Flex Reports Fourth Quarter and Fiscal 2019 Results

Flex (NASDAQ: FLEX) today announced results for its fourth quarter and
fiscal year ended March 31, 2019.

Fourth Quarter Fiscal 2019 Highlights:

• Net Sales: $6.2 billion, year over year revenue down 3 percent
• GAAP Loss Before Income Taxes: $36 million
• Adjusted Operating Income: $204 million
• GAAP Net Loss: $64 million
• Adjusted Net Income: $141 million
• GAAP Net Loss Per Share: $0.12
• Adjusted EPS: $0.27

Fiscal Year 2019 Results of Operations:

• Net Sales: $26.3 billion, year over year revenue up 3 percent
• Communications and Enterprise Compute: year over year revenue growth
  of 8 percent
• Industrial and Emerging Industries: year over year revenue growth of 4
  percent
• High Reliability Solutions: year over year revenue growth of 1 percent
• Consumer Technologies Group: year over year flat
• GAAP Income Before Income Taxes: $182 million
• Adjusted Operating Income: $872 million
• GAAP Net Income: $93 million
• Adjusted Net Income: $603 million
• GAAP EPS: $0.18
• Adjusted EPS: $1.14

An explanation and reconciliation of non-GAAP financial measures to GAAP
financial measures is presented in Schedules II and V attached to this
press release.

“During the quarter, we expanded adjusted operating margins on slightly
lower revenues, improved the quality of our sales mix, generated free
cash flow, and continued to streamline our investment portfolio,” said
Revathi Advaithi, CEO of Flex. “We achieved adjusted EPS within our
target range. These results reflect our unrelenting commitment to
customers and our intense focus on disciplined execution within our core
businesses.”

Advaithi continued, “During fiscal 2019, Flex grew revenue $865 million
or 3% to $26.3 billion, increased adjusted operating income dollars by
$86 million or 11% to $872 million, expanded adjusted operating margin
to 3.3% from 3.1%, and had a 4.6% increase in adjusted EPS to $1.14 from
$1.09.”

“For fiscal 2020, we will be focused on driving disciplined sustainable
execution around customer performance, growth and margins, along with
managing our product mix and returning to historical free cash flow
levels,” said Advaithi.

Balance Sheet and Other Financial Highlights

Flex ended the quarter with approximately $1.7 billion of cash on hand
and total debt of approximately $3.1 billion.

Cash flow from operations was negative $642 million for the three-month
period ended March 31, 2019, primarily due to cash collections of $888
million for certain receivables sold under our ABS programs reported as
investing activities. Adjusted cash flow from operations and free cash
flow were $246 million and $120 million, respectively, for the
three-month period ended March 31, 2019.

The Company remains committed to return over 50% of annual free cash
flow to its shareholders, as it repurchased ordinary shares for
approximately $65 million and $189 million during the three-month and
twelve-month periods ended March 31, 2019.

First Quarter Fiscal 2020 Guidance

• Revenue $6.1 billion to $6.5 billion
• GAAP Income Before Income Taxes $110 million to $130 million
• Adjusted Operating Income $195 million to $225 million
• GAAP EPS $0.18 to $0.22 which includes stock-based compensation
  expense and intangible amortization
• Adjusted EPS $0.25 to $0.29

Looking Ahead

The Company is not providing detailed fiscal 2020 guidance, but is
comfortable with the fiscal 2020 consensus adjusted EPS range that spans
from $1.20 to $1.30, and currently sits at $1.25. When adjusting for
stock-based compensation expenses and intangible amortization, the
Company’s GAAP EPS would be $0.28 below adjusted EPS.

Webcast and Conference Call

The Flex management team will host a conference call today at 2:00 PM
(PT) / 5:00 PM (ET) to review fourth quarter and fiscal 2019 results. A
live webcast of the event and slides will be available on the Flex
Investor Relations website at http://investors.flex.com.
An audio replay and transcript will also be available after the event on
the Flex Investor Relations website.

About Flex

Flex Ltd. (Reg. No. 199002645H) is the Sketch-to-Scale^®
solutions provider that designs and builds intelligent products
globally. With approximately 200,000 employees across 30 countries, Flex
provides innovative design, engineering, manufacturing, real-time supply
chain insight and logistics services to companies of all sizes across
industries and markets. For more information, visit flex.com
or follow us on Twitter @Flexintl.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of U.S. securities laws, including statements related to future
expected revenues and earnings per share. These forward-looking
statements involve risks and uncertainties that could cause the actual
results to differ materially from those anticipated by these
forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements. These risks include: that
future revenues and earnings may not be achieved as expected; the
challenges of effectively managing our operations, including our ability
to control costs and manage changes in our operations; our
identification of material weaknesses in our internal control over
financial reporting, which could, if not remediated result in a material
misstatement in our financial statements; compliance with legal and
regulatory requirements; the possibility that benefits of the Company’s
restructuring actions may not materialize as expected; that the expected
revenue and margins from recently launched programs may not be realized;
our dependence on a small number of customers; the impact of component
shortages, including its impact on our revenues; geopolitical risk,
including the termination and renegotiation of international trade
agreements; that recently proposed changes or future changes in tax laws
in certain jurisdictions where we operate could materially impact our
tax expense; the effects that the current macroeconomic environment
could have on our business and demand for our products; and the effects
that current credit and market conditions could have on the liquidity
and financial condition of our customers and suppliers, including any
impact on their ability to meet their contractual obligations

Additional information concerning these and other risks is described
under “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our reports on Forms
10-K and 10-Q that we file with the U.S. Securities and Exchange
Commission. The forward-looking statements in this press release are
based on current expectations and Flex assumes no obligation to update
these forward-looking statements. Our share repurchase program does not
obligate the Company to repurchase a specific number of shares and may
be suspended or terminated at any time without prior notice.

SCHEDULE V

FLEX AND SUBSIDIARIES
NOTES TO SCHEDULES I AND II,

(1) To supplement Flex’s unaudited selected financial data presented
consistent with Generally Accepted Accounting Principles (“GAAP”), the
Company discloses certain non-GAAP financial measures that exclude
certain charges and gains, including non-GAAP gross profit, non-GAAP
operating income, non-GAAP net income and non-GAAP net income per
diluted share. These supplemental measures exclude restructuring
charges, stock-based compensation expense, intangible amortization,
other discrete events as applicable and the related tax effects. These
non-GAAP measures are not in accordance with or an alternative for GAAP
and may be different from non-GAAP measures used by other companies. We
believe that these non-GAAP measures have limitations in that they do
not reflect all of the amounts associated with Flex’s results of
operations as determined in accordance with GAAP and that these measures
should only be used to evaluate Flex’s results of operations in
conjunction with the corresponding GAAP measures. The presentation of
this additional information is not meant to be considered in isolation
or as a substitute for the most directly comparable GAAP measures. We
compensate for the limitations of non-GAAP financial measures by relying
upon GAAP results to gain a complete picture of the Company’s
performance.

In calculating non-GAAP financial measures, we exclude certain items to
facilitate a review of the comparability of the Company’s operating
performance on a period-to-period basis because such items are not, in
our view, related to the Company’s ongoing operational performance. We
use non-GAAP measures to evaluate the operating performance of our
business, for comparison with forecasts and strategic plans, for
calculating return on investment, and for benchmarking performance
externally against competitors. In addition, management’s incentive
compensation is determined using certain non-GAAP measures. Also, when
evaluating potential acquisitions, we exclude certain of the items
described below from consideration of the target’s performance and
valuation. Since we find these measures to be useful, we believe that
investors benefit from seeing results “through the eyes” of management
in addition to seeing GAAP results. We believe that these non-GAAP
measures, when read in conjunction with the Company’s GAAP financials,
provide useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of
  the Company’s on-going operating results;
• the ability to better identify trends in the Company’s underlying
  business and perform related trend analyses;
• a better understanding of how management plans and measures the
  Company’s underlying business; and
• an easier way to compare the Company’s operating results against
  analyst financial models and operating results of competitors that
  supplement their GAAP results with non-GAAP financial measures.

The following are explanations of each of the adjustments that we
incorporate into non-GAAP measures, as well as the reasons for excluding
each of these individual items in the reconciliations of these non-GAAP
financial measures:

Stock-based compensation expense consists of non-cash charges for
the estimated fair value of stock options and unvested restricted share
unit awards granted to employees and assumed in business acquisitions.
The Company believes that the exclusion of these charges provides for
more accurate comparisons of its operating results to peer companies due
to the varying available valuation methodologies, subjective assumptions
and the variety of award types. In addition, the Company believes it is
useful to investors to understand the specific impact stock-based
compensation expense has on its operating results.

Intangible amortization consists primarily of non-cash charges
that can be impacted by, among other things, the timing and magnitude of
acquisitions. The Company considers its operating results without these
charges when evaluating its ongoing performance and forecasting its
earnings trends, and therefore excludes such charges when presenting
non-GAAP financial measures. The Company believes that the assessment of
its operations excluding these costs is relevant to its assessment of
internal operations and comparisons to the performance of its
competitors.

Customer related asset impairments consist primarily of non-cash
impairments of certain property and equipment to estimated fair value
for customers we are in the process of disengaging as well as additional
provisions for doubtful accounts receivable for customers that are
experiencing significant financial difficulties. Certain inventory on
hand was written down to net realizable value for these customers as
well. These costs are excluded by the Company’s management in assessing
current operating performance and forecasting its earnings trends and
are therefore excluded by the Company from its non-GAAP measures.

Contingencies and other consists primarily of costs not directly
related to ongoing or core business results such as (1) costs incurred
relating to the independent investigation undertaken by the Audit
Committee of the Company’s Board of Directors completed in June 2018,
(2) certain charges related to Multek China that was divested in the
second quarter of fiscal year 2019, (3) damages incurred from a typhoon
that impacted a China facility in the second quarter of fiscal year
2018, and (4) certain legal matters for which loss contingencies are
believed to be probable and estimable in the second quarter of fiscal
year 2018. These costs are excluded by the Company’s management in
assessing current operating performance and forecasting its earnings
trends and are therefore excluded by the Company from its non-GAAP
measures.

Restructuring charges include severance for rationalization at
existing sites and corporate SG&A functions as well as asset impairment,
lease termination, and other charges relate to the closures and
consolidations of certain operating sites. These costs may vary in size
based on the Company’s initiatives and are not directly related to
ongoing or core business results, and do not reflect expected future
operating expenses. These costs are excluded by the Company’s management
in assessing current operating performance and forecasting its earnings
trends and are therefore excluded by the Company from its non-GAAP
measures.

Other charges (income), net consists of various other types of
items that are not directly related to ongoing or core business results,
such as the gain or loss from certain divestitures, gain from
deconsolidation of certain entities, and impairment charges associated
with certain non-core investments. We exclude these items because they
are not related to the Company’s ongoing operating performance or do not
affect core operations. Excluding these amounts provides investors with
a basis to compare Company performance against the performance of other
companies without this variability.

Adjustment for taxes relates to the tax effects of the various
adjustments that we incorporate into non-GAAP measures in order to
provide a more meaningful measure on non-GAAP net income and certain
adjustments related to non-recurring settlements of tax contingencies or
other non-recurring tax charges, when applicable.

Adjustment for operating cash flows and free cash flow metrics due to
a recently issued accounting standard. In Q1 fiscal year 2019, the
adoption of the new cash flow accounting standard resulted in a
reclassification of cash flows related to the collection of certain
receivables sold through the Company’s asset-backed receivable
securitization program from operating activities to investing
activities. The Company utilizes net cash flow from its various A/R
sales programs as a low-cost source to fund operations and as a critical
net working capital management tool. Cash flow from operations is also a
critical metric that investors use to evaluate a company’s earnings
power. The Company views and manages all collections under the program
similarly without bifurcation and accordingly provides the adjustment to
reflect cash flows from operations inclusive of all collections of
receivables sold through the programs. The Company also excludes the
reduction to operating cash flows related to certain vendor programs
that is required for GAAP.

In addition, we define our free cash flow metric to be adjusted
operating cash flows described above less purchases of property and
equipment net of proceeds from dispositions and present cash flows on a
consistent basis for investor transparency. We believe 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 and for certain other
activities. Since Free Cash Flow includes investments in operating
assets, we believe this non-GAAP liquidity measure is useful in addition
to the most directly comparable GAAP measure – “net cash used in
operating activities.” See below for the three and twelve-month periods
ended March 31, 2019 reconciliation of GAAP to Non-GAAP measures:

(2) Basic shares were used in calculating diluted GAAP EPS for the
quarter ended March 31, 2019 and March 31, 2018 due to the net loss
recognized during the respective periods. Diluted shares for Q4 fiscal
2019 and fiscal 2018 were 522,460 thousand and 535,234 thousand which
were used in calculating diluted non-GAAP EPS for the respective
quarters.

(3) Customer related asset impairments for the three-month and
twelve-month periods ended March 31, 2019 and March 31, 2018 primarily
relate to additional provisions for doubtful accounts receivable,
inventory and impairment of property and equipment for certain customers
experiencing significant financial difficulties and /or we are
disengaging from.

(4) Throughout fiscal year 2018 and 2019, the Company incurred certain
restructuring charges primarily related to severance for rationalization
at certain existing operating sites and corporate functions.

We completed the wind-down of our Nike operations in Mexico in Q3 fiscal
year 2019 and recognized in total $66 million for the fiscal year. The
charge primarily consisted of non-cash asset impairments.

(5) Contingencies and other during fiscal year 2019 primarily
consist of costs incurred relating to the independent investigation
undertaken by the Audit Committee of the Company’s Board of Directors
which was completed in June 2018. In addition, it also includes certain
charges of the China based Multek operation that was divested in the
second quarter of fiscal year 2019.

During fiscal year 2018, the Company incurred charges in connection with
certain legal matters where it believed losses were probable and
estimable. The Company incurred various other charges predominately
related to damages incurred from a typhoon that impacted a China
facility. Additionally, certain asset impairments were recorded during
fiscal year 2018.

(6) As further described in the Company’s fiscal 2018 10K, the Company
deconsolidated Elementum and recognized a non-cash gain of $151.6
million. The Company also completed a sale of its Wink business in
fiscal year 2018 and recognized a gain on sale of $38.7 million. During
the last half of fiscal 2019, the Company reassessed its strategy with
respect to its entire investment portfolio. As a result, the Company
recognized an aggregate net charge related to investment impairments and
dispositions of approximately $119 million and $193 million for the
three- and twelve-month periods ended March 31, 2019, respectively. The
aggregate charge was primarily driven by write-downs of our investment
positions in a non-core cost method investment and Elementum that were
recognized in the third and fourth quarter of fiscal 2019, respectively.
The Company also incurred other investment impairments that were
individually immaterial as a result of our strategy shift and due to
market valuation changes. We continue to assess our strategy with
respect to the remaining investment portfolio and have not identified
any additional impairment indicators with respect to these investments
as of March 31, 2019.

During the first quarter of fiscal year 2019, the Company transferred
employees and equipment along with certain related software and IP, into
Bright Machines which later received additional equity funding from
third party investors and changed the composition of the Board of
directors removing Flex’s control. As such, we deconsolidated the entity
and recognized a gain of approximately $87 million in other income, net
for the year ended March 31, 2019.

(7) During the fourth quarter of fiscal year 2019, the company incurred
an expense of $15 million pertaining to initial implementation of
advanced pricing arrangements finalized with the Mexican tax authorities
during the fiscal year.

The remaining balance is primarily related to adjustment for exchange
rate fluctuation on income tax receivable position of an operating
subsidiary recognized in a prior period and tax effects of the various
adjustments that we incorporate into Non-GAAP measures.

(8) During the first quarter of fiscal year 2019, the Company amended
certain non-substantive terms of its existing contracts for its smaller
customers. The amendments removed the consideration regarding over-time
recognition under ASC 606. Accordingly, these customer contracts are now
accounted for consistent with prior accounting and revenue is recognized
upon shipment of product.

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