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2013 Investor & Analyst Day Mike McNamara, Chief Executive Officer
FLEXTRONICS PLATFORM
PHYSICAL INFRASTRUCTURE 100+ sites 200k+ people 100+ Sites 200K People Global Scale 30+ Countries
1,000+ C U S T O M E R S
100,000+ P R O D U C T S
100+ Million U N I T S
$100+ Billion VA L U E O F G O O D S P R O C E S S E D
INDUSTRY FOOTPRINT
C O N S U M E R C O M P U T I N G N E T W O R K I N G T E L E C O M M E D I C A L E N E R G Y A U T O M O T I V E I N D U S T R I A L
MANUFACTURING TECHNOLOGIES
P O W E R R I G I D /
F L E X I B L E C I R C U I T S
M A C H I N I N G M E T A L F O R M I N G P L A S T I C S M O L D E D
M A G N E S I U M
GLOBAL SCALE
H R I T C U L T U R E F I N A N C E
FLEXTRONICS PLATFORM
PHYSICAL INFRASTRUCTURE
100+ Sites 200K people 30+ countries
Innovation Engineering Logistics Supply Chain
END-TO-END SERVICES
Global Scale
I N N O V AT I O N L O G I S T I C S E N G I N E E R I N G S U P P L Y C H A I N
P R O D U C T I N N O V A T I O N
C E N T E R S
L O G I S T I C S M A N A G E M E N T
D E S I G N E N G I N E E R I N G O P T I M I Z A T I O N
END-TO-END SERVICES
V E N D O R M A N A G E D
I N V E N T O R Y
A D V A N C E D M A N U F A C T U R I N G
P R O D U C T C O -I N N O V A T I O N
S P A R E P A R T S L O G I S T I C S R E G I O N A L I Z A T I O N
3 D P R I N T I N G S E R V I C E S
E N G I N E E R I N G A U T O M A T I O N
R E V E R S E L O G I S T I C S
R A T I O N A L I Z A T I O N
END-TO-END PLATFORM S E RV I C E S
END-TO-END PLATFORM S E RV I C E S
FLEXTRONICS PLATFORM
PHYSICAL INFRASTRUCTURE
100+ Sites 200K people 30+ countries
REAL-TIME INFORMATION
Visibility Risk Execution Any app
Global Scale
Innovation Engineering Logistics Supply Chain
END-TO-END SERVICES
CLOUD, MOBILE & REAL-TIME O T H E R I N D U S T R I E S H AV E G O N E
A N D N O W, S O H A S S U P P LY C H A I N
2013 Investor & Analyst Day
David Mark, Chief Strategy Officer
LOOKING AHEAD
100+ Sites 200K people 30+ countries
Visibility Risk Execution Any app
Global Scale
Innovation Engineering Logistics Supply Chain
HOW ARE WE BUILDING IT?
100+ Sites 200K people 30+ countries
Visibility Risk Execution Any app
Global Scale
Innovation Engineering Logistics Supply Chain
F L E X T R O N I C S P H Y S I C A L I N F R A S T R U C T U R E
M O R E
F L E X T R O N I C S P H Y S I C A L I N F R A S T R U C T U R E
M O R E
M O R E
F L E X T R O N I C S P H Y S I C A L I N F R A S T R U C T U R E
100+ Sites 200K people 30+ countries
Visibility Risk Execution Any app
Global Scale
Innovation Engineering Logistics Supply Chain
F L E X T R O N I C S E N D - T O - E N D S E R V I C E S
B E T T E R
F L E X T R O N I C S E N D - T O - E N D S E R V I C E S
B E T T E R
F L E X T R O N I C S E N D - T O - E N D S E R V I C E S
B E T T E R
100+ Sites 200K people 30+ countries
Visibility Risk Execution Any app
Global Scale
Innovation Engineering Logistics Supply Chain
N E W
F L E X T R O N I C S R E A L - T I M E A P P S
N E W
F L E X T R O N I C S R E A L - T I M E A P P S
N E W
F L E X T R O N I C S R E A L - T I M E A P P S
100+ Sites 200K people 30+ countries
Visibility Risk Execution Any app
Global Scale
Innovation Engineering Logistics Supply Chain
2013 Investor & Analyst Day Tom Linton, Chief Supply Chain Officer
THE WORLD IS CHANGING.
1960s: Mass Production e.g. Sears
1980s: Lean e.g. Toyota
2000s: SCM 2.0 e.g. DELL
2010s: Virtual e.g. Amazon
T H E E V O L U T I O N O F T H E S U P P LY C H A I N
TOP 5 SUPPLY CHAIN TRENDS
Flextronics Has 200,000 Supply Chain Professionals in Over 30 Countries
#5 : REGIONAL & LOCAL SOURCING
• Labor arbitrage in decline
• Regional sourcing expands as economies grow
• Supply ecosystems emerge
The Flextronics Platform is the Control Tower for Modern Supply Chains
#4 : V IRTUAL CONTROL TOWERS
• Virtual supply chains – No factories – Advanced cloud tools and “apps”
• Supply chain winners – Global footprint – Transparent – Reliable – Flexible
Flextronics is the Supply Chain Risk Management Leader
#3 : SAFE, FAST, AND COST-EFFIC IENT
• Modern supply chains are 3-D
• Predictability becomes a competitive advantage
• Supply chains break through barriers to become faster, more cost efficient and safer
Velocity
Risk
COST
Flextronics is Recognized as a Leader Driving CSER
#2 : CSER BECOMES FUNDAMENTAL
• Optionalism disappears
• Policies expand globally
• Emerging country laws catch up
• Foreign corporations follow global norms
CORPORATE SOCIAL ENVIRONMENTAL RESPONSIBILITY
The Flextronics Platform Drives Trust, Transparency, and Reliability
#1 : “NON-ZERO” SUPPLY CHAINS WIN
• Win-Win trend continues
• Supply chain “ecosystems” focus on balance for success
• End-to-end supply chain solutions create new value for customers
• Supply chain becoming a magnet for top students
Product Innovation Engineering Logistics Supply Chain
END-TO-END SERVICES
REAL-TIME INFORMATION
Visibility Risk Execution Any app
PHYSICAL INFRASTRUCTURE 100+ sites 200k+ people 100+ Sites 200K People Global Scale 30+ Countries
Not Being Part of the Flextronics Ecosystem is a Competitive Disadvantage
2013 Investor & Analyst Day Doug Britt, President
Industrial & Emerging Industries
E X T R E M E LY B R O A D M A R K E T S
Building Automation Self Service Industrial
Automation Safety & Security
Lifestyle & Appliances
Capital Equipment Energy
R E A L I G N I N G F O R S A L E S G R O W T H
IMPLEMENTED AGGRESSIVE SALES APPROACH TO SELL FLEXTRONICS PLATFORM
DOUBLED DESIGN TEAM TO TRIPLE DESIGN ENGAGEMENTS
ADDED STRATEGIC SALES RESOURCES AND DISCIPLINED EXECUTION PROCESS
INCREASED CUSTOMER FOCUS
Delivered 27 proactive transformational proposals in Q4’13
$530
$423 $362
$359
$232 $216 $249
New Wins Bookings Value ($mil)
$205
31
Stro
ng O
ppor
tuni
ty P
ipel
ine
Return to growth in FY14 - 10%-15% growth in FY15
35 34 41 49 55 63 67
I N C R E M E N TA L B U S I N E S S W I N S
Customer Impact • Reduce inventory
waste • Maintain quality &
reliability • Increase access to
engineering platform, technology & resources
$50M+ WIN
Transforming customer process & improving inventory efficiency
Slow customer
processing speed
PRE- TRANSFORMATION
Significant inventory obsolesce
Limited electronic & mechanical expertise
D E S I G N PA RT N E R L A R G E F O O D & B E V E R A G E C O M P A N Y
Customer Impact • Global fulfillment from
N.A. and Asia • Simplified supply chain • Reduced operational
costs • Lead time reduction
from 12 weeks to 4 weeks
$75M WIN
Reduced supply chain & system integration centers from 10 to 2
10 supply chain nodes
PRE- TRANSFORMATION
Acquisition integration
N.A. fulfilling global
demand
S O L U T I O N S L E A D I N G T E S T A N D M E A S U R E M E N T C O M P A N Y
TRANSFORMING A GLOBAL FLOOR CARE COMPANY SUPPLY
CHAIN
$350M WIN
$350M WIN
Leverages end-to-end Flextronics Platform
Customer Impact • Real-time information • Flexibility • Scalability • Innovation • Visibility • Brand protection
Lead-time 35 weeks
PRE- TRANSFORMATION
5 EMS partners
Commit Process 14 days
Limited visibility
S U P P LY C H A I N T R A N S F O R M AT I O N F L O O R C A R E C O .
FUEL ING INDUSTRIAL GROWTH
OPERATIONAL EXCELLENCE DRIVING HIGH CUSTOMER SATISFACTION
INVESTMENT IN PRODUCT DESIGN FUELING NEW GROWTH OPPORTUNITIES
CREATING TRANSFORMATIONAL SALES USING THE FLEXTRONICS PLATFORM
CONVERTING OUR STRONG PIPELINE OF OPPORTUNITIES TO ACHIEVE 10% - 15% GROWTH AND OPERATING MARGINS BETWEEN 4% - 6%
2013 Investor & Analyst Day Mike Dennison, President
High Velocity Solutions
1 . GLOBAL AND REGIONAL SOLUTIONS
Enabling Global Brands to Regionalize
Providing unique “customized” solutions to help customers grow in promising markets
Enabling Regional Brands to Globalize
Providing complete supply chain solutions to help customers expand globally
Global Scale and Breadth of Services Support Core Business
2 . CORE ECOSYSTEMS
We Now Support All Five in Very Diverse Ways
Automation Delivery Velocity
Product Innovation
Centers
Material Science
Co-Innovation
3 . LEAD ACROSS KEY D IFFERENTIATORS
4 . LEAD IN CRIT ICAL MARKETS Wearable Electronics
Massive Growth Fueling New Opportunities, Brands and Products
Connected Home Future Markets
Developing and Managing Supply Chains for the Future
Fundamentally changing the way businesses bring new ideas/products to market
5 . SUCCESSFULLY EXECUTE GOOGLE
FIVE OBJECTIVES DRIVE SOL ID RESULTS
Thoughtful expansion of new customers and markets
Sustainable revenue growth
Profits in 2%+ range for FY’14
Ongoing innovation of services / solutions
Delivering supply chain excellence across the entire portfolio
2013 Investor & Analyst Day Chris Collier, Chief Financial Officer
2
A Financial Strategy That Supports Our Platform
Committed to increasing shareholder value
The Flextronics
Platform
Revenue Growth
Operating Profit
Expansion EPS
Accretion Cash Flow Generation
Capital Structure Strength
FINANCIAL PRINCIPLES
FY13 Year in Review
4
FY13 Performance - Revenue
Our execution was challenged by weak macro and customer demand softness
• Significant weakness in Multek • Power business program delays
INS
IEI
Components
HRS
HVS
$23.6B
INS
HVS
IEI HRS
May 2012
Target
Components
FY13 Actual
$26-27B • Significant weakness in telecom and server/storage
• Accelerated exit of RIM • Demand softness in consumer
• Weak demand in semi-cap • Strong growth in appliances
• Strong growth in Medical/Auto • Strategic acquisitions
5
FY13 Performance – Adjusted Operating Margin
Factory under-absorption due to revenue reduction
Multek factory under-absorption due to revenue reduction
Strong operational execution despite sharp revenue reduction
Stable margin while revenue under pressure
Components
IEI
HVS
Performed to plan HRS
INS
Missing our target is not acceptable
2.6%
Components
HRS
INS
HVS IEI
3.3% May 2012
Target
FY13 Actual
6
$182 $185 $200
$209
~ $215
Q1'13 Q2'13 Q3'13 Q4'13 FY14E SG&A* Expense Trend ($ Millions)
Investing in the Platform for Growth
Focused and disciplined investment to optimize our Platform
• Incremental spend associated with acquisitions
• Boosting innovation and our supply
chain solutions technologies • Enhancing selling and business
development capabilities • Incremental corporate infrastructure
Stabilized at ~$215M quarterly run rate
Quarterly run rate
*Adjusted SG&A includes Design and R&D expense but excludes stock compensation expense and restructuring charges
7
Charges ($ Millions) FY’13 Q1’14E
Update Cash Charges $123 ~$30 - $35
Non-Cash Charges 104 ~5
Total Charges $227 ~$35 - $40
Restructuring Program Update
Program Benefits: • Estimated savings increased to ~$160M • Cost reductions in headcount, depreciation
and operating expense • 95% of savings associated with cost of sales
Positioned for improved operational efficiency and profitability
~$10M ~$20M
~$35M ~$40M
Q4'13 Q1'14 Q2'14 Q3'14
Savings Trajectory to ~$160M Estimated quarterly savings
Program Update: • Slight expansion to ~$35 - $40M • One additional factory closing and other
rationalization efforts • Accounting charges completed in Q1’14
8
FY13 Year in Review
Achieved record quarterly revenue of ~$350M at its target margin
Securing new business broadly distributed across our portfolio
Repurchased 52M shares; brings our total net buyback to 27% of shares outstanding since FY09
$1B bond deal that extended our average debt maturity by ~3 years
Generated over $1B in Operating Cash Flow, and over $680M in Free Cash Flow
Exceptional bookings
Strong Cash Flow
Improved Capital Structure
Executed Share Repurchases
Re-Positioned Power Business
Despite some challenges this past year, we accomplished . . .
Further strengthening our competitiveness
Portfolio Management
10
Diversification
Margins
Reduced Volatility
Working Capital
EPS Accretion
Flex
Balanced Portfolio Drives Optimal Shareholder Return
HVS 100%
Low-Volume High Mix 100% 60/40 70/30
Revenue OP EPS Revenue OP EPSRevenue OP EPS
Less Optimal Optimal
FY14 Roadmap to Improved Performance
12
Execution is paramount to achieve our desired results
Our Platform Creates Significant Earnings Expansion
1 Adjusted EPS is tax effected at 9% and assumes 650M shares outstanding
2 Adjusted operating profit reflects an estimated incremental $30M restructuring benefit achieved upon full savings run rate
Revenue
Operating Profit
Operating Margin
EPS1
~$750M
~$15M
~2.0%
2¢
~$350M
~$16M
~4.5%
2¢
-----
~$30M2
-----
4¢
-----
~$10M
-----
1¢
Google/MOT Muted
Seasonality Restructuring Other
$5.3B
~$106M
2.0%
13¢
March 2013
~$500M
~$23M
~4.5%
3¢
New Bookings
Ramp
$6.9B
~$200M
~2.9%
25¢
Revenue Growth
Path to 30%+ Growth
Cash Flow Generation & Capital Structure
14
$175
$370
$518 $500 $500
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
($ Millions) Mar 31 2012
Mar 31 2013
Cash $1,518 $1,587
Debt 2,189 2,068
Net Debt 671 481
Debt/EBITDA¹ (LTM)
1.9x 1.9x
Total Liquidity² 2,878 3,087
Strong Capital Structure Significant Debt Maturities ($ Millions)
5% Sub. Notes 4.625% Sub. Notes
Our capital structure is in excellent shape and positioned to support our growth ¹ Debt/EBITDA: total funded debt divided by LTM EBITDA ² Total liquidity: cash at quarter-end plus unused revolver capacity
Term Loans
15
Target $3 - $4 Billion
$3 Billion
715
855
622
463 416
680
FY'08 FY'09 FY'10 FY'11 FY'12 FY'13 FY'14E FY'15E FY'16E FY'17E
Free Cash Flow Generation
Fundamentally Structured for Cash Flow Generation
• Growing operating profit
• Sustaining optimal working capital management
• Maintaining disciplined capex investments
Generating strong sustainable cash flow to support our growth
($ Millions)
16
Capital Allocation Strategy
~25% Strategic Acquisitions
• Strategic value • Revenue and operating growth • EPS accretive
~40% Capex
• Invest for top-line growth • Innovative solutions • Sustaining our platform
~35% Returning Value
• Committed to share repurchase • Potential for dividends
Creating shareholder value with a long-term vision
Guidance & Key Takeaways
18
Reiterate Guidance for Q1FY14 (June Qtr)
FLEX Business Groups JUN-13E Q/Q Outlook Integrated Network Solutions Flat Industrial & Emerging Solutions Low Single-Digit Growth High Reliability Solutions Flat High Velocity Solutions Low Double-Digit Growth
JUN-13E
Quarterly Revenue
($ Millions) $5,600
$5,300
Quarterly Adjusted EPS
$0.16
$0.12
19
Key Takeaways
Our Platform provides complete supply chain solutions Competitively Advantaged
Our financial principles are the foundation for growth Accountability
Positioned and committed to increasing shareholder value
Strategically investing and optimizing our Platform Smart Investments
20
Appendix: Notes The non-GAAP financial measures included in this presentation: adjusted SG&A, adjusted operating profit & margin, adjusted EPS, debt to EBITDA and free cash flow may exclude certain amounts that are included in the most directly comparable measures under GAAP or may be a supplemental measure of operating performance. Adjusted financial measures exclude charges primarily for restructuring, stock-based compensation expense and intangible amortization. Please refer to the Investors section of our website which contain the reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures. Adjusted operating margin by business group excludes intangible amortization, stock compensation expense and restructuring charges and represent approximations as the company does not include formal allocations of common facilities and overhead costs, or centralized corporate services such as marketing, IT and other administrative support. Although discrete financial information exists to a limited degree, the company opportunistically allocates its resources according to specific customer opportunity irrespective of the business group in which the business activity will be reported. Q1FY14E Guidance Notes: Quarterly GAAP earnings per diluted share are expected to be lower than the guidance provided herein by approximately $0.03 reflecting quarterly intangible amortization and stock-based compensation expense, and by approximately $0.06 for the remaining restructuring charges.
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