flextronics q4fy15 earnings release slides
TRANSCRIPT
Results for Q4 FY2015 & Fiscal 2015 (Ending March 31, 2015)
Earnings Announcement: April 29, 2015
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This 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.
If this presentation references non-GAAP financial measures, these measures are
located on the “Investor Relations” section of our website, www.flextronics.com along
with the required reconciliation to the most comparable GAAP financial measures.
Risks and Non-GAAP Disclosures
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Q4 FY2015 Income Statement Highlights
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
Prior Yr Prior Qtr Current Qtr
March 31, December 31, March 31,
($ in millions, except per share amounts) 2014 2014 2015
Net sales $6,724 $7,025 $5,952
Adjusted operating income 182 207 178
Adjusted net income 146 175 157
Adjusted EPS $0.24 $0.30 $0.27
GAAP operating income 137 193 164
GAAP net income 43 153 135
GAAP EPS $0.07 $0.26 $0.23
Q4 FY2015 Results vs. Guidance:
Net sales of $6.0B vs. $6.0 - $6.4B
Adjusted operating income of $178M at mid-point of $165 - $190M
Adjusted EPS of $0.27 at high-end of $0.23 - $0.27
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1,505
1,553
FY 2014 FY 2015
26,109 26,148
FY 2014 FY 2015
$0.89
$1.08
FY 2014 FY 2015
665
751
FY 2014 FY 2015
FY 2015 Income Statement Highlights
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
Adjusted Gross Profit($ in millions)
Revenue($ in millions)
Adjusted Earnings Per Share (EPS)
Adjusted Operating Income ($ in millions)
+13%
+3%
+0.2%
+21%
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Trended Quarterly Financial Highlights
Return on Invested Capital(ROIC %)
22.1%
22.8%23.3%
24.1%23.7%
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
$0.24 $0.25
$0.26
$0.30
$0.27
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
Adjusted Earnings Per Share (EPS)
6,724 6,643 6,529 7,025 5,952
5.8% 5.8% 5.8% 5.8%6.4%
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
Adj. Gross Margin
Adjusted Operating Income ($ in millions)
182 183 183207
178
2.7% 2.8% 2.8%2.9% 3.0%
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
% Revenue
Revenue & Adjusted Gross Margin($ in millions)
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Other Q4 Income Statement Highlights
• Income of $0.5M from:
• $6M foreign exchange gains
• $12M other income primarily due to gain on
sale of investment
• Outlook: quarterly estimate of ~$20M
• Q4 FY15 was 12%
• FY15 was 10%
• Outlook: 8-10% range
Interest & other
expense, net
Adjusted
income tax rate
• Intangible amortization $9M
• Stock based compensation $13M
• Aggregate impact on EPS $0.04
Reconciliation between
GAAP and Adj EPS
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Three Months
Ended
Twelve Months
Ended
($ in millions) Mar-15 Mar-15
GAAP net income $135 $601
Depreciation and amortization 133 528
Change in net working capital (72) 83
Other operating cash flows, net (72) (418)
Net cash provided by operating activities 124 794
Purchases of property & equipment, net (75) (240)
Free Cash Flow 49 554
Payments for share repurchases (125) (416)
Payments for borrowings and other (3) (103)
Net change in cash and cash equivalents ($79) $35
Cash Flows, Net Working Capital & Share Repurchases
Consistently Returning Over 50% of Annual Free Cash Flow to Shareholders
2,020 2,126
1,886 1,834 1,866
7.5%8.0%
7.2%6.5%
7.8%
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
% Annualized Revenue
Net Working Capital($ in millions)
400
510
322
475 416
757 684
639 591 563
FY11 FY12 FY13 FY14 FY15
Shares Outstanding
Share Repurchases($ in millions)
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Balanced Capital Structure
$1,628
$1,500
$593 $475 $500 $500
Liquidity 2015 2016 2017 2018 2019 2020 2021 2022 2023
Debt Maturities ($M) (Calendar Year)
Cash
Revolver
Total
Liquidity
$3,128
Key characteristics:
No near-term
maturities
Low financing cost
of ~3% at current
LIBOR rates
Strong liquidityExcellent credit
metricsDebt / EBITDA (LTM): 1.6x
Term Loans LIBOR + 150 to 162.5bps
4.625% Notes 5% Notes
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Fiscal Year 2015 Highlights
Consistent
Shareholder Return
Record
Adjusted EPS
Strong Sustainable
Free Cash Flow
Record level at $1.08, up 21% from $0.89 a year ago
Generated $554 million in free cash flow, bringing three year
cumulative free cash flow to nearly $2 billion
8 consecutive quarters of adjusted operating margin expansion,
enabling 13% year over year growth in adjusted operating profit
Repurchased 39 million shares for $416 million in fiscal 2015,
or 75% of free cash flow, and 297 million shares for $2.1 billion
over the past five fiscal years, reducing net shares outstanding
by 31%
Continuous
Improvement
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About Mirror Controls International (MCi)• Global leader in exterior mirror motion controls
• Highly automated production in China, Mexico, and Europe
• Global supplier to all top 10 OEMs
• LTM Revenue of €200M (~$216M USD1), which grew 20%
Compelling Strategic Rationale• Greatly enhances our automotive capabilities
• Complements existing motion control business (sunroof, sliding door, power liftgates)
• Strong IP and established OEM customer relationships
• Potential to expand into adjacent markets, both automotive and non-automotive
• High barrier to entry (45 years of experience)
Transaction Summary• All cash deal valued at €457M (~$494M USD1)
• Enhances operating margin profile, EPS and operating income accretive for FY16• Free cash flow positive
• Deal expected to close in the September quarter (Q2FY16)2
1 Based on exchange rate of Euro/USD $1.082 Completion of the transaction is subject to customary closing conditions, including regulatory approvals
Tremendous people, technology, and capabilities complement the Flextronics platform
Acquisition Meets Our Strategic and Financial Objectives
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35%
19%15%
31%
HRSIEI
CTG INS
Mar
2015
34%
($ in millions) Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 June-15E
Business Group $ $ $ $ $ Q/Q % Y/Y % Outlook (Q/Q)
INS $2,346 $2,440 $2,341 $2,358 $2,052 -13% -13% Up low single digit
CTG 2,510 2,222 2,210 2,647 1,861 -30% -26% Down mid single digit
IEI 1,021 1,125 1,097 1,106 1,132 2% 11% Up low single digit
HRS 847 856 881 914 907 -1% 7% Down low single digit
Total Revenue $6,724 $6,643 $6,529 $7,025 $5,952 -15% -11%
Revenue by Business Group
Certain prior quarter amounts have been recast to conform to current year presentation
Integrated Network Solutions(Telecom, Datacom, Server & Storage,
Converged Infrastructure)
Consumer Technology Group(Mobile, Consumer, Computing, Wearables,
Connected Living)
Industrial & Emerging Industries(Semiconductor & Capital Equipment, Office
Solutions & Industrial Automation, Test &
Measurement, Appliance & Lifestyle, Energy &
Metering, Lighting)
High Reliability Solutions(Automotive, Medical, Aerospace & Defense)
35%
15%13%
37% Mar
2014
28%
HRS IEI
CTG INS
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Q1 FY2016 Guidance
Other Information:
Adjusted SG&A Expense ~$203 +/- $5 million
Interest & Other Expense ~$20 million
Adjusted Income Tax Rate 8-10% range
GAAP EPS $0.16 - $0.22
WASO 580 million shares
($ in millions, except per share amounts)
Adjusted operating income excludes approximately $15 million for stock based compensation, of which approximately $13 million is excluded from adjusted SG&A.
GAAP EPS reflects approximately $0.04 for intangible amortization and stock-based compensation expense.
$5,600 - $6,200Revenue
$150 - $190Adjusted Operating Income
$0.20 - $0.26Adjusted Earnings Per Share
THANK YOU
For more information:
investors.flextronics.com
Appendix
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Revenue by Business Group FY13 to FY15
Certain prior quarter amounts have been recast to conform to current year presentation
($ in milions) $ $ $ $ $ % Total
INS $2,613 $2,530 $2,498 $2,295 $9,935 42%
CTG 1,695 1,990 2,013 1,339 7,037 30%
IEI 988 984 909 882 3,763 16%
HRS 681 671 703 780 2,835 12%
Total Revenue 5,976 6,175 6,123 5,295 23,569
($ in milions) $ $ $ $ $ % Total
INS $2,377 $2,461 $2,505 $2,346 $9,688 37%
CTG 1,702 2,224 2,922 2,510 9,358 36%
IEI 903 937 926 1,021 3,788 15%
HRS 809 788 830 847 3,275 13%
Total Revenue 5,791 6,410 7,183 6,724 26,109
($ in milions) $ $ $ $ $ % Total
INS $2,440 $2,341 $2,358 $2,052 $9,191 35%
CTG 2,222 2,210 2,647 1,861 8,940 34%
IEI 1,125 1,097 1,106 1,132 4,459 17%
HRS 856 881 914 907 3,557 14%
Total Revenue 6,643 6,529 7,025 5,952 26,148
Q1'15 Q2'15 Q3'15 Q4'15 FY'15
Q1'14 Q2'14 Q3'14 Q4'14 FY'14
Q1'13 Q2'13 Q3'13 Q4'13 FY'13