JABIL INC Q4 FY2024 earnings call

Bullet points:

• Jabil divested its Mobility business for $2.2 billion and returned proceeds via share buybacks.
• Reorganized into three segments to focus on speed, precision, and solutions.
• Fourth quarter results: ~$7 billion revenue, $318 million operating income, $1.18 GAAP diluted EPS, $2.30 core diluted EPS.
• Strong cash flow: $535 million cash flows from operations in Q4, adjusted free cash flow over $1 billion in FY 2024.
• Steve Borges discussed Regulated Industries' segments including healthcare, automotive, and renewable energy trends.
• Matt Crowley highlighted Intelligent Infrastructure's AI impact, data center infrastructure, and investments in liquid cooling and silicon photonics.
• Andy Priestley spoke about Connected Living & Digital Commerce's digital commerce and warehouse automation.
• Mike Dastoor emphasized team leadership, segment-specific growth drivers, and financial priorities.

For the fourth quarter, the DMS segment reported revenue of $3.5 billion, which was down approximately 22% year-over-year due to the Mobility divestiture, with a core operating margin of 5.4%. The EMS segment saw revenue of $3.5 billion, $285 million higher than expected, down roughly 13% year-over-year, but with core margins for EMS reaching 6.1% in Q4. For fiscal 2025, Jabil anticipates approximately $27 billion in revenue, with core margins around 5.4% and core earnings per share expected to be $8.65. The three segments are: Regulated Industries (healthcare, automotive, renewable energy), Intelligent Infrastructure (supporting cloud to data center), and Connected Living & Digital Commerce (consumer-facing and digital commerce).

Bullet points:

• Q1 2025 guidance: Total company revenue in the range of $6.3 billion to $6.9 billion, core operating income $304 million to $364 million, core diluted earnings per share $1.65 to $2.05.
• FY 2025 guidance: ~$27 billion revenue, core margins 5.4%, core earnings per share $8.65, free cash flow around $1.2 billion, CapEx 1.5% to 2% of revenue, with 80% of free cash flow returned to shareholders.
• Organic growth in FY 2025 expected at 2.3% on a base of $26.4 billion after adjusting for FY 2024 changes.

Bullet points:

• Volatility in end markets such as automotive, renewables, and 5G infrastructure.
• Impact of the Mobility divestiture on revenue and capacity utilization.
• Geopolitical challenges affecting the supply chain and manufacturing.
• Uncertainty regarding global minimum tax legislation impacting tax rates.

Q: Related to the cloud and data center infrastructure segment, how is the 11% year-on-year growth guidance for fiscal 2025 affected by consignment and revenue expansion beyond existing customers?

A: Mike Dastoor and Matt Crowley respond, noting a 12% growth year-on-year after excluding legacy network customers, focusing on executing strategies, new hyperscale accounts in silicon photonics, and data center power and cooling retrofits.

Q: On healthcare, what is the growth rate, impact of GLP-1 drugs, and likelihood of J&J-type deals?

A: Steve Borges answers, stating the healthcare market is growing 3%-4%, GLP-1 drugs impacting the medical device segment, new wins in injectors, CGMs, and autoinjectors, with a strong pipeline and ongoing discussions regarding J&J-type deals.

Q: About global footprint utilization, negative leverage from auto and transportation, and cash flow targets?

A: Mike Dastoor responds, discussing 70% utilization, negative leverage from auto and transportation, and confidence in $1.2 billion free cash flow with working capital improvements and CapEx reduction.

Q: Regarding capital equipment, what is the driver of growth and AI business margin?

A: Matt Crowley answers, citing the ATE business attach rate to AI GPU silicon and recovery in WFE as growth drivers, expecting AI margins to be in-line to slightly accretive to enterprise targets.

Q: About networking and comms business, demand drivers, visibility, and second half ramp?

A: Matt Crowley and Mike Dastoor respond, discussing AI impact on networking, visibility through the customer ecosystem, and second half ramp based on seasonality and booked business.

Q: On the exit of a major networking customer, revenue impact, portfolio rationalization, and renewable energy growth?

A: Mike Dastoor and Steve Borges answer, stating the exit of legacy network customer revenue, no major portfolio rationalization, and renewable energy growth from new wins in HVAC and battery storage and the impact of the Inflation Reduction Act.

Q: About margin outlook, revenue scale for the 6% target, and portfolio rationalization?

A: Mike Dastoor responds, discussing a $30 billion to $35 billion revenue scale for a 6% margin, normal portfolio rationalizations, and limited major exercises with a focus on value proposition and free cash flow.