filings.toolsJabil 10-Q 2023-11-30
Filed 2024-01-09. 8 sections, 162K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2023
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-14063
JABIL INC.
(Exact name of registrant as specified in its charter)
| Delaware | 38-1886260 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
10800 Roosevelt Boulevard North, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
(727) 577-9749
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, $0.001 par value per share | JBL | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 2, 2024, there were 127,545,611 shares of the registrant’s Common Stock outstanding.
JABIL INC. AND SUBSIDIARIES INDEX
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except for share data)
| November 30, 2023 (Unaudited) | August 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,550 | $ | 1,804 | |||||||
| Accounts receivable, net of allowance for credit losses | 3,693 | 3,647 | |||||||||
| Contract assets | 1,090 | 1,035 | |||||||||
| Inventories, net of reserve for excess and obsolete inventory | 5,124 | 5,206 | |||||||||
| Prepaid expenses and other current assets | 1,235 | 1,109 | |||||||||
| Assets held for sale | 1,962 | 1,929 | |||||||||
| Total current assets | 14,654 | 14,730 | |||||||||
| Property, plant and equipment, net of accumulated depreciation of $4,612 as of November 30, 2023 and $4,512 as of August 31, 2023 | 3,134 | 3,137 | |||||||||
| Operating lease right-of-use asset | 354 | 367 | |||||||||
| Goodwill | 661 | 621 | |||||||||
| Intangible assets, net of accumulated amortization | 177 | 142 | |||||||||
| Deferred income taxes | 155 | 159 | |||||||||
| Other assets | 279 | 268 | |||||||||
| Total assets | $ | 19,414 | $ | 19,424 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current installments of notes payable and long-term debt | $ | — | $ | — | |||||||
| Accounts payable | 5,630 | 5,679 | |||||||||
| Accrued expenses | 5,840 | 5,515 | |||||||||
| Current operating lease liabilities | 96 | 104 | |||||||||
| Liabilities held for sale | 1,464 | 1,397 | |||||||||
| Total current liabilities | 13,030 | 12,695 | |||||||||
| Notes payable and long-term debt, less current installments | 2,876 | 2,875 | |||||||||
| Other liabilities | 342 | 319 | |||||||||
| Non-current operating lease liabilities | 269 | 269 | |||||||||
| Income tax liabilities | 118 | 131 | |||||||||
| Deferred income taxes | 243 | 268 | |||||||||
| Total liabilities | 16,878 | 16,557 | |||||||||
| Commitments and contingencies | |||||||||||
| Equity: | |||||||||||
| Jabil Inc. stockholders’ equity: | |||||||||||
| Preferred stock, $0.001 par value, authorized 10,000,000 shares; no shares issued and no shares outstanding | — | — | |||||||||
| Common stock, $0.001 par value, authorized 500,000,000 shares; 275,716,586 and 273,949,811 shares issued and 128,647,431 and 131,294,422 shares outstanding as of November 30, 2023 and August 31, 2023, respectively | — | — | |||||||||
| Additional paid-in capital | 2,827 | 2,795 | |||||||||
| Retained earnings | 4,595 | 4,412 | |||||||||
| Accumulated other comprehensive loss | (6) | (17) | |||||||||
| Treasury stock at cost, 147,069,155 and 142,655,389 shares as of November 30, 2023 and August 31, 2023, respectively | (4,881) | (4,324) | |||||||||
| Total Jabil Inc. stockholders’ equity | 2,535 | 2,866 | |||||||||
| Noncontrolling interests | 1 | 1 | |||||||||
| Total equity | 2,536 | 2,867 | |||||||||
| Total liabilities and equity | $ | 19,414 | $ | 19,424 |
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for per share data)
(Unaudited)
| Three months ended | |||||||||||||||||||||||
| November 30, 2023 | November 30, 2022 | ||||||||||||||||||||||
| Net revenue | $ | 8,387 | $ | 9,635 | |||||||||||||||||||
| Cost of revenue | 7,612 | 8,892 | |||||||||||||||||||||
| Gross profit | 775 | 743 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 314 | 319 | |||||||||||||||||||||
| Research and development | 10 | 9 | |||||||||||||||||||||
| Amortization of intangibles | 6 | 8 | |||||||||||||||||||||
| Restructuring, severance and related charges | 127 | 45 | |||||||||||||||||||||
| Costs from the divestiture of businesses | 15 | — | |||||||||||||||||||||
| Operating income | 303 | 362 | |||||||||||||||||||||
| Other expense | 21 | 15 | |||||||||||||||||||||
| Interest expense, net | 47 | 48 | |||||||||||||||||||||
| Income before income tax | 235 | 299 | |||||||||||||||||||||
| Income tax expense | 41 | 76 | |||||||||||||||||||||
| Net income | 194 | 223 | |||||||||||||||||||||
| Net income attributable to noncontrolling interests, net of tax | — | — | |||||||||||||||||||||
| Net income attributable to Jabil Inc. | $ | 194 | $ | 223 | |||||||||||||||||||
| Earnings per share attributable to the stockholders of Jabil Inc.: | |||||||||||||||||||||||
| Basic | $ | 1.49 | $ | 1.65 | |||||||||||||||||||
| Diluted | $ | 1.47 | $ | 1.61 | |||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | 129.6 | 134.8 | |||||||||||||||||||||
| Diluted | 132.1 | 138.0 |
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
| Three months ended | |||||||||||||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are one of the leading providers of worldwide manufacturing services and solutions. We provide comprehensive electronics design, production and product management services to companies in various industries and end markets. Our services enable our customers to reduce manufacturing costs, improve supply-chain management, reduce inventory obsolescence, lower transportation costs and reduce product fulfillment time. Our manufacturing and supply chain management services and solutions include innovation, design, planning, fabrication and assembly, delivery and managing the flow of resources and products. We derive substantially all of our revenue from production and product management services (collectively referred to as “manufacturing services”), which encompass the act of producing tangible components that are built to customer specifications and are then provided to the customer.
We serve our customers primarily through dedicated business units that combine highly automated, continuous flow manufacturing with advanced electronic design and design for manufacturability. We currently depend, and expect to continue to depend for the foreseeable future, upon a relatively small number of customers for a significant percentage of our net revenue, which in turn depends upon their growth, viability and financial stability.
We conduct our operations in facilities that are located worldwide, including but not limited to, China, India, Malaysia, Mexico, Singapore and the United States. We derived a substantial majority, 86.4% of net revenue from our international operations for the three months ended November 30, 2023. Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products. Our global presence is key to assessing and executing on our business opportunities.
We have two reporting segments: Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”), which are organized based on the economic profiles of the services performed, including manufacturing capabilities, market strategy, margins, return on capital and risk profiles. Our EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, utilizing our large scale manufacturing infrastructure and our ability to serve a broad range of end markets. Our EMS segment is a high volume business that produces product at a quicker rate (i.e. cycle time) and in larger quantities and includes customers primarily in the 5G, wireless and cloud, digital print and retail, industrial and semi-capital equipment, and networking and storage industries. Our DMS segment is focused on providing engineering solutions, with an emphasis on material sciences, technologies and healthcare. Our DMS segment includes customers primarily in the automotive and transportation, connected devices, healthcare and packaging, and mobility industries.
We monitor the current economic environment and its potential impact on both the customers we serve as well as our end-markets and closely manage our costs and capital resources so that we can respond appropriately as circumstances change.
Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023 for further discussion of the items disclosed in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section as of November 30, 2023 contained herein.
Summary of Results
The following table sets forth, for the periods indicated, certain key operating results and other financial information (in millions, except per share data):
| Three months ended | |||||||||||||||||||||||
| November 30, 2023 | November 30, 2022 | ||||||||||||||||||||||
| Net revenue | $ | 8,387 | $ | 9,635 | |||||||||||||||||||
| Gross profit | $ | 775 | $ | 743 | |||||||||||||||||||
| Operating income | $ | 303 | $ | 362 | |||||||||||||||||||
| Net income attributable to Jabil Inc. | $ | 194 | $ | 223 | |||||||||||||||||||
| Earnings per share—basic | $ | 1.49 | $ | 1.65 | |||||||||||||||||||
| Earnings per share—diluted | $ | 1.47 | $ | 1.61 |
Key Performance Indicators
Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. Changes in our operating assets and liabilities are largely affected by our working capital requirements, which are dependent on the effective management of our sales cycle as well as timing of payments. Our sales cycle measures how quickly we can convert our manufacturing services into cash through sales. We believe the metrics set forth below are useful to investors in measuring our liquidity as future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts payable.
The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators:
| Three months ended | |||||||||||||||||
| November 30, 2023**(1)** | August 31, 2023**(1)** | November 30, 2022 | |||||||||||||||
| Sales cycle(2) | 42 days | 43 days | 39 days | ||||||||||||||
| Inventory turns (annualized)(3) | 5 turns | 5 turns | 5 turns | ||||||||||||||
| Days in accounts receivable(4) | 43 days | 40 days | 42 days | ||||||||||||||
| Days in inventory(5) | 78 days | 80 days | 78 days | ||||||||||||||
| Days in accounts payable(6) | 78 days | 77 days | 81 days |
(1)The calculation of these key performance indicators includes assets and liabilities held for sale for the three months ended November 30, 2023 and August 31, 2023, respectively.
(2)The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter was a direct result of changes in these indicators.
(3)Inventory turns (annualized) are calculated as 360 days divided by days in inventory.
(4)Days in accounts receivable is calculated as accounts receivable, net, divided by net revenue multiplied by 90 days. During the three months ended November 30, 2023, the increase in days in accounts receivable from the prior sequential quarter was primarily due to the timing of collections.
(5)Days in inventory is calculated as inventories, net and contract assets divided by cost of revenue multiplied by 90 days. During the three months ended November 30, 2023, the decrease in days in inventory from the prior sequential quarter was primarily driven by higher consumption of inventory to support sales during the quarter and improved working capital management.
(6)Days in accounts payable is calculated as accounts payable divided by cost of revenue multiplied by 90 days. During the three months ended November 30, 2023, the decrease in days in accounts payable from the three months ended November 30, 2022, was primarily due to cash payments and timing of purchases during the quarter.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. For further discussion of our significant accounting policies, refer to Note 1 — “Description of Business and Summary of Significant Accounting Policies” to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023.
Recent Accounting Pronouncements
See Note 18 – “New Accounting Guidance” to the Condensed Consolidated Financial Statements for a discussion of recent accounting guidance.
Results of Operations
Net Revenue
Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or separately report revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure.
The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of numerous factors, including the following: fluctuations in customer demand; efforts to diversify certain portions of our business; business growth from new and existing customers; specific product performance; and any potential termination, or substantial winding down, of significant customer relationships.
| Three months ended | |||||||||||||||||||||||||||||||||||
| (dollars in millions) | November 30, 2023 | November 30, 2022 | Change | ||||||||||||||||||||||||||||||||
| Net revenue | $ | 8,387 | $ | 9,635 | (12.9) | % |
Net revenue decreased during the three months ended November 30, 2023, compared to the three months ended November 30, 2022. Specifically, the EMS segment net revenue decreased 21% primarily due to: (i) a 12% decrease in revenues from existing customers within our 5G, wireless and cloud business, which continued transitioning to a customer-controlled consignment model in fiscal year 2024, (ii) a 7% decrease in revenues from existing customers within our digital print and retail business, and (iii) a 2% decrease in revenues from existing customers within our industrial and semi-capital equipment business. The DMS segment net revenue decreased 6% due to: (i) a 5% decrease in revenues from existing customers within our connected devices business and (ii) a 3% decrease from existing customers within our mobility business. The decrease is partially offset by a 2% increase in revenues from existing customers within our automotive and transportation business.
On September 26, 2023, we announced the signing of a definitive agreement to divest our mobility business to an affiliate of BYD Electronic (International) Company Limited (“BYDE”) in a cash transaction valued at approximately $2.2 billion. On December 29, 2023, the closing date, we completed the sale. See Note 15 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for additional information.
The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:
| Three months ended | |||||||||||||||||||||||
| November 30, 2023 | November 30, 2022 | ||||||||||||||||||||||
| EMS | 43 | % | 47 | % | |||||||||||||||||||
| DMS | 57 | % | 53 | % | |||||||||||||||||||
| Total | 100 | % | 100 | % |
The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:
| Three months ended | |||||||||||||||||||||||
| November 30, 2023 | November 30, 2022 | ||||||||||||||||||||||
| Foreign source revenue | 86.4 | % | 85.7 | % |
Gross Profit
| Three months ended | |||||||||||||||||||||||||||||||||||
| (dollars in millions) | November 30, 2023 | November 30, 2022 | |||||||||||||||||||||||||||||||||
| Gross profit | $ | 775 | $ | 743 | |||||||||||||||||||||||||||||||
| Percent of net revenue | 9.2 | % | 7.7 | % |
Gross profit as a percentage of net revenue increased for the three months ended November 30, 2023, compared to the three months ended November 30, 2022, primarily due to product mix, improved profitability across various businesses, and depreciation and amortization for long-lived assets no longer being recorded while these assets are classified as held for sale.
Selling, General and Administrative
| Three months ended | |||||||||||||||||||||||||||||||||||
| (in millions) | November 30, 2023 | November 30, 2022 | Change | ||||||||||||||||||||||||||||||||
| Selling, general and administrative | $ | 314 | $ | 319 | $ | (5) |
Selling, general and administrative expenses decreased during the three months ended November 30, 2023, compared to the three months ended November 30, 2022. The decrease is primarily due to a $6 million decrease in salary and salary related expenses.
Research and Development
| Three months ended | |||||||||||||||||||||||||||||||||||
| (dollars in millions) | November 30, 2023 | November 30, 2022 | |||||||||||||||||||||||||||||||||
| Research and development | $ | 10 | $ | 9 | |||||||||||||||||||||||||||||||
| Percent of net revenue | 0.1 | % | 0.1 | % |
Research and development expenses remained consistent as a percentage of net revenue during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.
Amortization of Intangibles
| Three months ended | |||||||||||||||||||||||||||||||||||
| (in millions) | November 30, 2023 | November 30, 2022 | Change | ||||||||||||||||||||||||||||||||
| Amortization of intangibles | $ | 6 | $ | 8 | $ | (2) |
Amortization of intangibles remained relatively consistent during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.
Restructuring, Severance and Related Charges
| Three months ended | |||||||||||||||||||||||||||||||||||
| (in millions) | November 30, 2023 | November 30, 2022 | Change | ||||||||||||||||||||||||||||||||
| Restructuring, severance and related charges | $ | 127 | $ | 45 | $ | 82 |
Restructuring, severance and related charges increased during the three months ended November 30, 2023, compared to the three months ended November 30, 2022, primarily related to the 2024 Restructuring Plan.
2024 Restructuring Plan
On September 26, 2023, our Board of Directors approved a restructuring plan to (i) realign our cost base for stranded costs associated with the sale and realignment of our mobility business and (ii) optimize our global footprint. This action includes headcount reductions across our Selling, General and Administrative (“SG&A”) cost base and capacity realignment (the “2024 Restructuring Plan”). The 2024 Restructuring Plan reflects our intention only and restructuring decisions, and the timing of such decisions, at certain locations, are still subject to consultation with our employees and their representatives.
Based on the analysis done to date, we currently expect to recognize approximately $300 million in pre-tax restructuring and other related costs over the course of our 2024 fiscal year. The charges relating to the 2024 Restructuring Plan are currently expected to result in net cash expenditures of approximately $200 million that will be payable over the course of our fiscal years 2024 and 2025. The exact timing of these charges and cash outflows, as well as the estimated cost ranges by category type, have not been finalized. This information will be subject to the finalization of timetables for the transition of functions, consultation with employees and their representatives as well as the statutory severance requirements of the jurisdictions impacted, and the amount and timing of the actual charges may vary due to a variety of factors. Our estimates for the charges discussed above exclude any potential income tax effects.
See Note 12 – “Restructuring, Severance and Related Charges” to the Condensed Consolidated Financial Statements for further discussion of restructuring, severance and related charges.
Costs from the Divestiture of Businesses
| Three months ended | |||||||||||||||||||||||||||||||||||
| (in millions) | November 30, 2023 | November 30, 2022 | Change | ||||||||||||||||||||||||||||||||
| Costs from the divestiture of businesses | $ | 15 | $ | — | $ | 15 |
Costs from the divestiture of businesses increased during the three months ended November 30, 2023, related to transaction costs incurred from the planned divestiture of our mobility business.
Other Expense
| Three months ended | |||||||||||||||||||||||||||||||||||
| (in millions) | November 30, 2023 | November 30, 2022 | Change | ||||||||||||||||||||||||||||||||
| Other expense | $ | 21 | $ | 15 | $ | 6 |
The change in other expense during the three months ended November 30, 2023, compared to the three months ended November 30, 2022, is primarily due to an increase in fees due to higher interest rates on our trade accounts receivable sales programs and global asset-backed securitization programs.
Interest Expense, Net
| Three months ended | |||||||||||||||||||||||||||||||||||
| (in millions) | November 30, 2023 | November 30, 2022 | Change | ||||||||||||||||||||||||||||||||
| Interest expense, net | $ | 47 | $ | 48 | $ | (1) |
Interest expense, net remained relatively consistent during the three months ended November 30, 2023, compared to the three months ended November 30, 2022.
Income Tax Expense
| Three months ended | |||||||||||||||||||||||||||||||||||
| November 30, 2023 | November 30, 2022 | Change | |||||||||||||||||||||||||||||||||
| Effective income tax rate | 17.6 | % | 25.6 | % | (8.0) | % |
The effective income tax rate differed for the three months ended November 30, 2023, compared to the three months ended November 30, 2022, primarily due to: (i) a change in the jurisdictional mix of earnings, driven in part by restructuring charges, (ii) a $19 million income tax benefit for the reversal of a non-U.S. unrecognized tax benefit due to audit closure for the three months ended November 30, 2023, and (iii) an $11 million income tax benefit for the reversal of a portion of the U.S. valuation allowance related to an acquisition for the three months ended November 30, 2023.
Non-GAAP (Core) Financial Measures
The following discussion and analysis of our financial condition and results of operations include certain non-GAAP financial measures as identified in the reconciliations below. The non-GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation. Also, our “core” financial measures should not be construed as an indication by us that our future results will be unaffected by those items that are excluded from our “core” financial measures.
We determine an annual normalized tax rate (“normalized core tax rate”) for the computation of the non-GAAP (core) income tax provision to provide better consistency across reporting periods. In estimating the normalized core tax rate annually, we utilize a full-year financial projection of core earnings that considers the mix of earnings across tax jurisdictions, existing tax positions, and other significant tax matters. We may adjust the normalized core tax rate during the year for material impacts from new tax legislation or material changes to our operations.
Included in the tables below are reconciliations of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Condensed Consolidated Financial Statements:
Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures
| Three months ended | |||||||||||||||||||||||
| (in millions, except for per share data) | November 30, 2023 | November 30, 2022 | |||||||||||||||||||||
| Operating income (U.S. GAAP) | $ | 303 | $ | 362 | |||||||||||||||||||
| Amortization of intangibles | 6 | 8 | |||||||||||||||||||||
| Stock-based compensation expense and related charges | 46 | 42 | |||||||||||||||||||||
| Restructuring, severance and related charges(1) | 127 | 45 | |||||||||||||||||||||
| Net periodic benefit cost(2) | 2 | 4 | |||||||||||||||||||||
| Costs from the divestiture of businesses | 15 | — | |||||||||||||||||||||
| Adjustments to operating income | 196 | 99 | |||||||||||||||||||||
| Core operating income (Non-GAAP) | $ | 499 | $ | 461 | |||||||||||||||||||
| Net income attributable to Jabil Inc. (U.S. GAAP) | $ | 194 | $ | 223 | |||||||||||||||||||
| Adjustments to operating income | 196 | 99 | |||||||||||||||||||||
| Net periodic benefit cost(2) | (2) | (4) | |||||||||||||||||||||
| Adjustments for taxes(3) | (45) | 1 | |||||||||||||||||||||
| Core earnings (Non-GAAP) | $ | 343 | $ | 319 | |||||||||||||||||||
| Diluted earnings per share (U.S. GAAP) | $ | 1.47 | $ | 1.61 | |||||||||||||||||||
| Diluted core earnings per share (Non-GAAP) | $ | 2.60 | $ | 2.31 | |||||||||||||||||||
| Diluted weighted average shares outstanding (U.S. GAAP and Non-GAAP) | 132.1 | 138.0 | |||||||||||||||||||||
(1)Charges recorded during the three months ended November 30, 2023, related to the 2024 Restructuring Plan. Charges recorded during the three months ended November 30, 2022, related to headcount reduction to further optimize our business activities.
(2)We are reclassifying the pension components in other expense to core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue. There is no impact to core earnings or diluted core earnings per share for this adjustment.
(3)Tax adjustments for the three months ended November 30, 2023, were partially driven by an income tax benefit for the reversal of a non-U.S. unrecognized tax benefit due to audit closure.
Adjusted Free Cash Flow
| Three months ended | |||||||||||
| (in millions) | November 30, 2023 | November 30, 2022 | |||||||||
| Net cash provided by operating activities (U.S. GAAP) | $ | 448 | $ | 166 | |||||||
| Acquisition of property, plant and equipment (“PP&E”)(1) | (288) | (314) | |||||||||
| Proceeds and advances from sale of PP&E(1) | 13 | 150 | |||||||||
| Adjusted free cash flow (Non-GAAP) | $ | 173 | $ | 2 |
(1)Certain customers co-invest in PP&E with us. As we acquire PP&E, we recognize the cash payments in acquisition of PP&E. When our customers reimburse us and obtain control, we recognized the cash receipts in proceeds and advances from the sale of PP&E.
Acquisitions and Divestitures
Acquisitions
On November 1, 2023, we completed the acquisition of ProcureAbility Inc. (“ProcureAbility”) for approximately $60 million in cash. ProcureAbility is a procurement services provider specializing in technology-enabled advisory, managed services, digital, staffing, and recruiting solutions.
The acquisition of ProcureAbility assets was accounted for as a business combination using the acquisition method of accounting. Assets acquired of $86 million, including $40 million in intangible assets and $38 million in goodwill, and liabilities assumed of $25 million were recorded at their estimated fair values as of the acquisition date. The allocation of the purchase price is considered preliminary pending final valuation for the Company. The excess of the purchase price over the fair value of the acquired assets and assumed liabilities was recorded to goodwill and was fully allocated to the DMS segment. The majority of the goodwill is currently not expected to be deductible for income tax purposes. The results of operations were
included in our condensed consolidated financial results beginning on November 1, 2023. Pro forma information has not been provided as the acquisition of ProcureAbility is not deemed to be significant.
Divestitures
We announced on September 26, 2023 that, through our indirect subsidiary, Jabil Circuit (Singapore) Pte. Ltd., a Singapore private limited company (“Singapore Seller”), we agreed to sell to an affiliate of BYD Electronic (International) Co. Ltd., a Hong Kong limited liability company (“Purchaser” or “BYDE”), our product manufacturing business in Chengdu, including our supporting component manufacturing in Wuxi (the “Business”) for cash consideration of approximately $2.2 billion, subject to certain customary purchase price adjustments. On December 29, 2023, the closing date, we completed the sale.
As of November 30, 2023, and August 31, 2023, the assets and liabilities of the Business were classified as held for sale and the carrying value is less than the estimated fair value less cost to sell and, thus, no adjustment to the carrying value of the disposal group is necessary. For the three months ended November 30, 2023, depreciation and amortization expense for long-lived assets are not recorded while these assets are classified as held for sale. The divestiture did not meet the criteria to be reported as discontinued operations and we continued to report the operating results for the Business in our Condensed Consolidated Statement of Operations in the DMS segment until the Closing Date.
Refer to Note 15 – “Business Acquisitions and Divestitures” to the Condensed Consolidated Financial Statements for discussion.
Liquidity and Capital Resources
We believe that our level of liquidity sources, which includes cash on hand, available borrowings under our revolving credit facilities and commercial paper program, additional proceeds available under our global asset-backed securitization program and under our uncommitted trade accounts receivable sale programs, cash flows provided by operating activities and access to the capital markets, will be adequate to fund our capital expenditures, the payment of any declared quarterly dividends, any share repurchases under the approved programs, any potential acquisitions, our working capital requirements and our contractual obligations for the next 12 months and beyond. We continue to assess our capital structure and evaluate the merits of redeploying available cash.
Cash and Cash Equivalents
As of November 30, 2023, we had approximately $1.6 billion in cash and cash equivalents, of which a significant portion was held by our foreign subsidiaries. Most of our foreign cash and cash equivalents as of November 30, 2023 could be repatriated to the United States without potential tax expense.
Notes Payable and Credit Facilities
Following is a summary of principal debt payments and debt issuance for our notes payable and credit facilities:
| (in millions) | 3.950% Senior Notes | 3.600% Senior Notes | 3.000% Senior Notes | 1.700% Senior Notes | 4.250% Senior Notes | 5.450% Senior Notes | Borrowings under revolving credit facilities**(1)** | Borrowings under loans | Total notes payable and credit facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of August 31, 2023 | $ | 497 | $ | 496 | $ | 593 | $ | 498 | $ | 495 | $ | 296 | $ | — | $ | — | $ | 2,875 | |||||||||||||||||||||||||||||||||||||||||||||||
| Borrowings | — | — | — | — | — | — | 395 | — | 395 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payments | — | — | — | — | — | — | (395) | — | (395) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | 1 | — | — | — | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of November 30, 2023 | $ | 497 | $ | 497 | $ | 593 | $ | 498 | $ | 495 | $ | 296 | $ | — | $ | — | $ | 2,876 | |||||||||||||||||||||||||||||||||||||||||||||||
| Maturity Date | Jan 12, 2028 | Jan 15, 2030 | Jan 15, 2031 | Apr 15, 2026 | May 15, 2027 | Feb 1, 2029 | Jan 22, 2025 and Jan 22, 2027 | Jul 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Original Facility/ Maximum Capacity(1) | $500 million | $500 million | $600 million | $500 million | $500 million | $300 million | $3.8 billion(1) | $1 million |
.
(1)As of November 30, 2023, we had $3.8 billion in available unused borrowing capacity under our revolving credit facilities. The senior unsecured credit agreement dated as of January 22, 2020 and amended on February 10, 2023 (the “Credit Facility”) acts as the back-up facility for commercial paper outstanding, if any. We have a borrowing capacity
of up to $3.2 billion under our commercial paper program. Commercial paper borrowings with an original maturity of 90 days or less are recorded net within the Condensed Consolidated Statements of Cash Flows, and have been excluded from the table above.
We have a shelf registration statement with the SEC registering the potential sale of an indeterminate amount of debt and equity securities in the future to augment our liquidity and capital resources.
Our Senior Notes and our credit facilities contain various financial and nonfinancial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the notes payable and credit facilities and potentially causing acceleration of amounts due under these notes payable and credit facilities. As of November 30, 2023 and August 31, 2023, we were in compliance with our debt covenants. Refer to Note 4 – “Notes Payable and Long-Term Debt” to the Condensed Consolidated Financial Statements for further details.
Global Asset-Backed Securitization Program
Certain Jabil entities participating in the global asset-backed securitization program continuously sell designated pools of trade accounts receivable to a special purpose entity, which in turn sells certain of the receivables at a discount to conduits administered by an unaffiliated financial institution on a monthly basis. In addition, a foreign entity participating in the global asset-backed securitization program sells certain receivables at a discount to conduits administered by an unaffiliated financial institution on a daily basis.
We continue servicing the receivables sold and in exchange receive a servicing fee under the global asset-backed securitization program. Servicing fees related to the global asset-backed securitization program recognized during the three months ended November 30, 2023 and 2022 were not material. We do not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as we estimate that the fee we receive to service these receivables approximates the fair market compensation to provide the servicing activities.
The special purpose entity in the global asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in our Condensed Consolidated Financial Statements. Certain unsold receivables covering up to the maximum amount of net cash proceeds available under the domestic, or U.S., portion of the global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of November 30, 2023.
The global asset-backed securitization program expires on November 25, 2024 and the maximum amount of net cash proceeds available at any one time is $600 million. During the three months ended November 30, 2023, we sold $1.0 billion of trade accounts receivable and we received cash proceeds of $1.0 billion. As of November 30, 2023, we had no available liquidity under our global asset-backed securitization program.
The global asset-backed securitization program requires compliance with several covenants including compliance with the interest ratio and debt to EBITDA ratio of the Credit Facility. As of November 30, 2023 and August 31, 2023, we were in compliance with all covenants under our global asset-backed securitization program. Refer to Note 5 – “Asset-Backed Securitization Program” to the Condensed Consolidated Financial Statements for further details on the program.
Trade Accounts Receivable Sale Programs
As of November 30, 2023, we may elect to sell receivables and the unaffiliated financial institutions may elect to purchase specific accounts receivable at any one time, at a discount, on an ongoing basis up to a: (i) maximum aggregate amount available of $2.3 billion under nine trade accounts receivable sale programs, (ii) maximum amount available of 100 million CHF under one trade accounts receivable sale program, and (iii) maximum amount available of 8.1 billion INR under one trade accounts receivable sale program. The trade accounts receivable sale programs either expire on various dates through 2028 or do not have expiration dates and may be terminated upon election of the Company or the unaffiliated financial institutions.
During the three months ended November 30, 2023, we sold $2.0 billion of trade accounts receivable under these programs and we received cash proceeds of $2.0 billion. As of November 30, 2023, we had up to $1.4 billion in available liquidity under our trade accounts receivable sale programs.
Cash Flows
The following table sets forth selected consolidated cash flow information (in millions):
| Three months ended | ||||||||||||||
| November 30, 2023 | November 30, 2022 | |||||||||||||
| Net cash provided by operating activities | $ | 448 | $ | 166 | ||||||||||
| Net cash used in investing activities | (75) | (176) | ||||||||||||
| Net cash used in financing activities | (620) | (241) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (7) | (10) | ||||||||||||
| Net decrease in cash and cash equivalents | $ | (254) | $ | (261) |
Operating Activities
Net cash provided by operating activities during the three months ended November 30, 2023, was primarily due to a decrease in non-cash expenses, net income, inventories, and an increase in accounts payable, accrued expenses and other liabilities. Net cash provided by operating activities was partially offset by an increase in accounts receivable, in prepaid expenses and other current assets, and in contract assets. The decrease in inventories is primarily due to higher consumption of inventory to support sales during the quarter and improved working capital management. The increase in accounts payable, accrued expenses and other liabilities is primarily due to the timing of purchases and cash payments. The increase in accounts receivable is primarily driven by the timing of collections. The increase in prepaid expenses and other current assets is primarily due to the timing of payments. The increase in contract assets is primarily due to timing of revenue recognition for the over time customers.
Investing Activities
Net cash used in investing activities during the three months ended November 30, 2023 consisted primarily of capital expenditures, principally to support ongoing business in the DMS and EMS segments and the acquisition of ProcureAbility, partially offset by proceeds from the planned divestiture of our mobility business and proceeds and advances from the sale of property, plant and equipment.
Financing Activities
Net cash used in financing activities during the three months ended November 30, 2023 was primarily due to (i) the repurchase of our common stock under our share repurchase authorization, (ii) payments for debt agreements (iii) treasury stock minimum tax withholding related to vesting of restricted stock, and (iv) dividend payments. Net cash used in financing activities was partially offset by borrowings under debt agreements.
Capital Expenditures
For Fiscal Year 2024, we anticipate our net capital expenditures to be in the range of 2.2 percent to 2.5 percent of net revenue. Upon closing of the Company’s sale of its mobility business, we anticipate our longer-term net capital expenditures to be in the range of 2.0 to 2.3 percent of net revenue. In general, our capital expenditures support ongoing maintenance in our DMS and EMS segments and investments in capabilities and targeted end markets. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things.
Dividends and Share Repurchases
We currently expect to continue to declare and pay regular quarterly dividends of an amount similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance and global economic conditions.
In July 2021, the Board of Directors approved an authorization for the repurchase of up to $1.0 billion of our common stock (the “2022 Share Repurchase Program”). As of February 28, 2023, 16.5 million shares had been repurchased for $1.0 billion and no authorization remained under the 2022 Share Repurchase Program.
In September 2022, the Board of Directors approved an authorization for the repurchase of up to $1.0 billion of our common stock (the “2023 Share Repurchase Program”). As of August 31, 2023, 2.7 million shares had been repurchased for $224 million, excluding excise tax. In September 2023, the Board of Directors amended and increased the 2023 Share Repurchase Program to allow for the repurchase of up to $2.5 billion of our common stock. As part of the 2023 Share Repurchase Program, we entered into an accelerated share repurchase (“ASR”) agreement with a bank in September 2023 to repurchase $500 million
of our common stock. During the first quarter of 2024, the ASR transaction was completed, and 3.9 million shares were delivered under the ASR agreement at an average price of $128.61. The final number of shares delivered upon settlement of the ASR agreement was determined based on a discount to the volume weighted average price of our common stock during the term of the agreement. As of November 30, 2023, 3.9 million shares had been repurchased for $500 million, excluding excise tax, and $2.0 billion remains available under the 2023 Share Repurchase Program approved in September 2023.
Contractual Obligations
As of the date of this report, there were no material changes outside the ordinary course of business, since August 31, 2023, to our contractual obligations and commitments and the related cash requirements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act as of November 30, 2023. Based on the Evaluation, our CEO and CFO concluded that the design and operation of our disclosure controls were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to our senior management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
For our fiscal quarter ended November 30, 2023, we did not identify any modifications to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
| Item 1. Legal Proceedings |
See the discussion in Note 17 - “Commitments and Contingencies” to the Condensed Consolidated Financial Statements.
Item 1A. Risk Factors
For information regarding risk factors that could affect our business, results of operations, financial condition or future results, see Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended August 31, 2023. For further information on our forward-looking statements see Part I of this Quarterly Report on Form 10-Q.
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
The following table provides information relating to our repurchase of common stock, excluding excise tax, during the three months ended November 30, 2023:
| Period | Total Number of Shares Purchased**(1)** | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program**(2)** | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)****(2) | |||||||||||||||||||
| September 1, 2023 – September 30, 2023 | — | $ | — | — | $ | 2,500 | |||||||||||||||||
| October 1, 2023 – October 31, 2023 | 3,875,386 | $ | 128.39 | 3,349,358 | $ | 2,000 | |||||||||||||||||
| November 1, 2023 – November 30, 2023 | 538,380 | $ | 128.61 | 538,380 | $ | 2,000 | |||||||||||||||||
| Total | 4,413,766 | $ | 128.42 | 3,887,738 |
(1)The purchases include amounts that are attributable to 526,028 shares surrendered to us by employees to satisfy, in connection with the vesting of restricted stock unit awards, their tax withholding obligations.
(2)In September 2022, our Board of Directors authorized the repurchase of up to $1.0 billion of our common stock as publicly announced in a press release on September 27, 2022 (the “2023 Share Repurchase Program”). As of August 31, 2023, 2.7 million shares had been repurchased for $224 million, excluding excise tax. In September 2023, our Board of Directors amended and increased the 2023 Share Repurchase Program to allow for the repurchase of up to $2.5 billion of our common stock as publicly announced in a press release on September 28, 2023. As part of the 2023 Share Repurchase Program, we entered into an accelerated share repurchase (“ASR”) agreement with a bank in September 2023 to repurchase $500 million of our common stock. During the first quarter of 2024, the ASR transaction was completed, and 3.9 million shares were delivered under the ASR agreement at an average price of $128.61. The final number of shares delivered upon settlement of the ASR agreement was determined based on a discount to the volume weighted average price of our common stock during the term of the agreement.
| Item 3. Defaults Upon Senior Securities |
None.
| Item 4. Mine Safety Disclosures |
Not applicable.
Item 5. Other Information
During the three months ended November 30, 2023, no director or executive officer of the Company adopted or terminated a trading arrangement intended to satisfy the affirmative defenses of Rule 10b5-1 under the Securities Exchange Act of 1934 or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
Index to Exhibits
| 101 | The following financial information from Jabil’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of November 30, 2023 and August 31, 2023, (ii) Condensed Consolidated Statements of Operations for the three months ended November 30, 2023 and 2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended November 30, 2023 and 2022, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended November 30, 2023 and 2022, (v) Condensed Consolidated Statements of Cash Flows for the three months ended November 30, 2023 and 2022, and (vi) the Notes to Condensed Consolidated Financial Statements. | ||||||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (Embedded within the inline XBRL Document in Exhibit 101). | ||||||||||||||||||||||||||||||||||||||||
| † | Indicates management compensatory plan, contract or arrangement | ||||||||||||||||||||||||||||||||||||||||
| * | Filed or furnished herewith | ||||||||||||||||||||||||||||||||||||||||
| ** | Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. Jabil agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon request. | ||||||||||||||||||||||||||||||||||||||||
Certain instruments with respect to long-term debt of the Registrant and its consolidated subsidiaries are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K since the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| JABIL INC. Registrant | ||||||||
| Date: January 9, 2024 | By: | /s/ KENNETH S. WILSON | ||||||
| Kenneth S. Wilson Chief Executive Officer | ||||||||
| Date: January 9, 2024 | By: | /s/ MICHAEL DASTOOR | ||||||
| Michael Dastoor Chief Financial Officer |