flextronics q1fy15 earnings release slides
DESCRIPTION
Flextronics Q1FY15 Earnings Release SlidesTRANSCRIPT
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Results for Q1 FY2015 (Quarter Ended June 27, 2014)
Earnings Announcement: July 24, 2014
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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.
Risks and Non-GAAP Disclosures
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Q1 FY2015 Income Statement 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
Prior Yr Prior Qtr Current Qtr
June 28, March 31, June 27,
($ in millions, except per share amounts) 2013 2014 2014
Net sales $5,791 $6,724 $6,643
Adjusted operating income 137 182 183
Adjusted net income 112 146 148
Adjusted EPS $0.18 $0.24 $0.25
GAAP operating income 87 137 172
Restructuring, other charges and credits (41) (90) 44
GAAP net income 59 43 174
GAAP EPS $0.09 $0.07 $0.29
Q1 FY2015 Results vs. Guidance:
Net sales of $6.6B exceeded guidance of $6.0 - $6.5B
Adjusted operating income of $183M exceeded guidance of $150 - $180M
Adjusted EPS of $0.25 exceeded guidance of $0.20 - $0.24
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137159
187 182 183
2.4% 2.5% 2.6% 2.7% 2.8%
Jun-13 Sep-13 Dec-13 Mar-14 Jun-14
% Revenue
$0.18 $0.22
$0.26 $0.24 $0.25
Jun-13 Sep-13 Dec-13 Mar-14 Jun-14
5,791 6,410
7,183 6,724 6,643
Jun-13 Sep-13 Dec-13 Mar-14 Jun-14
348 370
400 387 382
6.0%5.8%
5.6%5.8% 5.8%
Jun-13 Sep-13 Dec-13 Mar-14 Jun-14
% Revenue
Trended Quarterly Income Statement Highlights
Adjusted Gross Profit($ in millions)
Revenue($ in millions)
Adjusted Earnings Per Share (EPS)
Adjusted Operating Income ($ 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
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Other Income Statement Highlights
Adjusted interest & other expense $19 million
Adjusted income tax rate 9.9%
Reconciliation between GAAP & adjusted EPS:
• Intangible amortization $7 million
• Stock based compensation $12 million
• Other income $55 million, reversed charge from Q4’14
• Loss on sale of non-strategic Western European manufacturing operation $11 million
• Aggregate impact on EPS $0.04
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Three Months
Ended
($ in millions) Jun-14
GAAP net income $174
Depreciation and amortization 120
Change in net working capital (129)
Other operating cash flows, net (246)
Net cash used in operating activities (81)
Purchases of property & equipment, net (73)
Free Cash Flow (154)
Payments for repurchase of ordinary shares (106)
Proceeds of borrowings and other 14
Net change in cash and cash equivalents ($246)
Summary Statement of Cash Flows
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
Focused Working Capital Management• Target 6% - 8% of total revenue
Committed to Returning Over 50% of Annual Free Cash Flow to Shareholders
Disciplined Capital Investment• Target capex below depreciation level
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$1,348
$1,500
$600 $500 $500 $500
Liquidity 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Solid Capital Structure
Please refer to the Investor Relations section of our website which contain the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures
Significant Debt Maturities (Calendar Year)($ millions)
Term Loans
($ in millions)Mar-14 Jun-14
Cash $1,594 $1,348
Total Debt 2,103 2,129
Debt / EBITDA (LTM) 1.9x 1.9x
Cash
Revolver
Total
Liquidity
$2,848
4.625% Notes 5% Notes
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Q1 FY2015 CEO Commentary
Continuous Focus on Innovation & Differentiation
• All four business groups exceeded sales expectations
• Record quarterly sales for both IEI & HRS
• $183M operating profit exceeded guidance range
• 5 consecutive quarters of operating margin improvement
Broadly Exceeded
Expectations
Consistent Profit
Improvements
• Repurchased ~11M shares for $106M
• Bought back ~2% of shares outstanding
Steadily Returning
Value to Shareholders
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Motorola Update
• Google hardware ecosystem
• Regionalization and customization
• Strategic customer relationship
• Low cost investment ~$75M
Original Value Proposition
• Expanded capabilities
• Increased regionalization
• Vertical integration
• Google programs & innovation
• Expanding business opportunities
Strategic Value Created
• Strong Lenovo relationship
• No negative financial impact from Dallas shutdown
• Possible financial impact remains UNCHANGED:
• Cash flow generation of ~$100M - $150M
• Redeploy assets of ~$50M+
• Negative EPS impact of ~$0.02 - $0.03
• Limited restructuring impact
We Expect Limited Financial Impact
Future Direction
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Jun-14 Sep-14E
Business Group $ Q/Q % Y/Y % Outlook (Q/Q)
Integrated Network Solutions $2,503 4% -1% Decline Low Single Digits
Consumer Technology Group* 2,160 -11% 40% Decline High Single Digits
Industrial & Emerging Industries 1,134 10% 25% Stable
High Reliability Solutions 846 0% 5% Stable
Total Revenue $6,643 -1% 15%
Revenue by Business Group
Certain prior quarter amounts have been recast to conform to current year presentation
* High Velocity Solutions was renamed to Consumer Technology Group as of May 21, 2014 Investor & Analyst Day
($ in millions) Jun-13 Sep-13 Dec-13 Mar-14 Jun-14
Business Group $ % Total $ % Total $ % Total $ % Total $ % Total
Integrated Network Solutions $2,532 44% $2,588 40% $2,598 36% $2,418 36% $2,503 38%
Consumer Technology Group* 1,547 26% 2,097 33% 2,829 39% 2,436 36% 2,160 32%
Industrial & Emerging Industries 906 16% 940 15% 933 13% 1,027 15% 1,134 17%
High Reliability Solutions 806 14% 785 12% 823 12% 843 13% 846 13%
Total Revenue $5,791 $6,410 $7,183 $6,724 $6,643
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Q2 FY2015 Guidance
Other Information:
Adjusted SG&A Expense ~$200 million
Interest & Other Expense ~$20 million
Adjusted Income Tax Rate 8% - 10%
GAAP EPS $0.19 - $0.23
WASO ~595 million shares
$165 - $190Adjusted Operating Income
$0.22 - $0.26Adjusted Earnings Per Share
$6,200 - $6,600Revenue
($ in millions, except per share amounts)
Adjusted operating income excludes approximately $11 million for stock based compensation, of which approximately $9 million is excluded from adjusted SG&A.
GAAP EPS reflects approximately $0.03 for intangible amortization and stock-based compensation expense.
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THANK YOU
For more information:
investors.flextronics.com