FLEX LTD. - Quarter Report: 2022 December (Form 10-Q)

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 December 31, 2022

☐ 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						Not Applicable
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)


2 Changi South Lane,
Singapore						486123
(Address of registrant’s 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 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 January 20, 2023 was 451,081,016.

Table of Contents

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) — December 3 1 , 2022 and March 31, 2022	4
	Condensed Consolidated Statements of Operations (unaudited) — Three-Month and Nine -Month Periods Ended December 3 1 , 2022 and December 3 1, 2021	5
	Condensed Consolidated Statements of Comprehensive Income (unaudited) — Three-Month and Nine -Month Periods Ended December 3 1 , 2022 and December 3 1, 2021	6
	Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Shareholders' Equity (unaudited) — Three-Month and Nine -Month Periods Ended December 3 1 , 2022 and December 3 1, 2021	7
	Condensed Consolidated Statements of Cash Flows (unaudited) — Nine -Month Periods Ended December 3 1 , 2022 and December 3 1, 2021	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures		44

Table of Contents

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 December 31, 2022, the related condensed consolidated statements of operations, comprehensive income, and redeemable noncontrolling interest and shareholders’ equity for the three-month and nine-month periods ended December 31, 2022 and December 31, 2021, the condensed consolidated statements of cash flows for the nine-month periods ended December 31, 2022 and December 31, 2021, 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 Flex Ltd. and its subsidiaries as of March 31, 2022 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 20, 2022, 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, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

The 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 the 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
January 27, 2023

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS


	As of December 31, 2022		As of March 31, 2022
	(In millions, except share amounts) (Unaudited)


ASSETS
Current assets:
Cash and cash equivalents	$	2,565	$	2,964
Accounts receivable, net of allowance of $8 and $56, respectively	3,939		3,371
Contract assets	514		519
Inventories	7,838		6,580
Other current assets	963		903
Total current assets	15,819		14,337
Property and equipment, net	2,289		2,125
Operating lease right-of-use assets, net	596		637
Goodwill	1,340		1,342
Other intangible assets, net	332		411
Other assets	516		473
Total assets	$	20,892	$	19,325

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings and current portion of long-term debt	$	494	$	949
Accounts payable	6,630		6,254
Accrued payroll	502		470
Deferred revenue and customer working capital advances	2,985		2,002
Other current liabilities	1,057		1,036
Total current liabilities	11,668		10,711
Long-term debt, net of current portion	3,522		3,248
Operating lease liabilities, non-current	499		551
Other liabilities	601		608
Total liabilities	16,290		15,118

Redeemable noncontrolling interest	97		78
Shareholders’ equity

Ordinary shares, no par value; 1,500,000,000 authorized, 501,884,073 and 510,799,667 issued, and 451,644,718 and 460,560,312 outstanding as of December 31, 2022 and March 31, 2022, respectively	5,839		6,052
Treasury stock, at cost; 50,239,355 shares as of December 31, 2022 and March 31, 2022	(388)		(388)
Accumulated deficit	(702)		(1,353)
Accumulated other comprehensive loss	(244)		(182)


Total shareholders’ equity	4,505		4,129
Total liabilities, redeemable noncontrolling interest, and shareholders' equity	$	20,892	$	19,325

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
	(In millions, except per share amounts) (Unaudited)
Net sales	$	7,756	$	6,619	$	22,869	$	19,190
Cost of sales	7,168		6,126		21,155		17,752
Restructuring charges	5		2		5		10
Gross profit	583		491		1,709		1,428
Selling, general and administrative expenses	243		225		729		638

Intangible amortization	19		15		62		45
Operating income	321		251		918		745
Interest and other, net	59		8		152		(103)

Income before income taxes	262		243		766		848
Provision for income taxes	25		16		96		79
Net income	237		227		670		769
Net income attributable to redeemable noncontrolling interest	7		—		19		—
Net income attributable to Flex Ltd.	$	230	$	227	$	651	$	769

Earnings per share attributable to the shareholders of Flex Ltd.:
Basic	$	0.51	$	0.48	$	1.43	$	1.60
Diluted	$	0.50	$	0.48	$	1.41	$	1.58
Weighted-average shares used in computing per share amounts:
Basic	452		469		455		481
Diluted	459		474		462		487

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
	(In millions) (Unaudited)
Net income	$	237	$	227	$	670	$	769
Other comprehensive income (loss):
Foreign currency translation adjustments, net of zero tax	80		(8)		(83)		(19)
Unrealized gain (loss) on derivative instruments and other, net of tax	28		(13)		21		(20)
Comprehensive income	$	345	$	206	$	608	$	730
Comprehensive income attributable to redeemable noncontrolling interest	7		—		19		—
Comprehensive income attributable to Flex Ltd.	$	338	$	206	$	589	$	730

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY


	Redeemable Noncontrolling Interest		Ordinary Shares						Accumulated Other Comprehensive Loss						Total
Three Months Ended December 31, 2022	Amount		Shares Outstanding		Amount		Accumulated Deficit		Unrealized Loss on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
			(In millions) Unaudited
BALANCE AT SEPTEMBER 30, 2022	$	90	454		$	5,464	$	(932)	$	(73)	$	(279)	$	(352)	$	4,180
Repurchase of Flex Ltd. ordinary shares at cost	—		(2)		(40)		—		—		—		—		(40)


Net income	7		—		—		230		—		—		—		230
Stock-based compensation	—		—		27		—		—		—		—		27

Total other comprehensive income	—		—		—		—		28		80		108		108
BALANCE AT DECEMBER 31, 2022	$	97	$	452	$	5,451	$	(702)	$	(45)	$	(199)	$	(244)	$	4,505


	Redeemable Noncontrolling Interest		Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Nine Months Ended December 31, 2022	Amount		Shares Outstanding	Amount		Accumulated Deficit		Unrealized Loss on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
			(In millions) Unaudited
BALANCE AT MARCH 31, 2022	$	78	461	$	5,664	$	(1,353)	$	(66)	$	(116)	$	(182)	$	4,129
Repurchase of Flex Ltd. ordinary shares at cost	—		(17)	(293)		—		—		—		—		(293)

Issuance of Flex Ltd. vested shares under restricted share unit awards	—		8	—		—		—		—		—		—
Net income	19		—	—		651		—		—		—		651
Stock-based compensation	—		—	80		—		—		—		—		80

Total other comprehensive loss	—		—	—		—		21		(83)		(62)		(62)
BALANCE AT DECEMBER 31, 2022	$	97	452	$	5,451	$	(702)	$	(45)	$	(199)	$	(244)	$	4,505

Table of Contents


	Redeemable Noncontrolling Interest		Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Three Months Ended December 31, 2021	Amount		Shares Outstanding	Amount		Accumulated Deficit		Unrealized Loss on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
			(In millions) Unaudited
BALANCE AT OCTOBER 1, 2021	$	—	471	$	5,398	$	(1,747)	$	(49)	$	(88)	$	(137)	$	3,514
Repurchase of Flex Ltd. ordinary shares at cost	—		(5)	(90)		—		—		—		—		(90)

Issuance of Flex Ltd. vested shares under restricted share unit awards	—		1	—		—		—		—		—		—
Net income	—		—	—		227		—		—		—		227
Stock-based compensation	—		—	25		—		—		—		—		25

Total other comprehensive loss	—		—	—		—		(13)		(8)		(21)		(21)
BALANCE AT DECEMBER 31, 2021	$	—	467	$	5,333	$	(1,520)	$	(62)	$	(96)	$	(158)	$	3,655


	Redeemable Noncontrolling Interest		Ordinary Shares					Accumulated Other Comprehensive Loss						Total
Nine Months Ended December 31, 2021	Amount		Shares Outstanding	Amount		Accumulated Deficit		Unrealized Loss on Derivative Instruments and Other		Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Loss		Shareholders' Equity
			(In millions) Unaudited
BALANCE AT MARCH 31, 2021	$	—	492	$	5,844	$	(2,289)	$	(42)	$	(77)	$	(119)	$	3,436
Repurchase of Flex Ltd. ordinary shares at cost	—		(32)	(580)		—		—		—		—		(580)
Exercise of stock options	—		1	—		—		—		—		—		—
Issuance of Flex Ltd. vested shares under restricted share unit awards	—		6	—		—		—		—		—		—
Net income	—		—	—		769		—		—		—		769
Stock-based compensation	—		—	69		—		—		—		—		69

Total other comprehensive loss	—		—	—		—		(20)		(19)		(39)		(39)
BALANCE AT DECEMBER 31, 2021	$	—	467	$	5,333	$	(1,520)	$	(62)	$	(96)	$	(158)	$	3,655

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

Table of Contents

FLEX LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine-Month Periods Ended
	December 31, 2022		December 31, 2021
	(In millions) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	670	$	769
Depreciation, amortization and other impairment charges	371		357
Changes in working capital and other, net	(541)		(462)
Net cash provided by operating activities	500		664
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(455)		(333)
Proceeds from the disposition of property and equipment	20		9
Acquisition of businesses, net of cash acquired	2		(523)


Other investing activities, net	8		19
Net cash used in investing activities	(425)		(828)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings and long-term debt	819		729
Repayments of bank borrowings and long-term debt	(926)		(38)

Payments for repurchases of ordinary shares	(293)		(580)

Other financing activities, net	(53)		(3)
Net cash provided by (used in) financing activities	(453)		108
Effect of exchange rates on cash and cash equivalents	(21)		(7)
Net decrease in cash and cash equivalents	(399)		(63)
Cash and cash equivalents, beginning of period	2,964		2,637
Cash and cash equivalents, end of period	$	2,565	$	2,574

Non-cash investing activities:
Unpaid purchases of property and equipment	$	191	$	105
Right-of-use assets obtained in exchange of operating lease liabilities	76		42

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

Table of Contents

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 diversified manufacturing partner of choice that helps market-leading brands design, build and deliver innovative products that improve the world. Through the collective strength of a global workforce across approximately 30 countries with responsible, sustainable operations, Flex delivers advanced manufacturing solutions and operates one of the most trusted global supply chains, supporting the entire product lifecycle with fulfillment, after-market, and circular economy solutions for diverse industries including cloud, communications, enterprise, automotive, industrial, consumer devices, lifestyle, healthcare, and energy. Flex's three operating and reportable segments are:

•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; and

◦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; and

◦Industrial, including capital equipment, industrial devices, and renewables and grid edge.

•Nextracker, the leading provider of intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world. Nextracker's products enable solar panels to follow the sun’s movement across the sky and optimize plant performance.

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

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, 2022 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 nine-month periods ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2023. Certain prior period amounts in the condensed consolidated financial statements, as well as in the Notes thereto, have been reclassified to conform to the current presentation.

The Company's third quarters for fiscal years 2023 and 2022 ended on December 31 of each year, which are comprised of 92 and 91 days, respectively. The Company's first three quarters for fiscal years 2023 and 2022 both are comprised of 275 days.

The accompanying unaudited condensed consolidated financial statements include the accounts of Flex and its majority-owned subsidiaries, after elimination of intercompany accounts and transactions. The Company consolidates its majority-owned subsidiaries and investments in entities in which the Company has a controlling interest. For the consolidated majority-owned subsidiaries in which the Company owns less than 100%, the Company recognizes a noncontrolling interest for the ownership of the noncontrolling owners. In all cases other than the redeemable noncontrolling interest in Nextracker, the associated noncontrolling owners' interest in the income or losses of these companies is not material to the Company's results of operations for all periods presented, and is classified as a component of Interest and other, net, in the condensed consolidated statements of operations. Noncontrolling interest that is redeemable upon the occurrence of conditions outside of the control of the Company

Table of Contents

is reported as temporary equity in the consolidated balance sheets. The amount of consolidated net income attributable to Flex Ltd. and to the redeemable noncontrolling interest is presented in the condensed consolidated statements of operations.

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 stock options and restricted share unit awards granted under the Company's stock-based compensation plans. Due to the COVID-19 pandemic and geopolitical conflicts (including the Russian invasion of Ukraine), 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 COVID-19 pandemic and the Russian invasion of Ukraine. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.

Recently Adopted Accounting Pronouncements

In December 2022, the FASB issued ASU 2022-06 "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848", which defers the sunset date of ASC 848 from December 31, 2022 to December 31, 2024. ASC 848 provides relief for companies preparing for the discontinuation of interest rates, such as LIBOR. Entities that apply ASC 848 can continue to do so until December 31, 2024. The Company adopted the guidance during the third quarter of fiscal year 2023 with an immaterial impact on its consolidated financial statements.

In July 2021, the FASB issued ASU 2021-05 "Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments", which requires a lessor to classify a lease with variable lease payments that don’t depend on an index or a rate as an operating lease on the commencement date of the lease if specified criteria are met. The guidance is effective for the Company beginning in the first quarter of fiscal year 2023 with early adoption permitted. The Company adopted the guidance during the first quarter of fiscal year 2023 with an immaterial impact on its condensed consolidated financial statements.

Recently Issued Accounting Pronouncement

In September 2022, the FASB issued ASU 2022-04 "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations", which requires a buyer in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs. The amendments in this update do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance program. The guidance is effective for the Company beginning in the first quarter of fiscal year 2024, except for the amendment on rollforward information which is effective in fiscal year 2025, with early adoption permitted. The Company expects the new guidance will have an immaterial impact on its condensed consolidated financial statements, and intends to adopt the guidance retrospectively when it becomes effective in the first quarter of fiscal year 2024.

Table of Contents

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 December 31, 2022		As of March 31, 2022
	(In millions)
Raw materials	$	6,365	$	5,290
Work-in-progress	689		602
Finished goods	784		688
	$	7,838	$	6,580

Goodwill and Other Intangible Assets

During the nine-month period ended December 31, 2022, there was no material activity in the Company's goodwill account for each of its reportable segments.

The components of acquired intangible assets are as follows:


	As of December 31, 2022						As of March 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(In millions)
Intangible assets:
Customer-related intangibles	$	369	$	(189)	$	180	$	385	$	(157)	$	228
Licenses and other intangibles	294		(142)		152		319		(136)		183
Total	$	663	$	(331)	$	332	$	704	$	(293)	$	411

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)
2023 (1)	$	21
2024	69
2025	62
2026	42
2027	35
Thereafter	103
Total amortization expense	$	332

____________________________________________________________

(1)Represents estimated amortization for the remaining fiscal three-month period ending March 31, 2023.

Customer Working Capital Advances

Customer working capital advances were $2.2 billion and $1.4 billion, as of December 31, 2022 and March 31, 2022, 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 Current Liabilities

Other current liabilities include customer-related accruals of $275 million and $227 million as of December 31, 2022 and March 31, 2022, respectively.

Table of Contents

Redeemable Noncontrolling Interest

As a result of the sale by a subsidiary of the Company of redeemable preferred units (“Series A Preferred Units”), representing a 16.67% interest in the Company's subsidiary, Nextracker LLC ("Nextracker"), to TPG Rise Flash, L.P. ("TPG Rise") on February 1, 2022, the Company recognized approximately $7 million and $19 million of a payable-in-kind dividend due to TPG Rise during the three and nine-month periods ended December 31, 2022, respectively, based on a dividend rate of 5% per annum.

At TPG Rise’s election, the Company is required to purchase all of the outstanding Series A Preferred Units at their liquidation preference, which shall include all contributed but unreturned capital plus accrued but unpaid dividends, at the earlier of certain change in control events and February 1, 2028. Additionally, if Nextracker has not completed a qualified initial public offering (a "Qualified Public Offering") prior to February 1, 2027, then TPG Rise may cause the Company to purchase all of the outstanding Series A Preferred Units at their fair market value. The Company has determined that a Qualified Public Offering is likely and that the change in control is not probable as of December 31, 2022 and, as such, it is not probable that the noncontrolling interest will become redeemable.

3. REVENUE

Revenue Recognition

The Company provides a comprehensive suite of services for its customers that range from advanced product design to manufacturing and logistics to after-sales services. The first step in its process for revenue recognition is to identify a contract with a customer. A contract is defined as an agreement between two parties that creates enforceable rights and obligations and can be written, verbal, or implied. The Company generally enters into master supply agreements (“MSAs”) with its customers that provide the framework under which business will be conducted. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing formulas, payment terms, etc., and the level of business under those agreements may not be guaranteed. In those instances, the Company bids on a program-by-program basis and typically receives customer purchase orders for specific quantities and timing of products. As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order, or any other similar documents such as a statement of work, product addendum, emails or other communications that embody the commitment by the customer.

In determining the appropriate amount of revenue to recognize, the Company applies the following steps: (i) identifies the contracts with the customers; (ii) identifies performance obligations in the contracts; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations per the contracts; and (v) recognizes revenue when (or as) the Company satisfies a performance obligation. Further, the Company assesses whether control of the products or services promised under the contract is transferred to the customer at a point in time (PIT) or over time (OT). The Company is first required to evaluate whether its contracts meet the criteria for OT recognition. The Company has determined that for a portion of its contracts, the Company is manufacturing products for which there is no alternative use (due to the unique nature of the customer-specific product and intellectual property restrictions) and the Company has an enforceable right to payment including a reasonable profit for work-in-progress inventory with respect to these contracts. For certain other contracts, the Company’s performance creates and enhances an asset that the customer controls as the Company performs under the contract. As a result, revenue is recognized under these contracts OT based on the cost-to-cost method as it best depicts the transfer of control to the customer measured based on the ratio of costs incurred to date as compared to the total estimated costs at completion of the performance obligation. For all other contracts that do not meet these criteria, the Company recognizes revenue when it has transferred control of the related manufactured products which generally occurs upon delivery and passage of title to the customer.

Customer Contracts and Related Obligations

Certain of the Company’s customer agreements include potential price adjustments which may result in variable consideration. These price adjustments include, but are not limited to, sharing of cost savings, committed price reductions, material margins earned over the period that are contractually required to be paid to the customers, rebates, refunds tied to performance metrics such as on-time delivery, and other periodic pricing resets that may be refundable to customers. The Company estimates the variable consideration related to these price adjustments as part of the total transaction price and recognizes revenue in accordance with the pattern applicable to the performance obligation, subject to a constraint. The Company constrains the amount of revenues recognized for these contractual provisions based on its best estimate of the amount which will not result in a significant reversal of revenue in a future period. The Company determines the amounts to be recognized based on the amount of potential refunds required by the contract, historical experience and other surrounding facts and circumstances. Often these obligations are settled with the customer in a period after shipment through various methods which include reduction of prices for future purchases, issuance of a payment to the customer, or issuance of a credit note applied against the customer’s accounts receivable balance. In many instances, the agreement is silent on the settlement

Table of Contents

mechanism. Any difference between the amount accrued for potential refunds and the actual amount agreed to with the customer is recorded as an increase or decrease in revenue. These potential price adjustments are included as part of other current liabilities on the condensed consolidated balance sheet and disclosed as part of customer-related accruals in note 2.

Performance Obligations

The Company derives its revenues primarily from manufacturing services, and to a lesser extent, from innovative design, engineering, and supply chain services and solutions.

A performance obligation is an implicitly or explicitly promised good or service that is material in the context of the contract and is both capable of being distinct (customer can benefit from the good or service on its own or together with other readily available resources) and distinct within the context of the contract (separately identifiable from other promises). The Company considers all activities typically included in its contracts, and identifies those activities representing a promise to transfer goods or services to a customer. These include, but are not limited to, design and engineering services, prototype products, tooling, etc. Each promised good or service with regards to these identified activities is accounted for as a separate performance obligation only if it is distinct - i.e., the customer can benefit from it on its own or together with other resources that are readily available to the customer. Certain activities on the other hand are determined not to constitute a promise to transfer goods or service, and therefore do not represent separate performance obligations for revenue recognition (e.g., procurement of materials and standard workmanship warranty).

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual good or service is not separately identifiable from other promises in the contract and is, therefore, not distinct. Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations. In the event that more than one performance obligation is identified in a contract, the Company is required to allocate the transaction price between the performance obligations. The allocation would generally be performed on the basis of a relative standalone price for each distinct good or service. This standalone price most often represents the price that the Company would sell similar goods or services separately.

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.

A contract liability is recognized when the Company receives payments in advance of the satisfaction of performance. Contract liabilities, identified as deferred revenue, were $813 million and $704 million as of December 31, 2022 and March 31, 2022, respectively, of which $745 million and $615 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 nine-month periods ended December 31, 2022 and December 31, 2021, respectively. Historical information for the first three quarters of the fiscal year ended March 31, 2022 have been recast to reflect the new operating and reportable segments in the table below.

Table of Contents


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Timing of Transfer	(In millions)
FAS
Point in time	$	3,812	$	3,389	$	11,378	$	9,887
Over time	217		192		646		563
Total	4,029		3,581		12,024		10,450
FRS
Point in time	3,038		2,528		8,938		7,243
Over time	187		183		555		515
Total	3,225		2,711		9,493		7,758
Nextracker
Point in time	8		42		41		63
Over time	508		296		1,343		955
Total	516		338		1,384		1,018
Intersegment eliminations
Point in time	(14)		(11)		(32)		(36)
Over time	—		—		—		—
Total	(14)		(11)		(32)		(36)
Flex
Point in time	6,844		5,948		20,325		17,157
Over time	912		671		2,544		2,033
Total	$	7,756	$	6,619	$	22,869	$	19,190

4. SHARE-BASED COMPENSATION

The Company's primary plan used for granting equity compensation awards is the 2017 Equity Incentive Plan (the "2017 Plan").

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


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
	(In millions)
Cost of sales	$	7	$	6	$	21	$	17
Selling, general and administrative expenses	20		19		59		52
Total share-based compensation expense	$	27	$	25	$	80	$	69

Total number of options outstanding and exercisable were immaterial as of December 31, 2022. All options have been fully expensed as of December 31, 2022.

During the nine-month period ended December 31, 2022, the Company granted 7.0 million unvested restricted share unit ("RSU") awards. Of this amount, approximately 4.7 million are plain-vanilla unvested RSU awards that vest over a period of three years, with no performance or market conditions, and with an average grant date price of $16.51 per award. In addition, approximately 0.5 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 $16.68 per award. The number of shares contingent on performance conditions that ultimately will vest will range from zero up to a maximum of approximately 1.0 million based on a measurement of the Company's adjusted earnings per share growth over certain specified periods, and will cliff vest after a period of three years, to the extent such performance conditions have been met. Further, approximately 0.5 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 $23.45 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 1.0 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

Table of Contents

have been met. Finally, the remaining balance of approximately 1.2 million represents the number of shares issued upon vesting of RSU awards above target levels based on the achievement of certain market conditions.

As of December 31, 2022, approximately 14.6 million unvested RSU awards under all plans were outstanding, of which vesting for a targeted amount of 2.1 million shares is contingent on meeting certain market conditions, and vesting for a targeted amount of 0.9 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 4.2 million based on the achievement levels. The number of shares tied to performance conditions that will ultimately be issued can range from zero to 1.8 million based on the achievement levels. During the nine-month period ended December 31, 2022, 2.4 million shares vested in connection with the awards with market conditions granted in fiscal year 2020.

As of December 31, 2022, total unrecognized compensation expense related to unvested RSU awards under all plans, not including the 2022 Nextracker plan below, was approximately $158 million, and will be recognized over a weighted-average remaining vesting period of 2.0 years.

During the first three quarters of fiscal year 2023, Nextracker granted 11.8 million equity-based compensation awards, which included approximately 5.9 million unit options, 4.5 million RSU awards and 1.4 million performance-based restricted share unit awards (“PSU”) to its employees under the First Amended and Restated 2022 Nextracker LLC Equity Incentive Plan (the “2022 Nextracker Plan”). Vesting for the awards granted under the 2022 Nextracker Plan is contingent upon continued employee service and certain performance conditions, including a liquidity event such as the occurrence of an initial public offering or the sale of Nextracker.

Total unrecognized compensation expense related to unvested awards under the 2022 Nextracker Plan was approximately $55 million, which is expected to be recognized over a weighted-average period of approximately 3 years. No expense was recognized for equity-based compensation awards granted under the 2022 Nextracker Plan for the nine-month period ended December 31, 2022 as there was no occurrence of a liquidity event. Nextracker will record cumulative stock-based compensation expense related to these awards in the period when its liquidity event is completed for the portion of the awards for which the relevant service condition has been satisfied with the remaining expense recognized over the remaining service period.

Table of Contents

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				Nine-Month Periods Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
	(In millions, except per share amounts)
Basic earnings per share attributable to the shareholders of Flex Ltd.
Net income	$	237	$	227	$	670	$	769
Net income attributable to redeemable noncontrolling interest	7		—		19		—
Net income attributable to Flex Ltd.	$	230	$	227	$	651	$	769
Shares used in computation:
Weighted-average ordinary shares outstanding	452		469		455		481
Basic earnings per share	$	0.51	$	0.48	$	1.43	$	1.60

Diluted earnings per share attributable to the shareholders of Flex Ltd.
Net income	$	237	$	227	$	670	$	769
Net income attributable to redeemable noncontrolling interest	7		—		19		—
Net income attributable to Flex Ltd.	$	230	$	227	$	651	$	769
Shares used in computation:
Weighted-average ordinary shares outstanding	452		469		455		481
Weighted-average ordinary share equivalents from RSU awards (1)	7		5		7		6
Weighted-average ordinary shares and ordinary share equivalents outstanding	459		474		462		487
Diluted earnings per share	$	0.50	$	0.48	$	1.41	$	1.58

____________________________________________________________

(1)An immaterial amount of RSU awards for the three and nine-month periods ended December 31, 2022 and December 31, 2021, respectively, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents.

Table of Contents

6. BANK BORROWINGS AND LONG-TERM DEBT

Bank borrowings and long-term debt as of December 31, 2022 and March 31, 2022 are as follows:


	As of December 31, 2022		As of March 31, 2022
	(In millions)
5.000% Notes due February 2023	$	—	$	500
Term Loan due April 2024 - three-month TIBOR plus 0.436%	250		273
4.750% Notes due June 2025	599		598
3.750% Notes due February 2026	687		690
6.000% Notes due January 2028	396		—
4.875% Notes due June 2029	658		659
4.875% Notes due May 2030	687		690
Euro Term Loans	265		389
Delayed Draw Term Loan	150		—
3.600% HUF Bonds due December 2031	264		301
India Facilities	79		84
Other	—		31
Debt issuance costs	(19)		(18)
	4,016		4,197
Current portion, net of debt issuance costs	(494)		(949)
Non-current portion	$	3,522	$	3,248

The weighted-average interest rate for the Company's long-term debt was 4.5% and 4.0% as of December 31, 2022 and March 31, 2022, respectively.

Scheduled repayments of the Company's bank borrowings and long-term debt as of December 31, 2022 are as follows:


Fiscal Year Ending March 31,	Amount
	(In millions)
2023 (1)	$	26
2024	468
2025	250
2026	1,286
2027	—
Thereafter	2,005
Total	$	4,035

(1)Represents estimated repayments for the remaining fiscal three-month period ending March 31, 2023.

Notes due January 2028

In December 2022, the Company issued $400 million of 6.000% Notes due 2028 (the “Notes”). The Company received proceeds of approximately $396 million, net of discount, from the issuance which were used, together with cash on hand, for general corporate purposes, which includes redeeming its 2023 notes on December 20, 2022 and for working capital requirements. The Company incurred and capitalized as a direct reduction to the carrying amount of the Notes presented on the balance sheet of approximately $4 million of costs in conjunction with the issuance of the Notes.

Interest on the Notes is payable on January 15 and July 15 of each year, beginning on July 15, 2023. The Notes are senior unsecured obligations of the Company and rank equally with all of the Company's other existing and future senior and unsecured debt obligations.

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

Table of Contents

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.

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 principle 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 December 31, 2022, the Company was in compliance with the covenants in the indenture governing the Notes.

Euro Term Loan due December 2023

In December 2022, the Company borrowed €250 million (approximately $265 million as of December 31, 2022), under a 1-year term-loan agreement. The proceeds of the term loan were used to repay outstanding debt of a €250 million Euro term loan due on December 9, 2022. Borrowings under this term loan bear interest at Euro Interbank Offered Rate (EURIBOR) rate plus 0.7% per annum, which is payable in full on the last day of each 3-month interest period. The term loan is repayable upon maturity, and the borrowings have been included as bank borrowings and current portion of long-term debt under the condensed consolidated balance sheet.

The 2027 Credit Facility

In July 2022, the Company entered into a new $2.5 billion credit agreement which matures in July 2027 (the "2027 Credit Facility") and consists of a $2.5 billion revolving credit facility with a sub-limit of $360 million available for swing line loans, and a sub-limit of $175 million available for the issuance of letters of credit. The 2027 Credit Facility replaced the previous $2.0 billion revolving credit facility, which was due to mature in January 2026.

Borrowings under the 2027 Credit Facility bear interest, at the Company’s option, either at (i) the Base Rate, which is defined as the greatest of (a) the Administrative Agent’s prime rate, (b) the federal funds effective rate, plus 0.50% and (c) the Term Secured Overnight Financing Rate (Term SOFR) rate plus 1.0%; plus, in the case of each of clauses (a) through (c), an applicable margin ranging from 0.125% to 0.750% per annum, based on the Company’s credit ratings or (ii) Term SOFR (or (x) the “Alternative Currency Term Rate”, which is defined as, depending on the applicable currency at issue, either the Euro Interbank Offered Rate, Tokyo Interbank Offer Rate, or such other term rate per annum as designated with respect to such alternative currency or (y) the “Alternative Currency Daily Rate”, which is defined as, in the case of Sterling, the rate per annum equal to Sterling Overnight Index Average, and for any other alternative currency, such other term rate per annum as designated with respect to such alternative currency) plus the applicable margin for Term SOFR rate (or the Alternative Currency Term Rate) loans ranging between 1.125% and 1.750% per annum, based on the Company’s credit ratings, plus an adjustment for Term SOFR loans of 0.10% per annum and an adjustment for Sterling Overnight Index Average loans of 0.0326% per annum. Interest on the outstanding borrowings is payable, (i) in the case of borrowings at the Base Rate, on the last business day of March, June, September and December of each calendar year and the maturity date, (ii) in the case of borrowings at the Term SOFR rate (or the Alternative Currency Term Rate), on the last day of the applicable interest period selected by the Company, which date shall be no later than the last day of every third month and the maturity date and (iii) in the case of borrowings at the Alternative Currency Daily Rate, on the last day of each calendar month and the maturity date. The Company is required to pay a quarterly commitment fee on the unutilized portion of the revolving credit commitments under the 2027 Credit Facility ranging from 0.125% to 0.275% per annum, based on the Company’s credit ratings. The Company is also required to pay letter of credit usage fees ranging from 1.125% to 1.750% per annum (based on the Company’s credit ratings) on the amount of the daily average outstanding letters of credit and a fronting fee of 0.125% per annum on the undrawn and unexpired amount of each letter of credit.

Under the 2027 Credit Facility, the interest rate margins, commitment fee and letter of credit usage fee are subject to upward or downward adjustments if the Company achieves, or fails to achieve, certain specified sustainability targets with respect to workplace safety and greenhouse gas emissions. Such upward or downward sustainability adjustments may be up to 0.05% per annum in the case of the interest rate margins and letter of credit usage fee and up to 0.01% per annum in the case of the commitment fee.

Delayed Draw Term Loan

In September 2022, the Company entered into a $450 million delayed draw term loan agreement. Borrowings under the delayed draw term loan may be used for working capital, capital expenditures, refinancing of current debt, and other general corporate purposes. All borrowings under the delayed draw term loan will become due on the date that is 364 days after the initial borrowing. Interest is based on either (a) a Term SOFR-based formula plus a margin of 100.0 basis points to 162.5 basis points, depending on the Company’s credit ratings, or (b) a Base Rate formula plus a margin of 0.0 basis point to 62.5 basis

Table of Contents

points, depending on the Company's credit ratings. On November 30, 2022, the Company borrowed $450 million under the delayed draw term loan. Of this amount, $300 million was repaid in December 2022. As of December 31, 2022, the Company had $150 million in borrowings outstanding under the delayed draw term loan agreement, which amount is due on November 29, 2023.

The Euro term loan, the 2027 Credit Facility, and delayed draw term loan are unsecured, and contain customary restrictions on the ability of the Company and its subsidiaries to (i) incur liens, (ii) dispose of assets and (iii) make certain acquisitions of other entities. The Euro term loan also contains a restriction on the ability of the Company and its subsidiaries to change its line of business. The 2027 Credit Facility and delayed draw term loan also contain a restriction on the ability of the Company and its subsidiaries to engage in transaction with affiliates. These covenants are subject to a number of significant exceptions and limitations. The Euro term loan, the 2027 Credit Facility, and delayed draw term loan agreement also require that the Company maintain a maximum ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation and amortization), and a minimum interest coverage ratio. As of December 31, 2022, the Company was in compliance with the covenants under the Euro term loan, the 2027 Credit Facility, and delayed draw term loan agreement.

7. INTEREST AND OTHER, NET

Interest and other, net for the three and nine-month periods ended December 31, 2022 and December 31, 2021 are primarily composed of the following:


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
	(In millions)
Interest expenses on debt obligations	$	49	$	38	$	136	$	113
AR sales program related expenses	13		1		26		3
Equity in (earnings) loss on investments	(3)		(30)		3		(52)
Brazil tax credit (1)	—		(1)		—		(150)

____________________________________________________________

(1)During the nine-month period ended December 31, 2021, the Company recognized a $150 million gain related to a certain tax credit upon approval of a "Credit Habilitation" request by the relevant Brazil tax authorities.

8. 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.

Table of Contents

As of December 31, 2022, the aggregate notional amount of the Company’s outstanding foreign currency derivative contracts was $11.5 billion as summarized below:


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

CNY	1,759	—	$	252	$	—
EUR	279	38	281		41
HUF	141,230	—	421		—

ILS	376	—	106		—
JPY	33,525	—	300		—
MXN	7,826	—	403		—
MYR	510	101	115		23



Other	N/A	N/A	138		5
			2,016		69
Other Foreign Currency Contracts
BRL	—	1,060	—		201
CAD	122	72	90		53

CNY	3,917	—	562		—
EUR	2,364	2,527	2,509		2,673
GBP	247	287	297		346
HUF	90,357	77,398	238		204
ILS	645	286	182		81
INR	18,673	406	225		5

MXN	9,654	7,424	497		382
MYR	1,653	786	374		178
PLN	274	214	62		48


Other	N/A	N/A	142		100
			5,178		4,271

Total Notional Contract Value in USD			$	7,194	$	4,340

As of December 31, 2022, 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 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 interest and other, net in the condensed consolidated statements of operations. As of December 31, 2022 and March 31, 2022, 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. The deferred loss was $23 million as of December 31, 2022, and is expected to be recognized as a component of cost of sales and net sales in the condensed consolidated statements of operations over the next twelve-month period, except for the USD JPY cross currency swap, the USD HUF cross currency swaps and the USD EUR cross currency swap, which are further discussed below.

The Company entered into a USD JPY cross currency swap in April 2019 to hedge the foreign currency risk on the JPY term loan due April 2024, and the fair value of the cross currency swap was included in current and long-term other liabilities as of December 31, 2022. 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, and the fair value of the cross currency swaps was included in current and long-term other liabilities as of December 31, 2022. Additionally, the Company entered into a USD EUR cross currency swap in November 2022 to hedge the foreign currency risk on the EUR term loan due December 2023, and the fair value of the cross currency swap was included in current assets as of December 31, 2022. The changes in fair value of the cross currency swaps are reported in accumulated other comprehensive loss. In addition, corresponding amounts are reclassified out of accumulated

Table of Contents

other comprehensive loss to interest and other, net to offset the remeasurement of the underlying JPY and EUR loan principal and HUF bond principal, which also impact 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	December 31, 2022		March 31, 2022		Balance Sheet Location	December 31, 2022		March 31, 2022
	(In millions)
Derivatives designated as hedging instruments
Foreign currency contracts	Other current assets	$	40	$	22	Other current liabilities	$	28	$	35
Foreign currency contracts	Other assets	$	—	$	—	Other liabilities	$	112	$	61

Derivatives not designated as hedging instruments
Foreign currency contracts	Other current assets	$	37	$	21	Other current liabilities	$	41	$	26

The Company has financial instruments subject to master netting arrangements, which provide for the net settlement of all contracts with a single counterparty. The Company does not offset fair value amounts for assets and liabilities recognized for derivative instruments under these arrangements and, 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.

9. ACCUMULATED OTHER COMPREHENSIVE LOSS

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


	Three-Month Periods Ended
	December 31, 2022						December 31, 2021
	Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total
	(In millions)
Beginning balance	$	(73)	$	(279)	$	(352)	$	(49)	$	(88)	$	(137)
Other comprehensive gains (loss) before reclassifications	77		80		157		(27)		(14)		(41)
Net (gains) loss reclassified from accumulated other comprehensive loss	(49)		—		(49)		14		6		20
Net current-period other comprehensive gains (loss)	28		80		108		(13)		(8)		(21)
Ending balance	$	(45)	$	(199)	$	(244)	$	(62)	$	(96)	$	(158)

Table of Contents


	Nine-Month Periods Ended
	December 31, 2022						December 31, 2021
	Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total		Unrealized loss on derivative instruments and other		Foreign currency translation adjustments		Total
	(In millions)
Beginning balance	$	(66)	$	(116)	$	(182)	$	(42)	$	(77)	$	(119)
Other comprehensive loss before reclassifications	(72)		(83)		(155)		(20)		(24)		(44)
Net gains reclassified from accumulated other comprehensive loss	93		—		93		—		5		5
Net current-period other comprehensive gains (loss)	21		(83)		(62)		(20)		(19)		(39)
Ending balance	$	(45)	$	(199)	$	(244)	$	(62)	$	(96)	$	(158)

Substantially all unrealized gains and losses relating to derivative instruments and other, reclassified from accumulated other comprehensive loss for the three and nine-month periods ended December 31, 2022 were reclassified out of accumulated other comprehensive loss to interest and other, 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 December 31, 2022 and 2021 were $9 million and $1 million tax benefits, respectively. The tax impacts on the changes in accumulated other comprehensive loss for the nine-month periods ended December 31, 2022 and 2021 were immaterial and $1 million tax benefits, respectively.

10. TRADE RECEIVABLES SECURITIZATION

The Company sells trade receivables under two asset-backed securitization programs and an accounts receivable factoring program.

Asset-Backed Securitization Programs

The Company sells designated pools of trade receivables under its asset-backed securitization programs (the “ABS Programs”) to affiliated special purpose entities, each of which may in turn sell a fraction of the receivables to unaffiliated financial institutions, based on the Company's requirements. Under these programs, the entire purchase price of sold receivables is paid in cash. The ABS Programs contain guarantees of payment by the special purpose entities, in amounts equal to approximately the net cash proceeds under the programs, and are collateralized by certain receivables held by the special purpose entities. The accounts receivable balances sold under the ABS Programs are removed from the condensed consolidated balance sheets and the cash proceeds received by the Company are included as cash provided by operating activities in the condensed consolidated statements of cash flows.

During the nine-month periods ended December 31, 2022 and December 31, 2021, no accounts receivable were sold under the ABS Programs.

Trade Accounts Receivable Sale Programs

The Company also sells accounts receivables to certain third-party banking institutions. The outstanding balance of receivables sold and not yet collected on accounts where the Company has continuing involvement was approximately $0.8 billion and $0.6 billion as of December 31, 2022 and March 31, 2022, respectively. For the nine-month periods ended December 31, 2022 and December 31, 2021, total accounts receivable sold to certain third-party banking institutions was approximately $2.6 billion and $1.0 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.

11. 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

Table of Contents

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 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 December 31, 2022 and March 31, 2022.

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 noncurrent 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 nine-month periods ended December 31, 2022 and December 31, 2021.

Table of Contents

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 December 31, 2022 and March 31, 2022:


	Fair Value Measurements as of December 31, 2022
	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)	$	—	$	1,392	$	—	$	1,392

Foreign currency contracts (Note 8)	—		77		—		77

Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	—		37		—		37
Liabilities:
Foreign currency contracts (Note 8)	$	—	$	(181)	$	—	$	(181)



	Fair Value Measurements as of March 31, 2022
	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)	$	—	$	2,285	$	—	$	2,285

Foreign currency contracts (Note 8)	—		43		—		43
Deferred compensation plan assets:							0
Mutual funds, money market accounts and equity securities	—		39		—		39
Liabilities:							0
Foreign currency contracts (Note 8)	$	—	$	(122)	$	—	$	(122)

Other financial instruments

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


	As of December 31, 2022				As of March 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy
	(In millions)
5.000% Notes due February 2023	$	—	$	—	$	500	$	511	Level 1
Term Loan due April 2024 - three-month TIBOR plus 0.436%	250		250		273		273		Level 2
4.750% Notes due June 2025	599		590		598		615		Level 1
3.750% Notes due February 2026	687		650		690		690		Level 1
6.000% Notes due January 2028	396		397		—		—		Level 1
4.875% Notes due June 2029	658		621		659		687		Level 1
4.875% Notes due May 2030	687		644		690		713		Level 1
Euro Term Loans	265		265		389		389		Level 2
Delayed Draw Term Loan	150		150		—		—		Level 2
3.600% HUF Bonds due December 2031	264		190		301		301		Level 2
India Facilities	79		79		84		84		Level 2

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

The Term Loan due April 2024, Euro Term Loans, Delayed Draw Term Loan, and India Facilities bear interest at floating interest rates, and therefore, as of December 31, 2022, the carrying amounts approximate fair values.

Table of Contents

12. 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, (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.

In addition, the Company provides design and engineering services to its customers and also designs and makes its own products. As a consequence of these activities, its customers are requiring the Company to take responsibility for intellectual property to a greater extent than in its manufacturing and assembly businesses. Although the Company believes that its intellectual property assets and licenses are sufficient for the operation of its business as it currently conducts it, from time to time third-parties do assert patent infringement claims against the Company or its customers. If and when third-parties make assertions regarding the ownership or right to use intellectual property, the Company could be required to either enter into licensing arrangements or to resolve the issue through litigation. Such license rights might not be available to the Company on commercially acceptable terms, if at all, and any such litigation might not be resolved in the Company's favor. Additionally, litigation could be lengthy and costly and could materially harm the Company's financial condition regardless of the outcome. The Company also could be required to incur substantial costs to redesign a product or re-perform design services.

From time to time, the Company enters into intellectual property licenses (e.g., patent licenses and software licenses) with third-parties which obligate the Company to report covered behavior to the licensor and pay license fees to the licensor for certain activities or products, or that enable the Company's use of third-party technologies. The Company may also decline to enter into licenses for intellectual property that it does not think is useful for or used in its operations, or for which its customers or suppliers have licenses or have assumed responsibility. Given the diverse and varied nature of its business and the location of its business around the world, certain activities the Company performs, such as providing assembly services in China and India, may fall outside the scope of those licenses or may not be subject to the applicable intellectual property rights. The Company's licensors may disagree and claim royalties are owed for such activities. In addition, the basis (e.g., base price) for any royalty amounts owed are audited by licensors and may be challenged. Some of these disagreements may lead to claims and litigation that might not be resolved in the Company's favor. Additionally, litigation could be lengthy and costly and could materially harm the Company's financial condition regardless of the outcome.

One of the Company's Brazilian subsidiaries has received assessments for certain sales and import taxes. There were originally six tax assessments totaling the updated amount of 374 million Brazilian reals (approximately USD $71 million based on the exchange rate as of December 31, 2022). The Company successfully defeated one of the six assessments in September 2019 (totaling approximately 61 million Brazilian reals or USD $12 million). The Company successfully defeated another three of the assessments in September 2022 (totaling approximately 229 million Brazilian reals or USD $43 million), each of which remains subject to appeal. The Company was unsuccessful at the administrative level for one of the assessments and filed an annulment action in federal court in Brasilia, Brazil on March 23, 2020; the updated value of that assessment is 34 million Brazilian reals (approximately USD $6 million). One of the assessments remains in the review process at the administrative level. The Company believes there is no legal basis for any of these assessments and that it has meritorious defenses. The Company will continue to vigorously oppose all of these assessments, as well as any future assessments. The Company does not expect final judicial determination on any of these claims in the near future.

On February 14, 2019, the Company submitted an initial notification of voluntary disclosure to the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC") regarding possible noncompliance with U.S. economic sanctions requirements among certain non-U.S. Flex-affiliated operations. On September 28, 2020, the Company made a submission to OFAC that completed the Company’s voluntary disclosure based on the results of an internal investigation regarding the matter. On June 11, 2021, the Company notified OFAC that it had identified possible additional relevant transactions at one non-U.S. Flex-affiliated operation. The Company submitted an update to OFAC on November 16, 2021 reporting on the results of its review of those transactions. The Company intends to continue to cooperate fully with OFAC in this matter going forward. Nonetheless, it is reasonably possible that the Company could be subject to penalties that could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

A foreign Tax Authority (“Tax Authority”) has assessed a cumulative total of approximately $167 million in taxes owed for multiple Flex legal entities within its jurisdiction for various fiscal years ranging from fiscal year 2010 through fiscal year 2019.

Table of Contents

The assessed amounts related to the denial of certain deductible intercompany payments. The Company disagrees with the Tax Authority’s 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 adverse 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.

13. SHARE REPURCHASES

During the three and nine-month periods ended December 31, 2022, the Company repurchased 2.1 million and 17.8 million shares at an aggregate purchase price of $40 million and $293 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 $1.0 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 25, 2022. As of December 31, 2022, shares in the aggregate amount of $937 million were available to be repurchased under the current plan.

14. SEGMENT REPORTING

The Company reports its financial performance based on three operating and reportable segments, Flex Agility Solutions, Flex Reliability Solutions and Nextracker, 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.

An operating segment's performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include intangible amortization, stock-based compensation, restructuring charges, legal and other, and interest and other, net. A portion of depreciation is allocated to the respective segments, together with other general corporate research and development and administrative expenses.

Table of Contents

Selected financial information by segment is in the table below. Historical information for the first three quarters of the fiscal year ended March 31, 2022 have been recast to reflect the new operating and reportable segments in the table below and in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations."


	Three-Month Periods Ended				Nine-Month Periods Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
	(In millions)
Net sales:
Flex Agility Solutions	$	4,029	$	3,581	$	12,024	$	10,450
Flex Reliability Solutions	3,225		2,711		9,493		7,758
Nextracker	516		338		1,384		1,018
Intersegment eliminations	(14)		(11)		(32)		(36)
	$	7,756	$	6,619	$	22,869	$	19,190
Segment income and reconciliation of income before income taxes:
Flex Agility Solutions	$	181	$	163	$	523	$	453
Flex Reliability Solutions	143		136		465		407
Nextracker	60		18		133		68
Corporate and Other	(12)		(19)		(43)		(54)
Total segment income	372		298		1,078		874
Reconciling items:
Intangible amortization	19		15		62		45
Stock-based compensation	27		25		80		69

Restructuring charges	5		2		5		10

Legal and other (1)	—		5		13		5
Interest and other, net	59		8		152		(103)
Income before income taxes	$	262	$	243	$	766	$	848

(1)Legal and other consists of costs not directly related to core business results and may include 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 impairments (recoveries). During the third quarter of fiscal year 2022, the Company incurred $5 million in acquisition-related costs related to the acquisition of Anord Mardix. During the first half of fiscal year 2023, 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.

15. SUBSEQUENT EVENTS

On January 13, 2023, the Company announced that its subsidiary, Nextracker Inc. ("Nextracker"), publicly filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission ("SEC") relating to a proposed initial public offering of shares of Nextracker's Class A common stock. The initial public offering and its timing are subject to market and other conditions and the SEC’s review process, and there can be no assurance that we will proceed with such offering or any alternative transaction.

Table of Contents

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 (the "SEC"). These forward-looking statements are subject to risks and uncertainties, including, without limitation, those risks and uncertainties discussed in this section, as well as any risks and uncertainties discussed in Part 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, 2022. 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 diversified manufacturing partner of choice that helps market-leading brands design, build and deliver innovative products that improve the world. Through the collective strength of a global workforce across approximately 30 countries with responsible, sustainable operations, we deliver advanced manufacturing solutions and operate one of the most trusted global supply chains, supporting the entire product lifecycle with fulfillment, after-market, and circular economy solutions for diverse industries including cloud, communications, enterprise, automotive, industrial, consumer devices, lifestyle, healthcare, and energy. Our three operating and reportable segments are: