Flextronics Investor Presentation August 2015
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Transcript of Flextronics Investor Presentation August 2015
August 2015
1
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.
2
Cash Flow & Capital
Structure
Differentiated
StrategyIntro
Business
Groups
Latest Financial
Update
Why Invest in FLEX?
Our Improving Execution
Avg. World GDP Per
Capita
Intelligence of Things
World is Changing
Expanding TAM
Flex Platform
Visibility Into Strategies &
Innovation in Every
Industry
Manufacturing
Technologies
Balanced Global
Manufacturing Footprint
3
4
5
6
7
8
9-12
13
14
15
Continued Portfolio
Evolution
Driving Operating Income
& Margin Expansion
Structured To Deliver
Earnings Growth
CTG Summary
INS Summary
IEI Summary
HRS Summary
17
18
19
20-24
25-29
30-35
36-42
Driving Future Revenue
Growth
Strong Strategic
Relationships
Automotive Offerings
Medical Technology
Wearable Technology
Connected Home
Open Innovation Platform
Strategy
Success With Disruptors
Is Evidenced In IPOs
Customer Innovation
Center (CIC)
Lab IX
Elementum
44
45
46
47
48
49
50
51
52
53
54-55
ROIC
Unwavering Shareholder
Return Commitment
Free Cash Flow
Generation
Balanced Capital
Structure
Selective M&A
Transactions
MCi Acquisition
57
58
59
60
61
62
Q1 FY16 Earnings
IR Contact Info
63-72
73
3
Evolving our portfolio to provide more predictable
earnings and higher margin
Committed to 5-10% annual net income growth
Strong sustainable free cash flow
Committed to return over 50% of free cash flow
1
2
3
4
4
Portfolio evolution
continues
HRS business grew
25% in the last 2 years
IEI business grew 19%
in the last 2 years
Revenue($ in Billions)
2 year adjusted
operating profit growth
of 23%
8 consecutive quarters
of operating margin
expansion
Adj. Operating Income($ in Millions)
Adjusted net Income
growth of 15% in FY15
Achieved record annual
adjusted EPS
Adj. EPS(per share)
Generated ~$2 billion of
free cash flow in the last
3 years
On track to achieve 5-
year target by FY17
Free Cash Flow
~$24B
~$26B
FY13 FY15
+11%
$611
$751
FY13 FY15
+23%
$0.84
$1.08
FY13 FY15
+29%
FY15FY13 FY17E
~$2B
5-Year Target
$3 - $4 Billion by FY17
5
100
1,000
10,000
Intelligence
Age™
152x every
years
Information
Age
252x every
years
Modern
Age
402x every
years
1750 1850 1970 2010Source: World Bank, Maddison Project, De Long- UC Berkeley
Industrial
Age
1002x every
years
6
By 2020, the Intelligence of Things™ will bring 50 billion
connected devices to market, creating a $7.1T in TAM.(versus an estimated 10 billion connected devices today)
7
The World is Changing
Increased
RegionalizationGrowth of
Asian OEMsFaster Product
Cycles
More Disruptive
Products
New Hardware
OEMsCorporate Social
Environmental
Responsibility
Internet of Things
Supply Chain
Complexity
Innovation
on the Rise
8
Contract Manufacturing
(CM)
Electronics Manufacturing Services
(EMS)
End-to-End Supply Chain Solutions – Sketch to
Scale
Revenue
$0 $5B $25B $30B $35B
TAM:
$524B
TAM:
$940BTAM:
$1T+
1993-2001 2001-2010 2010-Future
Operating Margin
9
Flex PlatformA Supply Chain Solutions Provider
10
Monitor the health of your supply
chain real-time
Simultaneously launch new products
across multiple continents
Time-to-market advantages from
regionalized solutions
Real-Time Information to Run a
Modern Supply Chain
11
Innovation that brings products to
market faster
2,500+ engineers enabling
technology innovation
Global network of forward, reverse
and spare parts logistics
Services That Enable a
Connected World
12
~26 billion in sales in FY15
Over 100 sites spanning 30 countries
with a workforce of ~200,000
~52M square feet of manufacturing
and services globally
6 Product Innovation Centers and
expanding
Visibility into Strategies and
Innovation in Every Industry
13
Healthcare
$2Billion
Automotive
$2Billion
Industrial
$1Billion
Home
Appliances
$1Billion
Capital
Equipment
$1Billion
Energy
$1Billion
Datacom
$3Billion
Telecom
$3Billion
Server/Storage
$3Billion
Wearables
$1Billion
Connected
Living
$1Billion
Smartphones
$3Billion
14
PowerFlexible & Rigid
CircuitsMachining
Precision Plastics EnclosuresAutomotive Technologies
15
>70 Locations | ~25M Square Feet | ~200K Employees
Power
PCBA, Box Build, SI
Mechanicals
Aguascalientes, MX ●●
Althofen, Austria●
Austin, TX ●●Dallas, TX ●
Fort Worth, TX ●Houston, TX ●
Batam, Indonesia ●
Cebu, Philippines ●●
Ashville, NC ●Charlotte, NC ●
Chengdu, China ●●
Chennai, India ●●●
Columbia, SC ●
Coopersville, MI ●
Cork, Ireland ●Limerick, Ireland
●
Dalingshan (Dongguan), China ●Qiaotou (Dongguan), China ●
Guadalajara, MX ●●
Huang Tian (Shenzhen), China ●●Gushu (Shenzhen), China ●Nanjing, China ●Shanghai, China ●Shenzhen, China ●Suzhou, China ●Wuzhong (Suzhou), China ●●●Zhuhai, China ●●
Ibaraki, Japan ●
Jaguariuna, Brazil ●
Juarez, MX ●●
Joo Koon Singapore ●●Kallang, Singapore ●
Manaus, Brazil ●●
Migdal Haemek, Israel ●Ofakim, Israel ●Yavne, Israel ●
Mukachevo, Ukraine ●
Northfield, MN ●
Penang, Malaysia ●●Port of Tanjong Pelepas (Johor), Malaysia ●Senai (Johor), Malaysia ●●Skudai (Johor), Malaysia ●
Ronneby, Sweden ●
Sarvar, Hungary ●●Tab, Hungary ●Zalaegerszeg, Hungary ●
Sorocaba, Brazil ●●
Taipei, Taiwan ●
Tczew, Poland ●●
Tianjin, China ●
Tijuana, MX ●●
Timisoara, Romania ●●
Toronto, Canada ●
Treviso, Italy ●
Valencia, CA ●
Zurich, Switzerland ●
Tempe, AZ ●
Buffalo Grove, IL ●
Manchester, CT ●
Sonderborg, Denmark ●
16
17
More predictable earnings and high margins
1. Fiscal 2020 target represents our targeted long-term model (double-digit HRS & IEI growth, INS stable, CTG growing in-line with GDP 2.5%)
Target1
FY20E
~20% ~20%
~30%~30%
~40%
FY10
6%13%
42% 39%
19%
FY15
17% 14%
34%35%
31%
HRS + IEI
$8.0BHRS + IEI
$4.5BHRS + IEI
~$13.0B
CTG INS HRS IEI
18
FY15 Adjusted
Operating Income
Target Adjusted
Operating Margin Range
FY15 Adjusted
Operating Income
$228M
$132M
$257M
$218M
Corporate
Services & Other1 ($84M)
Total $751M
HRS
IEI
CTG
INS
2% 3%
4%
5%
6%
7%
4%3%16%
27%
26%31%
CTG INS HRS IEI
43%
1. Corporate services and other related to unallocated cost
19
Target Model Features
Revenue
Growth
Operating
Margin
Double digit 5-7%
Double digit 4-6%
Stable 3-4%
Better mix 2-3%
HRS
IEI
CTG
INS
~30%~30%
~20% ~20%
~60%
CTG INS HRS IEI
Target Fiscal 2020 Potential
Operating Profit Contribution
20
More Diversified
Accelerated time to market
Co-innovation
Visibility into future trends
Revenue($ in millions)
Fiscal2010
Fiscal2015
CTG INS HRS IEI
19%
6%13%
42%
39%
31%
17% 14%
34% 35%
Mobile• Smart Phones
• Wireless Modules
• Headsets
• Portable Audio
Consumer • Game Consoles & Accessories
• Wearable Technology
• Smart Home Devices
• Home Entertainment Equipment
Computing• EMS Desktop / Notebook PCs
• Tablets
• Printers
$7,037
$9,358 $8,940
FY13 FY14 FY15
21
Operating
Profit
5+ %
2+ %
3-4 %
Customers
Added
33
3
6
STRATEGIC
CORE
ICE Aggressive
Moderate
Stable
22
23
We lead in the wearable movement
• 300%+ avg CAGR
We lead connected home growth
• 81%+ avg CAGR
We are leading the NEXT BIG THING
• New Vectors in Development
• Higher Margins and more diversification
• Driven by the Intelligence of Things™
1 A better mix of customers and products
2 Actively engaging new markets for richer opportunities
and new growth
3 Leveraging our innovation to bring the Intelligence of
Things™ to consumer products
4 Running a lean operation of highly talented individuals to
consistently achieve stated financial results
24
Run THE Best Consumer Business
25
Stable revenue
Strong operating cash flow
Broad, deep market
penetration
Revenue($ in millions)
Fiscal2010
Fiscal2015
CTG INS HRS IEI
19%
6%13%
42%
39%
31%
17% 14%
34% 35%
Communications 3G / 4G / LTE
Wireless
Wireline
Networking• Routing
• Switch
• SDN
• Optical
Server & Storage Converged: Compute/Storage &
Appliance/Security
Enterprise
Flash / Hybrid Storage
SSD
$9,935 $9,688 $9,191
FY13 FY14 FY15
26
- $9 billion business
- Server, Storage - Converged: Compute/Storage & Appliance/Security
- Communications: Wireless & Wireline
- Networking: Routing, Switch, SDN & Optical
• Innovation & Investment
• 10 New customer logos, solid bookings and business pipeline
• High Operating Cash FlowFA
ST
FA
CT
S
27
Communication
#1
Network
#1
Server & Storage
#2
Converged
#1
Converged
Infrastructure
Network Function
Virtualization
Software
Defined
Open Source
/Compute
Source: IDC Ems QTR revenue tracker
Flash
Storage
23% CAGR
Data
Analytics
$76Billion
28
Source: IDC Ems QTR revenue tracker
Digital Data
will exceed
40Zettabytes
Internet
Security
$43Billion100xincrease in
Wi-Fi Capacity
8xGrowth in Smart
Phone Traffic 10xvideo data
traffic on mobile
network
37%Growth in
SDN NFV
Applications
Converged
Infrastructure
Network Function
Virtualization
Software
Defined
Open Source
/Compute
Telecom - Wireless
29Source: UBS Estimates, Company Reports, Gartner, and Dell Oro
3G
Enterprise
Switching
GPON/FTTH
PBX & Unified
Communication
IP Core & Edge
Routing
Enterprise RoutingEnterprise Storage Enterprise Server
Optical
Networking
WLAN
(Networking) Converged Infrastructure 3.0 (Server Storage)
Small Cells
Broadcast/Video
Investing & Emerging Legacy HardwareMarket Leadership Position
DAS
RRH
Security Appliance
Em
erg
ing
Tech
no
log
y G
row
th
Leg
acy
Tech
no
log
y
Microwave
Backhaul
Flash/Hybrid
Storage
LTE – 4G
100G400G
SDN
Reference
Platforms
Converged
Platforms
Rack Solutions
5G
C-Ran
30
Double digit growth
Massive TAM
Expansion across new
industries
Technology convergence
Revenue($ in millions)
Fiscal2010
Fiscal2015
CTG INS HRS IEI
19%
6%13%
42%
39%
31%
17% 14%
34% 35%
$3,763 $3,788
$4,459
FY13 FY14 FY15
IndustrialAppliances
and Lifestyle
Self-Service/
Smart Retail
Capital
Equipment
Office
Solutions
Safety &
Security
Energy
and Metering
31
$4.46Brevenue in FY15 and
18% increase over
FY14
Increased from
7 to 13accounts with
>100M in revenue
23 accounts
with double digit growth
12 accounts
with triple digit growth
>$1.6Bof new
manufacturing business wins
44new accounts
185 new program
ramps
17%revenue
contribution to Flex
total business
On track for double digit growth in FY16
LightingTAM: $72B
AutomationTAM: $102B
Capital EquipmentTAM: $140B
AgricultureTAM: $36B
Connected Home and Lifestyle
TAM: $198B
EnergyTAM: $371B
2014 Flex TAM’s
32
Industrial
AutomationAppliances Lifestyles Self-service HVAC
Capital
Equipment
Measurement
Instrumentation
& Test
Building
Automation
Safety &
SecuritySmart Grid Oil & Gas
Water Transport
& Treatment
33
Approaching $1B in Industrial Home and Lifestyle Business in FY15
Window
Controls
Water
Heater
HVAC
Lighting &
Fan Controls
Door LocksHome
Appliances Pool
EquipmentSmart
Irrigation
34
35
Design, Engineering and Manufacturing Partner for
Leading Global Electric Meter Companies
Over 25% of North American Electric Meters Produced for
all Major OEM’s
Energy Management
Largest Manufacturer of Crystalline Silicon Solar Silicon Modules, Outside China, with
1.7 GW/Year Capacity
Largest Manufacturer of Micro-Inverters in the World with over
10 million Shipped To-Date
Renewable Energy
Full Spectrum Capabilities to Support Residential,
Commercial and Utility Scale Products
Design, value engineering, Manufacturing and Cost Optimization Through
Alternate Materials Systems
Energy Storage
36
Double digit growth
Longer product lifecycles
Significant barriers to entry
Focused M&A
Revenue($ in millions)
Fiscal2010
Fiscal2015
CTG INS HRS IEI
19%
6%13%
42%
39%
31%
17% 14%
34% 35%
Automotive• Vehicle Electronics
• Connectivity
• Energy Management
Defense & Aerospace• Defense
• Civil Aviation
• Homeland Security
Medical• Consumer Health
• Drug Delivery
• Disposable Devices
• Medical Equipment
$2,835$3,275 $3,557
FY13 FY14 FY15
37
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
~21%
10%+
Revenue Bookings
FY16 FY17 FY18
95%Booked
92%Booked
85%Booked
*Compared to traditional competitors
Automotive Medical Aero & Defense
#1Industry(Technology and
Revenue)
#1*Industry(Technology and
Revenue)
79%(Bookings increase
over FY14)
38
~$2 billionsegment
25+ locations
9,000employees
15countries
• Connectivity &
Infotainment
• Motion & Power
Controls
• Smart Actuators
• Smart Camera
• Electronic Module
Design/Manufacturing
• EMI/EMC Simulation
and Validation
• VA/VE Analysis
• Component Validation,
Re-Flash “Last to
Touch” Logistics
• Overhead Consoles &
Ambient Lighting
• LED Driver Modules
• Flexible LED Lighting
(Q-Prime®)
• Power & Signal
Distribution
• Electrohydraulic
Controls
• Power Conversion,
Storage & Charging
Manufacturing
& ServicesSmart Electronics Clean TechLighting
39
Extends Flextronics’ market
leadership in automotiveCustomer and Global Expansion
• #1 - Global market share leader in exterior
mirror motion controls
– Extends existing $100M motion control
business
• “Smart” mirror embedded
with electronics
– Complements Flextronics smart
camera activity
– Actuators are the single most value-add
of all smart components in the mirror
• Accelerates our position with strategic
OEM’s (VW, Audi, Toyota, Fiat and
several OEM’s in China)
• #1 market share leader in China
• Specified by the OEM’s
40
• #1 manufacturing solutions provider in
the medical market
• ~$1.6B in annual revenue
• 14 FDA registered sites
• We helped design more than 65 medical
products that are in the market today
• Over 60 manufacturing transfers have
been made with 100% success rate
• Excellent track record in FDA inspections
We help medical customers become more competitive by bringing innovative products to market faster and at lower
costs through world-class end-to-end supply chain solutions with a commitment to quality in everything we do.
Expertise & ExperienceStrength & Stability
41
42
Laboratory Diagnostics Equipment• Lab Blood Diagnostics
• Mass Spectrometry
• High Pressure Liquid Chromatography
• Dialysis
▌
Consumer Diagnostics• Blood Glucose Meters
• Handheld Wireless Controllers
• Hearing Aids
• Aesthetic Care Devices
▌
Imaging & Monitoring• Ultrasound
• CT, MRI, PET
• X-ray
• Patient Monitoring
▌
Patient Mobility• Hospital Beds
• Patient Mobility Systems
▌
Disposable Devices• Diagnostic Catheters
• Wound Management
• Infusion Sets
• Pressure Cuffs
• Drug Delivery Cassettes & Cartridges
▌
Drug Delivery• Electro-Mechanical Drug Delivery Systems:
(Insulin, HGH, pain)
• Smart Patches
• Inhalers
▌
Microelectronics for Implantable
Devices• Neuro-Stimulation
• Cochlear Implants
• Cardiac Rhythm Management
▌
Orthopedics• Cases & Trays
• Instruments
• Power Tool Build & Repair
• Logistics
• Design (2015)
• Machining Expansion (2015)
▌
43
44
Non-traditional businessSignificant opportunities to grow
our market leading position
Strategic relationshipsPartnered across leading
customers in varied industries
InnovationDistinctly positioned as a product
innovation enabler
Partnering with
tomorrow’s disruptorsPowerful differentiation to create
future demand
45
Intense customer focus builds trust
and long-standing relationships
30 years
15 years
10 years
10 years
0 years
Rear CompartmentRear Tail Lamp PCBAs
LED Tail Lamp Controllers
Power Deck Lid/Lift Gate Controllers
Smart Cameras
DoorsMotion Control Modules
Power Mirror Actuators
SeatsPower Seat Modules
Front LightingFront Lamp PCBAs
Light Control Modules
Engine & PowertrainRecuperation Modules
DC/DC Converters
High Precision Solenoids (Engine & Transmission)
Wiring Harnesses (Al & Cu)
Battery Cables
Specialized Harnesses (incl. FPC & AL)
Instrument PanelDigital LCD Gauges
LED/RGB Ambient Lighting
Overhead SystemsOverhead Consoles
Dome Lamps
Sunroof ControllersConnectivity/InfotainmentConnectivity & Media Modules
Media Device Interface Modules
Rear Seat Entertainment Modules
Vehicle System Interface Modules
Head Units
46
47
Diabetes Blood glucose meters
Insulin delivery systems and tubing
sets
Dialysis disposables and equipment
CardiacDiagnostic catheters
Implantable heart monitoring systems
Cardiac rhythm monitoring
RespiratoryInhalers & Nebulizers
C-Pap
BrainNeuro-stimulation
Transdermal patch for migraines
OrthopedicsBlades and cutters
DiagnosticsBlood analyzers
Imaging
DermatologyWound management systems
Aesthetic care devices
MobilityHospital beds
Mobility systems
HearingCochlear implants
DentalHigh speed headpiece
PodiatricFoot ulcer system
Gel cushions
Hospital SuppliesIV pumps and tubing sets
Syringes
Blood collection devices
General Surgery Insufflation sets
Gastic bands
Surgical packs
48
Micro-electronics
encapsulation
(flex circuits)
Sensor Integration
Optics (image capture)
Smart Watch Packaging
(computing/mechanics)
Bendable / Stretchable
Electronics
Waterproofing
Customization/Personalization
Tech.
Flex Capabilities
Sport & Fitness
Wellness
Image Capture
Lifestyle Computing
Entertainment
Apparel & Fashion
Apparel & Fashion
Personal Data Management
Sectors We Support
Smart Watches
Smart Glasses
Notification Sensors
Smart Fabrics
Smart Fitness Wristbands
Super Fitness Watches
Fitness Shoe Sensors
Smart Socks
49
Wearables /
Fitness Trackers
Energy Management /
Thermostats
Streaming
Video
and
IPTV
Smart
Home
Controllers
Streaming
Audio
Cloud
Analytics
Smart Sensors
and
Lighting Controls
50
Sensors & Actuators
Open Innovation Platform
Lab IX/ Startups
InternalOEMs University Research Institutes
Government & Public
Innovation Services
ComputingBattery & Power
Mechanicals & Plastics
Smart Software
Human Machine Interface
Wireless & Connectivity
Value Engineering
Semiconductors Flexible Technologies
Technology Partners
Centers of Excellence
Aerospace & Defense
Automotive EnergyIndustrial Automation
Fitness & Medical
Consumer Electronics
Communications & Networking
Server & Storage
Markets & Products
51
2010 2012 2013 2014
IPO Date: July 2012
Product: Security Appliances
Flex Exclusive
IPO Date: Sept 2013
Product: Security Appliances
Flex Exclusive
IPO Date: Dec 2013
Product: Converged Storage
Flex Exclusive
IPO Date: Nov 2009
Product: Security Appliances
IPO Date: May 2013
Product: Optical
Products & SDN
Flex Exclusive
IPO Date: April 2012
Product: Network Control
IPO Date: Sept 2013
Product: SSD Enterprise
Storage
IPO Date: Nov 2012
Product: Wireless
Networking
IPO Date: June 2014
Product: SDN Solutions
(Gigabit Ethernet Switches)
52
Silicon Valley’s Customer Innovation CenterProduct Concept > Design & Engineering > Rapid Prototyping > Volume Production > Repair & Refurbish
Manufacturing
• Scalable
Manufacturing
• Procurement &
Sourcing
Advanced
Engineering &
Robotics Labs
• Value Engineering
Services
• Manufacturing
Technology
Innovation
Interconnect
Technology Center
• Multek (PCBs,
Flexible & Rigid)
• Advanced Printed
Circuits
• Integrated Design
Capabilities
Failure Analysis
Labs & Mechanicals
• Materials
Characterization
• Sheet Metal
Manufacturing
System
Integration
• Configure to
Order
• Build to Order
New Product Introduction
• Prototype to Product
Launch
• 3D Printing (plastic)
Confidential
Center
• Private & Secure
Manufacturing
Room
Lab IX
• Startup hardware
Accelerator
• Business Scaling
Resources
Global Services
• Forward & Reverse
Logistics
• Vendor Managed
Inventory
Innovation Labs &
Design Center
• Technology Innovation &
Engineering
• Design for ‘X’ Services
• 3D Printing (metal)
WELCOME
CENTER
53
54
Lightspeed Venture Partners
Dave Duffield (co-founder & co-CEO,
Workday)
Aaron Levie (co-founder & CEO, Box)
Jerry Yang (co-founder, Yahoo & founding
partner, AME Cloud Ventures)
Mike Frandsen (VP of products,
Workday)
Jim Davidson (co-founder, Silver Lake
Partners)
Outside investors:
Mike McNamara (CEO, Flex),
Nader Mikhail (founder & CEO,
Elementum),
Chris Schaepe (founder & partner,
Lightspeed Venture Partners),
Jim Davidson (co-founder, Silver Lake
Partners),
Ray Bingham (Chairman of the Board,
Flex and former CEO, Cadence)
Board of Directors:
Dave Duffield (co-founder & co-CEO,
Workday)
David Dibble (former EVP, Service
Engineering & Operations, Yahoo)
David Henke (former SVP, Engineering &
Operations, LinkedIn)
Aneel Bhusri (co-founder, chairman and
co-CEO, Workday)
Advisory Board:
Flex began incubating Elementum in 2012
Elementum is a majority-owned subsidiary of Flex
– Flex owns a majority of the outstanding equity and controls the board of directors
– Consolidated financials with Flex
Elementum has over $60M in total funding
55
Poor visibility into the state of
operations.
Unclear which suppliers are at
risk and when
Don’t know which shipments
are late until they don’t arrive
It takes way too long to get
commitment on new or
changed orders from partners
The Problem
Perspective: Real-time
visibility
Exposure: Risk
management
Transport: Shipment
tracking & carrier management
Fulfillment: Order
collaboration
The Solution
56
57
Improving earnings efficiency
Disciplined capital deployment
Internal target threshold stands at 20%
ROIC well above WACC
Return on Invested Capital1
(ROIC %)
19.0%
22.1%
23.7%
FY13 FY14 FY15
19%
22%
24%
1. 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 excludes charges for stock-based compensation expense and restructuring charges. The net invested capital asset base is defined as the sum of shareholders'
equity and net debt averaged over the last five quarters.
58
Committed to returning over 50% of annual free cash flow to shareholders
Since FY11, we have repurchased…
Over $2 Billion in stock
Over 300 Million shares
~ 30% of net shares outstanding
75%
63%
75%
% of Free Cash Flow
Returned to Shareholders
1-YrFY15
3-YrFY13-15
5-YrFY11-15$400
$510
$322
$475$416
813757
684639
591 563 568
FY10 FY11 FY12 FY13 FY14 FY15 FY16 YTD
Repurchased ($ millions)
Shares Outstanding
Share Repurchase($ millions)
65Mshares
82Mshares
52Mshares
60Mshares
39Mshares
$400
$510
$322
$475$416
8Mshares
$100
59
Generating strong sustainable free cash flow to support growth
$715M
$855M
$622M
$463M$416M
$680M $701M
$554M
225M
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 YTD FY17E
$3 Billion Target
$3 - $4 Billion
$715M
$855M
$622M
$463M$416M
$680M $701M
$554M
$225M
60
Debt Maturities ($ millions)
(Calendar Year)
Solid liquidity
No near-term maturities
Low cost of debt ~3.5%
Strong credit metrics (Debt / EBITDA (LTM) : 2.1x)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
$3.8B
$1.5B
Revolver
$2.3B
Cash
Total Liquidity
4.625%
Notes
5%
NotesTerm Loans
LIBOR + 125 to 137.5 bps
$593
$475$500 $500
Capital Structure as of Q1 FY2016 earnings announcement 7/23/2015
4.75%
Notes
$600
61
Primarily focused on investing to expand our HRS capabilities
Target capabilities
Strategic customers
Longer product lifecycles
Barriers to entry
Higher margins
EPS Accretive
Key Criteria$25-$100M
2 4
<$25M
Reflects M&A transactions completed from FY13 to FY16, excludes OEM asset acquisitions
>$100M
Purchase Price
2
62
Will not impact our shareholder return commitment
Hits our key M&A investment criteria
Compelling strategic rationale
Solid financial framework
• Strong growing revenue
• LTM €200M (USD$216M1), up 20%
• Positioned across all top 10 OEMs
• Over 90% of next 2 years of business booked
• Expand across FLEX business groups
• Accretive margin profile
• Well above HRS business margins
• Immediately accretive to EPS
• Greater than $0.01 per quarter
• Solid free cash flow generation
• Consideration of €457M (USD$494M1)
• Multiple attractive funding options
1. Based on exchange rate of Euro/USD $1.08
63
64
($ in millions, except per share amounts) June 27, 2014 March 31, 2015 June 26, 2015
Net sales $6,643 $5,952 $5,566
Adjusted operating income 183 178 159
Adjusted net income 148 157 134
Adjusted EPS $0.25 $0.27 $0.23
GAAP operating income 172 164 143
GAAP net income 174 135 111
GAAP EPS $0.29 $0.23 $0.19
Net sales of $5.6B vs. $5.6 - $6.2B
Adjusted operating income of $159M within guidance of $150 - $190M
Adjusted EPS of $0.23 at mid-point of $0.20 - $0.26
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
65 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
22.8%23.3%
24.1%23.7%
22.9%
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
(ROIC %)
$0.25 $0.26
$0.30
$0.27
$0.23
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
(EPS)
6,643 6,529 7,025
5,952 5,566
5.8% 5.8% 5.8%
6.4% 6.4%
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Adj. Gross Margin($ in millions)
183 183207
178159
2.8% 2.8%2.9%
3.0%2.9%
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
% Revenue($ in millions)
$57 2.9%
$39 2.5%
$29 2.6%
$60 6.6%
Corporate
Services & Other1 ($26)
Total $159 2.9%
INS
CTG
HRS
66
($ in millions)
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
IEI
1. Corporate services and other related to unallocated cost
3%2%
5% 7%
3% 4%
4% 6%
• Challenging INS macro-environment
• Margins on target
• Sustaining healthy margins
• Program ramps and investments weigh on margins
67
• Q1 FY16 was $17M, better than guidance of ~$20M
• Outlook: quarterly estimate of ~$25M
• Q1 FY16 was 5.6%
• Outlook: 8-10% range
• Intangible amortization $8M
• Stock based compensation $16M
• Aggregate impact on EPS $0.04
68
Three Months
Ended
($ in millions) Jun-15
GAAP net income $111
Depreciation and amortization 110
Change in net working capital 131
Other operating cash flows, net 10
Net cash provided by operating activities 362
Purchases of property & equipment, net (137)
Free Cash Flow 225
Payments for share repurchases (100)
Proceeds from borrowings, net 588
Other investing and financing, net (10)
Net change in cash and cash equivalents $703
2,126 1,886 1,834 1,866
1,730
8.0%7.2%
6.5%
7.8% 7.8%
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
% Annualized Revenue($ in millions)
400
510
322
475 416
100
757 684 639
591 563 568
FY11 FY12 FY13 FY14 FY15 FY16 YTD
Shares Outstanding
($ in millions)
69
$2,331
$1,500
$593 $475 $500 $500 $600
Liquidity 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
($M) (Calendar Year)
Cash
Revolver
Total
Liquidity
$3,831
••••
Term Loans LIBOR + 125 to 137.5bps
4.625% Notes 5% Notes 4.75% Notes
70
• Disciplined SG&A expense management
• Well balanced capital expenditures
• ROIC above 20% target
• Strong Q1 Free Cash Flow of $225M
• New branding and website will drive a richer sales engagement
• Launch of Flex Pulse and Flex Customer Experience Center
provides us with more effective tools
• Capital return program remains on track as 7.7M shares
were repurchased for $100M in Q1
• Repurchased 305M shares, reducing our net shares
outstanding by ~30% since FY11
71
36%
20%
16%
28%
HRSIEI
CTG INS
Jun
2015
36%
($ in millions) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15E
Business Group $ $ $ $ $ Q/Q % Y/Y % Outlook (Q/Q)
INS 2,440 2,341 2,358 2,052 1,966 -4% -19% Up high single digit
CTG 2,222 2,210 2,647 1,861 1,565 -16% -30% Up 15% - 25%
IEI 1,125 1,097 1,106 1,132 1,130 0% 1% Up mid to high single digit
HRS 856 881 914 907 905 0% 6% Up mid to high single digit
Total Revenue $6,643 $6,529 $7,025 $5,952 $5,566 -6% -16%
Certain prior quarter amounts have been recast to conform to current year presentation
Integrated Network
Solutions(Telecom, Datacom, 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, Test &
Measurement, Appliance & Lifestyle, Energy
& Metering, Lighting)
High Reliability
Solutions(Automotive, Medical, Aerospace &
Defense)
37%
17%13%
33% Jun
2014
30%
HRSIEI
CTG INS
72
Adjusted SG&A Expense ~$210 +/- $5 million
Interest & Other Expense ~$25 million
Adjusted Income Tax Rate 8-10% range
GAAP EPS $0.17 - $0.23
WASO 577 million shares
($ in millions, except per share amounts)
Adjusted operating income excludes approximately $16 million for stock based compensation, of which approximately $14 million is excluded from adjusted SG&A.
GAAP EPS reflects approximately $0.05 for intangible amortization and stock-based compensation expense.
$5,900 - $6,500
$165 - $205
$0.22 - $0.28
73
Kevin Kessel Mary Lee
VP, Investor Relations Sr. Manager, Investor Relations
[email protected] [email protected]
(408) 576 - 7985 (408) 576 - 5167
For more information contact:
investors.flextronics.com