Flex Ltd. EBITDA surged on 11.0% and Revenue increased on 6.6%
04/26/2018 • About Flex Ltd. (
$FLEX) • By InTwits
Flex Ltd. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 4.7% in FY2018 vs. 4.5% in FY2017 vs. 3.8% in FY2014
- Flex Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.0%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $63m in 2018, $31m in 2017, $19m in 2016, $12m in 2015, $13m in 2014
- The company has business model with average profitability: ROIC is 11.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Flex Ltd.'s Revenue increased on 6.6%. Revenue growth showed acceleration in FY18Q4 - it increased 9.4% YoY. During the last 5 years Revenue growth bottomed in FY2016 at -6.6% and was accelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.4 pp from 10.0% to 7.6% in 2018.
Gross Margin showed almost no change in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue followed a growing trend at 0.20 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. SBC as a % of Revenue was relatively stable in the last 5 years.
Net Income margin showed almost no change in FY2018. The efficient tax rate was 17.7% in FY2018 while the average for the last five years was 10.7%.
Investments (CAPEX, working capital and M&A)
Flex Ltd.'s CAPEX/Revenue was 2.2% in FY2018. Flex Ltd. showed small growth in CAPEX/Revenue of 0.88 pp from 1.3% in FY2015 to 2.2% in FY2018. It's average level of CAPEX/Revenue for the last three years was 2.2%. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2015 at 1.3% and was growing since that time.
Accounts receivable as a % of Revenue increased slightly on 0.71 pp from 9.2% to 9.9% in FY2018. Inventories as a % of Revenue increased slightly on 0.70 pp from 14.2% to 14.9% in FY2018. Accounts payable as a % of Revenue increased slightly on 1.5 pp from 20.1% to 21.5% in FY2018.
Flex Ltd. has spent
$268m on M&A in FY2018 which accounts for 1.1% of revenue.
Return on investment
The company operates at good ROE (15.1%) while ROIC is low (11.0%). ROIC increased on 2.5 pp from 8.5% to 11.0% in FY2018. ROE increased on 2.9 pp from 12.3% to 15.1% in FY2018.
Leverage (Debt)
Debt level is 1.2x Net Debt / EBITDA and 2.5x Debt / EBITDA. Net Debt / EBITDA surged on 0.2x from 1.0x to 1.2x in FY2018. Debt showed almost no change in FY2018 while cash dropped on 19.6%.
Flex Ltd. has good short term financial stability: Interest coverage ratio (ICR) is 5.2x. Flex Ltd. has no short term refinancing risk: cash is higher than short term debt (3,423.4%).
Average interest expence charged on company's debt was 4.2% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 7.4x and P/E 17.2x.
Management team
CEO total compensation was
$16,170,232 in FY2018 which included
$1,250,000 salary. Flex Ltd.'s CFO is Christopher E Collier "Chris". Christopher E Collier "Chris" has 6 years tenure at the company.
At the end of financial year the company had 1.8% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 200,000 employees. The number of employees didn't change in 2018. Average revenue per employee in FY2018 was
$127,206 and it increased on 6.6%.
Financial and operational results
FY ended 03/31/2018
Flex Ltd. ($FLEX) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 26,109 | 26,148 | 24,419 | 23,863 | 25,441 | 6.6% |
| Gross Profit | 1,499 | 1,545 | 1,608 | 1,521 | 1,663 | 9.3% |
| SG&A | 875 | 844 | 955 | 937 | 1,019 | 8.8% |
| EBITDA | 984 | 1,209 | 1,055 | 1,080 | 1,199 | 11.0% |
| EBIT | 520 | 669 | 539 | 470 | 644 | 36.9% |
| Interest expence | 80 | 76 | 98 | 108 | 123 | 14.0% |
| Tax | 35 | 70 | 11 | 51 | 92 | 80.1% |
| Net Income | 366 | 601 | 444 | 320 | 429 | 34.1% |
| Stock Based Compensation | 40 | 50 | 78 | 77 | 81 | 5.2% |
Balance Sheet
|
|---|
| Cash | 1,594 | 1,628 | 1,608 | 1,831 | 1,472 | -19.6% |
| Accounts Receivable | 2,698 | 2,338 | 2,045 | 2,193 | 2,518 | 14.8% |
| Inventory | 3,599 | 3,489 | 3,492 | 3,396 | 3,800 | 11.9% |
| Accounts Payable | 4,748 | 4,561 | 4,248 | 4,485 | 5,122 | 14.2% |
| Short Term Debt | 33 | 45 | 65 | 62 | 43 | -30.1% |
| Long Term Debt | 2,070 | 2,026 | 2,709 | 2,891 | 2,898 | 0.2% |
Cash flow
|
|---|
| Capex | 610 | 347 | 511 | 525 | 562 | 7.0% |
| Acquisitions | 238 | 67 | 911 | 189 | 268 | 41.9% |
Ratios
|
|---|
| Revenue growth | 10.8% | 0.2% | -6.6% | -2.3% | 6.6% | |
| EBITDA growth | 11.1% | 22.8% | -12.8% | 2.4% | 11.0% | |
|
|---|
| Gross Margin | 5.7% | 5.9% | 6.6% | 6.4% | 6.5% | 0.2% |
| EBITDA Margin | 3.8% | 4.6% | 4.3% | 4.5% | 4.7% | 0.2% |
| EBIT Margin | 2.0% | 2.6% | 2.2% | 2.0% | 2.5% | 0.6% |
| SG&A, % of revenue | 3.4% | 3.2% | 3.9% | 3.9% | 4.0% | 0.1% |
| SBC, % of revenue | 0.2% | 0.2% | 0.3% | 0.3% | 0.3% | -0.0% |
| Net Income Margin | 1.4% | 2.3% | 1.8% | 1.3% | 1.7% | 0.3% |
| CAPEX, % of revenue | 2.3% | 1.3% | 2.1% | 2.2% | 2.2% | 0.0% |
|
|---|
| ROIC | 12.6% | 15.6% | 10.9% | 8.5% | 11.0% | 2.5% |
| ROE | 16.6% | 26.6% | 18.0% | 12.3% | 15.1% | 2.9% |
| Net Debt/EBITDA | 0.5x | 0.4x | 1.1x | 1.0x | 1.2x | 0.2x |
| Interest coverage ratio (ICR) | 6.5x | 8.8x | 5.5x | 4.4x | 5.2x | 0.9x |
| Interest expence / Average debt | 3.8% | 3.7% | 4.0% | 3.8% | 4.2% | 0.4% |
People
|
|---|
| Insider ownership | 1.8% | 1.8% | 1.8% | 1.8% | 1.8% | 0.0% |
| Employees | 150,000 | 150,000 | 200,000 | 200,000 | 200,000 | 0.0% |
| Revenue/Employee, th. $ | 174 | 174 | 122 | 119 | 127 | 6.6% |
Flex Ltd. ($FLEX) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 6,008 | 6,270 | 6,752 | 6,411 | | 2.2% | 4.4% | 10.4% | 9.4% |
| EBITDA | 304 | 379 | 308 | 208 | | 12.2% | 53.4% | 5.2% | -22.7% |
| Net Income | 125 | 205 | 118 | -20 | | 18.0% | | -8.6% | -122.6% |
Balance Sheet
|
|---|
| Cash | 1,582 | 1,370 | 1,291 | 1,472 | | -5.8% | -10.9% | -30.5% | -19.6% |
| Short Term Debt | 46 | 47 | 43 | 43 | | -30.8% | -28.8% | -37.6% | -30.1% |
| Long Term Debt | 2,919 | 2,909 | 2,902 | 2,898 | | 8.4% | 8.6% | 3.7% | 0.2% |
Ratios
|
|---|
| Gross Margin | 6.8% | 6.3% | 6.6% | 6.4% | | -0.1% | 1.1% | -0.2% | -0.2% |
| EBITDA Margin | 5.1% | 6.0% | 4.6% | 3.2% | | 0.4% | 1.9% | -0.2% | -1.3% |
| Net Income Margin | 2.1% | 3.3% | 1.8% | -0.3% | | 0.3% | 3.3% | -0.4% | -1.8% |
Peers in Electronic Manufacturing Servi
Below you can find Flex Ltd. benchmarking vs. other companies in Electronic Manufacturing Servi industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | | 41.9% | -7.8% | -24.0% | 118.4% |
| Alpine 4 Technologies Ltd ($ALPP) | | | 35,893.8% | 5.8% | 71.5% |
| Kemet Corporation ($KEM) | | -1.3% | -10.7% | 3.1% | 58.4% |
| SMTC Corporation ($SMTX) | | -3.5% | -23.9% | -17.1% | 55.2% |
| IEC Electronics Corp. ($IEC) | | 5.1% | 0.0% | -24.1% | 21.2% |
| |
|---|
| Median (26 companies) | -24.3% | 2.8% | 1.7% | 3.0% | 8.4% |
|---|
| Flex Ltd. ($FLEX) | | 0.2% | -6.6% | -2.3% | 6.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Neonode Inc. ($NEON) | 68.2% | 66.0% | 86.9% | 77.1% | 89.2% |
| Andrea Electronics Corp ($ANDR) | 83.8% | 99.1% | 88.5% | 96.2% | 70.4% |
| Data I/O Corporation ($DAIO) | 53.9% | 52.4% | 55.0% | 58.9% | 59.4% |
| IPG Photonics Corporation ($IPGP) | 54.1% | 54.6% | 54.9% | 56.6% | 54.8% |
| CTS Corporation ($CTS) | 32.2% | 33.2% | 35.4% | 33.2% | 35.1% |
| |
|---|
| Median (26 companies) | 14.7% | 19.4% | 22.2% | 15.8% | 13.7% |
|---|
| Flex Ltd. ($FLEX) | 5.7% | 5.9% | 6.6% | 6.4% | 6.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| IPG Photonics Corporation ($IPGP) | 41.5% | 42.4% | 41.8% | 44.7% | 40.9% |
| TE Connectivity Ltd. ($TEL) | 19.7% | 19.3% | 20.9% | 20.4% | 21.4% |
| CTS Corporation ($CTS) | 14.7% | 9.0% | 20.7% | 14.0% | 17.8% |
| Methode Electronics, Inc. ($MEI) | 12.6% | 15.4% | 16.5% | 16.5% | 16.1% |
| RF Industries, Ltd. ($RFIL) | 12.4% | 6.7% | -12.1% | 3.1% | 15.9% |
| |
|---|
| Median (26 companies) | 4.8% | 5.8% | 5.4% | 5.0% | 4.6% |
|---|
| Flex Ltd. ($FLEX) | 3.8% | 4.6% | 4.3% | 4.5% | 4.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Maxwell Technologies, Inc. ($MXWL) | 3.7% | 2.5% | 4.9% | 6.6% | 11.3% |
| IPG Photonics Corporation ($IPGP) | 11.5% | 7.8% | 12.6% | 9.0% | 11.0% |
| eMagin Corporation ($EMAN) | 5.8% | 4.7% | 6.7% | 6.2% | 8.8% |
| TE Connectivity Ltd. ($TEL) | 5.3% | 4.9% | 5.3% | 5.6% | 6.7% |
| CTS Corporation ($CTS) | 3.2% | 2.5% | 5.2% | 4.3% | 6.1% |
| |
|---|
| Median (26 companies) | 2.7% | 2.4% | 2.8% | 3.4% | 2.5% |
|---|
| Flex Ltd. ($FLEX) | 2.3% | 1.3% | 2.1% | 2.2% | 2.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | 8.5% | 4.6% | -18.7% | 0.9% | 29.2% |
| IPG Photonics Corporation ($IPGP) | 27.0% | 27.8% | 25.1% | 29.9% | 22.9% |
| Methode Electronics, Inc. ($MEI) | 19.7% | 26.1% | 22.7% | 20.8% | 19.2% |
| TE Connectivity Ltd. ($TEL) | 17.3% | 15.1% | 15.9% | 16.2% | 18.4% |
| Kemet Corporation ($KEM) | -2.8% | 3.8% | 6.2% | 6.9% | 16.9% |
| |
|---|
| Median (28 companies) | 4.4% | 4.9% | 6.2% | 4.2% | 6.6% |
|---|
| Flex Ltd. ($FLEX) | 12.6% | 15.6% | 10.9% | 8.5% | 11.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpine 4 Technologies Ltd ($ALPP) | | | | 34.1x | 65.7x |
| SigmaTron International, Inc. ($SGMA) | 2.7x | 4.1x | 2.4x | 3.4x | 16.0x |
| SMTC Corporation ($SMTX) | 3.5x | 1.8x | 1.0x | | 11.3x |
| IEC Electronics Corp. ($IEC) | 7.1x | 14.0x | 2.0x | 5.6x | 4.9x |
| Key Tronic Corporation ($KTCC) | 0.2x | 3.4x | 2.6x | 2.5x | 3.9x |
| |
|---|
| Median (21 companies) | -0.5x | -0.9x | -0.0x | -0.1x | 0.2x |
|---|
| Flex Ltd. ($FLEX) | 0.5x | 0.4x | 1.1x | 1.0x | 1.2x |
