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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 July 1, 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 July 25, 2022 was 456,084,675.


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 July 1, 2022, and the related condensed consolidated statements of operations, comprehensive income, redeemable noncontrolling interest and shareholders’ equity, and cash flows for the three-month periods ended July 1, 2022 and July 2, 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 
July 29, 2022 

3

FLEX LTD.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
As of July 1, 2022As of March 31, 2022
(In millions, except share amounts)
(Unaudited)
ASSETS
Current assets:  
Cash and cash equivalents$2,647 $2,964 
Accounts receivable, net of allowance of $7 and $56, respectively
3,782 3,371 
Contract assets510 519 
Inventories7,243 6,580 
Other current assets965 903 
Total current assets15,147 14,337 
Property and equipment, net2,135 2,125 
Operating lease right-of-use assets, net611 637 
Goodwill1,336 1,342 
Other intangible assets, net372 411 
Other assets453 473 
Total assets$20,054 $19,325 
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:  
Bank borrowings and current portion of long-term debt$946 $949 
Accounts payable6,694 6,254 
Accrued payroll419 470 
Deferred revenue and customer working capital advances 2,400 2,002 
Other current liabilities1,131 1,036 
Total current liabilities11,590 10,711 
Long-term debt, net of current portion3,129 3,248 
Operating lease liabilities, non-current520 551 
Other liabilities640 608 
Total liabilities15,879 15,118 
Redeemable noncontrolling interest 84 78 
Shareholders’ equity  
Ordinary shares, no par value; 507,782,209 and 510,799,667 issued, and 457,542,854 and 460,560,312 outstanding, respectively
5,897 6,052 
Treasury stock, at cost; 50,239,355 shares as of July 1, 2022 and March 31, 2022
(388)(388)
Accumulated deficit(1,164)(1,353)
Accumulated other comprehensive loss(254)(182)
Total shareholders’ equity4,091 4,129 
Total liabilities, redeemable noncontrolling interest, and shareholders' equity$20,054 $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 Ended
 July 1, 2022July 2, 2021
(In millions, except per share amounts)
(Unaudited)
Net sales$7,347 $6,342 
Cost of sales6,812 5,871 
Gross profit535 471 
Selling, general and administrative expenses241 201 
Intangible amortization22 15 
Operating income272 255 
Interest and other, net40 22 
Income before income taxes232 233 
Provision for income taxes37 27 
Net income195 206 
Net income attributable to redeemable noncontrolling interest6  
Net income attributable to Flex Ltd.$189 $206 
Earnings per share attributable to the shareholders of Flex Ltd.:  
Basic$0.41 $0.42 
Diluted$0.40 $0.41 
Weighted-average shares used in computing per share amounts:  
Basic458 491 
Diluted468 499 

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 Ended
 July 1, 2022July 2, 2021
(In millions)
(Unaudited)
Net income$195 $206 
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of zero tax
(71)5 
Unrealized gain (loss) on derivative instruments and other, net of tax(1)3 
Comprehensive income$123 $214 
Comprehensive income attributable to redeemable noncontrolling interest6  
Comprehensive income attributable to Flex Ltd.$117 $214 

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 July 1, 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— (11)(181)— — — — (181)
Issuance of Flex Ltd. vested shares under restricted share unit awards— 8 — — — — — — 
Net income6 — — 189 — — — 189 
Stock-based compensation— — 26 — — — — 26 
Total other comprehensive loss— — — — (1)(71)(72)(72)
BALANCE AT JULY 1, 2022$84 458 $5,509 $(1,164)$(67)$(187)$(254)$4,091 

Redeemable
Noncontrolling
Interest
Ordinary SharesAccumulated Other Comprehensive LossTotal
Three Months Ended July 2, 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)$3,436 
Repurchase of Flex Ltd. ordinary shares at cost— (9)(162)— — — — (162)
Exercise of stock options— 1 — — — — — — 
Issuance of Flex Ltd. vested shares under restricted share unit awards— 5 — — — — — — 
Net income— — — 206 — — — 206 
Stock-based compensation— — 20 — — — — 20 
Total other comprehensive income— — — — 3 5 8 8 
BALANCE AT JULY 2, 2021$ 489 $5,702 $(2,083)$(39)$(72)$(111)$3,508 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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FLEX LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Three-Month Periods Ended
 July 1, 2022July 2, 2021
(In millions)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$195 $206 
Depreciation, amortization and other impairment charges124 118 
Changes in working capital and other, net(281)10 
Net cash provided by operating activities38 334 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property and equipment(107)(118)
Proceeds from the disposition of property and equipment16 3 
Other investing activities, net2 2 
Net cash used in investing activities(89)(113)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Repayments of bank borrowings and long-term debt(35)(1)
Payments for repurchases of ordinary shares(181)(162)
Other financing activities, net6 (3)
Net cash used in financing activities(210)(166)
Effect of exchange rates on cash and cash equivalents(56)1 
Net increase (decrease) in cash and cash equivalents(317)56 
Cash and cash equivalents, beginning of period2,964 2,637 
Cash and cash equivalents, end of period$2,647 $2,693 
Non-cash investing activities:  
Unpaid purchases of property and equipment$172 $88 
Right-of-use assets obtained in exchange of operating lease liabilities22 12 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.  ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION
Organization of the Company
Flex Ltd. ("Flex" or the "Company") is the 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). The Company also provides intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world.
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-month period ended July 1, 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 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
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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 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.
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 July 1, 2022As of March 31, 2022
 (In millions)
Raw materials$5,863 $5,290 
Work-in-progress658 602 
Finished goods722 688 
 $7,243 $6,580 
Goodwill and Other Intangible Assets
During the three-month period ended July 1, 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 $6 million, which primarily impacted its FRS segment.
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The components of acquired intangible assets are as follows:
 As of July 1, 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$370 $(164)$206 $385 $(157)$228 
Licenses and other intangibles304 (138)166 319 (136)183 
Total$674 $(302)$372 $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)$62 
202469 
202562 
202642 
202735 
Thereafter102 
Total amortization expense$372 
____________________________________________________________
(1)Represents estimated amortization for the remaining fiscal nine-month period ending March 31, 2023. 
Customer Working Capital Advances
Customer working capital advances were $1.8 billion and $1.4 billion, as of July 1, 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 $264 million and $227 million as of July 1, 2022 and March 31, 2022, respectively.
Redeemable Noncontrolling Interest
As a result of the Company's sale of redeemable preferred units (“Series A Preferred Units”), representing a 16.67% interest in its subsidiary Nextracker LLC ("Nextracker"), to TPG Rise Flash, L.P. ("TPG Rise") on February 1, 2022, the Company recognized $6 million of a payable-in-kind dividend due to TPG Rise during the three-month period ended July 1, 2022, based on a dividend rate of 5% per annum.
At TPG Rise’s election, the Company is required to repurchase 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 2, 2028. Additionally, if Nextracker has not completed a qualified initial public offering (a "Qualified Public Offering") prior to February 2, 2027, then TPG Rise may cause the Company to repurchase 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 July 1, 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
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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 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,
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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 $741 million and $704 million as of July 1, 2022 and March 31, 2022, respectively, of which $645 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-month periods ended July 1, 2022 and July 2, 2021, respectively. Historical information for the first quarter of fiscal year ended March 31, 2022 has been recast to reflect the new operating and reportable segments in the table below.
Three-Month Periods Ended
July 1, 2022July 2, 2021
Timing of Transfer(In millions)
FAS
Point in time$3,779 $3,248 
Over time212 184 
Total 3,991 3,432 
FRS
Point in time2,790 2,407 
Over time179 175 
Total 2,969 2,582 
Nextracker
Point in time23 9 
Over time372 332 
Total395 341 
Intersegment eliminations
Point in time(8)(13)
Over time  
Total(8)(13)
Flex
Point in time6,584 5,651 
Over time763 691 
Total $7,347 $6,342 

4.  SHARE-BASED COMPENSATION
The Company's primary plan used for granting equity compensation awards is the 2017 Equity Incentive Plan (the "2017 Plan").
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The following table summarizes the Company’s share-based compensation expense:
 Three-Month Periods Ended
 July 1, 2022July 2, 2021
 (In millions)
Cost of sales$7 $5 
Selling, general and administrative expenses19 15 
Total share-based compensation expense$26 $20 
Total number of options outstanding and exercisable were immaterial as of July 1, 2022. All options have been fully expensed as of July 1, 2022.
During the three-month period ended July 1, 2022, the Company granted 5.6 million unvested restricted share unit ("RSU") awards. Of this amount, approximately 4.5 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 $16.44 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 $16.66 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 $23.46 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 July 1, 2022, approximately 15.4 million unvested RSU awards under all plans were outstanding, of which vesting for a targeted amount of 2.2 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 4.4 million based on the achievement levels. The number of shares tied to performance conditions that will ultimately be issued can range from zero to 1.8 million based on the achievement levels. During the three-month period ended July 1, 2022, 2.4 million shares vested in connection with the awards with market conditions granted in fiscal year 2020.
As of July 1, 2022, total unrecognized compensation expense related to unvested RSU awards under all plans was approximately $217 million, and will be recognized over a weighted-average remaining vesting period of 2.4 years.
In April 2022, Nextracker granted 11.2 million equity-based compensation awards to its employees under the 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. No expense was recognized for equity-based compensation awards granted under the 2022 Nextracker Plan for the three-month period ended July 1, 2022 as there was no occurrence of a liquidity event.
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5.  EARNINGS PER SHARE 
The following table reflects basic weighted-average ordinary shares outstanding and diluted weighted-average ordinary share equivalents used to calculate basic and diluted earnings per share attributable to the shareholders of Flex: 
 Three-Month Periods Ended
 July 1, 2022July 2, 2021
 (In millions, except per share amounts)
Basic earnings per share attributable to the shareholders of Flex Ltd.
Net income$195 $206 
Net income attributable to redeemable noncontrolling interest6  
Net income attributable to Flex Ltd.$189 $206 
Shares used in computation:
Weighted-average ordinary shares outstanding458 491 
Basic earnings per share$0.41 $0.42 
Diluted earnings per share attributable to the shareholders of Flex Ltd.  
Net income$195 $206 
Net income attributable to redeemable noncontrolling interest6  
Net income attributable to Flex Ltd.$189 $206 
Shares used in computation:  
Weighted-average ordinary shares outstanding458 491 
Weighted-average ordinary share equivalents from RSU awards (1)10 8 
Weighted-average ordinary shares and ordinary share equivalents outstanding468 499 
Diluted earnings per share$0.40 $0.41 
____________________________________________________________
(1)5.2 million and 1.1 million RSU awards for the three-month periods ended July 1, 2022 and July 2, 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.
6.  BANK BORROWINGS AND LONG-TERM DEBT
Bank borrowings and long-term debt as of July 1, 2022 are as follows:
 As of July 1, 2022As of March 31, 2022
(In millions)
5.000% Notes due February 2023
$500 $500 
Term Loan due April 2024 - three-month TIBOR plus 0.430%
245 273 
4.750% Notes due June 2025
598 598 
3.750% Notes due February 2026
689 690 
4.875% Notes due June 2029
659 659 
4.875% Notes due May 2030
689 690 
Euro Term Loans367 389 
3.600% HUF Bonds due December 2031
266 301 
India Facilities 79 84 
Other 31 
Debt issuance costs(17)(18)
4,075 4,197 
Current portion, net of debt issuance costs(946)(949)
Non-current portion$3,129 $3,248 
The weighted-average interest rate for the Company's long-term debt was 4.1% and 4.0% as of July 1, 2022 and March 31, 2022.
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Scheduled repayments of the Company's bank borrowings and long-term debt as of July 1, 2022 are as follows:
Fiscal Year Ending March 31,Amount
(In millions)
2023 (1)$893 
202453 
2025245 
20261,288 
2027 
Thereafter1,613 
Total$4,092 
(1)Represents estimated repayments for the remaining fiscal nine-month period ending March 31, 2023.
7.  INTEREST AND OTHER, NET 
Interest and other, net for the three-month periods ended July 1, 2022 and July 2, 2021 are primarily composed of the following:
 Three-Month Periods Ended
 July 1, 2022July 2, 2021
 (In millions)
Interest expenses on debt obligations$43 $39 

8.  FINANCIAL INSTRUMENTS
Foreign Currency Contracts
The Company enters into short-term and long-term foreign currency derivatives 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 institution were not material.
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As of July 1, 2022, the aggregate notional amount of the Company’s outstanding foreign currency derivative contracts was $11.8 billion as summarized below: 
 Foreign Currency AmountNotional Contract Value in USD
CurrencyBuySellBuySell
 (In millions)
Cash Flow Hedges   
CNY3,038  $454 $ 
HUF138,710  415  
ILS352  102  
JPY33,525  300  
MXN6,829  339  
MYR540 94 123 21 
OtherN/AN/A176 120 
   1,909 141 
Other Foreign Currency Contracts
BRL9 867 2 166 
CAD115 68 89 53 
CNY4,598 688 688 102 
EUR3,003 2,838 3,165 2,984 
GBP165 201 201 244 
HUF78,890 67,113 209 178 
ILS376 166 109 48 
INR10,003  126  
MXN8,137 5,983 404 297 
MYR1,003 343 228 78 
SGD102 55 73 39 
OtherN/AN/A149 146 
   5,443 4,335 
Total Notional Contract Value in USD  $7,352 $4,476 
As of July 1, 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 July 1, 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. Deferred loss was $45 million as of July 1, 2022, and is expected to be recognized primarily as a component of cost of sales in the condensed consolidated statements of operations primarily over the next twelve-month period, except for the USD JPY cross currency swap, and the USD HUF cross currency swaps, 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 other current liabilities and other liabilities as of July 1, 2022. Additionally, 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 other current liabilities and other liabilities as of July 1, 2022. The changes in fair value of both the USD JPY cross currency swap and the USD HUF cross currency swaps are reported in accumulated other comprehensive loss. In addition, corresponding amounts are reclassified out of accumulated other comprehensive loss to interest and other, net to offset the remeasurement of the underlying JPY loan principal and HUF bond principal, which also impact the same line.
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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 DerivativesLiability Derivatives
  Fair Value Fair Value
 Balance Sheet
Location
July 1,
2022
March 31,
2022
Balance Sheet
Location
July 1,
2022
March 31,
2022
 (In millions)
Derivatives designated as hedging instruments      
Foreign currency contractsOther current assets$18 $22 Other current liabilities$49 $35 
Foreign currency contractsOther assets$ $ Other liabilities$116 $61 
Derivatives not designated as hedging instruments      
Foreign currency contractsOther current assets$26 $21 Other current liabilities$41 $26 
The Company has financial instruments subject to master netting arrangements, which provide for the net settlement of all contracts with a single counterparty. The Company does not offset fair value amounts for assets and liabilities recognized for derivative instruments under these arrangements, and as such, the asset and liability balances presented in the table above reflect the gross amounts of derivatives in the condensed consolidated balance sheets. The impact of netting derivative assets and liabilities is not material to the Company’s financial position for any of the periods presented. 
9.  ACCUMULATED OTHER COMPREHENSIVE LOSS 
The changes in accumulated other comprehensive loss by component, net of tax, are as follows: 
Three-Month Periods Ended
July 1, 2022July 2, 2021
 Unrealized 
loss on derivative
instruments and
other
Foreign currency
translation
adjustments
TotalUnrealized
loss on derivative
instruments and
other
Foreign currency
translation
adjustments
Total
(In millions)
Beginning balance$(66)$(116)$(182)$(42)$(77)$(119)
Other comprehensive gain (loss) before reclassifications(79)(68)(147)12 6 18 
Net (gains) losses reclassified from accumulated other comprehensive loss78 (3)75 (9)(1)(10)
Net current-period other comprehensive gain (loss)(1)(71)(72)3 5 8 
Ending balance$(67)$(187)$(254)$(39)$(72)$(111)
Substantially all unrealized losses and gains relating to derivative instruments and other, reclassified from accumulated other comprehensive loss for the three-month period ended July 1, 2022 were recognized as a component of 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. 
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
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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 three-month periods ended July 1, 2022 and July 2, 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 $0.7 billion and $0.6 billion as of July 1, 2022 and March 31, 2022, respectively. For the three-month periods ended July 1, 2022 and July 2, 2021, total accounts receivable sold to certain third-party banking institutions was approximately $0.8 billion and $0.2 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 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 July 1, 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 are comprised of 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. 
The Company has accrued for contingent consideration in connection with its business acquisitions as applicable, which is measured at fair value based on certain internal models and unobservable inputs. There were no contingent consideration liabilities outstanding as of July 1, 2022 and March 31, 2022.
There were no transfers between levels in the fair value hierarchy during the three-month periods ended July 1, 2022 and July 2, 2021. 
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Financial Instruments Measured at Fair Value on a Recurring Basis