Q4 2022 Jabil Inc Earnings Call
Good morning, and welcome to Jabil as fourth quarter of fiscal 2022 earnings call and fifth annual Investor briefing My.
My name is Adam Berry, I'm head of Investor Relations at Jabil and I represent a team here that's pretty excited to share. Our 2022 results with you today, while also providing additional detail around our focus and outlook as typical for our September call.
In terms of agenda over the next 60 minutes or so we aim to accomplish the following.
Discuss the trends underway within the end markets we serve.
Review, our fourth quarter and fiscal year 'twenty two results.
Provide first quarter guidance.
Offer a fiscal 'twenty three outlook that includes enterprise level growth, while also remaining sensible and grounded given the realities of the dynamic global macro environment surrounding us today.
And finally, we will refresh our capital allocation and shareholder return policies.
And most importantly, as our session unfolds I hope that we're able to provide you with further perspective on Jabil, which I believe is uniquely positioned to grow and win in an environment where supply chain Manny.
Manufacturing capabilities have never been so important.
Joining me on today's call is Mike <unk>, our Chief Financial Officer, and Mark Mondello, our chairman and CEO .
So together account for over 50 years of Jabil experience.
And importantly, when you think about the respective 10 years you can't help but also think about how they have guided jabil through periods of economic expansion and times, where macro conditions were a bit more challenged.
Tenure that gives me great confidence as we move into fiscal 'twenty three.
So with that there is just one more housekeeping item before we begin.
Please note the following.
During today's presentation, we will be making forward looking statements, including among other things those regarding the anticipated outlook for our business such as our currently expected first quarter and fiscal year net revenue earnings and cash flow.
These statements are based on current expectations forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially.
An extensive list of these risks and uncertainties are identified in our angry report on Form 10-K for the fiscal year ended August 31, 2021, and other pilings.
Jabil disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
As you can see on slide four Jabil has vastly improved since we began these investor briefing sessions in 2018.
Today Jabil is at $33 $5 billion enterprise with over 50 million square feet of manufacturing space across a 100 plus sites.
Our cash flow generation is strong.
Wowing us to invest in key end market growth, while also returning considerable cash to shareholders, which in fiscal 'twenty two was $744 million.
And a roughly 260000 people move with purpose and agility to meet customer needs within a wide ranging composition at the end markets you see here.
Moving to our next slide you can't help but notice the global nature of our manufacturing footprint.
Which enables us to manufacture on a local level for a global set of customers.
No matter, whether its mobility products in Asia health care products in North America, or <unk> infrastructure in Europe , we worked with our customers to design and develop the most impactful manufacturing solutions irrespective of region.
With our focus on speed and urgency.
This sense of consistency from plant to plant.
This is critical because in today's geopolitical climate, the ability to adjust and move with urgency has never been more important as we help customers react to changes in tariffs.
Pandemics and natural disasters energy shortages conflict and many other unforeseen events.
The Jabil a 2022 is also diversified and robust, thereby allowing us to meet challenges head on in one part of the business.
Outperforming and others.
So just exactly how do we get here.
Well I'm here to tell you it was very purposeful.
In the 2016 timeframe our management team concluded that our model was missing an important characteristic if we were going to deliver upon our financial priorities consistently and sustainably.
This important characteristic with diversification.
So beginning in roughly 2017, we embarked on a journey to grow and diversify our business in areas such as by G. <unk>.
Cloud healthcare packaging connected devices semi capital equipment.
Electric vehicles.
Our intentional and deliberate focus on these emerging end markets combined with our already robust traditional businesses in print and retail network and storage and mobility.
Resulting in considerable enterprise level growth over the past four to five years as you can see here.
And as a result today.
No product or product family represents more than 5% of our business, creating an added level of comfort as demand fluctuates up and down global taste change and technology constantly evolves.
Given our intentional focus on diversification over the next couple of minutes I would like to take a moment and review some of the end markets that have fueled our growth leading to the portfolio mix you see today.
Yeah.
In automotive, we're supporting a rapid shift in technology to electric vehicles as evidenced by our 121% revenue growth since fiscal 2018.
The growth has been driven by our best in class portfolio customers and an addressable market that is growing by the day.
In EV, our manufacturing processes support the industrialization and production of complex technology for electric vehicles, including battery management systems Inverters converters cables.
<unk> board and onboard charging.
And importantly, all of this increased complexity translates to increased content per vehicle for Jabil.
Since fiscal 2018, our <unk> wireless and cloud business has nearly tripled in spite of the asset light nature of the cloud model as our designed to dust value proposition resonates with existing and new customers.
From secure supply chain design and manufacturing to rack integration and ultimately recycling jabil is winning in an expanding market.
In healthcare our business has doubled since fiscal 2018 as the industry is experiencing tremendous change due to rising costs aging populations and the demand for better health care and in emerging markets.
To address these trends doctors hospitals and patients are adopting new and more innovative ways to deliver better more personalized treatment.
Consequently, healthcare Oems are partnering with Jabil.
And navigate these changes.
Today, we support customers in the development of solutions across medical devices.
Gnostics pharmaceutical delivery and orthopedics.
From rapid prototyping using additive manufacturing to high volume production tooling and injection molding robotics and rigorous test procedures for regulatory compliance.
Jabil healthcare offers an unmatched suite of capabilities, all of which uniquely positions us to offer technology enabled solution to our customers.
In industrial and semi cap our business has grown 43% since fiscal 2018, driven mainly by the increasing need for green energy and with incredibly strong global demand for semiconductors.
Within our industrial business alternative energy generation and consumption are driving increased need for power conversion power optimization.
Blind balancing and storage at the endpoints of generation and consumption, including accelerated adoption of evs as well as on the grid.
Jabil has been investing in this space with reference designs and scaled manufacturing partnerships globally.
On the semi cap side of our business semiconductor equipment has become increasingly complex and precise driving new generations of equipment at large scale.
And when you take a step back you will again notice and incredibly well diverse set of business sectors and supported some of the largest most innovative and successful brands in the world today.
And each of these end markets were incredibly focused on delivering consistent and reliable value from early in the product lifecycle like product innovation and design to more mature products, where we offer planning automation supply chain management and of course manufacturing.
At the end of the day, we build stuff here at Jabil, and we do it really really well.
In summary, so far today I've discussed the benefits of our global footprint.
Our focused and intentional growth in key end markets and.
And the high level of consistency brought forth through diversification.
Before turning the call over to Mike I'll try to tie this together through the use of real life examples within the business to demonstrate the importance of diversification, while also walking through our Q4 results.
For the quarter revenue was approximately $9 billion ahead of our forecast driven by much better than expected revenue in <unk> wireless and cloud and networking and storage as our ability to secure critical parts on higher end demand created meaningful revenue upside during the quarter.
<unk>.
At the same time healthcare and packaging connected devices mobility digital print and retail and industrial and semi cap, all performed really well and consistent to our expectations.
All of this growth was slightly offset by component shortages and automotive where supply chain challenges remain the most pronounced.
Altogether at the enterprise level revenue grew by 22% year over year, and 8% sequentially, reflecting continued strong demand.
In Q4, our GAAP operating income was $409 million and our GAAP diluted earnings per share was $2 25.
Core operating income during the quarter was $447 million an increase.
A 42% year over year, representing a core operating margin of 5%.
Up 80 basis points over the prior year driven by the aforementioned strength in certain end markets slightly.
Slightly offset by unanticipated costs associated with the power shortages in Chengdu during the month of August .
Net interest expense in the quarter came in higher than expectations at $53 million.
Primarily associated with rising interest rates.
While our tax rate came in better than expected.
Proximately 70 basis points, resulting in core diluted earnings per share of $2 34.
63% improvement over the prior year quarter.
And at the higher end of our range.
Revenue for the Dms segment was $4 4 billion.
An increase of 13% on a year over year basis.
While core operating margin for the segment came in at five 1% slightly lower due to the temporary power shutdowns and China revenue for our EMS segment came in at $4 6 billion.
An increase of 32% on a year over year basis, and well ahead of our plan from June .
Core margin for the segment was four 8% up 50 basis points year over year, reflecting good operating leverage on strong growth.
I believe the fourth quarter is the perfect illustration of our global network of factories adjusting.
And ultimately delivering for our customers and shareholders alike.
It feels as though the days of single end markets, creating outsized issues for the company.
Well off in the rearview mirror.
And if you are buying jabil today, it's not for a single product, but rather a tenured leadership team.
Strong manufacturing capabilities and the general assumption that technology is converging with our day to day lives.
Thanks for your time today. It is now my pleasure to turn the call over to Mike.
Thanks, Adam Good morning, everyone.
Thank you for joining us today and for your interest in Jabil.
Our business model has been intentionally structured the aim of delivering core operating margin expansion sustainable earnings growth and strong predictable cash flows.
On top of this our capital structure has been optimized to maximize our flexibility.
This flexibility has enabled us to reshape our end market portfolio over the last several years, which has performed extremely well evidenced by a very strong FY 'twenty two results.
I'm extremely pleased with the resiliency of our business, particularly considering the numerous challenges throughout the year.
Ongoing called the Graves war in the Ukraine.
Mobile inflation supply chain challenges and multiple energy shortages.
Despite these challenges we delivered year on year growth in revenue up 14% core operating income of 24%.
And core EPS up 36%, all while increasing core operating margin by 40 basis points over FY 'twenty one.
At a segment level for the year Dms revenue was $16 7 billion, an increase of 9% over the prior year.
While core operating income for the segment was up 12% year over year.
This resulted in core margin expanding 10 basis points to four 9%.
And the EMS for the year core operating income growth was incredibly strong up 43% over the prior year.
This resulted in core margin expanding an impressive 60 basis points over 'twenty one.
On revenue of $16 $7 billion.
The strength in our EMS margins is reflective of our improving mix and strong leverage on 20% year over year revenue growth.
Turning now to our cash flows and balance sheet.
In FY 'twenty, two fourth quarter cash flow from operations was $1 $65 billion.
For the quarter inventory days came in at 79 down six days sequentially on improved working capital management by the team.
It's worth noting that we offset a portion of our higher inventory levels with inventory deposits from our customers.
Which reside within the accrued expenses line item on the balance sheet.
Net of inventory deposits inventory days was 62 in Q4 down eight days from Q3.
While I am pleased with the sequential decline in inventory days. The team continues to be fully focused on bringing this metric down further in FY 'twenty three as some of the supply chain constraints continue to ease.
Net capital expenditures for the fiscal year with $841 million or two 5% of net revenue.
As a result of the strong Q4 cash flow generation adjusted free cash flow for fiscal year came in higher than expected at approximately $810 million.
And finally, we exited the quarter with total debt to quarter picked our levels of approximately one two times and cash balances of one 5 billion.
Next I would like to provide some clarity on our capex as shown in our cash flow statement.
As a reminder, our customers routinely co invest in plant property and equipment with us as part of our ongoing business model.
We often paid for these co investments upfront, which is then later reimbursed to us by customers.
Is the high dollar value of these core investments from our customers and how they are reflected on our cash flow statement. It is important that the two line items shown on this slide to reflect the true capex number and what we refer to as net capital expenditures.
Our net capital expenditures for the fiscal year amounted to $841 million.
Moving now to our capital returns to shareholders on the next slide.
During the fourth quarter, we repurchased three 8 million shares, bringing total shares repurchased in FY 'twenty, two to 11 8 million shares or $696 million.
To date, we have utilized $737 million up by $1 billion authorization granted in July of last year.
This brings our cumulative shares repurchased since FY 13 to approximately 102 million shares at an average price of $30, bringing our total returns to shareholders, including repurchases and dividends to approximately $3 6 billion.
Reflective of our ongoing commitment to return capital to shareholders.
In summary, I'm extremely pleased the resiliency of our portfolio and sustainable momentum underway across the business.
Which has allowed us to deliver exceptionally strong results in fiscal 'twenty two.
Moving to the next slide where I'll offer some insight about how we're thinking about the business this year by end market.
Across most of our end markets demand has been extremely resilient, particularly in markets that continue to benefit from strong secular tailwind many of which Adam highlighted a moment ago.
We continue to expect these secular markets to expand in FY 'twenty three.
We also expect some consumer centric end markets to underperform compared to the robust growth of the past 18 months.
Unlike in past economic slowdowns with Jabil was highly concentrated in a particular product or end market. Today. It is critical to think of Jabil is one company, but as a well diversified accumulation of many end markets a number of which we expect will continue to benefit from long term secular tailwind.
This product and end market diversification, coupled with a global network of connected factories.
Mobile is best in class supply chain management, and deep domain expertise makes jabil today markedly more resilient than we were 10 years ago as evidenced by our strong results in the last few years in the face of multiple significant global challenges.
Our FY 'twenty guidance assumes moderate economic slowdown and some moderation in growth, which will impact certain end markets more than others.
I'd now like to walk you through each end market and describe how we're thinking about our business in the coming year.
In our automotive and transportation end market, we expect the global transition to Evs to continue to drive robust growth within our automotive business. Despite choppy overall demand in global automotive purchases.
Our view is that <unk> adoption will continue to accelerate and gain a larger share of the auto market in FY 'twenty three regardless of the near term global growth dynamics.
<unk> content per vehicle, which can be as high as 3000 or more dollars for a fully electric vehicle continues to increase which provides further confidence in future growth.
It's also worth pointing out that project life cycles in this end market run as high as seven or more years, providing a high level of stability and stickiness.
In health care today, the industry is undergoing tremendous change due to rising costs aging populations and the demand for better health care and emerging markets.
Oems are seeking to address these dynamics by shifting the focus away from manufacturing towards improving patient outcomes.
<unk> credibility in the healthcare space has positioned us well to take advantage of this outsourcing of manufacturing trend.
Should we enter an economic slowdown it is our view that Oems will in fact look to accelerate this outsourcing trend.
A recession resistant and market with long product life cycles, and accretive margins and stable cash flows is why healthcare continues to be such an important component of our diversified portfolio.
Within connected devices, which I'll remind you is made up of a number of different customers.
<unk> generally remains resilient, but given the consumer centric nature of this end market as we move from the pandemic fueled consumer spending to a more normalized environment, we feel it's appropriate to take a conservative outlook and expect some moderation in growth.
And in mobility in demand signals continued to be strong as we navigate through a Q1 quarter.
This quarter, which has historically been associated with channel so turning to seasonal product launch is our highest revenue quarter.
It's worth noting we have a long track craft vertical operating successfully in this end market, which has been uniquely positioned within the portfolio as we partner with the most innovative brand and market leader in this space to supply key capabilities and a critical and hard to replicate.
In summary for Dms to me the key takeaway. This year is the considerable mix shift underway.
In FY, 'twenty, three automotive and transportation and health care and packaging I expect people than half of our Dms business with estimated revenue growth of approximately $1 $2 billion combined in FY 'twenty three.
Putting it altogether for Dms in FY 'twenty today, we're expecting 20 basis points of margin expansion on low to mid single digit revenue growth.
Turning now to EMS.
In digital adventure retail, we expect some moderation in consumer print as people return to office to slightly offset growth in industrial Frank and E Commerce and warehouse automation systems.
Within retail both in customer facing stores and in the warehouse technology is shifting rapidly.
As a result of the building and ramping some of the most complex e-commerce and warehouse automation systems in the industry.
It gives us confidence in our FY 'twenty three outlook.
Within our industrial business, we expect clean and smart energy infrastructure to drive growth for FY 'twenty three.
There are a few major trends described growth in this space, but the overarching one is the green energy Revolution.
Government legislation such as the recently enacted inflation reduction act in the U S with a sizable subsidies and incentives is already beginning to increase investment in this space.
As a reminder, we play across the entire energy value chain from energy generation and solar panels.
Our conversion transmission storage and metering to the management of power inside of homes and buildings.
These projects have multiyear investment timelines independent of underlying short term economic growth forecast.
We feel comfortable with the visibility we have in this space.
Within semi cap sofa customers continue to match ahead with Capex investments executing to their investment Roadmaps with the recently introduced chip back providing an additional catalyst in this space.
I'll remind you our strategy in this end market has been very thoughtful given the high cyclicality of the semi cap market and we have been very conservative around how we have invested in this business and our forecast for FY 'twenty three.
On the <unk> side infrastructure, Rollouts are going extremely well and demand remains high in the U S and Europe .
Rollouts are accelerating and our localized manufacturing capabilities are leading to market share gains in other geos such as India.
We expect these rollouts to play out over the next several years, regardless of near term economic conditions.
Therefore, the anticipate the <unk> end market to continue to be resilient, even in the face of moderate global slowdown.
And in the cloud space, our expectation is that the ongoing shift away from on Prem will continue to accelerate driving long term growth in this space.
If economic conditions Lincoln, our views of the cloud space should be a beneficiary as companies look to reduce costs in a moderating growth environment.
It's worth reminding everyone. We have deliberately structured our cloud business as a geocentric asset light service offering with very low levels of Capex and working capital.
To ensure this business remains asset light, we routinely look for mutually beneficial arrangements with our customers to optimize our asset light model.
With this in mind in FY 'twenty, three approximately $500 million in components, we procure and integrate with shift from the current purchase and resale model to a customer control consignment and service model.
This is in addition to the consignment of certain components, we had announced in earlier years.
This change will allow us to use our assets more efficiently in addition to improving margins.
Adjusting for this shift we expect continued robust unit growth in the cloud space in FY 'twenty three.
And then finally within legacy networking and storage end markets the value proposition that Jim will provide the best in class supply chain management deep domain expertise and engineering capabilities and manufacturing multiple G is resonating with our customers and we expect market share already.
The gain in the second half FY 'twenty two to drive growth in FY 'twenty, three with higher margins and robust cash flows.
With the current mix of business in Ams, We expect 20 basis points of core margin expansion in fiscal 'twenty three.
Low single digit revenue growth.
In summary in cable is not only well diversified but also markedly more resilient due to a multiyear proactive efforts to diversify our business and aligned tomorrow's trends.
As a result, we feel the outlook for our business are solid and.
And expect demand to be resilient with year over year revenue growth at an enterprise level to be approximately 3% for FY 'twenty three in spite of an economic slowdown.
Moving to the next slide.
For FY 'twenty, three we expect core operating margins to improve by a conservative 20 basis points over the prior year, mainly driven by end market growth and improved mix of business.
We also expect the investments we've made in <unk> automation.
Automation and factory Digitization will drive improved optimization across our footprint, which will translate to higher margins in the future.
Turning now to our Capex guidance for FY 'twenty three.
Net capital expenditures are expected to be in the range of $875 million.
Two 5% of net revenue.
This will come through a combination of both maintenance and strategic investments for future growth and efficiency gains.
In FY 'twenty three we expect to continue to invest in targeted areas of our business, but the bulk of our strategic growth Capex aimed at the automotive EV space, along with the healthcare <unk> wireless power generation and industrial end markets generating multiyear returns in FY 'twenty three and beyond.
Our improved profitability strong operational performance and disciplined investment has yielded significant cash flow over the last few years, which has allowed the company to strategically invest in higher return areas of our business.
Moving forward, we expect to continue generating strong cash flows.
This is possible as a result of earnings expansion, along with our team's disciplined approach and ability to execute.
In FY 'twenty, three we expect to generate adjusted free cash flow of more than $900 million.
It is important to note that this estimate is based on our current expectations of a moderation in growth and continuing supply chain constraints in certain secular end markets.
Paradoxically a more CVA risk recession is likely to improve cash flows due to the working capital nature of our business.
Moving to the next slide.
A key aspect of delivering high returns and delivering long term value to shareholders is ensuring our capital structure is appropriately balanced and optimized.
Over the last year that team has done an outstanding job of building, a solid and flexible debt and liquidity profile with current maturities appropriately stated in attractive interest rates.
We ended FY 'twenty, two with committed capacity and global credit facilities of $3 8 billion.
With this available capacity along with our year end cash balance Jabil ended the year with access to more than $5 3 billion.
Available liquidity, which we believe affords us ample flexibility.
And importantly, we are fully committed to maintaining our investment grade credit profile.
Turning now to our capital allocation framework.
In fiscal 'twenty, three and beyond we expect to generate significant free cash flow.
This dynamic it's an appropriate time to reiterate our capital allocation priorities and at a high level, how we plan to deploy our capital over the next two years.
This morning included in our earnings filing, we announced a $1 billion share repurchase program authorization from our board of directors.
With this incremental authorization, we have approximately $1 $3 billion in total share repurchase authorization, reflecting our belief and confidence in <unk> ability to generate strong earnings and free cash flows.
Turning now to our first quarter guidance on the next slide.
Dms segment revenue is expected to increase 2% on a year over year basis to $4 8 billion and EMS segment revenue is expected to be $4 5 billion.
And the increase of approximately 15% over the prior year.
We expect total company revenue in the first quarter of fiscal 'twenty three to be in the range of nine to $9 6 billion.
Core operating income is estimated to be in the range of $415 million to $475 million.
GAAP operating income is expected to be in the range of $367 million to $427 million.
Core diluted earnings per share is estimated to be in the range of $2 to $2 40.
GAAP diluted earnings per share is expected to be in the range of $1 65.
The $2 <unk>.
Interest expense in the first quarter is estimated to be in the range of $56 million to $60 million and for FY 'twenty three to be approximately $230 million.
Our fiscal 'twenty, three we will adopt an annual normalized tax rate for the compensation for our core income tax provision to provide better consistency across reporting periods.
As a result of the tax rate on core earnings in the first quarter and for the fiscal year is estimated to be 19%.
As we've transitioned to my final slide we expect the momentum underway across our business to continue even in a subdued economic environment.
Today, our business serves a diverse blend of end markets and areas that provide confidence in future earnings and cash flows.
We have deep domain expertise complemented by investments being made in capabilities.
All of which gives us confidence in our ability to deliver four 8% and core margins in FY 'twenty, three along with $8 15, and core EPS and more than $900 million in free cash flow.
And importantly, our balanced capital allocation framework approach is aligned and focused on driving long term value creation to shareholders.
I'd like to thank you for your time today and thank you for your interest in Jabil.
I'll now turn the call over to Mark.
Thanks, Mike.
Good morning.
I appreciate everyone, taking time to join our call today.
Yeah.
I'll begin by saying thanks to our team here at Jabil.
I applaud the terrific care you'd give our customers.
While also keeping our people safe.
Your attitudes amazing and your stamina is incredible.
Again, thank you.
Today marks our fifth annual Investor session.
A day, where we share insights and lay out the groundwork for our business.
Adam It's Mike discussed our progress.
Which largely stems from the construct and pedigree of the company.
I'll expand on this and offer more thoughts.
Starting with our approach.
At Jabil.
Each employee is critical to our success.
And everyone deserves to be treated with dignity and respect.
As you know we operate our business across a broad range of geographies.
With team members that don't look the same.
Don't talk the same.
That have physical limitations and narrow diversities.
Team members that practice different religions.
And team members that have different sexual orientations.
The diversity, we have throughout the company simply makes us better.
Better as a team.
And better for our customers.
Second element of our approach.
Pertains to ESG and sustainability.
At Jabil.
We aim to always do what's right.
This includes.
Doing right for our planet.
And doing right for our communities.
Our focus when it comes to ESG.
Is grounded by our actions.
An example.
As our goal of a 50% reduction in our greenhouse gas emissions.
By 2030.
Another example that we have underway.
Is directed towards mental health.
A topic that impacts all of us.
Either directly or indirectly.
Lastly, another action worth mentioning is our commitment to giving back.
Our employees collectively.
Are donating 1 million hours of their time during calendar 2022.
Although.
It isn't the 1 million hours per se.
It's the positive difference or Jabil team is making around the world.
Their efforts are extra ordinary.
And life changing.
Next I'd like to talk about our solutions.
And how they're enabled.
By our structure.
Our investments.
And our customers.
You see our structure.
Enables our collaboration.
Which allows us to act with precision and speed.
Our investments enable our execution.
Which allows us to take the ordinary.
And apply the extraordinary.
And our customers.
Enable our obsession.
It allows us to solve the complex.
Moving to slide 41.
Youll see a pie chart.
Which reflects our end markets.
Our portfolio, which provides the foundation.
On which we run our business today.
A foundation that offers a high degree of resiliency for the Corporation.
Resiliency during times of macro and geopolitical disruptions.
And doing more typical times.
When we are faced with the demands put forth by our customers.
A real strength of our portfolio is the presence we have in essential end markets.
That include five G.
Electric vehicles.
Personalized healthcare cloud.
Cloud computing and clean energy.
Markets that we believe will stimulate continued growth in earnings.
Especially.
When combined with the ongoing refinement and improvement.
Of our more traditional businesses.
Let's now take a look at how our business has performed over the last four to five years.
The AG sector as shown here.
Exhibit the diversified nature of our revenue.
With each sector, having a meaningful contribution.
So our overall financial results.
Let's also captured on this slide.
Are the end markets, where we've seen good growth.
Growth that we think will continue on a relative basis.
As we benefit from secular trends.
Please turn to slide 43.
Well review our outlook.
As Mike alluded to.
For FY 'twenty three.
We plan to deliver revenue of $34 5 billion.
With a core operating margin of four 8%.
The 20 basis point expansion when compared to FY 'twenty two.
This translates to $8 15 in core earnings per share.
A growth of 7% year on year.
In addition.
We believe our free cash flow for FY 'twenty, three will be in excess of $900 million.
Next.
If we take our FY 'twenty two results.
And our FY 'twenty three guidance.
Step back a bit.
And look at the past few years.
The data, which suggests that what we're doing.
Working.
And as I've said previously.
Meanwhile, diversified in our business as a significant catalyst.
But diversification for the sake of being diversified.
As in all of that special.
What is special.
Is the composition of our diversification.
And if we expand on the current composition of our business.
We don't anticipate any single product or any single product family.
To contribute more than 5% to 6% to our overall earnings in FY 'twenty three.
And Thats a good thing.
Yeah.
Moving on from our financials.
I'd like to talk a bit about our purpose.
At Jabil.
We are a purpose that serves as our ultimate guidepost.
And as Guidepost places an emphasis.
I am Karen.
Perspective.
Proper intentions and truthfulness.
These characteristics drive our behaviors and all we do.
Yeah.
I am proud of our team as they embrace our purpose.
And with their firm embrace comes exceptional conduct.
If we can now move to slide 46, where we can go over our path forward.
As we think about.
Fiscal 'twenty three.
Well certainly measure our success based on financial performance.
Paul will also great ourselves.
And keeping our people safe.
Exceptional customer care.
How we interact with our suppliers.
Suppliers, who stood by us and supported us.
During these most recent difficult times.
Either way.
Thanks to everyone listening today.
Who partners with Jabil on the supply side of our business.
We're grateful.
As our path forward.
It's clear that our journey is based on.
Our unique combination of approach.
<unk> and experience.
Our confident in our ability to execute.
Combined with our engineering expertise.
Our financial outlook, which was formed with rational assumptions.
And our continued commitment to returning capital to shareholders.
In closing.
We believe Jabil is making the world just a little bit better.
A little bit healthier.
And a little bit safer.
So our entire Jabil team.
Thank you for making Jabil jabil.
And.
In doing what you do each day.
I want all of you to be your true self.
Without fear or recourse.
I'm honored to serve such a reliable team.
With that I'll now turn the call back to Adam.
Thanks Mark.
Clearly a lot to like about Jabil today.
To summarize we began by describing how jabil has undergone deep and sustainable improvements to its business model.
And we highlighted the solid foundation upon which the company sits today.
And Mike Walk you through our financial playbook highlighted by the strength of our portfolio fueled by long term secular tailwind.
And importantly, Mike talked about our financial outlook against a challenged macroeconomic background.
To reiterate today demand still remains strong and well ahead of supply.
But as Mike noted conservatism has been baked into today's model, which anticipates revenue growth.
Spanning margins and strong cash flows.
And finally to wrap up our session today.
Mark offered insight into our unique approach.
<unk> portfolio and purpose.
I want to thank you for your time today and we appreciate your interest in Jabil.
<unk>, we're now ready for Q&A.
Thank you well now be conducting a question and answer session if you'd like to be placed into question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before.
Pressing star one one moment, please while we poll for questions.
First question today is coming from Jim Suva from Citi. Your line is now live.
Thank you and congratulations on the results and very strong outlook for both the quarter and the year.
Our thoughts are of course go out to you and your loved ones families as to whether it looks like it's getting quite negative there with the hurricane.
In lieu of that just wanted to know your outlook for the first quarter and full year does it build in a little bit for Hurricane I know, it's hard to predict and I'm sure you've got a playbook for closing up factories, and making sure importantly employees are safe and communicating with customers, but I assume that theres something built into there.
That is true and I assume you're probably going through.
Procedures for the negative weather situations. Thank you so much.
Thanks for the comments Jim.
Yes, we are.
If I think about if I think about the last number of years, starting with Covid and index and all the way through today.
We've dealt with a lot of challenges, which by the way to me.
As I said in my prepared remarks makes our team.
I dunno, even more reliable and more terrific when.
When we think about power outages, and Covid and Covid lingering in Covid shutdowns and geopolitical issues and unfortunate continued Warren Ukraine, and inflation and rising costs and now we've.
We're dealing with what looks to be a fairly nasty storm.
<unk> Bay area.
Specific to the storm.
These things these things ebb and flow by the hour right now the outlook doesn't look so good.
To put that in context, we've got about 250000 plus people in the company around the world.
We've got around 3000 in the Tampa Bay area, So first and foremost right. After we get off the call. We'll go around again check to be sure.
Everybody's.
Doing the right things and after the storm passes we will be sure everybody's okay. Much like we do in <unk>.
Any geographies, so and we do have our defense and aerospace factory here and we'll use we'll use standard jabil protocols.
We've closed the campus starting this afternoon and the campus will be closed.
Through the end of the week.
There'll be no material impact whatsoever to two.
Q1, our guide for 'twenty, three and again, Jim appreciate the kind words.
Great and then as my quick follow up it sounds like Youre, a consignment model and cloud business is actually progressing to be a more deeper relationship than say a couple of years ago.
That is true and does this lead to kind of increasingly more opportunities both on.
I'll, maybe lesser revenues, because it's a net model, but more so profitability and more potential improvement in margins.
Maybe I can break that into two first.
The depth of the relationship.
The depth of the relationship we have with our largest customer in the cloud business.
Is substantial and.
We really appreciate that and we work really hard to earn that but that relationships in great shape, when I think about.
All of our relationships and in the cloud.
<unk> wireless area.
<unk>.
We're really pleased with the areas in which we get to participate and feel pretty bullish about that through 'twenty, three and hopefully going into 'twenty four.
Specific to the cloud business Jim <unk>.
You alluded to the fact that.
I think we first started talking about a strategy that we had around a geocentric.
Configuration type of solution.
In the cloud space largely around.
Enhanced flexibility agility, and taking a lot of inventory.
And slack out of the supply chain, that's proven to be.
A good assumption I think we started talking about this back in 2018 19 timeframe. We also at that at that same point in time early on.
We crafted this business to be and Mike talked about this a bit but we kind of talk about it as asset light so lots of Chile lots of speed in the configuration moving very quickly.
Low low count of fixed assets on a relative basis to other parts of our business and then very efficient working capital management.
As part of that we use this term consignment and I don't want people to be confused about what consignment is consignment isn't any type of financial tool or anything we do to juice up margins per se.
Consignment is simply around.
When we take a look at what we do in our supply chain what values we add.
There is simply some materials based.
With our relationship with the suppliers as well as our customers, where we add very little value and so.
Based on that we continue to evolve and craft the supply chain.
And our cloud business, where we're spending most of our time, adding great value.
The impact of that and again, Mike Mike talked about this in his prepared remarks is that for.
Fiscal 'twenty three.
Roughly give or take a bit about $500 million material content will come out of the natural cloud business for.
For 'twenty three and so the impact of that is is if you look at the slides we presented.
Our cloud business going from FY 'twenty two to FY 'twenty three on a dollar basis I think shows.
At $200 million declined 22 to 'twenty three.
The exact slides, but we've been through the numbers enough so cloud.
<unk> wireless was about $6 5 billion dollar business in 'twenty two.
<unk> wireless in 'twenty, three will be a bit lower than that and a 636 $4 billion range.
But on a unit volume basis, our volumes are up.
And growth is exactly where we thought it would be for 'twenty. Three so again the dollars can appear a little bit distorted, but that is all about the fact that it's a continuation of running the cloud business in an asset light manner.
Thank you and congratulations once again thanks, Jim.
Thank you. Your next question is coming from Brookfield Buttress Arya from Bank of America. Your line is now live.
Perhaps your line is on mute please pickup your handset.
Hi, Thanks for taking.
My questions and.
I Hope you guys are staying safe over there in Florida.
Mark I have a couple of questions for you first on the EMS business can you talk a little bit about the seasonality of that business. I mean, there's so many different end markets. There you are guiding for strong growth, but just as we think about fiscal 'twenty three how should we think about seasonality in that business.
How should you think about seasonality I just don't.
Bruce I know, where youre getting at right I don't I, just don't think of seasonality.
I don't think a seasonality in the EMS space, it's really about the evolving construct to the business. So what might appear on the surface is seasonality is just a continuance of reshaping that business.
Again, as we focus on a good blend of margins and cash flows.
I guess for modeling purposes.
I don't want to be too per script here, but I think with the guidance that Mike provided for for Q1 of 'twenty three.
I think our margins on the EMS side, our year on year I would guess there'll be up 2030 basis points. So if you take a look at MFS.
And in of itself you.
You take a look at Q1 'twenty two you match that to Q1 'twenty three.
I would think the EMS margins will be up again 2030 basis points.
And then if you if you kind of extrapolate out Q Q2, Q3, Q4, I would guess margins will be similar.
As they were in 'twenty, two and I think the best part of the overall story with BMS is.
In FY 'twenty, one I think our EMS margins were sub 4% I think in FY 'twenty two our EMS margins were four 3% and I think in FY 'twenty three the EMS margins would be closer to four and a half to four 6% somewhere in that range.
Thank you. Our next question today is coming from Matt Sharon from Stifel. Your line is now live.
Yes, thanks, and good morning, and thanks for all the good information so far a.
Couple of questions for me one just in your outlook you are guiding networking and storage up roughly 6% for next year.
A little surprising and strong given concerns about it spending slowdown.
Is there are you getting a positive forecast from customers.
The supply constraints easing and is that giving you some more confidence in your guide any color there would be great.
Sure Matt I don't think its I think we would agree with you on the demand side.
And overall general terms I would say.
I would say the five to six points of upside is two things a there is there is a.
Still a decent amount of backlog that needs to be replenished and supply chain is getting better.
Albeit slowly, but moving in the right direction and number two is.
A lot of that is is what I would kind of consider wonderful customers, but legacy customers. Nonetheless, and we continue to pick up small pockets of share.
In the business. So I would say those are the main two components driving the growth from 'twenty to 'twenty three.
Okay. Thank you and then just a couple of.
Smaller questions one just on your outlook.
I don't think you provided a shared.
Share Count guide for Q1 or for 'twenty, three because you're twenty-three guide contemplate lower shares with the buyback.
Hey, Matt Yes, it does.
Less so for the year of about 138 to 140 million for Q1 in the 141 142 range.
Okay, and just lastly on the on the consignment shift with the cloud business that $500 million does that begin this quarter. So that's reflected in the year over year growth rates in Q1.
I would say the I would say that our best estimate is if you notice if you noticed.
As you guys build out your models I think youll see youll see what could appear to be maybe a little bit of distortion first half to second half.
If you compare 'twenty two to 'twenty three specifically on the EMS side that would suggest that.
The most of the consignment impact for the year will be towards the back half.
Okay, great. Thanks, so much again, yes. Thank you.
Thank you. Your next question is coming from Steven Fox from Fox Advisors. Your line is now live.
Hi, good morning, everyone.
Two questions from me if I could first of all Mark can you give us a sense of how your manufacturing footprint has changed over let's say the past year and into how you're planning to change. It next year not so much like were look things are located but maybe capabilities in different regions and if you could just maybe dial in a little bit on <unk>.
And southeast Asia ex China, and then as a follow up Mark Mike can you talk about the cash flows a little bit more so the buybacks or now you have a pretty huge percentage relative to your market cap.
Earmark for buybacks, you're saying, 80%.
Cash flows and obviously theres a range of of cash flow outcomes, depending on what you do with inventories can we assume.
That that 80% is solid no matter, what cash flows turn out or if you wind up with a lot more free cash flow because the inventories that maybe you would dial down the buybacks. Thanks.
Let me comment on the last comment first and I know, Michael Michael add to it and correct me, where I'm sure he'll correct me, where I'm wrong for sure, but I think the 80%, 80% I think is firm.
And I think that will include the buybacks plus our dividend over.
Over the next couple of years and Mike can expand on that.
In terms of the footprint Steve.
There's no there's no big changes to our footprint anticipated 'twenty two to 'twenty three.
We really like the footprint that we have.
We think that our current footprint.
But the number of factories you have in the U S and our ability to expand those factories.
Mike service well to the extent there is some re shoring with with clean energy, we'll see what happens with the chips Act, we've been staying very close to that.
Directly with our friends in D C.
There's a lot of details that need to be worked out there but.
That's one thing I could think about but.
As we often say.
The nice thing about Jabil is if you take a look at our capability as you take a look at our scale.
Almost independent of geopolitical issues theres going to be some bumping is for sure on the macro but over the next three to five years. There is a lot of things that still need to be built and we build stuff and we do it.
Awfully well and we can accommodate.
The needs of nearly.
Any geography, either on the supply side the demand side I would I would I think you asked about.
Southeast Asia and in India.
Over the over the last number of years, we've expanded into.
<unk> continued to grow in Malaysia.
We've ramped our wonderful cap campus in Vietnam.
Continue.
Southeast Asia will certainly continue to be of interest to us by the way.
We also have a wonderful footprint in mainland China that we're we're pleased with.
Then lastly for India, I think I think India. We've done we've done what I would consider moderate maybe even modest on a relative basis investments in India around the Mumbai area in Pune and that campus continues to scale.
If I had to wave a magic one and kind of.
Guess, what things might look like in India say in FY 'twenty four 'twenty five my guess would be our footprint in India will be greater than.
In fiscal 'twenty, four and 'twenty five than it is today.
And Steve on your buyback question. If you look at what we've done in FY 'twenty to be repurchased almost $700 million.
<unk> of our shares we will continue to be.
Well balanced.
Our approach and opportunistic at the same time.
We have an additional authorization of another $1 billion, bringing our total authorization to one almost one $3 billion.
If you look at if you look at the end markets.
Playing the secular tailwind that we continue to see our margin accretion on EPS equation cash flow accretion. All leads me to think that we're a highly under valued and we feel buybacks is the best way to tackle that issue.
Great that's super helpful and of course wishing the best for everybody in the Tampa area. Thank you.
Thank you next question is coming from Mark Delaney from Goldman Sachs. Your line is now live.
Yes. Good morning, Thank you for taking the questions and let me add my thoughts for everyone in Florida.
The company's fiscal 'twenty three guidance assumes a slowdown in certain end markets, even though as I understand it demand is generally strong.
Double click on that a bit and better understand are there end markets, where the company has seen signs of macro related slowness as you start fiscal 'twenty three or is it really.
Related to your assumptions about what may materialize based on.
Your your history with the business.
Well this is ever changing.
We will see we will see what the next 60 90 120 days hold between monetary policy and everything else I would say as we sit today Marc the only area that we're seeing.
Distinct decline in demand is around connected devices and consumer goods.
Other than that everything is either flat to up I spoke about.
The <unk> cloud.
Again unit volumes are up so.
Of the eight sectors that we talked about in our business to one that's down based on based on demand or our belief of what's going to happen in demand is.
In the area of consumer products and connected devices.
That's helpful. Thanks on supply chain, you said, its getting somewhat better, but still issues or the issues semiconductor supply demand or are there other supply chain constraints that the company is dealing with and you can just elaborate a little bit more on how you see that playing out over the course of fiscal 'twenty three.
I would say if we go back one year ago.
Say nine to 12 months ago.
We had we had tremendous challenges.
The more broad based across the supply chain as we sit today, we still have pockets of challenges I'd say the biggest challenges we have are around legacy semi conductors and.
Probably the biggest the biggest friction points continue be around the EV space.
The health care space.
<unk>.
But on a relative basis, what we've said the last number of calls is.
Our jabil team is doing a wonderful job in securing parts.
Relative to others so.
We will continue to secure the parts are.
The nice thing about the nice thing about how we look to forecast the business, whether it's on an annual basis like today.
When we go a degree deeper it's on our quarterly calls.
With with our systems, our it systems, how everything is linked together in terms of our factories.
It really allows us real time too.
Understand the puts and takes of the business from from the bottoms up so we start every single session.
With.
With input and data from the factories as well as the customers. So I think we've contemplated.
All of the supply chain issues that are at hand at the moment.
After the outlook for 'twenty three.
Some of that sneak one last question and then we mentioned electricity costs going higher and China, but I think Unfortunately were also higher in Europe , maybe you could remind us to what extent those are typically part of the cost plus structure and are you expecting you can pass on higher electricity costs in fiscal 'twenty, three or is that maybe a headwind you baked.
And to the guidance. Thank you and congratulations on the good results.
So I think I think things are very different maybe their boat is going to be rising you talked about China again, we saw some power outages there in the fourth quarter.
We've baked in some conservatism there for 'twenty three although it's modest in terms of.
In terms of Europe are too big.
Revenue generators are Poland and Hungary.
We've taken a hard look at and kind of done a deep dive in the constructive.
Our Poland and Hungary generate their power.
The impact to.
US through the winter months in Europe will be modest as well.
And I would just say that.
If I, if I, just kind of wrap that up into <unk>.
More global footprint.
We have seen and will continue to see rising cost in various areas of our business.
And we handle that differently with every single customer depending on.
The relationship the terms.
And the overall economics. The good news is I think we've given.
Appropriate.
Deep consideration to all of that and.
We're still bringing forward and outlook for 'twenty three that takes margins up 20 basis points to four 8%.
Thank you next question is coming from Shannon Cross from Credit Suisse. Your line is now live.
Alright. Thank you very much I was wondering sort of big picture as you talk to your customers you know industry four point now with robotics or <unk> printing AI ml all of the technology that you know your people are bringing to bear with regard to manufacturing I'm wondering how much of that is it part of our discussion with.
With your customers.
You know both from sort of a competitive advantage standpoint, as well as you know the ability to increase margins over time and as I look at your margin profile, obviously, it's improving but I'm wondering now how much of this is increased automation and things you can do yourself versus mix.
And then I have a follow up thank you.
I like your question.
Whether it's whether it's industry three point, our four point out I'm not quite sure but at Jabil, It's kind of it's kind of one point out it's right at the heart of what we do.
<unk>.
Our business is complicated at times, our strategy is really straightforward our strategy gets driven by each of the individual sectors, because that's where all the domain expertise lies in then at an enterprise level, we build stuff.
The better we built stuff the more flexible flexible we are building stuff the better our geography is in serving customers better engineering is the more market share gains will continue to capture as we move forward.
And Shannon and a big part of that is.
Again I think.
<unk>.
If we're not the largest were one of the largest large scale manufacturing and services company in the world and.
A huge huge amount of that is always our opex and our capex investments and.
And we just believe deeply in investing in the business because.
Again, we don't we don't want to be making decisions for today.
That that arent, great decisions long term and those investments are great decisions long term so whether it's.
Whether it's <unk>.
RBR, whether it's artificial intelligence, whether it's additional data analytics.
Whether it's robotics automation by the way, we make significant investments in those areas.
I would guess that independent of our customers between our overall advancement.
Data analytics robotics, all of that stuff, our opex investments are probably.
$4 to $500 million a year and we think those are terrific investments for the company and will be very material as we as we move forward in and run this company north of 5% at a very large scale.
Thank you and I. This is sort of a derivative question, but currency I'm I'm wondering how that comes into the conversations with customers.
In terms of where your manufacturing versus some of the currency moves or.
If it if it's a topic of discussion at all given where everything has moved in the last say six months.
Some pretty aggressive currency swings. So I was just wondering if that comes up.
In any of your discussions.
Sure So I'll answer that.
I think if you look at.
How we how we structure our pricing, etc revenues, mainly predominantly U S. Dollar based our bill of materials that we buy from suppliers is mainly predominantly U S. Dollar based the value add that you get the local labor the local cost.
<unk> does fluctuate we do have true up mechanisms.
Customers to up too.
To re price it does a significant move and we also hedge our FX.
On the value add portion as well so overall.
FX is not something I lose sleep over.
Okay. Thank you.
Thank you. Our next question today is coming from Paul Chung from Jpmorgan. Your line is now live.
Hi, Thanks for taking my question. So just some follow ups on cap allocation very strong free cash flow here to end of the year and you know.
Pretty nice outlook here kind of approaching $1 billion annually. So why not increase the authorization higher and then secondly.
Secondly, on the kind of acquisitions right.
Where should we expect to kind of be a little bit more active here should we expect kind of continued in house investments for customers and reimbursements or where can the firm be a little bit more active given some depressed private valuations here.
Thanks for the questions Paul.
Addressing the buybacks I think your comment was why not be more aggressive I think we're being very aggressive.
If we just take a look at.
Our cash flows we don't we delivered in 'twenty, two and the level of buyback.
The level of buybacks and Mike talked about this level of buybacks in 'twenty. Two is north of 700 million on free cash flows of $800 million I'd consider that extremely aggressive by the way that doesn't include our dividend.
If I think about 'twenty, three and 'twenty four.
Mike talked about the fact that we got authorization for an extra $1 billion, we add that to the unused portion of the prior authorization that puts in play about $1 billion three.
If I think about our free cash flow this year being 900 and were saying nothing.
Our fiscal 'twenty, four but hypothetically, let's say it was around 1 billion, you've got $1 billion in free cash flow and now you're talking about.
Total authorization of $1 billion, three plus another 100 million plus for dividend Youre talking about us returning a $1 billion for or give or take against free cash flows of 1 billion $9. So I think that's appropriate.
And we can debate, whether or not its aggressive enough, but I think it is.
A very nice return on capital directly to shareholders in terms of.
In terms of M&A.
We think so again.
I think one of the charm the real charming part of being in our business with all of the complexities is.
It's a big world out there and I said earlier, there's lots and lots and lots of things that need to be built and the world is not going to become virtual.
Completely.
The world is not going to become kind of holographic its like Theres hard things, we talk internally, sometimes a big part of the way we run the businesses Digi.
Digital with ones and zeros, but the output of that is based in Adams I mean, they're hard tangible things, we built and and again the market is massive so.
I, just we will continue to do small acquisitions, largely around acquiring engineering talent and technical capabilities.
But the best use of our capital.
Is exactly what you alluded to is at these valuations returning capital to shareholders via dividends and buyback and then also the best use of our cash is as both Capex and Opex investments.
Again with an eye on.
Continuing to pick up share continuing to two to position us in a very dominant portion of the overall supply chain.
Then also with an eye on getting the margins for the company over 5% on a sustainable basis.
Thank you and then just a quick follow up on component inflationary starting to see kind of more normalized prices in the market today and then if we start to see more kind of deflationary environment on components, how do we think about the impact on margins and cash flows. Thank you.
I would just say to you. The first part of your question is is the the overall if I take a look at our all of our bill of materials, which are in the tens of thousands and extrapolate this comment all over all of it.
The supply chain is very mixed.
There is some part of the supply chain, it's really more normalize and there is some part of the supply chain remaining that's inflationary.
I think that continues to move in the direction of overtime or being more normalized and in terms of.
In terms of the bill of materials, becoming deflationary I don't think we have to worry about that so much in 'twenty three.
We'll see what happens in the first half of 'twenty four but.
Yeah.
We've been doing this a long time and if you just kind of think about the 55 years at Jabil has been in business and maybe focus on the last 30.
It's just been a continuous sine wave up down up down up down in terms of our variable costs are fixed costs in cost of bill of material.
I think we'll continue to navigate well and that will continue to navigate that quite well with customers.
And I don't I don't I don't envision.
I certainly don't envision.
Wouldn't have guided the four 8% this year, if we thought there was a risk to that and.
I think this morning alone I've mentioned the idea of running the company at 5%.
I think.
Purposeful consideration of what might happen to the materials market component market in our bill of materials we.
We feel pretty confident of driving the margins to 5%.
Great. Thank you.
Welcome.
Thank you. Your next question today is coming from Melissa Fairbanks from Raymond James Your line is now live.
Great. Thanks, very much guys I'm hunkering down just south of you it looks like they're calling for a direct hit here now so quite an eventful day for all of us.
You mentioned supply is starting to ease can.
Can you share if that's more due to just jabil sourcing just improved efficiency on your part or are you seeing it free up more generally.
And then I've got a follow up to that.
Well most of the first off keep yourself safe and I don't think today is going to be all that exciting, but certainly starting at noon tomorrow I think things will get.
Quite interesting. So please please keep safe.
In terms of.
In terms of the overall bill of material.
I think I think some of it is is our scale and our leverage and I mentioned in my prepared remarks, we have we just have a wonderful network of suppliers. So I think thats part of it I think the other.
Part of it is.
With the current monetary policies and things going on around the world.
I think in general.
And this is now becoming maybe a little bit more and I used the word a little bit a little bit more of the rule versus the exception.
But I think I think demand in general on a macro basis will start to soften a bit.
I mentioned earlier that we're seeing it.
Largely around consumer product connected devices, but.
Demand will start to soften a bit and I think thats going to help with overall.
Supply chain, both continuity and supply as we move forward in the next nine to 12 to 18 months.
Okay great.
And then you mentioned inventories would be worked down over time, what would be your ideal inventory target is there excess inventory that youre holding that you're specifically looking to destock.
So.
There's inventories are all in today.
Yes, I love your term, we would like to destock dose and we're going to work very hard to destock. Some of these things in FY 'twenty three.
They were put there with purpose.
There to support the customers.
The old adage of.
The Golden screw deal, we've been dealing with that for a long long time, we think that starts to normalize the back half of 'twenty three and so on.
I would guess, we're very pleased by the way with the progress that we've made in terms of.
Days of inventory reduction as we got to the back half of fiscal 'twenty, two and I would guess, we will see a similar trajectory as we move through 'twenty three on a relative basis. So.
I'd be really disappointed if we're sitting here.
Let's say in the second half of 'twenty, three and our overall inventory levels.
Not down in a material way and Melissa just said.
A reminder, most of our inventory is actually raw materials, and where there is very little finished goods.
So we don't have a finished good problem or any any such like its the raw materials and ramp as Mark said, we actually bring it in for our customers. After they place so theyre legally contractually.
Obligated with that inventory as well as just Matt measure up.
Golden screw coming through that are manufacturing churning out products.
It's a relatively different inventory situation and perhaps retailers or any other type of market.
Sure perfect. Thanks, very much that's all from me stay safe guys you too Melissa Thank you.
Thank you. Your next question is a follow up from <unk> <unk> from Bank of America. Your line is now live hi, Thanks for taking the follow up and Mark. Thanks for all the details you gave so far.
I wanted to ask you a question on risk management in the Dms segment. If we look at mobility revenues right. So fiscal 'twenty two came in.
A little bit lower than what you had expected $100 million and youre guiding another $100 million lower for fiscal 'twenty, three but now connected devices. As you said as a consumer facing end market and you're guiding that down 9%. So when they look at these two things mobility and connected devices. They are about 47% of the fiscal 'twenty three.
<unk> for Dms in case these markets are weaker than what you expect how would your playbook change are there areas of investment that you would switch to other areas and overall do you think that there's enough strength in the automotive and healthcare segments.
Though that spend can ballots to any weakness in these other two segments.
Your thoughts on if there is incremental weakness in these two end market mobility and connected devices, how youre playbook changes.
Thanks.
Just a general comment that I don't think has much to do with your question I think.
I think the one the one area I would look at is as an.
And overall Dms, we continue to see awfully good growth in Evs, automotive and transport and we see we see.
Good stable growing business in health care and packaging so.
I'm not sure on your math on connected devices and mobility being.
47% other than.
And then we give it to you on the chart I'm just thinking about.
As we move into $2004 25.
From an overall risk standpoint, I would I think we're going to continue to see good trajectory of growth in the in the automotive.
Automotive transport health care packaging.
As we move beyond 'twenty three.
Point number one point number two is.
I think.
Trying to trying to put together.
At least in regards to Jabil specific trying to put together.
Connected devices with mobility I wouldn't do that because there's different elements of those businesses.
Beyond just raw demand that are material to jabil in terms of our realized demand versus the overall marketplace and last point to your question.
I think on connected devices and mobility in general as we sit today.
The way in which we run both of those businesses and the way in which.
We have agreed commercial terms with the customers.
Puts us in a situation where we feel.
Pretty good in terms of risk management to both areas of the business.
Okay. Thanks for the detail appreciate it yes, sorry for I think he got cut off earlier I apologize for that.
Thank you.
<unk> reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Our call has concluded thank you for your interest in Jabil.
Yeah.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.