Jabil FY 2Q17 Earnings Call Notes

Mark Mondello

We’re running a lot of simulations on tax stuff

“Hi Sean. It’s Mark. So since mid-January, Forbes and myself and other management have probably have been on about 60 to 80 calls from customers asking, hey, could we run some simulations, can we run some models, what if, what if, what if? One of the things that we are not doing is, is we are not offering the customers positions or thoughts about what may or may not happen in terms of tariff, tax, et cetera. But I think we are in a great position to run a bunch of different what-if scenarios. One of things we have encouraged our customers to do is run three, four, five scenarios so they kind of get it into muscle memory and therefore depending on whatever happens in terms of DC and the U.S. government, we are ready to act swiftly. I think we are very well positioned on an absolute basis and a relative basis. If you think about business coming back into the U.S., Jabil has a significant amount of capacity in the U.S. and resource and headcount. We have also been building product in the U.S. forever. If you think about Jabil from a political standpoint, we are an NYSE U.S. domiciled company. So I think both practically and politically, we are in a very, very good position to help. And then I would supplement that by saying, our digital cloud-based analytic tools in terms of supply chain analytics are being exercised quite heavily at the moment running a bunch of these different scenarios. So for us, it’s kind of being well prepared, helping our customers be well prepared and we will see what happens in the coming months out of Washington.”

Jabil FY 2Q16 Earnings Call Notes

Jabil Circuit’s (JBL) CEO Mark Mondello on Q2 2016 Results

Jabil is 50 years old

“I’d like to take a minute and acknowledge our 50th anniversary here at Jabil. 2016 is Jabil’s 50th year as a going concern. To me that’s an amazing accomplishment.”

Volatility in the mobile market can be maddening

“I’d now like to circle back to our Green Point business. As we know, this business has a well understood high-beta characteristic. Our Green Point team manages large scale demand fluctuations really well. In fact, I’d argue they do it better than anyone. Dealing with this volatility can be maddening. With that said, our continued participation in the mobility market is key to Jabil’s holistic approach to the overall ecosystem, a technology ecosystem that squarely relies on handheld computing.”

Mobile devices are here to stay

“Mobile devices are here to stay. They monitor and control an infinite number of connected devices as well as connect all of us in our daily lives. Apple remains dominant in this space and we’re fully committed to serving their brand.”

Weakness in mobility really hit us hard in the last four weeks or so

“Sure Steve. So we started seeing some softness in our Greenpoint business in the late January early February timeframe and I think that’s because of our position in supply chain. So we started seeing the softness in January and it really accelerated in February. And we had some modest declines that impacted Q2. So as I mentioned in my prepared remarks, we were down about $150 million in revenue but the outlook and the abruptness of the outlook for most certainly Q3 and then a portion of Q4 really hit us hard in I would say the last four weeks so.”

We are very very supportive with our largest customer

“let me start with, I love our biggest customer. And we’ll continue to make investments for them and we will be prudent in that. I think our ability to partner with them is outstanding, I think our ability to handle their volatility if and when it occurs is really, really good and I have a lot of confidence in Apple. So on the diversification side, what I can tell you is we are very, very supportive with our largest customer. We are seeing very good diversification within that large customer, but at the same time, we have a balance sheet such that we are leaning hard into our healthcare business, we are leaning hard into our EMS business”

The volatility sucks, but it is a lot different than 14 for us because we’ve diversified a bit more

“Yes, it sucks. I mean, as far as – I would love to be able to run our business on a quarter-to-quarter basis and I don’t like it at all and I take it to it heart, we have committed investors and it bothers me. But I think it’s drastically different, Amit, as far as fiscal year ’14. If you take a look at fiscal year ’14, we had a dramatic downturn as everybody knows on a program and for that year the company – I don’t remember the exact numbers, but I think we made about $340 million dollars in operating income. Today, we’ve got some abrupt downturns and the company is going to do $700 million. So I think it’s drastically different and I think what’s different about it is is we started three, three-and-half years ago to really drive in diversification throughout the company”

Jabil FY 1Q16 Earnings Call Notes

Mark Mondello

Automotive and digital connectivity are strong markets

“In my prepared comments, I touched on automotive. I think there are some good secular trends going on there that I highlighted. The overall, what I would call kind of a digital connectivity market, I highlighted one proof point in my commentary around what’s going on with connected home and I think you can extrapolate that out into some other end markets.”

Capital equipment market also an exciting market

“also highlighted our capital equipment market. And that’s really taking what we do at our core and also adding the capability of three acquisitions that we’ve recently made and support the capital equipment, and really it’s around the intricate capital equipment markets in the areas of semi-cap, advance test and industrial.”

Exciting things going on in healthcare and packaging side of business

“I will tell you pretty exciting things going on our business in the healthcare side and the packaging side. The healthcare business is interesting and I think I’d made a couple of comments in my prepared remarks. There’s a lot of disruption going on there. And we’re expanding our healthcare business into kind of looking at it as healthcare and wellness.”

Flexible, intelligent packaging

“And then on packaging, we’re really in the last couple of quarters driven an additional focus on that business with given it a little more independence than it had. And when you think about the packaging market, you’ve got packaging around rigid type devices or packages. You get flexible packaging and then you’ve got a whole area and smarter, intelligent packing.”

Healthcare is a space that’s being disrupted

“if you’re talking specific to healthcare. We have a bullish outlook on it, but I’d caution you up, everybody, not everybody – there’s lot of people racing to that space. It’s a space that’s been disrupted in a lot of different ways. It’s been disrupted at a hospital level. It’s been disrupted with data. It’s been disrupted from a digitization and mobility perspective. It’s being disrupted as far as industry consolidation, if you just look at the mega mergers that have taken place. So, if we’re thoughtful about it that disruption can be good for us.’

Miscellaneous Earnings Notes 10.1.15

Jabil Circuit’s (JBL) CEO Mark Mondello on Q4 2015 Results

The world is changing at a frenetic pace

“The world is changing at a frenetic pace and we’re changing with it. Here are three simple takeaways of what’s driving our business today: engineering and technical expertise; addressing real problems with solution selling; and diversification of our solutions and the products we deliver.”

Apple is a 24% customer

“I don’t pay much attention to concentration issues around brands. I pay attention to concentration around risk. And I think we stated that Apple was a 24% customer, that’s public information.”

AZZ’s (AZZ) CEO Tom Ferguson on Q2 2016 Results

Electric utility market remains sluggish in US

“The electric utility market in the U.S. remains sluggish but we have benefited from strong international opportunities and a solid backlog.”

IHS’ (IHS) CEO Jerre Stead on Q3 2015 Results

Automotive and industrial segments performing well

“Automotive continues to be very strong, really good job across the Board, but the rest of the pieces in industrial are performing very well too. In fact I feel really good with the solid performance in total.’

Automotive customers are ahead of the game doing analytics to make better offers to customers

“the source of sales product that we were building that provided OEMs an ability to do more targeted marketing. What I would say about automotive is they’re probably as far ahead as anyone, any of the business in the company around doing analytics with the underlying information and providing more robust offerings to customers.”

We only expect modest trimming of budgets for energy companies in 2016

“There are some smaller players in the U.S. upstream that will be under pressure, but we do think most of the big companies have made most of their cost reductions and the IOCs and major independents are in the process, while they’re in the process of deciding their capital budgets for 2016 and we expect some modest trimming.”

Art’s Way Manufacturing’s (ARTW) Chairman Marc McConnell on Q3 2015 Results

The plight of a small ag equipment manufacturer:

“We are still noticing that the dealers are struggling as well and they are definitely not wanting to stock any of our inventory. So we do anticipate that the sales that we have, we need to have inventory on hand in order to capitalize on those sales.”…

“And so, as we’ve discussed before in April, orders got pretty slow and really price of milk in particular is one thing that was helping us for a period of time and when that went down as well as the other commodities, that’s when it really got quieter order wise for us. So the whole, both oil and gas and especially ag are really in a tough period. And it’s normal part of the cycle. This has happened since the beginning of time, it seems like in the ag industry. And so we are preparing in such a way that we will be able to sustain a long prolonged period of slow sales.”…

“We’re fortunate to have a very strong capital position. We have good relationship with our bank. We are focused on keeping a lot of availability in liquidity with our banks so that we don’t get into any point of vulnerability. ”

Paychex’s (PAYX) CEO Martin Mucci on Q1 2016 Results

Startups are good at selling the low end but cant match our scale

“I think we continue to see good results from a selling perspective and so while they’re out there, I don’t think anyone has — no one has the sales team that we have, the distribution model and the number of sales people and the effectiveness. And so on the low end I think they sell very effectively and the low end being size”

Seeing continued strong employment growth in small businesses

“we’re seeing continued — particularly in the small business under 50, we’re seeing continued better employment growth than prerecession levels of 2004 and so — and it’s down a little bit from last year, but it’s consistently above that level. So we’re feeling like a steady improvement in small business formation and employment hiring ”

Diamond Foods’ (DMND) CEO Brian Driscoll Q4 2015 Results

Expanding capacity for kettle chips

“we’ve seen huge growth in Kettle and we’ve gone from being — our plants being 60% utilized to being basically filled. We are in the process of ordering new fryers and putting them in and our total CapEx this year is likely to be – whereas the year just ended, our CapEx was in the mid-20s, 27 million, our CapEx next year is likely to be in the mid-30s to cover the cost of that kind of expansion.”

It’s a tough market for acquisitions

“I think it’s a tough market. I think everybody says that, it’s a tough market. Valuations are high but maybe that could change with this current ongoing correction, who knows but I think it is a difficult market but we are looking for things that fit our profile. And we’re pretty confident quite frankly that we’re going to find something, maybe something more modest in size that will fit the profile and will work for us, inside what we can afford to pay.”

Jabil Circuit FY 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Splitting reporting into two segments

“going forward, we are going to report our business in two segments. The first segment is Jabil’s electronic manufacturing services, or EMS, segment. Our EMS segment will include our enterprise and infrastructure, high velocity, and industrial energy businesses.”

EMS segment characteristics

“The key characteristics of this segment are a common, holistic go-to-market approach; a value proposition based around leveraging IT, supply chain design, and engineering; technologies largely centered around core electronics, sharing of our large-scale manufacturing infrastructure, and the ability to serve a broad range of end markets.”

DMS Segment

“The second segment is Jabil’s diversified manufacturing services, or DMS segment. Our DMS segment includes our Nypro and Green Point brands. The key characteristics of our DMS segment are a diverse approach to engineering intensive solutions, steady participation in build to consumer markets, build to function versus build to print, access to higher growth markets, and an intense focus on material sciences and technologies.”

Differences in go to market

“So, again, as I said in the prepared comments, there’s a certain set of attributes and go-to-market strategies for our EMS business that are much, much different than the businesses that we take on for Green Point and/or Nypro.”

In EMS, driven by converging technologies

“But as I said in my prepared comments, it’s intriguing to me that as we see so many different technologies starting to converge so quickly, things like sensors, things like the additional bandwidth in wireless, things like cloud-based functions, things like appliances connecting to the internet, things going on in automotive.”

DMS opportunities in wearables, mobility, smart packaging, pharmaceuticals

“As far as the diversified space, I’d say the same thing. We’ve got great opportunities in lifestyles, wearables. Our mobility business is strong. And then our Nypro team, it’s, again, fascinating to me to see what they’re doing in the areas of packaging, what they’re doing in the areas of smart packaging, what they’re doing in the areas of pharmaceuticals, what they’re doing in the areas of overall med devices.”