FLEXFlex Ltd.

The Changes in U.S. and foreign government policies, including those relating to trade, sanctions, information security, data privacy, national security, and foreign investment, may affect the attractiveness of our services to customers and our ability to conduct business with certain customers can be affected by changes in U.S. and other countries' policies, including regarding trade. or suppliers. We have significant operations located in China, which have been in the past, been, and could in the future continue to be, adversely affected by evolving laws, regulations and policies, including with regard to import and export tariffs and restrictions, and information security and privacy, as well as changes in the political regulations, and geopolitical environment developments involving China. U.S.-China bilateral trade relations remain uncertain. The U.S.’s various trade actions, including imposing tariffs on certain goods imported from China or deemed to be of Chinese origin, as well as the potential for new tariffs, trade embargoes or sanctions by the U.S., and countermeasures imposed by China in response, have, in the past adversely affected, and could in the future, depending on their duration and implementation as well as our ability to mitigate their impact, adversely affect our business, including in the form of increased cost of goods sold, decreased margins, increased pricing for customers, and reduced sales. Moreover, we We could be subject to reputational harm if any of our customers, former customers or vendors were subject to U.S. sanctions or if our customers, former customers or vendors did business with sanctioned countries. entities or countries or otherwise violated applicable sanctions or export control laws. Furthermore, regional conflicts, including the conflicts in Ukraine and the Middle East, including the conflict in Israel and recent U.S. military operations in Iran, and tension between China and Taiwan, could result in sanctions, regional market instability, increased energy and transportation costs, supply chain disruptions, and other adverse regional and global financial and economic conditions, any of which can impact the demand for, or our ability to sell, our products and services in the impacted regions. Escalation of hostilities involving Iran, Israel, and the United States or regional proxy groups could adversely affect regional stability, threaten critical infrastructure such as data centers, impair access to ports and transportation routes including the Strait of Hormuz, and increase fuel, energy, freight, insurance, and security costs. In addition, expanded sanctions, export controls, or other governmental measures affecting the region could impair our ability to conduct business, collect receivables, or repatriate funds. In particular, geopolitical changes in China-Taiwan relations could disrupt the operations of several companies in Taiwan that are critical to the global supply of semiconductors and other electronic components on which many of our customers depend. depend, and any escalation of tensions could materially affect our supply chain and operations.

Net sales for the fiscal year ended March 31, 2025 2026 totaled $25.8 $27.9 billion, representing a decrease an increase of approximately $0.6 $2.1 billion, or 2%, 8%, from $26.4 $25.8 billion for the fiscal year ended March 31, 2024. 2025. Net sales for our FAS ITS segment increased decreased $0.2 billion, or 1%, 2%, from fiscal year 2024, 2025, mainly due to a 1% increase in our CEC business as strength in cloud outweighed softer demand in non-cloud. In addition, the CEC business benefited from an approximate $1 billion increase in customer buy-sell activity, which increases gross profit, but is accounted for as a reduction of the transaction price, and therefore, excluded from net sales. The results of the FAS segment also reflected a 15% increase in our Consumer Devices business from stronger demand, offset by a 4% 9% decrease in our Lifestyle business as demand weakened in consumer end markets. This was offset by a 6% increase in our Communications business due to softer stronger demand. Net sales in our FRS RMS segment decreased $0.8 increased $0.5 billion, or 6%, 5%, from fiscal year 2024, 2025, driven primarily by a decrease an increase in net sales of 10% 13% in our Industrial business which was driven by weaker stronger demand and the contribution from our acquisition of the manufacturing facility in renewables, clean energy and industrial devices Orangeburg, South Carolina in February 2025. Additionally, revenue from our Healthcare business increased by 5% driven by higher demand for medical equipment. This was partially offset by strong growth and the Crown acquisition in critical power offerings, a 3% 2% decrease in our Automotive business, and a 3% decrease business due to weaker demand. Net sales in our Health Solution business, primarily CPI segment increased by $1.8 billion, or 38% from fiscal year 2025, driven by softening a 29% increase in our Cloud and Cooling business and 61% growth in our Power business. The overall growth in CPI is primarily related to increased demand in medical equipment, partially offset by increased demand for medical devices. The factors described above include the impact of certain customers transitioning data center market and $0.2 billion related contributions from point acquisitions in time to over time revenue recognition which increased net sales by approximately 1% for the year ended March 31, 2025. This transition also contributed to an increase in contract assets as of March 31, 2025. United States and Poland.

A foreign Tax Authority ("Tax Authority") (“Tax Authority”) had assessed a cumulative total of approximately $285 $167 million in taxes owed for multiple Flex legal entities within its jurisdiction for various fiscal years ranging from fiscal year 2010 through fiscal year 2020. The assessed amounts related to the denial of certain deductible intercompany payments and taxability of income earned outside such jurisdiction. In the quarter ended March 31, 2025, approximately $118 million of the approximate $285 million assessment was abated by the Tax Authority, leaving approximately $167 million remaining. The Company disagrees disagreed with the Tax Authority’s remaining assessments and is was actively contesting the assessments through the administrative and judicial processes. During the third quarter of the fiscal year ended March 31, 2026, the Company and the Tax Authority agreed to a $50 million settlement covering all open fiscal years and all assessed amounts. The Company had previously expensed $31 million and paid $30 million to the Tax Authority in prior fiscal years and agreed to make an additional $20 million cash payment to the Tax Authority subsequent to the execution of a definitive settlement agreement, which resulted in a charge to income tax expense of $19 million in the third quarter of the fiscal year ended March 31, 2026. The definitive settlement agreement was executed on February 3, 2026 and the $20 million cash payment was made in the fourth quarter of the fiscal year ending March 31, 2026.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash income taxes paid both in the U.S. and foreign jurisdictions. This standard improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance adoption of this new standard did not have a material impact on the Company's consolidated financial statements and was adopted on a prospective basis as it is effective for the Company Company, beginning in the fourth quarter of fiscal year 2026. The Company expects the new guidance will have an immaterial impact on its consolidated financial statements, and intends to adopt the guidance prospectively when it becomes effective in the fourth quarter of fiscal year 2026. For additional information, see note 15 - "Income Taxes."