Jabil Inc Q4 2024 Earnings Call Summary

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

Question: Ruplu Bhattacharya - Bank of America - Analyst : Hi, thank you for taking my questions. And congrats to Steve, Matt and Andy on your respective assignments. For my first question, I'd like to ask related to the cloud and data center infrastructure segment. Your guidance for fiscal '25 suggests 11% year-on-year growth. Are you seeing any slowdown? I mean, what is the impact from consignment in fiscal '25? And is low-double-digit the right way of thinking about revenue growth in this segment? And if you can talk about what your plan is to expand revenues in this segment beyond your existing customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call

Question: Ruplu Bhattacharya - Bank of America - Analyst : Okay. Thanks for that, Matt and Mike. For my follow-up, I'll ask a question on healthcare. Again, looking at the growth rate for next year, 2% year-on-year seems a little low. Is the market itself growing low-single-digits right now? And can you talk about what you're seeing in terms of the various end markets within healthcare? Mike, I think you talked about GLP-1. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call Can you talk a little bit about that? What does that add in terms of revenue margins? And is there a likelihood of another J&J type of deal going forward? So just any details on the growth rate and what you're seeing in the markets?

Question: Ruplu Bhattacharya - Bank of America - Analyst : Okay. Thanks for that, Steve. Mike, if I can squeeze another quick one in? Just looking at your global footprint, I mean, what is the current utilization? And you talked about an impact of 20 basis points to 30 basis points. Is there do you think that there's a need for any restructuring of the footprint? And which end markets do you see investing in over the next year? Thank you. Thanks for all the details.

Question: Ruplu Bhattacharya - Bank of America - Analyst : Great, thank you so much.

Question: George Wang - Barclays - Analyst : Hey, guys, thanks for taking my question. I just first of all, I just want to ask about capital equipment. Obviously, it's cyclical, as you guys mentioned, but almost 20% growth stood out to me. Just curious if you can hone in a little bit, just talk about the driver behind it. Is this a new win or just say easy compare? Just curious about this strong double-digit growth for the semi-cap for this year.

Question: George Wang - Barclays - Analyst : Okay, great. Just a quick follow-up. Can you expand and talk about margin for the AI business? Margin seems to be the focal point for investors, as you guy said high-grade portfolio, fast growing AI cloud business with higher margin. Just how you think about also liquid cooling, OSAT and silicon photonics, potentially higher margin? And quickly, just curious, since you guys re-segmented, not sure if we can still reconcile to this $6 billion AI revenue you guys talked about a couple quarters ago. Besides this cloud and DCI, maybe there's some in the AI networking. So just curious whether does it still a valid number we should look at from grow by $1 billion to $6 billion this year, or should we just stick to a new disclose of segmentation of $5.1 billion for the current DCI for this year? Thanks.

Question: George Wang - Barclays - Analyst : Okay, great. Thank you.

Question: Steven Fox - Fox Advisors - Analyst : Hi, good morning, and thanks for doing this call in the middle of a hurricane. I guess, just on the automotive and transport segment, the numbers in the quarter, at least the revenues were a little less than expected. Again, the guidance for the full year, this fiscal year, is down. So in the near term, I'm wondering how much negative leverage that auto business is creating for you since I assume it's still high margin? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call And then, maybe more important, like if I think about this business longer term, I know it makes sense to think of further EV growth in the future, but there are a lot of dynamics out there that make you wonder about whether how the company is positioned in auto. If you could address whether these are good or bad for the for Jabil longer term? Mainly, we're seeing lower-cost vehicles out of China, we're seeing OEMs global OEMs having trouble competing in Asia, and you're seeing tariffs rise up all over the world, among other items. It just seems like the auto industry is going to go through some major changes, and I guess I'm wondering if Jabil is positioned well for that. And then, I had a follow-up.

Question: Steven Fox - Fox Advisors - Analyst : Yeah, that's Steve, that covered pretty much everything except for the short term. I'm just maybe just now dial it back and talk about, like, the negative leverage this year as auto and transportation maybe are down a little bit.

Question: Steven Fox - Fox Advisors - Analyst : Great. That's helpful. And just as a quick follow-up, the cash flow targets for this fiscal year are pretty impressive. Can you just walk through the puts and takes in terms of how we see free cash flow go up again towards that $1.2 billion number for the year? Thanks.

Question: Steven Fox - Fox Advisors - Analyst : Great. That's helpful. Thanks a lot and stay safe.

Question: Melissa Fairbanks - Raymond James - Analyst : Hey, guys, thanks so much. I hate to say it, but it seems like we're always running from a hurricane down here during your year-end calls. It'd be great if we could change that pattern. That would be fantastic. So just to start, I love the new segmentation and all the detail that you're giving us. I think it gives us all much better visibility into the real drivers. So thanks for that. Matt, you are the popular one on the call today, so I've got a question for you. Up and down the supply chain in the cloud and data center infrastructure supply chain, we've heard of increasing pricing pressure, both from Nvidia on their suppliers or attempts to protect the margins by the hyperscalers as the cost of these compute systems continue to skyrocket. I'm wondering if you're also seeing some pressure from your customers as they're more cost conscious when they're planning out their portfolios, or if this is actually an opportunity for Jabil as to maybe help consolidate the supply chain. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call

Question: Melissa Fairbanks - Raymond James - Analyst : Okay, great. Thanks. Maybe a quick one for Steve. So in the healthcare business, I was wondering if we could get a quick update on the equipment side of things, like the surgical robotics, the imaging. You had mentioned, there's an uptick in GLPs, maybe offsetting some gastric bypass surgeries. Wondering how that's playing through your customers planning longer term.

Question: Melissa Fairbanks - Raymond James - Analyst : Perfect. Thanks. This may be a question for all of you, or Mike, maybe you can address this. It's something I've been getting asked about. I think I know the answer, but just in case. Wondering how your customers are approaching the upcoming election. If there's been any change in their ordering or planning, or even delays with some of their longer-term program planning?

Question: Melissa Fairbanks - Raymond James - Analyst : Great. Thanks. I think that's all for me, guys. Stay safe. Take care. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call

Question: David Vogt - UBS - Analyst : Great. Thanks, again, guys, for taking everything, given the circumstances, and please stay safe. Maybe can I just start, maybe go to Matt, I know, Matt, you're answering a lot of questions, but I just want to get a better sense for not just on the cloud and data center side, but as it ties to networking and comms. Obviously, the networking and comms business ex the divestiture is still a little bit weak. How do we think about how those two different businesses work together going forward in terms of demand drivers? And over the longer term, obviously, when we hear from a lot of investors, there's some concern or maybe some fear that there's a degree of digestion that could potentially happen over the longer term. I know you just gave '25 numbers, but just how do you think about your visibility across different programs and how that maybe plays into your long-term thinking about the segment? And then, I've got a couple more.

Question: David Vogt - UBS - Analyst : Great. Thank you. That's helpful. Maybe one for either Greg or Mike, whoever wants to take this. So this is more on the model. When you think about, obviously, making the adjustments for the divestitures, the Mobility piece, the $700 million that you referenced earlier. Obviously, I think we're getting some questions about the back-half ramp that implied from an EPS perspective given the year-over-year comp in Q1 and, ultimately, what it probably looks like in Q2. I know you touched on it briefly, but can you help us understand how we should think about utilization going into the second half? And is that the driver of margin expansion on the gross line, or is it really driven by this buyback? I'm just trying to get a sense for how the second half ramps. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call And is the buyback really going to be upwards of like $900 million in the fiscal year based on piecing together the commentary about 80% of cash flow return to shareholders and your CapEx and upping your free cash flow numbers?

Question: David Vogt - UBS - Analyst : Great. Thanks, guys, for all the help and stay safe.

Question: Mark Delaney - Goldman Sachs - Analyst : Yes. Good morning, and thanks for taking my questions. I have a follow-up first on the data center market. Matt, you mentioned Jabil has won business with two new hyperscaler customers. Can you elaborate on how broad-based those wins are? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call Does it include assembly and services for hardware and racks, or was it more specifically tied into optical? And anything you can share around the timing for when some of these new program wins ramp up?

Question: Mark Delaney - Goldman Sachs - Analyst : Okay, helpful. Thank you for that. My next question was a follow-up on how you thought about guiding fiscal '25 and more with respect to revenue in the back half of the year. I'm hoping to better understand to what extent you tried to factor in any conservatism in terms of your forecasting by end market. Given what happened last year with some of the volatility, I'm curious if you've changed your approach on how you're trying to factor in any potential market macroeconomic volatility.

Question: Mark Delaney - Goldman Sachs - Analyst : That's helpful. And just lastly for me, and I'll turn it over. In terms of the EBIT margin outlook for fiscal '25 at 5.4%, Mike, you already spoke about the underutilization and how that's a factor year-on-year, but could you go into a bit more depth around any effect on from pricing and how this may be factoring into margin guidance for this year? Curious to better understand if there's been any change in the broader pricing landscape given some cyclical weakness that we're seeing in some of the end markets and if that's at all a factor in your guidance. Thank you.

Question: Mark Delaney - Goldman Sachs - Analyst : Okay. Thanks so much and wishing you all the best with the hurricane.

Question: Matt Sheerin - Stifel - Analyst : Yeah, thanks. Good morning, and thanks for all the information so far. My question regarding that exit of your major networking customer. The first question is, is that revenue all out of the model? And in terms of balance sheet receivables and cash flow from that, was that mostly a Q4 or are we going to see some of that in Q1? And then, on bigger picture, obviously, it's a big step for you to exit from a customer that you've had for 20-plus years. And I know the industry, a lot of your peers have also been disciplined walking away from major revenue opportunities, looking at returns and margins. So question is, have you looked at other relationships in terms of your portfolio back to customers? And is this giving you a little bit more leverage with customers in terms of pricing and returns as you look at forward contracts? Thanks.

Question: Matt Sheerin - Stifel - Analyst : Okay, thank you for that. And then, just a follow-up on the end markets. Your renewable energy and infrastructure, it looks like you're actually guiding for growth. And I know we've heard I mean, you've had headwinds, certainly in the demand front and so have your peers. So what's behind that forecast for seeing at least modest growth next 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. SEPTEMBER 26, 2024 / 12:30PM, JBL.N - Q4 2024 Jabil Inc Earnings Call

Question: Matt Sheerin - Stifel - Analyst : Okay. All right, thanks very much.

Question: Samik Chatterjee - JPMorgan Chase & Company - Analyst : Hi, thanks for taking my questions, and thank you for hosting the call under the circumstances, I wanted to start with a margin question more in relation to Mike, your prepared remarks, and the reiteration of the 6% margin target that you have. I'm just trying to think in terms of if you have any updated thoughts around what's the revenue scale that you need to get to that margin number. I know you're calling out about 20 basis points, 30 basis points to the 5.4% for fiscal '25, which implies that you'll still be at 5.6%, 5.7% underlying if you get to a $30 billion capacity or utilization of the $30 billion capacity. So just trying to think like what do you need in excess of that $30 billion, how do you think about what scale you need to get to that margin target? Thank you. And I have a follow-up.

Question: Samik Chatterjee - JPMorgan Chase & Company - Analyst : Okay. Got it. And for my follow-up, I guess, it's probably a question for you, again, Mike, in terms of the strategy update that you provided, no major changes, focusing more on profitable growth. As you think about your portfolio and the opportunity to keep expanding margins. Should we be expecting some level of portfolio rationalization happening every year, or a continuous look at the portfolio to weed out some of the lower-margin businesses and continue to drive the mix higher, or is this the biggest chunk in terms of what's coming out in fiscal '25, and everything beyond that should be really immaterial in that sense? Thank you.

Question: Samik Chatterjee - JPMorgan Chase & Company - Analyst : Okay. Got it. And I'll just sneak one in. This is a follow-up to the question David asked you on the ramp through the year. You do have revenue that's relatively flattish through the rest of the year in terms of the implied implicit annualized run rate here, but you're starting off the first quarter with 5.1% margin and implicitly you have to end somewhere in the high 5% in the fourth quarter to get to the full year of 5.4%. What is the driver there? I think you said some you answered it, but I didn't really catch what you were implying. Is it mix, is it something else that's really driving that margin to end up being in the high 5%s by the time you end exit the year?

Question: Samik Chatterjee - JPMorgan Chase & Company - Analyst : Okay. All right. Thank you. Thanks for taking my questions.