FLEX LTD
For the period ended Jun 28, 2024. Filed Jul 26, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 28, 2024 · Filed Jul 26, 2024
FLEX$69.78+4.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-02.
0000866374-24-000012
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-28; filed 2024-07-26.
0000866374-24-000034
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 107 previous paragraphs and 99 current paragraphs.
52 unchanged; 32 reworded; 14 added; 21 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
•changes in tax legislation;
Current report
FAS segment margin increased approximately 120 basis points, to 5.3%, for the three-month period ended June 28, 2024, from 4.1% for the three-month period ended June 30, 2023. The margin increase was primarily due to strong execution, product mix and cost savings actions taken.
Current report
Selling, general and administrative expenses (“SG&A”) was approximately $0.2 billion, or 3.4% of net sales, during the three-month period ended June 28, 2024, decreasing $22 million from approximately $0.2 billion or 3.4% of net sales, during the three-month period ended June 30, 2023. This decrease reflects our enhanced cost control efforts to keep SG&A expenses relatively flat.
Current report
Interest expense
Current report
Interest expense was $56 million during the three-month periods ended June 28, 2024 and June 30, 2023, as the effects of higher short term borrowings were offset by interest savings from debt repayments.
Current report
Interest income
Current report
Interest income during the three-month period ended June 28, 2024 was $16 million and was consistent with the prior year period.
Current report
Other charges (income), net
Current report
The OECD Pillar Two Global Anti-Base Erosion (“GloBE”) model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million. Numerous foreign jurisdictions have already enacted tax legislation based on the GloBE rules, with some effective as early as January 1, 2024. As of June 28, 2024, we recognized a nominal income tax expense for Pillar Two GloBE minimum tax. The Company is continuously monitoring the evolving application of this legislation and assessing its potential impact on our future tax liability.
Current report
Net income from continuing operations
Current report
Net income from continuing operations was $139 million during the three-month period ended June 28, 2024, compared to $147 million during the three-month period ended June 30, 2023, driven by the factors discussed above.
Current report
Net income from discontinued operations
Current report
Net income from discontinued operations was zero during the three-month period ended June 28, 2024, compared to $64 million during the three-month period ended June 30, 2023, as Nextracker was spun off during the fourth quarter of fiscal year 2024.
Current report
Net income attributable to noncontrolling interest was zero during the three-month period ended June 28, 2024, compared to $25 million during the three-month period ended June 30, 2023, as Nextracker was spun off during the fourth quarter of fiscal year 2024.
Removed paragraphs (21)
Previous report
•Nextracker, the leading provider of intelligent, integrated solar tracker and software solutions that are used in utility-scale and ground-mounted distributed generation solar projects around the world. Nextracker's products enable solar panels to follow the sun’s movement across the sky and optimize plant performance.
Previous report
Other Developments
Previous report
On July 3, 2023, our subsidiary Nextracker Inc. ("Nextracker") completed a follow-on offering to its initial public offering, which was completed on February 13, 2023, and issued 15,631,562 shares of Class A common stock and received net proceeds of $551 million. The entire net proceeds were used by Nextracker to acquire 14,025,000 Nextracker LLC common units from Yuma, Inc., our indirect wholly-owned subsidiary, and 1,606,562 Nextracker LLC common units from TPG Rise Flash, L.P., an affiliate of the global alternative asset management firm TPG. As a result of the repurchase of Nextracker LLC common units by Nextracker, 15,631,562 shares of Nextracker Class B common stock were cancelled. Subsequent to the follow-on offering, we owned 74,432,619 shares of Class B common stock, representing 51.5% of the total outstanding shares of Nextracker common stock and, accordingly, continued to control Nextracker. We received approximately $495 million from the follow-on offering, after distribution of net proceeds to TPG and expenses.
Previous report
On October 25, 2023, we announced our plan to effect a Spin-off of all of our remaining interests in Nextracker to our shareholders on a pro rata basis pursuant to the Agreement and Plan of Merger, dated as of February 7, 2023 (the “Merger Agreement”).
Previous report
On January 2, 2024, we completed the Spin-off of our remaining interests in Nextracker to Flex shareholders on a pro rata basis based on the number ordinary shares of Flex held by each shareholder of Flex (the “Distribution”) as of December 29, 2023, which was the record date of the Distribution. Under the previously disclosed terms of the Spin-off, Flex shareholders received approximately 0.17 shares of Nextracker Class A common stock for every Flex ordinary share held as of the record date of the Distribution. Flex shareholders received cash in lieu of any fractional shares.
Previous report
As a result of the completion of the Spin-off, Nextracker became a fully independent public company, we no longer directly or indirectly hold any shares of Nextracker common stock or any securities convertible into or exchangeable for shares of Nextracker common stock and we will no longer consolidate Nextracker into our future financial results. Flex ordinary shares continue to trade on Nasdaq under the ticker symbol “FLEX” and shares of Nextracker Class A common stock continue to trade on Nasdaq under the ticker symbol “NXT”.
Previous report
The historical results of Nextracker will be reported in our consolidated financial statements as discontinued operations beginning in our fourth quarter ending March 31, 2024.
Previous report
Also, prior to or in connection with the Spin-off, we entered into various agreements to effect the Spin-off and provide a framework for the relationship between us and Nextracker following the Spin-off, including a Separation Agreement, a Tax Matters Agreement, a Transition Services Agreement, as well as agreements governing future trading relationships.
Previous report
•our customers' decisions to choose internal manufacturing instead of outsourcing for their product requirements;
Previous report
•changes in tax legislation; and
Previous report
Net sales during the nine-month period ended December 31, 2023 totaled $21.9 billion, representing a decrease of approximately $1.0 billion, or 4% from $22.9 billion during the nine-month period ended December 31, 2022. Net sales for our FAS segment decreased approximately $1.3 billion, or 11% from the nine-month period ended December 31, 2022, primarily driven by a significant decrease in our Consumer Devices business, a high-teen percentage decrease in our Lifestyle business and a low single-digit percentage decrease in our CEC business due to the same factors as noted in the three-month period discussion above. Net sales for our FRS segment increased approximately $0.1 billion, or 1% from the nine-month period ended December 31, 2022, primarily driven by a high single-digit percentage increase in our Automotive business and a mid single-digit percentage increase in our Health Solutions business which benefited from ramps across various end markets, offset by a mid single-digit percentage decrease in our Industrial business due to lower customer demand. Net sales for our Nextracker segment increased approximately $0.4 billion, or 27% from the nine-month period ended December 31, 2022, primarily driven by the same factors as noted in the three-month period discussion above. Net sales decreased $1.3 billion to $6.7 billion in Asia, decreased $0.4 billion to $4.3 billion in Europe, and increased $0.8 billion to $10.9 billion in the Americas.
Previous report
Cost of sales during the nine-month period ended December 31, 2023 totaled $19.9 billion, representing a decrease of approximately $1.2 billion, or 6% from $21.2 billion during the nine-month period ended December 31, 2022. The lower cost of sales for the nine-month period ended December 31, 2023 was primarily driven by decreased consolidated sales of $1.0 billion or 4%. Cost of sales in FAS for the nine-month period ended December 31, 2023 decreased approximately $1.3 billion, or 11% from the nine-month period ended December 31, 2022, which is aligned with the overall 11% decrease in FAS revenue during the same period primarily due to the drivers noted in the discussion above for the three-month period. Cost of sales in FRS for the nine-month period ended December 31, 2023 increased approximately $22 million, or 0.3% from the nine-month period ended December 31, 2022, which is in line with the overall 1% increase in FRS revenue during the same period, primarily due to the drivers noted in the discussion above for net sales for the nine-month period. Cost of sales in our Nextracker segment for the nine-month period ended December 31, 2023 increased approximately $97 million, or 8% from the nine-month period ended December 31, 2022, primarily driven by the same factors noted above in the three-month period discussion.
Previous report
Gross profit during the nine-month period ended December 31, 2023 increased $0.2 billion to $1.9 billion, or 8.6% of net sales, from $1.7 billion, or 7.5% of net sales, during the nine-month period ended December 31, 2022. Gross margin improved 110 basis points during the same period due to the same factors noted above in the three-month period discussion.
Previous report
FAS segment margin increased approximately 50 basis points, to 5.0%, for the three-month period ended December 31, 2023, from 4.5% for the three-month period ended December 31, 2022. The margin increase was primarily due to strong execution against new project ramps and product mix. The FAS segment margin increased approximately 20 basis points, to 4.6% for the nine-month period ended December 31, 2023, from 4.4% for the nine-month period ended December 31, 2022. This was primarily due to strong execution and product mix.
Previous report
Nextracker segment margin increased approximately 1,110 basis points, to 22.8% for the three-month period ended December 31, 2023, from 11.7% for the three-month period ended December 31, 2022. The margin increase was driven by disciplined pricing, freight savings, and favorable cost absorption with increased revenue. Nextracker segment margin increased approximately 1,060 basis points, to 20.2% for the nine-month period ended December 31, 2023, from 9.6% for the nine-month period ended December 31, 2022. The increase in Nextracker segment margin during the nine-month period is due to the same factors noted in the discussion above for the three-month period.
Previous report
Selling, general and administrative expenses (“SG&A”) was approximately $0.3 billion, or 3.7% of net sales, during the three-month period ended December 31, 2023, increasing $21 million from approximately $0.2 billion or 3.1% of net sales, during the three-month period ended December 31, 2022. SG&A was $0.8 billion, or 3.7% of net sales, during the nine-month period ended December 31, 2023, increasing $77 million from $0.7 billion or 3.2% of net sales, during the nine-month period ended December 31, 2022. The increase was primarily due to elevated SG&A costs to support higher revenue growth in our Nextracker business and higher labor costs.
Previous report
Interest, net
Previous report
Interest, net was an expense of $36 million during the three-month period ended December 31, 2023 compared to an expense of $54 million during the three-month period ended December 31, 2022, primarily due to higher interest income, and lower bank borrowings compared to the prior year period.
Previous report
Interest, net was an expense of $112 million during the nine-month period ended December 31, 2023 compared to an expense of $150 million during the nine-month period ended December 31, 2022, primarily due to the same drivers noted in the discussion above for the three-month period.
Previous report
Other charges, net
Previous report
Other charges, net remained flat at an expense of $5 million during both the three-month periods ended December 31, 2023 and December 31, 2022, primarily due to foreign exchange transaction loss.
Reworded paragraphs (32)
Previous wording
This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words “expects,” “anticipates,” “believes,” “intends,” “plans” and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission (the "SEC"). These forward-looking statements are subject to risks and uncertainties, including, without limitation, those risks and uncertainties discussed in this section, as well as any risks and uncertainties discussed in Part II, Item 1A, “Risk Factors” of this report on Form 10-Q, and in Part I, Item 1A, “Risk Factors” and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. In addition, new risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.
Current wording
This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words “expects,” “anticipates,” “believes,” “intends,” “plans” and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those risks and uncertainties discussed in this section, as well as any risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. In addition, new risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.
Previous wording
We are the diversified manufacturing partner of choice that helps market-leading brands design, build and deliver innovative products that improve the world. Through the collective strength of a global workforce across approximately 30 countries with responsible, sustainable operations, we support the entire product lifecycle with advanced manufacturing solutions and operate one of the most trusted global supply chains. We also provide additional value to customers through a broad array of services, including design and engineering, component services, rapid prototyping, fulfillment, and circular economy solutions. We support a diverse set of industries including cloud, communications, enterprise, automotive, industrial, consumer devices, lifestyle, healthcare, and energy. As of December 31, 2023, our three operating and reportable segments were as follows:
Current wording
We are the advanced, end-to-end manufacturing partner of choice that helps market-leading brands design, build, deliver and manage innovative products that improve the world. Through the collective strength of a global workforce across approximately 30 countries with responsible, sustainable operations, we support our customers' entire product lifecycle with a broad array of services in every major region. Our full suite of specialized capabilities includes design and engineering, supply chain, manufacturing, post-production and post-sale services. We partner with customers across a diverse set of industries including cloud, communications, enterprise, automotive, industrial, consumer devices, lifestyle, healthcare, and energy. As of June 28, 2024, our two operating and reportable segments were as follows:
Previous wording
◦Industrial, including capital equipment, industrial devices, and renewables and grid edge.
Current wording
◦Industrial, including capital equipment, industrial devices, embedded and critical power offerings, and renewables and grid edge.
Previous wording
We believe that our continued business transformation is strategically positioning us to take advantage of the long-term, future growth prospects for outsourcing of advanced manufacturing capabilities, design and engineering services and after-market services.
Current wording
We believe that our strategy is positioning us to take advantage of the long-term, future growth prospects for outsourcing of advanced manufacturing capabilities, design and engineering services and after-market services.
Previous wording
Component shortages and logistical constraints improved as the year progressed. We continue to monitor potential supply chain disruptions, including disruptions in international commerce as a result of attacks on shipping vessels in the Red Sea. Refer to“Risk Factors - “Supply chain disruptions, manufacturing interruptions or delays, or the failure to accurately forecast customer demand, have in the past affected, and may in the future, affect our ability to meet customer demand, lead to higher costs, or result in excess or obsolete inventory. We have been and continue to be adversely affected by supply chain issues, including shortages of required electronic components.”as disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.
Current wording
Component shortages experienced in the recent past have largely subsided, however, logistical constraints exist which have increased freight costs. We continue to monitor potential supply chain disruptions, including disruptions in international commerce as a result of attacks on shipping vessels in the Red Sea. Refer to“Risk Factors - Supply chain disruptions, manufacturing interruptions or delays, or the failure to accurately forecast customer demand, have in the past affected, and may in the future affect, our ability to meet customer demand, lead to higher costs, or result in excess or obsolete inventory.” as disclosed in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Previous wording
We are one of the world's largest providers of global supply chain solutions, with revenues of $21.9 billion for the nine-month period ended December 31, 2023 and $30.3 billion in the fiscal year ended March 31, 2023. We have established an extensive network of manufacturing facilities in the world's major consumer and enterprise markets (Asia, the Americas, and Europe) to serve the growing outsourcing needs of both multinational and regional customers. We design, build, ship, and service consumer and enterprise products for our customers through a network of over 100 facilities in approximately 30 countries across four continents. Prior to the Spin-off, we also provided intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world. The following tables set forth the relative percentages and dollar amounts of net sales by region and by country, and net property and equipment by country, based on the location of our manufacturing sites:
Current wording
We are one of the world's largest providers of global supply chain solutions, with revenues of $6.3 billion for the three-month period ended June 28, 2024 and $26.4 billion in the fiscal year ended March 31, 2024. We have established an extensive network of manufacturing facilities in the world's major consumer and enterprise markets (Asia, the Americas, and Europe) to serve the growing outsourcing needs of both multinational and regional customers. We design, build, ship, and service consumer and enterprise products for our customers through a network of approximately 100 facilities in approximately 30 countries across four continents. The following tables set forth the relative percentages and dollar amounts of net sales by region and by country, and net property and equipment by country, based on the location of our manufacturing sites:
Previous wording
•global economic conditions, including inflationary pressures, currency volatility, slower growth or recession, higher interest rates, and geopolitical uncertainty (including as a result of the ongoing conflict between Russia and Ukraine and the Israel-Hamas war);
Current wording
•global economic conditions, including inflationary pressures, currency volatility, slower growth or recession, higher interest rates, and geopolitical uncertainty (including arising from the ongoing conflict between Russia and Ukraine and the Israel-Hamas war);
Previous wording
•the effects on our business due to certain customers' products having short product lifecycles;
Current wording
•the effects on our business due to certain customers' products having short product lifecycles, our customers' ability to cancel or delay orders or change production quantities or locations, the short-term nature of our customers' commitments and rapid changes in demand;
Previous wording
•the impacts on our business due to component shortages, disruptions in transportation or other supply chain related constraints including disruptions in international commerce as a result of attacks on shipping vessels in the Red Sea;
Current wording
•the impacts on our business due to supply chain issues, including component shortages, disruptions in transportation or other supply chain related constraints including disruptions in international commerce as a result of attacks on shipping vessels in the Red Sea;
Previous wording
•changes in trade regulations and treaties.
Current wording
•changes in trade regulations and treaties; and
Previous wording
We are also subject to other risks as outlined in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and in Part II, Item 1A of this report on Form 10-Q.
Current wording
We are also subject to other risks as outlined in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Previous wording
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Due to geopolitical conflicts (including the Russian invasion of Ukraine and the Israel-Hamas war), there has been and we expect there will continue to be uncertainty and disruption in the global economy and financial markets. We have made estimates and assumptions taking into consideration certain possible impacts due to the Russian invasion of Ukraine, the Israel-Hamas war, and other geopolitical conflicts. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Current wording
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Due to geopolitical conflicts (including the Russian invasion of Ukraine and the Israel-Hamas war), there has been and we expect there will continue to be uncertainty and disruption in the global economy and financial markets. We have made estimates and assumptions taking into consideration certain possible impacts due to the Russian invasion of Ukraine, the Israel-Hamas war, and other geopolitical conflicts. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Previous wording
Net sales during the three-month period ended December 31, 2023 totaled $7.1 billion, representing a decrease of approximately $0.7 billion, or 8% from $7.8 billion during the three-month period ended December 31, 2022. Net sales for our FAS segment decreased approximately $0.6 billion, or 14% from the three-month period ended December 31, 2022, primarily driven by significant decreases in our Lifestyle and Consumer Devices businesses, and a mid single-digit percentage decrease in our Communications, Enterprise and Cloud ("CEC") business due to softer demand in consumer end markets and difficult year-over-year comparisons in CEC. Net sales for our FRS segment decreased approximately 0.3 billion, or 8% from the three-month period ended December 31, 2022, primarily driven by a high-teen percentage decrease in our Industrial business due to difficult year-over year comparisons and lower customer demand, partially offset by a low single-digit increase in our Automotive business due to higher customer demand. Net sales for our Health Solutions business remained relatively flat. Net sales for our Nextracker segment increased approximately $0.2 billion, or 38% from the three-month period ended December 31, 2022, primarily driven by an increase in gigawatts delivered. Net sales decreased $0.8 billion to $2.0 billion in Asia, decreased $0.2 billion to $1.3 billion in Europe, and increased $0.3 billion to $3.8 billion in the Americas.
Current wording
Net sales during the three-month period ended June 28, 2024 totaled $6.3 billion, representing a decrease of approximately $0.6 billion, or 8% from $6.9 billion during the three-month period ended June 30, 2023. Net sales for our FAS segment decreased approximately $0.2 billion, or 7% from the three-month period ended June 30, 2023, primarily driven by a low double-digit percentage decrease in our Communications, Enterprise and Cloud ("CEC") business driven by difficult year-over-year comparisons and a mid single-digit percentage decrease in our Lifestyle business due to softer demand in certain markets. This was partially offset by a high-teen percentage increase in our Consumer Devices business due to higher customer demand. Net sales for our FRS segment decreased approximately $0.3 billion, or 10% from the three-month period ended June 30, 2023, primarily driven by a high-teen percentage decrease in our Industrial business and a high single-digit percentage decrease in our Health Solutions business due to difficult year-over-year comparisons and lower customer demand across various end markets. The factors described above that decreased FAS and FRS revenues were partially offset by the effect of certain customer arrangements transitioning from point in time to overtime revenue during the quarter which also contributed to an increase in contract assets at June 28, 2024. Net sales decreased $0.4 billion to $1.9 billion in Asia, decreased $0.1 billion to $1.4 billion in Europe, and were flat at $3.0 billion in the Americas.
Previous wording
Our ten largest customers during the three and nine-month periods ended December 31, 2023 accounted for approximately 35% and 33% of net sales, respectively. Our ten largest customers during the three and nine-month periods ended December 31, 2022 accounted for approximately 35% of net sales. No customer accounted for more than 10% of net sales during the three or nine-month periods ended December 31, 2023 or December 31, 2022.
Current wording
Our ten largest customers during the three-month periods ended June 28, 2024 and June 30, 2023 accounted for approximately 43% and 36% of net sales, respectively. No customer accounted for more than 10% of net sales during the three-month periods ended June 28, 2024 or June 30, 2023.
Previous wording
Cost of sales during the three-month period ended December 31, 2023 totaled $6.4 billion, representing a decrease of approximately $0.8 billion, or 11% from $7.2 billion during the three-month period ended December 31, 2022. The lower cost of sales for the three-month period ended December 31, 2023 was primarily driven by decreased consolidated sales of $0.7 billion or 8%. Cost of sales in FAS for the three-month period ended December 31, 2023 decreased approximately $0.5 billion, or 15% from the three-month period ended December 31, 2022, which is relatively in line with the overall 14% decrease in FAS revenue during the same period primarily as a result of lower revenue in our Lifestyle, Consumer Devices, and CEC businesses. Cost of sales in FRS for the three-month period ended December 31, 2023 decreased approximately $0.3 billion, or 10% from the three-month period ended December 31, 2022, which is in line with the overall decrease in FRS revenue during the same period, primarily as a result of lower revenue in our Industrial business. Cost of sales in our Nextracker segment for the three-month period ended December 31, 2023 increased approximately $66 million, or 15% from the three-month period ended December 31, 2022, primarily due to the 38% increase in Nextracker revenue during the same period, offset by improved profitability resulting from a decline in freight and logistics costs and improved operational execution.
Current wording
Cost of sales during the three-month period ended June 28, 2024 totaled $5.8 billion, representing a decrease of approximately $0.6 billion, or 9% from $6.4 billion during the three-month period ended June 30, 2023. The lower cost of sales for the three-month period ended June 28, 2024 was primarily driven by decreased consolidated sales of $0.6 billion or 8%. Cost of sales in FAS for the three-month period ended June 28, 2024 decreased approximately $0.3 billion, or 8% from the three-month period ended June 30, 2023, which is relatively in line with the overall 7% decrease in FAS revenue during the same period primarily as a result of lower revenue in our CEC and Lifestyle businesses. Cost of sales in FRS for the three-month period ended June 28, 2024 decreased approximately $0.3 billion, or 10% from the three-month period ended June 30, 2023, which is in line with the overall decrease in FRS revenue during the same period, primarily as a result of lower revenue in our Industrial business.
Previous wording
Gross profit is affected by fluctuations in cost of sales elements as outlined above and further by a number of factors, including product lifecycles, unit volumes, product mix, pricing, competition, new product introductions, and the expansion or consolidation of manufacturing facilities, as well as specific restructuring activities initiated from time to time. The flexible design of our manufacturing processes allows us to manufacture a broad range of products in our facilities and better utilize our manufacturing capacity across our diverse geographic footprint and service customers from all segments. In the case of new programs, profitability normally lags revenue growth due to product start-up costs, lower manufacturing program volumes in the start-up phase, operational inefficiencies, and under-absorbed overhead. Gross margin for these programs often improves over time as manufacturing volumes increase, as our utilization rates and overhead absorption improve, and as we increase the level of manufacturing services content. As a result of these various factors, our gross margin varies from period to period.
Current wording
Gross profit is affected by a fluctuation in cost of sales elements as outlined above and further by a number of factors, including product lifecycles, unit volumes, product mix, pricing, competition, new product introductions, and the expansion or consolidation of manufacturing facilities, as well as specific restructuring activities initiated from time to time. The flexible design of our manufacturing processes allows us to manufacture a broad range of products in our facilities and better utilize our manufacturing capacity across our diverse geographic footprint and service customers from all markets. In the case of new programs, profitability normally lags revenue growth due to product start-up costs, lower manufacturing program volumes in the start-up phase, operational inefficiencies, and under-absorbed overhead. Gross margin for these programs often improves over time as manufacturing volumes increase, as our utilization rates and overhead absorption improve, and as we increase the level of manufacturing services content. As a result of these various factors, our gross margin varies from period to period.
Previous wording
Gross profit during the three-month period ended December 31, 2023 increased $59 million to $0.6 billion, or 9.0% of net sales, from $0.6 billion, or 7.5% of net sales, during the three-month period ended December 31, 2022. Gross margin improved 150 basis points during the three-month period ended December 31, 2023 primarily due to favorable mix with growth in our higher-margin Nextracker segment, partially offset by an increase in restructuring costs.
Current wording
Gross profit during the three-month period ended June 28, 2024 decreased $5 million to $0.5 billion, or 7.5% of net sales, from $0.5 billion, or 6.9% of net sales, during the three-month period ended June 30, 2023, primarily driven by lower sales compared to the prior year period. Gross margin improved 60 basis points during the three-month period ended June 28, 2024 primarily due to favorable mix in our FAS segment combined with savings from restructuring actions.
Previous wording
FRS segment margin increased approximately 100 basis points, to 5.4% for the three-month period ended December 31, 2023, from 4.4% for the three-month period ended December 31, 2022. The margin increase was primarily driven by improving margins in our Automotive and Health Solutions businesses due to increased productivity partially offset by lower sales in our Industrial business. FRS segment margin increased approximately 30 basis points, to 5.2% for the nine-month period ended December 31, 2023 from 4.9% for the nine-month period ended December 31, 2022. This was driven by improving margins in our Health Solutions business due to increased productivity and the effect of reduction in inflation recoveries, partially offset by lower sales in our Industrial business.
Current wording
FRS segment margin remained flat at 5.0% for the three-month periods ended June 28, 2024 and June 30, 2023. This was driven by improving margins in our Health Solutions business due to increased productivity offset by lower sales and operating leverage in our Industrial business.
Previous wording
In October, 2023, we committed to targeted restructuring activities to improve operational efficiencies by reducing excess workforce capacity. During the three and nine-month periods ended December 31, 2023, we recognized approximately $74 million and $100 million of restructuring charges, respectively, primarily related to employee severance.
Current wording
We committed to targeted restructuring activities to improve operational efficiencies by reducing excess workforce capacity. During the three-month period ended June 28, 2024, we recognized approximately $25 million of restructuring charges, primarily related to employee severance.
Previous wording
Amortization of intangible assets decreased to $17 million during the three-month period ended December 31, 2023, from $19 million for the three-month period ended December 31, 2022, and decreased to $54 million during the nine-month period ended December 31, 2023, from $62 million for the nine-month period ended December 31, 2022, primarily due to certain intangibles now being fully amortized.
Current wording
Amortization of intangible assets decreased to $16 million during the three-month period ended June 28, 2024, from $20 million for the three-month period ended June 30, 2023, primarily due to certain intangibles now being fully amortized.
Previous wording
Other charges, net was an expense of $32 million during the nine-month period ended December 31, 2023 compared to an expense of $2 million during the nine-month period ended December 31, 2022, primarily due to higher foreign exchange transaction losses compared to the prior year period.
Current wording
Other charges (income), net was an expense of $1 million during the three-month period ended June 28, 2024 compared to an expense of $11 million during the three-month period ended June 30, 2023, primarily due to lower foreign exchange transaction losses compared to the prior year period.
Previous wording
The consolidated effective tax rate was 24% and 2% for the three and nine-month periods ended December 31, 2023, and 10% and 13% for the three and nine-month periods ended December 31, 2022, respectively. The effective rate varies from the Singapore statutory rate of 17% as a result of recognition of earnings in different jurisdictions (we generate most of our revenues and profits from operations outside of Singapore), operating loss carryforwards, income tax credits, release of previously established valuation allowances for deferred tax assets, liabilities for uncertain tax positions, as well as the effect of certain tax holidays and incentives granted to our subsidiaries primarily in China, Malaysia, the Netherlands and Israel. The effective tax rate for the three-month period ended December 31, 2023 was significantly higher than the effective tax rate for the three-month period ended December 31, 2022 primarily due to a $21 million reduction of previously recorded deferred tax assets of Nextracker with the charge being fully attributable to noncontrolling interests. The effective tax rate for the nine-month period ended December 31, 2023 was significantly lower than the effective tax rate for the nine-month period ended December 31, 2022 primarily due to the recording of a $140 million deferred tax asset, with an offsetting entry to income tax benefit fully attributable to noncontrolling interest in connection with Nextracker's follow-on public offering whereby Nextracker purchased additional Nextracker LLC units from a related Flex U.S. subsidiary.
Current wording
The consolidated effective tax rates were 28% and 10% for the three-month periods ended June 28, 2024 and June 30, 2023, respectively. The effective rate varies from the Singapore statutory rate of 17% as a result of recognition of earnings in different jurisdictions (we generate most of our revenues and profits from operations outside of Singapore), operating loss carryforwards, income tax credits, release of previously established valuation allowances for deferred tax assets, liabilities for uncertain tax positions, as well as the effect of certain tax holidays and incentives granted to our subsidiaries primarily in China, Malaysia, the Netherlands and Israel. The effective tax rate for the three-month period ended June 28, 2024 was higher than the effective tax rate for the three-month period ended June 30, 2023 primarily due to the tax accrual required for our U.S. tax group after the U.S. tax group valuation allowance release in the fiscal year ended March 31, 2024, the recognition of a withholding tax accrual on the undistributed earnings of our Chinese subsidiaries due to the decision in the fiscal year ended March 31, 2024 to not indefinitely reinvest our China earnings in China, the estimated impact of the Organization for Economic Co-operation and Development's (“OECD”) framework on base erosion profit shifting Pillar Two and unfavorable foreign exchange impacts.
Previous wording
In response to the challenging economic environment following the COVID-19 pandemic, we continuously evaluate our ability to meet our obligations over the next 12 months and have proactively reset our capital structure during these times to improve maturities and liquidity. As a result, we expect that our current financial condition, including our liquidity sources are adequate to fund current and future commitments. As of December 31, 2023, we had cash and cash equivalents of approximately $2.8 billion and bank and other borrowings of approximately $3.4 billion. As of December 31, 2023, we had a $2.5 billion revolving credit facility that is due to mature in July 2027, and a $0.5 billion Nextracker revolving credit facility that is due to mature in February 2028, under which we had no borrowings outstanding. As of December 31, 2023, we were in compliance with the covenants under all of our credit facilities and indentures; we also expect to remain in compliance with the covenants in the upcoming 12 months for our credit facilities and indentures.
Current wording
We continuously evaluate our ability to meet our obligations over the next 12 months and beyond and proactively reset our capital structure to improve maturities and liquidity. We expect that our current financial condition, including our liquidity sources are adequate to fund current and future commitments. As of June 28, 2024, we had cash and cash equivalents of approximately $2.2 billion and bank and other borrowings of approximately $3.2 billion. We have a $2.5 billion revolving credit facility that is due to mature in July 2027 (the "2027 Credit Facility"), under which we had no borrowings outstanding as of June 28, 2024. As of June 28, 2024, we were in compliance with the covenants under all of our credit facilities and indentures; we also expect to remain in compliance with the covenants in the upcoming 12 months for our credit facilities and indentures.
Previous wording
In fiscal year 2024, we implemented a 10b5-1 bond buyback program, aiming to repurchase certain outstanding bonds issued by us. During the nine-month period ended December 31, 2023, we repurchased approximately $8 million of the 4.750% Notes due 2025, resulting in an immaterial gain on our condensed consolidated statement of operations.
Current wording
During the three-month period ended June 28, 2024, we repurchased approximately $41 million of the 4.750% Notes due 2025 under our 10b5-1 bond buyback program, resulting in an immaterial gain on our condensed consolidated statement of operations.
Previous wording
Cash provided by operating activities was $0.6 billion during the nine-month period ended December 31, 2023, primarily driven by $0.9 billion of net income for the period plus $0.5 billion of non-cash charges such as depreciation, amortization, and stock-based compensation offset by certain changes in net working capital as discussed below.
Current wording
Cash provided by operating activities was $0.3 billion during the three-month period ended June 28, 2024, primarily driven by $0.1 billion of net income for the period plus $0.2 billion of non-cash charges such as depreciation, amortization, and stock-based compensation and a reduction in net working capital as discussed below.
Previous wording
We believe net working capital ("NWC") is a key metric that measures our liquidity. Net working capital is calculated as current assets less current liabilities. Net working capital increased approximately $0.3 billion to $5.5 billion as of December 31, 2023, from $5.2 billion as of March 31, 2023. The increase was primarily the result of the effect of a decrease in accounts payable of $0.6 billion and working capital advances of $0.4 billion partially offset by a reduction in inventory of $0.7 billion.
Current wording
We believe net working capital ("NWC") is a key metric that measures our liquidity. Net working capital is calculated as current assets less current liabilities. Net working capital decreased approximately $0.9 billion to $3.6 billion as of June 28, 2024, from $4.5 billion as of March 31, 2024. The decrease was primarily the result of the effect of an increase in the current portion of long-term debt of $0.5 billion and a reduction in inventory of $0.4 billion.
Previous wording
Cash used in investing activities was $0.4 billion during the nine-month period ended December 31, 2023. This was primarily driven by $0.4 billion of net capital expenditures for property and equipment to continue expanding capabilities and capacity in support of primarily our expanding CEC, Automotive, and Industrial businesses.
Current wording
Cash used in investing activities was $0.1 billion during the three-month period ended June 28, 2024. This was primarily driven by $0.1 billion of net capital expenditures for property and equipment to continue expanding capabilities and capacity in support of our CEC, Automotive, and Industrial businesses.
Previous wording
We believe adjusted free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments, fund acquisitions, repurchase company shares and for certain other activities. Our adjusted free cash flow is defined as cash from operations, less net purchases of property and equipment allowing us to present adjusted cash flows on a consistent basis for investors. Our adjusted free cash flow for the nine-month periods ended December 31, 2023 and December 31, 2022 was an inflow of $0.2 billion and an inflow of $0.1 billion, respectively. Adjusted free cash flow is not a measure of liquidity under U.S. GAAP, and may not be defined and calculated by other companies in the same manner. Adjusted free cash flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Adjusted free cash flows reconcile to the most directly comparable GAAP financial measure of cash flows from operations as follows:
Current wording
We believe adjusted free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments, fund acquisitions, repurchase company shares and for certain other activities. Our adjusted free cash flow is defined as cash from operations, less net purchases of property and equipment allowing us to present adjusted cash flows on a consistent basis for investors. Our adjusted free cash flow for the three-month periods ended June 28, 2024 and June 30, 2023 was an inflow of $0.2 billion and an outflow of $0.2 billion, respectively. Adjusted free cash flow is not a measure of liquidity under U.S. GAAP, and may not be defined and calculated by other companies in the same manner. Adjusted free cash flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Adjusted free cash flows reconcile to the most directly comparable GAAP financial measure of cash flows from operations as follows:
Previous wording
Cash used by financing activities was $0.8 billion during the nine-month period ended December 31, 2023, which was primarily driven by $0.8 billion of cash paid for the repurchase of our ordinary shares and $0.4 billion in repayments of bank borrowings and long-term debt, offset by $0.5 billion of net proceeds from the issuance of Nextracker shares, after the distribution to TPG and expenses.
Current wording
Cash used by financing activities was $0.5 billion during the three-month period ended June 28, 2024, which was primarily driven by $0.5 billion of cash paid for the repurchase of our ordinary shares.
Previous wording
Our cash balances are generated and held in numerous locations throughout the world. Liquidity is affected by many factors, some of which are based on normal ongoing operations of the business and some of which arise from fluctuations related to global economics and markets. Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances; however, any current restrictions are not material. We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout the global organization. We believe that our existing cash balances, together with anticipated cash flows from operations and borrowings available under our credit facilities, will be sufficient to fund our operations through at least the next twelve months. As of December 31, 2023 and March 31, 2023, approximately 49% and 27%, respectively, of our cash and cash equivalents were held by foreign subsidiaries outside of Singapore. Although substantially all of the amounts held outside of Singapore could be repatriated under current laws, a significant amount could be subject to income tax withholdings. We provide for tax liabilities on these amounts for financial statement purposes, except for certain of our foreign earnings that are considered indefinitely reinvested outside of Singapore (approximately $1.9 billion as of March 31, 2023). Repatriation could result in an additional income tax payment; however, for the majority of our foreign entities, our intent is to permanently reinvest these funds outside of Singapore and our current plans do not demonstrate a need to repatriate them to fund our operations in jurisdictions outside of where they are held.
Current wording
Our cash balances are generated and held in numerous locations throughout the world. Liquidity is affected by many factors, some of which are based on normal ongoing operations of the business and some of which arise from fluctuations related to global economics and markets. Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances; however, any current restrictions are not material. We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout the global organization. We believe that our existing cash balances, together with anticipated cash flows from operations and borrowings available under our credit facilities, will be sufficient to fund our operations through at least the next twelve months and beyond. As of June 28, 2024 and March 31, 2024, approximately 59% and 55%, respectively, of our cash and cash equivalents were held by foreign subsidiaries outside of Singapore. Although substantially all of the amounts held outside of Singapore could be repatriated under current laws, a significant amount could be subject to income tax withholdings. We provide for tax liabilities on these amounts for financial statement purposes, except for certain of our foreign earnings that are considered indefinitely reinvested outside of Singapore (approximately $0.7 billion as of March 31, 2024). Repatriation could result in an additional income tax payment; however, for the majority of our foreign entities, our intent is to permanently reinvest these funds outside of Singapore and our current plans do not demonstrate a need to repatriate them to fund our operations in jurisdictions outside of where they are held. Where local restrictions prevent an efficient intercompany transfer of funds, our intent is that cash balances would remain outside of Singapore and we would meet our liquidity needs through ongoing cash flows, external borrowings, or both.
Previous wording
Historically, we have funded operations from cash and cash equivalents generated from operations, proceeds from public offerings of equity and debt securities, bank debt and lease financings. We also have the ability to sell a designated pool of trade receivables under ABS programs and sell certain trade receivables, which are in addition to the trade receivables sold in connection with these securitization agreements. We may enter into debt and equity financings, sales of accounts receivable and lease transactions to fund acquisitions and anticipated growth as needed.
Current wording
Historically, we have funded operations from cash and cash equivalents generated from operations, proceeds from public offerings of equity and debt securities, bank debt and lease financings. We may enter into debt and equity financings, sales of accounts receivable and lease transactions to fund acquisitions and anticipated growth as needed.
Previous wording
Under our current share repurchase program, our Board of Directors authorized repurchases of our outstanding ordinary shares for up to $2.0 billion in accordance with the share purchase mandate approved by our shareholders at the date of the most recent Annual General Meeting which was held on August 2, 2023. During the nine-month period ended December 31, 2023, we paid $781 million to repurchase shares under the current and prior repurchase plans at an average price of $25.32 per share. As of December 31, 2023, shares in the aggregate amount of $1.5 billion were available to be repurchased under the current plan.
Current wording
Under our current share repurchase program, our Board of Directors authorized repurchases of our outstanding ordinary shares for up to $2.0 billion in accordance with the share purchase mandate approved by our shareholders at the date of the most recent Annual General Meeting which was held on August 2, 2023. During the three-month period ended June 28, 2024, we paid $457 million to repurchase shares under the current repurchase plan at an average price of $29.88 per share. As of June 28, 2024, shares in the aggregate amount of $556 million were available to be repurchased under the current plan.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Net income attributable to noncontrolling interest
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
•our customers' ability to cancel or delay orders or change production quantities;
Previous report — wording carried elsewhere
Where local restrictions prevent an efficient intercompany transfer of funds, our intent is that cash balances would remain outside of Singapore and we would meet our liquidity needs through ongoing cash flows, external borrowings, or both.