JABIL INC Q1 FY2025 earnings call

• Strong start to FY'25 with Q1 revenue at $7 billion, up 1% year-on-year (excluding Mobility Divestiture). Core operating income was $347 million, core operating margins 5% despite Hurricane-related impact. - Cash flow and balance sheet metrics: Inventory at 76 days (flat sequentially), net inventory days 56 (within target range). Cash flow from operations $312 million, net capital expenditures $86 million. Adjusted free cash flow for Q1 $226 million. - Strategic moves: Opened large-scale manufacturing site in Croatia, acquired Mikros Technologies, relocated and ramped multiple existing programs to the US. - Growth areas: Intelligent Infrastructure driven by AI, cloud, data center; Regulated Industry facing challenges in EV and renewables; Connected Living under pressure but Digital Commerce growing.

Regulated Industry: Reported revenue of roughly $3 billion, down 7% year-on-year due to weakness in Renewable Energy and EV markets. Core operating margins increased by 10 basis points to 4.7%. Intelligent Infrastructure: Saw revenue of $2.5 billion, up 5% year-on-year driven by strong demand in AI-related cloud, data center infrastructure, and capital equipment markets. Core operating margin was 4.8%, a 10 basis point improvement. Connected Living & Digital Commerce: Revenues were $1.5 billion, down 46% year-on-year due to Mobility Divestiture. Excluding the divestiture, revenue growth was ~12%. Core operating margins for the segment came in at 5.8% in Q1.

• Q2 FY'25 revenue expected to be in the range of $6.1 billion to $6.7 billion. Core operating income estimated to be in the range of $286 million to $346 million. Core diluted earnings per share estimated to be in the range of $1.60 to $2. GAAP diluted earnings per share expected to be in the range of $0.69 to $1.27. - Full year FY'25: Anticipates approximately $27.3 billion in revenue with core operating margins of 5.4%, core earnings per share expected to be $8.75, and robust free cash flow generation of $1.2 billion.

• General risks related to economic uncertainties, including potential impacts from tariff changes and fluctuations in end markets. - Hurricane-related impacts were managed, but ongoing risks associated with natural disasters and their effects on operations.

Q: Can you talk about the relative margins of each segment and what we should expect for fiscal '25?

A: Mike Dastoor stated margins north of 5% for segments, with Intelligent Infrastructure seeing biggest growth over next few years.

Q: Has your expectation for AI-related revenues changed?

A: Mike Dastoor said AI-related revenues increased to $6.5 billion, with $500 million increase in AI space.

Q: Can you talk about your capital allocation plans?

A: Greg Hebard said 80% of free cash flow to share buybacks, committed to completing $1 billion share authorization. Mike Dastoor discussed acquisition of Mikros Technologies for engineering capabilities.

Q: Can you elaborate on deepening relationship with hyperscale customers?

A: Mike Dastoor said deepening relationship with largest customer, working on new business, and details on second hyperscaler in silicon photonics.

Q: How should we expect inventory in the back half given higher revenue growth?

A: Greg Hebard said inventory range between 55-60 days, back half in lower part of range.

Q: Talk about US footprint and moving programs in?

A: Mike Dastoor discussed moving battery power management and other programs to US, well positioned for expansions.

Q: How does tariff discussion impact costs?

A: Mike Dastoor said tariffs are pass through, US footprint well positioned, automation and robotics key.

Q: How is business for full year relative to prior outlook?

A: Mike Dastoor said puts and takes in business environment, being prudent on forward-looking guidance.

Q: Color on semi cap equipment and silicon photonics?

A: Mike Dastoor discussed growth in automated test equipment and silicon photonics share gains.

Q: Color on auto and transport and seasonality?

A: Mike Dastoor talked about EV weakness, technology agnostic capabilities, and seasonality impacts on margins.

Q: Impact of EV tax credit repeal?

A: Mike Dastoor said small impact, baked in forecasts.

Q: Margin delta from cloud and data center revenue uplift?

A: Mike Dastoor said cloud and data center business has enterprise margin, semicap business above enterprise margins.

Q: Capital allocation and M&A focus?

A: Greg Hebard said focusing on M&A for capabilities, 80% to share buybacks, 20% to M&A.