Jabil(US:JBL)2024-03-15 15:33Financial Data and Key Metrics Changes - Revenue for Q2 2024 was approximately $6.8 billion, aligning with guidance, with core operating income at $338 million, or 5% of revenue, reflecting a 20 basis point increase year-over-year [5][6] - GAAP operating income was approximately $1.1 billion, with GAAP diluted earnings per share at $7.31, significantly influenced by the sale of the mobility business [6] - Core diluted earnings per share for the quarter was $1.68, exceeding the midpoint of guidance by $0.05 [6] Performance by Business Segment - DMS segment revenue was $3.4 billion, down approximately 16% year-over-year, primarily due to the mobility divestiture, but showed 11% growth in automotive and transportation [7] - EMS segment revenue was $3.3 billion, down roughly 18% year-over-year, with declines attributed to a consignment model shift in the cloud business and lower demand in 5G and renewable energy markets [8] Market Data and Key Metrics Changes - Inventory days increased to 87 days, with cash flows from operations at $218 million and adjusted free cash flow of $48 million for the quarter [9] - The company ended the quarter with cash balances of $2.6 billion and total debt to core EBITDA levels of approximately 1.2 times [9] Company Strategy and Development Direction - The divestiture of the mobility business and subsequent share buybacks reflect a strategic intent to reshape the business while maintaining shareholder returns [10] - The company is focusing on growth in automotive, healthcare, and AI data centers, with expectations of continued growth in these sectors [19][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience despite market headwinds, emphasizing a diversified approach across geographies and end markets [17] - The outlook for fiscal '25 remains optimistic, with expectations of core EPS of $10.65 driven by growth in AI-related revenue and new program wins [26][31] Other Important Information - The company successfully closed on the sale of its mobility business for approximately $2.2 billion, which has been allocated towards share repurchases [6] - AI-related revenue is expected to reach approximately $6 billion in FY '25, with a growth rate of 20% year-on-year [22][48] Q&A Session Summary Question: Insights on cuts within 5G and renewables programs - Management indicated that the cuts were due to unexpected demand reductions, particularly in India for 5G and inventory corrections in renewables, and expressed confidence that these adjustments would stabilize moving forward [36][38] Question: Drivers of better margins - The margin improvements are attributed to a mix shift towards higher-margin AI-related business and successful cost optimization efforts [40][41] Question: AI revenue quantification and competitive advantage - AI-related revenue is projected to exceed $6 billion in FY '25, with a significant portion coming from data center operations, and the company aims to leverage its integrated service offerings as a competitive advantage [47][49][66] Question: Confidence in guidance despite recent cuts - Management emphasized strong long-term relationships with customers and a conservative approach to forecasting, which supports confidence in the guidance provided [53][55]