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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
Form 10-Q
(Mark One)
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
 
Or
 
         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)
(656876-9899
 Registrant’s telephone number, including area code
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, No Par ValueFLEXThe 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 filerAccelerated filerNon-accelerated filerSmaller reporting company
Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
 
The number of shares of the registrant’s ordinary shares outstanding as of October 21, 2022 was 452,783,958.


FLEX LTD.
 
INDEX
 
  Page
   
 
 
 
 
 
 
   
   
 

2

PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of Flex Ltd., Singapore

Results of Review of Interim Financial Information
 
We have reviewed the accompanying condensed consolidated balance sheet of Flex Ltd. and its subsidiaries (the “Company”) as of September 30, 2022, the related condensed consolidated statements of operations, comprehensive income, and redeemable noncontrolling interest and shareholders’ equity for the three-month and six-month periods ended September 30, 2022 and October 1, 2021, the condensed consolidated statements of cash flows for the six-month periods ended September 30, 2022 and October 1, 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 
October 28, 2022 

3

FLEX LTD.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
As of September 30, 2022As of March 31, 2022
(In millions, except share amounts)
(Unaudited)
ASSETS
Current assets:  
Cash and cash equivalents$2,453 $2,964 
Accounts receivable, net of allowance of $8 and $56, respectively
3,956 3,371 
Contract assets531 519 
Inventories7,726 6,580 
Other current assets964 903 
Total current assets15,630 14,337 
Property and equipment, net2,201 2,125 
Operating lease right-of-use assets, net596 637 
Goodwill1,325 1,342 
Other intangible assets, net328 411 
Other assets543 473 
Total assets$20,623 $19,325 
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:  
Bank borrowings and current portion of long-term debt$916 $949 
Accounts payable6,818 6,254 
Accrued payroll479 470 
Deferred revenue and customer working capital advances 2,700 2,002 
Other current liabilities1,233 1,036 
Total current liabilities12,146 10,711 
Long-term debt, net of current portion3,081 3,248 
Operating lease liabilities, non-current495 551 
Other liabilities631 608 
Total liabilities16,353 15,118 
Redeemable noncontrolling interest 90 78 
Shareholders’ equity  
Ordinary shares, no par value; 1,500,000,000 authorized, 503,876,758 and 510,799,667 issued, and 453,637,403 and 460,560,312 outstanding, respectively
5,852 6,052 
Treasury stock, at cost; 50,239,355 shares as of September 30, 2022 and March 31, 2022
(388)(388)
Accumulated deficit(932)(1,353)
Accumulated other comprehensive loss(352)(182)
Total shareholders’ equity4,180 4,129 
Total liabilities, redeemable noncontrolling interest, and shareholders' equity$20,623 $19,325 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

FLEX LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three-Month Periods EndedSix-Month Periods Ended
 September 30, 2022October 1, 2021September 30, 2022October 1, 2021
(In millions, except per share amounts)
(Unaudited)
Net sales$7,766 $6,229 $15,113 $12,571 
Cost of sales7,175 5,755 13,987 11,625 
Restructuring charges 9  9 
Gross profit591 465 1,126 937 
Selling, general and administrative expenses245 213 486 414 
Intangible amortization21 15 43 30 
Operating income325 237 597 493 
Interest and other, net53 (134)93 (111)
Income before income taxes272 371 504 604 
Provision for income taxes34 35 71 62 
Net income238 336 433 542 
Net income attributable to redeemable noncontrolling interest6  12  
Net income attributable to Flex Ltd.$232 $336 $421 $542 
Earnings per share attributable to the shareholders of Flex Ltd.:  
Basic$0.51 $0.70 $0.92 $1.11 
Diluted$0.50 $0.69 $0.91 $1.10 
Weighted-average shares used in computing per share amounts:  
Basic455 482 457 487 
Diluted460 487 464 493 

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

5


FLEX LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 Three-Month Periods EndedSix-Month Periods Ended
 September 30, 2022October 1, 2021September 30, 2022October 1, 2021
(In millions)
(Unaudited)
Net income$238 $336 $433 $542 
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of zero tax
(92)(16)(163)(11)
Unrealized loss on derivative instruments and other, net of tax(6)(10)(7)(7)
Comprehensive income$140 $310 $263 $524 
Comprehensive income attributable to redeemable noncontrolling interest6  12  
Comprehensive income attributable to Flex Ltd.$134 $310 $251 $524 

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

6

FLEX LTD.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY

Redeemable
Noncontrolling
Interest
Ordinary SharesAccumulated Other Comprehensive LossTotal
Three Months Ended September 30, 2022AmountShares
Outstanding
AmountAccumulated
Deficit
Unrealized
Loss on
Derivative
Instruments
and Other
Foreign
Currency
Translation
Adjustments
Total
Accumulated
Other
Comprehensive
Loss
Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT JULY 1, 2022$84 458 $5,509 $(1,164)$(67)$(187)$(254)$4,091 
Repurchase of Flex Ltd. ordinary shares at cost— (4)(72)— — — — (72)
Net income6 — — 232 — — — 232 
Stock-based compensation— — 27 — — — — 27 
Total other comprehensive loss— — — — (6)(92)(98)(98)
BALANCE AT SEPTEMBER 30, 2022$90 454 $5,464 $(932)$(73)$(279)$(352)$4,180 

Redeemable
Noncontrolling
Interest
Ordinary SharesAccumulated Other Comprehensive LossTotal
Six Months Ended September 30, 2022AmountShares
Outstanding
AmountAccumulated
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— (15)(253)— — — — (253)
Issuance of Flex Ltd. vested shares under restricted share unit awards— 8 — — — — — — 
Net income12 — — 421 — — — 421 
Stock-based compensation— — 53 — — — — 53 
Total other comprehensive loss— — — — (7)(163)(170)(170)
BALANCE AT SEPTEMBER 30, 2022$90 454 $5,464 $(932)$(73)$(279)$(352)$4,180 




7

Redeemable
Noncontrolling
Interest
Ordinary SharesAccumulated Other Comprehensive LossTotal
Three Months Ended October 1, 2021AmountShares
Outstanding
AmountAccumulated
Deficit
Unrealized
Loss on
Derivative
Instruments
and Other
Foreign
Currency
Translation
Adjustments
Total
Accumulated
Other
Comprehensive
Loss
Shareholders'
Equity
(In millions)
Unaudited
BALANCE AT JULY 2, 2021$ 489 $5,702 $(2,083)$(39)$(72)$(111)$3,508 
Repurchase of Flex Ltd. ordinary shares at cost— (18)(328)— — — — (328)
Net income— — — 336 — — — 336 
Stock-based compensation— — 24 — — — — 24 
Total other comprehensive loss— — — — (10)(16)(26)(26)
BALANCE AT OCTOBER 1, 2021$ 471 $5,398 $(1,747)$(49)$(88)$(137)$3,514 

Redeemable
Noncontrolling
Interest
Ordinary SharesAccumulated Other Comprehensive LossTotal
Six Months Ended October 1, 2021AmountShares
Outstanding
AmountAccumulated
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)$3,436 
Repurchase of Flex Ltd. ordinary shares at cost— (27)(490)— — — — (490)
Exercise of stock options— 1 — — — — — — 
Issuance of Flex Ltd. vested shares under restricted share unit awards— 5 — — — — — — 
Net income— — — 542 — — — 542 
Stock-based compensation— — 44 — — — — 44 
Total other comprehensive loss— — — — (7)(11)(18)(18)
BALANCE AT OCTOBER 1, 2021$ 471 $5,398 $(1,747)$(49)$(88)$(137)$3,514 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8

FLEX LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Six-Month Periods Ended
 September 30, 2022October 1, 2021
(In millions)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$433 $542 
Depreciation, amortization and other impairment charges247 236 
Changes in working capital and other, net(539)(264)
Net cash provided by operating activities141 514 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property and equipment(296)(210)
Proceeds from the disposition of property and equipment18 5 
Acquisition of businesses, net of cash acquired4  
Other investing activities, net3 2 
Net cash used in investing activities(271)(203)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Proceeds from bank borrowings and long-term debt 20 
Repayments of bank borrowings and long-term debt(39)(9)
Payments for repurchases of ordinary shares(253)(490)
Other financing activities, net(4)(8)
Net cash used in financing activities(296)(487)
Effect of exchange rates on cash and cash equivalents(85)(3)
Net decrease in cash and cash equivalents(511)(179)
Cash and cash equivalents, beginning of period2,964 2,637 
Cash and cash equivalents, end of period$2,453 $2,458 
Non-cash investing activities:  
Unpaid purchases of property and equipment$181 $122 
Right-of-use assets obtained in exchange of operating lease liabilities56 28 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

9

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 six-month periods ended September 30, 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 first quarters for fiscal years 2023 and 2022 ended on July 1, 2022, which is comprised of 92 days in the period, and July 2, 2021, which is comprised of 93 days in the period, respectively. The second quarters for fiscal years 2023 and 2022 ended on September 30, 2022 and October 1, 2021, respectively, which are comprised of 91 days in both periods.
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
10

operations. Noncontrolling interest that is redeemable upon the occurrence of conditions outside of the control of the Company 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 Pronouncement
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 when it becomes effective in the first quarter of fiscal year 2024.

2.  BALANCE SHEET ITEMS 
Inventories 
The components of inventories, net of applicable lower of cost and net realizable value write-downs, were as follows: 
As of September 30, 2022As of March 31, 2022
 (In millions)
Raw materials$6,196 $5,290 
Work-in-progress737 602 
Finished goods793 688 
 $7,726 $6,580 
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Goodwill and Other Intangible Assets
During the six-month period ended September 30, 2022, there was no material activity in the Company's goodwill account for each of its reportable segments, other than foreign currency translation adjustments of $15 million, which primarily impacted its FRS segment.
The components of acquired intangible assets are as follows:
 As of September 30, 2022As 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$349 $(168)$181 $385 $(157)$228 
Licenses and other intangibles270 (123)147 319 (136)183 
Total$619 $(291)$328 $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)$38 
202464 
202558 
202639 
202733 
Thereafter96 
Total amortization expense$328 
____________________________________________________________
(1)Represents estimated amortization for the remaining fiscal six-month period ending March 31, 2023. 
Customer Working Capital Advances
Customer working capital advances were $2.0 billion and $1.4 billion, as of September 30, 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.
Other Current Liabilities
Other current liabilities include customer-related accruals of $236 million and $227 million as of September 30, 2022 and March 31, 2022, respectively.
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 $6 million and $12 million of a payable-in-kind dividend due to TPG Rise during the three and six-month periods ended September 30, 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 September 30, 2022 and, as such, it is not probable that the noncontrolling interest will become redeemable.
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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 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
13

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 $792 million and $704 million as of September 30, 2022 and March 31, 2022, respectively, of which $731 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 six-month periods ended September 30, 2022 and October 1, 2021, respectively. Historical information for the first and second quarters of the fiscal year ended March 31, 2022 have been recast to reflect the new operating and reportable segments in the table below.
Three-Month Periods EndedSix-Month Periods Ended
September 30, 2022October 1, 2021September 30, 2022October 1, 2021
Timing of Transfer(In millions)
FAS
Point in time$3,787 $3,250 $7,566 $6,498 
Over time217 187 429 371 
Total 4,004 3,437 7,995 6,869 
FRS
Point in time3,110 2,308 5,900 4,715 
Over time189 157 368 332 
Total 3,299 2,465 6,268 5,047 
Nextracker
Point in time10 12 33 21 
Over time463 327 835 659 
Total473 339 868 680 
Intersegment eliminations
Point in time(10)(12)(18)(25)
Over time    
Total(10)(12)(18)(25)
Flex
Point in time6,897 5,558 13,481 11,209 
Over time869 671 1,632 1,362 
Total $7,766 $6,229 $15,113 $12,571 

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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 EndedSix-Month Periods Ended
 September 30, 2022October 1, 2021September 30, 2022October 1, 2021
 (In millions)
Cost of sales$7 $6 $14 $11 
Selling, general and administrative expenses20 18 39 33 
Total share-based compensation expense$27 $24 $53 $44 
Total number of options outstanding and exercisable were immaterial as of September 30, 2022. All options have been fully expensed as of September 30, 2022.
During the six-month period ended September 30, 2022, the Company granted 5.7 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 $16.50 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 have been met.  
As of September 30, 2022, approximately 14.8 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 six-month period ended September 30, 2022, 2.4 million shares vested in connection with the awards with market conditions granted in fiscal year 2020.
As of September 30, 2022, total unrecognized compensation expense related to unvested RSU awards under all plans, not including the 2022 Nextracker plan below, was approximately $186 million, and will be recognized over a weighted-average remaining vesting period of 2.2 years.
During the first half 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 six-month period ended September 30, 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.
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5.  EARNINGS PER SHARE 
The following table reflects basic weighted-average ordinary shares outstanding and diluted weighted-average ordinary share equivalents used to calculate basic and diluted earnings per share attributable to the shareholders of Flex: 
 Three-Month Periods EndedSix-Month Periods Ended
 September 30, 2022October 1, 2021September 30, 2022October 1, 2021
 (In millions, except per share amounts)
Basic earnings per share attributable to the shareholders of Flex Ltd.
Net income$238 $336 $433 $542 
Net income attributable to redeemable noncontrolling interest6  12  
Net income attributable to Flex Ltd.$232 $336 $421 $542 
Shares used in computation:
Weighted-average ordinary shares outstanding455 482 457 487 
Basic earnings per share$0.51 $0.70 $0.92 $1.11 
Diluted earnings per share attributable to the shareholders of Flex Ltd.  
Net income$238 $336 $433 $542 
Net income attributable to redeemable noncontrolling interest6  12