Mike McNamara - Investor Relations Solutions

Mike McNamara
Investor Day – May 2012
1
Executive Overview
• Extensive global footprint, manufacturing technologies and
services
• Growth business with structurally higher growth rates than
the GDP and the electronics industry
• Business transformation leading to optimized portfolio
generating less volatility and higher margins
• Sustainable business model generating strong free cash
flow and >20% ROIC
• Expanding operating margin to 3.5% this year
• Exceptionally well positioned for eco-system shifts
2
Flextronics Manufacturing
Karlskrona, Sweden
Boeblingen &
Paderborn, Germany
Juarez, MX
Cork, Ireland
Tczew, Poland
Sarvar, Tab
& Zala, Hungary
Austin, Dallas, Longview
& Houston, TX
Chengdu, China
Beregovo &
Mukachevo, Ukraine
Nanjing, Malu/Shanghai
& Suzhou, China
Northfield, MN
Asheville, Charlotte,
Creedmoor, NC
Columbia, SC Treviso, Italy
Milpitas, CA
Valencia, CA
Tijuana, MX
Nogales, MX
Ramos Arizpe, MX
Aguascalientes, MX
Timisoara, Romania
Ibaraki, Japan
Dongguan, Ganzhou, Gushu,
Huangtian, Shenzhen, Xixiang
& Zhuhai, China
Althofen,
Austria
Arad, Migdal Haemek,
Ofakim & Yavne, Israel
Guadalajara, MX
Bukit, Penang, PTP &
Senai, Malaysia
Chennai, India
Manaus, Brazil
Kallang & Joo
Koon Singapore
Batam, Indonesia
Sao Paulo, Brazil
Sorocaba, Brazil
>100 Locations
│
25 Million Square Feet
│
200,000 Employees3
3
Flextronics Global Services and Software
Venray,
Netherlands
Manchester &
Swindon, UK
Cork & Limerick,
Ireland
Pardubice,
Czech Republic
Lodz, Poland
Budapest &
Pecs, Hungary
Toronto, Canada
Louisville, KY
Shanghai, China
Milpitas, CA
Juarez, MX
Raleigh, NC
Milan, Italy
Istanbul, Turkey
Dubai, UAE
Koriyama, Japan
Memphis, TN
Hong Kong &
Shenzhen, China
Delhi, India
Austin &
Laredo, TX
Mumbai, India
Guadalajara, MX
Bangalore &
Chennai, India
Senai, Malaysia
Changi, Singapore
Sorocaba, Brazil
>25 Locations
│
7 Million Square Feet
│
11,000 Employees
4
4
Flextronics Design Engineering
Frickenhausen,
Ostbeven & Tuebingen,
Germany
Ottawa &
Toronto, Canada
Detroit, MI
Milpitas, CA
Atlanta, GA
Austin, & Irving, TX
Karlskrona, Sweden
Brno, Czech
Republic
Beijing, China
Monza &
Treviso, Italy
Shanghai, China
Althofen,
Austria
Taipei, Taiwan
Guadalajara, MX
Bukit & Penang,
Malaysia
Hong Kong &
Shenzhen, China
Singapore
26 Design Centers
│
2000+ Design Engineers
5
Broad Base of Manufacturing Technologies and Services
Total FY13E Revenue ~ $5B
•
•
•
•
•
•
•
•
•
•
•
•
PCB
Flexible Circuits
Rigid/Flex Circuits
Power Solutions
Metal Fabrication
Precision Machining
Plastics
Cables
Advanced Displays
Global Services
Electronic Materials
Advanced Manufacturing Services
Many ways to create competitive differentiation
6
Extensive Relationships with our Customers
Top Ten
Customers
PCB
Power
Services
PCBA
System
Integration
Countries
Customer
HQ
A
X
X
X
X
X
4
North America
X
X
X
5
North America
X
X
X
5
China
X
X
X
5
China
B
C
X
D
E
X
X
X
X
X
16
North America
F
X
X
X
X
X
9
North America
G
X
X
X
X
8
Europe
H
X
X
X
X
6
North America
I
X
X
X
X
9
Europe
J
X
X
X
4
North America
X
Sophisticated worldwide management system required to
support international OEMs
7
Historical Revenue Growth ($B)
35.0
30.8
30.0
28.5
27.4
CAGR 35%
25.0
29.4
24.0
20.0
18.9
15.0
12.1
13.1 13.4
14.5
15.9 15.3
10.0
7.0
5.0
0.0
4.0
0.1
0.2
0.5
1.5
2.6
FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Demonstrated ability to scale and manage a global system
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GDP, Electronics and EMS Growth Rates Last 10 Years
10%
• Potential size is limitless
8%
EMS
8.6%
6%
Electronics
6.0%
4%
2%
GDP
3.8%
• Large outsourcing deals
continue
• New markets drive new
outsourcing revenue
• Economics of
outsourcing are
compelling
Source: GDP- IMF, EMS – IDC, Electronics - Prismark
A structurally higher growth Industry than the
GDP or electronics
9
Our Four Primary Business Groups
High Reliability Solutions
Medical, Automotive, Aerospace & Defense
Industrial & Emerging Industries
Energy Management, Application & Lifestyle,
Renewable Energy, Equipment & Automation
High Velocity Solutions
Consumer, Mobile, Computing, Internet
Access Products
Integrated Network Solutions
Telecom, Networking and Server &
Storage
10
Our Portfolio Transformation
FY07
FY13E
FY12
28%
39%
58%
11%
8%
3%
Revenue $18.9B
High Velocity
~45%
~10%
~15%
14%
Revenue $29.4B
High Reliability
~30%
39%
Revenue $26-$27B
Industrial & Emerging
Integrated Network
Actively manage the portfolio to adapt to market and
eco-system shifts and expand margins
11
Competitive Market Position
2007
Market
Rank
2007-2012
Flex CAGR
2012 Market
Rank
Telecom
1
18%
1
Networking
4
12%
2
Server & Storage
10
36%
3
Automotive
3
27%
1
Medical
3
38%
1
>20
21%
6
Business
Group
Integrated
Network
Solutions
High Reliability
Solutions
Segment
Aerospace & Defense
High Velocity
Solutions
Consumer
2
1%
4
Industrial &
Emerging
Industries
Industrial
2
12%
1
Our capabilities and scale create competitive advantage
12
Source: IDC and Flextronics
Low Volume/High Mix Revenue for the North American
Competitors
2012 Revenue ($B)
Key Attributes
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• Longer product life cycles
18
$17.8B
16
FLEX
14
12
10
8
6
4
2
• Less forecast variability
• Higher margins
• Higher complexity
• Closer proximity to
customer’s design centers
required
• Regional manufacturing
footprint essential
Less competition
0
Leading position in low volume/high mix business
13
Low Volume/High Mix Business Revenue ($M)
25,000
CAGR 10.4%
20,000
15,000
10,000
5,000
FY10
FY11
FY12
FY13E
FY'13E*
Steady, predictable growth
14
Flextronics Power
Revenue ($M)
1200
• 4th largest power supply
company
1000
800
Differentiators
77% CAGR
600
• Innovative patented
technology for high
efficiency servers,
chargers and adapters
• 3 dedicated manufacturing
sites – final factory closure
complete in the September
quarter
400
200
0
FY07 FY08 FY09 FY10 FY11 FY12 FY13E
• Expect margin expansion
in the second half of FY13
15
Multek
Revenue ($M)
1200
1000
6.5% CAGR
Differentiators
• Invested in complex and
mobile PCBs, and flex/rigid
flex circuits
• Highly diversified:
800
- No Customer > 10%
- Top 50% of revenue is
spread across 15
customers
600
400
• Strong growth forecasted this
year based on state of the art
manufacturing facilities
200
0
FY07 FY08 FY09 FY10 FY11 FY12 FY13E
• Expect margin expansion in
the second half of FY13
16
Flextronics Power Revenue ($M)
1200
Multek Revenue ($M)
1200
1000
77% CAGR
1000
800
800
600
600
400
400
200
200
0
0
FY07 FY08 FY09 FY10 FY11 FY12 FY13E
6.5% CAGR
FY07 FY08 FY09 FY10 FY11 FY12 FY13E
These are very valuable assets that are not reflected in
our stock price today
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$2.0
GAAP EPS
GAAP EPS
$1.0
$0.60
$0.89
$0.77
$0.70
FY11
FY12 FY13E
$0.47
$0.12
$0.03
$0.0
-$0.16
-$0.31
-$0.67
-$1.0
-$2.0
-$8.0
FY08 – Restructuring and Solectron Integration
FY09 – Goodwill impairment
-$0.92
FY08 FY10
– Solectron
IntegrationAircent Investment and N/R Impairment
- Restructuring,
FY09 FY13E
– Goodwill
impairment
- GAAP
Adjusted Consensus
FY10 - Restructuring and investment impairment
FY13E - GAAP Adjusted Consensus
-$7.46
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
Quality of earnings has become exceptionally high
18
18
Free Cash Flow Generation ($M)
900
855
800
715
700
600
622
529
500
399
400
463
435
416
298
300
200
100
34
6
0
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
Strong free cash flow that accelerates in a bad economy
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Key Ecosystem
Shifts
Flex Competitive Position
and Response
Rising Manufacturing
Costs in China
Large scale manufacturing sites in Malaysia, India, Indonesia,
Mexico, Brazil, Ukraine and Eastern Europe, employing more
than 75,000 people
Increasing Regulation
Driving Regional
Manufacturing
Broadest footprint outside of China and greater than any North
America or Taiwanese competitor
Product Convergence
Requiring Multiple
Technologies
Manufacture the largest and most diverse set of products in the
world
End to End Supply
Chain Services
Mobility and the Cloud
Innovative development of end-to-end supply chain software
tools for customer intelligence leveraging analytics
Broad expertise in products, design engineering and product
technologies for mobile, server, storage, telecom and networking
Outstanding competitive position for the future
20
Conclusion
• Well positioned with scale, capabilities and cost
structure to win
• Operating a product portfolio with longer product life
cycles, less forecast variability and higher margins
• Generating strong free cash flow
• Fundamentally structured to achieve 3.5% operating
margin this fiscal year
• Well positioned for eco-system shifts
21