Mike Dastoor: No. So, I think the company, the management team, everyone feels we’re highly undervalued still, and the best return that we can get is in buybacks. Having said that, if an M&A comes up — I’ll just remind you our debt leverage is at a very low point. It’s at like 1.1, and that gives us sufficient room to do an acquisition if needed from debt if the financials work out and it’s capability driven, it’s all in the right end markets, et cetera. So, it’ll be based on — it’ll be based off of our debt structure. So, I would think of the buybacks as — we’re definitely going to go and do that, and any M&A will be on top of that, and we have plenty of liquidity and plenty of leverage to do that.
Steven Fox: Great. Thank you so much.
Operator: Thank you. Next question is coming from Matt Sheerin from Stifel. Your line is now live.
Matt Sheerin: Yes, thanks, and good morning, everyone. A couple of questions for me if I can. One on in terms of your guidance for EMS, it looks like you’re guiding Networking and Storage down 6% and you also talked about,, Kenny, the fact that you’re disciplined, you starting to optimize your customer portfolio there. So, does that guidance reflect just weakness in end markets in terms of visibility with customers, or are you disengaging with some programs that don’t meet your return or profitability goals?
Kenny Wilson: Yeah, hey, [Steven] (ph), it’s a little bit of both in this instance.
Matt Sheerin: Okay. Maybe drill down a little bit in terms of what you’re seeing in those markets?
Kenny Wilson: Yeah, I mean just that, there are kind of some legacy EMS type kind of built to print type of models in some instances. And our view there is that where we can serve — we’re always looking to find where we can serve and add value. If our serve and add value becomes 100% built to print, then probably there’s people that can do that cheaper than us and can do it — and allowing us to add value for other customers where we can be vertical or where we can do — just do more engineering services or whatever. So, I mean, we’re not walking away from customers. It’s a discussion around, look, I’m not sure it’s the right fit for ourselves and for our customers. So there’s a little bit of that. And then some of it is just end market softness right now.
We see some softness in that market as well as in the consumer space. So, we do expect that to recover. I mean, we’re not walking away from the Networking and Storage business, just to be clear. We also see that in that area of our business that the amount of enhanced or advanced networking that’s required to support the AI data centers is significant also. So, we think, longer term, this business will be okay for us, but we’re just seeing a little bit of softness in the short term, plus, some discussions with a couple of customers.
Matt Sheerin: Okay, thanks for that. And then, my next question, just regarding the inventory picture, supply chain challenges that you’ve had, and how we should think about how that flows through the model in the next year. You had a nice inventory reduction quarter-on-quarter. That net number is down. So, are you expecting that to reduce further? And are you seeing any other supply chain issues that you’ve called out in previous quarters, particularly in auto and medical in terms of legacy parts?
Mike Dastoor: Let me try and take that, Matt. The inventory days did come down by four days. I think the team did an excellent job. If you look at our supply chain team, our ops team, our BD teams, finance teams, all of them have done a fantastic job in getting that particular metric down. I think the focus that we put on that from a free cash flow perspective, from a working capital perspective, is all paying off. Having said that now, I don’t expect it to go down into the low 50s. I think that 55 to 60, I think on previous calls I mentioned that’s the range I was expecting mid to long term. It came sooner than expected, which is always a pleasant surprise. But I would expect that 55 to 60 day sort of range to be maintained.
It might differ by nuances in particular quarters. It might go up a little bit, it might go down a little bit, but over the long term, I expect 55 to 60 days to be maintained. From a supply chain perspective, yes, supply chain constraints are coming down. However, I think, like you mentioned, the automotive and healthcare pieces, there still are some shortages going on there. Maybe not the same level that they were at three to six months ago, but we’re still seeing some issues in those end markets all because of the legacy chips like you said as well. So, something we’re watching, and when that starts coming down and normalizing, yeah, we’ll get to the 55-ish range over a long period as well.
Matt Sheerin: Okay, thank you. And just lastly, on the interest expense line, which was — which you’re guiding $73 million. What should we think about the full year, particularly with your excess cash in terms of bringing down your short-term borrowings? Is there a number that we should model for the year?
Mike Dastoor: Yeah, the excess cash has been built into our forecast. I think the number I’d say of FY ’24 would be in the range of $290 million to $300 million. Again, we’re being conservative there. If interest rates continue to go up, we don’t have a crystal ball around that. But it’s mainly our variable rate, which is higher right now because of everything that’s going on in the markets. So, conservatively, I’d model $290 million to $300 million, Matt.
Matt Sheerin: Okay. All right, thank you very much.
Operator: Thank you. Next question is coming from Mark Delaney from Goldman Sachs. Your line is now live.
Mark Delaney: Yes, good morning, and thank you very much for taking my questions. First on Mobility, by exiting that business, do you think you can allow Jabil to better pursue some of these other end markets? And maybe give us a little bit more details as you think about things like management time, perhaps feeling less constrained by customer diversification considerations or having more capital to invest?
Kenny Wilson: Hey, thanks for the question. So, Mark, yeah, so firstly, I mentioned in my prepared remarks about the Mobility and the Mobility team. And I’d just like to call out again our gratitude as an organization for the work that they’ve done, which has been outstanding. I also think it would be a remiss of me not to call — we’re right in the middle of the transition right now and the collaboration between our team and the BYD team is absolutely outstanding. So, we’re really pleased about how that’s going. Yeah, in terms of the business, for sure, what we’ve been looking at here is — and the way we try and focus our growth is, where can we add most value for our customer, and look at the world through the eyes of our customer.
