Operating Income ($M)

3.5%3.2% 3.3%

3.6% 3.5%


Adj. Operating Margin

200190

197

223205

Q4 FY17Target Adjusted

Operating Margin Range

($M)

Rev$ OP$(adj.)

OP%(adj.)

$1,983 $53 2.7%Continued investments in cloud and data center while challenging demand environment persists

$1,535 $41 2.7%Operating solidly in target range while investing in new technologies and markets

$1,296 $53 4.1%Returned to target range on broad strength led by energy and capital equipment

$1,049 $84 8.0%Strong sustainable margins led by solid execution and continued Auto expansion

Corporate Services &

Other2-- ($26) --

Total $5,863 $205 3.5%

6

4

2

2.5

9

6

4

3.5

Operating Performance by Business Group

2.7%

2.7%

4.1%

8.0%

4

CEC

CTG

IEI

HRS

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Other Income Statement Comments

• Q4 FY17 was $34M

• FY17 was $113M

• FY18 quarterly outlook $30M - $35M

Interest & other expense, net

• Q4 FY17 was 8.7%

• FY17 was 8.8%

• Long-term effective tax rate range 10% - 15%

Adjusted

income tax rate

Reconciliation between GAAP and Adjusted EPS

Q4 aggregate impact on EPS $0.13

• Stock based compensation $15M or $0.03 in EPS

• Net intangible amortization $17M or $0.03 in EPS

• Restructuring and other charges $37M or $0.07 in EPS

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Strong Cash Flow Generation

Three Months Ended

Twelve Months Ended

($M)(Mar 31, 2017) (Mar 31, 2017)

GAAP net income $87 $320

Depreciation and amortization 126 514

Change in net working capital 10 184

Other operating cash flows, net (86) 132

Net cash provided by operating activities 137 1,150

Purchases of property & equipment, net (104) (490)

Free Cash Flow 33 660

Other investing and financing, net (50) (258)

Debt proceeds, net 81 171

Payments for share repurchases (90) (350)

Net change in cash and cash equivalents ($26) $223

1,789 1,796 1,851

1,626 1,611

7.7% 7.6% 7.7%

6.6% 6.9%


% Annualized Revenue

Net Working Capital3

($M)

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Balanced Capital Structure

Key Characteristics

• Solid liquidity• No significant near-term maturities

• Low cost of debt ~3.5%• Strong credit metrics (Debt / Adj. EBITDA (LTM): 2.4x)

Term Loan LIBOR + 137.5bps

$107 EURIBOR +69bps

Investment Grade Rating: Moody’s, S&P, Fitch

$1,831

$1,500

$503 $500 $700 $500 $600

Liquidity 2017 2018 2019 2020 2021 2022 2023 2024 2025

Significant Debt Maturities ($M) (Calendar Year)

Cash

Revolver

Total Liquidity$3,331

Term Loan LIBOR + 137.5bps

4.625% Notes

5% Notes 4.75% Notes$53 EURIBOR +100bps

322

475 416 420

350

FY13 FY14 FY15 FY16 FY17

6,597

7,063

8,017

8,580

9,117

FY13

FY14

FY15

FY16

FY17

31%

27%

28%

684 639 591 563 545 531

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Improving Profitability

Fiscal Year 2017 Business HighlightsPortfolio Evolution Driving Richer Mix

Consistent Shareholder Returns

HRS + IEI Revenue ($M)

Adj. Earnings Per Share(EPS)

Adj. Operating Margin (%)

Free Cash Flow4

($M)

Share Repurchases($M)

HRS + IEI as % Total Revenue

$0.84$0.89

$1.08$1.14 $1.17


2.6% 2.5%2.9%

3.2% 3.4%


680 701

554

639 660


shares outstanding

38%

35%

34%

22%18%

26%

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Revenue by Business Group

Communications & Enterprise ComputeTelecom, Networking, Server & Storage, Storage & Security Appliance, Converged Infrastructure, Software Defined Product Solutions.

Consumer Technologies GroupWearables, Fashion, Connected Living, Gaming, Mobile, PCs/Printers.

Industrial & Emerging IndustriesSemiconductor & Capital Equipment, Office Solutions, Household Industrial & Lifestyle, Industrial Automation & Kiosks, Energy & Metering, Lighting.

High Reliability SolutionsMedical: Consumer Health, Digital Health, Disposables, Drug Delivery, Diagnostics, Life Sciences & Imaging Equipment.Automotive: Vehicle Electronics, Connectivity, Clean Technologies.

Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17E($M) $ $ $ $ $ Q/Q % Y/Y % Outlook Y/Y %

CEC 2,201 2,196 2,102 2,102 1,983 (6%) (10%) Down 5% - 15%

CTG 1,364 1,314 1,665 1,849 1,535 (17%) 13% Up 5% - 15%

IEI 1,190 1,289 1,243 1,141 1,296 14% 9% Flat to up 5%

HRS 1,018 1,078 999 1,023 1,049 2% 3% Up 5% - 10%

Total $5,773 $5,877 $6,009 $6,115 $5,863 (4%) 2%

Q4 FY17

40%

HRS IEI

CTGCEC

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Q1 FY2018 Guidance – June 2017

GAAP Income Before Income Taxes $100 - $130 million

GAAP Earnings Per Share $0.16 - $0.20

Other Information:

Interest & Other Expense $30 - $35 million

Adjusted Income Tax Rate Low-end of 10% to 15% range

WASO 538 million shares

($M, except per share amounts)

$5,700 - $6,100Revenue

$170 - $200Adjusted Operating Income

$0.24 - $0.28Adjusted Earnings Per Share

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For more information, go to investors.flex.com

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Appendix: Reconciliation of GAAP to Non-GAAP Measures

Quarter-endedMarch 31, 2017

($Thousands, except debt to EBITDA ratio) GAAP Adjustments Non-GAAP

Pretax income $98,941 $72,171 $171,112

Depreciation 106,990 -- 106,990

Amortization 19,078 (19,078) --

Interest, net 24,471 6,827 31,298

EBITDA 249,480 59,920 309,400

EBITDA – rolling 4 qtrs. 980,377 273,452 1,253,829

Total Debt $2,952,143 -- $2,952,143

Debt to EBITDA 3.0x (0.7x) 2.4x


ROIC %

GAAP 13.9%Non-GAAP Adjustments 6.2%

Non-GAAP 20.1%

Return on Invested Capital (ROIC) is calculated by dividing the Company's last twelve months after-tax Non-GAAP operating income by the net invested capital asset base as of each date. Please refer to the Investor Relations section of our website for full reconciliation of last twelve months after tax Non-GAAP operating income to the most directly comparable GAAP financial measure. The net invested capital asset base is defined as the sum of shareholders' equity plus debt less cash and cash equivalents averaged over the last five quarters.

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Debt/EBITDA are non-GAAP financial measures. EBITDA is derived by adjusting for net interest and adding back depreciation to non-GAAP pretax income. Quarterly Debt to EBITDA is calculated by dividing the Company's total debt as of the date presented by LTM EBITDA. Non-GAAP pretax income excludes certain amounts that are included in the most directly comparable measures under GAAP including stock-based compensation expense, restructuring charges, intangible amortization and certain other charges. Additionally, non-GAAP interest includes the loss on the sale of accounts receivable under our global AR securitization and factoring programs.


($Thousands, except per share amounts)

GAAP gross profit $384,804

Stock-based compensation expense 2,517

Restructuring and other 31,735

Non-GAAP gross profit $419,056

GAAP income before income taxes $98,941



Intangible amortization 19,078

Interests and other, net 27,663

Other charges, net 6,186

Non-GAAP operating income $204,962

GAAP provision for income taxes $12,067

Intangible amortization benefits 1,725

Tax benefit on restructuring and other 1,132

Non-GAAP provision for income taxes $14,924

GAAP net income $86,874



Intangible amortization 19,078

Adjustments for taxes (2,857)

Non-GAAP net income $156,189

Diluted EPS

GAAP EPS $0.16

Non-GAAP EPS $0.29

For more details on the GAAP to Non-GAAP adjustments for current and historical periods, please refer to the Investor Relations section of our website which includes press releases and summary financials of the respective periods.

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Appendix: Definitions

1. Return on Invested Capital (ROIC) is calculated by dividing the Company's last twelve months after-tax Non-GAAP operating income by the net invested capital asset base as of each date. After-tax non-GAAP operating income excludes charges for stock-based compensation expense, restructuring expense and certain other charges or income. The net invested capital asset base is defined as the sum of shareholders' equity plus total debt less cash and cash equivalents averaged over the last five quarters. We believe ROIC is a useful measure in providing investors with information regarding our performance. ROIC is a widely accepted measure of earnings efficiency in relation to total capital employed. We believe that increasing the return on total capital employed, as measured by ROIC, is an effective method to sustain and increase shareholder value. ROIC is not a measure of financial performance under generally accepted accounting principles in the U.S., and may not be defined and calculated by other companies in the same manner. ROIC should not be considered in isolation or as an alternative to net income or loss as an indicator of performance. Please refer to the Investor Relations section of our website for full reconciliation of last twelve months after tax Non-GAAP operating income to the most directly comparable GAAP financial measure.

2. Corporate services and other: corporate service costs that are not included in the assessment of the performance of each of the identified business groups.

3. Net Working Capital is calculated as accounts receivable (AR), net adding back the reduction in AR resulting from the non-cash AR sales plus inventories less accounts payable.

4. Free cash flow is calculated as cash from operations less net purchases of property and equipment.

earnings announcement: april 27, 2017 · •q4 fy17 was $34m •fy17 was $113m •fy18 quarterly...

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