Flex(US:FLEX)2025-07-25 20:16PART I. FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements for Q1 FY2026 show increased net sales to $6.6 billion, net income to $192 million, and total assets to $19.1 billion Condensed Consolidated Balance Sheets Total assets increased to $19.13 billion and total liabilities to $14.04 billion as of June 27, 2025, with shareholders' equity at $5.09 billion Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 27, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total current assets | $13,467 | $12,841 | | Total assets | $19,132 | $18,381 | | Total current liabilities | $9,921 | $9,850 | | Total liabilities | $14,043 | $13,379 | | Total shareholders' equity | $5,089 | $5,002 | Condensed Consolidated Statements of Operations Q1 FY2026 net sales increased to $6.58 billion, operating income to $311 million, and net income to $192 million, with diluted EPS at $0.50 Statement of Operations Summary (in millions, except per share data) | Metric | Q1 FY2026 (ended June 27, 2025) | Q1 FY2025 (ended June 28, 2024) | | :--- | :--- | :--- | | Net sales | $6,575 | $6,314 | | Gross profit | $572 | $471 | | Operating income | $311 | $233 | | Net income | $192 | $139 | | Diluted EPS | $0.50 | $0.34 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q1 FY2026 significantly increased to $300 million, driven by higher net income and positive other comprehensive income Comprehensive Income Summary (in millions) | Component | Q1 FY2026 (ended June 27, 2025) | Q1 FY2025 (ended June 28, 2024) | | :--- | :--- | :--- | | Net income | $192 | $139 | | Foreign currency translation adjustments | $69 | $(16) | | Unrealized gain (loss) on derivatives | $39 | $(27) | | Comprehensive income | $300 | $96 | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $5.09 billion, influenced by net income and other comprehensive income, partially offset by share repurchases - Key changes in shareholders' equity for the quarter included a $192 million increase from net income and a $247 million decrease due to share repurchases25 Condensed Consolidated Statements of Cash Flows Operating cash flow was $399 million, with $179 million used in investing and $283 million in financing, resulting in a $50 million net cash decrease Cash Flow Summary (in millions) | Cash Flow Activity | Q1 FY2026 (ended June 27, 2025) | Q1 FY2025 (ended June 28, 2024) | | :--- | :--- | :--- | | Net cash provided by operating activities | $399 | $340 | | Net cash used in investing activities | $(179) | $(82) | | Net cash used in financing activities | $(283) | $(468) | | Net change in cash and cash equivalents | $(50) | $(231) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, segment information, debt instruments, a $35 million acquisition, contingencies, and a new $2.75 billion credit facility - The company operates through two segments: Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS)3237 - On April 30, 2025, the company acquired a manufacturing business in Poland for an estimated $35 million, included in the FRS segment85 - Subsequent to the quarter end, on July 15, 2025, the company established a new $2.75 billion credit facility maturing in July 2030, replacing its previous facility105 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports a 4% revenue increase to $6.6 billion, improved gross margin to 8.7%, strong operating cash flow, and robust liquidity with $2.2 billion cash Overview Flex operates as a global end-to-end manufacturing partner through two segments, offering vertically-integrated supply chain solutions from design to service - Flex operates through two reportable segments: Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS)108113 - The company's strategy is to offer a full range of vertically-integrated global supply chain solutions, from design to post-sale services109 Results of Operations Q1 FY2026 net sales increased 4% to $6.6 billion, gross margin improved to 8.7%, and net income rose to $192 million with a 22% effective tax rate Net Sales by Segment (in millions) | Segment | Q1 FY2026 | Q1 FY2025 | % Change | | :--- | :--- | :--- | :--- | | Flex Agility Solutions | $3,691 | $3,365 | 10% | | Flex Reliability Solutions | $2,884 | $2,949 | -2% | | Total | $6,575 | $6,314 | 4% | - Gross margin improved by 120 basis points year-over-year to 8.7%, attributed to favorable product mix and continued operational execution132 Segment Income and Margin | Segment | Q1 FY2026 Income | Q1 FY2026 Margin | Q1 FY2025 Income | Q1 FY2025 Margin | | :--- | :--- | :--- | :--- | :--- | | Flex Agility Solutions | $240M | 6.5% | $179M | 5.3% | | Flex Reliability Solutions | $172M | 6.0% | $147M | 5.0% | - The consolidated effective tax rate for the quarter was 22%, down from 28% in the prior-year period, primarily due to favorable foreign exchange impacts and tax benefits146 Liquidity and Capital Resources Flex maintains strong liquidity with $2.2 billion cash, generated $399 million operating cash flow, and established a new $2.75 billion credit facility - The company had cash and cash equivalents of approximately $2.2 billion and total debt of approximately $3.7 billion as of June 27, 2025151 Adjusted Free Cash Flow (in millions) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net cash provided by operating activities | $399 | $340 | | Net purchases of property and equipment | $(131) | $(108) | | Adjusted free cash flow | $268 | $232 | - In July 2025, the company established a new $2.75 billion revolving credit facility, maturing in July 2030151 Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure, including interest rate and foreign currency risks, were reported for the quarter - There were no material changes in the company's exposure to market risks for changes in interest and foreign currency exchange rates during the quarter164 Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter165 - No material changes to the company's internal control over financial reporting occurred during the quarter167 PART II. OTHER INFORMATION Legal Proceedings Material legal proceedings, including a commercial dispute settlement and tax assessments, are detailed in Note 13 of the financial statements - For details on material legal proceedings, the report refers to Note 13, "Commitments and Contingencies"169 Risk Factors No material changes to previously disclosed risk factors were reported compared to the Annual Report on Form 10-K - The company states there are no material changes from the risk factors discussed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2025170 Unregistered Sales of Equity Securities and Use of Proceeds Flex repurchased 7.2 million ordinary shares for $247 million, with $0.8 billion remaining for future repurchases under current authorization Issuer Purchases of Equity Securities (Q1 FY2026) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - May 3, 2025 | 5,001,483 | $30.66 | | May 4 - May 31, 2025 | 1,191,921 | $40.72 | | June 1 - June 27, 2025 | 1,009,205 | $44.68 | | Total | 7,202,609 | - | - As of June 27, 2025, approximately $0.8 billion was available for future share repurchases under the existing plan171 Other Information Two officers adopted Rule 10b5-1 trading plans for potential sales of company shares during the quarter - Two officers, Daniel J. Wendler and Michael P. Hartung, adopted Rule 10b5-1 trading plans during the quarter for selling company shares173174175 Exhibits Exhibits include incentive plans, award agreements, officer certifications, and XBRL data files filed with the Form 10-Q - The exhibits include various compensation plan documents, officer certifications (Sections 302 and 906), and XBRL interactive data files178