Flex Reports Net Sales of $6.2 Billion in 1Q19

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Flex has announced the results for its first quarter ended June 28, 2019.

First Quarter Fiscal 2020 Highlights:

• Net Sales: $6.2 billion, year over year revenue down 3%
• GAAP Income Before Income Taxes: $64 million
• Adjusted Operating Income: $208 million
• GAAP Net Income: $45 million
• Adjusted Net Income: $138 million
• GAAP Net Income Per Share: $0.09
• Adjusted EPS: $0.27

“For the first quarter, I am pleased that we achieved adjusted EPS within guidance range and 11% year-over-year growth in adjusted operating profit with free cash flow of $114 million. We are repositioning our portfolio to reduce exposure to high-volatility, low-margin business, while investing in design-led wins and higher-margin segments,” said Revathi Advaithi, CEO of Flex. “This acceleration of our strategy to reposition our mix and drive profitable growth combined with disciplined execution positions Flex well for the future.”

Financial Highlights

Flex ended the quarter with approximately $1.9 billion of cash on hand and total debt of approximately $3.2 billion.

Cash flow from operations was negative $657 million for the three-month period ended June 28, 2019, primarily due to cash collections of $899 million for certain receivables sold under the Company’s ABS programs reported as investing activities. Adjusted cash flow from operations and free cash flow were $237 million and $114 million, respectively, for the three-month period ended June 28, 2019.

The Company remains committed to using share buy-backs to enhance shareholder returns and repurchased approximately $52 million of ordinary shares during the three-month period ended June 28, 2019.

Second Quarter Fiscal 2020 Guidance

• Revenue: $6.1 billion to $6.5 billion
• GAAP Loss Before Income Taxes: $15 million to $110 million
• Adjusted Operating Income: $220 million to $250 million
• GAAP Loss Per Share: $0.05 to $0.25 which includes $0.07 for stock-based compensation expense and intangible amortization and $0.27 to $0.51 for estimated restructuring and other charges not reflected in adjusted EPS
• Adjusted EPS: $0.29 to $0.33.

As a result of recent geopolitical developments and uncertainties, primarily impacting one customer in China, we have seen a reduction in demand for products assembled for that customer.  Due to these circumstances, the Company has decided to accelerate its strategic decision to reduce its exposure to certain high-volatility products in both China and India.  The Company also initiated targeted activities to restructure its business to further reduce and streamline its cost structure.

The Company expects to incur additional restructuring and other charges throughout fiscal 2020 currently estimated in the range of $145 million to $265 million.  Second quarter GAAP guidance includes the full impact of these charges although the timing of recognition may extend throughout fiscal 2020.

Looking Ahead

The Company is not providing detailed fiscal 2020 guidance but remains comfortable with the prior fiscal 2020 consensus adjusted EPS range that spanned from $1.20 to $1.30. When adjusting for restructuring and other charges of $0.37 to $0.57, stock-based compensation expenses and intangible amortization of $0.28, the Company’s GAAP EPS would range from $0.65 to $0.85 below adjusted EPS.

About Flex

Flex Ltd. is the Sketch-to-Scale solutions provider that designs and builds intelligent products globally. With approximately 200,000 employees across 30 countries, Flex provides innovative design, engineering, manufacturing, real-time supply chain insight and logistics services to companies of all sizes across industries and markets.