Jabil Inc.

Greetings and welcome to the Jabil first quarter of fiscal year 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Adam Barry, Vice President of Investor Relations. Thank you. You may begin.

Good morning, and welcome to Jabil's first quarter of fiscal 2022 earnings call. Joining me on today's call is Chief Executive Officer Mark Mondello and Chief Financial Officer Mike Destor. Please note that today's call is being webcast live, and during our prepared remarks, we will be referencing slides. To follow along with the slides, please visit jabil.com within our investor relations section. At the conclusion of today's call, the entire call will be posted for audio playback on our website. I'd now like to ask that you follow our earnings presentation with the slides on the website, beginning with a forward-looking statement. During this conference call, we will be making forward-looking statements, including, among other things, those regarding the anticipated outlook for our business, such as our currently expected second quarter and 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 on our annual report on Form 10-K for the fiscal year ended August 31st, 2021 and other filings. If the 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'd now like to shift our focus to our strong quarter and outstanding results. First off, the team delivered $400 million of core operating income on roughly $8.6 billion in revenue, resulting in a core operating margin of 4.7%. These results were primarily driven by broad-based strength in several key end markets including healthcare, industrial and semi-cap, and of course mobility as customary for our first fiscal quarter. And finally, it's worth noting that our team was able to accomplish all of this in spite of the chaotic global supply chain environment. In summary, we delivered strong results, grew in key end markets, and successfully navigated a dynamic global supply chain clearly demonstrating the power of Jabil by way of our scale, tools, team, and relationship. In a few moments, both Mike and Mark will provide more details on the quarter, while also addressing our improved outlook for the year. But before I hand it over, I'll pass along some thoughts from Jabil's procurement and supply chain team, as you may find it helpful when modeling our year. In short, demand continues to outstrip supply. particularly as it relates to semiconductors, an issue that has persisted since 2019. That said, Jabil continues to leverage best-in-class tools and relationships to maximize our allocation and keep the factories in production to the best of our ability. So far, we have been extremely successful, and we would like to thank our supplier partners for their continued support and commitment to Jabil. As we move ahead, we anticipate continued supply chain challenges, which have been incorporated in our guidance, similar to previous quarters. We do expect some relief towards the back half of the fiscal year, but the general consensus is that demand will remain ahead of supply for the next six months. With that, I'd now like to turn the call over to Mike.

Thank you, Adam, and thank you for joining us today. As Adam just highlighted, Q1 was an exceptional quarter. The team delivered strong results on three fronts, revenue, core operating income, and core delivered earnings per share. Our results were better than expected due to a combination of continued end market strength and excellent operational execution by the entire JBL team, along with lower tax and interest expense. Net revenue for the first quarter was $8.6 billion, up 9.4% over the prior year quarter. GAAP operating income was $350 million, and our GAAP diluted earnings per share was $1.63. Core operating income during the quarter was $400 million, an increase of 9.6% year-over-year, representing a core operating margin of 4.7%. Core deleted earnings per share was $1.92, a 20% improvement over the prior year quarter. Now, turning to our first quarter segment results on the next slide. Revenue for our DMS segment was $4.7 billion, an increase of 11.1% on a year-over-year basis. The strong year-over-year performance in our DMS segment was broad-based, with strength across our healthcare, automotive, and mobility businesses. Core margin for the segment came in at 5.4%. Revenue for our EMS segment came in at $3.9 billion, an increase of 7.4% on a year-over-year basis. The stronger year-over-year performance in our EMS segment was also broad-based with strength across our digital print and retail, industrial and semi-cap, and 5G wireless and cloud businesses. Core margin for the segment was 3.8%, 40 basis points higher than the prior year, reflecting solid execution by the team. Turning now to our cash flows and balance sheet. In Q1, inventory days came in at 66 days, a decline of five days sequentially. The management team continues to be fully focused on this metric, particularly in the current environment and I expect over the medium to longer term our inventory days to normalize below 60. Cash flows used in operations were $46 million in Q1, and net capital expenditures totaled $73 million. We exited the quarter with total debt to core EBITDA levels approximately 1.3 times and cash balances of $1.2 billion. During Q1, we repurchased approximately 2.1 million shares, $127 million. Turning now to our second quarter guidance on the next slide. EMS segment revenue is expected to increase 4 percent on a year-over-year basis to $3.8 billion, while EMS segment revenue is expected to increase 14 percent on a year-over-year basis to $3.6 billion. We expect total company revenue in the second quarter of fiscal 22 to be in the range of $7.1 billion to $7.7 billion. Core operating income is estimated to be in the range of $290 million to $350 million. GAAP operating income is expected to be in the range of $266 million to $326 million. Core-delivered earnings per share is estimated to be in the range of $1.35 to $1.55. Gap-delivered earnings per share is expected to be in the range of $1.19 to $1.39. The tax rate on core earnings in the second quarter is estimated to be approximately 24%. Next, I'd like to take a few moments to highlight a balanced portfolio of businesses by end market. Today, both segments are in incredibly good shape. In September, I highlighted several long-term sustainable secular trends in strategically important end markets, such as healthcare, automotive, cloud, semi-cap, 5G infrastructure, and the associated connected devices, along with power generation and energy storage. For the remainder of FY22 and beyond, we continue to expect these secular trends to drive strong growth. Our electric vehicle business, in particular, continues to outperform in spite of global supply chain issues as the transition to EV accelerates. And importantly, a broad-based growth associated with these secular trends is expected to drive solid year-over-year core operating margin expansion in both segments, all of which gives us confidence in our ability to deliver strong financial results for FY22. And a balanced capital allocation framework approach is aligned and focused on driving long-term value creation to shareholders. I would like to wish each and every one of you a safe and happy holiday. Thank you for your time today, and thank you for your interest in Jabil. I'll now turn the call over to Mark.