Unless otherwise specifically stated, references in this report to “Flex,” “the
Company,” “we,” “us,” “our” and similar terms mean
subsidiaries.
This report on Form 10-Q contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. The words “expects,”
“anticipates,” “believes,” “intends,” “plans” and similar expressions identify
forward-looking statements. In addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. We undertake no obligation to
publicly disclose any revisions to these forward-looking statements to reflect
events or circumstances occurring subsequent to filing this Form 10-Q with the
are subject to risks and uncertainties, including, without limitation, those
risks and uncertainties discussed in this section, as well as any risks and
uncertainties discussed in Part I, Item 1A, “Risk Factors” and in
Part II, Item 7, “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
not possible for management to predict all such risk factors or to assess the
impact of such risk factors on our business. Accordingly, our future results may
differ materially from historical results or from those discussed or implied by
these forward-looking statements. Given these risks and uncertainties, the
reader should not place undue reliance on these forward-looking statements.
OVERVIEW
We are the diversified manufacturing partner of choice that helps market-leading
brands design, build and deliver innovative products that improve the world.
Through the collective strength of a global workforce across approximately 30
countries with responsible, sustainable operations, we deliver advanced
manufacturing solutions and operate one of the most trusted global supply
chains, supporting the entire product lifecycle with fulfillment, after-market,
and circular economy solutions for diverse industries including cloud,
communications, enterprise, automotive, industrial, consumer devices, lifestyle,
healthcare, and energy. Our three operating and reportable segments are:
•Flex Agility Solutions (“FAS”), which is comprised of the following end
markets:
•Communications, Enterprise and Cloud, including data infrastructure, edge
infrastructure and communications infrastructure;
•Lifestyle, including appliances, consumer packaging, floorcare, micro mobility
and audio; and
•Consumer Devices, including mobile and high velocity consumer devices.
•Flex Reliability Solutions (“FRS”), which is comprised of the following end
markets:
•Automotive, including next generation mobility, autonomous, connectivity,
electrification, and smart technologies;
•Health Solutions, including medical devices, medical equipment and drug
delivery; and
•Industrial, including capital equipment, industrial devices, and renewables and
grid edge.
•Nextracker, the leading provider of intelligent, integrated solar tracker and
software solutions used in utility-scale and ground-mounted distributed
generation solar projects around the world.
panels to follow the sun’s movement across the sky and optimize plant
performance.
Our strategy is to provide customers with a full range of cost competitive,
vertically-integrated global supply chain solutions through which we can design,
build, ship and service a complete packaged product for our customers. This
enables our customers to leverage our supply chain solutions to meet their
product requirements throughout the entire product lifecycle.
Over the past few years, we have seen an increased level of diversification by
many companies, primarily in the technology sector. Some companies that have
historically identified themselves as software providers, Internet service
providers or e-commerce retailers have entered the highly competitive and
rapidly evolving technology hardware markets, such as mobile devices, home
entertainment and wearable devices. This trend has resulted in a significant
change in the manufacturing and supply chain solutions requirements of such
companies. While the products have become more complex, the supply chain
solutions required by such companies have become more customized and demanding,
and it has changed the manufacturing and supply chain landscape significantly.
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We use a portfolio approach to manage our extensive service offerings. As our
customers change the way they go to market, we have the capability to reorganize
and rebalance our business portfolio in order to align with our customers’ needs
and requirements in an effort to optimize operating results. The objective of
our business model is to allow us to be flexible and redeploy and reposition our
assets and resources as necessary to meet specific customers’ supply chain
solution needs across all the markets we serve and earn a return on our invested
capital above the weighted average cost of that capital.
We believe that our continued business transformation to improve our portfolio
mix is strategically positioning us to take advantage of the long-term, future
growth prospects for outsourcing of advanced manufacturing capabilities, design
and engineering services and after-market services.
Update on the Impact of COVID-19, Component Shortages and Logistical Constraints
on our Business
With the second wave of the global pandemic including follow-on variants of
COVID-19, there have been renewed disease control measures being taken to limit
the spread including movement bans and shelter-in-place orders. Although not
materially impacting our results for the first quarter of fiscal year 2023, most
recently, with the lockdowns in
and/or restrictions at certain of our manufacturing facilities in
continue to closely monitor the situation in all the locations where we operate.
Our priority remains the welfare of our employees. In addition, our end markets
continue to be impacted by the global supply chain disruptions. Component
shortages and logistical constraints are pervasive across the entire value
chain. COVID-19 related restrictions also contributed to a declining workforce,
including at ports and warehouses, as well as creating driver shortages around
the world. We expect persistent waves of COVID-19 to remain a headwind into the
near future. Component shortages and significantly increased logistic costs are
also expected to persist at least in the near future as we are continuing to see
increasing supply constraints and costs. We continue to carefully monitor
potential supply chain disruptions due to ongoing tightness in the overall
component environment. Refer to “Risk Factors – The ongoing COVID-19 pandemic
has materially and adversely affected our business and results of operations.
The duration and extent to which it will continue to adversely impact our
business and results of operations remains uncertain and could be material.” and
“– Supply chain disruptions, manufacturing interruptions or delays, or the
failure to accurately forecast customer demand, could affect our ability to meet
customer demand, lead to higher costs, or result in excess or obsolete
inventory. We have been and continue to be adversely affected by supply chain
issues, including shortages of required electronic components.” as disclosed in
Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal
year ended
We are continuously evaluating our capital structure in response to the current
environment and expect that our current financial condition, including our
liquidity sources are adequate to fund future commitments. See additional
discussion in the Liquidity and Capital Resources section below.
Russian Invasion of
We are monitoring and responding to the escalating conflict in
associated sanctions and other restrictions. As of the date of this report,
there is no material impact to our business operations and financial performance
in
financial performance remains uncertain and will depend on future developments,
including the severity and duration of the conflict and its impact on regional
and global economic conditions. We will continue to monitor the conflict and
assess the related restrictions and other effects and pursue prudent decisions
for our team members, customers, and business.
Other Developments
On
registration statement on Form S-1 with the
public offering of
offering and its timing are subject to market and other conditions and the
review process, and there can be no assurance that we will proceed with such
offering or any alternative transaction. Refer to “Risk Factors – We are
pursuing alternatives for our
separation of the business, through an initial public offering of
otherwise, which may not be consummated as or when planned or at all, and may
not achieve the intended benefits.” as disclosed in Part I, “Item 1A. Risk
Factors” of our Annual Report on Form 10-K for the fiscal year ended
2022
On
interest in
million
for
consolidated financial statements in our Annual Report on Form 10-K for the
fiscal year ended
This Quarterly Report on Form 10-Q for the fiscal quarter ended
does not constitute an offer to sell or a solicitation of an offer to buy
securities, and shall not constitute an offer, solicitation or sale in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of that jurisdiction.
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Business Overview
We are one of the world’s largest providers of global supply chain solutions,
with revenues of
extensive network of manufacturing facilities in the world’s major consumer and
enterprise markets (
outsourcing needs of both multinational and regional customers. We design,
build, ship, and service consumer and enterprise products for our customers
through a network of over 100 facilities in approximately 30 countries across
four continents. We also provide intelligent, integrated solar tracker and
software solutions used in utility-scale and ground-mounted distributed
generation solar projects around the world. The following tables set forth the
relative percentages and dollar amounts of net sales by region and by country,
and net property and equipment by country, based on the location of our
manufacturing sites (amounts may not sum due to rounding):
Three-Month Periods Ended
July 1, 2022 July 2, 2021
(In millions)
Net sales by region:
Americas $ 3,315 45 % $ 2,579 41 %
Asia 2,517 34 % 2,365 37 %
Europe 1,515 21 % 1,398 22 %
$ 7,347 $ 6,342
Net sales by country:
China $ 1,584 22 % $ 1,531 24 %
Mexico 1,555 21 % 1,221 19 %
U.S. 1,216 17 % 876 14 %
Malaysia 570 8 % 411 6 %
Brazil 527 7 % 464 7 %
Hungary 286 4 % 352 6 %
Other 1,609 21 % 1,487 24 %
$ 7,347 $ 6,342
As of As of
Property and equipment, net: July 1, 2022 March 31, 2022
(In millions)
Mexico $ 643 30 % $ 626 29 %
U.S. 350 16 % 354 17 %
China 304 14 % 299 14 %
Malaysia 123 6 % 110 5 %
India 120 6 % 129 6 %
Hungary 116 5 % 118 6 %
Other 479 23 % 489 23 %
$ 2,135 $ 2,125
We believe that the combination of our extensive open innovation platform
solutions, design and engineering services, advanced supply chain management
solutions and services, significant scale and global presence, and manufacturing
campuses in low-cost geographic areas provide us with a competitive advantage
and strong differentiation in the market for designing, manufacturing and
servicing consumer and enterprise products for leading multinational and
regional customers. Specifically, we offer our customers the ability to simplify
their global product development, manufacturing process, and after sales
services, and enable them to meaningfully accelerate their time to market and
cost savings.
Our operating results are affected by a number of factors, including the
following:
•the impacts on our business due to component shortages, disruptions in
transportation or other supply chain related constraints including as a result
of the COVID-19 global pandemic;
•the effects of the COVID-19 global pandemic on our business and results of
operations;
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•changes in the macro-economic environment and related changes in consumer
demand;
•the mix of the manufacturing services we are providing, the number, size, and
complexity of new manufacturing programs, the degree to which we utilize our
manufacturing capacity, seasonal demand, and other factors;
•the effects on our business when our customers are not successful in marketing
their products, or when their products do not gain widespread commercial
acceptance;
•our ability to achieve commercially viable production yields and to manufacture
components in commercial quantities to the performance specifications demanded
by our customers;
•the effects that current credit and market conditions (including as a result of
the COVID-19 global pandemic and the ongoing conflict between
and suppliers, including any impact on their ability to meet their contractual
obligations;
•the effects on our business due to certain customers’ products having short
product lifecycles;
•our customers’ ability to cancel or delay orders or change production
quantities;
•our customers’ decisions to choose internal manufacturing instead of
outsourcing for their product requirements;
•integration of acquired businesses and facilities;
•increased labor costs due to adverse labor conditions in the markets we
operate;
•changes in tax legislation; and
•changes in trade regulations and treaties.
We are also subject to other risks as outlined in Part I, Item 1A of our Annual
Report on Form 10-K for the fiscal year ended
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Due to the COVID-19 pandemic
and the ongoing conflict between
continue to be uncertainty and disruption in the global economy and financial
markets. We have made estimates and assumptions taking into consideration
certain possible impacts due to COVID-19 and the Russian invasion of
These estimates may change, as new events occur, and additional information is
obtained. Actual results may differ from those estimates and assumptions.
Refer to the accounting policies under Item 7, “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
significant judgments and estimates used in the preparation of the condensed
consolidated financial statements.
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