捷普科技 (JBL) 2011 Q4 法說會逐字稿

Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jabil Circuit fourth-quarter and full fiscal year 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. I would now like to turn the conference over to Ms. Beth Walters, Senior Vice President of Communications and Investor Relations. Ms. Walters, please go ahead.

Thanks, Julianne, and thank you, everyone for joining us. Welcome to our fourth-quarter and fiscal year 2011 earnings call. Joining me today are President and CEO, Timothy Main and Chief Financial Officer, Forbes Alexander. This call is being recorded, and will be posted for audio playback on the Jabil website, Jabil.com, in the investor section. Our fourth-quarter and fiscal year press release and corresponding webcast with slides are also available on our website. In these slides, you will find the financial information that we covered during this conference call.

We ask that you follow our presentation with the slides on the website, and beginning with slide 2 now. Here is our forward-looking statement. During this conference call, we will be making forward-looking statements, including those regarding the anticipated outlook for our business, our currently expected first quarter of fiscal 2012 net revenue and earnings results, our long-term outlook for our Company, and improvements in our operational efficiencies and financial performance.

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 in our annual report on Form 10-K for the fiscal year ended August 31, 2010, our subsequent reports on Form 10-Q and Form 8-K, and our other securities filings. Jabil disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Today's call will begin with our fourth quarter and fiscal year results, some comments and highlights from Forbes Alexander on the results, as well as guidance on our first fiscal quarter of 2012. Tim Main will then follow with some macro environment and Jabil-specific comments about our performance, our model and our current outlook. We will then open it up to questions from call attendees. I will now turn the call over to Forbes.

Thank you, Beth and hello everyone. I'll ask you to refer to slide 3. Net revenue for the fourth quarter was $4.3 billion, an increase of 11% year-over-year. GAAP operating income was $165.6 million, or 3.9% of revenue, which compares to $103 million of GAAP operating income on revenues of $3.9 billion or 2.7% for the same period in the prior year.

Core operating income, excluding the amortization of intangibles and stock-based compensation, increased 19% to $187.2 million, and represents 4.4% of revenue. This compares to $157 million, or 4.1% for the same period in the prior year. On a sequential basis, revenue increased 1% in the fourth quarter, while core operating income increased 5%. Core diluted earnings per share was $0.62, an increase of 19% over the prior year.

I now ask you to turn to slide 4. In fiscal 2011, net revenue was $16.5 billion, an increase of 23%. GAAP operating income was $578.7 million, an increase of 77%, and represented 3.5% of revenue. This compares to $327.6 million of GAAP operating income, on revenues of $13.4 billion for fiscal 2010, and 2.4% of revenue.

Core operating income, excluding amortizations of intangibles and stock-based compensation, increased 46% to $715.2 million, and represented 4.3% of revenue for the full fiscal year. This compares to $490.9 million, or 3.7% for the same period in the prior year. Core diluted earnings per share was $2.34, an increase of 54% over the prior year.

I'd now ask you to turn to slide 5 for our segment discussion. In the fourth quarter, our Diversified Manufacturing Services segment grew 10% sequentially. On a year-over-year basis, this segment grew 35%. Revenue was approximately $1.7 billion, representing 40% of total Company revenue. Core operating income expanded in the quarter to 6.7% of revenue.

The Enterprise and Infrastructure segment grew 1% sequentially. On a year-over-year basis, this segment grew 10% for the quarter. Revenue was approximately $1.4 billion, representing 32% of total Company revenue in the fourth quarter. Core operating income for this segment was 2.6% of revenue.

The decline in core operating margin this quarter was primarily attributable to actions we are taking to restructure our operations in Italy, specifically, severance costs, asset write-offs, and other related charges of approximately $8 million. The balance of the decline in operating performance is attributed to sequential increase in losses in Italy, and infrastructure readiness for ongoing wireless program ramps in non-Western European geographies.

As we move through fiscal 2012, the continued ramp up of these new programs around the world will continue, diluting the negative impact of operating results in Western Europe. We therefore expect margins in this segment to steadily improve over the course of the fiscal year, and core operating margin targets between 4% and 4.5% remain intact. As for any future actions, we expect that routine tailoring of our infrastructure will be ongoing and absorbed through operating earnings, as we have done in the fourth fiscal quarter. We do not expect any future actions to be material enough to be disruptive to our operations, or the expected margin performance for the Company overall.

Our High Velocity segment decreased 9% sequentially. On a year-over-year basis, this segment decreased 11% for the quarter. Revenue was approximately $1.2 billion, representing 28% of the total Company revenue in this quarter. Core operating income for the segment was 3.1% of revenue. The sequential increase in core operating margin, a result of a more favorable mix of revenues and the successful implementation of lean initiatives.

I'd now ask you to turn to slide 6 for a discussion of our segment performance on a yearly basis. In fiscal 2011, our Diversified Manufacturing Services segment grew 43%. Revenue was approximately $6 billion, representing 36% of total Company revenue, and core operating income was 6.5% of revenue for the full year. The Enterprise and Infrastructure segment grew 18% in fiscal 2011. Revenue was approximately $5.2 billion, representing 32% of total Company revenue, and core operating income was 3.9% for the full year. And finally, our High Velocity segment grew 11%. Revenue was approximately $5.3 billion, again representing 32% of total Company revenue, and core operating income was 2.4% for the full year.

I'd now ask you to refer to slides 7 through 10 for the following discussion. We are very pleased with our fiscal 2011 performance. Our focused strategy of driving growth and returns in a differentiated and sustainable manner has resulted in a sustainable portfolio and income mix change to our business. Over the course of the first fiscal quarter of 2010, through the fourth fiscal quarter of 2011, our Diversified Manufacturing Services segment has grown from 29% to 40% of Company revenues, while our High Velocity segment has fallen from 40% to 28% of overall revenues. Our Enterprise and Infrastructure segment remained at 32% of overall revenue. Executing to this strategy has also delivered core operating income expansion from 3.4% to 4.4% over the same time frame.

In fiscal 2011, the resulting mix in revenue contributed to margin expansion from 3.7% to 4.3%. Our investments in the fiscal year were and shall remain focused towards our Diversified Manufacturing Services segment. Approximately 60% of these investments were made in the Diversified Manufacturing Services segment, 11% in Enterprise and Infrastructure, and 8% in High Velocity, the balance being IT and Infrastructure, to support our current and planned future growth.

Referring to slides 11 and 12, our capital returns in fiscal 2011 were exceptional, in a year where revenue grew 23%. We exited the year with a GAAP return on invested capital of 26%, EBITDA in excess of $1 billion or 6.1% of revenue. Our earnings growth and focused balance sheet management allowed us to produce very strong cash flows, producing $304 million of operating cash flow in the fourth quarter, $828 million for the full fiscal year, resulting in a free cash flow yield of some 40%, exceeding the target we had established at the beginning of the fiscal year. These strong cash flows have also allowed us to return some $260 million to shareholders through stock repurchases, and our ongoing dividend payment.

We enter fiscal 2012 in a position of strength, our balance sheet positioned to allow strategic flexibility and support continued growth as we continue to position Diversified Manufacturing Services towards 50% of our overall revenue stream. It's also important to note that fiscal 2011 performance continues the production of quality earnings amongst our peer group, with Jabil producing positive GAAP earnings nine years out of ten years through the end of fiscal 2010.

Looking ahead into 2012, we expect continued growth. First fiscal 2012 guidance can be found on slides 14 and 15. We expect revenue in the first quarter on a year-over-year basis to be up approximately 8%, or in the range of $4.3 billion to $4.5 billion. The Diversified Manufacturing Services segment is expected to increase 3% sequentially, the Enterprise and Infrastructure segment is expected to be consistent, and our High Velocity segment is expected to increase 6% sequentially, representing less seasonality than in past years, as a result of continued diversification of our business model.

Core operating income is estimated to be in the range of $185 million to $205 million, and the core operating margin in a range of 4.3% to 4.5%. Our core earnings per share will be in the range of $0.62 to $0.70 per diluted share, based upon a diluted share count of 213 million shares. Based upon the current estimates of production, the tax rate on core operating income is expected to be 17% for the quarter, and the full fiscal year.

We anticipate that late in the first quarter, we should complete the acquisition of Telmar Network Technology, continuing our strategy of diversification and growth in our Diversified Manufacturing Services segment. Our capital expenditures and acquisition of Telmar are estimated to be $225 million in the quarter. The majority of these capital expenditures are associated with investments in Diversified Manufacturing Services, and the associated IT infrastructure.

At this point, I'd like to hand the call over to Tim Main. Tim?

Thank you, Forbes. 2011 was a remarkable year for us, and we're very pleased with the growth and the advancement made on key strategic objectives to diversify our business and to premise our value to customers on highly-differentiated services and capabilities. The growth is particularly gratifying, given the fact that we operated for three quarters of the fiscal year with developed world GDP growth at very low levels.

Now, someone said to me that Jabil's a cyclical business, and I think the evidence indicates just the opposite. Please turn to slide 17. In fact, since 2008, Jabil's compound annual growth rate of EPS places ninth among Fortune 500 companies, with over $15 billion in revenue. When you look at the facts and results, it is a bit stunning, and I have a lot of people ask me, Tim, if it isn't the business cycle, your big customers, or the latest products, what is it? I think it would be an oversimplification to attribute the results solely to mix and our exposure to growth markets.

Please turn to slide 18. In fact, I think a big contributor to our story is our culture of continuous improvement. Look from blitz kaizen events, 14,000 events this year, we have 3,000 people enrolled in Lean Six Sigma education programs, we've significantly expanded our human development and leadership training resources, we have developed and deployed proprietary global logistics and planning tools around the world, significantly increased the depth of our critical product engineering capability in key areas, and we continue to invest in our IT Infrastructure and are one of the few companies in the world that I have ever come across that actually operate a Company of this size with a single instance of SAP around the world, and that gives us some very key strategic advantages.

Now let's take a look at our three business areas for a little bit more color. Please turn to slide 19. In High Velocity, it's really about staying ahead of the game, and we do this by having a hyperactive focus on costs, rapid development of new technology approaches and locations really keeps us lean and moving to the right locations in the world. The business area is continuously providing synergy to high-growth areas like healthcare, which we've talked about many times in the past. And it is an asset-light business that generates free cash flow, to help repurchase shares and fund expansion in other areas of our business. And margin performance in this area has been good all year, and well within our targeted range, and actually above our targeted range in most recent quarters.

Please turn to slide 20. In the Enterprise and Infrastructure area, we do operate at the higher end of the product and service complexity. Our customers are continuously challenged, with an ever-expanding number of new countries, suppliers, order configurations, services they must provide to their customers, and delivering of the different customers all over the world. Our job is really to provide simplification to this web of complexity.

We do this through engineering intimacy. We product develop many, many of our products today, that we are shipping in a collaborative way. Superb manufacturing of very complex products in low-cost locations around the world. Proprietary planning tools that help our customers balance demand and supply, which becomes exceedingly difficult in today's environment. We have more locations, we have scale, and we have more capabilities than our competition and we have the ability to deploy plug and play systems around the world and pop-up order fulfillment capabilities in places like Brazil and Russia.

Please turn to slide 21. In Diversified Manufacturing Services, we're really there to make a difference, make a difference to patients, to the environment, to help our customers' products more attractive, more functional and to help make the user experience better through after-market support. We do this in the materials technology group, which has been a big part of our growth story this year, and this group continues to provide synergistic value to targeted markets, particularly healthcare. After-market services is an area of great opportunity for us, and we have recently made an acquisition we hope to close later this quarter, and we expect to see more growth from this group in coming years.

Healthcare and instrumentation is a particularly attractive area for us and we've expanded our ability to help our product -- our customers design, develop and deploy their products around the world, and we're moving from electronics to non-electronic areas as well. In industrial and clean tech, we were an early mover and have some significant advantages in this area. Now our business is gaining in breadth, capability and reputation and we look forward to a bright future in this business area for many years to come.

Turn to slide 22 please. So putting it all together, this is what I think our business is about. It isn't about the hot product, the big customer, or timing the business cycle. When I look at the landscape, our customers are doing business in a world that is going through very rapid change, a world in which 80% of global GDP growth is generated in developing economies. Where our customers are, what they do, and how they do it is in a constant state of change and challenge. And managing a business, whether it's customer or Jabil, in a globalizing, urbanizing, resource scarce and socially connected] world is a tough task for our customers. What do we do? We just make it easier.

Jabil does effort every day to make it easier for our customers to be successful in global markets, make it easier for customers to develop, have made, deliver and service products around the world, and we think the demand for this value proposition has been strong, and will continue to be strong across more markets for many years to come. That's really what I think the business is about.

And to conclude my prepared remarks I'd like to remind everybody that there is an appendix and you can refer to the appendix for some more detailed information regarding metrics and other information that we typically provide on conference calls. And with that, I'd like to turn it over to the operator for questions.

Thank you. (Operator Instructions). Your first question is from the line of Lou Miscioscia with Collins Stewart.

Yes, thank you. Tim, maybe you could just give us a few more thoughts on the macro trends out there. In the sense, obviously you've got a broad base of business, and your results obviously are very good and realize that you're outperforming almost all your customers, but maybe give us a little bit more read on what they're telling you, and maybe also in the Diversified Manufacturing area.

I'd love to give you some color on that. I think it's really remarkable how little macroeconomic trends have mattered to the Company this year. I think US GDP growth in the March quarter was less than a point, in the June quarter, about a point, in the September quarter, I can't imagine it being much above a point. I don't think European GDP growth has amounted to much all year. I think Japan is teetering on the edge of recession, so I think that covers around 60% of the world's economy, and we put up 23% revenue growth in that type of environment, so the remarkable thing to me is how little the macroeconomic environment has mattered to the Company's results over the course of the year.

And I think as we move it into 2012, I think we're being a little bit conservative in the level of growth that we could put up consecutively, after having such a robust 2011. But it's still a year in which we think Diversified Manufacturing Services has the ability to grow at the range, maybe at the low end of the range, but certainly within the targeted long-term growth ranges, and Enterprise and Infrastructure we would expect a similar level of performance. In the High Velocity, we'll see what consumer trends are over the course of the year, and we think it's a good set of conditions right now to be conservative and it's not all bad if revenue growth slows down from 23% to 10%-ish. That's not a big deal for the Company, and give us an opportunity to really drive margin expansion and EPS growth in 2012. So we kind of like the environment, Lou.

Maybe you could just expand on that, if you did see slower top line growth, where do you think you could drive earnings?

Well, the continuous improvement culture, I think, is very important to us. 14,000 blitz kaizen events, I think our kaizen events were up 44% year-over-year. We're continuously looking to improve our productivity. That has an excellent impact in High Velocity and Enterprise and Infrastructure. We do have, as Forbes mentioned, a number of new programs ramping in Enterprise and Infrastructure that we think will grow our top line over the course of 2012, and much of that is a function of market share gains and so we look forward to that.

And then Diversified Manufacturing Services, I mean, we really have a combination of internal manufacturing that's being externalized, have some very valuable services that Jabil provides in access to emerging economies, product development, localizing supply chains, and this is an area of activity that we just see very robust demand from healthcare customers, industrial customers. We think our clean tech business is in a very strong position, and materials technology group continues to do very well. So overall, I think it's an area that the combination of driving a lean culture and higher levels of productivity, along with specific revenue growth in targeted areas, should result in a year in which we can put up another good year.

Okay. Great. Let me give you a good luck on the new fiscal year, and I'll pass it on to the next guy.

Thanks, Lou.

Your next question is from the line of Amitabh Passi with UBS.

Hi, thank you. I hope you can hear me. I'm on my mobile.

Sure can.

Tim, first question for you. Perhaps you could drill a little more -- E&I came in slightly below your expectations for the August quarter. HP was slightly better. In DMS, it looks like your healthcare instrumentation had a very strong uptick in industrial and clean tech went down quite a bit. So maybe you could just help us understand some of the dynamics during the quarter and perhaps what you are seeing for the November quarter.

Yes. Hi, it's Forbes. I'll take some of this one. In terms of Enterprise and Infrastructure, it was up 1% sequentially. I think we guided up 3%. So nothing material really going on there. When you look at the number of programs that we have, and the number of ramps going on, so to really dial something in to $10 million, $15 million is pretty tough. So overall very pleased with the overall performance of our Enterprise and Infrastructure from a growth perspective and as we move into fiscal 2012. So nothing really of major note.

I think in terms of High Velocity, that did perform much better than we had anticipated, at the midpoint of our guidance. I think we guided that down 13% sequentially and actually came in 9% or 10% down sequentially. So just a little bit better demand profile over a number of areas in there as you'd be aware. That includes handset activity, printing products and set top boxes, so no real standout there but just a little bit better in sell-through than we'd initially anticipated coming into the quarter. What was the next part of the question?

I thought your healthcare instrumentation segment was up very strong in the quarter and I was just trying to figure out is that strength sustainable? Was it the benefit of maybe one or two large programs kicking in? How sustainable is that?

Diversified Manufacturing Services was up 10% sequentially. And we didn't provide a lot of color to each individual area within diversified.

Okay. I'll take it as a follow-up. And then just a clarification, Forbes, for you. What was the charge you took in the quarter in the E&I segment?

I think it was about $8 million.

Okay. Thanks.

Your next question is from the line of Craig Hettenbach with Goldman Sachs.

Yes, Tim, in the after-market services business, can you talk about, or just maybe update the strategy there on the heels of the Telmar acquisition, what that really does for you in terms of new markets, and then also future opportunities as you go forward to build out your after-market services business?

Yes, great question. We are very excited about the after-market services area. It's a great platform for our Company in global logistics, and providing services to a broader range of customers. It's historically been primarily consumer electronics type of activities and some IT activities. The IT area has been growing rapidly.

The Telmar acquisition is interesting, as it gives us some very high-end engineering and troubleshooting capability, along with some capabilities that after-market services doesn't possess today, in terms of servicing carriers and providing a higher level of functionality to that service set. So it's a big, fragmented, poorly-run market and we're the biggest gorilla in the market today. We believe we're the best-run after-market services business out there and we intend to press that advantage into different verticals as well as globally, geographically, and with a broader set of our existing customers. So it's an area that we're actually very, very excited about.

Okay. If I can follow up and follow the last question on the medical side. It did look like as a percentage of revenue in the quarter it jumped up from 7% to 9%. I know in the past, the Company has talked about increased focus in that market and some new hires. So also just looking for an update there in terms of the pipeline of activity that you're seeing in healthcare and instrumentation. That would be helpful.

Healthcare and instrumentation is doing very well. We think over the course of 2012, we'll continue to gain momentum. One of the nice things about that business area is the very long product lives, and I think investors typically associate short product lives, and very rapid program transitions to our industry. In that particular business area, especially, product lives are 7 to 10 years. It often takes 2 to 3 years to bring them to market, very long product development cycles, so we have a very nice pipeline of products that are in production, products that are near production and products that are in development today. And so we have good line of sight to continued growth in that area and we're very bullish on it.

Thank you.

Your next question is from the line of Brian Alexander with Raymond James.

Yes, thanks. Tim, you alluded to maybe being at the low end of the 20%-plus growth target in DMS for fiscal year 2012, which is understandable, given the year that you just had. But how uniform do you think that growth would be within DMS in the sub-sectors? Do you think one will be a bigger driver than the others?

Not especially. We have a Telmar acquisition we're adding that will help after-market services in the specialized services area. Our material technology group continues to grow. I just addressed healthcare and instrumentation, which has a very robust pipeline of opportunities, and more and more industrial customer and our clean tech customers continues to be robust, so I think it will be another year of outstanding growth across the board.

Great. And then just a follow-up, if I look at the margins, the operating margins implied in your guidance for the November quarter, roughly flat year-over-year. Forbes, should we think about margins expanding in DMS and High Velocity with margins declining in the Enterprise segment, like we just saw this quarter for the reasons that you talked about?

So going into the first fiscal quarter, I think you should see some margin expansion in the Enterprise and Infrastructure segment. There's certainly opportunity for some margin expansion within the Diversified Manufacturing Services, as we bring additional programs to bear there. In terms of High Velocity, there was exceptional performance in our fourth fiscal quarter. We have the results of the mix of businesses in there, but as we looking into the first fiscal quarter, it will do, guiding up 6%. I would expect our margin to come in a little bit, and certainly be above the high end of our long-term targeted range for certain types of viewpoints.

Okay. Thank you.

Your next question is from the line of Sean Hannan with Needham & Company.

Yes. Thank you. So Tim, if you can comment a little bit around, or just follow up on some of the comments that you had earlier, you've obviously observed that there's been a little bit of caution, to a degree that we've seen with OEMs and when we think about the macro environment, you're obviously benefiting, reaping the benefits of prior business development now. Can you talk about your strategy today, as you approach new business? What are you communicating to customers in terms of the value that you would incrementally bring to the table in this kind of period of anxiety perhaps? Do you see any changes in reception you're getting now or the ability to get across the goal line and sign that new business?

Yes, well, customer anxiety counseling service is not something we've had across our portfolio. And I think our value proposition is compelling. We talked a little bit about our value proposition for the three major business areas and we're getting a very warm reception, because with developed world GDP growth as low as it is, it's even more imperative that European, Japanese and North American customers accelerate their growth and penetration in emerging markets and that makes global supply chain networks more complicated for them and product development more complicated for them. And our job is to help them simplify those issues, and we do a very good job of that.

We're gaining a reputation for that in these key market areas. So we're getting a very warm reception, and I think we're in a period of great opportunity for companies that have very high levels of expertise and can help OEMs across a diverse set of markets manage the complexity of dealing with a world that's in constant change, and that's something that we will continue to develop and add people, and capability to our portfolio and take advantage of the scale that we have gained, and the capabilities that we have today.

Thank you. Then a quick question around your R&D investments and strategy. The overall spend has been down this year versus, say, the last few. I realize a lot of this is you getting much more efficient with how you're focusing your efforts, but can you help us understand how to think about your R&D approach as we look forward, and really how does this reconcile to your approach, and when considering that there is an increased focus on higher design markets, such as DMS?

Yes, I think what's missing is, when we actually do spend in product development and we spend -- depending -- I don't have the latest numbers in front of me, but anywhere from $85 million to $100 million in product development. Most of that is paid for by the customer. And that's the part you're missing. So it's in revenue, and it's in cost of goods sold and it's SG&A, and that has been steadily expanding over the last few years, and our level of confidence has dramatically increased in the last two years.

We've added a lot of Infrastructure in places like enterprise storage, in places like healthcare, in places like design for manufacturability and value engineering, which is used by virtually all customers in some levels. So design is touching almost every single relationship we have in important ways and particularly important in healthcare and in the enterprise storage markets. So I think the part that is missing for investors, frankly, is that our spend in this area is $85 million to $100 million, and we have a very, very rapidly increasing engineering headcount and a rapidly improving capability that customers are paying us for, and that's a really good thing.

And what you guys see in terms of R&D is what is specifically categorized as R&D under Generally Accepted Accounting Principle rules. And that's stuff that we fund on our own for which we expect no return compensation from customers. We'll continue to do that at some level, because we think that's important for us to stay in front of the product development cycle, and keep our expertise advanced. But behind the door, there's a whole lot of activity going on that you can't see.

That's very helpful, Tim. Thanks so much.

Okay.

Your next question is from the line of Amit Daryanani with RBC Capital Markets.

Thanks a lot. Just have a question around your November quarter guidance, specifically on the High Velocity side. Your largest customer there, I think, has talked about units being up 20%, 25% plus in their November quarter. Doesn't look like you're factoring in that kind of growth for them when you guide High Velocity to up 6%. Is that accurate, or are there sort of offsets to that kind of growth in that segment?

Hi, Amit. I kind of look at it and, gosh, the August quarter was a quarter that we put up great sequential growth in a period when High Velocity was down 9%, I think sequentially. Again, I think it's one of those cases where beta or variability associated with handset deliveries, in the August quarter and the November quarter respectively, not that big a deal, not that big a deal. And gosh, if it's better than that, super. We'll make a little bit more money. And if it's where we have it today, then that's okay too. And I think we're being -- in this environment, it pays to be little bit conservative in guidance, and I think we are, but we're not making any specific comments around customer deliveries, new products or expectations on volume. I think it's a case where, to continue to support the promise, that that's important to the overall results of the Company is misleading.

Fair enough. When you look at the 10% to 15% growth potential that you've talked about in the past, I was wondering if you could maybe slide it in, in a way, and help us understand how much of that is really dependent on end market growth that we all seem to be nervous about, versus competitive wins or organic growth opportunities that you guys may have.

That's a great question. I would love to be able to come up with a metric that was GDP growth plus, because that's really what our growth story has been about. In last quarter's conference call, we indicated that we're one of 15 companies that have grown revenue, EBITDA, 25% on a compound annual growth rate since going public in 1993, so from 1994 through 2010 we're a very, very elite group of companies that have been able to sustain that kind of growth, and you can talk all you want about 90-day time windows and what's happening on the margin.

You can't grow at 25% for 18 years, 16 years, whatever that is, if you're reliant on macroeconomic growth. You have to be developing new markets and opportunities and through all the freak-outs in communications and Asian crises and debt crises and everything else, our business has gone out and made a pretty darn good business, in helping customers approach the world and manage complexity, and showing customers that it's really advisable for them to let us manage making their stuff for them. When we look at the world, and even going forward, that's really what our growth is premised on.

So when we really analyzed this carefully a few years ago, I think we came up with the metric that 80% of our growth was really a percent of new customers, market share gains, new type organic growth with existing customers, expanding services, and the balance of it was really attributable to what's happening in the secular growth trends of electronics and customers and macroeconomic activity and that kind of thing. So I mean, I'm not here to say that we're immune to rapid, abrupt contractions in economic activity. That hurts everybody in the world. But in a relatively benign, soft patch type of market, this is a business that can grow well above the S&P 500, and has for the last 18 years.

Got it. That was helpful. Just a quick one. Do you guys have any customers over 10% of revenue in Q4 and how many were there?

Yes, there were two.

Thank you.

Thanks, Amit.

Your next question is from the line of Wamsi Mohan with Bank of America-Merrill Lynch.

Yes, thank you. Tim, the aggregate Company growth rate of, if let's say you ended up at 10% for fiscal 2012, would you still expect you could drive the $700 million in cash flow from operations, and are you re-evaluating your CapEx assumptions of $450 million, given the more uncertain demand environment today?

Just on CapEx, I'll look forward to answer the question around cash flow in 2012, and what our thoughts are there. From a CapEx standpoint, we'll evaluate that real-time as business conditions change. I think the prospect that we would expect CapEx to be in the same range indicates that we expect the same type of activity out there, and that we're not forecasting a significant contraction of activity. So Forbes?

On the back of Tim's comments here, I very much believe that cash flow from operations, the $700 million, $800 million number is certainly within our sight. We did a magnificent over the last four quarters, in managing our working capital. Sequentially for the first time in many quarters, we saw sequential reduction in inventory, so we're getting our arms around that and making some great progress there. Certainly if we look at our overall cash flow yields this year of like 40%, I think 12 months ago I provided a target of somewhere between 30% to 35% of our EBITDA. I think that's a very valid target for this business model and certainly that is certainly in our sights for fiscal 2012 also.

Okay. Great. You did have a very good cash flow quarter here. As a follow-up, can you address where you are with finding businesses to place in your sights in Western Europe, and where you are in improving the utilization rates there? It sounded like Italy was a larger drag than expected in the fourth quarter, so how many more quarters do you think this would be a headwind? Thank you.

Yes, so I think, Wamsi, it was operationally a little bit worse this quarter than last quarter. We have talked about taking some actions to streamline or restructure those operations. So as we move through fiscal 2012, we'll see a reduction in cost base, which will clearly benefit us. In terms of additional revenue load, we continue to work that, and I think we're probably within a quarter or two away of adding some additional revenues both into France and Southern Italian operations.

So, I think you'll see a reducing impact as we move into Q2, Q3 and Q4. As we move, the guidance does contemplate the same types of economic losses in this next coming quarter with the exception of the restructuring charges. So I would say, it will be progressing nicely as we move through Q4 -- fiscal 2012.

My last one, if I could sneak one in as well. How much revenue, if any, are you incorporating within in your guidance from the Telmar acquisition?

It's really small. We hope to get this closed early November, so it will be probably at most $10 million to $15 million.

Okay. Great. Thanks, Forbes.

Your next question is from the line of Steve O'Brien with JPMorgan.

Thanks for taking my questions. Just one point of clarification, I guess, more than anything, on the E&I margins. Forbes, I thought you said something about getting those back to 4% to 4.5%. Is that exiting the fiscal year, or is that on average for the fiscal year? And if it's on average, does that mean you'll be sort of above your long-term range in some of the latter quarters, to make up for where the business is at now?

Yes, no, the 4% to 4.5% is our long-term target. And certainly, the actions that we're taking here, and the continuing ramps, that will not be an average for the year. That will be more of a -- I would suggest a Q3, Q4-type number, in terms of isolation of those particular quarters. So certainly to average 4% to 4.5% is certainly a stretch for the fiscal year, but I would suggest look for a (inaudible) targets around Q3 and Q4 of fiscal 2012.

Great, and on the HPS margin, I thought it sounded like next quarter could also be above the target range, but maybe not to the extent the 3.1% was this quarter. Is there another quarter of favorable mix here, or is there just -- not to make too much out of two quarters, but is the business potentially operating here at a higher profitability level than the target range?

We'll see how many quarters we can string together at that level. I think moving into the November quarter, more handset volume would serve to not be favorable from a mix standpoint. That would serve to dilute the margins a little bit. That will be offset by better utilization through the areas of the business that produce those products, and our continued effort on lean initiatives and productivity really resulting in cost reductions. So there are offsetting factors. I think mix would move against us a little bit in the November quarter, but we'll continue to work on costs and it should be a quarter in which we can operate above the high end of the targeted range.

Thanks for that, Tim. Maybe one last one, if I could. On the industrial and wireless Infrastructure outlook, you hear other folks supplying the OEMs and those industries, talking about order cuts and what have you. And carrier CapEx in some areas being potentially uncertain going into next year. What gives you the confidence that it sounds like Jabil has regarding these future programs coming on as expected?

You mentioned two different business areas, industrial and then wireless communications. Those are two different areas for us. But because the business activity's a little bit different in each of those areas. I think it's a little bit remarkable that people are looking at this like slow macroeconomic growth as a recent event. It's been going on like this for, going on a year. March was horrible, June quarter's horrible, September quarter's going to be horrible. There's no macroeconomic tailwind to the business.

And so to think that recently people woke up and saw that the US government couldn't come up with a debt refinancing plan, and then everybody freaked out and cut out their orders is a little bit laughable. I mean, is it getting a lot worse? We don't see any precipitous decline in our business, and you see you're absolutely right, I mean, here and there you see people trimming here and there, and there's more conservatism overall moving into the picture. But man oh, man, I mean, this is not recent. This is like a year long of no growth from a macro standpoint.

And again, I think it -- to really appreciate the value that Jabil brings and what our growth story is about, we really have to think about other things besides the business cycle, big customers and hot products. We really need to think about the value of simplifying complex global supply chain networks, and why that's valuable to so many OEMs, in so many different markets around the world. And that's what we're trading on.

Okay. Great. Thanks.

Thank you.

Your next question is from the line of Matt Sheerin with Stifel Nicolaus. Mr. Sheerin, your line is open. There is no response from that line. Your next question is from the line of Shawn Harrison with Longbow Research.

Hi. Hopefully you can hear me.

Hi, Shawn. We can.

Hi. Just wanted to follow up on a prior question. Forbes, you made the comment of some better inventory management, but how do you expect to see inventory dollars trend and maybe even turns, but more dollars during the first two quarters or the first half of this fiscal year? Are you going to see dollars hold steady or are you going to see maybe some incremental reduction in inventories?

Yes, we're making progress. We're guiding up as we're moving into the first half of next year. So I think there's some opportunity to continue this reduction. Where it gets a little bit tricky in terms of guiding to that in the November quarter is how much of that sell-through in some areas of the business occurs into the -- is repositioned, excuse me, in inventory, for continued sell-through in the December period. So we'll see how that works, but certainly, I've been very pleased over the last fiscal quarter, we're seeing dollar reduction and I certainly believe there's opportunity to continue that trend as we move through the first two fiscal quarters here.

Was the reduction this quarter more finished good or where was it in inventory?

I mean, we don't look at it that way. Actually, as we exited the quarter, our work in process and finished goods were a couple of points higher than we typically see, but nothing dramatic. So overall, it's in terms of raw material and the way we plan our capacity.

People tend to look at that as a proxy for what's going on in end markets, the latest indicator, and I would caution anybody to think about Jabil's inventory levels that way. The way I'd look at it is, look, here's a business that has gone from having 40% of its business in High Velocity, which is a very high inventory turnover business, to a business that's got 40% of its business in Diversified Manufacturing Services, which is an extremely complex area. 70% of Jabil's production is built in lot quantities of less than 100. This is not a high-volume Company. This is a high-mix, high-complexity Company, and we've managed to maintain inventory turns at 7 turns and actually had an absolute dollar reduction in our inventory levels in the August quarter.

So we're not looking at inventory as a proxy for what's going on, and actually our raw material, work in process, finished goods levels have been pretty consistent all year. So as Forbes said, we will continue to work like the devil to make our balance sheet more efficient and drive cash flow by being more efficient in the way we manage inventory. But yes, you compare Jabil's high-mix business to some of our competitors that are more pure plays in that area and our inventory turnover's pretty good at 7 turns.

That's a very fair response, and then just a brief follow-up, share count for the first quarter?

213 million.

Okay. Thanks so much.

Your next question is from the line of Sherri Scribner with Deutsche Bank.

Hi. Thanks. Tim, I was wondering if you would be willing to give us some thoughts about revenue growth for fiscal 2012. Obviously your long-term target range is 10% to 15%. The fiscal 1Q number looks like, at the midpoint, it's up about 8%. Are you guys comfortable with the 10% to 15% revenue growth for fiscal 2012?

Yes, we haven't provided any annual guidance, Sherri. I think most people will be fairly cautious in the way they look at 2012. I would look at it this way. If we had an 8% revenue growth year, I think that would be spectacular. And it would be well above the S&P growth rate, and I think it would give us an opportunity to drive very significant profitability expansion and cash flow and do great things for shareholders. So I think at the outset of this year, a note of caution is healthy for everybody. But even with that note of caution, I think the expected performance of the Company is outstanding, relative to the rest of the companies that people can go invest in.

Okay. And then, last year you gave some guidelines around the Green Point business being -- essentially doubling this year. Would you be willing to give us any detail on your expectations for that segment of the business for fiscal 2012?

Yes. We expect it to continue to grow. I hope it doesn't double again just because that's really painful for everybody. But it's going through growth and I think it will have another good year and I would rather not be more specific than that at this point. I think Diversified Manufacturing Services overall will continue to lead the pack in terms of growth at Jabil.

Okay. And just quickly, did you disclose what percentage of revenue your top 10 customers were?

We did not. But I can tell you it's about 60%.

60%?

6-0%, yes.

Okay. Thank you.

Thank you.

Your next question is from the line of Jim Suva with Citi.

Thank you. And congratulations to you and your team and the outlook is really spectacular. When we look at your segment guidance, Tim, I think you had mentioned that Diversified should likely be up about 3% quarter-over-quarter. Can you help us understand, as I think your long-term growth rate year-over-year goals are up 20% to 30%, so are you on track where you think you'll hit your long-term sales growth goals in each of the segments, or is there something going on there? I think you heard you mention you expect Diversified Services to lead, and up 3% quarter to quarter just doesn't look like it's on track or maybe there's a lot of seasonality that we just need to get educated on with your new segmentations.

Yes, if it grew at 3% every quarter for fiscal 2012, when you end up fiscal 2012 revenue and look at it year-over-year over fiscal 2011, it would actually be about 25%. It would be -- I'm sorry?

On a year-over-year basis.

On a year-over-year basis. So yes, I think we're still looking for a good year there, and again, all other things being equal, it's being relatively cautious in the way we look at the world today but 25% year-over-year growth rate for DMS is supported by 3%. If you look at 2013 and you said if you continue to grow at that rate, then growth will slow down but we're opening up new opportunities in clean tech and healthcare and specialized services all the time, so I think we'll have ample opportunity in conference calls over the course of 2012 to talk about exciting new things we're doing there.

That makes a lot of sense. The other two segments, I think your goal if I remember correctly for Enterprise Infrastructure was up 5% to 10% long-term and High Velocity up 5% to 10%. If I'm right on those, are you also on track to kind of meet those goals in this environment?

Those are long-term objectives, and I'd say that the High Velocity area is an area where growth is not the priority. Quality, cash flow and velocity of assets is really the priority there. So if you looked at 2012, and said gosh, I don't think High Velocity will grow at all, I don't think that would be something that would be that important to us. I think in Enterprise and Infrastructure it is a year that we would expect to be in the targeted range of growth of 5% to 10%.

Great. And a question for Forbes. Forbes, you still have what I believe to be more than enough cash to run the business, and you had a very successful stock buyback. Your priorities use of cash now, you did return a lot of cash to shareholders on your stock buyback. Is stock buyback something that you're considering looking at, and going to the Board again for more approval or more M&A? It just seems like you have more than enough cash to run the business, which is a great problem to have.

Yes, it's a nice problem to have, Jim. E exited the year almost over $900 million of cash again, so that's great news. Stock repurchase is one of the many alternatives we have. As you say, we're in a great position. First and foremost, it's about reinvesting cash to continue to grow the business. Our strategy that we laid out a year ago was to drive our Diversified Manufacturing Services segment solution to the 50% of the overall revenue stream. We've made great strides this year, adding 5 percentage points and I think we're going to pass that another 5% next year. So that's the first area of thought process.

We are committed to our dividend and we continue to review the levels of those dividends with our Board on a quarterly basis and we'll be doing that again at our next Board meeting. So no specific direction that I can provide you today, but certainly I consider all these various alternatives, investing in the business, acquisitions, our dividend policy and a stock repurchase program on a holistic basis to continue to give us flexibility with our capital structure.

Thank you, and congratulations to you and your team there at Jabil.

Thanks, Jim.

Thanks, Jim.

Ladies and gentlemen, we have reached the end of our allotted time for our questions and answer session. I'll now turn the floor back over to Ms. Walters for any final comments.

Great. Thank you, operator, and thank you all for joining us on the call today. Most of our investors have asked us to keep our call to an hour, so we're going to respect that, and please know that we are here for the remainder of the week and happy to take any follow-up questions or calls that anyone would like to do. Thank you for joining us.

Thank you all for participating in today's conference call. You may now disconnect.