Technology
Electronic Components
$17.15B
138K
Jabil Inc. provides manufacturing services and solutions worldwide. It operates in two segments, Electronics Manufacturing Services and Diversified Manufacturing Services. The company offers electronics design, production, and product management services; electronic circuit design services, such as application-specific integrated circuit design, firmware development, and rapid prototyping services; and designs plastic and metal enclosures that include the electro-mechanics, such as the printed circuit board assemblies (PCBA). It also provides three-dimensional mechanical design comprising the analysis of electronic, electro-mechanical, and optical assemblies, as well as various industrial design, mechanism development, and tooling management services. In addition, the company provides computer-assisted design services consisting of PCBA design, as well as PCBA design validation and verification services; and other consulting services, such as the generation of a bill of materials, approved vendor list, and assembly equipment configuration for various PCBA designs. Further, it offers product and process validation services, such as product system, product safety, regulatory compliance, and reliability tests, as well as manufacturing test solution development services. Additionally, the company provides systems assembly, test, direct-order fulfillment, and configure-to-order services. It serves 5G, wireless and cloud, digital print and retail, industrial and semi-cap, networking and storage, automotive and transportation, connected devices, healthcare and packaging, and mobility industries. The company was formerly known as Jabil Circuit, Inc. and changed its name to Jabil Inc. in June 2017. Jabil Inc. was founded in 1966 and is headquartered in Saint Petersburg, Florida.
Key insights and themes extracted from this filing
Net revenue decreased from $8,475 million for the three months ended May 31, 2023, to $6,765 million for the three months ended May 31, 2024, a decrease of 20.2%. This decrease is primarily driven by declines in both the DMS and EMS segments.
Gross profit as a percentage of net revenue increased to 9.0% for the three months ended May 31, 2024, compared to 8.2% for the three months ended May 31, 2023. This improvement is attributed to product mix and the absence of depreciation and amortization for long-lived assets related to the mobility divestiture.
The effective income tax rate increased from 24.0% for the three months ended May 31, 2023, to 35.7% for the three months ended May 31, 2024. This increase is primarily due to a change in the jurisdictional mix of earnings and the gain from the divestiture of the mobility business.
The company completed the sale of its product manufacturing business in Chengdu, including its supporting component manufacturing in Wuxi, on December 29, 2023. This divestiture resulted in a pre-tax gain of $944 million but also contributed to the overall revenue decrease.
On November 1, 2023, the Company completed the acquisition of ProcureAbility Inc. for approximately $60 million in cash. ProcureAbility is a procurement services provider specializing in technology-enabled advisory, managed services, digital, staffing, and recruiting solutions, indicating a strategic move to broaden service capabilities.
The Board of Directors approved a restructuring plan on September 26, 2023, to realign the Company's cost base and optimize its global footprint. This includes headcount reductions and capacity realignment, with expected pre-tax restructuring and related costs of approximately $300 million.
The sales cycle remained relatively stable at 47 days for the three months ended May 31, 2024, compared to 48 days in both the prior quarter and the same quarter last year. This indicates consistent management of working capital.
Days in inventory decreased to 81 days for the three months ended May 31, 2024, compared to 87 days in the prior quarter. This improvement suggests better inventory management and efficiency.
Selling, general and administrative expenses decreased due to a decrease in stock-based compensation expense associated with forfeitures of time-based, performance-based and market-based restricted stock awards, suggesting potential issues with employee retention or performance targets.
The company's sales are concentrated among specific customers, with the five largest customers accounting for approximately 37% of net revenue for the nine months ended May 31, 2024. This concentration poses a risk if any of these major customers reduce their business with Jabil.
The company operates in more than 30 countries worldwide, exposing it to risks associated with international sales and operations, including geopolitical uncertainties. These uncertainties can impact the company's financial performance and operations.
The company's restructuring plan, while intended to improve efficiency, introduces execution risk. The amount and timing of actual charges may vary due to factors such as the finalization of timetables, consultation with employees, and jurisdictional statutory severance requirements.
The EMS segment's net revenue decreased due to the continued transitioning to a customer-controlled consignment model in the cloud business during fiscal year 2024. This shift impacts revenue recognition and potentially margins.
The DMS segment's net revenue decreased primarily due to the divestiture of the mobility business. This indicates a significant change in the segment's composition and competitive landscape.
Despite short-term revenue declines, the company is strategically positioning itself for long-term growth through acquisitions like ProcureAbility and restructuring efforts to optimize its cost structure and global footprint, indicating a proactive approach to maintaining a competitive edge.
The 2024 Restructuring Plan is designed to realign the company's cost base and optimize its global footprint. This initiative is expected to improve operational efficiency by reducing headcount and realigning capacity.
Days in accounts payable increased during the three months ended May 31, 2024, indicating a potential shift in payment terms or cash management strategies that could impact operational efficiency.
The increase in gross profit as a percentage of net revenue is attributed to product mix and the absence of depreciation and amortization for long-lived assets related to the mobility divestiture. This suggests improved operational efficiency in the remaining business segments.
Research and development expenses remained consistent as a percentage of net revenue, indicating a continued commitment to innovation despite overall revenue declines. However, the absolute amount spent on R&D has decreased.
The acquisition of ProcureAbility, a procurement services provider specializing in technology-enabled solutions, suggests a focus on enhancing technological capabilities and service offerings.
The EMS segment focuses on leveraging IT, supply chain design, and engineering technologies, indicating a commitment to technological advancements in core electronics manufacturing.
The company continues to repurchase shares under its share repurchase program, indicating a commitment to returning capital to shareholders despite the decrease in net revenue. In June 2024, the company repurchased $121 million of shares and entered into ASR agreements to repurchase an additional $555 million.
The company anticipates net capital expenditures to be in the range of 2.2 percent to 2.5 percent of net revenue for Fiscal Year 2024, indicating a continued investment in its manufacturing capabilities.
The divestiture of the mobility business generated pre-tax cash proceeds of approximately $2.2 billion, providing the company with significant capital for reinvestment or other strategic initiatives.
The company's credit facilities include sustainability-linked adjustments to interest rates, indicating a commitment to ESG principles. The amendment instituted certain amendments to the sustainability-linked adjustments to the interest rates applicable to borrowings under the three-year revolving credit facility and the five-year revolving credit facility.
The 10Q filing does not provide specific details on environmental, social, or governance initiatives beyond the sustainability-linked adjustments to credit facilities. This suggests a lack of transparency or focus on ESG matters in the reported period.
The company mentions risks arising from expectations relating to environmental, social and governance considerations in the forward-looking statements section, indicating that ESG factors are considered in the company's risk assessment.
The European Union and other countries have committed to enacting substantial changes that would reshape international tax rules, including the introduction of a global minimum tax. This could increase the company's taxes and negatively impact its provision for income taxes.
The company mentions the effect of COVID-19 and its impact on operations, sites, customers, and the supply chain as a factor that might cause differences in future results, indicating that the pandemic's effects are still a relevant consideration.
The company monitors the current economic environment and its potential impact and closely manages its costs and capital resources, suggesting an awareness of and responsiveness to market conditions.