Greetings, and welcome to the Jabil Second Quarter of Fiscal Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Adam Berry, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and welcome to Jabil's second quarter of fiscal 2021 earnings call. Joining me on today's call are Chief Executive Officer, Mark Mondello; and Chief Financial Officer, Mike Dastoor. Please note that today's call is being webcast live, and during our prepared remarks, we will be referencing slides. To follow along with the slides, please visit jabil.com within our Investor section of our website. At the conclusion of today's call, the entire call will be posted for audio playback on our website. Before handing the call over to Mark, I'd now ask that you follow our earnings presentation with the slides on the website, beginning with our forward-looking statement. During this conference call, we will be making forward-looking statements, including, among other things, those regarding the anticipated outlook for our business, such as our currently expected third quarter and fiscal year 2021 net revenue, earnings and cash flows. These statements are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. An extensive list of these risks and uncertainties are identified in our Annual Report on Form 10-K for the fiscal year ended August 31, 2020 and other filings. Jabil disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. With that, it's now my pleasure to turn the call over to Mark.

Thanks, Adam. Good morning. I appreciate everyone taking time to join our call today. I'll begin by offering a warm thanks to all of our people here at Jabil. Thank you for your commitment and thank you for always making safety your top priority. And stepping back and reflecting for a moment, it's hard to believe that 12 months have passed since we first encountered COVID. I think about sitting alongside Mike and Adam one year ago, here in our March 2020 earnings call, when clarity vanished and uncertainty ran wild. Yet in typical Jabil fashion, our people did what they do; they dove in and gave their very best to combat the pandemic. They did so by looking after one another, while taking outstanding care of our customers. It's a point in time that I'll never forget; it's a point in time that highlights the level of respect and admiration that I have for our team here at Jabil. Their attitude and their actions continue to impress. And for sure, there is no other team I'd rather be part of. Again, much thanks to all of our employees who simply make Jabil, Jabil. Please turn to Slide 5 where we'll take a look at our 2Q results. Our second quarter came in well ahead of expectations, driven by stronger than expected product demand, solid execution and a well-balanced contribution throughout the entire company. The team delivered core earnings per share of $1.27 on revenue of $6.8 billion, resulting in a core operating margin of 4.2%. I'm really pleased with our financial results for the quarter. Although, what's quite interesting to me is the overall construct of the business in combination with the improvements we've made to our balance sheet. All in all, our performance during the first half of…

Thank you, Mark, and good morning, everyone. As Mark just detailed, our second quarter performance was outstanding driven by the combination of broad-based end-market strength and associated leverage, and improved portfolio mix and excellent operational execution by the entire Jabil team. We saw broad-based revenue strength across the business, most notably in mobility, cloud, healthcare, connected devices, automotive and semi-cap. Given the additional revenue, I am particularly pleased with the strong leverage we achieved during the quarter which enabled us deliver a strong core operating margin of 4.2%. And finally, our net interest expense came in better than expected during the quarter, due in large part to better working capital management coupled with the proactive steps we've taken over the past year to optimize our capital structure. Putting it all together on the next slide, net revenue for the second quarter was $6.8 billion, $300 million above the midpoint of our guidance range. On a year-over-year basis, revenue increased by $700 million or 11%. GAAP operating income was $236 million and our GAAP diluted earnings per share was $0.99. Core operating income during the quarter was $285 million, an increase of 78% year-over-year representing a core operating margin of 4.2%, a 160 basis point improvement over the prior year. Net interest expense in Q2 was $33 million and core tax rate came in at approximately 23%. Core diluted earnings per share was $1.27, a 154% improvement over the prior year quarter. Now, turning to our second quarter segment results on the next slide. Revenue for our DMS segment was $3.6 billion, an increase of 26% on a year-over-year basis. The strong performance in our DMS segment was extremely broad-based as several of the end-markets we serve are becoming increasingly critical such as connected devices, healthcare, automotive and mobility. Core margins…

Thanks, Mike. As we begin the Q&A session, I'd like to remind our call participants that per our customer agreements we will not address any customer or product-specific information. We appreciate your understanding and cooperation. Operator, we're now ready for Q&A.

[Operator Instructions] Our first question today is from Ruplu Bhattacharya of Bank of America. Please proceed with your question.

Hi, thanks for taking my questions and congrats on the strong results. You know, I had a couple of questions. Maybe Mark, first question on the EMS side. You're guiding now to $13.4 billion that's almost a billion dollars higher than the previous guidance. But the operating margin is still guided at 3.6%. So just curious, I mean, why isn't the operating margin target for that for this year for EMS moving up a little bit more? Just if you can just talk about the puts and takes on that. Thanks.

Thanks, Ruplu. I feel good about where the margin. I think you're right, we look at the overall corporate margin for the year, we think we'll be around 4.2%. And EMS will be in the range of I would guess 3.6%, 3.7%. I look at that relative to fiscal '19. If I go back that far, and I think EMS in '19, was around 3% all in. Last year, we're below that and I acknowledge that was a COVID year with excessive COVID expenses. But I feel pretty good about that business overall. I think we're doing the right things in cloud. I look at that business today in terms of a mix of legacy business, some businesses that we've gotten a bit of a nudge or help with COVID. But most importantly, Ruplu, I think about things that Mike was talking about in his prepared remarks in terms of trends that we think are going to be around for a while. Things like 5G, electric vehicles, cloud computing, clean energy. So I feel good about the year. We continue to make OpEx investments as well in the EMS segment, but I think we're on a good trajectory. The things I obsess about or worry about. The condition of the EMS business, the next two, three years isn't one of them.

Okay. Thanks for clarifying that. And that makes sense. Just on the mobility side, I want to ask a general question. I mean, are you concerned or how concerned are you about any configuration changes that might come up in the rest of the year? Can you may be at a high level, just talk about how prepared Jabil is this year versus in prior years about handling mobility related, you know, volatility that can come up in the rest of the year?

I don't want to speculate on any configuration changes or anything like that. Our relationship in that space with our main customer there is super solid. And when I just think back about the last two, three years of execution, I've got again, very little doubt in our ability to execute on the mobility side, configuration changes or not. So again, not an area that then I'm losing a lot of sleep over.

Great. Thanks for the details and again, congrats on the quarter end and the strong guide. Thank you.

The next question is from Adam Tindle of Raymond James. Please proceed with your question.

Okay, thanks. Good morning. Mark. I wanted to start with a question on operating margin and acknowledge it's been very strong so far. A two parter [ph] just on near term and long term moving forward. So first on near term, your Q3 guidance implies that total company operating margin is going to be down, maybe somewhere around mid-3% range or so and then back up to around 4% or so in Q4, based on the EPS guide if I got that correct, doesn't look like that's volume related because revenue is going to be flattish during this time. So, maybe just more color on drivers of the Q3 dip and rebound in Q4. And secondly, you mentioned longer term as you exit this year with a four handle. The trajectory that that puts you on as you think about fiscal '22 and beyond, because you said you wanted to build on that?

Yes, thanks Adam. Q3 is always a little bit of a debit for us. And, as much as we take a lot of I don't know if the words pride we feel really good about the overall mixing of the business. What we've done in the last two, three years. But again, we always see a little bit of a soft spot in terms of enterprise level, in terms of up margin. I think you're right, enterprise margins for Q3 will be around the 3.5% range. And, again, I compare that to last year, which maybe it's nonsense, because of COVID it's up substantially year-on-year. I'm going off a memory, but I got to believe that if we went back to fiscal '19, we'd be up year-on-year in terms of Q3 to Q3 as well. So none of it has anything to do with reflection of the business other than for certain parts of our business as you know, Q3 tends to be more of an investment quarter on an OpEx line than the other quarters. The thing that I'm focused on more than anything is beginning of the year. So we've had, we've strung together, I don't know, adding four, five years where the overall enterprise up margin line has been bouncing around 3.5%. That says we've really been focused on adding good quality growth to the company. And in September, we gave an outlook that said for the year we do a four handle on up margin. 90 days ago in December, we took that up to four one now we're taking that up to four two. So I feel, I'm more focused on that trajectory than the quarter-on-quarter results. And in terms of your comments forward looking beyond '21, we'll give more detail around that in the Investor Day in September, I had said something in my prepared remarks today around the fact that we're very focused on continuing a positive direction with margins as we get into fiscal '22. And that would be relative to the four two, that we hope to post this year.

Got it. And maybe just as a follow up for Mike, you talked about being able to plan to generate over $600 million of free cash flow this year, wondering if that's also something that you can build on like Mark's comments on operating margin as we think about a go forward basis, or are there are CapEx investments to achieve that operating margin improvement? And maybe you can just tie in your capital allocation priorities as you answer that question? Thank you.

Thanks, Adam. Yes, definitely free cash flow will, I think we've said more than $600 million for this year, as we continue into FY '22. I expect that to continue to grow. Again, we've said this before CapEx is something where we've been extremely disciplined in that 2.9%, 3% range. So free cash flows next year again, we'll get guidance in September, but I expect that to go up on a similar unraid [ph] as it's done in FY '21. As relates to capital allocation Adam, we continue to be sort of well balanced. We continue with our buybacks. I talked about our buybacks in my prepared remarks, we have to earn $34 million left of our authorization, we intend to complete their authorization in Q3 and Q4 or in the second half of the year. So that shows that we're extremely committed to the buyback program. And that will continue into '22, '23. I don't want to preempt anything now. But I'm sure we'll be continuing that progress from a buyback standpoint. Most of the, I think we laid out a few quarters ago the capital allocation percentages, roughly half buys into buybacks, dividends, some of the balance of that goes into debt restructuring and the balance would be opportunistic, sort of M&A as well. So well balanced. Capital allocation continues going forward.

Very helpful. Thank you both.

The next question is from Jim Suva of Citigroup. Please proceed with your question.

Thank you and good results. If I look at your updated guidance on the buy segments, am I correct that the 5G wireless and cloud is the one that kind of is giving you the most surprise there? And if so, are any of your segments or all of them or any of them experiencing semiconductor shortages? Are you able to procure all the components and items needed? Thank you.

Thanks, Jim. I assume you're talking about our eight sectors [ph]. Yes, so, I'm not quite sure we mean, in terms of surprise, in terms of the uplift, for sure. So I don't know that it's a surprise to us that we're seeing strength in 5G and cloud. Back in December, we knew that there was going to be some component shortages and constraints. But we've been very bullish on the 5G wireless infrastructure and cloud area of our business. So whether surprised or not, it's certainly an area where we continue to see strength. And I think that's largely both on the 5G side and the cloud side. Our services and our solutions are being well accepted and embraced out in the marketplace. So feel really good about that area of the business. In terms of supply constraints, I would say that we talked about this a bit in December, let's say, nine months ago, or so. You know, there was demand drops everywhere, based on COVID. I think that people took a lot of their demand signals, cut them abruptly. And then, at least our conversations with our customers, very few people anticipated the rebound that we've seen, which largely started August, September timeframe, and a bit to our surprise is continued to be very strong through early stages of 2021. And on the supply side, again, all of that drove constraints. One good piece of information, I think to share is any type of supply constraints, whether it be around resin, whether it be around silicon, whether it be around passives, whether it be around mechanicals all that's handicapped into our numbers and I would actually say that we took a fairly deep handicap to that for our Q3 and Q4. So I feel if anything, maybe there's some slight upsides to what we've put out today, assuming that the supply constraints don't work and worse. And the other thing I would say is, I think the procurement team at Jabil just simply the best team in the business. And if I think about our scale, if I think about our holistic approach to demand planning, whether that cuts across healthcare or mobility or EMS business or automotive, our team's knowledge of the marketplace, the knowledge of the commodities, knowledge of technologies, and in the long standing relationships we have is really allowing us to navigate what otherwise is a tough component market at the moment. So I feel we're getting along and getting by quite well, all things considered on a relative basis.

Thank you so much for the details.

The next question is from Steven Fox of Fox Advisors. Please proceed with your question.

Thanks. Good morning. Two questions if I could, please. First Mark, could you just give a little more color on where the healthcare solutions businesses on its margin journey and how it did in the quarter? You know, maybe referencing back to when you first did the J&J [ph] deal, and what you were thinking for next year? And then secondly, I just don't clear based on what you just said about constraints and potential inventory builds, Mike, you're talking about still doing $600 million in cash flow, free cash flow is the difference between prior thinking just basically higher EBIT, offset by more inventory investments or there other puts and takes. Thanks.

[Technical Difficulty] Please continue to stand by the presentation will resume momentarily. This is the operator, the presenters have been rejoined, please presume

Hey Steve, somehow you cut off.

Sorry for breaking the conference call. Did you hear any of my questions? Or should I repeat?

If you could repeat them, that'd be great.

Yes, sure. So first question, again, was on the health care area. So if you can provide some color into how it performed during the quarter, both top line and margin and where you are on the margin journey, you know, referencing back to when you first did the J&J deal? And then secondly, I'm just trying to understand make sure I understand the that the cash flow target staying at $600 million plus, you have higher EBIT, but it sounds like higher inventory investments. Is that basically the puts and takes versus 90 days ago, or is there anything else? Thanks.

Yes, thank you. So on the healthcare side, I think we're -- I think we continue to hit it on all cylinders. Steve Borges [ph] and his team who run that business, we started talking about the JJMD relationship. I don't even know how long ago now to 2.5 years ago, we kind of laid out a roadmap there and our health care team has executed nearly flawlessly to the roadmap that we laid out. So feel good about that and then the business around the JJMD. And I talked in my prepared remarks about different trends. And the team is really focused on things like for health care, like personalized health, like digital health. We announced sometime during the quarter, another relationship that has everything to do with technology around auto injection and auto injectors. And so I just look at the technology, the investments that our healthcare teams are making, and feel really good about that. Our healthcare and packaging business, speed, last year, I think was in the neighborhood of $4.1 billion, $4.2 billion. And I would guess, as we exit this year, health care and packaging, we'll be bumping up against $5 billion. And I think we'll continue to see good solid growth in that area for the next two to three years. In terms of the $600 million of cash flow it's another number that I feel really good about and on the surface. Maybe it's a little bit confusing, because EBITDA is going up and margins are going up. So why wouldn't cash flow go up? We have been working diligently to continue to shape the portfolio. Our number one focus as our leadership team is cash flows and management over the next two, three, four years. I think if we ever get to a point where as a leadership team, we decide not to grow the company. That would be a perilous thing to do and makes no sense to us as long as we're adding good quality business, again, attached to secular trends that allow us to continue to expand margins, as we look at '22 and '23. So if I take you back to the beginning of the year, we said we do $26.5 billion, $27 billion in revenue. Now we're bumping up against $28 billion, $28.5 billion. And with the additional top line with the way the teams managing working capital, the way the team's managing CapEx, and then Mike alluded to the fact that we were going to complete our buyback authorization by August 31 of the year. So I think we're being well balanced in terms of both capital investments, OpEx investments and shareholders. I feel good about the $600 million plus. And then we'll give an update to what I think you should anticipate is stronger cash flows as we get into the Investor Day in September.

Great, appreciate all that color. Thank you.

The next question is from Paul Coster of JP Morgan. Please proceed with your question.

Yes, thanks for taking my question. You talked earlier of, a platform for better margins in the future. And they're really improving. And I'm just wondering, Mark, if you can talk about how much of this is structural in the industry itself? And how much of it is under your control? What is that you are doing today that makes you feel sure that you're locking in higher margins in sort of medium term?

I don't know that it's structural to our industry. I hope so. I think if our competition can lock in higher margins that's always good but we're pretty inwardly focused, Paul. I think about first and foremost we obsess about customer care and customer solutions. And I think, if we don't get that out of order, Paul, and we continue to obsess about our customers and what they need in solving their issues; the financials will follow. If I step back and I look at this fiscal year, I was noticing something over the weekend, this will be along with the margin trajectory, I think this would be the first year we've ever had in the history of the company, if we execute, and that's a big capital, if but if we execute, we're going to string together four consecutive quarters where every single quarter is at or exceeds $1 per share. And that just kind of jumped off the page. But in terms of margin expansion, you asked about is it structural? I think so. That's our plan and that's what will allow us to take margins up from the 4.2%, as we get into next year. And I think about everything from our balance sheet, if you take a look at, and again, now I'm coming at it a little bit more from an EPS perspective. But since you asked the question around is it structural. Our balance sheet continues to improve, net debts going down, interest expense is going down. Overall, liquidity has gone up. And then I take a look at the business and I look at things like I think we have very, very good overhead and overhead costs, I think about overall demand, I think about the secular trends that we've talked about, sometimes that's a really, really overused term. But we are truly embedded in so many of those markets, which I think are going to be around for the next two or three years. And then, the whole COVID thing, it's not behind us yet. But with the vaccine being here, we hope to have 70%, 80% of our employees globally have access to the vaccine over the next six to eight months. It's just and then I think lastly, and we've been talking about this for 10 to 12 quarters is the mix of our businesses as healthy as it's ever been. So I think you shake all that stuff up together. And again, I take a look at the last couple years margins have been around 3.5%. I think that there's a real opportunity here for us to, on a structural basis, increase margins by 100 basis points as we look forward after that 3.5% base.

Well, maybe the follow up then Mark is, what is it that you're not doing? Are you able to, it sounds like you had the choice of not doing some business, because you could be satisfying your customers delighting them even but it could be bad business that you're doing ultimately, from a margin perspective. So can you talk to us a little bit about how you shaped the portfolio and what you do at the front end to prevent low margin business coming in and hurting the overall business model?

I think it starts with absolute clarity, communication to the troops internally. You know, I can tell you this, I've been with the company a long time. Right screw things up is when I have stuff in my head with the leadership team and we don't communicate it to the group. What I can tell you and the reciprocal of that is when the group understands where we're going and why we're going there and what our purpose is there's no better team, there just isn't. And so people understand that there's two things that we're focused on for the next two, three, four years, and that's continued expansion of cash flows, and continued expansion and margins. And by the way, our portfolio, we kind of refer to as a portfolio for a reason. We have some business that might be a little softer on the margin side, but based on terms based on the business itself have tremendous cash flows. And we have other businesses that have tremendous margin, but maybe the working capital is a little richer, we have some of that in our healthcare, space and other areas. But when you blend all that together, I think there's just a picture here, that we're just starting to paint. And, again, we feel pretty good for the next two to three years. To answer your question directly. We're just going to stay away from bad business. And you know that that could mean a variety of things. But I think internally people are pretty clear on what we're going to go after. Certainly, if we can go after business where there's going to be positive trends going forward. It's goodness for everybody. But I think I think the organization is pretty clear about the type of businesses we're not going to go after.

Thanks so much.

The next question is from Shannon Cross of Cross Research. Please proceed with your question.

Thank you very much. I wanted to dig a bit more into the 5G Wireless and cloud outlook, the increase? I'm just curious to know specifically, maybe you can give some more details on what's driving that and what I'm trying to figure out is, is this demand that would have come in the future but as being pulled in now as people start to ramp 5G? Or are you seeing market share gains and actually end market growth because obviously, the market is growing? But how much of it has been driven by increased and demand overall? And then I have a follow up. Thank you.

Shannon, I'd say and I don't want to be offensive by not getting into details. I would say this with a high degree of confidence. For sure, we're seeing stretch secular trends and trends that are very positive in terms of cloud and finally, what looks to be reasonable plans in terms of the 5G Wireless rollout. So that's going to be helpful. And we think that's here to stay for, not a number of months, but a number of years. And by the way, we think that's going to have all kinds of tangents tied to it as well, once the 5G rollout gets underway in terms of derivatives to other parts of our business. And then I think I complement that with saying, there's just been good acceptance of our solutions and our services in the space, both on the design side, I think Mike alluded to, he was using some fancy terms around, what we call a kind of designed to dust and repurposing older servers. And he did a nice job explaining it, but it sounds a little, I don't know, overly technical or whatever. But when we talk about the design side, all the way to repositioning and disposing of older hardware, kind of front to back, I think, Shannon, the solutions we have in that space. Again, it's still what I would call early days, but had been received quite well. And I would also suggest that there is some market share wins in there as well.

Great, that was helpful. And then my second question is just on stimulus, if you think back to last summer, and maybe what you, I know, it's somewhat hard to determine how much benefit you guys saw directly from stimulus, but how are you thinking about it, when you gave us the guidance for this year in terms of the checks that are going to be hitting in the next few weeks? Thank you.

Yes, thanks. Let me break up the back half of '21 with '22 and '23. I can't make sense of the US equity markets anymore, because I don't know how they got detached from fundamentals in so many ways. I just think that when you put $4 trillion of stimulus into the system, and there's dollars everywhere, they got to go somewhere. I think that stimulus will be a bit of a driver for the next couple quarters, maybe into 1Q of '22. But the nice thing is, so as we navigate '21, I see two things. I see certain parts of our business being driven by what I would call COVID type behaviors, some of those will dissipate, some of those maintain. I see certain parts of our business that are stimulus-related. In certain parts of the United States right now, you go and you try to buy a truck or car, an appliance, whatever it may be; there is backlogs everywhere, and I think that's stimulus related. But as the impact of stimulus, and the impact of COVID start to attenuate a bit and fall off of it, I think what's right behind that is kind of -- no kidding, no nonsense secular trends. And again, Mike talked about it, I talked about it in our prepared remarks; and I think those specific trends certainly will be a driver for our business the next two, three, four years, so it's not like I'm sitting here going, geez, when stimulus abates [ph], when COVID types of hardware either go away or reduce -- that there is not going to be other elements that continue to give us a little bit of an uplift. So, I don't know if that helps or gets at your question, but that's how I see it.

Yes, very helpful. Thank you very much.

Yes, thank you.

The next question is from Matt Sheerin of Stifel. Please proceed with your question.

Yes, thank you and good morning. Mark, your commentary across end-markets extremely positive; one area that you're still guiding down year-over-year as networking and storage. Looks like you took that up a little bit from $2.3 billion to $2.4 billion but still down. Could you tell us what you're seeing in that market? Is there still weakness in on-prim spend and expectations of that improving as the recovery continues post-COVID?

Yes, sure. So the network storage business was around $2.8 billion in fiscal '20. September, we took that all the way down to $2.2 billion, and again, that's a reflection of a couple of things; it's a reflection of some of the legacy business may be starting to lose footing, and lose a little traction out in the marketplace. Number two is; again as we continue to think about our portfolio for fiscal '22 and '23, there are certain areas of that business that when we think about our overall invested capital, might not make sense for us any longer but the nice thing is, from the September timeframe to December timeframe, to today, we've actually been on a trajectory back up. So that's nothing more than, A) we have tremendous relationships with certain customers in that space; and we'll continue to serve those customers, serve them well; and as long as they'll have us, and appreciate the value we provide, we're all in. And -- so I -- again, I think about $2.8 billion in '20 to down $2.2 billion in the last -- I think December, and today we've taken it back up by $200 million roughly. And I would just look at -- I'd look at network and storage as a -- a very key element of our eight sector makeup. And I would say that even though in some of those businesses, margins might be tight, cash flows are quite good, so it's a very good complement to the other seven sectors.

Okay, thank you for that. And then just a question regarding your packaging initiatives, particularly the eco-friendly initiatives; you just announced a big paper bottle solutions, investment, and plan. Could you talk more about that; the opportunity? And how important is that in terms of a growth driver for Jabil?

Well, won't be much of a growth driver this year. We have to be very, very, very selective in our M&A. We are committed to returning capital to shareholders but at the same time, and I made this comment around growth; you know, if we ever get to a point where we're not growing the company, then shame on us, but we have to do so in a margin-friendly cash flow-friendly way, which is I think, what I hope this year's results will start to prove out. And as part of that the good news is, almost all of our material growth is organic which is the best growth to have by two magnitudes, but we will continue to complement that with select M&A activity, and for us to put some dollars in play with the acquisition you're talking about is a wonderful company with wonderful people and great leadership, a company called Ecologic. We are very excited about the platform that they've developed, and we always ask ourselves the question; when we're looking at acquisitions we start with culture alignment, we start with capability and competency, and then what are we going to do with the business when we own it strategically. We have a wonderful roadmap internally around sustainable packaging, and this is kind of a second or third step for us, we believe that we'll be able to take that technology, and as we look towards fiscal '22, fiscal '23, give that technology -- it's due in terms of further R&D, and then giving that technology exposure to maybe bigger brands that we support based on our balance sheet, our scale and our relationships.

Okay, thanks very much.

Matt, you're welcome.

The next question is from Mark Delaney of Goldman Sachs. Please proceed with your question.

Yes, good morning. Thanks very much for taking the questions. The company's doing very well on margins and guiding to 4.2% for this year, despite what I would think are some temporary cost headwinds related to the supply chain environment, including the shipping cost as the most important component shortages that the whole industry is having to deal with. Can you talk about how much of a headwind the company may be seeing from some of those supply chain types of costs this year? And if we were to add that back, do you think that's more representative of the underlying margin levels that the company can hopefully build off of going forward? Or are there any other temporal factors that we should be thinking about that's influencing margins this year?

Thanks, Mark. You know, I -- geez [ph], I said earlier, we've -- we've certainly handicapped the business for Q3 and Q4, and I think our handicap has been appropriate. So I think that in and of itself might suggest that -- you know, if we didn't handicap the business, maybe margins would be 4.3% for the year, I wouldn't get much ahead of that. But I also mentioned earlier, Mark, the method to our madness in terms of supply chain management, it's wonderful. And just listening to others, either a few customers, suppliers or folks in our industry, we're navigating this thing beautifully, and it's a tough deal but the impact to us, I think will be minimal on a relative basis. And again, as we sit here today, we had a debrief from our entire procurement team last week, and we feel like this thing will start to show levels of relief, as we get into 1Q of 2022 and for sure, as we get into calendar 2022. So to frame out that timeframe, call it September, October, November timeframe; we'll start seeing relief. And then I think things will be back to more normal conditions, call it January, February, March of 2022. With that said, again, we gave the guidance we gave to today for Q3 and Q4, and I suddenly feel confident. And as I mentioned earlier, when you look at margins at 4.2 [ph] for the year, I think -- I think we're going to continue to effort to have an upward trajectory of that as we get into 2022, even with considerations of near-term supply changes.

That's very helpful. My follow-up question was on the EV opportunity, and automotive has been a growing business for Jabil, and an area I realized that Jabil has a lot of capabilities already; Foxconn is moving to divert or brought it out it's business in doing full electric vehicle architectures, and even final car assembly. I'm interested if that's the type of business that Jabil would also consider expanding into within the automotive and EV space? Thanks.

I think it's a part right [ph] to think that we'll set up automotive factories. The capital intensity, that is enormous, and I don't want our people focused away from what we do really, really well which is sensors, components, sub-assemblies for the entire automotive space; and thank you for the compliment on that, we do have a very good track record in automotive. One of the strategic decisions we made two and a half, three years ago was -- is all hands on in terms of really focusing hard on electrification and EV, not just with automobiles but all the transportation; and I think that -- I think that decision is paying dividends to us. When you think about the term electrification, that would suggest right in our core and the R&D dollars and the investments we've made in that area have been substantial; so I feel pretty good about how we're positioned there, and we'll see how that plays out for '22 and '23. If I had to speculate, make a little bit of a guess today; I think today we look at that the -- the H-sector [ph] chart and -- in FY '20 automotive transport was about $1.7 billion, in September we took that up to $1.9 billion. We're sitting here today saying it will be a bit over $2.2 billion. And I would -- if I had to venture a guess today, I would say the trajectory of that sector as we move through '22 is going to continue to be up and to the right. Thank you.

Thank you.

Yes, thank you.

This now concludes our call. Thank you for your interest in Jabil. You may disconnect your lines at this time. Thank you for your participation.