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Flextronics Investor & Analyst Day 2013 - Chris Collier (CFO)
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Flextronics Investor & Analyst Day 2013 - Chris Collier (CFO)

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Flextronics Investor & Analyst Day 2013 - Chris Collier (CFO) …

Flextronics Investor & Analyst Day 2013 - Chris Collier (CFO)
May 30, 2013


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  • 1. 2013 Investor & Analyst Day Chris Collier, Chief Financial Officer
  • 2. 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
  • 3. FY13 Year in Review
  • 4. 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. 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 planHRS INS Missing our target is not acceptable 2.6% Components HRS INS HVS IEI 3.3% May 2012 Target FY13 Actual
  • 6. 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 ~$215M quarterly run rate Quarterly run rate *Adjusted SG&A includes Design and R&D expense but excludes stock compensation expense and restructuring charges
  • 7. 7 Charges ($ 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. 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
  • 9. Portfolio Management
  • 10. 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 OptimalOptimal
  • 11. FY14 Roadmap to Improved Performance
  • 12. 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 SeasonalityRestructuring 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
  • 13. Cash Flow Generation & Capital Structure
  • 14. 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% Sr. Notes4.625% Sr. 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. 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. 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
  • 17. Guidance & Key Takeaways
  • 18. 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 JUN-13E Quarterly Adjusted EPS $0.16 $0.12
  • 19. 19 Key Takeaways Our Platform provides complete supply chain solutionsCompetitively Advantaged Our financial principles are the foundation for growthAccountability Positioned and committed to increasing shareholder value Strategically investing and optimizing our PlatformSmart Investments
  • 20. 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.