Constellation Energy Corporation

Greetings and welcome to Jabil's second quarter fiscal year 2025 conference call and webcast. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Adam Barry, Investor Relations. Thank you. You may begin.

Good morning, and welcome to Jabil's second quarter fiscal year 2025 earnings call. Joining me on today's call are Chief Financial Officer Greg Hebert and Chief Executive Officer Mike Destor. Please note that today's presentation is being live streamed, and during our prepared remarks, we will be referencing slides. To view these slides, please visit the investor relations section of Jabil.com. After today's presentation concludes, a complete recording will be available on website for playback. In addition, we will be making forward-looking statements during this presentation, including among other things, those regarding the anticipated outlook for our business, such as our currently expected fiscal year net revenue and earnings. These statements are based on current expectations, forecasts, and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. An extensive list of these risks and uncertainties are identified in our annual report on Form 10-K for the fiscal year ended August 31, 2024, and other filings with the SEC. Table disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I'll now turn the call over to Greg.

Thanks, Adam. Good morning, everyone. Thanks for taking the time to join our call today. I'm extremely pleased with our strong Q2 results where the team delivered solid margins and cash flows on $6.7 billion in revenue. When excluding approximately $250 million associated with the divested mobility business in the prior year quarter, revenue increased 3% year-on-year. Core operating income for the quarter came in at $334 million. Core operating margins came in at 5%. Net interest expense in Q2 came in at $61 million. On a GAAP basis, operating income was $245 million, and our GAAP diluted earnings per share was $1.06. Core diluted earnings per share was $1.94. Turning now to our performance by segment in the quarter, our regulated industry segment reported revenue of roughly $2.7 billion as guided. On a year-over-year basis, this represents a decrease of 8% due to expected weakness in our renewable energy and EV markets. Despite this, core operating margin for the segment increased year-over-year by 20 basis points to 4.8% based on favorable mix in the segment. In the intelligent infrastructure segment, we saw revenue of $2.6 billion, up 18% year-on-year, above what we expected in December. This growth was primarily driven by strong demand in our AI-related cloud, data center infrastructure, and capital equipment markets. The core operating margin for the segment was 5.3%. a 110 basis point improvement compared to our prior year quarter. In our connected living and digital commerce segment, revenue was $1.3 billion, down 13% year-on-year due to our mobility divestiture. Excluding revenue associated with the divested mobility business from the prior year, revenue growth for the segment was approximately 4%. This reflects strong year-on-year growth across our digital commerce and warehouse automation markets, which was partly offset by weaker demand and consumer-driven connected living products. On a sequential basis, segment revenue was down 13%, which is consistent with the historical seasonality typically observed in the connected living sector following the holiday period. Our operating margins for the segment came in at 4.5% in Q2. Next, I'll provide an update on our cash flow and balance sheet metrics for the end of Q2, starting with inventory. As anticipated, during the quarter, inventory days increased four days sequentially to 80 days, which reflects typical seasonality in our business. However, on a year-on-year basis, inventory days decreased by seven days. Net of inventory deposits from our customers, inventory days were 61, a quarter-on-quarter increase of five days, which is slightly above our targeted range of 55 to 60 days. This was mainly due to timing within our intelligent infrastructure segment as we support strong growth. As we progress through the fiscal year, we anticipate that inventory days will normalize into our targeted range. In Q2, cash flow from operations for the quarter were solid, amounting to $334 million. Net capital expenditures for the second quarter were $73 million. For the full year, we continue to expect net CapEx to be between 1.5% to 2% of revenue. As a result of the solid second quarter performance and cash flow generation, adjusted free cash flow for the quarter came in at $261 million. bringing our year-to-date adjusted free cash flow to $487 million. With our strong first half results, we now anticipate free cash flow for the year to exceed $1.2 billion. We exited the second quarter with a healthy balance sheet with debt-to-court EBITDA levels of approximately 1.4 times and cash balances of approximately $1.6 billion. In Q2, we repurchased 2.5 million shares. The quarter ended with 364 million remaining on our current $1 billion share repurchase authorization, which we expect to complete by the end of FY25. Before I move on to guidance for the next quarter, I'd like to wrap up my remarks on Q2 by recognizing the Jabil team's strong execution this quarter. The team's efforts have yielded strong results through the first half of FY25, despite a highly dynamic environment. The company continues to show remarkable resilience and is poised for future revenue growth, improved margins, and robust free cash flow generation. With that, let's turn to the next slide for Q3 FY25 guidance. Beginning with revenue by segment, we anticipate revenue for our regulated industries will be $3 billion. down approximately 1% year-on-year, reflecting appropriate caution in the EV market. For our intelligent infrastructure segment, we expect revenue for the quarter to be $2.8 billion, up approximately 22% year-over-year, on broad-based growth across our capital equipment, advanced networking, cloud, and data center infrastructure markets. This strength is expected to be slightly offset by lower demand in our 5G end market. In our connected living and digital commerce segment, revenues are expected to be $1.2 billion. This is down 16% year over year, mainly due to weaker year-on-year demand in our connected living markets, offset slightly by continued growth across the digital commerce space. Total company revenue for Q3 is expected to be in the range of $6.7 billion to $7.3 billion. Core operating income for Q3 is estimated to be in the range of $348 million to $408 million. GAAP operating income is expected to be in the range of $282 million to $352 million. Core diluted earnings per share is estimated to be in the range of $2.08 to $2.48. Gap diluted earnings per share is expected to be in the range of $1.50 to $1.99. Net interest expense in the third quarter is estimated to be approximately $61 million. For FY25, we now expect it will be in the range of $240 to $245 million. Our core tax rate for Q3 and for the year is expected to be 21%. With that, I'd like to thank you for your time this morning and for your interest in JABL. I'll now turn the call over to Mike.