JABIL INC (JBL)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are one of the leading providers of worldwide manufacturing services and solutions. We provide comprehensive electronics design, production, and product management services to companies in various industries and end markets. We derive substantially all of our revenue from production and product management services (collectively referred to as “manufacturing services”), which encompass the act of producing tangible components that are built to customer specifications and are then provided to the customer.

On December 29, 2023 (“the Closing Date”), we completed the sale of our product manufacturing business in Chengdu, including its supporting component manufacturing in Wuxi (the “Mobility Business”) to an affiliate of BYD Electronic (International) Co. Ltd. (“BYDE”) for pre-tax cash proceeds of approximately $2.2 billion, subject to certain post-closing adjustments.

At August 31, 2024, we had two reporting segments: Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”), which are organized based on the economic profiles of the services performed, including manufacturing capabilities, market strategy, margins, return on capital and risk profiles. Our EMS segment is focused on leveraging IT, supply chain design, and engineering, technologies largely centered on core electronics, utilizing our large-scale manufacturing infrastructure and our ability to serve a broad range of end markets. Our EMS segment is a high-volume business that produces product at a quicker rate (i.e., cycle time) and in larger quantities and includes customers primarily in the 5G, wireless and cloud, digital print and retail, industrial and semi-capital equipment, and networking and storage industries. Our DMS segment is focused on providing engineering solutions, with an emphasis on material sciences, technologies, and healthcare. Our DMS segment includes customers primarily in the automotive and transportation, connected devices, and healthcare and packaging industries. The DMS segment included the results of the Mobility Business prior to the Closing Date.

Beginning September 1, 2024, we reorganized our internal structure to focus on speed, precision, and solutions and as a result of our organizational realignment, we will report our business in the following three segments: Regulated Industries, Intelligent Infrastructure, and Connected Living and Digital Commerce. Our Regulated Industries segment is focused on regulated markets and includes revenues from customers primarily in the automotive and transportation, healthcare and packaging, and renewable energy infrastructure industries. Our Intelligent Infrastructure segment is focused on the modern digital ecosystem including artificial intelligence (“AI”) infrastructure and includes revenues from customers primarily in the capital equipment, cloud and data center infrastructure, and networking and communications industries. Our Connected Living and Digital Commerce segment is focused on digitalization and automation, including warehouse automation, and robotics, and includes revenues from customers primarily in the connected living and digital commerce industries.

Our cost of revenue includes the cost of electronic components and other materials that comprise the products we manufacture; the cost of labor and manufacturing overhead; and adjustments for excess and obsolete inventory. As a provider of turnkey manufacturing services, we are responsible for procuring components and other materials. This requires us to commit significant working capital to our operations and to manage the purchasing, receiving, inspecting, and stocking of materials. At times, we collect deposits from our customers related to the purchase of inventory in order to effectively manage our working capital. Although we bear the risk of fluctuations in the cost of materials and excess scrap, our ability to purchase components and materials efficiently may contribute significantly to our operating results. While we periodically negotiate cost of materials adjustments with our customers, rising component and material prices may negatively affect our margins. Net revenue from each product that we manufacture consists of an element based on the costs of materials in that product and an element based on the labor and manufacturing overhead costs allocated to that product. Our gross margin for any product depends on the mix between the cost of materials in the product and the cost of labor and manufacturing overhead allocated to the product.

Our operating results are impacted by the level of capacity utilization of manufacturing facilities; indirect labor costs; and selling, general, and administrative expenses. Operating income margins have generally improved during periods of high production volume and high capacity utilization. During periods of low production volume, we generally have reduced operating income margins.

We monitor the current economic environment and its potential impact on both the customers we serve as well as our end markets and closely manage our costs and capital resources so that we can try to respond appropriately as circumstances change.

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We have consistently utilized advanced circuit design, production design and manufacturing technologies to meet the needs of our customers. To support this effort, our engineering staff focuses on developing and refining design and manufacturing technologies to meet specific needs of specific customers. Most of the expenses associated with these customer-specific efforts are reflected in our cost of revenue. In addition, our engineers engage in research and development (“R&D”) of new technologies that apply generally to our operations. The expenses of these R&D activities are reflected in the research and development line item within our Consolidated Statements of Operations.

An important element of our strategy is the expansion of our global production facilities. The majority of our revenue and materials costs worldwide are denominated in U.S. dollars, while our labor and utility costs in operations outside the U.S. are denominated in local currencies. We economically hedge certain of these local currency costs, based on our evaluation of the potential exposure as compared to the cost of the hedge, through the purchase of foreign currency exchange contracts. Changes in the fair market value of such hedging instruments are reflected within the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income.

See Note 14 – “Concentration of Risk and Segment Data” to the Consolidated Financial Statements.

Summary of Results

The following table sets forth, for the periods indicated, certain key operating results and other financial information (in millions, except per share data):

Key Performance Indicators

Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. Changes in our operating assets and liabilities are largely affected by our working capital requirements, which are dependent on the effective management of our sales cycle as well as timing of payments. Our sales cycle measures how quickly we can convert our manufacturing services into cash through sales. We believe the metrics set forth below are useful to investors in measuring our liquidity, as future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable, and accounts payable.

The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators:

(1)The calculation of these key performance indicators includes assets and liabilities held for sale for the three months ended August 31, 2023.

(2)The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct result of changes in these indicators.

(3)Inventory turns (annualized) are calculated as 360 days divided by days in inventory.

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(4)Days in accounts receivable is calculated as accounts receivable, net, divided by net revenue multiplied by 90 days. During the three months ended August 31, 2024, the increase in days in accounts receivable from the three months ended August 31, 2023, was primarily due to the timing of collections.

(5)Days in inventory is calculated as inventory and contract assets divided by cost of revenue multiplied by 90 days. During the three months ended August 31, 2024, the decrease in days in inventory from the prior sequential quarter and the three months ended August 31, 2023, was primarily driven by higher consumption of inventory to support sales during the quarter and improved working capital management.

(6)Days in accounts payable is calculated as accounts payable divided by cost of revenue multiplied by 90 days. During the three months ended August 31, 2024, the increase in days in accounts payable from the prior sequential quarter and the three months ended August 31, 2023, was primarily due to timing of purchases and cash payments during the quarter.

Critical Accounting Policies and Estimates

The preparation of our Consolidated Financial Statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. For further discussion of our significant accounting policies, refer to Note 1 – “Description of Business and Summary of Significant Accounting Policies” to the Consolidated Financial Statements.

Revenue Recognition

For our over time customers, we believe the measure of progress which best depicts the transfer of control is based on costs incurred to date, relative to total estimated cost at completion (i.e., an input method). This method is a faithful depiction of the transfer of goods or services because it results in the recognition of revenue on the basis of our to-date efforts in the satisfaction of a performance obligation relative to the total expected efforts in the satisfaction of the performance obligation. We believe that the use of an input method best depicts the transfer of control to the customer, which occurs as we incur costs on our contracts. The transaction price of each performance obligation is generally based upon the contractual standalone selling price of the product or service.

Inventory Valuation

We purchase inventory based on forecasted demand and record inventory at the lower of cost and net realizable value. Management regularly assesses inventory valuation based on current and forecasted usage, customer inventory-related contractual obligations, and other lower of cost and net realizable value considerations. If actual market conditions or our customers’ product demands are less favorable than those projected, additional valuation adjustments may be necessary.

Long-Lived Assets

We have recorded intangible assets, including goodwill, in connection with business acquisitions. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows. The fair value of acquired amortizable intangible assets impacts the amounts recorded as goodwill. We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

We perform a goodwill impairment analysis on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If the qualitative assessment is not performed or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired, and a loss is recognized in the amount equal to that excess.

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For further discussion related to impairment analyses performed during fiscal year 2024, and performed in connection with the divestiture of the Mobility Business, refer to Note 6 – “Goodwill and Other Intangible Assets” and Note 17 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements.

Income Taxes

We estimate our income tax provision in each of the jurisdictions in which we operate, a process that includes estimating exposures related to examinations by taxing authorities. We must also make judgments regarding the ability to realize deferred tax assets. The carrying value of our net deferred tax assets is based on our belief that it is more likely than not that we will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets that we do not believe meet the “more likely than not” criteria. We assess whether an uncertain tax position taken or expected to be taken in a tax return meets the threshold for recognition and measurement in the Consolidated Financial Statements. Our judgments regarding future taxable income as well as tax positions taken or expected to be taken in a tax return may change due to changes in market conditions, changes in tax laws or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances and/or tax reserves established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. For further discussion related to our income taxes, refer to Note 16 – “Income Taxes” to the Consolidated Financial Statements.

Recent Accounting Pronouncements

See Note 20 – “New Accounting Guidance” to the Consolidated Financial Statements for a discussion of recent accounting guidance.

Results of Operations

Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, for the results of operations discussion for the fiscal year ended August 31, 2023, compared to the fiscal year ended August 31, 2022.

Net Revenue

Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or separately report revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure.

The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of numerous factors, including the following: fluctuations in customer demand; efforts to diversify certain portions of our business; business growth from new and existing customers; specific product performance; and any potential termination, or substantial winding down, of significant customer relationships.

2024 vs. 2023

Net revenue decreased during the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023. Specifically, the EMS segment net revenue decreased 18% primarily due to: (i) a 9% decrease in revenues from existing customers within our 5G, wireless, and cloud business, primarily driven by the continued transitioning to a customer-controlled consignment model in our cloud business during fiscal year 2024, (ii) a 4% decrease in revenues from existing customers within our industrial and semi-capital equipment business, (iii) a 3% decrease in revenues from existing customers within our digital print and retail business, and (iv) a 2% decrease in revenues from existing customers within our networking and storage business. The DMS segment net revenue decreased 16% due to: (i) a 13% decrease primarily driven by the divestiture of the Mobility Business, (ii) a 3% decrease in revenues from existing customers within our connected devices business, and (iii) a 1% decrease in revenues from existing customers within our healthcare and packaging business. The decrease is partially offset by a 1% increase in revenues from existing customers within our automotive and transportation business.

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On December 29, 2023, we completed the sale of the Mobility Business. See Note 17 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for additional information.

The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:

The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:

(1)Decrease from prior periods is driven by the divestiture of the Mobility Business during the fiscal year ended August 31, 2024. See Note 17 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for additional information.

Gross Profit

2024 vs. 2023

Gross profit as a percentage of net revenue increased for the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023, primarily due to product mix and depreciation and amortization for long-lived assets related to the Mobility Business divestiture no longer being recorded while these assets were classified as held for sale.

Selling, General and Administrative

2024 vs. 2023

Selling, general and administrative expenses decreased during the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023. The decrease is primarily due to lower salary and salary related expenses.

Research and Development

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2024 vs. 2023

Research and development expenses remained consistent as a percent of net revenue during the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023.

Amortization of Intangibles

2024 vs. 2023

Amortization of intangibles increased during the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023, primarily due to amortization related to the Green Point trade name, which was reclassified to a definite-lived intangible asset during fiscal year 2024. The increase is partially offset by certain intangible assets that were fully amortized during fiscal year 2023.

Restructuring, Severance, and Related Charges

2024 vs. 2023

Restructuring, severance and related charges increased during the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023, primarily due to charges related to the 2024 Restructuring Plan.

2024 Restructuring Plan

On September 26, 2023, our Board of Directors approved a restructuring plan to (i) realign our cost base for stranded costs associated with the sale and realignment of the Mobility Business and (ii) optimize our global footprint. This action includes headcount reductions across our Selling, General and Administrative (“SG&A”) cost base and capacity realignment (the “2024 Restructuring Plan”).

The 2024 Restructuring Plan, totaling approximately $300 million in pre-tax restructuring and other related costs, was substantially complete as of August 31, 2024.

2025 Restructuring Plan

On September 24, 2024, our Board of Directors approved a restructuring plan to align our support infrastructure to further optimize organizational effectiveness. This action includes headcount reductions across our SG&A and manufacturing cost base and capacity realignment (the “2025 Restructuring Plan”). The 2025 Restructuring Plan reflects our intention only and restructuring decisions, including the timing of such decisions, at certain locations remain subject to consultation with the Company’s employees and their representatives.

Based on the analysis done to date, we currently expect to recognize approximately $150 million to $200 million in pre-tax restructuring and other related costs over the course of our 2025 fiscal year. The charges relating to the 2025 Restructuring Plan are currently expected to result in net cash expenditures of approximately $100 million to $130 million that will be payable over the course of our fiscal years 2025 and 2026. The exact timing of these charges and cash outflows, as well as the estimated cost ranges by category type, have not been finalized. This information will be subject to the finalization of timetables for the transition of functions, consultation with employees and their representatives as well as the statutory severance requirements of the jurisdictions impacted, and the amount and timing of the actual charges may vary due to a variety of factors. Our estimates for the charges discussed above exclude any potential income tax effects.

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See Note 15 – “Restructuring, Severance and Related Charges” to the Consolidated Financial Statements for further discussion of restructuring, severance and related charges.

Gain from the Divestiture of Businesses

In the second quarter of fiscal year 2024, we completed the divestiture of the Mobility Business. As a result of the transaction, we recorded a pre-tax gain of $942 million, subject to certain post-closing adjustments that are still being finalized.

See Note 17 – “Business Acquisitions and Divestitures” to the Condensed Consolidated Financial Statements for additional information.

Acquisition and Divestiture Related Charges

Acquisition and divestiture related charges recorded during the fiscal year ended August 31, 2024, primarily related to transaction and disposal costs incurred in connection with the divestiture of the Mobility Business.

See Note 17 – “Business Acquisitions and Divestitures” to the Condensed Consolidated Financial Statements for additional information.

Loss on Debt Extinguishment

2024 vs. 2023

There were no losses on extinguishment of debt during the fiscal years ended August 31, 2024, and 2023.

Other Expense

2024 vs. 2023

Other expense increased during the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023, due to an increase in fees primarily due to higher interest rates on our trade accounts receivable sales programs and global asset-backed securitization program, as well as higher utilization of our global asset-backed securitization program.

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Interest Expense, net

2024 vs. 2023

Interest expense, net decreased during the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023, due to lower borrowings primarily on our credit facilities and commercial paper program. The decrease is partially offset by an increase due to higher interest rates primarily on our credit facilities and commercial paper program.

Income Tax Expense

2024 vs. 2023

The effective income tax rate decreased for the fiscal year ended August 31, 2024, compared to the fiscal year ended August 31, 2023, primarily due to: (i) the gain from the divestiture of the Mobility Business and corresponding $58 million of income tax expense for the fiscal year ended August 31, 2024, and (ii) an income tax expense of $146 million related to a change in the indefinite reinvestment assertion associated with the divestiture of the Mobility Business for the fiscal year ended August 31, 2023. These decreases were partially offset by a change in the jurisdictional mix of earnings, driven in part by restructuring charges, for the fiscal year ended August 31, 2024.

Non-GAAP (Core) Financial Measures

The following discussion and analysis of our financial condition and results of operations include certain non-GAAP financial measures as identified in the reconciliation below. The non-GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Also, our “core” financial measures should not be construed as an inference by us that our future results will be unaffected by those items that are excluded from our “core” financial measures.

Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance and related charges, distressed customer 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 from the divestiture of businesses, acquisition and divestiture related charges, loss on debt extinguishment, (gain) loss 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. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation.

In fiscal year 2023, the Company adopted an annual normalized tax rate (“normalized core tax rate”) for the computation of the non-GAAP (core) income tax provision to provide better consistency across reporting periods. In estimating the normalized core tax rate annually, the Company utilizes a full-year financial projection of core earnings that considers the mix of earnings across tax jurisdictions, existing tax positions, and other significant tax matters. The Company may adjust the normalized core tax rate during the year for material impacts from new tax legislation or material changes to the Company’s operations.

Prior to fiscal year 2023, the Company determined the tax effect of the items included and excluded from core earnings quarterly.

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We are reporting “core” operating income, “core” earnings and cash flows to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our “core” manufacturing operations. A significant portion (based on the respective values) of the items that are excluded for purposes of calculating “core” operating income and “core” earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset. In the case of restructuring, severance and related charges, we may make associated cash payments in the future. In addition, although, for purposes of calculating “core” operating income and “core” earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders’ ownership interest. We encourage you to consider these matters when evaluating the utility of these non-GAAP financial measures.

Adjusted free cash flow is defined as net cash provided by (used in) operating activities less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from the sale of property, plant and equipment). We report adjusted free cash flow as we believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally and fund future growth and to provide a return to shareholders.

Included in the tables below are a reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Consolidated Financial Statements:

Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023 for the non-GAAP financial measures discussion for the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures

(1)Charges recorded during the fiscal year ended August 31, 2024, related to the 2024 Restructuring Plan. Charges recorded during the fiscal year ended August 31, 2023, related to headcount reduction to further optimize our business activities.

(2)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.

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(3)Charges recorded during the fiscal year ended August 31, 2024, related to costs associated with product quality liabilities, which is classified as a component of cost of revenue and selling, general and administrative expenses in the Consolidated Statements of Operations.

(4)We completed the divestiture of our Mobility Business and recorded a pre-tax gain of $942 million, subject to certain post-closing adjustments that are still being finalized. We incurred $70 million of acquisition and divestiture related charges during the fiscal year ended August 31, 2024, primarily related to the divestiture of our Mobility Business.

(5)The majority of the adjustment for taxes for the fiscal year ended August 31, 2024, was driven by income tax expense associated with the divestiture of the Mobility Business. The adjustment for taxes for the fiscal year ended August 31, 2023, primarily related to a change in the indefinite reinvestment assertion associated with operations that were classified as held for sale.

Adjusted Free Cash Flow

(1)Certain customers co-invest in PP&E with us. As we acquire PP&E, we recognize the cash payments in acquisition of PP&E. When our customers reimburse us and obtain control, we recognize the cash receipts in proceeds and advances from the sale of PP&E.

Quarterly Results (Unaudited)

The following table sets forth certain unaudited quarterly financial information for the three months ended August 31, 2024, and 2023. In the opinion of management, this information has been presented on the same basis as the audited consolidated financial statements appearing elsewhere, and all necessary adjustments (consisting primarily of normal recurring accruals) have been included in the amounts stated below to present fairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements and related notes thereto. The operating results for any quarter are not necessarily indicative of results for any future period.

Acquisitions and Divestitures

Acquisitions

On November 1, 2023, we completed the acquisition of ProcureAbility Inc. (“ProcureAbility”) for approximately $60 million in cash. ProcureAbility is a procurement services provider specializing in technology-enabled advisory, managed services, digital, staffing, and recruiting solutions.

The acquisition of ProcureAbility was accounted for as a business combination using the acquisition method of accounting. Assets acquired of $87 million, including $40 million in intangible assets and $38 million in goodwill, and liabilities assumed of $26 million were recorded at their estimated fair values as of the acquisition date. The preliminary estimates and measurements are subject to change during the measurement period for assets acquired, liabilities assumed and tax adjustments. The excess of the purchase price over the fair value of the acquired assets and assumed liabilities was recorded to goodwill and was fully allocated to the DMS segment. The majority of the goodwill is currently not expected to be deductible for income tax

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purposes. The results of operations were included in our condensed consolidated financial results beginning on November 1, 2023. Pro forma information has not been provided as the acquisition of ProcureAbility is not deemed to be significant.

On October 1, 2024, we completed the acquisition of Mikros Technologies LLC for consideration transferred of $62 million. Mikros Technologies LLC is a leader in the engineering and manufacturing of liquid cooling solutions for thermal management. The final purchase price is subject to adjustment based on conditions within the purchase agreement.

Divestitures

We announced on September 26, 2023, that, through our indirect subsidiary, Jabil Circuit (Singapore) Pte. Ltd., a Singapore private limited company (“Singapore Seller”), we agreed to sell the Mobility Business to an affiliate of BYDE for cash consideration of approximately $2.2 billion, subject to certain customary purchase price adjustments.

As of August 31, 2023, we determined the Mobility Business met the criteria to be classified as held for sale. Accordingly, we presented the assets and liabilities of the Mobility Business as held for sale in the Consolidated Balance Sheets as of August 31, 2023. Assets and liabilities classified as held for sale had a carrying value less than the estimated fair value less cost to sell and, thus, no adjustment to the carrying value of the disposal group was necessary. Depreciation and amortization expense for long-lived assets was not recorded for the period in which these assets were classified as held for sale. The divestiture did not meet the criteria to be reported as discontinued operations, and we continued to report the operating results for the Mobility Business in our Consolidated Statements of Operations in the DMS segment until the Closing Date (defined below).

On December 29, 2023, (the “Closing Date”), we completed the sale of the Mobility Business. As a result of the transaction, we derecognized net assets of approximately $1.2 billion and recorded a pre-tax gain of $942 million, subject to certain post-closing adjustments that are still being finalized. In addition, we agreed to indemnify BYDE from certain liabilities that may arise post-close that relate to periods prior to the Closing Date. We incurred transaction and disposal costs in connection with the sale of approximately $67 million during the fiscal year ended August 31, 2024, which are included in continuing operations in our Consolidated Statements of Operations.

We perform a goodwill impairment analysis on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In connection with the preparation of the Company’s financial statements for the quarter ended February 29, 2024, we completed an impairment analysis for goodwill recorded within the reporting unit impacted by the divestiture of the Mobility Business. The quantitative assessment was used, and we determined that the fair value of the impacted reporting unit exceeded the carrying value and that no impairment existed immediately prior to or subsequent to divesting the Mobility Business. We allocated goodwill to the disposal group based on the relative fair value of the Mobility Business as compared to the impacted reporting unit.

In the second quarter of fiscal year 2024 and in connection with the divestiture of the Mobility Business, we made a strategic decision that the indefinite-lived (“Green Point”) trade name valued at $51 million acquired during the acquisition of Green Point should no longer be classified as an indefinite-lived intangible asset. Accordingly, prior to reclassifying the trade name to a finite-lived intangible asset, we completed a quantitative assessment for impairment and determined the fair value of the asset exceeded the carrying value. The trade name was assigned a two-year estimated useful life and is being amortized on a straight-line basis as of the Closing Date.

Refer to Note 17 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for discussion.

Liquidity and Capital Resources

We believe that our level of liquidity sources, which includes cash on hand, available borrowings under our revolving credit facilities and commercial paper program, additional proceeds available under our global asset-backed securitization program and under our uncommitted trade accounts receivable sale programs, cash flows provided by operating activities, and access to the capital markets will be adequate to fund our capital expenditures, the payment of any declared quarterly dividends, any share repurchases under the approved program, any potential acquisitions, our working capital requirements and our contractual obligations for the next 12 months and beyond. We continue to assess our capital structure and evaluate the merits of redeploying available cash.

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Cash and Cash Equivalents

As of August 31, 2024, we had approximately $2.2 billion in cash and cash equivalents, of which a significant portion was held by our foreign subsidiaries. Most of our foreign cash and cash equivalents as of August 31, 2024, could be repatriated to the United States without potential tax expense.

Notes Payable and Credit Facilities

Following is a summary of principal debt payments and debt issuance for our notes payable and credit facilities:

(1)On February 23, 2024, we entered into an amendment (the “Amendment”) to our senior unsecured credit agreement dated as of January 22, 2020 (as amended, the “Credit Facility”). The Amendment, among other things, (i) instituted certain amendments to the sustainability-linked adjustments to the interest rates applicable to borrowings under the three-year revolving credit facility (the “Three-Year Revolving Credit Facility”) and the five-year revolving credit facility (the “Five-Year Revolving Credit Facility”) and (ii) extended the termination date of the Three-Year Revolving Credit Facility (with respect to the available commitments of the extending lenders) to January 22, 2026, and of the Five-Year Revolving Credit Facility (with respect to the available commitments of the extending lenders) to January 22, 2028, in each case subject to an additional one-year extension at the option of the Company.

(2)As of August 31, 2024, we had $4.0 billion in available unused borrowing capacity under our revolving credit facilities. The Credit Facility acts as the back-up facility for commercial paper outstanding, if any. We have a borrowing capacity of up to $3.2 billion under our commercial paper program. Commercial paper borrowings with an original maturity of 90 days or less are recorded net within the Consolidated Statements of Cash Flows, and have been excluded from the table above.

In the ordinary course of business, we have letters of credit and surety bonds with banks and insurance companies outstanding of $58 million as of August 31, 2024. Unused letters of credit were $60 million as of August 31, 2024. Letters of credit and surety bonds are generally available for draw down in the event we do not perform.

We have a shelf registration statement with the SEC registering the potential sale of an indeterminate amount of debt and equity securities in the future to augment our liquidity and capital resources.

Our Senior Notes and our credit facilities contain various financial and nonfinancial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the notes payable and credit facilities and potentially causing acceleration of amounts due under these notes payable and credit facilities. As of August 31, 2024, and 2023, we were in compliance with our debt covenants. Refer to Note 7 – “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements for further details.

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Global Asset-Backed Securitization Program

Certain Jabil entities participating in the global asset-backed securitization program continuously sell designated pools of trade accounts receivable to a special purpose entity, which in turn sells certain of the receivables at a discount to conduits administered by an unaffiliated financial institution on a monthly basis. In addition, a foreign entity participating in the global asset-backed securitization program sells certain receivables at a discount to conduits administered by an unaffiliated financial institution on a daily basis.

We continue servicing the receivables sold and in exchange receive an immaterial servicing fee under the global asset-backed securitization program. We do not record a servicing asset or liability on the Consolidated Balance Sheets as we estimate that the fee we receive to service these receivables approximates the fair market compensation to provide the servicing activities.

The special purpose entity in the global asset-backed securitization program is a wholly owned subsidiary of the Company and is included in our Consolidated Financial Statements. Certain unsold receivables covering up to the maximum amount of net cash proceeds available under the domestic, or U.S., portion of the global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of August 31, 2024.

The global asset-backed securitization program expires on November 25, 2024. Effective February 20, 2024, the terms of the global asset-backed securitization program were amended to increase the maximum amount of net cash proceeds available at any one time from $600 million to $700 million. During the fiscal year ended August 31, 2024, we sold $4.0 billion of trade accounts receivable, and we received cash proceeds of $4.0 billion. As of August 31, 2024, we had no available liquidity under our global asset-backed securitization program.

The global asset-backed securitization program requires compliance with several covenants including compliance with the interest ratio and debt to EBITDA ratio of the Credit Facility. As of August 31, 2024, we were in compliance with all covenants under our global asset-backed securitization program. Refer to Note 8 – “Asset-Backed Securitization Programs” to the Consolidated Financial Statements for further details on the programs.

Trade Accounts Receivable Sale Programs

Following is a summary of the trade accounts receivable sale programs with unaffiliated financial institutions. Under the programs we may elect to sell receivables, and the unaffiliated financial institutions may elect to purchase, at a discount, on an ongoing basis (in millions):

(1)Maximum amount of trade accounts receivable that may be sold under a facility at any one time.

(2)Any party may elect to terminate the agreement upon 30 days prior notice.

(3)Any party may elect to terminate the agreement upon 15 days prior notice.

During the fiscal year ended August 31, 2024, we sold $8.2 billion of trade accounts receivable under these programs and we received cash proceeds of $8.2 billion. As of August 31, 2024, we had up to $1.7 billion in available liquidity under our trade accounts receivable sale programs.

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Cash Flows

The following table sets forth selected consolidated cash flow information (in millions):

Operating Activities

Net cash provided by operating activities during the fiscal year ended August 31, 2024, was primarily due to non-cash expenses and net income, a decrease in inventories and an increase in accounts payable, accrued expenses, and other liabilities. Net cash provided by operating activities was partially offset by an increase in prepaid expenses and other current assets, an increase in accounts receivable and an increase in contract assets. The decrease in inventories is primarily due to higher consumption of inventory to support sales and improved working capital management. The increase in accounts payable, accrued expenses and other liabilities is primarily due to the timing of purchases and cash payments. The increase in prepaid expenses and other current assets is primarily due to the timing of payments. The increase in accounts receivable is primarily driven by the timing of collections. The increase in contract assets is primarily due to timing of revenue recognition for the over time customers.

Investing Activities

Net cash provided by investing activities during the fiscal year ended August 31, 2024, consisted primarily of proceeds from the divestiture of our Mobility Business and proceeds and advances from the sale of property, plant and equipment, partially offset by capital expenditures, principally to support ongoing business in the DMS and EMS segments and the acquisition of ProcureAbility and certain other third-party assets.

Financing Activities

Net cash used in financing activities during the fiscal year ended August 31, 2024, was primarily due to (i) the repurchase of our common stock under our share repurchase authorization, (ii) payments for debt agreements, (iii) treasury stock minimum tax withholding related to vesting of restricted stock, and (iv) dividend payments. Net cash used in financing activities was partially offset by (i) borrowings under debt agreements and (ii) net proceeds from the exercise of stock options and issuance of common stock under the employee stock purchase plan.

Capital Expenditures

For Fiscal Year 2025, we anticipate our net capital expenditures to be in the range of 1.5 percent to 2.0 percent of net revenue. In general, our capital expenditures support ongoing maintenance in our Regulated Industries, Intelligent Infrastructure, and Connected Living and Digital Commerce segments and investments in capabilities and targeted end markets. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative, and regulatory factors, among other things.

Dividends and Share Repurchases

Following is a summary of the dividends and share repurchases for the fiscal years indicated below (in millions):

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(1)The difference between dividends declared and dividends paid is due to dividend equivalents for unvested restricted stock units that are paid at the time the awards vest.

(2)Excludes commissions and excise taxes.

We currently expect to continue to declare and pay regular quarterly dividends in amounts similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance and global economic conditions.

We repurchase shares of our common stock under share repurchase programs authorized by our Board of Directors. The following Board approved share repurchase programs were executed through a combination of open market transactions and accelerated share repurchase (“ASR”) agreements (in millions):

(1)In September 2023, the Board of Directors amended and increased the 2023 Share Repurchase Program to allow for the repurchase of up to $2.5 billion of our common stock.

(2)As of October 21, 2024, 0.7 million shares had been repurchased for $84 million and $916 million remains available under the 2025 Share Repurchase Program.

Under ASR agreements, we make payments to the participating financial institutions and receive an initial delivery of shares of common stock. The final number of shares delivered upon settlement of the ASR agreements is determined based on a discount to the volume weighted average price of our common stock during the term of the agreements. At the time the shares are received by the Company, the initial delivery and the final receipt of shares upon settlement of the ASR agreements results in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share.

The terms of ASR agreements, structured as outlined above, were as follows (in millions, except average price):

In addition, we repurchased shares of our common stock through the open market as follows (in millions):

Contractual Obligations

Our contractual obligations as of August 31, 2024, are summarized below. As disclosed below, while we have certain non-cancelable purchase order obligations for property, plant and equipment, we generally do not enter into non-cancelable purchase orders for materials until we receive a corresponding purchase commitment from our customer. Non-cancelable purchase orders do not typically extend beyond the normal lead time of several weeks, at most. Purchase orders beyond this time frame are typically cancellable.

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(1)Consists of interest on notes payable and long-term debt outstanding as of August 31, 2024.

(2)Excludes $25 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.

(3)Includes $124 million of payments related to a lease with a variable interest entity (“VIE”), for which the Company is not the primary beneficiary. This is also the Company’s maximum exposure to loss related to the VIE.

(4)Excludes $274 million of residual value guarantees that could potentially come due in future periods. The Company does not believe it is probable that any amounts will be owed under these guarantees. Therefore, no amounts related to the residual value guarantees are included in the lease payments used to measure the right-of-use assets and lease liabilities.

(5)Consists of purchase commitments entered into as of August 31, 2024, primarily for property, plant and equipment and software pursuant to legally enforceable and binding agreements.

(6)Includes the estimated company contributions to funded pension plans during fiscal year 2025 and the expected benefit payments for unfunded pension and postretirement plans from fiscal years 2025 through 2034. These future payments are not recorded on the Consolidated Balance Sheets but will be recorded as incurred.

(7)Consists of $17 million related to the one-time transition tax as a result of the Tax Cuts and Jobs Act of 2017 that will be paid in annual installments through fiscal year 2026.

(8)As of August 31, 2024, we have $99 million recorded as a long-term liability for uncertain tax positions. In addition, we agreed to indemnify BYDE from certain liabilities that may arise post-close that relate to periods prior to the Closing Date. We are not able to reasonably estimate the timing of payments, or the amount by which our liability for these uncertain tax positions will increase or decrease over time, and accordingly, this liability has been excluded from the above table.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are one of the leading providers of worldwide manufacturing services and solutions. We provide comprehensive electronics design, production and product management services to companies in various industries and end markets. We derive substantially all of our revenue from production and product management services (collectively referred to as “manufacturing services”), which encompass the act of producing tangible components that are built to customer specifications and are then provided to the customer.

We have two reporting segments: Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”), which are organized based on the economic profiles of the services performed, including manufacturing capabilities, market strategy, margins, return on capital and risk profiles. Our EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, utilizing our large scale manufacturing infrastructure and our ability to serve a broad range of end markets. Our EMS segment is a high volume business that produces product at a quicker rate (i.e. cycle time) and in larger quantities and includes customers primarily in the 5G, wireless and cloud, digital print and retail, industrial and semi-capital equipment, and networking and storage industries. Our DMS segment is focused on providing engineering solutions, with an emphasis on material sciences, technologies and healthcare. Our DMS segment includes customers primarily in the automotive and transportation, connected devices, healthcare and packaging, and mobility industries.

Our cost of revenue includes the cost of electronic components and other materials that comprise the products we manufacture; the cost of labor and manufacturing overhead; and adjustments for excess and obsolete inventory. As a provider of turnkey manufacturing services, we are responsible for procuring components and other materials. This requires us to commit significant working capital to our operations and to manage the purchasing, receiving, inspecting and stocking of materials. At times, we collect deposits from our customers related to the purchase of inventory in order to effectively manage our working capital. Although we bear the risk of fluctuations in the cost of materials and excess scrap, our ability to purchase components and materials efficiently may contribute significantly to our operating results. While we periodically negotiate cost of materials adjustments with our customers, rising component and material prices may negatively affect our margins. Net revenue from each product that we manufacture consists of an element based on the costs of materials in that product and an element based on the labor and manufacturing overhead costs allocated to that product. Our gross margin for any product depends on the mix between the cost of materials in the product and the cost of labor and manufacturing overhead allocated to the product.

Our operating results are impacted by the level of capacity utilization of manufacturing facilities; indirect labor costs; and selling, general and administrative expenses. Operating income margins have generally improved during periods of high production volume and high capacity utilization. During periods of low production volume, we generally have reduced operating income margins.

We monitor the current economic environment and its potential impact on both the customers we serve as well as our end markets and closely manage our costs and capital resources so that we can try to respond appropriately as circumstances change.

We have consistently utilized advanced circuit design, production design and manufacturing technologies to meet the needs of our customers. To support this effort, our engineering staff focuses on developing and refining design and manufacturing technologies to meet specific needs of specific customers. Most of the expenses associated with these customer-specific efforts are reflected in our cost of revenue. In addition, our engineers engage in research and development (“R&D”) of new technologies that apply generally to our operations. The expenses of these R&D activities are reflected in the research and development line item within our Consolidated Statements of Operations.

An important element of our strategy is the expansion of our global production facilities. The majority of our revenue and materials costs worldwide are denominated in U.S. dollars, while our labor and utility costs in operations outside the U.S. are denominated in local currencies. We economically hedge certain of these local currency costs, based on our evaluation of the potential exposure as compared to the cost of the hedge, through the purchase of foreign currency exchange contracts. Changes in the fair market value of such hedging instruments are reflected within the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income.

On September 26, 2023, we announced the signing of a definitive agreement to divest our mobility business to BYD Electronic (International) Company Limited (“BYDE”) in a cash transaction valued at approximately $2.2 billion. The transaction is

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anticipated to close within the first two quarters of our fiscal year 2024 (which is the period from September 1, 2023 through February 29, 2024), and is subject to closing conditions, including required regulatory approvals.

See Note 13 – “Concentration of Risk and Segment Data” to the Consolidated Financial Statements.

Summary of Results

The following table sets forth, for the periods indicated, certain key operating results and other financial information (in millions, except per share data):

Key Performance Indicators

Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. Changes in our operating assets and liabilities are largely affected by our working capital requirements, which are dependent on the effective management of our sales cycle as well as timing of payments. Our sales cycle measures how quickly we can convert our manufacturing services into cash through sales. We believe the metrics set forth below are useful to investors in measuring our liquidity as future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts payable.

The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators:

(1)The calculation of these key performance indicators includes assets and liabilities held for sale for the three months ended August 31, 2023.

(2)The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct result of changes in these indicators.

(3)Inventory turns (annualized) are calculated as 360 days divided by days in inventory.

(4)Days in accounts receivable is calculated as accounts receivable, net, divided by net revenue multiplied by 90 days. During the three months ended August 31, 2023, the increase in days in accounts receivable from the prior sequential quarter was primarily due to an increase in accounts receivable, primarily driven by timing of collections.

(5)Days in inventory is calculated as inventory and contract assets divided by cost of revenue multiplied by 90 days. During the three months ended August 31, 2023, the decrease in days in inventory from the prior sequential quarter was primarily driven by sales activity during the quarter resulting in a higher consumption of inventory and improved working capital management.

(6)Days in accounts payable is calculated as accounts payable divided by cost of revenue multiplied by 90 days. During the three months ended August 31, 2023, the decrease in days in accounts payable from the three months ended August 31, 2022 was primarily due to cash payments and timing of purchases during the quarter. During the three months ended August 31, 2023, the increase in days in accounts payable from the prior sequential quarter was primarily due to an increase in material purchases and timing of cash payments during the quarter.

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Critical Accounting Policies and Estimates

The preparation of our Consolidated Financial Statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. For further discussion of our significant accounting policies, refer to Note 1 – “Description of Business and Summary of Significant Accounting Policies” to the Consolidated Financial Statements.

Revenue Recognition

For our over time customers, we believe the measure of progress which best depicts the transfer of control is based on costs incurred to date, relative to total estimated cost at completion (i.e., an input method). This method is a faithful depiction of the transfer of goods or services because it results in the recognition of revenue on the basis of our to-date efforts in the satisfaction of a performance obligation relative to the total expected efforts in the satisfaction of the performance obligation. We believe that the use of an input method best depicts the transfer of control to the customer, which occurs as we incur costs on our contracts. The transaction price of each performance obligation is generally based upon the contractual stand-alone selling price of the product or service.

Inventory Valuation

We purchase inventory based on forecasted demand and record inventory at the lower of cost and net realizable value. Management regularly assesses inventory valuation based on current and forecasted usage, customer inventory-related contractual obligations and other lower of cost and net realizable value considerations. If actual market conditions or our customers’ product demands are less favorable than those projected, additional valuation adjustments may be necessary.

Long-Lived Assets

We have recorded intangible assets, including goodwill, in connection with business acquisitions. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows. The fair value of acquired amortizable intangible assets impacts the amounts recorded as goodwill. We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

We perform a goodwill impairment analysis on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If the qualitative assessment is not performed or if the Company determines that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a loss is recognized in the amount equal to that excess.

We perform an indefinite-lived intangible asset impairment analysis on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company may elect to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible is impaired. If the qualitative assessment is not performed or if the Company determines that it is not more likely than not that the fair value of an indefinite-lived intangible exceeds the carrying value, the recoverability is measured by comparing the carrying amount to the fair value. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, the indefinite-lived intangible asset is considered impaired.

We completed our annual impairment analysis for goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2023. The qualitative assessment was used for all reporting units and we determined that it is more likely than not that the fair values of our reporting units and the indefinite-lived intangible assets are in excess of the carrying values and that no impairment existed as of the date of the impairment analysis.

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Income Taxes

We estimate our income tax provision in each of the jurisdictions in which we operate, a process that includes estimating exposures related to examinations by taxing authorities. We must also make judgments regarding the ability to realize deferred tax assets. The carrying value of our net deferred tax assets is based on our belief that it is more likely than not that we will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets that we do not believe meet the “more likely than not” criteria. We assess whether an uncertain tax position taken or expected to be taken in a tax return meets the threshold for recognition and measurement in the Consolidated Financial Statements. Our judgments regarding future taxable income as well as tax positions taken or expected to be taken in a tax return may change due to changes in market conditions, changes in tax laws or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances and/or tax reserves established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. For further discussion related to our income taxes, refer to Note 15 — “Income Taxes” to the Consolidated Financial Statements.

Recent Accounting Pronouncements

See Note 19 – “New Accounting Guidance” to the Consolidated Financial Statements for a discussion of recent accounting guidance.

Results of Operations

Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 for the results of operations discussion for the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021.

Net Revenue

Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or separately report revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure.

The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of numerous factors, including the following: fluctuations in customer demand; efforts to diversify certain portions of our business; business growth from new and existing customers; specific product performance; and any potential termination, or substantial winding down, of significant customer relationships.

2023 vs. 2022

Net revenue increased during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022. Specifically, the DMS segment net revenue increased 8% due to: (i) a 7% increase in revenues from existing customers within our automotive and transportation business, (ii) a 4% increase in revenues from existing customers within our healthcare and packaging businesses and (iii) a 1% increase in in revenues from existing customers within our mobility business. The increase was partially offset by a 4% decrease in revenues from existing customers within our connected devices business. The EMS segment net revenue remained consistent due to: (i) a 2% increase in revenues from existing customers within our industrial and semi-capital equipment business and (ii) a 2% decrease in revenues from existing customers within our 5G, wireless and cloud business.

On September 26, 2023, we announced the signing of a definitive agreement to divest our mobility business to BYD Electronic (International) Company Limited (“BYDE”) in a cash transaction valued at approximately $2.2 billion. The transaction is anticipated to close within the first two quarters of our fiscal year 2024 (which is the period from September 1, 2023 through February 29, 2024), and is subject to closing conditions, including required regulatory approvals. See Note 16 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for additional information.

During fiscal year 2024, we expect an additional $700 million in components that we procure and integrate for our cloud business will shift from a purchase and resale model to a customer-controlled consignment service model. As a result of this continued transition, revenue associated with these components are shown on a net basis and as a result, we expect higher gross margins and lower cash used in this business.

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The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:

The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:

Gross Profit

2023 vs. 2022

Gross profit as a percentage of net revenue increased for the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, primarily due to product mix.

Selling, General and Administrative

2023 vs. 2022

Selling, general and administrative expenses increased during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022. The increase is primarily due to: (i) a $26 million increase due to higher salary and salary related expenses, (ii) a $14 million increase in stock-based compensation expense due to higher anticipated achievement levels for certain performance-based stock awards and increased awards granted, and (iii) $12 million of other selling, general and administrative expenses.

Research and Development

2023 vs. 2022

Research and development expenses remained consistent as a percent of net revenue during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

Amortization of Intangibles

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2023 vs. 2022

Amortization of intangibles remained relatively consistent during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

Restructuring, Severance and Related Charges

2023 vs. 2022

Restructuring, severance and related charges increased during the fiscal year ended August 31, 2023, compared to the fiscal year ended August 31, 2022 primarily related to a headcount reduction to further optimize our business activities.

2024 Restructuring Plan

On September 26, 2023, our Board of Directors approved a restructuring plan to (i) realign our cost base for stranded costs associated with the sale and realignment of our mobility business and (ii) optimize our global footprint. This action includes headcount reductions across our Selling, General and Administrative (“SG&A”) cost base and capacity realignment (the “2024 Restructuring Plan”). The 2024 Restructuring Plan reflects our intention only and restructuring decisions, and the timing of such decisions, at certain locations are still subject to consultation with our employees and their representatives.

Based on the analysis done to date, we currently expect to recognize approximately $300 million in pre-tax restructuring and other related costs over the course of our 2024 fiscal year. The charges relating to the 2024 Restructuring Plan are currently expected to result in net cash expenditures of approximately $200 million that will be payable over the course of our fiscal years 2024 and 2025. The exact timing of these charges and cash outflows, as well as the estimated cost ranges by category type, have not been finalized. This information will be subject to the finalization of timetables for the transition of functions, consultation with employees and their representatives as well as the statutory severance requirements of the jurisdictions impacted, and the amount and timing of the actual charges may vary due to a variety of factors. Our estimates for the charges discussed above exclude any potential income tax effects.

See Note 14 – “Restructuring, Severance and Related Charges” to the Consolidated Financial Statements for further discussion of restructuring, severance and related charges.

Loss on Debt Extinguishment

2023 vs. 2022

The change in loss on debt extinguishment during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, is due to the “make-whole” premium incurred for the redemption of the 4.700% Senior Notes during the fiscal year ended August 31, 2022.

Gain on Securities

2023 vs. 2022

Gain on securities remained consistent during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

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Other Expense (Income)

2023 vs. 2022

The change in other expense (income) during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, is primarily due to a $57 million increase in fees due to higher interest rates on our trade accounts receivable sale programs and global asset-backed securitization program.

Interest Expense, net

2023 vs. 2022

Interest expense, net increased during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, primarily due to higher interest rates on our commercial paper program and credit facilities.

Income Tax Expense

2023 vs. 2022

The effective income tax rate increased for the fiscal year ended August 31, 2023, compared to the fiscal year ended August 31, 2022, primarily due to: (i) a change in the jurisdictional mix of earnings, (ii) an income tax expense of $146 million related to a change in the indefinite reinvestment assertion resulting from the planned divestiture and operations classified as held for sale for the fiscal year ended August 31, 2023, and (iii) an income tax benefit of $26 million for the reversal of a portion of the U.S. valuation allowance for the fiscal year ended August 31, 2022. These increases were partially offset by a $17 million income tax expense for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions for the fiscal year ended August 31, 2022.

Non-GAAP (Core) Financial Measures

The following discussion and analysis of our financial condition and results of operations include certain non-GAAP financial measures as identified in the reconciliation below. The non-GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Also, our “core” financial measures should not be construed as an inference by us that our future results will be unaffected by those items that are excluded from our “core” financial measures.

Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the 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, loss on debt extinguishment, (gain) loss 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. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation.

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For fiscal year 2023, the Company adopted an annual normalized tax rate (“normalized core tax rate”) for the computation of the non-GAAP (core) income tax provision to provide better consistency across reporting periods. In estimating the normalized core tax rate annually, the Company utilizes a full-year financial projection of core earnings that considers the mix of earnings across tax jurisdictions, existing tax positions, and other significant tax matters. The Company may adjust the normalized core tax rate during the year for material impacts from new tax legislation or material changes to the Company’s operations.

Prior to fiscal year 2023, the Company determined the tax effect of the items included and excluded from core earnings quarterly.

We are reporting “core” operating income, “core” earnings and cash flows to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our “core” manufacturing operations. A significant portion (based on the respective values) of the items that are excluded for purposes of calculating “core” operating income and “core” earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset. In the case of restructuring, severance and related charges, we may make associated cash payments in the future. In addition, although, for purposes of calculating “core” operating income and “core” earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders’ ownership interest. We encourage you to consider these matters when evaluating the utility of these non-GAAP financial measures.

Adjusted free cash flow is defined as net cash provided by (used in) operating activities less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from the sale of property, plant and equipment). We report adjusted free cash flow as we believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally and fund future growth and to provide a return to shareholders.

Included in the tables below are a reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Consolidated Financial Statements:

Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 for the non-GAAP financial measures discussion for the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021.

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Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures

(1)Recorded during the fiscal year ended August 31, 2023, related to headcount reduction to further optimize our business activities.

(2)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.

(3)The adjustment for taxes for the fiscal year ended August 31, 2023, primarily relates to a change in the indefinite reinvestment assertion associated with operations that have been classified as held for sale.

Adjusted Free Cash Flow

(1)Certain customers co-invest in property, plant and equipment (“PP&E”) with us. As we acquire PP&E, we recognize the cash payments in acquisition of PP&E. When our customers reimburse us and obtain control, we recognized the cash receipts in proceeds and advances from the sale of PP&E.

Quarterly Results (Unaudited)

The following table sets forth certain unaudited quarterly financial information for the three months ended August 31, 2023 and 2022. In the opinion of management, this information has been presented on the same basis as the audited consolidated financial statements appearing elsewhere, and all necessary adjustments (consisting primarily of normal recurring accruals) have been included in the amounts stated below to present fairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements and related notes thereto. The operating results for any quarter are not necessarily indicative of results for any future period.

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Acquisitions and Divestitures

We announced on September 26, 2023 that, through our indirect subsidiary, Jabil Circuit (Singapore) Pte. Ltd., a Singapore private limited company (“Singapore Seller”), we have agreed to sell to BYD Electronic (International) Co. Ltd., a Hong Kong limited liability company (“Purchaser” or “BYDE”), our product manufacturing business in Chengdu, including our supporting component manufacturing in Wuxi (the “Business”) for cash consideration of approximately $2.2 billion, subject to certain customary purchase price adjustments. The sale is being made pursuant to a definitive agreement (the “Purchase Agreement”) for the sale and purchase of certain assets of Singapore Seller and the shares of Juno Singapore Target Newco Pte. Ltd. (the “Target”). Following a pre-closing reorganization (the “Reorganization”), the Target will hold, indirectly or directly, the Business.

Pursuant to the Preliminary Acquisition Agreement, dated August 26, 2023, by and between Purchaser and Singapore Seller, and the Purchase Agreement, Purchaser paid an aggregate deposit in the amount of $440 million, of which $132 million was paid to an escrow agent and $308 million was paid to the Company. Singapore Seller is entitled to retain the deposits in all circumstances, except in the event of a termination of the Purchase Agreement by Purchaser due to Singapore Seller’s breach of any warranty or failure to comply with any covenant applicable to it that would cause any closing condition of Purchaser to not be satisfied. Purchaser is entitled to repayment of $390 million of the deposit if on April 1, 2024 (i) the Reorganization has not been completed in all material respects, other than as a result of the failure to obtain regulatory approvals in the People’s Republic of China, and (ii) all other mutual conditions and conditions of Singapore Seller to closing have been satisfied.

The transaction is anticipated to close within the first two quarters of our current fiscal year 2024 (which is the period from September 1, 2023 through February 29, 2024). The closing of the transaction is subject to certain customary closing conditions set forth in the Purchase Agreement that include, among other things, receipt of regulatory approvals, accuracy of the warranties of the parties (subject to certain materiality standards set forth in the Purchase Agreement), completion of the Reorganization in all material respects, and material performance of certain respective obligations. The closing of the transaction is not conditioned on the receipt of financing.

As of August 31, 2023, the assets and liabilities of the Business were classified as held for sale and the carrying value is less than the estimated fair value less cost to sell and, thus, no adjustment to the carrying value of the disposal group is necessary. The planned divestiture did not meet the criteria to be reported as discontinued operations and we will continue to report the operating results for the Business in our Consolidated Statement of Operations in the DMS segment until the transaction is closed.

Refer to Note 16 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for discussion.

Liquidity and Capital Resources

We believe that our level of liquidity sources, which includes cash on hand, available borrowings under our revolving credit facilities and commercial paper program, additional proceeds available under our global asset-backed securitization program and under our uncommitted trade accounts receivable sale programs, cash flows provided by operating activities and access to the capital markets will be adequate to fund our capital expenditures, the payment of any declared quarterly dividends, any share repurchases under the approved program, any potential acquisitions, our working capital requirements and our contractual obligations for the next 12 months and beyond. We continue to assess our capital structure and evaluate the merits of redeploying available cash.

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Cash and Cash Equivalents

As of August 31, 2023, we had approximately $1.8 billion in cash and cash equivalents, of which a significant portion was held by our foreign subsidiaries. Most of our foreign cash and cash equivalents as of August 31, 2023 could be repatriated to the United States without potential tax expense.

Notes Payable and Credit Facilities

Following is a summary of principal debt payments and debt issuance for our notes payable and credit facilities: