Results for Q2 Fiscal 2016 Earnings Announcement: October 19, 2015 (Ending September 25, 2015)
Results for Q2 Fiscal 2016Earnings Announcement: October 19, 2015
(Ending September 25, 2015)
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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. 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.
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Q2 FY2016 Income Statement Highlights
Prior Yr Prior Qtr Current Qtr ($ in millions, except per share amounts) September 26, 2014 June 26, 2015 September 25, 2015
Net sales $6,529 $5,566 $6,317
Adjusted operating income 183 159 196
Adjusted net income 157 134 153
Adjusted EPS $0.26 $0.23 $0.27
GAAP operating income 172 143 180
GAAP net income 139 111 123
GAAP EPS $0.23 $0.19 $0.22
Q2 FY2016 Results vs. Guidance:Net sales of $6.3B above the mid-point guidance of $5.9 - $6.5B
Adjusted operating income of $196M above the mid-point of our guidance range of $165 - $205M
Adjusted EPS of $0.27 towards the high-end of guidance of $0.22 - $0.28
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
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Quarterly Financial 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
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15
23.3%24.1%
23.7%22.9% 22.7%
Return on Invested Capital(ROIC %)
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15
$0.26
$0.30 $0.27
$0.23
$0.27
Adjusted Earnings Per Share (EPS)
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15
6,529 7,025 5,952
5,566 6,317
5.8% 5.8%6.4% 6.4% 6.3%
Adj. Gross Margin
Adjusted Operating Income ($ in millions)
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 $100
$120
$140
$160
$180
$200
$220
$240
183207
178159
196
2.8%2.9%
3.0%2.9%
3.1%% Revenue
Revenue & Adjusted Gross Margin($ in millions)
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Quarterly Operating Performance by Business Group
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
$66 3.0%
$41 2.0%
$32 2.8%
$71 7.5%
Corporate Services & Other1 ($14)
Total $196 3.1%
INS
CTG
HRS
($ in millions)
IEI
Target Adjusted Operating Margin Range
1. Corporate services and other related to unallocated cost
OP $ OP %
3%
5% 7%
3% 4%
4% 6%
• Strong sequential top-line growth and improved utilization levels
• Remained within target range while managing mobile phone demand erosion in China
Q2 FY16(Sep-15)
• Exceeded target range due to solid execution and strong contribution from MCi acquisition
• Revenue fell short of expectations due to ramp challenges and increased macro weakness
2%
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Other Income Statement Highlights
•Q2 FY16 was $24M, better than guidance of ~$25M•Outlook: quarterly estimate of ~$25M
Interest & other expense, net
•Q2 FY16 was 11.4% •Outlook: 8-10% tax rate
Adjusted income tax rate
•Intangible amortization $16M•Stock based compensation $16M•Aggregate impact on EPS $0.05
Reconciliation between GAAP and Adjusted EPS
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Cash Flows, Net Working Capital & Share Repurchases
Consistently Returning Over 50% of Annual Free Cash Flow to Shareholders
Three Months Ended
Six Months Ended
($ in millions) Sep-15 Sep-15
GAAP net income $123 $234
Depreciation and amortization 120 230
Change in net working capital (27) 104
Other operating cash flows, net 84 94
Net cash provided by operating activities 300 662
Purchases of property & equipment, net (157) (294)
Free Cash Flow 143 368 Payments for share repurchases (142) (242)
Payments/Proceeds from borrowings, net (13) 575
Other investing and financing, net (651) (661)
Net change in cash and cash equivalents ($663) $40
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15
1,886 1,834 1,866 1,730 1,858
7.2%6.5%
7.8% 7.8%7.4%
% Annualized RevenueNet Working Capital($ in millions)
FY11 FY12 FY13 FY14 FY15 FY16 YTD
400 510
322
475 416
242
757 684 639 591 563 557
Shares Outstanding
Share Repurchases($ in millions)
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Balanced Capital Structure
Liquidity 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
1668.4
1500
3168.4
588.7 468.8 500 500 600
Debt Maturities ($M) (Calendar Year)
Cash
Revolver
Total Liquidity$3,168
Key characteristics: • No near-term
maturities
• Low cost of debt ~3.5%• Solid liquidity
• Strong credit metrics (Debt / EBITDA (LTM): 2.2x)
Term Loans LIBOR + 125 to 137.5bps
4.625% Notes 5% Notes 4.75% Notes
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Q2 FY2016 Highlights and Key Trends
• Strong SG&A control, with costs running below guidance• Capex expected in-line or below depreciation for rest of the fiscal year
Controlling the Controllable
• Sketch-to-scale engagement model well received by customers• Nike partnership exemplifies sketch-to-scale value proposition and
fresh approach to innovation, design and manufacturing
Improving Engagement Model
• Invested $142M to repurchase ~13M shares or ~2% of float• NEXTracker acquisition complements our $1B+ Energy business and
drives accretive growth, margin, EPS and cash flow
Deploying Capital In A Disciplined Way
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Revenue by Business Group
35%
18%15%
32%
HRSIEI
CTG INSSep2015
33%
($ in millions) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15EBusiness Group $ $ $ $ $ Q/Q % Y/Y % Outlook (Q/Q)
INS 2,341 2,358 2,052 1,966 2,205 12% -6% Up mid to high single digits
CTG 2,210 2,647 1,861 1,565 2,011 28% -9% Down low single digits
IEI 1,097 1,106 1,132 1,130 1,146 1% 4% Up mid to high single digits
HRS 881 914 907 905 955 6% 8% Up low single digits
Total Revenue $6,529 $7,025 $5,952 $5,566 $6,317 13% -3%
Integrated Network Solutions(Telecom, Networking, Server & Storage, Converged Infrastructure)
Consumer Technology Group(Wearables, Digital Health, Gaming, Connected Home, Mobile, PC/Printers)
Industrial & Emerging Industries(Semiconductor & Capital Equipment, Office Solutions & Industrial Automation, Appliance & Lifestyle, Energy, Lighting)
High Reliability Solutions(Automotive, Medical, Aerospace & Defense)
36%
17%13%
34% Sep2014
30%
HRS IEI
CTG INS
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Other Information:Adjusted SG&A Expense ~$210 - $215 million
Interest & Other Expense ~$25 million
Adjusted Income Tax Rate 8-10% range
GAAP EPS $0.22 - $0.28
WASO 563 million shares
($ in millions, except per share amounts)
Adjusted operating income excludes approximately $20 million for stock based compensation, of which approximately $17 million is excluded from adjusted SG&A. GAAP EPS reflects approximately $0.06 for intangible amortization and stock-based compensation expense.
$6,200 - $6,800Revenue
$195 - $235Adjusted Operating Income
$0.28 - $0.34Adjusted Earnings Per Share
December Quarter Guidance – Q3 FY2016
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For more information go to investors.flextronics.com