01—Abstract
Summary
Summary of the 10-Q filed April 5, 2024. Cited figures are marked; the original filing is the authoritative source.
Jabil Inc. (JBL) reported results for the second quarter of fiscal 2024 (three months ended February 29, 2024).
Net revenue was $6.77 billiona, down from $8.13 billion in the prior-year quarter, and the filing attributes the decline to lower EMS revenue from 5G, wireless and cloud customers, along with the divestiture of the mobility business. Operating income rose to $1.13 billion from $359 million, driven mainly by a $944 million pre-tax gain from the December 29, 2023 sale of the Chengdu product manufacturing business (mobility). Net income attributable to Jabil was $927 million, or $7.31 per diluted share, compared with $207 million, or $1.52 per diluted share, a year earlier.
Core operating income (non-GAAP) was $338 millionb versus $391 million, and diluted core EPS was $1.68 versus $1.88. On the balance sheet, cash and cash equivalents increased to $2.57 billion, total assets fell to $17.12 billion, and notes payable and long-term debt was $2.88 billion. Six-month operating cash flow was $666 million, and adjusted free cash flow (non-GAAP) was $221 million.
The company repurchased $1.3 billionc of common stock year to date, with $1.2 billion remaining under its amended 2023 Share Repurchase Program. The company also launched a 2024 Restructuring Plan expected to total approximately $300 million in pre-tax charges during fiscal 2024.
For investors, the key tensions are a shrinking top line and thinner core margins against a one-time gain that inflated reported GAAP earnings, alongside heavy capital return. The filing also notes that five largest customers accounted for approximately 39%d of six-month net revenue, a concentration risk that remains relevant going forward.
02—Key points
Key Highlights
- Net revenue fell 16.8% to $6.77 billion in the quarter (from $8.13 billion), with EMS down 18% and DMS down 16%, reflecting lower 5G, wireless and cloud volumes and the mobility divestiture.
- Reported operating income increased to $1.13 billion from $359 million, primarily because of a $944 million pre-tax gain on the divestiture of the mobility business.
- Diluted EPS was $7.31 versus $1.52 a year earlier, while diluted core EPS (non-GAAP) was $1.68 versus $1.88.
- Cash and cash equivalents rose to $2.57 billion; six-month operating cash flow was $666 million and adjusted free cash flow (non-GAAP) was $221 million.
- The company repurchased $1.3 billion of common stock in the six months, with $1.2 billion remaining under the amended 2023 Share Repurchase Program.
- The 2024 Restructuring Plan is expected to cost approximately $300 million in pre-tax charges during fiscal 2024, and $197 million was recorded in the six months.
- Five largest customers accounted for approximately 39% of six-month net revenue, and the filing notes continued dependence on a relatively small number of customers.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Jabil kept $0.14.
- Revenue$6.77B100.0%
- Cost of revenue−$6.14B90.7%
- Gross profit$630.0M9.3%
- Operating costs$501.0M7.4%
- Operating income$1.13B16.7%
- Interest, other & tax−$204.0M3.0%
- Net income$927.0M13.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed April 5, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $6.77B$8.13B | −16.8% |
| Cost of Revenue | $6.14B$7.47B | −17.9% |
| Gross Profit | $630.00M$661.00M | −4.7% |
| R&D Expenses | $10.00M$8.00M | +25.0% |
| SG&A Expenses | $308.00M$285.00M | +8.1% |
| Operating Income | $1.13B$359.00M | +215.0% |
| Net Income | $927.00M$207.00M | +347.8% |
| EPS (Basic) | $7.41$1.55 | +378.1% |
| EPS (Diluted) | $7.31$1.52 | +380.9% |
| Shares Outstanding (Basic) | 125.20M133.60M | −6.3% |
| Shares Outstanding (Diluted) | 126.90M136.30M | −6.9% |
05—Questions
Frequently Asked Questions
Why did reported earnings rise so sharply when revenue declined?
The quarter included a pre-tax gain of $944 million from the December 29, 2023 sale of the Chengdu product manufacturing business (the mobility business). Net income attributable to Jabil was $927 million versus $207 million a year earlier, but core earnings (non-GAAP) were $213 million versus $256 million, excluding that one-time gain and related items.
What drove the decline in net revenue?
The EMS segment revenue decreased 18%, primarily from a 12% decrease in revenues from existing 5G, wireless and cloud customers, including the transition to a customer-controlled consignment model in cloud. The DMS segment decreased 16%, driven by a 17% decline from the mobility divestiture, partly offset by a 3% increase in automotive and transportation revenues.
How is Jabil returning capital to shareholders?
Through the six months, the company repurchased 10.4 million shares for $1.3 billion, excluding excise tax, under the amended 2023 Share Repurchase Program, which allows up to $2.5 billion. It also declared quarterly dividends of $0.08 per share in October 2023 and January 2024, and $1.2 billion remains available under the program.
What is the status of the 2024 Restructuring Plan?
The Board approved the plan on September 26, 2023. The company expects approximately $300 million in pre-tax restructuring and related costs during fiscal 2024, including $150 million to $180 million of severance, $80 million to $120 million of asset write-offs, and $30 million to $40 million of contract termination and other costs. Charges of $197 million were recorded in the six months ended February 29, 2024.
How much liquidity does Jabil have?
As of February 29, 2024, the company had approximately $2.6 billion in cash and cash equivalents and $3.9 billion of unused revolving credit facility capacity. It also had up to $15 million of availability under its global asset-backed securitization program and up to $1.0 billion under its trade accounts receivable sale programs. The company stated it was in compliance with its debt covenants.
06—Continue