FLEX REPORTS THIRD QUARTER FISCAL 2024 RESULTS
- Strong third-quarter fiscal year 2024 results with net sales of $7.1 billion
- CEO emphasized strong execution and market positioning
- Fourth-quarter and fiscal year 2024 guidance provided
- Completion of the spin-off of remaining interest in Nextracker to Flex shareholders
- None.
Insights
The disclosed financial results of Flex reveal a robust performance in the third quarter, with net sales reaching $7.1 billion and adjusted net income at $309 million. These figures are critical indicators of the company's profitability and operational efficiency. The differentiation between GAAP and non-GAAP measures, such as adjusted operating income and earnings per share, provides a clearer picture of the company's earnings by excluding one-time charges and non-cash expenses like stock-based compensation, which can distort the true economic performance.
Moreover, the updated fiscal year 2024 guidance, which projects revenues between $27.7 billion to $28.3 billion, suggests that Flex is anticipating continued growth. However, the exclusion of Nextracker's financials in the fourth quarter, due to the spin-off, will likely lead to a revised revenue forecast for Core Flex between $26.0 billion to $26.6 billion. This strategic move could indicate a sharpened focus on Flex's core business segments post-spin-off, potentially unlocking shareholder value and allowing for a more straightforward valuation of Flex's business.
Flex's strategic decision to spin off Nextracker and provide separate guidance for Core Flex suggests a significant shift in the company's business structure. This move could be interpreted as a pursuit of strategic focus and operational agility. Investors and analysts often favor such corporate actions as they can lead to enhanced market performance and investor returns. By becoming an independent entity, Nextracker's performance will no longer be intertwined with Flex's results, which might appeal to investors seeking pure-play investment opportunities.
The market will also closely monitor the discontinued operations reporting for Nextracker, which could provide insights into the historical contribution of Nextracker to Flex's financials and the potential impact of the spin-off on future profitability. The ability of Flex's management to execute this transition smoothly will be critical to maintaining investor confidence and could influence stock performance in the near term.
The completion of the spin-off of Nextracker is not only a strategic decision but also a complex legal process that involves the distribution of Nextracker shares to Flex shareholders. The legal intricacies of such a transaction include ensuring compliance with SEC regulations and fair treatment of shareholders, particularly concerning the receipt of cash in lieu of fractional shares. This action demonstrates Flex's commitment to corporate governance and equitable shareholder practices.
It is also important to note that following the spin-off, Flex will no longer consolidate Nextracker's financials, which will lead to a change in Flex's financial reporting. The historical results of Nextracker will be classified as discontinued operations in Flex's consolidated financial statements, which is a standard accounting practice for divested businesses. This reclassification will provide transparency and help investors evaluate the ongoing performance of Flex's core operations separate from its former subsidiary.
Third Quarter Fiscal Year 2024 Highlights:
- Net Sales:
$7.1 billion - GAAP Operating Income:
$348 million - Adjusted Operating Income:
$477 million - GAAP Net Income attributable to Flex Ltd:
$197 million - Adjusted Net Income attributable to Flex Ltd:
$309 million - GAAP Earnings Per Share:
$0.45 - Adjusted Earnings Per Share:
$0.71
An explanation and reconciliation of non-GAAP financial measures to GAAP financial measures is presented in Schedules II and V attached to this press release.
"Overall, fiscal Q3 was another quarter of strong execution," said Revathi Advaithi, CEO of Flex. "We continue to deliver on our commitments, and we are very well positioned in markets with strong, long-term secular drivers."
Fourth Quarter Fiscal 2024 Guidance
Fourth quarter FY24 guidance excludes Flex's
- Revenue:
to$5.8 billion $6.4 billion - GAAP Operating Income:
to$252 million $302 million - Adjusted Operating Income:
to$305 million $355 million - GAAP EPS:
to$0.38 .$0.48 - Adjusted EPS:
to$0.50 which excludes$0.60 for stock-based compensation expense,$0.07 for net intangible amortization, and$0.03 for net restructuring charges.$0.02
Fiscal Year 2024 Guidance Updated - Total Flex
Fiscal year 2024 guidance includes Flex's economic interest in Nextracker for Q1 through Q3 FY24, and excludes it from Q4 FY24, which reflects the January 2, 2024 spin-off of all of Flex's remaining interest in Nextracker.
- Revenue:
to$27.7 billion $28.3 billion - GAAP EPS:
to$1.77 $1.87 - Adjusted EPS:
to$2.47 which excludes$2.57 for stock-based compensation expense,$0.35 for net restructuring charges and$0.24 for net intangible amortization, offset by ($0.13 ) for tax, noncontrolling interest share of subsidiary's non-GAAP adjustments and other, compared to GAAP earnings per share.$0.02
In addition, we are providing fiscal year 2024 guidance for Core Flex to provide further transparency in our core business trends. Core Flex represents Flex, excluding Flex's economic interest in Nextracker for the entire FY2024. Core Flex is a non-GAAP measure that does not reflect discontinued operations presentation under GAAP.
Fiscal Year 2024 Guidance – Core Flex
- Revenue:
to$26.0 billion $26.6 billion - GAAP EPS:
to$1.42 $1.52 - Adjusted EPS:
to$2.07 which excludes$2.17 for stock-based compensation expense,$0.26 for net restructuring charges,$0.24 for net intangible amortization and$0.13 for other compared to GAAP earnings per share.$0.02
Completed Spin-off of remaining interest in Nextracker to Flex Shareholders
As previously announced, on January 2, 2024, Flex completed the spin-off of all of its remaining interest in Nextracker Inc. ("Nextracker") to Flex shareholders on a pro rata basis based on the number ordinary shares of Flex held by each shareholder of Flex (the "Distribution") as of December 29, 2023, which was the record date of the Distribution. Under the previously disclosed terms of the transaction, Flex shareholders received approximately 0.17 shares of Nextracker Class A common stock for every Flex ordinary share held as of the record date of the Distribution. Flex shareholders received cash in lieu of any fractional shares.
As a result of the completion of the spin-off, Nextracker became a fully independent public company, Flex no longer directly or indirectly holds any shares of Nextracker common stock or any securities convertible into or exchangeable for shares of Nextracker common stock and Flex will no longer consolidate Nextracker into its financial results. Following the spin-off, Flex ordinary shares continue to trade on Nasdaq under the ticker symbol "FLEX" and shares of Nextracker Class A common stock continue to trade on Nasdaq under the ticker symbol "NXT".
The historical results of Nextracker and certain assets and liabilities included in the spin-off will be reported in Flex's consolidated financial statements as discontinued operations beginning in Flex's fourth quarter ending March 31, 2024.
Webcast and Conference Call
The Flex management team will host a conference call today at 1:30 PM (PT) / 4:30 PM (ET), to review third quarter fiscal 2024 results. A live webcast of the event and slides will be available on the Flex Investor Relations website at http://investors.flex.com. An audio replay and transcript will also be available after the event on the Flex Investor Relations website.
About Flex
Flex (Reg. No. 199002645H) is the manufacturing partner of choice that helps a diverse customer base design and build products that improve the world. Through the collective strength of a global workforce across 30 countries and responsible, sustainable operations, Flex delivers technology innovation, supply chain, and manufacturing solutions to diverse industries and end markets.
Contacts
Investors & Analysts
David Rubin
Vice President, Investor Relations
(408) 577-4632
David.Rubin@flex.com
Media & Press
Yvette Lorenz
Director, Corporate PR and Executive Communications
(415) 225-7315
Yvette.Lorenz@flex.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of
Additional information concerning these, and other risks is described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K for the fiscal year ended March 31, 2023 and in subsequent quarterly reports on Form 10-Q, as well as the registration statement, including the proxy statement/prospectus, and other documents filed by Flex or Nextracker, as applicable, with the
SCHEDULE I | ||||
FLEX | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (2) | ||||
(In millions, except per share amounts) | ||||
Three-Month Periods Ended | ||||
December 31, 2023 | December 31, 2022 | |||
GAAP: | ||||
Net sales | $ 7,103 | $ 7,756 | ||
Cost of sales | 6,400 | 7,168 | ||
Restructuring charges | 61 | 5 | ||
Gross profit | 642 | 583 | ||
Selling, general and administrative expenses | 264 | 243 | ||
Restructuring charges | 13 | — | ||
Intangible amortization | 17 | 19 | ||
Operating income | 348 | 321 | ||
Interest, net | 36 | 54 | ||
Other charges, net | 5 | 5 | ||
Income before income taxes | 307 | 262 | ||
Provision for income taxes | 74 | 25 | ||
Net income | 233 | 237 | ||
Net income attributable to noncontrolling interest and redeemable noncontrolling interest | 36 | 7 | ||
Net income attributable to Flex Ltd. | $ 197 | $ 230 | ||
Diluted earnings per share attributable to the shareholders of Flex Ltd: | ||||
GAAP | $ 0.45 | $ 0.50 | ||
Non-GAAP | $ 0.71 | $ 0.62 | ||
Diluted shares used in computing per share amounts | 436 | 459 | ||
See Schedule II for the reconciliation of GAAP to non-GAAP financial measures. See the accompanying notes on Schedule V attached to this press release. | ||||
FLEX | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (2) | ||||
(In millions, except per share amounts) | ||||
Nine-Month Periods Ended | ||||
December 31, 2023 | December 31, 2022 | |||
GAAP: | ||||
Net sales | $ 21,910 | $ 22,869 | ||
Cost of sales | 19,935 | 21,155 | ||
Restructuring charges | 81 | 5 | ||
Gross profit | 1,894 | 1,709 | ||
Selling, general and administrative expenses | 806 | 729 | ||
Restructuring charges | 19 | — | ||
Intangible amortization | 54 | 62 | ||
Operating income | 1,015 | 918 | ||
Interest, net | 112 | 150 | ||
Other charges, net | 32 | 2 | ||
Income before income taxes | 871 | 766 | ||
Provision for income taxes | 21 | 96 | ||
Net income | 850 | 670 | ||
Net income attributable to noncontrolling interest and redeemable noncontrolling interest | 239 | 19 | ||
Net income attributable to Flex Ltd. | $ 611 | $ 651 | ||
Diluted earnings per share attributable to the shareholders of Flex Ltd: | ||||
GAAP | $ 1.37 | $ 1.41 | ||
Non-GAAP | $ 1.95 | $ 1.79 | ||
Diluted shares used in computing per share amounts | 446 | 462 | ||
See Schedule II for the reconciliation of GAAP to non-GAAP financial measures. See the accompanying notes on Schedule V attached to this press release. | ||||
SCHEDULE II | ||||
FLEX | ||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)(2) | ||||
(In millions, except per share amounts) * | ||||
Three-Month Periods Ended | ||||
December 31, 2023 | December 31, 2022 | |||
GAAP operating income | $ 348 | $ 321 | ||
Intangible amortization | 17 | 19 | ||
Stock-based compensation expense | 39 | 27 | ||
Restructuring charges | 73 | 5 | ||
Non-GAAP operating income | $ 477 | $ 372 | ||
GAAP provision for income taxes | $ 74 | $ 25 | ||
Intangible amortization benefit | 3 | 3 | ||
Other tax related adjustments | 9 | — | ||
Non-GAAP provision for income taxes | $ 86 | $ 28 | ||
GAAP net income attributable to Flex Ltd. | $ 197 | $ 230 | ||
Intangible amortization | 17 | 19 | ||
Stock-based compensation expense | 39 | 27 | ||
Restructuring charges | 73 | 5 | ||
Interest and other, net | 3 | — | ||
Paid-in-kind and pre-IPO dividends paid to redeemable noncontrolling interest | — | 7 | ||
Noncontrolling interest share of subsidiary's non-GAAP adjustments | (8) | — | ||
Adjustments for taxes | (12) | (3) | ||
Non-GAAP net income | $ 309 | $ 285 | ||
Diluted earnings per share attributable to the shareholders of Flex Ltd: | ||||
GAAP | $ 0.45 | $ 0.50 | ||
Non-GAAP | $ 0.71 | $ 0.62 | ||
See the accompanying notes on Schedule V attached to this press release. | ||||
*Amounts may not sum due to rounding | ||||
FLEX | ||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)(2) | ||||
(In millions, except per share amounts) * | ||||
Nine-Month Periods Ended | ||||
December 31, 2023 | December 31, 2022 | |||
GAAP operating income | $ 1,015 | $ 918 | ||
Intangible amortization | 54 | 62 | ||
Stock-based compensation expense | 125 | 80 | ||
Restructuring charges | 97 | 5 | ||
Legal and other | 2 | 13 | ||
Non-GAAP operating income | $ 1,293 | $ 1,078 | ||
GAAP provision for income taxes | $ 21 | $ 96 | ||
Intangible amortization benefit | 9 | 9 | ||
Other tax related adjustments | 155 | (4) | ||
Non-GAAP provision for income taxes | $ 185 | $ 101 | ||
GAAP net income attributable to Flex Ltd. | $ 611 | $ 651 | ||
Intangible amortization | 54 | 62 | ||
Stock-based compensation expense | 125 | 80 | ||
Restructuring charges | 97 | 5 | ||
Legal and other | 2 | 13 | ||
Interest and other, net | 12 | 4 | ||
Paid-in-kind and pre-IPO dividends paid to redeemable noncontrolling interest | — | 19 | ||
Noncontrolling interest share of subsidiary's non-GAAP adjustments | 133 | — | ||
Adjustments for taxes | (164) | (5) | ||
Non-GAAP net income | $ 870 | $ 829 | ||
Diluted earnings per share attributable to the shareholders of Flex Ltd: | ||||
GAAP | $ 1.37 | $ 1.41 | ||
Non-GAAP | $ 1.95 | $ 1.79 | ||
See the accompanying notes on Schedule V attached to this press release. | ||||
*Amounts may not sum due to rounding | ||||
SCHEDULE III | ||||
FLEX | ||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (2) | ||||
(In millions) | ||||
As of December 31, 2023 | As of March 31, 2023 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 2,764 | $ 3,294 | ||
Accounts receivable, net of allowance for doubtful accounts | 3,605 | 3,739 | ||
Contract assets | 604 | 541 | ||
Inventories | 6,815 | 7,530 | ||
Other current assets | 1,089 | 917 | ||
Total current assets | 14,877 | 16,021 | ||
Property and equipment, net | 2,328 | 2,349 | ||
Operating lease right-of-use assets, net | 612 | 608 | ||
Goodwill | 1,348 | 1,343 | ||
Other intangible assets, net | 266 | 316 | ||
Other assets | 935 | 758 | ||
Total assets | $ 20,366 | $ 21,395 | ||
LIABILITIES, NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Bank borrowings and current portion of long-term debt | $ 3 | $ 150 | ||
Accounts payable | 5,292 | 5,930 | ||
Accrued payroll and benefits | 513 | 522 | ||
Deferred revenue and customer working capital advances | 2,567 | 3,143 | ||
Other current liabilities | 1,011 | 1,110 | ||
Total current liabilities | 9,386 | 10,855 | ||
Long-term debt, net of current portion | 3,431 | 3,691 | ||
Operating lease liabilities, non-current | 502 | 506 | ||
Other liabilities | 602 | 637 | ||
Total liabilities | 13,921 | 15,689 | ||
Total Flex Ltd. shareholders' equity | 5,965 | 5,351 | ||
Noncontrolling interest | 480 | 355 | ||
Total shareholders' equity | 6,445 | 5,706 | ||
Total liabilities, noncontrolling interest, and shareholders' equity | $ 20,366 | $ 21,395 | ||
See the accompanying notes on Schedule V attached to this press release. |
SCHEDULE IV | ||||
FLEX | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(In millions) | ||||
Nine-Month Periods Ended | ||||
December 31, 2023 | December 31, 2022 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net income | $ 850 | $ 670 | ||
Depreciation, amortization and other impairment charges | 390 | 371 | ||
Changes in working capital and other, net | (593) | (541) | ||
Net cash provided by operating activities | 647 | 500 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Purchases of property and equipment | (449) | (455) | ||
Proceeds from the disposition of property and equipment | 21 | 20 | ||
Other investing activities, net | 14 | 10 | ||
Net cash used in investing activities | (414) | (425) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Proceeds from bank borrowings and long-term debt | 2 | 819 | ||
Repayments of bank borrowings and long-term debt | (398) | (926) | ||
Payments for repurchases of ordinary shares | (781) | (293) | ||
Proceeds from issuances of Nextracker shares | 552 | — | ||
Payment for purchase of Nextracker LLC units from TPG | (57) | — | ||
Other financing activities, net | (86) | (53) | ||
Net cash used in financing activities | (768) | (453) | ||
Effect of exchange rates on cash and cash equivalents | 5 | (21) | ||
Net decrease in cash and cash equivalents | (530) | (399) | ||
Cash and cash equivalents, beginning of period | 3,294 | 2,964 | ||
Cash and cash equivalents, end of period | $ 2,764 | $ 2,565 | ||
SCHEDULE V
FLEX AND SUBSIDIARIES
NOTES TO SCHEDULES I, II, and III
(1) To supplement Flex's unaudited selected financial data presented consistent with
In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of the Company's operating performance on a period-to-period basis because such items are not, in our view, related to the Company's ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, for calculating return on investment, and for benchmarking performance externally against competitors. In addition, management's incentive compensation is determined using certain non-GAAP measures. Also, when evaluating potential acquisitions, we exclude certain items described below from consideration of the target's performance and valuation. Since we find these measures to be useful, we believe that investors benefit from seeing results "through the eyes" of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering:
- the ability to make more meaningful period-to-period comparisons of the Company's ongoing operating results;
- the ability to better identify trends in the Company's underlying business and perform related trend analysis;
- a better understanding of how management plans and measures the Company's underlying business; and
- an easier way to compare the Company's operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures.
The following are explanations of each of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding each of these individual items in the reconciliations of these non-GAAP financial measures:
Stock-based compensation expense consists of non-cash charges for the estimated fair value of unvested restricted share unit and stock option awards granted to employees and assumed in business acquisitions. The Company believes that the exclusion of these charges provides for more accurate comparisons of its operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact stock-based compensation expense has on its operating results.
Intangible amortization consists primarily of non-cash charges that can be impacted by, among other things, the timing and magnitude of acquisitions. The Company considers its operating results without these charges when evaluating its ongoing performance and forecasting its earnings trends, and therefore excludes such charges when presenting non-GAAP financial measures. The Company believes that the assessment of its operations excluding these costs is relevant to its assessment of internal operations and comparisons to the performance of its competitors.
Restructuring charges include severance charges at existing sites and corporate SG&A functions as well as asset impairment, and other charges related to the closures and consolidations of certain operating sites and targeted activities to restructure the business. These costs may vary in size based on the Company's initiatives, are not directly related to ongoing or core business results, and do not reflect expected future operating expenses. These costs are excluded by the Company's management in assessing current operating performance and forecasting its earnings trends and are therefore excluded by the Company from its non-GAAP measures.
During the three and nine-month periods ended December 31, 2023, the Company recognized approximately
Legal and other consist primarily of costs not directly related to core business results and may include matters relating to commercial disputes, government regulatory and compliance, intellectual property, antitrust, tax, employment or shareholder issues, product liability claims and other issues on a global basis as well as acquisition related costs and customer related asset impairments (recoveries). During the first three quarters of fiscal year 2024 and 2023, the Company accrued for certain loss contingencies where losses were considered probable and estimable. These costs are excluded by the Company's management in assessing current operating performance and forecasting its earnings trends and are therefore excluded by the Company from its non-GAAP measures.
Interest and other, net consist of various other types of items that are not directly related to ongoing or core business results, such as the gain or losses related to certain divestitures, currency translation reserve write-offs upon liquidation of certain legal entities, debt extinguishment costs and impairment charges or gains associated with certain non-core investments. The Company excludes these items because they are not related to the Company's ongoing operating performance or do not affect core operations. Excluding these amounts provides investors with a basis to compare Company performance against the performance of other companies without this variability.
Paid-in-kind and pre-IPO dividends paid to redeemable noncontrolling interest relates to dividends paid to TPG Rise Flash, L.P. ("TPG Rise"). Prior to the Nextracker IPO, pro-rated
Noncontrolling interest share of subsidiary's non-GAAP adjustments represents the share of non-GAAP adjustments attributable to noncontrolling interest. During the three and nine month periods ended December 31, 2023,
Adjustments for taxes relates to the tax effects of the various adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income and certain adjustments related to non-recurring settlements of tax contingencies or other non-recurring tax charges, when applicable. During the three and nine month periods ended December 31, 2023, the Company recognized a
(2) Noncontrolling interests have been included on the consolidated balance sheets as components of redeemable noncontrolling interest and total shareholders' equity. As a result of the Nextracker February 13, 2023 IPO, the redeemable noncontrolling interest are not applicable for the period ended December 31, 2023. The amount of consolidated net income attributable to Flex Ltd. and to the noncontrolling interest and redeemable noncontrolling interest are presented in the consolidated statements of operations. In the fourth quarter of fiscal year 2023, Nextracker Inc. completed the Nextracker IPO through a series of reorganization transactions that resulted in Nextracker Inc. having an umbrella partnership C corporation ("Up-C") structure and the conversion of redeemable noncontrolling interest to noncontrolling interest.
Upon the IPO, Flex recorded a noncontrolling interest within shareholders' equity, reflecting the portion of Nextracker that was not owned by Flex. On a subsequent measurement basis, the carrying value of this noncontrolling interest is adjusted for earnings attributable to the noncontrolling interest.
As of December 31, 2023 and March 31, 2023, the carrying value of noncontrolling interest were
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SOURCE Flex
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