SEC Form 10-Q filed by Flex Ltd.

10/31/24 4:05:04 PM ET

$FLEX

Electrical Products

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flex-20240927

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-23354

FLEX LTD.

(Exact name of registrant as specified in its charter)


Singapore						98-1773351
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)


2 Changi South Lane,
Singapore						486123
(Address of principal executive offices)						(Zip Code)

(65) 6876-9899

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Ordinary Shares, No Par Value

FLEX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s ordinary shares outstanding as of October 25, 2024 was 387,783,445.

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FLEX LTD.

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Balance Sheets (unaudited) — September 27, 2024 and March 31, 2024	4
	Condensed Consolidated Statements of Operations (unaudited) — Three-Month and Six-Month Periods Ended September 27, 2024 and September 29, 2023	5
	Condensed Consolidated Statements of Comprehensive Income (unaudited) — Three-Month and Six-Month Periods Ended September 27, 2024 and September 29, 2023	6
	Condensed Consolidated Statements of Noncontrolling Interest and Shareholders' Equity (unaudited) — Three-Month and Six-Month Periods Ended September 27, 2024 and September 29, 2023	7
	Condensed Consolidated Statements of Cash Flows (unaudited) — Six-Month Periods Ended September 27, 2024 and September 29, 2023	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities a nd Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		40

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Flex Ltd., Singapore

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Flex Ltd. and its subsidiaries (the “Company”) as of September 27, 2024, the related condensed consolidated statements of operations, comprehensive income, noncontrolling interest and shareholders’ equity for the three-month and six-month periods ended September 27, 2024 and September 29, 2023, the condensed consolidated statement of cash flows for the six-month periods ended September 27, 2024 and September 29, 2023, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of March 31, 2024 and the related consolidated statements of operations, comprehensive income, redeemable noncontrolling interest and shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May 17, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2024 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ DELOITTE & TOUCHE LLP
San Jose, California
October 31, 2024

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FLEX LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS


	As of September 27, 2024		As of March 31, 2024
	(In millions, except share amounts) (Unaudited)


ASSETS
Current assets:
Cash and cash equivalents	$	2,601	$	2,474
Accounts receivable, net of allowance of $10 and $12, respectively	3,502		3,033
Contract assets	595		249
Inventories	5,466		6,205
Other current assets	1,187		1,031
Total current assets	13,351		12,992
Property and equipment, net	2,254		2,269
Operating lease right-of-use assets, net	581		601
Goodwill	1,146		1,135
Other intangible assets, net	223		245
Other non-current assets	1,031		1,015
Total assets	$	18,586	$	18,257

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt	$	531	$	—
Accounts payable	5,144		4,468
Accrued payroll and benefits	473		488
Deferred revenue and customer working capital advances	2,134		2,615
Other current liabilities	1,024		968
Total current liabilities	9,306		8,539
Long-term debt, net of current portion	3,178		3,261
Operating lease liabilities, non-current	476		490
Other non-current liabilities	623		642
Total liabilities	13,583		12,932


Shareholders’ equity

Ordinary shares, no par value; 1,500,000,000 authorized, 389,775,099 and 408,101,772 issued and outstanding, respectively	4,377		5,074

Accumulated earnings	799		446
Accumulated other comprehensive loss	(173)		(195)


Total shareholders’ equity	5,003		5,325
Total liabilities and shareholders' equity	$	18,586	$	18,257

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three-Month Periods Ended				Six-Month Periods Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
	(In millions, except per share amounts) (Unaudited)
Net sales	$	6,545	$	6,933	$	12,859	$	13,825
Cost of sales	5,998		6,411		11,825		12,810
Restructuring charges	16		3		32		20
Gross profit	531		519		1,002		995
Selling, general and administrative expenses	216		221		429		456
Restructuring charges	2		—		11		6
Intangible amortization	16		17		32		37
Operating income	297		281		530		496
Interest expense	53		49		109		105
Interest income	16		15		32		31
Other charges (income), net	(4)		14		(3)		25

Income from continuing operations before income taxes	264		233		456		397
Provision for (benefit from) income taxes	50		32		103		49
Net income from continuing operations	214		201		353		348
Net income from discontinued operations, net of tax	—		205		—		269
Net income	214		406		353		617
Net income attributable to noncontrolling interest	—		178		—		203
Net income attributable to Flex Ltd.	$	214	$	228	$	353	$	414

Basic earnings per share from continuing operations	$	0.54	$	0.45	$	0.89	$	0.78
Basic earnings per share from discontinued operations	—		0.06		—		0.15
Basic earnings per share attributable to the shareholders of Flex Ltd.	$	0.54	$	0.51	$	0.89	$	0.93

Diluted earnings per share from continuing operations	$	0.54	$	0.45	$	0.87	$	0.77
Diluted earnings per share from discontinued operations	—		0.06		—		0.15
Diluted earnings per share attributable to the shareholders of Flex Ltd.	$	0.54	$	0.51	$	0.87	$	0.92

Weighted-average shares used in computing per share amounts:
Basic	394		443		398		445
Diluted	400		448		405		452

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three-Month Periods Ended				Six-Month Periods Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
	(In millions) (Unaudited)
Net income	$	214	$	406	$	353	$	617
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	55		(38)		39		(47)
Unrealized gain (loss) on derivative instruments and other	10		(33)		(17)		1
Comprehensive income	$	279	$	335	$	375	$	571
Comprehensive income attributable to noncontrolling interest	—		178		—		203
Comprehensive income attributable to Flex Ltd.	$	279	$	157	$	375	$	368

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY


	Ordinary Shares					Accumulated Other Comprehensive Loss										Total
Three Months Ended September 27, 2024	Shares Outstanding	Amount		Accumulated Earnings (Deficit)		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Gain (Loss)		Total Flex Ltd. Shareholders' Equity		Noncontrolling Interest		Shareholders' Equity
	(In millions) Unaudited
BALANCE AT JUNE 28, 2024	399	$	4,649	$	585	$	(23)	$	(215)	$	(238)	$	4,996	$	—	$	4,996
Repurchase of Flex Ltd. ordinary shares at cost	(10)	(300)		—		—		—		—		(300)		—		(300)
Issuance of Flex Ltd. vested shares under restricted share unit awards	1	—		—		—		—		—		—		—		—
Net income	—	—		214		—		—		—		214		—		214
Stock-based compensation	—	28		—		—		—		—		28		—		28
Total other comprehensive income (loss)	—	—		—		10		55		65		65		—		65
BALANCE AT SEPTEMBER 27, 2024	390	$	4,377	$	799	$	(13)	$	(160)	$	(173)	$	5,003	$	—	$	5,003


	Ordinary Shares					Accumulated Other Comprehensive Loss										Total
Six Months Ended September 27, 2024	Shares Outstanding	Amount		Accumulated Earnings (Deficit)		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Gain (Loss)		Total Flex Ltd. Shareholders' Equity		Noncontrolling Interest		Shareholders' Equity
	(In millions) Unaudited
BALANCE AT MARCH 31, 2024	408	$	5,074	$	446	$	4	$	(199)	$	(195)	$	5,325	$	—	$	5,325
Repurchase of Flex Ltd. ordinary shares at cost	(25)	(757)		—		—		—		—		(757)		—		(757)


Issuance of Flex Ltd. vested shares under restricted share unit awards	7	—		—		—		—		—		—		—		—
Net income	—	—		353		—		—		—		353		—		353
Stock-based compensation	—	60		—		—		—		—		60		—		60
Total other comprehensive income (loss)	—	—		—		(17)		39		22		22		—		22
BALANCE AT SEPTEMBER 27, 2024	390	$	4,377	$	799	$	(13)	$	(160)	$	(173)	$	5,003	$	—	$	5,003

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FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY (CONTINUED)


	Ordinary Shares					Accumulated Other Comprehensive Loss										Total
Three Months Ended September 29, 2023	Shares Outstanding	Amount		Accumulated Earnings (Deficit)		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Gain (Loss)		Total Flex Ltd. Shareholders' Equity		Noncontrolling Interest		Shareholders' Equity
	(In millions) Unaudited
BALANCE AT JUNE 30, 2023	449	$	5,949	$	(374)	$	20	$	(189)	$	(169)	$	5,406	$	380	$	5,786
Repurchase of Flex Ltd. ordinary shares at cost	(11)	(309)		—		—		—		—		(309)		—		(309)
Nextracker follow on sales and related transactions	—	607		—		—		—		—		607		(108)		499
Net income	—	—		228		—		—		—		228		178		406
Stock-based compensation	—	45		—		—		—		—		45		—		45
Total other comprehensive income (loss)	—	—		—		(33)		(38)		(71)		(71)		—		(71)
BALANCE AT SEPTEMBER 29, 2023	438	$	6,292	$	(146)	$	(13)	$	(227)	$	(240)	$	5,906	$	450	$	6,356


	Ordinary Shares					Accumulated Other Comprehensive Loss										Total
Six Months Ended September 29, 2023	Shares Outstanding	Amount		Accumulated Earnings (Deficit)		Unrealized Gain (Loss) on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Gain (Loss)		Total Flex Ltd. Shareholders' Equity		Noncontrolling Interest		Shareholders' Equity
	(In millions) Unaudited
BALANCE AT MARCH 31, 2023	450	$	6,105	$	(560)	$	(14)	$	(180)	$	(194)	$	5,351	$	355	$	5,706
Repurchase of Flex Ltd. ordinary shares at cost	(20)	(506)		—		—		—		—		(506)		—		(506)
Issuance of Flex Ltd. vested shares under restricted share unit awards	8	—		—		—		—		—		—		—		—
Nextracker follow on sales and related transactions	—	607		—		—		—		—		607		(108)		499
Net income	—	—		414		—		—		—		414		203		617
Stock-based compensation	—	86		—		—		—		—		86		—		86
Total other comprehensive income (loss)	—	—		—		1		(47)		(46)		(46)		—		(46)
BALANCE AT SEPTEMBER 29, 2023	438	$	6,292	$	(146)	$	(13)	$	(227)	$	(240)	$	5,906	$	450	$	6,356

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six-Month Periods Ended
	September 27, 2024		September 29, 2023
	(In millions) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	353	$	617
Depreciation, amortization and other impairment charges	257		260
Changes in working capital and other, net	49		(514)
Net cash provided by operating activities	659		363
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(214)		(319)
Proceeds from the disposition of property and equipment	6		19
Acquisition of businesses, net of cash acquired	(1)		—


Other investing activities, net	3		3
Net cash used in investing activities	(206)		(297)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings and long-term debt	499		2
Payments of bank borrowings, long-term debt and other financing liabilities	(57)		(398)

Payments for repurchases of ordinary shares	(757)		(506)
Proceeds from issuances of Nextracker shares	—		552
Payment for purchase of Nextracker LLC units from TPG	—		(57)
Other, net	(6)		(53)
Net cash used in financing activities	(321)		(460)
Effect of exchange rates on cash and cash equivalents	(5)		—
Net change in cash and cash equivalents	127		(394)
Cash and cash equivalents, beginning of period	2,474		3,294
Cash and cash equivalents, end of period	$	2,601	$	2,900

Non-cash investing activities:
Unpaid purchases of property and equipment	$	96	$	117
Right-of-use assets obtained in exchange of operating lease liabilities	37		77

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION

Organization of the Company

Flex Ltd. ("Flex" or the "Company") is 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, Flex supports our customers' entire product lifecycle with a broad array of services in every major region. The Company's full suite of specialized capabilities includes design and engineering, supply chain, manufacturing, post-production and post-sale services. Flex partners with customers across a diverse set of industries including cloud, communications, enterprise, automotive, industrial, consumer devices, lifestyle, healthcare, and energy. As of September 27, 2024, Flex's two operating and reportable segments were as follows:

•Flex Agility Solutions ("FAS"), which is comprised of the following end markets:

◦Communications, Enterprise and Cloud, including data infrastructure, edge infrastructure and communications infrastructure

◦Lifestyle, including appliances, consumer packaging, floorcare, micro mobility and audio

◦Consumer Devices, including mobile and high velocity consumer devices.

•Flex Reliability Solutions ("FRS"), which is comprised of the following end markets:

◦Automotive, including next generation mobility, autonomous, connectivity, electrification, and smart technologies

◦Health Solutions, including medical devices, medical equipment and drug delivery

◦Industrial, including capital equipment, industrial devices, embedded and critical power offerings and renewables and grid edge.

The Company's service offerings include a comprehensive range of value-added design and engineering services that are tailored to the various markets and needs of its customers. Other focused service offerings relate to manufacturing (including enclosures, metals, plastic injection molding, precision plastics, machining, and mechanicals), system integration and assembly and test services, materials procurement, inventory management, logistics and after-sales services (including product repair, warranty services, re-manufacturing and maintenance), supply chain management software solutions and component product offerings (including flexible printed circuit boards and power adapters and chargers).

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and in accordance with the requirements of Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the fiscal year ended March 31, 2024 contained in the Company’s Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Operating results for the three and six-month periods ended September 27, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2025.

The first quarters for fiscal years 2025 and 2024 ended on June 28, 2024, which is comprised of 89 days in the period, and June 30, 2023, which is comprised of 91 days, respectively. The second quarters for fiscal years 2025 and 2024 ended on September 27, 2024 and September 29, 2023, respectively, which are comprised of 91 days in both periods.

The accompanying unaudited condensed consolidated financial statements include the accounts of Flex and its subsidiaries, after elimination of intercompany accounts and transactions. The Company consolidates subsidiaries and investments in entities in which the Company has a controlling interest. For the consolidated subsidiaries in which the Company owns less than 100%, the Company recognizes a noncontrolling interest for the ownership of the noncontrolling owners.

On January 2, 2024, Flex completed its spin-off (the "Spin-off") of its remaining interest in Nextracker Inc. ("Nextracker"). After the Spin-off, Flex no longer consolidates the financial results of Nextracker within its financial results of continuing operations. For all the periods prior to the Spin-off, the financial results of Nextracker are presented as net earnings from

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discontinued operations in the condensed consolidated statements of operations and unless otherwise indicated Flex's disclosures are presented on a continuing operations basis. The historical statements of comprehensive income and cash flows and the balances related to shareholders' equity have not been revised to reflect the Spin-off. See note 6 "Discontinued Operations" for additional information.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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. Estimates are used in accounting for, among other things: allowances for doubtful accounts; inventory write-downs; valuation allowances for deferred tax assets; uncertain tax positions; valuation and useful lives of long-lived assets including property, equipment, and intangible assets; valuation of goodwill; valuation of investments in privately held companies; asset impairments; fair values of financial instruments, notes receivable and derivative instruments; restructuring charges; contingencies; warranty provisions; incremental borrowing rates in determining the present value of lease payments; accruals for potential price adjustments arising from customer contracts; fair values of assets obtained and liabilities assumed in business combinations; and the fair values of restricted share unit awards granted under the Company's stock-based compensation plans. Due to geopolitical conflicts (including the Russian invasion of Ukraine, the Israel-Hamas war, and other geopolitical conflicts), there has been and will continue to be uncertainty and disruption in the global economy and financial markets. The Company has made estimates and assumptions taking into consideration certain possible impacts due to the Russian invasion of Ukraine and the Israel-Hamas war. 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.

Supplier Finance Programs

The Company has four supplier finance programs, all of which have substantially similar characteristics, with various financial institutions that act as the paying agent for certain payables of the Company. The Company established these programs through agreements with the financial institutions to enable more efficient payment processing to our suppliers while also providing our suppliers a potential source of liquidity to the extent they choose to sell their receivables to the financial institutions in advance of the due dates. Our suppliers’ participation in the programs is voluntary, the Company is not involved in negotiations of the suppliers’ arrangements with the financial institutions to sell their receivables, and our rights and obligations to our suppliers are not impacted by our suppliers’ decisions to sell amounts under these programs. Under these supplier finance programs, the Company pays the financial institutions the stated amount of confirmed invoices from its participating suppliers on the original maturity dates of the invoices. All payment terms are short-term in nature and are not dependent on whether the suppliers participate in the supplier finance programs or if the suppliers elect to receive early payment from the financial institutions. No guarantees are provided by the Company under the supplier finance programs and the Company incurs no costs related to the programs. We have no economic interest in a supplier’s decision to participate in the supplier finance programs.

Obligations under these programs are classified within accounts payable on the condensed consolidated balance sheets, with the associated payments reflected in the operating activities section of the condensed consolidated statement of cash flows. The Company's outstanding obligations confirmed as valid under its supplier finance programs as of September 27, 2024 and March 31, 2024 were $133 million and $123 million, respectively.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The guidance is effective for the Company beginning in the fourth quarter of fiscal year 2026. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance prospectively when it becomes effective in the fourth quarter of fiscal year 2026.

In November 2023, the FASB issued ASU 2023-07 "Segment Reporting - Improvements to Reportable Segment Disclosures", which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The guidance is effective for the Company beginning in the fourth quarter of fiscal year 2025, with early adoption permitted. The Company is currently assessing the impact of ASU 2023-07 on its consolidated financial statements, and intends to adopt the guidance retrospectively when it becomes effective in the fourth quarter of fiscal year 2025.

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2. BALANCE SHEET ITEMS

Inventories

The components of inventories, net of applicable lower of cost and net realizable value write-downs, were as follows:


	As of September 27, 2024		As of March 31, 2024
	(In millions)
Raw materials	$	4,569	$	5,045
Work-in-progress	460		623
Finished goods	437		537
	$	5,466	$	6,205

Goodwill and Other Intangible Assets

During the six-month period ended September 27, 2024, the activity in the Company's goodwill account included approximately $3 million of foreign currency translation and an approximately $8 million goodwill addition from an acquisition in the first quarter of fiscal year 2025.

The components of acquired intangible assets are as follows:


	As of September 27, 2024						As of March 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(In millions)
Intangible assets:
Customer-related intangibles	$	292	$	(172)	$	120	$	316	$	(186)	$	130
Licenses and other intangibles	309		(206)		103		298		(183)		115
Total	$	601	$	(378)	$	223	$	614	$	(369)	$	245

The gross carrying amounts of intangible assets are removed when fully amortized.

The estimated future annual amortization expense for intangible assets is as follows:


Fiscal Year Ending March 31,	Amount
	(In millions)
2025 (1)	$	32
2026	45
2027	37
2028	28
2029	25
Thereafter	56
Total amortization expense	$	223

____________________________________________________________

(1)Represents estimated amortization for the remaining fiscal six-month period ending March 31, 2025.

Customer Working Capital Advances

Customer working capital advances were $1.8 billion and $2.2 billion as of September 27, 2024 and March 31, 2024, respectively. The customer working capital advances are not interest-bearing, do not generally have fixed repayment dates and are generally reduced as the underlying working capital is consumed in production or the customer working capital advance agreement is terminated.

Other Non-Current Assets

Other non-current assets include deferred tax assets of $657 million and $644 million as of September 27, 2024 and March 31, 2024, respectively.

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Other Current Liabilities

Other current liabilities include customer-related accruals of $245 million and $277 million as of September 27, 2024 and March 31, 2024, respectively.

3. REVENUE

Contract Balances

A contract asset is recognized when the Company has recognized revenue, but not issued an invoice for payment. Contract assets are classified separately on the condensed consolidated balance sheets and transferred to receivables when rights to payment become unconditional and invoiced.

A contract liability is recognized when the Company receives payments in advance of the satisfaction of performance. Contract liabilities, identified as deferred revenue, were $372 million and $490 million as of September 27, 2024 and March 31, 2024, respectively, of which $334 million and $449 million, respectively, is included in deferred revenue and customer working capital advances under current liabilities.

Disaggregation of Revenue

The following table presents the Company’s revenue disaggregated based on timing of transfer, point in time or over time, for the three and six-month periods ended September 27, 2024 and September 29, 2023, respectively.


	Three-Month Periods Ended				Six-Month Periods Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Timing of Transfer	(In millions)
FAS
Point in time	$	2,924	$	3,280	$	5,797	$	6,716
Over time	682		338		1,174		503
Total	3,606		3,618		6,971		7,219
FRS
Point in time	2,237		3,145		4,870		6,277
Over time	702		170		1,018		329
Total	2,939		3,315		5,888		6,606
Flex
Point in time	5,161		6,425		10,667		12,993
Over time	1,384		508		2,192		832
Total	$	6,545	$	6,933	$	12,859	$	13,825

4. STOCK-BASED COMPENSATION

Flex historically maintains stock-based compensation plans at a corporate level. The Company grants equity compensation awards under its 2017 Equity Incentive Plan (the "2017 Plan").

Stock-Based Compensation Expense

The following table summarizes the Company’s share-based compensation expense for the 2017 Plan:


	Three-Month Periods Ended				Six-Month Periods Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
	(In millions)
Cost of sales	$	8	$	7	$	16	$	14
Selling, general and administrative expenses	20		21		44		46
Total share-based compensation expense	$	28	$	28	$	60	$	60

The 2017 Plan

During the six-month period ended September 27, 2024, the Company granted approximately 4.6 million restricted share unit ("RSU") awards. Of this amount, approximately 2.9 million are plain-vanilla unvested RSU awards that vest over a period

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of three years, with no performance or market conditions, and with an average grant date price of $31.86 per award. In addition, approximately 0.7 million unvested shares represent the target amount of grants made to certain key employees whereby vesting is contingent on certain performance conditions, and with an average grant date price of $31.04 per award. These performance-based RSUs include awards tied to the Company's adjusted earnings per share growth and awards tied to operating profit goals. The number of shares that will ultimately vest will range from zero up to a maximum of approximately 1.2 million based on the level of achievement of these performance conditions. The awards will cliff vest after a period of one to three years, depending on the specific performance metrics, to the extent such performance conditions have been met. Further, approximately 0.3 million unvested shares represent the target amount of grants made to certain key employees whereby vesting is contingent on certain market conditions. The average grant date fair value of these awards contingent on certain market conditions was estimated to be $42.36 per award and was calculated using a Monte Carlo simulation. The number of shares contingent on market conditions that ultimately will vest will range from zero up to a maximum of approximately 0.6 million based on a measurement of the percentile rank of the Company’s total shareholder return over certain specified periods against the Company's peer companies, and will cliff vest after a period of three years, to the extent such market conditions have been met. Finally, the remaining balance of approximately 0.7 million represents the number of shares issued upon the vesting of RSU awards above target levels based on the achievement of certain market and performance conditions for awards granted in fiscal year 2022. These awards were issued and immediately vested in accordance with the terms and conditions of the underlying awards.

As of September 27, 2024, approximately 12.4 million unvested RSU awards under the 2017 Plan were outstanding, of which vesting for a targeted amount of approximately 1.2 million shares is contingent on meeting certain market conditions, and vesting for a targeted amount of approximately 1.6 million shares is contingent on meeting certain performance conditions. The number of shares tied to market conditions that will ultimately be issued can range from zero to approximately 2.4 million based on the achievement levels. The number of shares tied to performance conditions that will ultimately be issued can range from zero to approximately 3.0 million based on the achievement levels. During the six-month period ended September 27, 2024, approximately 1.6 million shares vested in connection with the awards with market and performance conditions granted in fiscal year 2022.

As of September 27, 2024, total unrecognized compensation expense related to unvested RSU awards under the 2017 Plan was approximately $221 million, and will be recognized over a weighted-average remaining vesting period of 2.0 years.

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5. EARNINGS PER SHARE

The following table reflects basic weighted-average ordinary shares outstanding and diluted weighted-average ordinary share equivalents used to calculate basic and diluted earnings per share attributable to the shareholders of Flex:


	Three-Month Periods Ended				Six-Month Periods Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
	(In millions, except per share amounts)
Numerator:
Net income from continuing operations	$	214	$	201	$	353	$	348
Net income from discontinued operations, net of tax	—		205		—		269
Less: Net income attributable to noncontrolling interest	—		178		—		203
Net income from discontinued operations attributable to Flex Ltd.	—		27		—		66
Total net income attributable to Flex Ltd.	$	214	$	228	$	353	$	414

Denominator:
Weighted-average ordinary shares outstanding - basic	394		443		398		445
Weighted-average ordinary share equivalents from RSU awards (1)	6		5		7		7
Weighted-average ordinary shares and ordinary share equivalents outstanding - diluted	400		448		405		452

Earnings per share - basic
Continuing operations	$	0.54	$	0.45	$	0.89	$	0.78
Discontinued operations, net of tax	—		0.06		—		0.15
Total attributable to the shareholders of Flex Ltd.	$	0.54	$	0.51	$	0.89	$	0.93

Earnings per share - diluted
Continuing operations	$	0.54	$	0.45	$	0.87	$	0.77
Discontinued operations, net of tax	—		0.06		—		0.15
Total attributable to the shareholders of Flex Ltd.	$	0.54	$	0.51	$	0.87	$	0.92

____________________________________________________________

(1)An immaterial amount of RSU awards and 1.9 million RSU awards for the three and six-month periods ended September 27, 2024, respectively, and an immaterial amount of RSU awards and 2.1 million RSU awards for the three and six-month periods ended September 29, 2023, respectively, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents.

6. DISCONTINUED OPERATIONS

On January 2, 2024, the Company completed the Spin-off of its remaining interests in Nextracker. For additional details on the Spin-off, refer to Part I, Item 1, “Business” and note 1, "Organization of The Company" and note 7, “Discontinued Operations” of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. Nextracker's financial results for periods prior to the Spin-off have been reflected in our condensed consolidated statement of operations, retrospectively, as discontinued operations.

The key components of net income from discontinued operations for the three and six-month periods ended September 29, 2023 were as follows:

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	Three-month period ended		Six-month period ended
	September 29, 2023		September 29, 2023
	(In millions)
Net sales (1)	$	538	$	982
Cost of sales (1)	392		725
Gross Profit	146		257
Selling, general and administrative expenses	51		86
Operating income	95		171
Interest and other, net	3		4
Income before income taxes	92		167
Provision for income taxes	(113)		(102)
Net income from discontinued operations	205		269
Net income from discontinued operations attributable to noncontrolling interest (2)	178		203
Net income from discontinued operations attributable to Flex Ltd.	$	27	$	66

(1) Both net sales and cost of sales from discontinued operations includes the effect of intercompany transactions that were eliminated from Flex's condensed consolidated statements of operations of approximately $34 million and $70 million for the three and six-month periods ended September 29, 2023, respectively.

(2) Net income from discontinued operations attributable to noncontrolling interest represented a share of pre-tax income of $40 million and $69 million and of income tax expense of $2 million and $6 million for the three and six-month periods ended September 29, 2023. As such, pre-tax income attributable to Flex Ltd. from discontinued operations was $52 million and $98 million for the same periods. In addition, during the three-month period ended September 29, 2023, a $140 million deferred tax asset was recorded, with an offsetting entry to income tax benefit fully attributable to noncontrolling interest in connection with Nextracker's follow-on public offering.

Details of cash flows from discontinued operations for the six-month period ended September 29, 2023 were as follows:

Six-month period ended

September 29, 2023

(In millions)

Net cash provided by discontinued operations operating activities (1)

253

Net cash used in discontinued operations investing activities

(1)

(1) Cash flows from discontinued operations operating activities includes an inflow from intercompany transactions that were eliminated from Flex's consolidated operations of $(4) million for the six-month period ended September 29, 2023.

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7. BANK BORROWINGS AND LONG-TERM DEBT

Bank borrowings and long-term debt as of September 27, 2024 and March 31, 2024 are as follows:


	Maturity Date	As of September 27, 2024		As of March 31, 2024
		(In millions)
4.750% Notes (1)	June 2025	$	532	$	584
3.750% Notes (1)	February 2026	680		682
6.000% Notes (1)	January 2028	397		397
4.875% Notes (1)	June 2029	656		657
4.875% Notes (1)	May 2030	678		681
5.250% Notes (1)	January 2032	499		—
3.600% HUF Bonds (2)	December 2031	283		274
Other		1		1
Debt issuance costs		(17)		(15)
		3,709		3,261
Current portion, net of debt issuance costs		(531)		—
Non-current portion		$	3,178	$	3,261

(1)The notes are carried at the principal amount of each note, less any unamortized discount or premium and unamortized debt issuance costs. The notes are the Company’s senior unsecured obligations and rank equally with all other existing and future senior unsecured debt obligations.

(2)The bonds mature in December 2031 with annual payments equal to 10% of the original principal amount thereof on each of the seventh, eighth, and ninth anniversaries of the bonds, with the remaining 70% due upon maturity.

The weighted-average interest rate for the Company's long-term debt was 4.6% and 4.5% as of September 27, 2024 and March 31, 2024, respectively.

Scheduled repayments of the Company's bank borrowings and long-term debt as of September 27, 2024 are as follows:


Fiscal Year Ending March 31,	Amount
	(In millions)
2025 (1)	$	—
2026	1,212
2027	—
2028	397
2029	28
Thereafter	2,089
Total	$	3,726

(1)Represents estimated repayments for the remaining fiscal six-month period ending March 31, 2025.

Notes due January 2032

In August 2024, the Company issued $500 million of 5.250% Notes due 2032 (the “Notes”). The Company received proceeds of approximately $496 million, net of discount and certain issuance costs. The Company incurred and capitalized as a direct reduction to the carrying amount of the Notes presented on the balance sheet of approximately $5 million of costs incurred in conjunction with the Notes issuance. Interest on the Notes is payable on January 15 and July 15 of each year, beginning on January 15, 2025.

The indenture governing the Notes contains covenants that, among other things, restrict the ability of the Company and certain of the Company's subsidiaries to create liens; enter into sale-leaseback transactions; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's assets to, another person, or permit any other person to consolidate, merge, combine or amalgamate with or into the Company. These covenants are subject to a number of significant limitations and exceptions set forth in the indenture. The indenture also provides for customary events of default, including, but not limited to, cross defaults to certain specified other debt of the Company and its subsidiaries.

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In the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. If any other event of default under the indenture occurs or is continuing, the trustee or holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare the entire principal of Notes, together with all accrued and unpaid interest, if any, to be due and payable immediately, but upon certain conditions such declaration and its consequences may be rescinded and annulled by the holders of a majority in principal amount of the Notes. As of September 27, 2024, the Company was in compliance with the covenants in the indenture governing the Notes.

8. INTEREST EXPENSE AND INTEREST INCOME

Interest expense and interest income for the three and six-month periods ended September 27, 2024 and September 29, 2023 are composed of the following:


	Three-Month Periods Ended				Six-Month Periods Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
	(In millions)
Interest expenses on debt obligations	$	46	$	38	$	89	$	82
AR sale program related expenses	7		11		20		23
Interest income	(16)		(15)		(32)		(31)

9. FINANCIAL INSTRUMENTS

Foreign Currency Contracts

The Company enters into short-term and long-term foreign currency derivative contracts, including forward, swap, and options contracts, to hedge only those currency exposures associated with certain assets and liabilities, primarily accounts receivable, accounts payable, debt, and cash flows denominated in non-functional currencies. Gains and losses on the Company's derivative contracts are designed to offset losses and gains on the assets, liabilities and transactions hedged, and accordingly, generally do not subject the Company to risk of significant accounting losses. The Company hedges committed exposures and does not engage in speculative transactions. The credit risk of these derivative contracts is minimized since the contracts are with large financial institutions and, accordingly, fair value adjustments related to the credit risk of the counterparty financial institutions were not material.

As of September 27, 2024, the aggregate notional amount of the Company’s outstanding foreign currency derivative contracts was $8.1 billion as summarized below:


	Notional Contract Value in USD
Currency	Buy		Sell
	(In millions)
Cash Flow Hedges			p



HUF	$	446	$	—



MXN	487		—




Other	696		12
	1,629		12
Other Foreign Currency Contracts



CNY	475		318
EUR	1,484		1,364




JPY	14		270
MXN	391		316
MYR	286		121



Other	690		769
	3,340		3,158

Total Notional Contract Value in USD	$	4,969	$	3,170

As of September 27, 2024, the fair value of the Company’s short-term foreign currency contracts was included in other current assets or other current liabilities, as applicable, in the condensed consolidated balance sheets. Certain of these contracts

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are designed to economically hedge the Company’s exposure to monetary assets and liabilities denominated in a non-functional currency and are not accounted for as hedges under the accounting standards. Accordingly, changes in the fair value of these instruments are recognized in earnings during the period of change as a component of other charges (income), net in the condensed consolidated statements of operations. As of September 27, 2024 and March 31, 2024, the Company also has included net deferred gains and losses in accumulated other comprehensive loss, a component of shareholders’ equity in the condensed consolidated balance sheets, relating to changes in fair value of its foreign currency contracts that are accounted for as cash flow hedges. Deferred loss was immaterial as of September 27, 2024, and is expected to be recognized primarily as a component of cost of sales in the condensed consolidated statements of operations over the next twelve-month period, except for the USD HUF cross currency swaps.

The Company entered into USD HUF cross currency swaps in December 2021 to hedge the foreign currency risk on the HUF bonds due December 2031. The fair value of the cross currency swaps was included in other current liabilities and other non-current liabilities as of September 27, 2024, and in other current assets and other non-current liabilities as of March 31, 2024. The changes in fair value of the USD HUF cross currency swaps are reported in accumulated other comprehensive loss. In addition, corresponding amounts are reclassified out of accumulated other comprehensive loss to other charges (income), net to offset the remeasurement of the underlying HUF bond principal, which also impacts the same line.

The following table presents the fair value of the Company’s derivative instruments utilized for foreign currency risk management purposes:


	Fair Values of Derivative Instruments
	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
	Balance Sheet Location	September 27, 2024		March 31, 2024		Balance Sheet Location	September 27, 2024		March 31, 2024
	(In millions)
Derivatives designated as hedging instruments
Foreign currency contracts	Other current assets	$	23	$	45	Other current liabilities	$	(36)	$	(9)
Foreign currency contracts	Other non-current assets	$	—	$	—	Other liabilities	$	(19)	$	(33)

Derivatives not designated as hedging instruments
Foreign currency contracts	Other current assets	$	22	$	14	Other current liabilities	$	(15)	$	(10)

The Company has financial instruments subject to master netting arrangements, which provide for the net settlement of all contracts with certain counterparties. The Company does not offset fair value amounts for assets and liabilities recognized for derivative instruments under these arrangements, as such, the asset and liability balances presented in the table above reflect the gross amounts of derivatives in the condensed consolidated balance sheets. The impact of netting derivative assets and liabilities is not material to the Company’s financial position for any of the periods presented.

10. ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in accumulated other comprehensive loss by component, net of tax, are as follows:

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	Three-Month Periods Ended
	September 27, 2024						September 29, 2023
	Unrealized gain (loss) on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized gain (loss) on derivative instruments and other		Foreign currency translation adjustments		Total
	(In millions)
Beginning balance	$	(23)	$	(215)	$	(238)	$	20	$	(189)	$	(169)
Other comprehensive gain (loss) before reclassifications	8		55		63		(38)		(38)		(76)
Net (gain) loss reclassified from accumulated other comprehensive loss	2		—		2		5		—		5
Net current-period other comprehensive gain (loss)	10		55		65		(33)		(38)		(71)
Ending balance	$	(13)	$	(160)	$	(173)	$	(13)	$	(227)	$	(240)


	Six-Month Periods Ended
	September 27, 2024						September 29, 2023
	Unrealized gain (loss) on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized gain (loss) on derivative instruments and other		Foreign currency translation adjustments		Total
	(In millions)
Beginning balance	$	4	$	(199)	$	(195)	$	(14)	$	(180)	$	(194)
Other comprehensive gain (loss) before reclassifications	(22)		39		17		63		(47)		16
Net (gain) loss reclassified from accumulated other comprehensive loss	5		—		5		(62)		—		(62)
Net current-period other comprehensive gain (loss)	(17)		39		22		1		(47)		(46)
Ending balance	$	(13)	$	(160)	$	(173)	$	(13)	$	(227)	$	(240)

Substantially all unrealized gains and losses relating to derivative instruments and other, reclassified from accumulated other comprehensive loss for the three and six-month periods ended September 27, 2024 were reclassified out of accumulated other comprehensive loss to other charges (income), net and cost of sales in the condensed consolidated statement of operations, which primarily relate to the Company’s foreign currency contracts accounted for as cash flow hedges. The tax impacts on the changes in accumulated other comprehensive loss for the three-month periods ended September 27, 2024 and September 29, 2023 were $2 million and $11 million, respectively. The tax impacts on the changes in accumulated other comprehensive loss for the six-month periods ended September 27, 2024 and September 29, 2023 were $11 million and $9 million, respectively.

11. TRADE RECEIVABLES SALES PROGRAMS

The Company sells accounts receivables to certain third-party banking institutions under factoring programs. The outstanding balance of receivables sold and not yet collected on accounts where the Company has continuing involvement was approximately $0.7 billion and $0.8 billion as of September 27, 2024 and March 31, 2024, respectively. For the six-month periods ended September 27, 2024 and September 29, 2023, total accounts receivable sold to certain third-party banking institutions was approximately $2.1 billion and $1.7 billion, respectively. The receivables that were sold were removed from the condensed consolidated balance sheets and the cash received was included as cash provided by operating activities in the condensed consolidated statements of cash flows.

12. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value establishes a fair value hierarchy based on the level of independent, objective evidence

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surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1 - Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. There were no balances classified as level 1 in the fair value hierarchy as of September 27, 2024 and March 31, 2024.

Level 2 - Applies to assets or liabilities for which there are inputs other than quoted prices included within level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets) such as cash and cash equivalents and money market funds; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

The Company values foreign exchange forward contracts using level 2 observable inputs which primarily consist of an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.

The Company’s cash equivalents include bank time deposits and money market funds, which are valued using level 2 inputs, such as interest rates and maturity periods. Due to their short-term nature, their carrying amount approximates fair value.

The Company has deferred compensation plans for its officers and certain other employees. Amounts deferred under the plans are invested in hypothetical investments selected by the participant or the participant's investment manager. The Company's deferred compensation plan assets are included in other non-current assets on the consolidated balance sheets and include money market funds, mutual funds, corporate and government bonds and certain convertible securities that are valued using prices obtained from various pricing sources. These sources price these investments using certain market indices and the performance of these investments in relation to these indices. As a result, the Company has classified these investments as level 2 in the fair value hierarchy.

Level 3 - Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

There were no transfers between levels in the fair value hierarchy during the six-month periods ended September 27, 2024 and September 29, 2023.

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Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 27, 2024 and March 31, 2024:


	Fair Value Measurements as of September 27, 2024
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	1,640	$	—	$	1,640

Foreign currency contracts (Note 9)	—		45		—		45

Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	—		44		—		44
Liabilities:
Foreign currency contracts (Note 9)	$	—	$	(70)	$	—	$	(70)



	Fair Value Measurements as of March 31, 2024
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	759	$	—	$	759

Foreign currency contracts (Note 9)	—		59		—		59
Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	—		41		—		41
Liabilities:							0
Foreign currency contracts (Note 9)	$	—	$	(52)	$	—	$	(52)

Other financial instruments

The following table presents the Company’s major debts not carried at fair value:


	As of September 27, 2024				As of March 31, 2024
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy
	(In millions)
4.750% Notes due June 2025	$	532	$	531	$	584	$	578	Level 1
3.750% Notes due February 2026	680		673		682		662		Level 1
6.000% Notes due January 2028	397		411		397		404		Level 1
4.875% Notes due June 2029	656		658		657		643		Level 1
4.875% Notes due May 2030	678		679		681		662		Level 1
5.250% Notes due January 2032	499		503		—		—		Level 1
3.600% HUF Bonds due December 2031	283		226		274		219		Level 2

The Notes due June 2025, February 2026, January 2028, June 2029, May 2030 and January 2032 are valued based on broker trading prices in active markets. HUF Bonds are valued based on the broker trading prices in an inactive market.

13. COMMITMENTS AND CONTINGENCIES

Litigation and other legal matters

In connection with the matters described below, the Company has accrued for loss contingencies where it believes that losses are probable and estimable. Although it is reasonably possible that actual losses could be in excess of the Company’s accrual, the Company is unable to estimate a reasonably possible loss or range of loss in excess of its accrual, due to various reasons, including, among others, that: (i) the proceedings are in early stages or no claims have been asserted, (ii) specific damages have not been sought in all of these matters, (iii) damages, if asserted, are considered unsupported and/or exaggerated,

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(iv) there is uncertainty as to the outcome of pending appeals, motions, or settlements, (v) there are significant factual issues to be resolved, and/or (vi) there are novel legal issues or unsettled legal theories presented. Any such excess loss could have a material effect on the Company’s results of operations or cash flows for a particular period or on the Company’s financial condition.

The Company is currently involved in a commercial dispute related to a construction matter with related production objectives. Management assessed the potential outcomes of this dispute, considered available information, and consulted with legal counsel and as a result of this assessment recognized $50 million in Selling, general and administrative expenses in the fourth quarter of the fiscal year ended March 31, 2024 as an accrual. The ultimate resolution of this dispute is uncertain, and the actual outcome may differ from the estimates made by management. Changes in circumstances or additional information may impact the Company’s assessment of its loss and could result in adjustments to the $50 million accrual, however, management currently believes that the resolution of this dispute will not have a material effect on the Company’s financial position, results of operations or cash flows. The Company will continue to monitor developments related to this matter and will adjust its accrual and disclosures accordingly in future reporting periods as additional information becomes available.

One of the Company's Brazilian subsidiaries received six assessments for certain sales and import taxes. Four of the assessments have been successfully definitively defeated. Two remain, where the Company was unsuccessful at the administrative level and filed annulment actions in federal court in Brasilia, Brazil. The first annulment action was filed on March 23, 2020; the updated value of that assessment inclusive of interest and penalties is 36 million Brazilian reals (approximately USD $7 million). The second annulment action was filed on September 19, 2023; the updated value of that assessment inclusive of interest and penalties is 59 million Brazilian reals (approximately USD $11 million). The Company believes that it has meritorious defenses to these assessments and will continue to vigorously oppose them, as well as any future assessments. The Company does not expect final judicial determination on any of these claims in the near future.

A foreign Tax Authority (“Tax Authority”) had assessed a cumulative total of approximately $285 million in taxes owed for multiple Flex legal entities within its jurisdiction for various fiscal years ranging from fiscal year 2010 through fiscal year 2020. The assessed amounts related to the denial of certain deductible intercompany payments and taxability of income earned outside such jurisdiction. Subsequent to the quarter ended September 27, 2024, approximately $118 million of the approximate $285 million assessment was abated by the Tax Authority, leaving approximately $167 million remaining. The Company disagrees with the Tax Authority’s remaining assessments and is actively contesting the assessments through the administrative and judicial processes.

As the final resolution of the above outstanding tax item remains uncertain, the Company continues to provide for the uncertain tax positions based on the more likely than not standard. While the resolution of the issues may result in tax liabilities, interest and penalties, which may be significantly higher than the amounts accrued for these matters, management currently believes that the resolution will not have a material effect on the Company’s financial position, results of operations or cash flows.

In addition to the matters discussed above, from time to time, the Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business. The Company defends itself vigorously against any such claims. Although the outcome of these matters is currently not determinable, management expects that any losses that are probable or reasonably possible of being incurred as a result of these matters, which are in excess of amounts already accrued in the Company’s consolidated balance sheets, would not be material to the financial statements as a whole.

14. SHARE REPURCHASES

During the three and six-month periods ended September 27, 2024, the Company repurchased 9.8 million and 25.1 million shares at an aggregate purchase price of $300 million and $757 million, respectively, and retired all of these shares.

Under the Company’s current share repurchase program, the Board of Directors authorized repurchases of its outstanding ordinary shares for up to $1.7 billion in accordance with the share repurchase mandate approved by the Company’s shareholders at the date of the most recent Annual General Meeting held on August 8, 2024. As of September 27, 2024, shares in the aggregate amount of $1.5 billion were available to be repurchased under the current plan.

15. SEGMENT REPORTING

The Company reports its financial performance based on two operating and reportable segments, Flex Agility Solutions and Flex Reliability Solutions, and analyzes operating income as the measure of segment profitability. The determination of these segments is based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

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intangible amortization, stock-based compensation, restructuring charges, legal and other, and interest, net and other charges, net. A portion of depreciation is allocated to the respective segments, together with other general corporate research and development and administrative expenses.

Selected financial information by segment is in the table below.


	Three-Month Periods Ended				Six-Month Periods Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
	(In millions)
Net sales:
Flex Agility Solutions	$	3,606	$	3,618	$	6,971	$	7,219
Flex Reliability Solutions	2,939		3,315		5,888		6,606
	$	6,545	$	6,933	$	12,859	$	13,825
Segment income and reconciliation of income from continuing operations before income taxes:
Flex Agility Solutions	$	218	$	167	$	397	$	313
Flex Reliability Solutions	159		171		306		336
Corporate and Other	(19)		(11)		(39)		(29)
Total segment income	358		327		664		620
Reconciling items:
Intangible amortization	16		17		32		37
Stock-based compensation	28		28		60		60
Restructuring charges	17		1		42		24
Legal and other (1)	—		—		—		3
Interest expense	53		49		109		105
Interest income	16		15		32		31
Other charges (income), net	(4)		14		(3)		25

Income from continuing operations before income taxes	$	264	$	233	$	456	$	397

(1)Legal and other consists of costs not directly related to core business results and including matters relating to commercial disputes, government regulatory and compliance, intellectual property, antitrust, tax, employment or shareholder issues, product liability claims and other issues on a global basis as well as acquisition related costs and customer related asset recoveries. During the first half of fiscal year 2024, the Company accrued for certain loss contingencies where losses are considered probable and estimable.

Corporate and other primarily includes corporate service costs that are not included in the chief operating decision maker's ("CODM") assessment of the performance of each of the identified reportable segments.

The Company provides an overall platform of assets and services, which the segments utilize for the benefit of their various customers. The shared assets and services are contained within the Company's global manufacturing and design operations and include manufacturing and design facilities. Most of the underlying manufacturing and design assets are co-mingled in the operating campuses and are compatible to operate across segments and highly interchangeable throughout the platform. Given the highly interchangeable nature of the assets, they are not separately identified by segment nor reported by segment to the Company's CODM.

16. RESTRUCTURING CHARGES

During the three and six-month periods ended September 27, 2024, the Company recognized approximately $18 million and $43 million of restructuring charges, respectively, most of which related to employee severance.

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The following table summarizes the provisions, respective payments, and remaining accrued balance as of September 27, 2024 for charges incurred during the six-month period ended September 27, 2024:


	Severance		Long-Lived Asset Impairment		Other Exit Costs		Total
	(In millions)
Balance as of March 31, 2024	$	77	$	—	$	3	$	80
Provision for charges incurred during the six-month period ended September 27, 2024	42		1		—		43
Cash payments during the six-month period ended September 27, 2024	(34)		—		—		(34)
Non-cash reductions during the six-month period ended September 27, 2024	—		(1)		—		(1)
Other adjustments	(2)		—		—		(2)
Balance as of September 27, 2024	83		—		3		86
Less: Current portion (classified as other current liabilities)	83		—		3		86
Accrued restructuring costs, net of current portion (classified as other liabilities)	$	—	$	—	$	—	$	—

17. SUBSEQUENT EVENTS

On October 16, 2024, the Company entered into a definitive agreement to acquire 100% ownership of Crown Technical Systems (“Crown”), a U.S. leader in critical power solutions for $325 million in an all-cash transaction. The acquisition will add to the Company' portfolio of power products and expand its offering in the utility and data center markets and is expected to close in the third quarter of fiscal year 2025, subject to customary closing conditions, including regulatory approval. For reporting purposes, Crown will be included in the Industrial reporting unit within the FRS segment.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise specifically stated, references in this report to “Flex,” “the Company,” “we,” “us,” “our” and similar terms mean Flex Ltd. and its subsidiaries.

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.

OVERVIEW

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 September 27, 2024, our two operating and reportable segments were as follows: