results for q3 fiscal 2017 - s21.q4cdn.com · •q3 fy17 was $26m •q4 fy17 outlook $25m-$30m...

Results for Q3 Fiscal 2017

Earnings Announcement: January 26, 2017

(Quarter Ending December 31, 2016)

1

Risks and Non-GAAP Disclosures

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.

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

comparable GAAP measures for the current period results.

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/

2

Q3 FY2017 Income Statement Highlights

Prior Yr Current Qtr

($M, except per share amounts) December 31, 2015 December 31, 2016

Net sales $6,763 $6,115

Adjusted operating income 236 223

Adjusted net income 196 183

Adjusted EPS $0.35 $0.34

GAAP income before income taxes 127 140

GAAP net income 149 129

GAAP EPS $0.27 $0.24

Q3 FY2017 Results vs. Guidance

Net sales of $6.1B in the range of guidance $6.0 - $6.4B

Adjusted operating income of $223M above the mid-point of guidance $205 - $235M

Adjusted EPS of $0.34 towards the high-end of guidance $0.31 - $0.35

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.

For all historical periods referenced in this presentation, refer to the Investor Relations section of our website.

Revenue & Adjusted Gross Margin($M)

3

Quarterly Financial Highlights

22% 22% 22%20% 20%

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Return on Invested Capital(ROIC %)

$0.35

$0.29 $0.27 $0.28

$0.34


Adjusted Earnings Per Share (EPS)

6,763

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

6.7%7.1% 6.9% 6.9% 7.1%


Adj. Gross Margin

Adjusted Operating Income ($M)

236 200 190 197

223

3.5% 3.5%3.2% 3.3%

3.6%


Adj. Operating Margin



Q3 FY17(December 31, 2016)

Target Adjusted

Operating Margin Range

($M)

Rev$ OP$(adj.)

OP%(adj.)

$2,102 $62 3.0%Challenging demand environment but continuing to operate

within the targeted range.

$1,849 $59 3.2%Driving a more diversified customer base by leveraging

new technologies and the expansion into new markets.

$1,141 $40 3.5%Sequential improvement and progressing towards targeted

range, despite energy project delays.

$1,023 $83 8.1%Strong execution and margins remain meaningfully inside

the targeted range.

Corporate

Services &

Other1-- ($21) --

Total $6,115 $223 3.6%

6

4

2

2.5

9

6

4

3.5

Operating Performance by Business Group

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

3.2%

3.0%

3.5%

8.1%

4Please 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.


CEC

CTG

IEI

HRS

5

Other Income Statement Comments

• Q3 FY17 was $26M

• Q4 FY17 outlook $25M-$30M

Interest & other

expense, net

• Q3 FY17 was 7.2%

• FY17 outlook 8-10% tax rate

Adjusted

income tax rate

Reconciliation

between GAAP and

Adjusted EPS

Aggregate impact on EPS $0.10:

• Stock based compensation $21M or $0.04 in EPS

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

• Severance charges $16M or $0.03 in EPS

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6

Cash Flows & Net Working Capital

Three

Months

Ended

Nine

Months

Ended

($M)(Dec 31, 2016) (Dec 31, 2016)

GAAP net income $129 $233

Depreciation and amortization 128 388

Change in net working capital 214 174

Other operating cash flows, net (2) 218

Net cash provided by operating activities 469 1,013

Purchases of property & equipment, net (106) (385)

Free Cash Flow 363 628

Other investing and financing, net (94) (208)

Debt proceeds, net 126 90

Payments for share repurchases (75) (260)

Net change in cash and cash equivalents $320 $250

1,808 1,789 1,796 1,851

1,626

6.7%

7.7% 7.6%7.7%

6.6%


% Annualized Revenue

Net Working Capital($M)

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

Free Cash Flow is calculated as cash from operations less net purchases of property & equipment.


Committed to return over 50% of annual

free cash flow to shareholders

$1,857

$1,500

$525 $500 $700 $500 $600

Liquidity 2017 2018 2019 2020 2021 2022 2023 2024 2025

Significant Debt Maturities ($M) (Calendar Year)

Cash

Revolver

Total

Liquidity

$3,357

Term Loan LIBOR + 137.5bps

4.625% Notes

5% Notes 4.75% Notes$52 EURIBOR +100bps

7

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): 2.3x)

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

Term Loan LIBOR + 137.5bps

26%

16%34%

24%

8

Q3 FY2017 Highlights and Key Trends

158

114 121 144

363

9.3% 9.7%8.3% 7.3%

9.6%


FCF Yield

Free Cash Flow($M)

90 89 95 90

75

551 545 546 541 537


Shares Outstanding (M)

Share Repurchases($M)

HRSIEI

CTG CEC

Strong

Cash FlowContinued

Portfolio Evolution

Capital Return

Commitment

Adj.

Op. Profit

Mix

FCF yield is calculated based on (LTM free cash flow/outstanding shares at

quarter-end) / share price at quarter-end.

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. For all historical periods referenced in this presentation, refer to the Investor Relations section of our website.

50%

34%

19%17%

30% Revenue

Mix

36%

CTGCEC

IEIHRS

37%

18%15%

30%

9

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.

Dec

2015

33%

HRS IEI

CTG CEC

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17E($M) $ $ $ $ $ Q/Q % Y/Y % Outlook Q/Q %

CEC 2,469 2,201 2,196 2,102 2,102 0% (15%) Down 5 - 10%

CTG 2,058 1,364 1,314 1,665 1,849 11% (10%) Down 20 - 30%

IEI 1,214 1,190 1,289 1,243 1,141 (8%) (6%) Up 10% - 15%

HRS 1,022 1,018 1,078 999 1,023 2% 0% Flat to Up 5%

Total Revenue $6,763 $5,773 $5,877 $6,009 $6,115 2% (10%)

34%

19%17%

30% Dec

2016

36%

HRS IEI

CTG CEC

10

Q4 FY2017 Guidance – March 2017

GAAP Income Before Income Taxes $100 - $130 million

GAAP Earnings Per Share $0.17 - $0.21

Other Information:

Interest & Other Expense $25 to $30 million

Adjusted Income Tax Rate 8.0% to 10.0%

WASO ~543 million shares

($M, except per share amounts)

$5,500 - $5,900Revenue

$185 - $215Adjusted Operating Income

$0.27 - $0.31Adjusted Earnings Per Share

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11

For more information, go to investors.flex.com

12

Appendix: Reconciliation of GAAP to Non-GAAP Measures

Quarter-endedDecember 31, 2016

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

Pretax income $140,242 $56,936 $197,178

Depreciation 109,415 -- 109,415

Amortization 18,734 (18,734) --

Interest, net 23,516 6,613 30,129

EBITDA 291,907 44,815 336,722

EBITDA – rolling 4 qtrs. 957,712 301,198 1,258,910

Total Debt $2,866,840 -- $2,866,840

Debt to EBITDA 3.0x (0.7x) 2.3x


ROIC %

GAAP 13.1%

Non-GAAP Adjustments 6.9%

Non-GAAP 20.0%

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 is reconciled to the nearest GAAP measure above. 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, 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 $416,455

Stock-based compensation expense 2,437

Restructuring 14,968

Non-GAAP gross profit $433,860

GAAP SG&A expenses $231,551

Stock-based compensation expense (18,344)

Restructuring (2,453)

Non-GAAP SG&A expenses $210,754

GAAP income before income taxes $140,242



Intangible amortization 18,734

Interests and other, net 22,838

Other charges, net 3,090

Non-GAAP operating income $223,106

GAAP provision for income taxes $10,773

Intangible amortization benefits 1,776

Tax benefit on restructuring 1,684

Non-GAAP provision for income taxes $14,233

GAAP net income $129,469



Intangible amortization 18,734

Adjustments for taxes (3,460)

Non-GAAP net income $182,945

Diluted EPS

GAAP EPS $0.24

Non-GAAP EPS $0.34

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.

results for q3 fiscal 2017 - s21.q4cdn.com · •q3 fy17 was $26m •q4 fy17 outlook $25m-$30m...

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