捷普科技 (JBL) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to Jabil's Fourth-Quarter and Full Fiscal Year 2014 conference call.

(Operator Instructions)

Thank you. I would now like to turn today's conference over to Beth Walters, Senior Vice President Communications and Investor Relations. Please go ahead.

Thank you. Welcome to our fourth-quarter of 2014 earnings call. Joining me today are CEO, Mark Mondello, and our 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 Investors section. Our first-quarter and FY14 press release, slides, and corresponding webcast links are also available on our website.

In these materials, you will find the financial information that we will cover during this conference call. We ask that you follow our presentation with the slides on the website, beginning with slide 2, our forward-looking statements.

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 FY15 net revenue and earnings results, the financial performance for the Company, and our long-term outlook for the Company. 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 fiscal year ended August 31, 2013. On 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 opening remarks from Mark. We will then move on to fourth-quarter and fiscal year results, as well as guidance on our first fiscal quarter of 2015 from Forbes. We will then open it up to question from call attendees.

But for now, I'll turn the call over to Mark.

Thanks, Beth. Good afternoon, everyone. I appreciate you taking time to join our call today.

I'd like to start by thanking all of our people here at Jabil. The team's commitment and fortitude are tested when times are challenging and situational business conditions drive change.

This illustrates directionally the environment we've experienced the past 12 months. Through all of this, our team has done an amazing job. Again, thank you.

Let's reflect a bit on a few of their accomplishments. We expanded our broad range of capabilities, a key catalyst for growth.

Our net promoter scores are at an all-time high. This is so vital, as we pride ourselves on exceptional customer care. We also believe there's a direct correlation between positive scores and our ability to gain market share.

We began ramping our campus in Chengdu, China in anticipation of future growth. We successfully launched a variety of development programs, some of which exhibited substantial complexity, scope and scale.

Fixed assets have been successfully redeployed in relatively short order, resulting in new revenue streams for FY15. We captured tremendous value with the sale of our after-market services business. The Company returned approximately $330 million of capital to shareholders via share buyback and dividends, and we realized an exceptional outcome in managing our net working capital efficiency throughout the fiscal year.

I maintain a high degree of confidence in our path forward. Our team continues to construct a solid foundation for which to build upon. To call our current business environment dynamic is an understatement.

We're seeing an infinite number of applied technologies, an exponential rate of change, and highly disruptive product innovation. This sums to an unprecedented landscape across the various markets we serve, and results in many common mandates for our customers.

Mandates such as the need for greater global reach, acceleration of time to market, resilience to supply chain disruptions, differentiated product innovation, and the ability to change course seamlessly and with terrific speed. These mandates bode well for Jabil.

As such, we'll drive further expansion of our technical capabilities, continue advancement of our service offerings, and remain quite thoughtful in our go-to-market approach. Based on these attributes and common characteristics, 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. 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.

Anticipated revenue for our EMS segment is roughly $10.5 billion to $11 billion for FY15. We anticipate annual growth rates in the range of zero to 5%, with normalized core operating margins of 2% to 4%.

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, heavy 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.

Anticipated revenue for our DMS segment is roughly $6 billion to $7 billion for FY15. We anticipate annual growth rates in the range of 8% to 12%, with normalized core operating margins of 5% to 7%. This would result in our DMS segment contributing roughly 40% of our revenue for the first fiscal quarter of this year.

I'll now spend a few minutes providing additional detail, starting with our unique Green Point brand. Throughout the years, our Green Point team has successfully delivered world-class development. Development of several large scale product ramps.

Green Point's success is further supported by an organization that has earned customer trust by assuring world-class security, all while maintaining a firm commitment to product quality. This further solidifies Green Point as a major player across the mobility, wearables, and consumer lifestyle markets. Our Green Point team is expanding their strategic footprint and their best-in-class development teams in anticipation of future business awards.

Our campus in Chengdu will offer the incredible combination of massive scale, broad based service offerings, and high volume production. Production that will incorporate advanced material sciences, complex automation, precision fabrication, and final assembly end test.

Continued organizational and people development will also be a theme within Green Point. This will enable their goal of greater scale, both at a site and global level. I'm truly excited as Green Point continues to bring amazing new solutions to the marketplace.

Let they me new take a few minutes and talk about our wonderful Nypro brand. I remind you that we closed our acquisition of Nypro just prior to the start of FY14. A top priority for our Nypro leadership team was preserving perfect business continuity and product quality, while carefully maneuvering a complex wave of integration activity.

The team has built upon the strong cultures of both Jabil and Nypro, to create a formidable healthcare and packaging franchise. A franchise supported by an array of powerful capabilities. Capabilities in the areas of automation, technical innovation, tooling, product imagination, and final assembly and distribution.

Simply put, with Nypro and Jabil, we're realizing that one plus one equals something much greater than two, especially over the long term. While navigating and managing so many activities, the Nypro leadership team has prioritized and emphasized the need to maintain a strong focus on employee safety. They've done exactly that, resulting in education and recognition for the balance of Jabil's global organization.

FY15 brings a number of exciting new product ramps within Nypro. In the areas of medical hardware, pharmaceutical devises, and food, beverage and consumer product packaging. Our Nypro team is laser-focused on the tasks ahead, as they continue to improve the lives of others while offering a safe pair of hands to our customers. They continue to expand their business portfolio with capability-rich long life cycle commercial opportunities.

Finally, I'd like to provide a little color specific to our EMS segment. This team added 30 new customer relationships throughout the year, while receiving a multitude of Supplier of the Year awards. Through entrepreneurialship and tireless work ethic, our EMS team embraced complex challenges and delivered winning results.

They also demonstrated a unique capability of applying ingenuity and technology, which they developed and learned from one industry and creatively applied it to another. As the rate of complexity increases, Jabil's EMS team is well positioned, with huge scale in time-tested solutions, cutting across a broad footprint. A footprint that includes China, Vietnam, India, Malaysia, Eastern Europe, Mexico, Brazil, and the United States.

Our EMS team is rapidly expanding from a pure build-to-print model, to now include a build-to-spec model. Various industries are struggling to exploit the rapid convergence of wireless connectivity, robotics, sensors, computing, and cloud-based forces. This presents an opportunity, as our trusted EMS team sits at the epicenter of these converging worlds.

I'd like to close out my prepared comments by sharing a few final thoughts. FY15 will see us make substantial investments. As stated, we're expanding our China footprint.

We continue to drive expansion of our capabilities. We are actively exploring new non-traditional markets, and we are taking additional development projects in anticipation of new revenue streams in future years. These are the correct decisions for our business, and I believe the correct decisions for shareholders.

In combination, we will fine tune the engine this year and optimize our performance. I'm confident that our team will deliver core earnings-per-share in the range of $1.65 to $1.95 for FY15, as communicated during our past two earnings calls. Our portfolio strategy provides such a solid foundation as we move forward.

We're most fortunate to have a unique combination of scale, innovative solutions, rich capabilities, and a tremendous leadership team. A leadership team that is experienced in what we do, time tested, and proven.

As I lock beyond this fiscal year, my belief is our overhead costs will fully normalize. We will see accretive returns on the investments we put in play. Our interest expense will be reduced, and our revenue will approach a run rate of $5 billion a quarter.

I believe the outcome will be core operating margins of 4%. ROIC well in excess of our weighted average cost-to-capital, and strong operational cash flows.

Thank you. Let me now turn the call over to Forbes, where he will take you through our detailed financial results, as well as our guidance for the first fiscal quarter.

Thank you, Mark. Good afternoon, everyone. I'd like to ask you to turn to slide 3, where I'll review our fourth fiscal quarter results.

Net revenue for the fourth-quarter was $4.1 billion, a decline of 10% on a year-over-year basis. GAAP operating income was $46.6 million, and on a net GAAP basis, it was a loss of $26.2 million. GAAP net diluted loss per share was $0.13 for the quarter.

GAAP net earnings in the quarter included $20 million of restructuring and associated charges. $6 million associated with the amortization of intangibles. $2 million of stock-based compensation, and adjustments associated with the sale of our after-market services business and the sale of a Nypro joint venture of some $12 million.

Core operating income, excluding amortization of intangibles, stock-based compensation, restructuring and certain other expenses was $79.5 million, and represented 2% of revenue. Core diluted earnings-per-share were $0.05.

Turning to the full year on slide 4. Net revenues for the full year were $15.8 billion, a decline of 9% year-over-year.

GAAP operating income was $204 million, representing 1.3% of revenue. This compares to $452 million of income from revenues of $17.2 billion, or 2.6% of revenue in FY13. Diluted net earnings-per-share were $1.19.

Core operating income, excluding amortization of intangibles, stock-based compensation, restructuring, impairment charges, and certain other expenses was $345 million, and represents 2.2% of revenue. This compares to $642 million, or 3.7% for the same period in the prior year. Core diluted earnings-per-share was $0.53.

Turning to slide 5 and our fourth-quarter segment discussion. In the fourth-quarter, our Diversified Manufacturing Services segment declined 3% on a year-over-year basis, while it grew 11% sequentially.

Revenue for the segment was approximately $1.8 billion, representing 44% of total Company revenue. Operating income was 1.7% of revenue during the quarter. Reflective of the cost infrastructure in place within Green Point.

As you will recall, we chose, throughout 2014, to maintain levels of cost infrastructure within these operations, as we have been preparing for a return to more historical levels of production in FY15 and beyond.

The enterprise and infrastructure segment increased 1% on a year-over-year basis. Revenue was approximately $1.4 billion, and represented 34% of total Company revenue. Core operating income for this segment was 2.4%.

Finally, the high velocity segment decreased 32% on a year-over-year basis, primarily as a result of our BlackBerry disengagement. Revenue was approximately $880 million, and represented 22% of total Company revenue.

Core operating income was 1.8% of revenue in the quarter. Total Company revenue on a sequential basis increased 7%, with all three segments showing growth.

Turning to slide 6, a discussion around our yearly segment performance. Our Diversified Manufacturing Services segment declined 2% on a year-over-year basis. Revenue was approximately $6.9 billion, representing 44% of total Company revenue, while core operating income was 2.5% for the full year.

Enterprise and infrastructure segment declined 4%, while revenue was approximately $5.3 billion. Representing 34% of revenue, and core operating income was 2.4% for the full year.

Our high velocity segment declined 24% as compared to FY13, as a result of our BlackBerry disengagement. Revenue was approximately $3.5 billion, and represented 22% of total Company revenue. While core operating income was 1.2%.

For the fiscal year, we had one customer with revenues over 10%. That was Apple at 18%.

I'd now like to review some of our balance sheet metrics, and ask you to turn to slide 7. We ended the fiscal year with cash balances of approximately $1 billion. Debt levels declined by some $200 million in the fourth-quarter to $1.9 billion.

Cash flow from operations for the quarter were $89 million, and for the full fiscal year approximately $500 million. Core EBITDA for the quarter was approximately $194 million, representing 4.8% of revenue. While the full year's EBITDA was $802 million or 5.1%.

During the fourth fiscal quarter, we repurchased approximately 6.4 million shares at a total cost of $130 million. Repurchases for the full fiscal year totaled 13.7 million shares at a total cost of $260 million, or at an average price of $19.01. Approximately $40 million remains outstanding under our current repurchase authorization.

Net capital expenditures for the fiscal year totaled $460 million. Such expenditures are higher than previously forecast, as a result of the timing of building infrastructure acceptance ahead of our previous forecasts. This to support future growth opportunities in our Chengdu, China site, wins in the United States and Europe within our Nypro healthcare business, which will ramp through FY15 would ramp to scale in 2016. And also engineering capability investments in Taichung, Taiwan.

I'd now like to turn to our restructuring, and ask you to move to slide 8. Our broad capacity alignment plan announced in the third-quarter of 2013 remains on track to deliver $65 million of benefits in 2015. As a reminder, our plan outlined $188 million of costs to be recognized over a seven quarter period.

Since its inception, we've recognized $124 million of these costs, with cash outlays to date of $81 million. The balance of $64 million of charges and $70 million of cash is anticipated to occur over the next few quarters, as we commence downsizing of our under utilized high-cost footprint. The restructuring activity associated with our BlackBerry disengagement has been concluded, with total charges of $50 million being recorded in the FY14.

I'd now like to discuss our business outlook for FY15, specifically the first-quarter and our segment reporting. You can find information on slides 9 through 12.

Firstly, our first-quarter guidance. We expect revenue in the first-quarter of 2015 on a year-over-year basis to be consistent. And to be in the range of $4.2 billion to $4.4 billion, or at its mid point an increase of 6% sequentially.

Core operating income is estimated to be in the range of $135 million to $165 million, and core operating margin in the range of 3.2% to 3.8%. Core earnings-per-share are estimated to be in the range of $0.41 to $0.53 per diluted share, and GAAP earnings per share is expected to be in the range of $0.24 to $0.40 per diluted share. This based upon a diluted share count of 196 million shares.

Based upon current estimates of production, the tax rate on core operating income is expected to return to historical levels at 22% for the quarter and the full year. As Mark noted in his prepared remarks, we shall be reporting two segments in FY15, the Electronic Manufacturing Services segment and the Diversified Manufacturing Services segment.

Please note that on slide 16 in the slide show we posted to our website, we have provided recast Electronic Manufacturing Services and Diversified Manufacturing Services segment revenues a net core operating income percentages for the fiscal year's 2013, 2014, and each of the quarters in those fiscal years.

Turning now to those segments and year-on-year performance. The Electronic Manufacturing Services segment is expected to decrease approximately 5%, or estimated revenues of $2.6 billion.

The Diversified Manufacturing Services segment is expected to increase approximately 6% on a year-over-year basis, with revenues estimated to be approximately $1.7 billion. This represents a sequential increase of 30% in the first fiscal quarter. With the investments and infrastructure and capabilities we've made in FY14, we are very well-positioned as we move into FY15 and beyond.

Based on current estimates, revenues are expected to be in the range of $16.5 billion to $18 billion, and earnings per diluted share in the range of $1.65 to $ 1.95. During FY15, cash flows from operations are estimated to be in the range of $700 million to $800 million, while capital expenditures in the fiscal year are expected to be in the range of $350 million to $450 million.

I'd now like to hand the call back over to Beth.

Great. Thank you, Forbes and Mark. Operator, we are just about ready to begin our question and answer session.

Before we do, I'd like to remind all of our call participants that in customary fashion we will not be addressing any customer or product specific questions out of respect for our customers and their respective businesses. So with that, thank you for your cooperation and we're ready to begin, operator.

(Operator Instructions)

Your first question comes from the line of Mark Delaney with Goldman Sachs. Mark, your line is open.

Can you hear me?

Now we can.

Okay, I'm sorry about that. Thanks very much for taking the question.

I was hoping you could elaborate a little bit more on some of the new program ramps that you talked about for FY15. And I know you mentioned you have several different ones under way.

Can you just talk about how sustainable you think some of these new programs will be, or if it's some of these are just for a few quarters? And then if you could also discuss how you're doing with some of the yields on some of these new program ramps?

Thanks, Mark, for the question. The program ramps are all over the map.

I talked about that I think in the last call. So, I would characterize the program ramps as having different characteristics, as far as time buckets and product life cycles. So 80% of them will have a impact to FY15, a fairly material impact.

I would characterize and I would say upwards of 70%, 80% of them will have some level of impact into FY16. And then there's some development programs run again that I would imagine will have life cycles in the 3 to 5 year range.

Great, thank you for that color. And then maybe you can just help us think a little bit about the margin trajectory.

By my math, it seems like the FY15 guidance implies something for core EBIT margins in the mid 3% range, and then in past cycles the Company has hit the high 3%s or even the 4%s in parts of other cycles. You mentioned some investments that you're still making, and maybe you can just help us think about the potential for the Company to get back to the historical margin levels over time.

Yes, so I think you're spot on. If you're looking at modeling 2015 as we sit today in the mid 3%s, I think that's appropriate.

And as I mentioned in my prepared comments, we are working like heck to get our margins back to 4%. I think I would keep your models in the mid 3%s for FY15, at least for now. And that's driven by a couple different things.

Number one is, we're coming off of a tough year. The teams worked hard. I talked a lot about their accomplishments.

We have normalized a vast majority of our overhead costs, based on some of the issues and decisions that were made in 2014. But were not fully there yet. So that will have a little bit of negative pressure on margins for 2015.

And the other part, Mark, is, is we're seeing reasonably strong revenues for FY15. And when we think about the strength of the business overall, we are going to go ahead and continue to make some investments and take on some development work in FY15 as well. So said another way, if we chose not to do any of that, I would guess that our operating margins for the year might be at 4%, but I don't think that's the right decision for the business over the long term.

Thank you very much, and good luck.

Thanks, Mark.

Your next question comes from the line of Brian Alexander, Raymond James.

Okay, thanks and good afternoon guys. Mark, what's the rationale for changing the reporting structure of the business now? And is this just a reporting change, or is there something more strategic or operational behind the change, and how is this going to affect things like org structure, management roles, responsibilities et cetera beyond just the reporting change?

And then as far as the targets are concerned for the year, it looks like you took the revenue up versus what you had before, but you kept the EPS range intact. I just wanted to see if you could talk about that as well.

Okay. Let me start with your first question, which is around reporting structure. So, we felt like the timing was good to align the reporting structure at the beginning of the fiscal year with exactly how we're running the business. So when we think about it, Brian, as CEO of the Company, I look at the business in two buckets.

I look at it as our EMS business, and then our business that's clearly not EMS-based. So heavily around our Nypro brand and our Green Point brand.

So A, it made a lot of sense for us to start reporting the business in the manner in which its run for this fiscal year. The other reason is, and what I tried to capture in my prepared comments, Brian, is, is the environments continue to change. And our businesses again are distinctly different.

So, I thought it appropriate to run the business and report the business based on attributes and characteristics to which they operate. So again, as I said in the prepared comments, there's a certain set of attributes and go-to-markets strategies for our EMS business that are much, much different than the businesses that we take on for Green Point and/or Nypro. So that's what drove the decision.

And I'm glad we're doing it. Because again, it ends up allowing us to report the business in the exact fashion to which we manage it and run it.

Organizationally, there's really no major organizational changes. One or two levels below myself, we have a management team that continues to take a hard look at the business in many different buckets. We'll continue to do so.

When you run a business like ours with the margin structure that we have, we have to keep track of every nickel. And that's done only by taking a hard look at managing the business in small bites, if you will.

In regards to your question on taking revenue up, I don't know where you're getting that from. There's a data point I believe back in our March call where there may have been a question around when we first came out with the $1.65 to $1.95 number, I think there was a question around what revenue we were thinking about for the EPS range for 2015.

That's right.

I don't remember whether I gave the answer or Forbes gave the answer, but I think we gave an answer on or about $16.5 billion, give or take a bit. Today we're giving a mid point of $17 billion, $17.250 something like that, Brian. So if that's what you're referring to, my commentary would be, again, we still haven't normalized all of our overhead costs.

I would remind you that as we went into FY14, before we had some of the issues that took place, we had overhead and infrastructure both around our execution, and operations, and strategy to support a $18 billion, $18.5 billion, $19 billion business. Some of that overhead we've taken out of the Company. Some of that overhead I think it would be unwise to remove.

I see that overhead structure, Brian, normalizing as we get into FY16. Maybe sooner, but I wouldn't model that. And then in addition, Brian, we're seeing good strength in the business. And as I outlined in the prepared comments, I think it's quite wise for us to make some of the investments we're choosing to make.

Let me just ask it maybe a different way. As far as the long-term targets, are you making any changes to your margin assumptions? So specifically, the EMS margins, the way you've recast it at 2% to 4%, that was actually your previous target for high velocity. Which is the lowest margin within that group.

The other EMS sub segments would have been higher than that. So I was maybe a little surprised that 2% to 4% was the range you went with for that consolidated group. And I'm just wondering, has anything changed versus the last time you updated the margin targets?

Brian, I could have this wrong. But I think that our high velocity margins longer term, yes they were 2% to 4%. Enterprise infrastructure I think was 3% to 4%, if I have that right, and then industrial was in the diversified range. If you take a look at that at a blended kind of weighted average, I feel comfortable with a 2% to 4% range for the entire EMS mix.

Okay, thank you very much.

Thanks, Brian.

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

Thank you. Hope you can hear me.

Mark, I just wanted to get some sense of how we should expect the ebb and flow for revenues throughout the year. I think your fiscal first-quarter guidance of $4.3 billion is roughly a quarter of the full year guide.

Should we expect things to be relatively flat quarter-to-quarter? Are you expecting seasonality as you normally do? Just wanted to get some help in terms of how you would guide us, and how to think about the revenue trajectory as we go through the year.

Sure. I would caution you, again, we've given some ranges for the year, and we've given fairly discrete guidance for Q1. But in an effort to answer your question and help you with your models, if you will. I would -- our DMS business, especially the Green Point business, and I've talked about this for the last year, it's great business.

It has some volatility built in. So again, there's always risks in getting too cute with giving direction on how we shape out the business. But as we sit today, I think what Forbes talked about was kind of a mid point for Q1 of about $150 million of core operating profits.

If you modeled some seasonality similar to FY13, from Q1 to Q2, and then you assume that the back half of the year was modestly higher than the first half of the year. I think that would be appropriate for your models as we sit today.

Okay, perfect. That's helpful. And then just a quick follow-up.

Your enterprise and infrastructure segments seem to have come in better than I think you had anticipated when you give us guidance. Would love to get some incremental insight in terms of maybe some of the moving parts, where you think the upside came from? That would be helpful.

Yes, it's Forbes here. For the fourth quarter, it was pretty broad-based actually.

We were a little bit surprised, but you're right. It's about $100 million above where we'd anticipated coming into the quarter. But I would say it was pretty broad-based, both across the areas we serve and telecommunications networking and under storage areas.

Okay, excellent. Thank you, gents. I'll just go back in queue.

Thanks.

Your next question comes from the line of Steven Fox, Cross Research.

Hello, good afternoon. Just going back to the new segment reporting.

Forbes, is there any way you could give us some color on how some of the cash flow characteristics break out between the two segments, CapEx, D&A? And also just the relative asset split, and whether you're still -- will the businesses be running shared, or will they will be sharing plants? And then I had a follow-up.

Yes, so let me take the first. Yes, there's an amount of shared capacity, clearly, across the Corporation. And as we certainly ramp into our Chengdu facility, also, that will be shared capacity across the Corporation.

In terms of cash flows, we weren't going to report a specific cash flow basis. But as we move forward here, we'll also be reporting the asset position of each of these segments as we are required to do that in our filings. But specifically, we're not going to focus on the cash flow reporting there.

As you move forward into the fiscal year, I would endeavor to provide you guidance in terms of our CapEx. I think that's appropriate, as we see where we're making our investments and see where the growth profile of that business is.

Okay. And at this point, can you give us a rough sense for how much CapEx is going into each business this year?

At this stage, what we're seeing is about $350 million to $450 million on an overall basis. But certainly given the growth trajectory and the level of complexity, I would weight the CapEx more towards the Diversified Manufacturing Services segment than the EMS segment.

Okay, great. And then just one last question. Mark, you mentioned the ramps. Just putting aside the fixed overhead that you're looking to fill with the new programs.

In terms of the ramps themselves, can you just characterize your execution in the last quarter and through this quarter? It is it a margin drag, or is it going about as expected? And then with the program ramps, is there another layer up or is it a consistent build off of, especially in DMS, off of the 30% growth you're looking at this quarter?

The ramps I would characterize altogether as quite good. And again, I think that's reflected in the confidence we've offered in the full-year guidance.

As far as -- I think it was Mark that asked the question earlier, our program ramps have all different tails to them. So again, we won't get into those details. Some of them will go beyond 2015, and some of them will have 3 to 5 year product life cycles with them.

Fair enough. Thanks for the color.

Your next question comes from the line of Jim Suva, Citi.

Thank you, and congratulations to you and your team there at Jabil. Looking at the EPS guidance, it's very strong and encouraging for the next quarter for the core outlook, the November quarter. If you were to annualize it at that though, it would meaningfully surpass your guidance to your range.

And especially, if one considers, I'm just taking for example the mid point of say about $0.50 for the November quarter. That would put you at about a $2 run rate.

And when one considers that you're still going to see benefits from restructuring and then flow through and the realignments from all that. I guess one has to ask about the linearity of earnings and those cost savings, and why wouldn't EPS be at the two handle on it? Thank you.

Well I think we addressed that somewhat in a prior question. There's going to be some seasonality. And if please if I don't answer correctly, I'll try to restate the answer.

But there's going to be some seasonality, we believe, in going from Q1 to Q2. So we feel pretty good about Q1, and there will be some seasonality to Q2. And again, if you'd take a look at a little bit of the shape of earnings from 2013, I think that might help. And I would believe that, again, with that shape, the back half of the year has potential to be marginally higher than the first half.

Okay. And then how about seasonality? Is that segment related, or is that Companywide related?

Then my follow-up would be on the free cash flow. What do you plan on doing with the free cash flow? Would that be to pay down debt, future strategic M&A, stock buyback, or how should we think about your free cash flow after you back out CapEx?

Jim, in terms of the seasonality, I would expect a dominant piece of the seasonality to be within the Diversified Manufacturing segment. There will be some within the Electronic Manufacturing segment, but I would say the dominant piece would be within Diversified.

Then in terms of your follow-up question, in terms of the cash flows. We expect another strong year in operating cash flow $700 million to $800 million, CapEx $400 million at its mid point. So it leaves $350 million, $400 million of free cash flow.

We'll continue to appropriately measure what we do there. We're obviously in a growth mode here, so we like to make some tuck-in acquisitions in terms of capabilities throughout the balance of the year. That is part of our growth and capability strategy.

So certainly want to leave some room for that. And we're committed to our dividend as we move through the fiscal year, and we'll see where we go from there. But certainly, we're in good shape as we move through the year here.

Thank you very much.

Your next question comes from the line of Shawn Harrison, Longbow Research.

(inaudible) calling on behalf of Shawn. I just wanted to delve in a little bit more on the margins, specifically the DMS business.

You talked about the trajectory and the timing. When would you hit the low end then of the 5% to 7% target? Is that more of a second half of 2015 focus, or would that be pushed out at all to 2016?

In terms of margin and DMS, no, we would certainly with the guidance we provided for the first fiscal quarter, sequentially up 30%. We would certainly expect great opportunity to be in that range of guidance 5% to 7%, actually in the first quarter. So things are going well, and certainly we'd expect to be in the range of the guidance for each of the quarters of FY15.

Great. And then just a clarification, I think in the opening remarks you had said that -- you had mentioned the 8% to 12% sales range for DMS, but on the slide it says 8% to 10%. Is that just miss printed?

The range is 8% to 12% in terms of an actual growth target.

Okay, thank you.

Your next question comes from the line of Sherry Scribner, Deutsche Bank.

Hello, this is Clepe Shetty calling on behalf of Sherri. I actually had a question on incremental growth, and if it's being driven entirely by new program ramps, or what you're seeing in the end market or if there's any signs of improvement?

The majority of the growth that we're seeing certainly within Diversified Manufacturing is new program ramps. Mark, in his prepared remarks, did talk to multiple developments and ramps going on. So it's predominantly new ramps that's showing that growth.

As we look at the full year, from a Companywide perspective, overall markets seem to be pretty stable. We saw a little bit of an uptick in Q4 there, I think that will be more normalized as we move into the November, the fourth calendar quarter, if you will. So I'd characterize it as end markets being stable, and these new ramps that we've been investing in, providing the majority of the growth as we move through FY15.

And I had a follow-up question. Mark, I think you did talk about this previously.

You mentioned that the operating margin targets for FY15 should probably be around the 3% range, but 4% remains your target. What revenue levels do you think are needed to return to those (technical difficulty) of operating margin targets, and when do you expect to be able to reach these levels?

Yes, let me clarify a little bit. So I think what I said was, I think it's appropriate to model around a mid 3% range for FY15. And to get there, I think we can get there with the guidance we've provided for the full fiscal year.

I also said in the prepared remarks that, again, there was a lot of work done in FY14. This year is about optimizing the business and growing the business, and I think if we're successful in that, we end up normalizing our overhead. I think a 4% range beyond FY15 is very achievable.

Okay, thank you.

Your next question comes from the line of Nicole Kumar with Stifel Nicolaus.

Hello, this is Nick Kumar for Matt Sheerin. Just want to delve into DMS business. You guys are guiding growth for 8% to 12%, so most of the growth is coming from Green Point? Ar are you seeing growth in Nypro and packaging side as well?

We're seeing growth from both. And that's one of the things that has us excited. So we're seeing growth from both the Green Point side and the Nypro side.

Okay, thank you.

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

Yes, can you hear me?

We can.

We can hear you.

Okay, great. Thanks for taking my question here. So there was a comment earlier about 30 wins in FY14, I'm sorry, for 30 new customers. Can you share what that might have been on a net basis first?

And then secondarily, can you talk a little bit about the new win environment incrementally from what you already are starting to ramp in hand? The prospects that you're seeing in the two segments that you'll now be reporting on? And then specifically within EMS, whether the pricing variable is having any bit more of an impact there, and any detail around that would be great. Thanks.

Okay, so let's break that down a little bit. There was a lot of information there in the question. So let's start with the customer wins.

We won't discuss those, and most of those wins were booked in 2014. And the vast majority will have some level of impact to us in 2015. But I would say that from a materiality standpoint, from a customer count perspective, most of the impact will be in 2016 and 2017 as far as magnitude of profit dollars.

Mark, I was actually looking to get some clarification around the number of net customers that we had through the year. If we added 30, what does that look like on a net basis?

Are you asking how many customers we have as a Corporation?

No. We added -- if I understood correctly, we added 30 new customers. I'm assuming general course of business, some customers lost. Just wanted to get a sense of what that might have looked like on a net basis.

I'd say our customer attrition and loss was very, very low relative to the 30 wins.

Okay, thank you. And then in terms of the prospects right now for DMS versus EMS, et cetera?

Prospects for both are good. There's certain parts of our EMS business where the business is flat, and not growing. But as I said in my prepared comments, it's intriguing to me that as we see so many of the 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, the opportunities that we're seeing are exciting.

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 are 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. So again, the opportunities we have are widespread.

Okay, thanks. And then just last on pricing?

Your question was exactly what?

Are we seeing incremental price pressures within EMS, or that's impacting any of the sub segments there? Thanks.

Sure. We see pricing pressure every day. I would characterize it as the pricing pressure we're seeing is very consistent with what we've seen in last 2 to 3 years. It's always there, and I would characterize it as intense.

For me, it's just a different degree of intenseness. It never goes away. I'm sorry?

Normalized trends, as it's been recently.

Normalized trends, that's correct.

Great, all right. Thank you.

Operator, we have time for one more question please?

Your last question comes from the line of Brian Alexander, Raymond James.

Thanks for taking the follow-ups. I wanted to ask about CapEx, Forbes. So in the quarter, $200 million gross, and for the year over $600 million.

I think that was $100 million above your expectations a quarter ago, and well above your original outlook of $250 million to $350 million for the year. So is that all for incremental manufacturing capacity for DMS, or is it for other segments?

And more importantly, how confident are you that the CapEx range you gave today of $350 million to $450 for FY15 will remain intact? Or might that be a moving target? And are you factoring in any equipment sales in FY15 as an offset, or is that a gross number or a net number? Thanks.

So first of all, the net CapEx in FY14 was $460 million. We did accelerate acceptance of buildings, in particular in China into Q4 to prepare for some ramps in 2015 here. So if you look at the [paratal], if you will, of spend last year I think it was somewhere in the region of $250 million on physical footprint.

So buildings, lease holds, associated with that. So that prepares us very, very nicely for 2015 into 2016. So that gives me a level of confidence in the $350 million to $450 million on an overall net basis looking at 2015. And there will be some minor equipment disposals, just very routine operational stuff in 2015. But kind of on the mid point of about $400 million.

As I said to an earlier reply to an earlier question on the split of that CapEx, I'd expect it certainly to be more weighted towards the Diversified area. A lot of development work going on there, a lot of program ramps in process, both across healthcare, pharma, food groups, and obviously across the broader Green Point area.

There will be some incremental CapEx in the Electronic Manufacturing Services arena. We do expect that to grow on a year-over-year basis within the targeted range of zero to 5%. So expect some there, but the majority to go on the Diversified side.

Okay, I appreciate it. Thank you.

Okay, thank you everyone for joining us on the call today. Appreciate your taking the time, and we will be available for the rest of the week to answer any follow-up questions you might have. Thank you.

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