SHARE-BASED COMPENSATION

3 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement, Recognized Amount [Abstract]

Equity Compensation Plans

Flex historically maintains stock-based compensation plans at a corporate level. The Company's primary plan used for granting equity compensation awards is the Company's 2017 Equity Incentive Plan (the "2017 Plan"). During the fiscal year 2023, Nextracker granted equity compensation awards to Nextracker employees under the 2022 Nextracker Inc. Equity Incentive Plan (the "2022 Nextracker Plan"), which is administered by Nextracker, a majority owned subsidiary of the Company.

Share-Based Compensation Expense

The following table summarizes the Company’s share-based compensation expense for all equity incentive plans:


	Three-Month Periods Ended
	June 30, 2023		July 1, 2022
	(In millions)
Cost of sales	$	9	$	7
Selling, general and administrative expenses	32		19
Total share-based compensation expense	$	41	$	26

Total number of options outstanding and exercisable were immaterial as of June 30, 2023. All options have been fully expensed as of June 30, 2023.

The 2017 Plan

During the three-month period ended June 30, 2023, the Company granted 4.8 million restricted share unit ("RSU") awards. Of this amount, approximately 3.0 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 $26.81 per award. In addition, approximately 0.4 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 $26.72 per award. The number of shares contingent on performance conditions that ultimately will vest will range from zero up to a maximum of approximately 0.8 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 0.4 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 $35.64 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 0.8 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. Finally, the remaining balance of approximately 1.2 million represents the number of shares issued upon vesting of RSU awards above target levels based on the achievement of certain market conditions for awards granted in the fiscal year 2021. These awards were issued and immediately vested in accordance with the terms and conditions of the underlying awards.

As of June 30, 2023, approximately 12.6 million unvested RSU awards under the 2017 plan were outstanding, of which vesting for a targeted amount of 1.3 million shares is contingent on meeting certain market conditions, and vesting for a targeted amount of 1.3 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 2.6 million based on the achievement levels. The number of shares tied to performance conditions that will ultimately be issued can range from zero to 2.6 million based on the achievement levels. During the three-month period ended June 30, 2023, 2.3 million shares vested in connection with the awards with market conditions granted in fiscal year 2021.

As of June 30, 2023, total unrecognized compensation expense related to unvested RSU awards under the 2017 Plan, was approximately $237 million, and will be recognized over a weighted-average remaining vesting period of 2.4 years.

The 2022 Nextracker Plan

During the three-month period ended June 30, 2023, Nextracker awarded 1.1 million equity-based compensation awards to its employees under the 2022 Nextracker Plan, which included approximately 0.5 million option awards, 0.5 million RSU ("NRSU") awards and 0.1 million performance-based restricted share unit ("NPSU") awards. Vesting for the awards granted under the 2022 Nextracker Plan is contingent upon continued employee service and certain performance conditions.

As of June 30, 2023, approximately 5.8 million unvested options awards, NRSU awards, and NPSU awards under the 2022 Nextracker Plan were outstanding, of which vesting for a targeted amount of approximately 3.8 million shares is contingent on meeting certain performance conditions.

Total unrecognized compensation expense related to unvested awards under the 2022 Nextracker Plan was approximately $61 million, which is expected to be recognized over a weighted-average period of approximately 2.5 years. Approximately $8 million of expense was recognized for equity-based compensation awards granted under the 2022 Nextracker Plan for the three-month period ended June 30, 2023