Q1 2024 Jabil Inc Earnings Call

Hello and welcome to the J-BOL First Quarter Fiscal Year 2024 Earnings Conference Call and Webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow.

Hello, and welcome to the Jabil first quarter fiscal year 'twenty 'twenty four earnings conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation. He may be placed in the question queue at any time by pressing star one on your <unk>.

You may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Adam Berry, Vice President, Invest Relations. Please go ahead, Adam.

Telephone keypad as a reminder, this conference is being recorded.

Speaker Change: It's now my pleasure to turn the call over to Adam Berry, Vice President Investor Relations. Please go ahead Adam.

Good morning and welcome to Jables first quarter of fiscal 2024 earnings call.

Morning.

Adam Berry: And welcome to Jabil as first quarter of fiscal 'twenty 'twenty four earnings call.

Joining me today are Chief Executive Officer Kenny Wilson and Chief Financial Officer Mike Test Lake d'Est riotsub.

Speaker Change: Joining me today are Chief Executive Officer, Kenny Wilson, and Chief Financial Officer, Mike that store.

In terms of our agenda today, we plan to focus on the following.

Speaker Change: In terms of our agenda today, we plan to focus on the following.

Speaker Change: Review, our Q1 results.

discuss the trends underway within the end markets we serve, and provide Q2 guidance. We will also address displeasinggran sparking in terms of How rezoningAuditing from the

Speaker Change: Discuss the trends underway within the end markets we serve.

And provide Q2 guidance.

Speaker Change: We'll also reiterate our capital allocation plans.

reinforce our core margin and EPS outlook for the year.

Speaker Change: Reinforce our core margin and EPS outlook for the year.

and in doing so, provide you with the detail as to why we feel confident in achieving these goals for this year and next.

Speaker Change: And in doing so provide you with the detail as to why we feel confident in achieving these goals for this year and next.

despite our updated outlook as discussed on November 28.

Despite our updated outlook as discussed on November 28.

But before we begin, please note that today's call is being webcast live. And during our prepared remarks, we will be starting the webcast live.

Speaker Change: But before we begin.

Speaker Change: Please note that today's call is being webcast live.

Speaker Change: And during our prepared remarks, we will be referencing slides.

To follow along with the slides, please visit jaybull.com within the investor relations portion of the web.

Speaker Change: To follow along with the slides please visit Jabil dot com within the Investor relations portion of the website.

At the conclusion of today's call, the entirety of today's presentation will be posted for audio playback.

Speaker Change: At the conclusion of today's call the entirety of today's presentation will be posted for audio playback.

I'd now like to ask you to follow along with our presentation with slides on the website.

I'd now like to ask you to follow along with our presentation with slides on the website.

Speaker Change: Beginning with the forward looking statement.

During this conference call, we will be making forward-looking statements, including, among other things, those regarding the anticipated outlook for our...

Speaker Change: During this conference call, we will be making forward looking statements, including among other things those regarding the anticipated outlook for our business.

These statements are based on current expectations, forecasts, and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ material.

Speaker Change: 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 on our angry report on form 10K. For the fiscal year ended August 31st, 2023, and other filings with the SEC.

Speaker Change: An extensive list of these risks and uncertainties are identified on our annual report on Form 10-K for the fiscal year ended August 31, 2023, and other filings with the SEC.

Jable Disclames any intention or obligation to update or revise any forward looking states.

Speaker Change: 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.

whether as a result of new information, future events, or other ones.

With that, I'd now like to shift our focus to our first quarter results.

Speaker Change: With that I'd now like to shift our focus to our first quarter results, where the team delivered approximately $8 $4 billion in revenue.

where the team delivered approximately $8.4 billion in revenue.

Near the low end of our guidance range provided in September , and in line with our updated expectations announced on November 28th.

Speaker Change: Near the low end of our guidance range provided in September and in line with our updated expectations announced on November 28.

It's worth noting the majority of the year over year decline was driven by the previously announced move to a consignment model, where we transition certain components we procure and integrate into the cloud space to a customer-controlled consignment.

Speaker Change: It's worth noting the majority the majority of the year over year decline was driven by the previously announced move to a consignment model, where we transitioned certain components, we procure and integrate into the cloud space to a customer controlled consignment services model.

Speaker Change: Yeah.

Core operating income for the quarter came in at $499 million, or 6% of revenue.

Speaker Change: Core operating income for the quarter came in at $499 million or 6% of revenue.

This is up 120 basis points year over year due to an improved mix of business, normal seasonal patterns within our mobility.

Speaker Change: This is up 120 basis points year over year due to an improved mix of business normal seasonal patterns within our mobility business and the previously announced accounting impacts of assets held for sale.

and the previously announced accounting impacts of assets held per sale.

Excluding the impact of assets held for sale, core operating margin was roughly 5.3% up 50 basis points a year on you.

Speaker Change: Excluding the impact of assets held for sale core operating margin was roughly five 3% up 50 basis points year on year.

Net interest expense for the quarter came in $3 million better than expected at $70 million, reflecting lower levels of inventory during the quarter as a result of lower revenue and better working capital management by the...

Speaker Change: Net interest expense for the quarter came in $3 million better than expected at $70 million, reflecting lower levels of inventory during the quarter as a result of lower revenue and better working capital management by the team.

From a gap perspective, operating income was $303 million, and our gap deluded earnings per share was $1.47.

Speaker Change: From a GAAP perspective, operating income was $303 million and our GAAP diluted earnings per share was $1 47.

Core diluted earnings per share for the quarter was $2.60.

Core diluted earnings per share for the quarter was $2 60.

a 13% improvement over the prior year quarter and at the midpoint of the range we provided in September . September

Speaker Change: A 13% improvement over the prior year quarter and at the midpoint of the range we provided in September.

Speaker Change: Yeah.

Speaker Change: Now turning to the performance by segment in the quarter.

Revenue for the DMS segment came in at $4.8 billion, down approximately 6% from the prior year.

Speaker Change: Revenue for the Dms segment came in at $4 $8 billion down approximately 6% from the prior year.

Driven by continued weakness from our connected devices and Mark.

Speaker Change: Driven by continued weakness from our connected devices end market.

These declines were partially offset by year over year growth in our automotive and transportation and healthcare business.

Speaker Change: These declines were partially offset by year over year growth in our automotive and transportation and health care businesses.

Core operating margin for the segment came in at 7%, 180 basis points higher than the same quarter from a year ago. Given solid mix, normal seasonal pattern within our mobility business, and the aforementioned previously announced accounting impact of assets held for sale.

Speaker Change: Core operating margin for the segment came in at 7%.

Speaker Change: 180 basis points higher than the same quarter from a year ago, given solid mix normal seasonal pattern within our mobility business and the aforementioned previously announced accounting impact of assets held for sale.

Excluding the impact of assets held per sale associated with the mobility sale core operating margins for DMS were six

Speaker Change: Excluding the impact of assets held for sale associated with the mobility sale core operating margins for Dms were 6%.

Revenue for our EMS segment came in at $3.6 billion. Down roughly 21%.

Speaker Change: Revenue for our EMS segment came in at $3.6 billion.

Speaker Change: Down roughly 21% year over year.

This decline was driven by our move to a consignment model and a softening in demand at end markets like by G, networking and digital print. Given this.

Speaker Change: This decline was driven by our move to a consignment model and a softening in demand in end markets like by G networking and digital print.

Speaker Change: Given this combination of consignment and mix core margins for the EMS segment, where an impressive four 6%.

Core margins for the EMS segment were an impressive or 0.6%. Up 30 basis.

Speaker Change: Up 30 basis points year over year.

Speaker Change: Okay.

Next, I'd like to begin with an update on our cash flow and balance sheet metrics as of the end of Q1, beginning with inventory, which improved two days sequentially.

Speaker Change: Next I'd like to begin with an update on our cash flow and balance sheet metrics as of the end of Q1, beginning with inventory, which improved two days sequentially to 78 days.

Net of inventory deposits from our customers, inventory days were 58 and Q1, consistent with our strong Q4 performance.

Speaker Change: Net of inventory deposits from our customers inventory days were 58 in Q1, consistent with our strong Q4 performance.

Our first quarter cash flows from operations came in at $448 million.

Speaker Change: Our first quarter cash flows from operations came in at $448 million, while net capital expenditures totaled $275 million, resulting in a $173 million and adjusted free cash flow during the quarter.

While net capital expenditures totaled $275 million, resulting in $173 million in adjusted free cash load during the course.

In the quarter, we repurchase 3.9 million shares for $500 million, leaving us with $2 billion remaining on our current repurchase authorization as of November 30.

Speaker Change: In the quarter, we repurchased three 9 million shares for $500 million, leaving us with $2 billion remaining on our current repurchase authorization as of November 30th.

With this, we ended the quarter with cash balances of $1.6 billion and total debt to core EBITDA levels of approximately 1.1 times.

Speaker Change: With this we ended the quarter with cash balances of $1 $6 billion.

Speaker Change: And total debt to core EBITDA levels of approximately one one times.

So in summary, Q1 was largely a very good quarter.

Speaker Change: Yes.

Speaker Change: So in summary.

Speaker Change: Q1 was largely a very good quarter.

While our top line growth came in a bit lower than expected, the team still delivered good year over year growth in core margins, core EPS, and adjusted free cash flow.

Speaker Change: While our topline growth came in a bit lower than expected the team still delivered good year over year growth in core margins core EPS and adjusted free cash flow.

At the same time, we were incredibly active in terms of repurchasing our own shares and we made solid progress on the sale of our mobility business. With that, thank you. I'll now hand it over to Kenny.

Speaker Change: At the same time, we were incredibly active in terms of repurchasing our own shares and we made solid progress on the sale of our mobility business.

Speaker Change: With that thank you I'll now hand, it over to Kenny.

Kenny Wilson: Thanks, Adam and good morning, everyone.

As Adam mentioned, on November 28th, we announced a reduction in an outlook for fiscal year 24, based on a broad folding of demand across multiple end marks.

Kenny Wilson: As Adam mentioned on November 28, we announced a reduction in our outlook for fiscal year 'twenty four based on a broad slowdown of demand across multiple end markets.

In short, customers adjusted demand schedules as they reacted to a slow down on end markets heading into the end of the calendar year.

Kenny Wilson: In short customers adjusted demand schedules I should react to just slow down in end markets heading into the end of the calendar year.

Although we feel this floating will be temporary in nature, it is incumbent on us to react and adjust our model appropriately to leg with our customer's requirements.

Kenny Wilson: Although we feel the slowdown will be temporary in nature. It is incumbent on us to react and adjust our model appropriately so aligned with our customers' requirements.

Kenny Wilson: Agility in our industry is key.

Being able to absorb changes in demand signals effectively across our network is a critical part of our value proposes.

Kenny Wilson: <unk> been able to absorb changes in demand signals effectively across our network is a critical part of our value proposition.

This agility is part of our DNA and is reflected in our ability to effectively absorb downsides in revenue. Fundable assets, flexible automation, single instance of SAP, common manufacturing, and

Kenny Wilson: This agility as part of our DNA and is reflected in our ability to effectively absorb then saves and revenue.

Kenny Wilson: Fungible assets flexible automation.

Kenny Wilson: Single instance of SAP.

Kenny Wilson: And manufacturing execution systems.

Kenny Wilson: Focus on margin rich value added services.

and multi-customer sites set up specifically to manage disparate end-market.

Kenny Wilson: Multi customer sites set up specifically to my these disparate ad markets.

In one campus, I just some examples of disciplines embedded in our model.

Kenny Wilson: In one campus are just some examples of disciplines embedded in our model.

ETH Coding is a focus at a large part of why we believe we can manage margins consistent with our Q1 guide at EPS $9 plus, while absorbing a broad-based is a focus at EPS $9 plus, while absorbing a broad-based

Kenny Wilson: These coding it is a focus on a large part of why we believe we can manage margins consistent with our Q1 guide.

Kenny Wilson: E P S at $9, plus while absorbing a broad based slowdown.

Turning to end markets, where you take a deeper look, we still expect growth in key areas like electric vehicles and renewables.

Kenny Wilson: Okay.

Kenny Wilson: Turning to end markets, where you take a deeper look we still expect growth in key areas like electric vehicles and renewables.

albeit at a modestly slower pace than previously anticipated.

Kenny Wilson: Albeit at a modestly slower pace than previously anticipated.

In health care, her business remains robust, un-fundational, and tens of what we are trying to accomplish at G.

Kenny Wilson: And health care business remains robust and foundational intangible what we're trying to accomplish a table.

Our ability to provide key solutions and capabilities to customers in complex areas without sourcing as underpandorated and quality's paramount underpins our confidence that we will continue to go in this end mark.

Kenny Wilson: Our ability to provide key solutions and capabilities to customers in complex areas.

Kenny Wilson: Thing is underpenetrated and coffee is polymeric underpins our confidence that we will continue to grow in this end market.

And cloud our team continues to drive forward within the IDRA centers.

Kenny Wilson: And climate our team continued to drive forward with indeed, I data center space.

Remember, this business moved into a consignment model last year, which makes revenue look unusually low relative to previous years, while in reality the business is growing volumes by roughly 20%.

Kenny Wilson: Remember this business moved them to a consignment model last year.

Which makes revenue look unusually low relative to previous years, whether in reality the business is growing volumes by roughly 20%.

In connected devices we've seen softening for some time and this doesn't seem likely to change in the near term.

Kenny Wilson: And connected devices, we've seen softening for some time and this it doesn't seem likely to change in the near term.

Well, an enterprise communications at 5G, we could say it takes specs off the space and global rollout.

Kenny Wilson: Well in enterprise Communications and five we continue to expect softness in global Rollouts.

Starting to renewables, we've seen softness and solar and wind driven by a combination of reduced channel inventory cell through impact of interest rates and incentive uncertainty.

Kenny Wilson: Turning to the renewables, we've seen softness in solar and wind driven by a combination of reduced channel inventory sell through.

Impact of interest rates on incentive uncertainty.

Outlook wise we remain optimistic based on multiple new business wins and some supply chain consolidation within our current customer.

Kenny Wilson: Likewise, we remain optimistic based on multiple new business wins, and some supply chain consolidation within our current customer base.

Kenny Wilson: Okay.

On the Silverman-Bellety business, I am really pleased with the progress we are making.

On the sale of our mobility business I'm really pleased with the progress we are making.

The selfless collaboration between our teams where we're working on closing the deal and shouldn't the needs of our customer remain top of mind, has been really pleasing to see.

Kenny Wilson: The sale force collaboration between our teams for working on closing the deal.

Shouldnt the needs of our customer remains top of mind has been really pleasing to see.

Focusing on your day job, keeping product flowing will manage in a complex transition is hard. In fact, we are managing this so successfully as another proof point of our belief that BYD electronics is a correct partner for this transaction.

Kenny Wilson: Focusing on your day job keeping product flowing while managing a complex transition is hard.

Kenny Wilson: I think we are managing this so successfully is another proof point of I believe the BYD electronics is a great partner for those transactions.

Taking all together, we never expect revenue not associated with the mobility divestiture to be down 5% year over year on a link for like.

Kenny Wilson: Taken altogether, we now expect revenue not associated with him ability divestiture to be down 5% year over year on a like for like basis.

Reflecting what all of the above is pretty satisfying to see the resilience of our model. With despite end-market drop in us, we expect to post year-on-year growth in core margins in the EPS, while also driving an excess of £1 billion in free cash.

Kenny Wilson: Reflecting on all of the above is pretty satisfying to see the rezoning of the sovereign model, where despite end market Choppiness, we expect to post year on year growth in core margins and EPS, while also driving it in excess of 1 billion in free cash flows.

Further, we remain committed to our previous fiscal year 25 guidance.

Kenny Wilson: Further we remain committed to our previous fiscal year 'twenty five guidance includes those margins at five 6% plus on EPS in excess of $10 65.

of margins at 5.6% plus an EPS in excess of $10.65.

In closing I want to shoot a final thought.

In GEBO we are always planning our future, and as sad as I am to say goodbye to my colleagues as I transition to BYD Electronics.

Kenny Wilson: And G, but we would always planning our future on a Saturday I have to say goodbye to my colleagues as they transition to BYD electronics.

I would like to welcome the procurement services team from Procureability.

Speaker Change: I would like to welcome to procurement services team from procure a L. A P.

and the Silicon Fetronics technical team from Intel as a joiner company.

Speaker Change: And the Silicon Photonics technical team from Intel.

Speaker Change: And our company.

Welcome, and we look forward to your contribution as we focus on the next chapter of our company's growth and diversification.

Welcome and look forward to your contribution as we focus on the next chapter of our company's growth and diversification.

Thank you for joining us today and for your interest in Jebel. I will no hand the call to make.

Speaker Change: Thank you for joining us today and for your interest in Jabil.

Speaker Change: I'll now hand, the call Tonight.

Kenny Wilson: Thanks, Kenny and good morning, everyone.

Over the next few minutes, I plan to provide more information on the following.

Kenny Wilson: Over the next few minutes I plan to provide more information on the following.

First, I'll walk you through a financial outlook for Q2 and FY24, which remains largely consistent with our announcement on November 28th.

Kenny Wilson: First I'll walk you through our financial outlook for Q2, and FY 'twenty, four which remains largely consistent with our announcement on November 28.

and then I'll provide an update on our accelerated buyback execution plan.

Kenny Wilson: And then I'll provide an update on our accelerated buyback execution paths.

With that, let's turn to the next slide for our second quarter guidance.

Kenny Wilson: With that let's turn to the next slide for our second quarter guidance.

We anticipate the transaction to close during Q2 of FY24.

Kenny Wilson: We anticipate the transaction to close during Q2 of FY 'twenty for the.

The exact date of the close will drive where we land. For Q2, we expect total company revenue to be in the range of $7 billion to $7.6 billion.

Kenny Wilson: The exact date of the close will drive where we land.

Kenny Wilson: For Q2, we expect total company revenue to be in the range of $7 billion to $7 $6 billion.

The midpoint of this range assumes the mobility transaction closes January 31st, which is consistent with our modeling assumptions in September .

Kenny Wilson: The midpoint of this range assumes the mobility transaction closes January 31st which is consistent with our modeling assumptions in September.

or operating income for Q2 is estimated to be in the range of $339 million to $399 million.

Kenny Wilson: Core operating income for Q2 is estimated to be in the range of $339 million to $399 million.

Gap operating income is expected to be in the range of $260 million to $301 million.

Kenny Wilson: GAAP operating income is expected to be in the range of $216 million to $301 million.

Code of learning for share is estimated to be in the range of $1.73 to $2.13.

Core diluted earnings per share is estimated to be in the range of $1 73 to $2.13.

Yeah.

Gap to learn the Spachairs expect to be in the range of 77 cents to $1.37.

GAAP diluted earnings per share you expect to be in the range of 77 cents to one dollar and 37 cents.

Net inter-sick spends in the second quarter, that's made it to be $62 million dollars.

Kenny Wilson: Net interest expense in the second quarter is estimated to be $62 million.

The foreturning to Opelier guidance is worth noting that a Q2 guidance is materially influenced by the Mobility Transaction closed day.

Kenny Wilson: Before turning to our full year guidance, it's worth noting that our Q2 guidance is materially influenced by the mobility transaction close date.

I thought it would be helpful if I provide you with the potential impact of an earlier close.

Kenny Wilson: I thought it would be helpful. If I provide you with the financial impact of an earlier close.

For modeling purposes, a December close would reduce the midpoint of our Q2 revenue and core EPS outlawed ranges by approximately $400 million and 30 cents respectively. For the year, it would also reduce our revenue outlook by $400 million while the loss in core EPS would be expected to be upset through accelerated free purchases and lower interest expense given the earlier receipt of net funds. Now, we'll...

Kenny Wilson: For modeling purposes, a December close would reduce the midpoint of our Q2 revenue and core EPS outlook ranges by approximately $400 million.30, respectively for the year. It would also reduce our revenue outlook by $400 million, while the loss and core EPS would be expected.

Kenny Wilson: To be upset through accelerated repurchases and lower interest expense given the earlier receipt of net funds.

Kenny Wilson: Now moving onto our full year guidance on the next slide.

As we announced a few weeks ago towards the end of our quarter, we noticed a widespread slowdown in customer demand.

Kenny Wilson: As we announced a few weeks ago towards the end of a quarter, we noticed a widespread slowdown in customer demand.

The majority of the slowdown you're seeing is being driven by excess inventory and not customers channel which review as short term in nature.

Kenny Wilson: The majority of the slowdown we're seeing is being driven by excess inventory in our customers' channel, which we view as short term in nature.

In our view, once the Excess Channel inventory clears up, we're optimistic that the secular trends cross our business remain intact and gives us confidence in future growth.

Kenny Wilson: In our view once the excess channel inventory clears up we're optimistic that the secular trends across our business remain intact and gives us confidence in future growth.

It is important note that Jable's net in mintroid days is in good shape and remains consistent with our target range of 55 to 60 days.

Kenny Wilson: It is important note that Jabil is net inventory days is in good shape and remains consistent with our target range of 55 to 60 days.

For FY 24, we expect revenue to be approximately $31 billion for our modeling assumption of a January 34 clause for the mobility transaction.

Kenny Wilson: For FY cleaning full we expect revenue to be approximately $31 billion for a modeling assumption of a January 30, plus clause for the mobility transaction.

Importantly for the year, we continue to expect year-on-year growth across the end markets that are experiencing strong multi-year tailwinds, notably in renewable energy infrastructure, electric vehicles, AI cloud data centers, and healthcare.

Kenny Wilson: Importantly, we continue to expect year on year growth across the end markets that are experiencing strong multiyear tailwind, notably in renewable energy infrastructure electric vehicles.

Kenny Wilson: AI cloud data centers and health care.

Kenny Wilson: Moving to the next slide.

Despite the revenue had wins in the near term, we are confident that we both are able to be more resilient as we've diversified across geographies, products, customers, and end marks.

Kenny Wilson: Despite the revenue headwinds in the near term, we are confident that we'd be able to be more resilient as we diversified across geographies.

Kenny Wilson: <unk> customers and end markets.

Because of this, we don't expect the same level of margin erosion traditionally seen in past slowdowns.

Kenny Wilson: Because of this we don't expect the same level of margin erosion traditionally seen in past slowdowns.

Our diversified approach, global footprint, and strong relationships with customers gives us confidence in weathering these near-term challenges.

Kenny Wilson: Our diversified approach global footprint and strong relationships with customers.

Kenny Wilson: It gives us confidence in weathering these near term challenges.

We're adapting, staying focused on margins and cash flow and committed to delivering value.

Kenny Wilson: We're adapting staying focused on margins and cash flow and committed to delivering values.

Notably for FY 24, we select SPAC core operating margins to be in the range of 5.3 to 5.5%.

Kenny Wilson: Notably for FY 'twenty, four we shouldn't expect operating margins to be in the range of $5 three to five 5%.

I would now like to walk you through the dynamics of how we're able to maintain margins despite lower revenue.

Kenny Wilson: I would now like to walk you through the dynamics of how we're able to maintain margins despite lower revenue.

Kenny Wilson: Yeah.

As a reminder, we have completely changed the construct of our business.

Kenny Wilson: As a reminder, we have completely changed the construct of our business.

We're in the process of divesting one of the highest fixed cost businesses.

Kenny Wilson: We're in the process of divesting went up a highest fixed cost businesses.

Additionally, four of our end markets, EDs, healthcare, renewables and cloud are growing volumes year and year, all the in at lower levels than previously anticipated.

Kenny Wilson: Additionally, four of our end markets E D's healthcare renewables and cloud are drilling volumes year on year, albeit at lower levels than previously anticipated.

which means, deleveraging is limited as we are able to push our planned investments and costs which have not been incurred yet.

Which means deleveraging is limited as we are able to push our planned investments and costs, which have not been incurred yet.

Kenny Wilson: Yeah.

In addition to pushing our ramp and investment costs, we're also moving ahead with reducing our SGNA in the back half of the year and optimizing our global footprint.

Kenny Wilson: In addition to pushing our ramp in investment costs. We're also moving ahead with reducing our SG&A in the back half of the air and optimizing our global footprint.

All of this gives me confidence in our ability to deliver core operating margins in the 5.3 to 5.5 percent range in FY 24.

All of this gives me confidence in our ability to deliver core operating margins in the five three to five 5% range in FY 'twenty four.

Next, I'd like to provide an update on our share repurchases for the year.

Kenny Wilson: Next I'd like to provide an update on actually on repurchases for the year.

In Q1 we executed the previously mentioned $500 million, accelerated share repurchase.

Kenny Wilson: In Q1, we executed the previously mentioned $500 million accelerated share repurchase.

In September , we originally expected to do a series of accelerated buybacks totally $1.7 billion in FY24 and $800 million in FY25.

Kenny Wilson: In September we originally expected to do a series of accelerated buybacks totaling $1 $7 billion in FY, 'twenty, four and $800 million in FY 'twenty five.

We now intend to execute a series of accelerated buybacks of the entire $2.5 billion repurchase authorization in FY 24.

Kenny Wilson: We now intend to execute a series of accelerated buybacks of the entire of $2 $5 billion repurchase authorization in FY 'twenty four.

Kenny Wilson: Yeah.

As a result, I now expect last so to be in the range of 124 to 127 million for FY 24.

Kenny Wilson: As a result, I now expect last summer to be in the range of $124 million to $127 million for FY 'twenty four.

We also now expect interest expense to be lower this year in the range of 250 to 260 million dollars compared to our expectations in September as we expect working capital levels to decline with lower revenues.

Kenny Wilson: We also now expect interest expense to be lower this year in the range of $250 million to $260 million compared to our expectations in September as we expect working capital levels to decline with lower revenue.

All of these actions gives me confidence that we will upset lower income and deliver poor earnings for F-WI-24 to be an excess of $9 per share.

Kenny Wilson: All of these actions gives me confidence that we will offset lower income and delivered core earnings for FY 'twenty four to be in excess of $9 per share.

And our cashflow outlet for the year remains robust and we have committed to delivering a just a free cashflow in excess of $1 billion in FY 24.

Kenny Wilson: And our cash flow outlook for the year remains robust and we are committed to delivering adjusted free cash flow in excess of $1 billion in FY 'twenty four.

In my view, Jabil is well positioned to navigate the current economic environment, evidence by our performance over the past several years.

Kenny Wilson: In my view Jabil is well positioned to navigate the current economic environment evidenced by our performance over the past several years.

We are not only well-diversified, but also markedly more resilient than we were several years ago, due to our intentional efforts to invest and align our resources with areas in key end markets, which are undergoing multi-year secular growth.

Kenny Wilson: We are not only diversified but also markedly more resilient than we were several years ago due to intentional efforts to invest and align our resources with Erez in key end markets, which are undergoing multiyear secular growth.

Thank you for your time today and for joining us this morning. I'll now turn the call over to Adam.

Kenny Wilson: Thank you for your time today and for joining us this morning.

Speaker Change: Now turn the call over to Adam.

Adam Berry: Thanks, Mike.

So as you can see, we remain well positioned and extremely bullish on the future of J.B.

Adam Berry: So as you can see we remain well positioned and extremely bullish on the future of Jabil.

Thank you for your time, operator, we're now ready for Q&A.

For your time, operator, we're now ready for Q&A.

Thank you. Now we can conduct a question and answer session. If you'd like to be placed in the question, Q, please press star one on your telephone keypad. Once again, that star one to be placed in the question, Q, and star one, star two, if you that should be removed from the Q. One moment please.

Speaker Change: Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad. Once again Thats star one to be placed in the question queue and star wont start to if you like to be removed from the Q1 moment. Please while we poll for questions. Our first question today is coming.

Our first question today coming from Rupal Bhattacharya from Bank of America. Your line is now live. Morning.

Speaker Change: Blue button.

Speaker Change: From Bank of America. Your line is now live.

Good morning, Thank you for taking my questions.

Can you address how you're managing risk in this environment?

Speaker Change: Can you address how you are managing risk in this environment.

For example, what gives you confidence in the 31 billion and $9 plus an EPS guidance for fiscal 24, given you likely have limited visibility in the second half? The question would be how weak and revenues be for you to still hit that $9 plus EPS target for this year? And can you also comment on any risk with Jables-owned inventory?

Speaker Change: For example, what gives you confidence in the 31 billion and $9 plus in EPS guidance for fiscal 'twenty four.

Speaker Change: Given you likely have limited visibility in the second half the question would be how weak and revenues be for you to still hit that $90 plus EPS target for this year and can you also comment on any risk with Jabil is on inventory.

And I have a follow up thank you.

Hey, thanks, Ruth. So first, let me take the last part of your question there, which is I think our model is relatively consistent that we don't take inventory risk. So everything that we buy is underwritten by a forecast or a purchase order. So we're pretty comfortable in that. And if you look at where we are in Q1, with the slowdown at 50 days, you don't still end this reading in and so we're pretty constant there.

Speaker Change: Thanks.

Speaker Change: So firstly, let me take the last part of your question there, which is I think you know our model is relatively consistent that we don't take inventory risk. So everything that we buy is underwritten by a forecasted a purchase order. So you know, we're we're pretty comfortable about it and if you look at where.

Speaker Change: We out in Q1, you know what with the slowdown at 50 days.

Speaker Change: You guys still industry, leading it and that's what we're pretty confident there.

If you look at the way our companies set up, we run divisions, we get division leads, we'll then get a leadership team to support that. So we're pretty intimate with our customers. All of our teams have been very, very active.

Speaker Change: If you look at where our company is set up we run divisions spoken division leads and <unk> got a leadership team to support that so so we're pretty intimate with our customers all of our team have been very very active with our customer.

with a customer base you're looking at what happened to Q1, what's going to what's happening for the balance of the year and the feedback although new units with different impacts and different end markets.

Speaker Change: Customer base Youre looking at what happened in Q1, what's going to what's happening for the balance of the year.

Speaker Change: And the feedback, although nunes with with different impacts in different end markets.

What we see is relatively consistent and incidentally myself, I mean, I've been in Europe and Asia and over the last month meeting a lot of our customers also.

Speaker Change: What we see is relatively consistent and incidentally myself I've been in Europe and in Asia.

Speaker Change: The last month's meeting a lot of our customers also so the feedback is and remember we get forecast 12 months forecast pretty much for all of our customers. We see the fees, we look at what a purely on what they're selling.

So the feedback is, and remember, we get 4 casts, 12 runs, 4 casts, pretty much for all of our casts.

We see their feeds, you know, we look at what they're cooling and what they're selling. So the feedback generally is, look.

Speaker Change: So the feedback generally as Luke.

We expect the next couple of quarters to be in the entry correction and we think beyond that we're in decent shape. And we've baked that into what we see for the back half of the year. Did the elephant like to emphasize is that in the discussions we're having?

Speaker Change: We expect the next couple of quarters to be inventory correction and everything beyond that where we are in decent shape.

Speaker Change: And we've baked that into what we see for the bucket back half of the year.

I'd like to emphasize is that in the discussions we're having.

Speaker Change: Times like this.

Ultimately can be good for us from a consolidation perspective. You know, so we're pretty active in a number of discussions with our customers about how can we make their business easier by helping them consolidate supply chains so that their business has simpler to manage.

Ultimately can be good for us from a consolidation perspective, so we're pretty active in a number of discussions with our customers about how can we make their business easier by helping them consolidate supply chain. So that the business is simpler commodity so I mean, I would say that what we're really close with our customers. The data we get is pretty consistent.

I mean, I would say that we're really close with our customers. The data we get is pretty consistent. We're more on through really closely. I mean, we'd like for the image to be sold through, but it's not. And when we think it will be over the next couple of quarters. But we'll be heading into our guide for Q2 for the balance of the year.

Speaker Change: We're monitoring it really closely.

I mean, we'd like for that mix it can be sold through but.

Speaker Change: When we think it will be over the next couple of quarters, but well baked that into our guide for Q2 for the balance of the year.

and rupture if i could just out if you look at our uh... revenue while we've taken revenue down by two and a half billion dollars about a billion of that is the first time

Speaker Change: And if I could just add if you look at our revenue while we've taken revenue down by $2 billion of about $1 billion of that is the best time, so they're not taking the second half is absolutely going to recover we're still being conservative about.

So we're not taking the second half as a absolute amount of cover. We're still being conservative about the second half of the year, about a billion and a half coming out. Visibility is a little limited right now. Not from our perspective, or from our customers perspective as well. So we think what an $1.5 billion per second half is appropriate at this stage. And then if I can, let me just walk you through.

Speaker Change: The second half of the air <unk> billion and a half coming out.

Speaker Change: He's a little limited right now not from our perspective from our customers.

Speaker Change: Expected as well so.

One 5 billion per second half as is appropriate at this stage and then if I can let me just walk you through how we expect EPS to change because this is a very critical and important piece. If you look at what we provided in September we decided the range of 939 17, if I take a midpoint of 930.

how we expect EBS to change. Because this is a very critical and important piece. If you look at what we provided in September , we'd say the range of 9.30 to 9.70. If I take a midpoint of 9.50 and start from there, the revenue loss of about a $1.5 billion.

And our stock from that.

Speaker Change: Revenue loss about a bit.

Speaker Change: And impacts us by roughly $1 20, <unk> hadn't that is a that.

Impact says by roughly $1.20. And that is...

That is sort of the Deleveraging when you're growing here on year Especially in the four end markets that we've been focused on in automotive healthcare Renewables cloud. We're growing here on year which not going down so when you grow here on here your

Speaker Change: That is sort of the deleveraging when you're growing year on year.

Especially in these four end markets that we've been focused on in automotive health care renewables cloud like growing year on year, which started going down. So when you grow year on year no deleverage. It is very limited you can actually push out a whole bunch of investments and costs and ramps.

It is very limited. You can actually push out a whole bunch of investments and costs and ramps.

to quarters out from here. So there's a little bit of no answer that most people are ignoring that we're in the right end markets, all of them are still showing growth year on year. I'll be at lower levels, but still year on year growth. Some of the lower margin businesses, even if you double...

Speaker Change: Until two quarters out for the year. So there's a little there's a little pick up nuance here that most people are ignoring them that we're in the right end markets. All of them are still showing growth year on year, albeit at lower levels, but still year on year growth some of the lower margin businesses, even if you double the deleveraging.

The deleveraging ramp from a 304% to 8%, you still, we're losing some level of income, but it's not that much. The margin.

Speaker Change: There are three or 4% to 8% and you still got we're losing some level of.

Speaker Change: Some level of income, but it's not that much to the margin.

It's not that impacted on the lower margin now businesses and then I talked a little bit about Bibax and my Propedium ox we completed a 500 million

Speaker Change: It's not that impacted on the lower margin businesses, and then I talked a little bit about buybacks in my prepared remarks, we completed a 500 million.

Dollar buyback in September . That was huge.

Speaker Change: Total buyback in September Iraq that was huge guy that was the biggest buyback lease up or down in a single quarter Uh huh.

God that was the biggest bio-vaculate ever done in a single quarter. And what I mentioned in my primary marks is that we are going to double down on that. So in September .

What I mentioned in my prepared remarks is that we are going to double down on that so in September we'd anticipated doing an additional $1 2 billion in 'twenty, four and 800 million and 25 now all of that 2 billion leftover is going to be done in FY 'twenty. Four we think this is a good time to put appropriate time.

We'd anticipated doing an additional 1.2 billion in 24 and 800 million in 25.

Now all of that 2 billion left over is going to be done in FY24. We think this is a good time and it's a good appropriate time to it when when

Speaker Change: Do it when a win win.

when there's a slowdown going in, we still feel very highly undervalued.

Speaker Change: When when there's a slowdown going in we still feel we're a highly undervalued.

And by that's the best return we can get from our pre-cash flows.

Speaker Change: Buybacks is the best return, we can get jobs from our free cash flows from the proceeds of the funds that we will get once the mobility divestiture was done so there's a bit of a long winded answer, but you can pick up 150, <unk> quite easily between buyback and lower interest cost as well as interests will be lower because it.

From the proceeds of the funds that we will get

Once the mobility, the vestiture is done. So it's a little bit of a long-winded answer, but you could pick up 40, 50 cents quite easily between buyback and lower interest cost as well. Interest will be lower because working capital will be lower because of lower revenue. Plus, up to yesterday's news, interest rate.

Working capital will be lower because of lower revenue plus after yesterday's news if interest rates.

Do what the pet is saying. I think there's a little bit of pickup there as well So there's a whole bunch of puts and takes but we feel pretty strong about the nine goals

Speaker Change: Do what the fed is saying I think theres, a little bit of pick up there as well. So there's a whole bunch of puts and takes but we feel pretty strong about the $9 plus.

Okay, thank you for all the details there, Mike and Kenny. I appreciate that. Let me ask you a follow-up question, which is really the same question for physical 25. I mean, you're guiding for 1065 plus EPS and you're maintaining the operating margin target of 5.6% plus.

Speaker Change: Okay. Thank you for all the details there, Mike and Anne Kenny.

Speaker Change: I appreciate that let me ask you a follow up question, which is really the same question for fiscal 'twenty Fives, I mean, you're guiding for 10, 65, plus EPS and you're maintaining the operating margin target of five 6% plus what again. The question is what revenue level do you need to see in fiscal 'twenty five to be able to hit that 10 65.

What, again, the question is what revenue level do you need to see in fiscal 25 to be able to hit that 1065 target? And you mentioned that you can push out some investments, but is there any risk to doing that in terms of hurting future revenue growth? So just your thoughts on maintaining the guidance that you have for fiscal 25 and how confident you are in that. Thank you so much, I appreciate it.

Speaker Change: Target and you mentioned that you can push out some investments, but is there any risk to doing that in terms of hurting future revenue growth. So just your thoughts on on maintaining the guidance that you had for fiscal 'twenty, five and and and how confident you are in that thank you. So much I appreciate the details yes.

Yes, so Rupuo, if you look at a Q3 and Q4 run rate, obviously provided 31 billion has the annuals.

If you look at our Q3 and Q4 run rates, obviously, they provided 31 billion as Daniel.

revenue number we've done Q1 and Q2 so you can extrapolate the second half of the year. If you take those run rates into F-25, some small level of recovery, we're not even thinking of a big recovery coming through. Some level of new business which is already in the pipeline by the way so we're working on multiple

Revenue number that we've got in Q1 and Q2. So you can extrapolate the second half of the year. If you take those run rates into FY 'twenty five or some small level of recovery, we're not even thinking up a big recovery coming through some level of new business, which is already in the pipeline by the way. So we're working on multiple.

new business wins and overall if you even from a smaller base if you grow by 4.5 fix per cent

Speaker Change: New business wins.

Speaker Change: And overall the Q, even from a smaller base if it grew by 45, 6%.

The margin we're going to be doing 5.4

Speaker Change: The margin, we're gonna be doing $5 four at least at the midpoint from five three to five five that we sat in 'twenty four it's it's it's five.

at least at the midpoint from 5.3 to 5.5 that we said in 24, it's, yeah, 5.6% in 20% of the dollar strength.

Speaker Change: Five 6% in 'twenty five is not a stretch.

So margins, we expect that to be higher. If you look at the low ovasso, we'll have not only an FY24 as a result of us doing the entire $2.5 billion shape repurchase authorization in 24. There's an impact in 25 as well, because you're getting the entire ovasso impact in 25. So overall, I think FY25 is in really good shape.

Speaker Change: Margins, we expect that to be higher right. If you look at if you look at the lower left so we'll have not only in FY 'twenty four as a result of us doing the entire $2 5 billion dollar out.

Speaker Change: Share repurchase authorization in 'twenty four it doesn't impact in 'twenty, five as well because youre getting the entire lasso impact in 'twenty five so overall I think FY 'twenty five is.

Speaker Change: As in isn't really a good shape.

Speaker Change: Okay. Thanks for all the details.

Thank you father

Speaker Change: Thanks Rupert.

Thank you. Next question is coming from Stephen Fox from Fox

Speaker Change: Thank you next question is coming from Steven Fox from Fox Advisors. Your line is now live.

Hi, good morning. I just wanted to follow up on some of the comments you just made on the

Steven Fox: Hi, Good morning, I just wanted to follow up on some of the comments you just made on the the revenues and how are you know how it is playing out by the different served markets. So you mentioned that new program costs are down so I guess, you're seeing push outs in certain markets. But then you also mentioned that customer forecasts are coming down which.

the revenues and how it's playing out by the difference to our market.

So you mentioned that new program costs are down. So I guess you're seeing push-ups in certain markets. But then you also will mention that customer forecasts are coming down, which I assume is for existing programs mainly. So I was wondering if you could sort of dissect.

I assume is for existing programs, mainly so I was wondering if you could sort of dissect where not every single line item, but just sort of big picture, where youre seeing more new program push outs, and why and where it's more related to current end demand and then I had a follow up yes.

where, you know, not every single line on it, but just sort of big picture where you're seeing more new program pushouts and why, and where it's more related to current end demand. And then I had to follow up.

Yeah, thanks, thanks, Steve. So I would say, I mean, if you want to just, if I run through our end markets, just to give you some color.

Speaker Change: Yeah. Thanks, Thanks, Steve So I would say I mean, if if we were if you wanted to just if I run through our end markets just to give you some color.

So, like, you know, so 5G is obviously soft and you see that from the customers that we serve, you know, are slow down in end markets there, our network and switching business. We see, you know, the kind of campus and enterprise space softer with an inventory block, but the...

Speaker Change: So it's like you know so <unk>, obviously soft and you see that from the customers that we serve you don't slow down and then and then market sphere.

Speaker Change: Our network and switching business, we see you know what we can accomplish and enterprise space software with an inventory glut, but the well.

You know, we're really going great guns and you know, accelerated switching around the AI space. So that's been pretty positive for us in healthcare, or those down, but far more meta-vases are up. And then an auto, which I think is a part of in terms of your question about new products. We see the new products can push out there to some degree.

Speaker Change: We're really going great guns, and accelerated switching around the eye space. So that that's been pretty positive for us in health care.

Speaker Change: Off those better and bought a farm on med devices Iraq.

And then in auto.

Speaker Change: What you think is a part of it in terms of your question about your products, we see that new products getting pushed out do you have to some degree.

You know what I would always say is that I don't have always said is that we think our auto business is going to be up into the right, but it's not going to be linear. It's going to be lumpy and we see that and you know if you look at the auto market where

Speaker Change: You know what I would always say is that although we've always said is that we think our auto business is going to be up into the right, but it's not going to be linear it's going to be lumpy and we see that and you know and if you look at the auto market we are.

People are saying that expectation is it's going to grow 20, 30%, but you look at inventory and then the lots right now. So we see some pressure out in order more of although to make a earlier point we're still growing pretty nicely there. And then on renewables, so we look at the residential slowing down with interest rates effectively, commercial still going reasonably okay. We see a kind of slowdown in energy storage as people wait for the IRA to really get better then.

Speaker Change: People are saying that you know the expectation is it's going to grow 20% people are saying, but you look at the inventory and then the launch right now so we see some push out in an automotive although it can make a failure point, we're still growing pretty nicely. There and then on renewables. So we look at you look at the residential slowing down with Amtrak streets affair.

Commercial still going reasonably okay.

Speaker Change: That kind of slowdown in energy storage is as people wait for the Iot to really get better then.

But we think the back wall gear we're going to recover relatively quickly there after. So I think that's some of the key in markets. I mentioned in cloud where AI is really driving our cloud business, we're operating in a new facility to support that. So we're up there.

Speaker Change: But and but we think the backlog of work when it was going to cover them relatively quickly thereafter, so I think if I I mean, that's some of the key end markets I mentioned inquiries, where AI is really driving our cloud business you know what I'll tell you that our new facility and to support that so you know, we're we're not be here.

So generally, renewables is a little bit softer with some new product and being delayed. We do see consolidation in the renewable space which you think is going to help us for sure, as the industry recovers there. And then in autumn, it's just a push out of some orders. So hopefully that answered your question.

So generally renewables is a little bit softer with some new products and being delayed we do see consolidation in the renewable space, which you think is going to help us for sure.

As the industry recovers.

Speaker Change: And then in automotive is just appreciate it off some orders by that so hopefully that answered your question.

and if i can get a good look at the these uh... i think everyone's senior chopper and everyone seem that the the increased uh... inventory that dealers et cetera i think the early adapters have already played out and they've got the heeves it now becomes a question of cost

Speaker Change: Yes.

Speaker Change: If you look at E vs I think everyone's.

Speaker Change: The Choppiness everyone has seen the increased inventories at dealers et cetera, I think the early adaptors of already played out and they've got their E vs. It now becomes a question of cost.

All the OEMs, all the EED companies are going to try and get their costs down. Who do you go to when you want to get your cost down to an ELS company?

All of the Oems all the all the companies are going to try and get the cost out who do you go to when you wanted to get your cost down to an E&S company. So this value proposition that <unk> provides from a from a E. D. A from an E D manufacturing perspective, we're well positioned for E visa well positioned.

So this value proposition that EMS provides from a...

from an ED manufacturing perspective, where well positioned for EDs or well positioned for hybrids. If you look at the battery management systems, the compute modules, the optics, all of that, we're in a good...

For hybrid is if you look at the battery management systems, the compute modules.

Speaker Change: The uptake so all of that we're in a good space to actually provide some value to our Oems who have to now take that cost down a bit because that's the second wave of EV will be cost base not about the early adoption.

base to actually provide some value to OEMs who have to now take their costs down a bit because that's the second wave of EV will be cost based, not the early adoption wave that we just wrote a few quarters of.

Speaker Change: Wave that we just rolled up you are you a quarters ago.

That's very helpful. And then just as a follow up, Mike, I know you're still saying 1 billion plus for free cash flow, but off of the November announcement, if I just change the revenues functions and kept my working capital turn numbers, that the lower sales was like worth $200 million more for cash flow by my calculation. Is that the type of sort of change in free cash flow we can see off of the revised guidance or are my message?

Speaker Change: Great. That's very helpful. And then just as a follow up Mike I know, you're still saying 1 billion plus for free cash flow, but also of the November announcement, if I just change the revenue assumptions and kept my working capital turn numbers I doubt that the lower sales was like worth $200 million more free cash flow by them.

Speaker Change: My calculation is that the type of sort of change in free cash. So we can see off of the revised guidance or am I missing something.

So obviously you're a part of pre-cashlers income, and when you lose to $1.5 billion, you do lose income, even though you're margin.

Speaker Change: So obviously, a part of free cash flow as income, Steve and you need to do is try to have $1 billion you do lose income even though your margin.

uh... is maintained the dollars to uh... come out so there's an offset you're absolutely right on the work capital working capital does go down uh... and that is sort of baked in but you also lose the income the other area that we're looking at is cap extra very carefully uh... we've always been disciplined in these times we're even more disciplined and the perpushing out

Speaker Change: <unk> maintained the dollars to come out so theres an upset you you're absolutely right on the working capital working capital does go down and that is sort of baked in but you also lose the income the other area that we're looking at is capex out very carefully we've always been disciplined in these times, where even more disciplined than the port pushing have investments.

investments were pushing out some level of CapEx that would help free cash flows while in early days, see that's why.

Speaker Change: Pushing out some level of Capex are that would help free cash flows while in its early days. So that's why we stuck with the 1 billion plus but do I expect it to be higher than that yes.

We've stopped with the 1 billion plus part. Do I expect it to be higher than that? Yes. Great. Let's help.

Speaker Change: Great. That's helpful. Thank you.

Excuse me.

Thank you. Next question is coming from Matt Sheryl from Steveholt. Your line is now...

Speaker Change: Thank you next question is coming from Matt Sheerin from Stifel. Your line is now live.

Yes, thank you. I had just another question related to inventories and free cash flow. You talked about that gross number of days, I think, 78 days, which is down. And the net number, I guess roughly 25% of your inventory is backed by customer deposits. But given that lead times are pretty short for components, wouldn't we assume that customers will want that cash back as you reduce inventory, you have to pay them back and they don't need to give you more cash deposits because there isn't that need for buffer or the shortened situation that we saw a couple years ago. And how does that impact the future free cash flow?

Yes. Thank you.

Matt Sheerin: Just another question related to inventories and in free cash flow.

Matt Sheerin: You talked about that that gross number of days I think 78 days, which is down and the net number I guess roughly 25% of your inventory is backed by customer deposits.

But given the lead times are pretty short for our components.

Speaker Change: Wouldn't a wouldn't we assume that customers will want that cash back in other words as you as you reduce inventory you have to pay them back in and they don't need to give you more cash deposits because because there isn't that that need for buffer or the or the shortage situation that we saw a couple of years ago and how does that impact.

The future free cash flow.

So let me just answer that in a slightly different way than you've asked it. I expected, I'm always expected in Madrid days between the 55 to 60 day range. When inventory goes...

Speaker Change: So let me just answer that in a slightly different way than you've asked it I expected them always expected inventory days between the 55 to 60 day range when inventory goes up the inventory deposits call up and say what inventory they start coming down or normalizing, yes, there is a level of thought.

The inventory deposits go up in sick. When inventory days start coming down and normalizing, yes, there is a level of return on the inventory deposits. So a quick answer to your question is, are you gonna see a pop in pre-cash flow because inventory's gonna go down the answers now? It's not a pop in pre-cash flow. It will still be in the 55 to 60 days. It's just a matter of the gross number going down and the inventory deposits going down in sick.

Speaker Change: Return on the inventory of deposit so a quick answer to your question is are you going to see a pop in free cash flow because inventories are going to go down the answer is no. It's not a pop in free cash flow.

Speaker Change: It will still be in the 55 to 60 days, it's just a matter of the gross number going down on the inventory of deposits going down in St.

So that's something we're good at managing, that's something we have really good relationships with customers, and we're always working on that particular problem. So no fee cash flow won't get a pop. It's already baked into our numbers at that 5560, and that's where it will stay.

So that's something we're good at managing that something we have really good relationships with customers and we're always working on now on that particular problem. So no free cash flow wouldn't get a pop.

Speaker Change: It's already baked into our numbers at that 50, 560, and Thats, where it will stay.

Okay, thank you for that. And then can you just back to the pre-announcement from a couple of weeks ago, that came a couple of months after you had guided for the November quarter, and then you saw obviously a big cut across your customer base. And you seem to be lagging some of your competitors in terms of what they saw, right? We saw some of one of your big competitors a month earlier, you know, take down numbers in a similar way. So what do you think the difference is in terms of, I know that the supply, we were seeing a rolling correction, right, different end markets. But why do you think you're seeing it later than some competitors? Is it because of end markets or because of other reasons?

Speaker Change: Okay. Thank you for that and then Kenny just back back to the the pre announcement from a couple of weeks ago. If that came a couple of months. After you had guided for the remember a quarter and then you saw obviously a big cut across your customer base and you seem to be lagging some of your competitors in terms of what they saw.

Speaker Change: All right. We saw some one of your big competitors are months earlier, you know take down numbers are in a in a similar way. So what do you think the differences in terms of and I know that the supply you weren't seeing a rolling correction rate different end markets, but why do you think youre seeing it later than some competitors is it because of end markets or because of other <unk>.

I mean, I think there's a little bit of when people report the results and from our perspective, we've seen that late in our quarter. They did mark us on New Inns to some degree.

Speaker Change: Yeah I mean.

Speaker Change: I mean, I think there's a little bit of when people report their results in and and brought it from our perspective, we've seen that late in a quarter.

Speaker Change: You know where where in some of the dead markets are new into some degree as other customers, but generally we've seen that broad based across our.

as of the customers, but generally we see it broad based across our customers. And we also see that a lot of our customer report.

Speaker Change: Our customers and we also see that a lot of our customer report.

you know, calendar quarters and it was really the back end of the announcements we have the data actions to reduce the right look. So I mean, I would push back quite strongly that our visibility into our customer base is disconnected and then we don't do a good I could have jolved that as our competitors to be honest.

Speaker Change: You know calendar quarters, and it was really the backend of author announcements we took actions to.

Speaker Change: Alright, so I I mean, I would I would push back quite strongly about that.

Speaker Change: This ability into our customer base has disconnected.

Speaker Change: We don't do a good job of that as our competitors to be honest.

I think it's just time and based on, we got that feedback toward the back end of our quarter. So that would be my answer. Okay, I appreciate it. Yeah, I was just accusing that. I was just trying to figure out the perspective. Thank you very much.

Speaker Change: I think it's just payment based on it was that we got that feedback in towards the back end of a quarter. So that would be my answer okay.

Speaker Change: Okay I appreciate that yeah, I wasn't suggesting that at all I was just trying to figure out that the perspective. Thank you very much.

Speaker Change: You're welcome.

The next question is coming from Summary Strategy from J.P. Morgan, your line is online.

Speaker Change: Thank you next question is coming from Simeon Chatterji from J P. Morgan Your line is now live.

Simeon Chatterji: Hi, good morning, Thanks for taking my questions. If I can just start with one on the end markets and just wanted to confirm for US I know you got them interesting broad based weakness that you saw across your end markets, but just trying to rank order the weakness that you're seeing and what you're embedding in that sort of blend hopping limited.

If I can just start with one on the end market and just want to confirm for I know your

market but just trying to rank all of the weakness

a guy looks like it's more auto's and industrial and semi-cap and we're going to one confirm that I'm sort of interpreting that right.

Speaker Change: <expletive> in the guide it.

Speaker Change: It looks like it's more autos and industrial and semi cap and.

Speaker Change: One good film that I'm sort of interpreting that right secondly, how do you.

Overall you describe a lot of the weakness as temporary but how do you address concerns of the EV market in particular when I think the average investor out there is thinking that EV penetration looking 5 years out is now going to be

Speaker Change: Just what are you describing a lot of the weakness is temporary but how do you address gone so until the EV market in particular.

Speaker Change: I think the average investor out there I was thinking that you've you been accretion looking five years out does not want to be probably a lot lower than what it was expected to be just given sort of the demand profile, we are seeing though so.

Speaker Change: He talks about how this changes the more sort of long term growth profile on Evs for you and I have a quick follow up thank you.

Speaker Change: So let me take the easy one first.

We've always, I mean, we've grown 40% and we've said that that would go there in this year.

Speaker Change: I mean, we've always I mean, we'd be growing 40% and we.

You said that that would slow down this year.

I mean, we're still bullish on the EV space in the longer term. And remember that, although the demand moves up and down, and we look at this in the longer term, 5, 6, 7, 10 years. So from our perspective, and then what we do is we look at, where does the demand patterns, and we've got a global footprint, we do things consistently across the globe. So...

I mean, we are still bullish on the EV space in the longer term and remember that although.

Speaker Change: Although the demand.

Demand moves up and down then we will look at this in the longer term 567 10 years. So from our perspective, what we do is build a cat we list the demand patterns and we've got a global footprint, we do things consistently across the globe. So.

The fact that there's growth in Asia and it slows down in other markets means that we've got a footprint in each of those regions, the customer base that we have is really positive. We've got a really good customer base focused in North America.

Speaker Change: The fact that there is growth in Asia, and it slows down in other markets. It means that we've got a footprint in each of those regions.

Speaker Change: The customer base that we have is really positive is really.

Speaker Change: We've got a really good customer base.

Speaker Change: Focus in North America, Europe, Indonesia, So we.

We're able to adapt to changes in demand cycles. And if you look right now in China, where the demands are picking up, we build EVs in China. We've got multiple customers here. So...

Speaker Change: We were able to adapt to changes in demand cycles, and if you look right now in China, where the demand is picking up you know we'd be bolt evs in China, We've got multiple end customers here. So.

We think the long-term trend is good there. We think within the right areas, we think within the right markets and we think we've got the right capabilities. So we think it's going to be up into the right. It's going to be 20%, 30%, 40%. We think we can adapt to any of those numbers. So we're pretty confident in the long term of our EV strategy.

Speaker Change: We think the long term trend is good there we think we're in the right areas, particularly in the right markets and we think we've got the right capabilities. So we think there's going to be up into the right is it going to be 20%, 30%, 40% and we think we can adopt it to any of those numbers. So we.

Speaker Change: We were pretty confident in the long term.

Speaker Change: <unk> strategy.

Speaker Change: Yeah.

So in terms of other markets, you know, we're still growing, I think we said in prepare remarks that, you know, our oral business is going to grow at 11%, healthcare and packaging, 6%. So...

Speaker Change: So in terms of other markets. You know we were still we're still growing I think we said in prepared remarks that you know our auto business is going to grow up 11% and health care and packaging, 6%. So.

As Mike mentioned, the areas of our business that were really focused and grown with secular tailwinds, we think are still good time to grow renewables at 7%. So, yeah, we think that we're in a good spot across all of those end marks.

Speaker Change: As Mike mentioned the areas of our business that we're really focused on growing the secular tailwind as we think.

Speaker Change: They'll continue to grow renewables at 7%. So yeah, we we think that we're in a good spot and across all of those end markets.

And for me follow up, I, the question that we're getting most from investors and margins today.

Speaker Change: And for my follow up Al.

Speaker Change: The question that we're getting most from investors and margins today as you mentioned the push out in terms of investment when you think about margin guidance for next year is the assumption that some of those investments.

Speaker Change: We'll need to sort of be put back into the model next year as you're pushing the modal fiscal 'twenty four or.

is the margin guidance maintained despite as

Speaker Change: Is it is the margin guidance is maintained despite as you make those investments come back next year. Thank you.

So I think the way to think of this is that the revenue comes out, the cost comes out. When the revenue comes back, as we expected to be sometime in FY25, those costs will come back, but there will be an offset. So net net, the impact on margin will be neutral. I think we've said 5.3 to 5.5, but I think we've put a remember, we've changed the construct of...

Speaker Change: So I think the way to think of this as the revenue comes out of the cost comes out when the revenue comes back as we expect it to be sometime in FY 'twenty five those costs will come back, but there will be an upset so net net.

Speaker Change: The the impact on margin will be a neutral I think we've said $5 three to 5.5 I think we've got a remember you can change the construct.

of our business completely. The poor end markets do not underestimate that those continue to grow. It's not by chance that we happen to be in those poor end markets over the last few years. We've intentionally focused on those end markets because we always thought those are the long term secular end markets. I think overall

Speaker Change: Oh PA business completely yeah. The four end markets do not underestimate that those continue to grow it's not by chance that we happened to be in those poor market itself over the last few years, we've intentionally focused on those end markets because we always thought there was a long term secular.

Speaker Change: Secular end markets I think overall.

The way to think about cost pushouts, it's completely dependent on whether that revenue is there. The revenue suddenly comes back, this cost will come back. So I'm not saying 5.3 to 5.5 will suddenly jump up if those revenues come back. We have other plans on making margin continue to go up as we continue to change the mix as we continue to add new operational efficiencies, the automation side, AI, ML.

Speaker Change: The way to think about cost push outs, it's completely dependent on whether that revenues that the revenue side. When it comes back those costs will come back so I'm not saying a $5 three to 5.5 is suddenly jump off of those revenues come back. We have other plans are making margin continue to go up as we are continuing to change the mix as we continue to.

Speaker Change: Add a new operational efficiencies the automation side AI ml.

robotics, all of that will continue to provide on an annualized basis. It might be at least 10 to 20 basis points by itself. The mix of the business, the revenue piece will provide the balance. So, yeah, I think the push-out is completely revenue-driven.

Speaker Change: Robotics all of that will continue to provide are on an annualized basis. It might be at least 10 to 20 basis points by itself and the mix of the business. The revenue piece will provide the balance SaaS I, yes, I think the push outs is completely revenue driven.

Speaker Change: That's great. Thank you.

Thank you. Next question is coming from George Wang from Barclays, your line is in a line.

Speaker Change: Thank you. Your next question is coming from George Wang from Barclays. Your line is now live.

Hey guys, yeah, just kind of want to double click on the connected devices. You guys didn't elaborate too much in the prepare remark. Just, you know, you guys took down, you know, now expecting down 25% was 15%.

George Wang: Oh, Hey, guys.

George Wang: Just kind of want to double click on the connected devices you guys didn't elaborate too much in the prepared remarks, just you know you guys took down now.

George Wang: Now expecting about 25%.

last time and the kind of heels of down 15% last year for 23, just curious kind of who any mostly brought based slow down within the connected devices or kind of who you know one of the the few customers kind of you know driving the weakness maybe you can kind of double click there.

George Wang: King.

George Wang: Last time and kind of all the heal itself you know down 15.

George Wang: 15% last year by 23, just curious kind of little any mostly broad based slowdown within the connected devices of all kind of who you know well that the few customers kind of driving the weakness maybe you can kind of double click there.

Hey, George, thanks for the question. So we always talk about connected devices as effectively what we do for a consumer. You know, we view that as being an area where we can incubate capabilities that can support us across the rest of our business.

Speaker Change: Yeah, Hey, George Thanks for the question. So so we always talk about connected debates is effectively you know what.

Speaker Change: We do for consumer.

Speaker Change: That has been an area, where we can incubate capabilities that can support us across the rest of our business.

What we do find is that we've got to be quite selective there because any of it is...

Speaker Change: But what we do find is that we'll be going to be quite selective there because it's it's.

It's consumer, short life cycles, you know, you're dependent on some things and if products are successful or not, sometimes as an expectation in margins that the margins will be pretty tight for us. So I thought it's not a case of as de-focusing in that side of our business, but it's a case of as being selective in terms of the margin profile for some specific program. So I think you see, and you should see across our network, and I think to the previous question on margins, do you think in a share, when we got the opportunity off all your financial service institution today,

Speaker Change: As consumer short life cycles, you know you have depended on some things and if products are successful or not some things as an expectation in margins that the margins will be ob pretty tight for us. So.

Speaker Change: It's not a case of us be focusing in that side of our business, but it is the case it was being selective in terms of the the margin profile for some specific programs. So I think you'll see it and you should see across our network and I think to the previous question on margins.

Speaker Change: We are going to continue to.

focus our footprint and our people and our capabilities and areas of the business that we think will be a long-term executive support, our capabilities, and that our support our cash flows and margins. So I think in this instance, it's the case of, it's really maybe one or two other areas of our business where we're just choosing not to engage because we think that we can add more value for our customers with the capabilities in different end marks.

Focus our footprint and our people and our capabilities in areas of the business that we think will be a long term accretive.

Speaker Change: To support our capabilities and support our cash flows and margins. So I think in this instance, it's a case of Israel with maybe one or two other areas of our business. We are you know what we're just choosing not to engage because we think that that and we can add more value for our customers with the capabilities and different end markets.

Okay, that makes sense. The additional people could follow up just kind of in terms of the AI, the data center kind of in terms of the consignment model shift. How much additional margin you guys can extract from this consignment shift, obviously, it's the additive to the bottom line man, the kind of margin profile. And also maybe you can talk for kind of a slightly more just on the projects ramping within the AI, that's being a pretty popular topic with the masters nowadays.

Okay that makes sense I just ask one quick follow up just kind of in terms of that.

You know that data center kind of all in terms of the consignment model shifts.

Speaker Change: How much additional margin you guys can extract from this cause I'm gonna shift obviously, it's additive to the to the bottom line and that kind of all in the margin profile and also maybe you can talk about a ton of food slightly more just on the projects ramping waiting the AI, that's being a pretty popular topic I always think masters nowadays.

I think there's multiple ways of looking at the AI, the AI and the new GPUs that drive.

Speaker Change: I think there's multiple ways of looking at the Yale AI Yeah piece.

Speaker Change: And ER and ER and the new Gpus that drive.

Power requirements that drive space requirements. It's going to exponentially continue to sort of grow on an annual basis. The margin stack on what we do today will be relatively stable. It's the new services that we provide, the new value add that we'll be looking at in terms of liquid cooling, botanics. Those are the pieces that we think will be highly margined, I'm not

Speaker Change: Requirements that drive space requirements, Oh, it's gonna exponentially continue to sort of grow on an annual basis.

Speaker Change: The margin stack on what we do it today it would be relatively stable. It's the new services that we provide the new value added that we'll be looking at in terms of a.

Speaker Change: Liquid cooling photonics those are the pieces that are we think will be highly margin accretive I'm not suggesting that will happen immediately but over time I do expect the AI cloud datacenters.

suggesting that will happen immediately, but over time, I do expect the AI Cloud Data Centers, the margin to go up that entire stack to be more value-ad based.

Speaker Change: The margin to go up that entire stack ER to ER to be more value ad based.

Okay, great. Thank you.

Speaker Change: Yeah.

Back in next question is coming from David Vogue from UBS. Your line is now live.

Speaker Change: Thank you next question is coming from David vote from UBS. Your line is now live.

Great, thanks guys for squeezing me in. So maybe Kenny, one for you first, obviously since the pre-release, you've had a couple of weeks kind of go back and do sort of, I would imagine a deeper dive in terms of the categories and what your customers are saying. How do you frame sort of the inventory digestion? I know at the time you said, maybe one to two quarters and I think I heard you say two quarters. Is that kind of the latest feedback that you're hearing from your partners?

David vote: Great. Thanks, guys for squeezing me in so maybe Kenny one for you first you know obviously since the pre release you've had a couple of weeks kind of go back in and see sort of a I would imagine a deeper dive in terms of the categories and what your customers are saying.

Speaker Change: How do you how do you frame sort of the inventory digestion I know at the time you said you know what maybe one to two quarters and I think I heard you say two quarters is that kind of the latest feedback that you're hearing from your partners today, and then and then one for Mike on capital allocation I think I heard you say, you're going to do the entire $2 5 billion buyback.

today and then one from my on capital allocation, I think I heard you say you're gonna do the entire 2.5 billion buyback.

in fiscal 24. So I know you don't really don't talk about the following year, but what do you think that means for?

Speaker Change: In fiscal 'twenty for them. So I know you don't really you don't talk about the following year, but you know what do you think that means for.

Fiscal 25 in the context of your $10.65 P.S. guidance

Speaker Change: Fiscal 'twenty five in the context of your $10.65 EPS guidance reiteration. Thanks.

Speaker Change: Hey, David Thank you so on the inventory correction, David as I mentioned that.

David, thank you. So on the industry correction, David, as I mentioned, it was subsequent to meeting you in Phoenix. Our folks have been outbearing our customers as I have.

Speaker Change: Subsequent to meeting your in Phoenix, you know, what our folks have been beating our customers as I have.

I would say that the sentiment is fairly having to work, if anything marginally better, but still, in some areas, a quarter, and a lot of areas, a couple quarters. So it's relatively consistent with what we discussed in Phoenix. So no change to the negative, maybe just slightly more positive. But just to re-emphasize that.

Speaker Change: I would say that the sentiment certainly hasn't got worse famous and marginally better, but it's still you know in some areas a quarter and a lot of it is a couple of quarters. So it's relatively consistent with with what we discussed then and Phoenix.

Speaker Change: So no no change to the negative maybe just slightly more positive, but just to reemphasize that.

The discussions we're having, what we see is, we are seeing opportunities to, we are customers are looking to consolidate their supply chains with fewer suppliers than them. That's...

Speaker Change: The discussions we're having what we see is we are seeing opportunities to where our customers are looking to consolidate their supply chains with fewer suppliers and.

Speaker Change: Yes.

Positive for us long term positive for us.

And David from BIMAC, perspective, you're absolutely right. We're gonna try and get the whole 2.5 billion done now.

Speaker Change: And David from a buyback perspective, you're absolutely right, we're going to try and get the whole of $2 5 billion done Oh. This year that not only has a positive impact on the lifestyle in FY 'twenty or I think we've said $124 million 7 million last year by the end of 'twenty four and then for FY 'twenty five.

this year that not only has a positive impact on WASO in FY24, I think we've said 124 million to 127 million WASO by the end of 24. And then for FY25, we'll have a normalized buyback program. And if you look back...

Speaker Change: We'll have a normalized buyback program and if you look back at our history over the last 678 10 years.

and our history over the last six, seven, eight, ten years. We've done about 500 million a year, so it'll be, it'll be.

Speaker Change: We've done about 500 million, yes, that'd be a it'll be save again, we don't have the authorization from the board yet for that FY 'twenty five it's early days, but I would expect that to be in that $500 million range and when you add all the early buybacks and planning for lots of that Oh lessor was down 210.

Save again, we don't have the authorization we've board yet for that FY25 it's early days, but I'd expect that to be in that $500 million range. And when you have all the early buybacks in 24,

Must've had a lesser was down to 110.

uh... to one hundred and fifteen uh... depending on your price that sort of uh... it is it is the best use of our fund and i keep saying that uh... with our history uh... what we've done with last year's proves that out that we've been now we put out money for our mouth as uh... and we will continue to do so as we feel uh... we're still highly undervalue

Speaker Change: 215, depending on share price had set up.

It is it is the best use of our funds and I keep saying that our with our history.

Speaker Change: What we've done over the last few years proves that out of that we've been we've put our money where our mouth is that I believe will continue to do the size, we feel we're still highly undervalued.

And can I just make a quick follow up? I think Mike mentioned lower interest rates could have a stimulative effect on the business. Maybe Kenny, if you can kind of help us think about where do you think the most?

Speaker Change: And can I just make a quick follow up I think Mike mentioned, you know lower interest rates could have a stimulative effect on the business, maybe Kenny if you can.

Speaker Change: Help us think about where do you think the most.

impact could be felt by end market, which is the most sensitive to rates, you know, given your mix, I would imagine, you know, more of the renewables for sure. Right. Yeah, renewables for sure. I mean, if we look at our...

Impact could be felt by end market, which is the most sensitive to rates you know given your mix I would imagine you know more of the renewables for sure.

Speaker Change: Yeah Yeah.

Speaker Change: Renewables for sure I mean, if we look at it.

We've developed a really great capabilities in a renewable space.

Speaker Change: We've got we've developed.

Speaker Change: Hello can really great capabilities in the renewable space.

And we're kind of just waiting for, you know, things to bed down and guidance from, you know, through with the IRA, but also interest rates are a sure impact in solar rollouts and the residential space. So I would say out of all of our businesses, broad auto-ohel pulse also, obviously.

Speaker Change: And we're kind of just waiting for things to bear there then in guidance from from the get go through with the IRB, but also interest rates for shooter impact and solar rollouts in the residential space. So I would say out of all of our businesses auto Hail pulse also obviously.

But I think renewables would be the number one way we would expect to see a tailwind there.

Speaker Change: But I think renewables would be the number one we would expect to see a tailwind there.

I will also expect some level of enterprise level spent to improve. I think a lot of CFOs have been pulling back on purchases, enterprise level purchases, which interest rates going down, just the whole macro environment changes on that perspective.

Speaker Change: We expect some level of enterprise level spend to improve the I think a lot of CFO they've been pulling back on purchases enterprise level purchases.

Speaker Change: With interest rates going down it's just the old macro.

Speaker Change: And vitamin Cat changes on that are on that perspective. So we do expect that all other end markets to have an impact will it happen immediately yeah, probably not but all the time and it will have a positive impact for us and for almost every other company as well.

We do expect other end markets to have an impact. Will it happen immediately, probably not, but over time it will have a positive impact. For us and for almost every other company as well.

Speaker Change: Got it thanks guys.

Thank you. Our next question is coming from Melissa Fairbanks. From Raymond James, you're right, it's now live.

Speaker Change: Thank you. Our next question is coming from Melissa Fairbanks from Raymond James Your line is now live.

Hey guys, thanks very much. Talk about getting in under the wire. I'm curious about the comment that you've made or the comments that you've made on supply chain consolidation and renewables. I know supply chain services, this is one area that's driving more direct customer engagement in your business overall. So in renewables, are you working directly with these customers managing their supply chain or is this consolidation happening for their downstream?

Melissa Fairbanks: Hey, guys. Thanks, very much to talk about getting in under the wire.

Melissa Fairbanks: I'm curious [laughter] I'm curious about the comment that you've made a comment that you've made on supply chain consolidation and renewables.

Melissa Fairbanks: No supply chain services. This is one area, that's driving more like direct customer engagement and your business. Overall. So in renewables are you working directly with these customers managing their supply chain or is this consolidation happening further downstream.

Hey, Melissa. So I would disconnect the two a little bit. So what will, you know, would there be some announcements from other supply chain services? We just said that our supplier, some actually yesterday and today, which has been fabulous to meet with our suppliers.

Melissa Fairbanks: So.

Melissa Fairbanks: Disconnect the two a little bit so so what will you know whether it be someone who spends from us in supply chain and San Francisco, We just had our supplier summit actually yesterday and today, which has been fabulous to meet with our suppliers.

We've been talking supply chain services for a long time, and we're just putting the building blocks in, please, to make that material for us in the longer term, but obviously to support our customers.

Melissa Fairbanks: You'll be we'd been talking supply chain, San Francis for a long time, and we're just putting the building blocks in place to make that material flows and the longer term, but obviously to support our customers in terms of supply chain consolidation.

In terms of supply chain consolidation, what we're finding is that...

Melissa Fairbanks: What we're finding is that.

And it goes back to, I think, pre-COVID where the world thought that...

Melissa Fairbanks: And it goes back to I think pre cohort, where the world thought that.

Pinting diversification was good to have multiple suppliers, the dual source.

Melissa Fairbanks: Supply chain diversification was good so have multiple suppliers be dual sourced them.

And then people found out that that was hugely difficult to manage. So when you get dislocations like this, our customers think, how can I simplify my life? How can I simplify my world? I mean, people look at inventory relative to our peers and they're saying, well, maybe that's an indicator of that I should be safe with Jabel. And what we see is just...

Melissa Fairbanks: And then people find out that that was hugely difficult to manage so when you get dislocations like this.

Melissa Fairbanks: Our customers are thinking how can I simplify my life I've kind of simplify my world I mean people look at inventory relative to our peers, and they're saying well maybe be that size.

Melissa Fairbanks: I'd indicated all of that that I shouldn't be safe with that with Jabil and what we see is just.

Melissa Fairbanks: Discussions around.

Look, can you, can we, Matt, can you manage my supply chain? Can you build it in your sites? It gives me, you know, less people to engage with, as long as you can trust it and you can deliver. So it really is that dislocation that's driving those discussions and, you know, that's happened in multiple, if I look at,

Melissa Fairbanks: Can you remind can you manage my supply chain can you build in your your sites. It gives me you know less people to engage with as long as you can trust that you can deliver so it really is that M. Dislocation that's driving those discussions and then.

Melissa Fairbanks: That has happened.

Melissa Fairbanks:

Other times like this that what we found has been good for our business, if you look at the pre-to-post COVID. So we do expect that this will be good for us also in the longer term.

Melissa Fairbanks: Other times like this that I you know what we've found is being good for our business. You know if you look at the pre to post COVID-19. So.

Melissa Fairbanks: So we do expect that this will be good for US also in the longer term.

Melissa Fairbanks: Okay.

Maybe as a follow-up, I'm glad you mentioned Silicon Photonics a couple of questions ago. I think this acquisition is really interesting in terms of adding value, but we haven't really talked about it a lot. Does the acquisition of the Intel Silicon Photonics business, does this bring any revenue along with it? Or is it simply about bringing in more of the supply stack internally and it's already kind of reflected in your business?

Melissa Fairbanks: Alright, great.

Speaker Change: It was a follow up I'm glad you mentioned silicon Photonics, a couple of questions ago. I think this acquisition is really interesting in terms of adding value, but we haven't really talked about it a lot does the acquisition of the Intel Silicon Photonics business does this bring any revenue along with it or is it simply about bringing in more of the supply chain supply.

Speaker Change: My stack internally and it's already kind of reflected in your business and then longer term does this provide more of a competitive moat in AI.

And then longer term does this provide more of a competitive mode in AI? Yeah, so for...

Speaker Change: So for sure.

Let me just give you a little bit of background on that and then talk about what we're doing. We did a Mac physician in 2014 of a optical business, a small optical business with a token capability like we do. And we've been gradually building that and the key for us was it was in the tail-coast space, but it was always going to be focused on the data column space in the longer term, that's who we've seen the value.

Speaker Change: Let me talk about the let me just give you a little bit of background on that and then they can talk about what we're doing we did an acquisition in 2014 of our optical.

Speaker Change: That's just a small optical business was okay. It was a tuck in capability like we do and we've been gradually building that AR and the key for US was in the telco space, but it was always going to be focused on on the datacom space in the longer term, that's where we seem to value them.

So what we've been growing that capability, is not using material for us, but the capability is something that we think we can develop.

Speaker Change: So we've been growing that capability.

Speaker Change: Not usually material photos, but the capability is something that we think because we can develop them. So that's until opportunity is it really came out of a discussion with our clients provide us we are looking for us to look into this aggregate supply chains and want us to be more practical.

So this until opportunity is, it really came out of a discussion with our private providers where they're looking for us, they're looking to disaggregate supply chains and want us to be more vertical.

So we take up a capability that's got, you know.

Speaker Change: So we pick up a capability. That's got you know 400 gig with developing 800 gig and a $1 66.

400 gig, you know, we're developing 800 gig and in 1.60. So the technical team that come along with that will help us, as you know, really, really engaging in that technical.

Speaker Change: So the technical team that come along with that what will help us as you know really really engage in that.

Speaker Change: That technical roadmap.

What that does is I think it's a competitive mode because people do look for kind of minimise a number of suppliers and who can add more value. For sure, in the AI data centres, photonics is becoming more and more critical with power related. So we see all of that as a positive. I think that we have big sum of the revenues into our guide through 24, 90, 25.

Does this I think is a competitive moat because you know people would you look for kind of minimize the number of suppliers and who can add more value for sure and the idea of the Santos photonics is going to be is becoming more and more critical with power related. So we see it we see all of that as a positive.

Speaker Change: That we we have big some of the revenues in two of our <unk>.

Speaker Change: 24 25.

But I do think that as we fill up the you know at 1.6 P. M capability that I think that that you'll see that become much much more detail and then they will look for other areas of our business and we were you know that that's a big play for example, northern.

Speaker Change: One of which we haven't talked about because it lets just focus on telco in datacenter and automotive is going to be a player there and I mean I'd like to call. It micro he's driving up the qdoba you'd who manages that for us out of Asia is just an industry expert so we're feeling and the Intel team better.

which we haven't talked about because this is focused on Telco and data center. Or the mode of this is going to be a play there. And I mean, I'd like to call out, you know, Macri, we've driving out the KW, manages that for us out of Asia. It's just an industry expert. So we're feeling in the Intel team that are embedded in our selling in real well.

Speaker Change: Embedded into our Upselling and real well so well.

We're feeling pretty bullish about that in the longer term, Melissa. So thanks for asking.

Speaker Change: We're feeling pretty bullish about that in the longer term Melissa so thanks for asking.

Great. Thanks very much. That's it for me, guys. Thank you.

Melissa Fairbanks: Great. Thanks, very much that's it for me guys. Thank.

Speaker Change: Thank you.

Thank you. Next question is coming from Mark Delaney from Goldman Sachs, your line is now live.

Speaker Change: Thank you next question is coming from Mark Delaney from Goldman Sachs. Your line is now live.

Good morning, thanks very much for taking my questions. Question about regionalization, and are you still seeing customers looking to have more of their manufacturing done in North America in order to improve supply chain resiliency or have changes in demand and component lead time is meaningfully altered any of those customers.

Mark Delaney: Good morning, and thanks very much for taking my questions. A question on regionalization and are you still seeing customers looking to have more of their manufacturing done in North America in order to improve supply chain resiliency or have changes in demand and component lead times meaningfully altered any of those customer plants.

Speaker Change: Yeah, Hey, Mark them.

Speaker Change: It's an interesting question. So so I think it's nuanced by by end market I'm sure for shooter in renewables.

Speaker Change: We're seeing a real push for it to get the benefit of the incentives and to be in North America that that's 100%.

Speaker Change: In fact, we're active.

Speaker Change: And and a relatively large scale and in that discussion where you expect more from us in the next three to six months.

So definitely, and renewables. Outside of that, I think that the pace is relatively consistent. You know, we're still seeing, I mean, I think you're point of a regionalisation.

Speaker Change: So definitely in renewables.

Speaker Change: I would say to that I think the piece that is relatively consistent you know were still seeing I mean, I think your point about regionalization.

You know, we are still being asked to can we build more EVs from North America and Mexico? Can we build them in Europe for the European market and in off-site tariffs, etc. And in Asia for Asia? So I don't think that's necessarily sped up any or slowed down.

Speaker Change: We are still be lost too can be built more evs from North America, and Mexico can be built with them in Europe for the European market, and obviously parts et cetera, and any in Asia for Asia. So I don't think that's necessarily sped up Andy or slow down.

Other than the renewable space, we were definitely going to pick up and ask for us to be localised. Tony, let me also qualify that by saying, you know, in the cloud space, the secure supply there becomes quite important and we think that that's going to be a tailwind for us in the longer term. We talked earlier with Melissa on a photonics, which I think will be a play there also. I think cloud renewables in the rest of the business is relatively consistent.

Speaker Change: Other than in the renewable space for what therefore seen a pickup in us for us to be localized.

Oh, sorry, let me also qualify that by saying.

No in the climate space, the secure supply of it becomes quite important and we think that that's going to be a few wins for us in the longer term.

Speaker Change: We talked earlier with Melissa on the Photonics, which I think will be a player. There also so I think clouds and renewables and the rest of the business is relatively consistent.

My other question is on margins and recognizing the outlook the company has for improved margins and also the progress you've made over the last several years. So hoping to better understand you as you're seeing lead times for components normalized as you're seeing weaker demand. Have you seen any change in your ability to pass through higher costs and negotiate with customers around pricing and light of those changing market conditions?

Speaker Change: Okay. Thanks for that can't eat my other question was on margins and recognizing the outlook. The company has for improved margins and also the progress you've made over the last several years and so hoping to better understand you know as you're as you're seeing lead times for components normalize as youre seeing weaker demand have you seen any change in your ability to pass through higher costs and negotiate with with customers around pricing.

Speaker Change: And in light of those changing market conditions.

I mean, I would, you know, we talk about, you know, like people talk about leverage with customers and we don't view that we at all.

Speaker Change: I mean.

Speaker Change: I would you know we talk about our people.

Speaker Change: People talk about language with customers and we don't view it that way at all.

You know what, as I mentioned, we've got a supplier summit right now for surely things are coming down. I mean, we pass through, we negotiate a lot of and our customers behalf and then we pass that through to our customers and we engage with our suppliers. So, we're not seeing any pick up in our reduction in margins based on lead times being reduced. And you know what, our businesses, you know, we write that that up and down and so on that we don't see any real changes there.

Speaker Change: As I mentioned, we've got a supplier summit right now for surely things are coming down I mean, we'd be pass through we'd be negotiate a lot of on a customer's behalf and then be passed through to our customers who engage with our suppliers. So.

Speaker Change: And it's we've not seen any pick up in a reduction in margins based on lead times right.

Speaker Change: Uh huh.

Speaker Change: This is you would raise that up and down and so no. We don't see any real changes there.

Speaker Change: Thank you and happy holidays.

Speaker Change: Thanks, Mark all the best.

Thank you. We have reached end of our question and answer session. I'd like to turn the four back over to management for any further closing.

Speaker Change: Thank you we've reached end of our question and answer session I would like to turn the floor back over to management for any further or closing comments.

Thank you very much for joining our call today. We appreciate your interest in Jabel. Everyone here would like to wish all of those a very happy holiday, a peaceful holiday. And we are looking forward to joining the S&P 500 tomorrow. So have a great holiday.

Speaker Change: Thank you very much for joining our call today. We appreciate your interest in Jabil, everyone here would like to wish all of those are very happy holiday a peaceful holiday and we are looking forward to joining the S&P 500 tomorrow. So.

Speaker Change: Have a great holiday.

Speaker Change: Yeah.

Thank you that does conclude today's telecom for the webcast. You may disconnect your lines at this time and have a wonderful day.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day.

Speaker Change: Thank you for your participation today.