Jabil Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Congrats on the quarter. Can you talk about the relative margins of each segment and what we should expect for fiscal '25, so for regulated industries and Intelligent Infrastructure and Connected Living. How do you -- how should we think about margin recovery in each of these segments, which segment has the most upside to margins?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay. Mike, has your expectation for AI-related revenues changed? I think you had guided $6 billion last time for AI revenues in fiscal '25. But since cloud is doing well, do you think your revenues can -- related to AI can be higher -- and can you talk about some of the new opportunities you have in this segment going forward?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay. Got it. And maybe the last one for me. Can you talk about your capital allocation plans. How should we think about the cadence of buybacks you did -- can you talk a little bit more about the acquisition you talked about what is the revenue contribution from that? And what is your focus on further M&A in this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:30PM, JBL.N - Q1 2025 Jabil Inc Earnings Call

Question: Matt Sheerin - Stifel Nicolaus and Company, Incorporated - Analyst : Mike, I wanted to just follow up on your comments regarding the hyperscale customers. Could you mention that you're deepening your relationship with your largest customer. Could you elaborate, does that mean your just winning more business? Or are you doing other things for that customer? And then in terms of that second hyperscale customer that you announced on the photonics side, could you give us the potential size of that opportunity?

Question: Matt Sheerin - Stifel Nicolaus and Company, Incorporated - Analyst : And as part of the strategy, with that new customer, for instance, to cross-sell the systems integration skill sets that you have and as you look at other hyperscale customers as well? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:30PM, JBL.N - Q1 2025 Jabil Inc Earnings Call

Question: Matt Sheerin - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. And then for my second question, regarding the inventory, you've done a very good job of bringing down inventory improving cash flows. It looks like you're guiding sort of flattish inventory. How should we expect the back half given that you're going to have higher revenue growth in the back half of fiscal '25?

Question: Steven Fox - Fox Advisors LLC - Analyst : A couple of questions for me. First of all, Mike, can you talk a little bit more about the US footprint from two perspectives. One, you mentioned that you moved some more programs into the US in the quarter. Can you give us a little bit color on what was moved in. And then looking ahead, how do we think about just your ability to meet, say, urgent needs to move production into the US, say, over the next six to nine months versus your willingness to sort of add capacity as we see some changes in tariffs? And then I had a follow-up.

Question: Steven Fox - Fox Advisors LLC - Analyst : I'm just wondering sort of like how capacity is currently to meet some of these needs in the near term versus maybe you have to start considering expansions at some of your sites and when that would happen?

Question: Steven Fox - Fox Advisors LLC - Analyst : Great. That's helpful. And then on the cloud piece, you covered a lot of the details already, but I was just curious specifically as your largest cloud customer moves to a new silicon, like what does that mean for Jabil in general as we see these advanced silicon to roll out? Is that helping your business neutral? What are the general impacts?

Question: Mark Delaney - Goldman Sachs - Analyst : I guess first to follow up on the tariff discussion. Can you give us a better sense of how costs compare in the US relative to Mexico, maybe, for example, fully loaded labor costs in the US versus Mexico. And as you're engaged with customers and their thinking through potentially having to move some of their capacity. Do you think the cost is something that they can get -- that they would be able to overcome? Or would they more generally just look to absorb tariffs and maybe keep their business in Mexico when they think about some of the cost differential.

Question: Mark Delaney - Goldman Sachs - Analyst : My other question is just trying to better conceptualize how you're seeing the business for the full year relative to your prior outlook. Company [B] earnings relative to its guidance in 1Q by $0.15, you took up the full year EPS guidance by $0.10. So it does imply, at least just from the basic math that there's slightly lower expectation for earnings for the next three quarters relative to what you've previously been expecting. Are you actually seeing any meaningful change over the next three quarters in the business environment? Or is that just putting too fine a point on the old versus new EPS guidance?

Question: George Wang - Barclays - Analyst : Congrats on the quarter strong results. I have two quick ones. Firstly, I just want to double-click on the semi cap equipment Obviously, you guys did up the guidance for share implying 25% growth year-over-year. And can you kind of pass out ATE versus WFE? It seems that AE should still have a relatively better performance this year. And how about any update on the WFE? Are you guys still expecting modest recovery this year?

Question: George Wang - Barclays - Analyst : Okay. Great. Just a quick follow-up on the Sif transceiver business. Obviously, you guys are gaining share heading to [800G, 1.60] potentially. And just concerning kind of the next-generation design, potentially beyond the transceiver, you guys alluded to some sharing in the medium term, just because of silicon photonics on the -- eventually go to CPO, maybe in the intermediate term, you have [LPOLL]. Can you talk about some of the upside for Jabil let silicon photonics design kind of lead to further share gains just as we sort had not beyond the [plugables].

Question: Melissa Fairbanks - Raymond James - Analyst : I'm not sure if Steve Borges is in the room. If not, I'll just put this out to the team. I wanted to see if we could go into a little more color on what you're seeing in auto and transport over the past earnings cycle, most recent earnings cycle. We've heard of some improvement in the China EV market from across the supply chain. It's also my understanding, you have some new programs coming in transport, like with buses I'm just wondering about some of the moving parts there and what's incrementally weaker?

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. Great. That's great color. As a follow-up, this is something that I get asked constantly, and you may or may not be able to answer it quite yet. When Mobility was a piece of the business, the seasonality of the model was a little bit easier to predict I know with the resegmentation, a lot of REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:30PM, JBL.N - Q1 2025 Jabil Inc Earnings Call people are trying to parse through. Is there any pattern of seasonality within either of the -- any of the three segments -- or do we just kind of -- there are too many moving parts at this point, none of them are as big as mobility was as a monolift to move things?

Question: David Vogt - UBS Equities - Analyst : Mike, one for you and maybe one for Greg. Can you -- I appreciate all the color on the cloud and data center. Can you maybe talk to the sort of the margin delta from that revenue uplift. I know there's typically in an industry that has some pretty competitive players hasn't been sort of the best gross margin and/or segment margin for you guys. Can you kind of talk through sort of that revenue uplift? And is that impacting sort of your overall margin outlook for the year? And then one for Greg. You talked about capital return, buybacks and dividend but we didn't hear much in the way of M&A. And I know M&A has been a part of the strategy. Maybe can you kind of talk to where the focus is today. Healthcare has kind of been a flattish business for you, if I factor in sort of the packaging subsegment as well. Is that kind of what we should be focused on in 2025 and beyond is sort of opportunistic tactical deals in other segments outside of the more traditional datacom and networking space at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:30PM, JBL.N - Q1 2025 Jabil Inc Earnings Call

Question: David Vogt - UBS Equities - Analyst : Great. And Greg on capital allocation.