Jabil Posts Third Quarter Results

Today, Jabil Inc. (NYSE: JBL), reported preliminary, unaudited financial results for its third quarter of fiscal year 2021.

“Our third quarter performance was outstanding,” said CEO Mark Mondello. “The combination of strong demand and excellent execution by the team allowed us to deliver $277 million in core operating income on revenue of $7.2 billion,” he added.

Third Quarter of Fiscal Year 2021 Highlights:

  • Net revenue: $7.2 billion
  • Diversified Manufacturing Services (DMS) year-on-year revenue growth: 21 percent
  • Electronics Manufacturing Services (EMS) year-on-year revenue growth: 8 percent
  • U.S. GAAP operating income: $239.8 million
  • U.S. GAAP diluted earnings per share: $1.12
  • Core operating income (Non-GAAP): $276.9 million
  • Core diluted earnings per share (Non-GAAP): $1.30

Fourth Quarter of Fiscal Year 2021 Outlook:

  • Net revenue
 

$7.3 billion to $7.9 billion

  • U.S. GAAP operating income
 

$242 million to $302 million

  • U.S. GAAP diluted earnings per share
 

$1.00 to $1.20 per diluted share

  • Core operating income (Non-GAAP) (1)
 

$280 million to $340 million

  • Core diluted earnings per share (Non-GAAP) (1)
 

$1.25 to $1.45 per diluted share

  • Total company revenue
 

Increase 4 percent year-on-year

Fiscal Year 2021 Updated Outlook:

“I’m confident in our plan. As a result, we are raising our financial outlook for the balance of the year. We now expect FY21 revenue to be in the neighborhood of $29.5 billion, with core EPS of approximately $5.50,” added Mondello.

________________

(1) Core operating income and core diluted earnings per share exclude anticipated adjustments of $12.0 million for amortization of intangibles (or $0.08 per diluted share), $22.0 million for stock-based compensation expense and related charges (or $0.14 per diluted share) and $4.0 million for restructuring, severance and related charges (or $0.03 per diluted share).

(Definitions: “U.S. GAAP” means U.S. generally accepted accounting principles. Jabil defines core operating income as U.S. GAAP operating income less amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges and business interruption and impairment charges, net plus other components of net periodic benefit cost. Jabil defines core earnings as U.S. GAAP net income before amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, (gain) impairment on securities, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Jabil defines core diluted earnings per share as core earnings divided by the weighted average number of outstanding diluted shares as determined under U.S. GAAP. Jabil defines adjusted free cash flow as net cash provided by (used in) operating activities plus cash receipts on sold receivables less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from sale of property, plant and equipment). Jabil reports core operating income, core earnings, core diluted earnings per share and adjusted free cash flow to provide investors an additional method for assessing operating income, earnings, diluted earnings per share and free cash flow from what it believes are its core manufacturing operations. See the accompanying reconciliation of Jabil’s core operating income to its U.S. GAAP operating income, its calculation of core earnings and core diluted earnings per share to its U.S. GAAP net income and U.S. GAAP earnings per share and additional information in the supplemental information.)

Forward Looking Statements: This release contains forward-looking statements, including those regarding our anticipated financial results for our third quarter of fiscal year 2021 and our guidance for future financial performance in our fourth quarter of fiscal year 2021 (including, net revenue, total company revenue, U.S. GAAP operating income, U.S. GAAP diluted earnings per share, core operating income (Non-GAAP), core diluted earnings per share (Non-GAAP) results and the components thereof, including but not limited to amortization of intangibles, stock-based compensation expense and related charges, and restructuring, severance and related charges) and in fiscal year 2021 (including revenue and core earnings per share). The statements in this release are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially from our current expectations. Such factors include, but are not limited to: our determination as we finalize our financial results for our third quarter of fiscal year 2021 that our financial results and conditions differ from our current preliminary unaudited numbers set forth herein; the scope and duration of the COVID-19 outbreak and its impact on our operations, sites, customers and supply chain; managing growth effectively; our dependence on a limited number of customers; competitive challenges affecting our customers; managing rapid declines or increases in customer demand and other related customer challenges that may occur; risks arising from relationships with emerging companies; changes in technology; our ability to introduce new business models or programs requiring implementation of new competencies; competition; transportation issues; our ability to maintain our engineering, technological and manufacturing expertise; retaining key personnel; our ability to purchase components efficiently and reliance on a limited number of suppliers for critical components; risks associated with international sales and operations; our ability to achieve expected profitability from acquisitions; risk arising from our restructuring activities; issues involving our information systems, including security issues; regulatory risks (including the expense of complying, or failing to comply, with applicable regulations; risk arising from design or manufacturing defects; and intellectual property risk); financial risks (including customers or suppliers who become financially troubled; turmoil in financial markets; tax risks; credit rating risks; risks of exposure to debt; currency fluctuations; energy prices; and asset impairment); changes in financial accounting standards or policies; and risk of natural disaster, climate change or other global events. Additional factors that could cause such differences can be found in our Annual Report on Form 10-K for the fiscal year ended August 31, 2020 and our other filings with the Securities and Exchange Commission. We assume no obligation to update these forward-looking statements.

Supplemental Information Regarding Non-GAAP Financial Measures: Jabil provides supplemental, non-GAAP financial measures in this release to facilitate evaluation of Jabil’s core operating performance. These non-GAAP measures exclude certain amounts that are included in the most directly comparable U.S. GAAP measures, do not have standard meanings and may vary from the non-GAAP financial measures used by other companies. Management believes these “core” financial measures are useful measures that facilitate evaluation of the past and future performance of Jabil’s ongoing operations on a comparable basis.

Jabil reports core operating income, core earnings, core diluted earnings per share and adjusted free cash flows to provide investors an additional method for assessing operating income, earnings, earnings per share and free cash flow from what it believes are its core manufacturing operations. Among other uses, management uses non-GAAP financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when determining incentive compensation. The Company determines the tax effect of the items excluded from core earnings and core diluted earnings per share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain jurisdictions where the Company does not expect to realize a tax benefit (due to existing tax incentives or a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a reduced or 0% tax rate is applied. Detailed definitions of certain of the core financial measures are included above under “Definitions” and a reconciliation of the disclosed core financial measures to the most directly comparable U.S. GAAP financial measures is included under the heading “Supplemental Data” at the end of this release.

Meeting and Replay Information: Jabil will hold a conference call today at 8:30 a.m. ET to discuss its earnings for the third quarter of fiscal year 2021. To access the live audio webcast and view the accompanying slide presentation, visit the Investor Relations section of Jabil’s website, located at https://investors.jabil.com. An archived replay of the webcast will also be available after completion of the call.

About Jabil: Jabil (NYSE: JBL) is a manufacturing solutions provider with over 260,000 employees across 100 locations in 30 countries. The world’s leading brands rely on Jabil’s unmatched breadth and depth of end-market experience, technical and design capabilities, manufacturing know-how, supply chain insights and global product management expertise. Driven by a common purpose, Jabil and its people are committed to making a positive impact on their local community and the environment. Visit www.jabil.com to learn more.

JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

May 31, 2021

(unaudited)

August 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

1,240,729

$

1,393,557

Accounts receivable, net

3,227,627

2,847,743

Contract assets

1,070,606

1,104,700

Inventories, net

3,979,329

3,131,783

Prepaid expenses and other current assets

741,223

657,102

Total current assets

10,259,514

9,134,885

Property, plant and equipment, net

3,812,159

3,665,312

Operating lease right-of-use asset

360,938

362,847

Goodwill and intangible assets, net

914,253

906,723

Deferred income taxes

165,612

165,407

Other assets

228,232

162,242

Total assets

$

15,740,708

$

14,397,416

LIABILITIES AND EQUITY

Current liabilities:

Current installments of notes payable and long-term debt

$

50,168

$

50,194

Accounts payable

6,193,198

5,687,038

Accrued expenses

3,490,480

3,211,528

Current operating lease liabilities

113,150

110,723

Total current liabilities

9,846,996

9,059,483

Notes payable and long-term debt, less current installments

2,876,599

2,678,288

Other liabilities

302,602

268,925

Non-current operating lease liabilities

303,703

302,035

Income tax liabilities

169,593

148,629

Deferred income taxes

102,255

114,657

Total liabilities

13,601,748

12,572,017

Commitments and contingencies

Equity:

Jabil Inc. stockholders’ equity:

Preferred stock

Common stock

267

264

Additional paid-in capital

2,490,892

2,413,616

Retained earnings

2,525,323

2,040,922

Accumulated other comprehensive income (loss)

14,722

(34,168

)

Treasury stock, at cost

(2,893,193

)

(2,609,250

)

Total Jabil Inc. stockholders’ equity

2,138,011

1,811,384

Noncontrolling interests

949

14,015

Total equity

2,138,960

1,825,399

Total liabilities and equity

$

15,740,708

$

14,397,416

JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share data)

(Unaudited)

 

Three months ended

Nine months ended

May 31,
2021

May 31,
2020

May 31,
2021

May 31,
2020

Net revenue

$

7,214,645

$

6,335,642

$

21,875,721

$

19,966,423

Cost of revenue

6,646,845

5,879,494

20,103,436

18,526,311

Gross profit

567,800

456,148

1,772,285

1,440,112

Operating expenses:

Selling, general and administrative

305,559

302,849

914,253

916,772

Research and development

9,657

11,587

27,143

33,647

Amortization of intangibles

12,066

13,178

35,160

42,895

Restructuring, severance and related charges

744

69,150

5,655

144,005

Operating income

239,774

59,384

790,074

302,793

(Gain) Impairment on securities

(2,409

)

(2,409

)

12,205

Interest and other, net

28,888

45,611

85,243

145,098

Income before income tax

213,295

13,773

707,240

145,490

Income tax expense

43,277

64,036

183,861

157,620

Net income (loss)

170,018

(50,263

)

523,379

(12,130

)

Net income attributable to noncontrolling interests, net of tax

538

695

1,803

1,689

Net income (loss) attributable to Jabil Inc.

$

169,480

$

(50,958

)

$

521,576

$

(13,819

)

Earnings (loss) per share attributable to the stockholders of Jabil Inc.:

Basic

$

1.14

$

(0.34

)

$

3.49

$

(0.09

)

Diluted

$

1.12

$

(0.34

)

$

3.41

$

(0.09

)

Weighted average shares outstanding:

Basic

148,110

150,723

149,500

151,956

Diluted

151,976

150,723

152,838

151,956

JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

Nine months ended

May 31, 2021

May 31, 2020

Cash flows provided by operating activities:

Net income (loss)

$

523,379

$

(12,130

)

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

644,743

600,692

Restructuring and related charges

3,043

39,292

Recognition of stock-based compensation expense and related charges

76,119

62,214

Deferred income taxes

(15,933

)

18,279

Provision for allowance for doubtful accounts

5,395

14,636

Other, net

16,217

20,979

Change in operating assets and liabilities, exclusive of net assets acquired:

Accounts receivable

(365,061

)

142,470

Contract assets

47,135

(92,574

)

Inventories

(839,570

)

(229,398

)

Prepaid expenses and other current assets

(73,024

)

(44,331

)

Other assets

(32,220

)

(9,089

)

Accounts payable, accrued expenses and other liabilities

680,637

59,686

Net cash provided by operating activities

670,860

570,726

Cash flows used in investing activities:

Acquisition of property, plant and equipment

(878,020

)

(648,945

)

Proceeds and advances from sale of property, plant and equipment

286,702

93,679

Cash paid for business and intangible asset acquisitions, net of cash

(49,833

)

(145,595

)

Other, net

(3,081

)

21,398

Net cash used in investing activities

(644,232

)

(679,463

)

Cash flows used in financing activities:

Borrowings under debt agreements

1,081,486

9,521,853

Payments toward debt agreements

(908,265

)

(9,533,522

)

Payments to acquire treasury stock

(261,788

)

(189,500

)

Dividends paid to stockholders

(37,872

)

(38,411

)

Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan

20,354

16,179

Treasury stock minimum tax withholding related to vesting of restricted stock

(22,155

)

(23,085

)

Other, net

(48,901

)

(13,106

)

Net cash used in financing activities

(177,141

)

(259,592

)

Effect of exchange rate changes on cash and cash equivalents

(2,315

)

(31,677

)

Net decrease in cash and cash equivalents

(152,828

)

(400,006

)

Cash and cash equivalents at beginning of period

1,393,557

1,163,343

Cash and cash equivalents at end of period

$

1,240,729

$

763,337

JABIL INC. AND SUBSIDIARIES

SUPPLEMENTAL DATA

RECONCILIATION OF U.S. GAAP FINANCIAL RESULTS TO NON-GAAP MEASURES

(in thousands, except for per share data)

(Unaudited)

 

Three months ended

Nine months ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Operating income (U.S. GAAP)

$

239,774

$

59,384

$

790,074

$

302,793

Amortization of intangibles

12,066

13,178

35,160

42,895

Stock-based compensation expense and related charges

18,765

16,882

76,119

62,214

Restructuring, severance and related charges

744

69,150

5,655

144,005

Distressed customer charge

14,963

Net periodic benefit cost (1)

5,534

2,797

16,850

7,398

Business interruption and impairment charges, net

4,574

(806

)

4,574

Acquisition and integration charges

6,119

3,374

30,005

Adjustments to operating income

37,109

112,700

136,352

306,054

Core operating income (Non-GAAP)

$

276,883

$

172,084

$

926,426

$

608,847

Net income (loss) attributable to Jabil Inc. (U.S. GAAP)

$

169,480

$

(50,958

)

$

521,576

$

(13,819

)

Adjustments to operating income

37,109

112,700

136,352

306,054

(Gain) Impairment on securities

(2,409

)

(2,409

)

12,205

Net periodic benefit cost (1)

(5,534

)

(2,797

)

(16,850

)

(7,398

)

Adjustments for taxes

(584

)

(2,422

)

(1,732

)

1,166

Core earnings (Non-GAAP)

$

198,062

$

56,523

$

636,937

$

298,208

Diluted earnings (loss) per share (U.S. GAAP)

$

1.12

$

(0.34

)

$

3.41

$

(0.09

)

Diluted core earnings per share (Non-GAAP)

$

1.30

$

0.37

$

4.17

$

1.93

Diluted weighted average shares outstanding (U.S. GAAP)

151,976

150,723

152,838

151,956

Diluted weighted average shares outstanding (Non-GAAP)

151,976

152,693

152,838

154,412

________________

(1)

Following the adoption of Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715) (“ASU 2017-07”), pension service cost is recognized in cost of revenue and all other components of net periodic benefit cost, including return on plan assets, are presented in other expense. We are reclassifying the pension components in other expense to core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue. There is no impact to core earnings or diluted core earnings per share for this adjustment.

JABIL INC. AND SUBSIDIARIES

SUPPLEMENTAL DATA

ADJUSTED FREE CASH FLOW

(in thousands)

(Unaudited)

 

Nine months ended

May 31, 2021

May 31, 2020

Net cash provided by operating activities (U.S. GAAP)

$

670,860

$

570,726

Acquisition of property, plant and equipment

(878,020

)

(648,945

)

Proceeds and advances from sale of property, plant and equipment

286,702

93,679

Adjusted free cash flow (Non-GAAP)

$

79,542

$

15,460

Contacts:

Investor Contact
Adam Berry
Vice President, Investor Relations
(727) 577-9749
Adam_Berry@jabil.com

Media Contact
Michelle Smith
Vice President, Corporate Communications
(727) 577-9749
Michelle_Smith@jabil.com

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