Q1 2017 Earnings Slides

Results for Q1 Fiscal 2017

Earnings Announcement: July 21, 2016

(Quarter Ending July 01, 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.flextronics.com along with the required reconciliation to the most comparable GAAP financial measures.

http://www.flextronics.com/

2

Q1 FY2017 Income Statement Highlights

Prior Yr Prior Qtr Current Qtr

($M, except per share amounts) June 26, 2015 March 31, 2016 July 01, 2016

Net sales $5,566 $5,773 $5,877

Adjusted operating income 159 200 190

Adjusted net income 134 161 149

Adjusted EPS $0.23 $0.29 $0.27

GAAP income before income taxes 119 69 117

GAAP net income 111 61 106

GAAP EPS $0.19 $0.11 $0.19

Q1 FY2017 Results vs. Guidance

Net sales of $5.9B at the high-end of guidance $5.5 - $5.9B

Adjusted operating income of $190M at the mid-point of guidance $175 - $205M

Adjusted EPS of $0.27 at the mid-point of guidance $0.25 - $0.29

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.

3

Quarterly Financial Highlights

23% 23%22% 22% 22%

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

Return on Invested Capital(ROIC %)

$0.23

$0.27

$0.35

$0.29 $0.27


Adjusted Earnings Per Share (EPS)

5,566 6,317

6,763

5,773 5,877

6.4% 6.3%

6.7%

7.1%6.9%


Adj. Gross Margin

Adjusted Operating Income ($M)

Revenue & Adjusted Gross Margin($M)

159 196

236

200 190

2.9%3.1%

3.5% 3.5%

3.2%


Adj. Operating Margin



Q1 FY17(July 01, 2016)

Target Adjusted Operating Margin Range

($M)

Rev$ OP$(adj.)

OP%(adj.)

$2,196 $62 2.8%Revenue and adjusted operating profit dollars grew y-o-y in a challenging industry environment.

$1,314 $25 1.9%Absorbed the impact from the wind-down of our Lenovo Motorola smartphone operations in China.

$1,289 $50 3.9%Adjusted operating margin up 130 bps y-o-y on improved operations and NEXTracker acquisition.

$1,078 $88 8.2%Revenue grew y-o-y for the 26th straight quarter. Well-managed customer ramps aid profit contribution.

Corporate Services &

Other1-- ($35) --

Total $5,877 $190 3.2%

6

4

2

2.5

9

6

4

3.5

Operating Performance by Business Group

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

1.9%

2.8%

3.9%

8.2%

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

• Q1 FY17 was $28M

• Q2 FY17 outlook ~$25M

Interest & other expense, net

• Q1 FY17 was 8.4%

• Q2 FY17 outlook 8-10% tax rate

Adjusted income tax rate

Reconciliation between GAAP and Adjusted EPS

Aggregate impact on EPS $0.08:

• Stock based compensation $24M

• Net intangible amortization $19M

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»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.


6

Cash Flows & Net Working Capital

Consistently Returning Over 50% of Annual Free Cash Flow to Shareholders

Quarter Ended

($M)(July 01, 2016)

GAAP net income $106

Depreciation and amortization 129

Change in net working capital 8

Other operating cash flows, net 21

Net cash provided by operating activities 264

Purchases of property & equipment, net (143)

Free Cash Flow 121

Payments for share repurchases (95)

Debt repayments, net (17)

Other investing and financing, net 63

Net change in cash and cash equivalents 72

1,730 1,858 1,808 1,789 1,796

7.8%7.4%

6.7%

7.7% 7.6%


% Annualized Revenue

Net Working Capital($M)



7

Balanced Capital Structure

Key Characteristics

• Solid liquidity• No significant near-term maturities

$1,679

$1,500

$574 $536 $500 $500 $600

Liquidity 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Debt Maturities ($M) (Calendar Year)

Cash

Revolver

Total Liquidity$3,179

Term Loans LIBOR + 125 & 137.5bps 4.625% Notes

5% Notes 4.75% Notes$56 EURIBOR +100bps



• Low cost of debt ~3.5%• Strong credit metrics (Debt / Adj. EBITDA (LTM): 2.2x)

Investment Grade Rating (Moody’s, S&P, Fitch)

28%

22%

39%

11%

8

Q1 FY2017 Highlights and Key Trends

225

143 158

114 121

13.9%13.0%

9.3% 9.7%8.3%


FCF Yield

Free Cash Flow($M)

100

142

90 89 95

568 557 551

545 546


Shares Outstanding

Share Repurchases($M)

61%

HRS

IEI

CTGCEC

38%

22%18%

22%

HRS IEI

CTG

CEC

Revenue Mix

40%

Strong Cash Flow

Continued Portfolio Evolution

Capital Return Commitment

Adj. Op. Profit

Mix

40%

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.

9

Revenue by Business Group

Communications & Enterprise ComputeTelecom, Networking, Server & Storage, Security, Cloud 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.

36%

20%16%

28% Jun2015

36%

HRS IEI

CTG CEC 38%

22%18%

22%

HRS IEI

CTGCEC

Jun2016

40%

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

CEC 1,966 2,205 2,469 2,201 2,196 0% 12% Down mid-single-digits

CTG 1,565 2,011 2,058 1,364 1,314 -4% -16% Up 15 - 25%

IEI 1,130 1,146 1,214 1,190 1,289 8% 14% Stable

HRS 905 955 1,022 1,018 1,078 6% 19% Down mid-single-digits

Total Revenue $5,566 $6,317 $6,763 $5,773 $5,877 2% 6%

10

Q2 FY2017 Guidance – September 2016

Other Information:

Interest & Other Expense ~$25 million

Adjusted Income Tax Rate 8.0% to 10.0%

GAAP EPS $0.18 - $0.22

WASO ~550 million shares

($M, except per share amounts)

Adjusted operating income and Adjusted EPS exclude $24M of stock compensation, of which $21M is attributable to SG&A, and $20M of intangible amortization expense. GAAP EPS is expected to be in the range of $0.18 to $0.22.

$5,800 - $6,200Revenue

$180 - $210Adjusted Operating Income

$0.26 - $0.30Adjusted Earnings Per Share

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11

AppendixReconciliation of GAAP to Non-GAAP Financial Measures

Quarter-endedJuly 01, 2016

($Thousands, except per share amount)

GAAP gross profit $405,995Stock-based compensation expense 2,433

Non-GAAP gross profit $408,428

GAAP SG&A expenses $239,546Stock-based compensation expense (21,364)

Non-GAAP SG&A expenses $218,182

GAAP income before income taxes $116,923Stock-based compensation expense 23,797

Intangible amortization 21,598

Interests and other, net 24,399

Other charges, net 3,529

Non-GAAP operating income $190,246

GAAP provision for income taxes $11,194Intangible amortization benefits 1,850

Tax benefit on intangible assets 638

Non-GAAP provision for income taxes $13,682

GAAP net income $105,729Stock-based compensation expense 23,797

Intangible amortization 21,598

Adjustments for taxes (2,488)

Non-GAAP net income $148,636

EPS

GAAP EPS $0.19

Non-GAAP EPS $0.27


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

Pretax income $116,923 $45,395 $162,318

Depreciation 106,946 -- 106,946

Amortization 21,598 (21,598) --

Interest, net 24,414 5,309 29,723

EBITDA 269,881 29,106 298,987

EBITDA – rolling 4 qtrs. 1,057,120 -- 1,269,670

Total Debt $2,758,616 -- $2,758,616

Debt to EBITDA 2.6x (0.4) 2.2x


ROIC %

GAAP 18.9%Non-GAAP Adjustments 2.7%

Non-GAAP 21.6%

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 certain other charges. The net invested capital asset base is defined as the sum of shareholders' equity plus total 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 or income. Additionally, non-GAAP interest includes the losses on sale under our global AR securitization and factoring programs.

Q1 2017 Earnings Slides

Business

Transcript of Q1 2017 Earnings Slides