Date post: | 09-Jan-2017 |
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Results for Q4 Fiscal 2016Earnings Announcement: April 28, 2016
(Quarter Ending March 31, 2016)
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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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Q4 FY2016 Income Statement Highlights
Prior Yr Prior Qtr Current Qtr ($ millions, except per share amounts) March 31, 2015 December 31, 2015 March 31, 2016 Net sales $5,952 $6,763 $5,773 Adjusted operating income 178 236 200 Adjusted net income 157 196 161 Adjusted EPS $0.27 $0.35 $0.29 GAAP operating income 164 212 118 GAAP net income 135 149 61 GAAP EPS $0.23 $0.27 $0.11
Q4 FY2016 Results vs. Guidance:Net sales of $5.8B at the mid-point guidance of $5.5 - $6.1BAdjusted operating income of $200M above the mid-point guidance of $175 - $215M Adjusted EPS of $0.29 above the mid-point guidance of $0.25 - $0.31
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Quarterly Financial Highlights
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
24% 23% 23% 22% 22%
Return on Invested Capital(ROIC %)
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
$0.27 $0.23
$0.27
$0.35
$0.29
Adjusted Earnings Per Share (EPS)
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
5,952 5,566 6,317 6,763
5,773
6.4% 6.4% 6.3%6.7%
7.1% Adj. Gross Margin
Adjusted Operating Income ($M)
Revenue & Adjusted Gross Margin($M)
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
178 159 196
236 200
3.0% 2.9%3.1%
3.5% 3.5% Adj. Operating Margin
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$67 3.0% $265 3.0%
$35 2.5% $164 2.3%
$47 4.0% $158 3.4%
$81 7.9% $295 7.6% Corporate Services & Other1
($30) ($90)
Total $200
3.5%
$792
3.2%
Q4 FY16(Mar-16)
Operating Performance by Business Group
INS
CTG
HRS
($ millions)
IEI
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 group.
OP$ OP%
FY16
OP$ OP%
Target Adjusted Operating Margin Range
3%
5% 7%
3% 4%
4% 6%
2%
Sustaining margins despite lower sequential revenue
Continue to drive a richer sketch-to-scale engagement model
2nd straight quarter of margins within target range despite challenging macro
Exceeded target margin range for the 3rd straight quarter
Q4 FY16Adj. Operating Margin
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Other Income Statement Comments
•Q4 FY16 was $26M•Q1 FY17 outlook ~$25M
Interest & other expense, net
•Q4 FY16 was 7.6% •FY16 was 8.4%•Q1 FY17 outlook 8-10% tax rate
Adjusted income tax rate
Reconciliation between GAAP and Adjusted EPS
• Stock based compensation $21M or $0.04 in EPS• Net intangible amortization $17M or $0.03 in EPS• Bad debt charge $61M or $0.11 in EPS for an Energy customer
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Cash Flows, Net Working Capital & Share Repurchases
Consistently Returning Over 50% of Annual Free Cash Flow to
Shareholders
Three Months Ended
Twelve Months Ended
($ millions) Mar-16 Mar-16 GAAP net income $61 $444 Depreciation and amortization 132 492 Change in net working capital (59) 137 Other operating cash flows, net 63 63 Net cash provided by operating activities 197 1,136
Purchases of property & equipment, net (83) (497) Free Cash Flow 114 639 Payments for share repurchases (89) (420) Proceeds from borrowings, net (20) 694 Payments for acquired businesses (13) (917) Other investing and financing, net (19) (17) Net change in cash and cash equivalents (27) (21)
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
1,866 1,730 1,858 1,808 1,789
7.8% 7.8% 7.4%6.7%
7.7%% Annualized Revenue
Net Working Capital($M)
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Balanced Capital Structure
Key Characteristics:
• Low cost of debt ~3.5%
• Strong credit metrics (Debt / EBITDA (LTM): 2.2x)
• Solid liquidity• No significant near-term
maturities
Liquidity 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
1608
1500
3108
577.5 547.5 500 500 600
Debt Maturities ($M) (Calendar Year)
Cash
Revolver
Total Liquidity$3,108
Term Loans LIBOR + 125 &
137.5bps4.625% Notes
5% Notes 4.75% Notes$56 EURIBOR +100bps
FY11 FY12 FY13 FY14 FY15 FY16
400 510
322 475 416 420
813 757 684 639 591 563 545
FY15
31%
35%
17%14%
34%
HRS
INS
IEI
CTGFY 2015 FY 2016
751 792
Improving Profitability
Portfolio Evolution Driving a Richer Mix
Consistently Return Value to Shareholders
Adjusted Earnings Per Share (EPS)
FY 2015 FY 2016$1.0
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$1.14
Adjusted Operating Income ($M)
HRSIEI
CTG INS36%
19%16%
29% FY16
HRS IEI
CTG INS
35%
Revenue Mix
Free Cash Flow ($M)
FY 2015 FY 2016
554
639
Share Repurchases ($M)
Fiscal Year 2016 Business Highlights
+6% growth
+5% growth +15% growth
9shares outstanding
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Revenue by Business Group
38%
20%18%
24%
HRS IEI
CTGINS
Mar2016
38%
($ millions) Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-17EBusiness Group $ $ $ $ $ Q/Q % Y/Y % Outlook (Q/Q)INS 2,052 1,966 2,205 2,469 2,201 -11% 7% StableCTG 1,861 1,565 2,011 2,058 1,364 -34% -27% Down high single digitsIEI 1,132 1,130 1,146 1,214 1,190 -2% 5% Up low single digitsHRS 907 905 955 1,022 1,018 0% 12% StableTotal Revenue $5,952 $5,566 $6,317 $6,763 $5,773 -15% -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)
35%
19%15%
31% Mar2015
34%
HRS IEI
CTG INS
Certain amounts have been recast to conform to current year presentation
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Other Information:Interest & Other Expense ~$25 millionAdjusted Income Tax Rate 8.0% to 10.0% GAAP EPS $0.17 - $0.21WASO ~551 million shares
($ millions, except per share amounts)
Adjusted operating income excludes approximately $21 million for stock based compensation, of which approximately $18 million is excluded from adjusted SG&A. GAAP EPS reflects approximately $0.08 for intangible amortization and stock-based compensation expense.
$5,500 - $5,900Revenue
$175 - $205Adjusted Operating Income
$0.25 - $0.29Adjusted Earnings Per Share
June Quarter Guidance – Q1 FY2017
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For more information go to investors.flextronics.com