Hello, and welcome to Jabil's Third Quarter 2021 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Adam Berry, Vice President, Investor Relations. Please go ahead, sir.

Good morning and welcome to Jabil's third 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 slides, please visit jabil.com with our - within our Investor Relations section. 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 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 net revenue and earnings. 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 saying thank you to all of our people here at Jabil. Thanks for the attention you give to our customers and the care you offer one another. At Jabil, it’s people that drive our success, and it's these same people that truly make us who we are. Each day, they carry our culture, and they cement our values. Again, thanks to all. Please turn to slide five. We will now take a look at our Q3 financial results. The quarter came in ahead of expectations, driven by solid execution and a moderate uptick in demand. Said differently, we saw well-balanced contributions across the company. Altogether, the team delivered core operating income of $277 million on revenue of $7.2 billion, creating a core operating margin of 3.8% for the quarter. For sure, I'm pleased with these results. Although what's most interesting to me is the current construct of the business and the improvements we've made to our balance sheet. This powerful combination has us feeling confident as we look towards fiscal '22. As customary, Mike will provide more detail around the quarter and speak to our forward guidance during his prepared remarks. Moving to slide six, you'll see a pie chart, a colorful chart that represents our commercial portfolio and underscores the effectiveness of our team. Today, our business is diversified, and it's diversified at scale, providing more resiliency than ever before. And in my opinion, it offers Jabil a real competitive advantage, especially when we consider our performance and the sustainability of the business. Furthermore, each individual piece of the pie harbors specific domain expertise and deep technical knowledge, all of which make up our library of essential and valuable capabilities. Add to…

Thank you, Mark. And good morning, everyone. As Mark just highlighted, our third quarter results were very strong driven higher by the combination of continued end market strength and excellent operational execution by the entire Jabil team. In Q3, we saw continued strength with notable revenue upside during the quarter in mobility, cloud, connected devices and semi-cap relative to our plan 90 days ago. Given the additional revenue, I'm particularly pleased with the strong leverage we achieved during the quarter, which enabled us to deliver a solid core operating margin of 3.8%, approximately 30 basis points higher than expected. In Q3, our interest and tax expense also came in better than expected. The compounding effects of higher revenue and the associated leverage, along with lower interest and tax expense, allowed us to deliver strong core diluted earnings per share in Q3. Putting it all together on the next slide. Net revenue for the third quarter was $7.2 billion, approximately $300 million above the midpoint of our guidance range. On a year-over-year basis, revenue increased 14%. GAAP operating income was $240 million, and our GAAP diluted earnings per share was $1.12. Core operating income during the quarter was $277 million, an increase of 61% year-over-year, representing a core operating margin of 3.8%, 110 basis point improvement over the prior year. Net interest expense in Q3 was $36 million, and core tax rate came in at approximately 18%. Core diluted earnings per share was $1.30, a 251% improvement over the prior year quarter. Now turning to our third quarter segment results on the next slide. Revenue for our DMS segment was $3.6 billion, an increase of 21% on a year-over-year basis. The strong year-over-year performance in our DMS segment was broad-based with strength across our connected devices, health care, automotive, and mobility…

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 questions. We appreciate your understanding. Operator, we are now ready for Q&A.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Ruplu Bhattacharya from Bank of America. Your line is now live.

Hi. Thanks for taking my questions. And congrats on the quarter and on the guide. I have two questions. The first one is on margins. So you talked about margin accretion in fiscal '22. Mark, when I look at fiscal '20 versus fiscal '21, you're having strong margin improvement, 100 basis points to 4.2%. But going forward, should we think that the margin improvement will be more on the DMS, the Diversified Manufacturing Side versus EMS? Because it looks like from your last quarter's guidance, EMS revenues are going from $13.4 billion to $14.1 billion, but the margins are still 3.6%. So just your thoughts on what you can do to improve margins? And what are the areas, what are the leverage factors you have to improve margins going forward?

So Ruplu, if I could take the liberty of maybe answering the question directly, but maybe slightly indirectly, right? We - I think one of the interesting things about the way we've shaped the company the last four or five years is, is we have a portfolio where we balance constantly, and the balancing really is about the team. It's led by the likes of Mike Loparco, Steve Borges to Kenny Wilson, the guys running the segments. And then our operational team, our supply chain team, day in and day out, we're balancing between cash flows and margins, and they're not mutually exclusive. So one of the things I said something in my prepared remarks around FY '22, you know, our objective internally and we decided to share it on the call is in terms of margin accretion, we think we'll get margin accretion year-on-year. And then in terms of core EPS off of the $5.50 that we talked about today for '21, our goal is to try to get EPS next year with a six handle on it, which is the double-digit growth. And then as importantly is the cash flows, which we think next year we can get a seven handle on the cash flows. Where does all that come from? I think it comes from things that we continually talk about internally, and we've talked about on the call. It comes with our approach, the solutions we're taking to the marketplace, and then again, Ruplu, the portfolio overall. If we look at our DMS business, very round numbers, right. Our DMS business in fiscal '20, you know, $13 billion, in '22, it will be substantially higher. If we look at our EMS business, $13.5 billion, $14 billion, I don't think the top line will grow as much as DMS. But I think in terms of what that team has done reshaping the business, they've been very, very selective and intentional in terms of where we're making investments. So I would say, it's approach. I would say, it's portfolio. And I don't think we need, you know, we don't need substantial tailwinds to deliver '22. Now if the macro goes sideways on all of us, all bets are off. But I don't think we would have - Mike and I had a long talk the last couple of days, and we just felt it was appropriate to give, again, a little bit of color on kind of where we're up to internally in terms of '22. Quite frankly, when I get together with my direct reports at this point in the year, we spend very little time talking about 4Q. We've got a wonderful team of folks that will, we hope, touchwood, will deliver the year. We're spending all of our efforts on '22. So again, I don't know if that answers your question, but we'll provide a lot more color on that on the September 29th meeting.

Okay. Thanks for all the details on that. I appreciate the color. Maybe for my last question, Mark, if you can just kind of talk a little bit about the health care and packaging side. How is the J&J business trending? How is the core medical business trending? And any thoughts on packaging, so any color on the growth of that market? Thank you.

Yeah, I'd say we like it all. We continue to make investments in capabilities. If I take that in reverse order, we've had a couple of press releases come out, and we're not big on press releases in terms of - I think companies get over press released. So, we try to be very selective. But on the packaging side, a lot of focus on integration in terms of smart packaging and then a lot of efforts in terms of the environment, what we call eco-friendly packaging, and we're bullish on that. And in terms of health care, we've been banging on the drum on health care for three or four years. And again, I would just say health care overall, whether it'd be on the pharma side, med device, diagnostics, et cetera, is performing above plan. And we've got a pretty interesting path forward for FY '22, Ruplu.

Got it. Thanks again and congrats on the strong execution.

I look forward to talking to you on Monday.

Yeah, same here. Thank you.

All right.

Thank you. Our next question today is coming from Steven Fox from Fox Advisors. Your line is now live.

Thanks. Good morning. Two questions, if I could. First, on the 30 basis points of upside in the quarter, could you break that down a little bit in terms of how much was just pure revenue-driven versus some execution? And what the headwinds might have been in the quarter related to supply chain and COVID? And then secondly, Mark, you mentioned how on the EMS side, you're re-imagining some OEM relationships in the last couple of years. Can you just give us a couple of examples of what that exactly means and how it's driving growth? Thanks.

I like your term re-imagining. I'll come back to that in a minute. For the quarter, it was just - I forget the words I used in my prepared remarks, but it was modest top line strength, it cut across I think the upside for Q3 was just under $300 million versus guide. If I had to think through the areas where we saw that, this is an overused term, an overly generic term. But when it's the truth, it was really across lots of our different sectors. If I had to pick a couple, network and storage was stronger than we expected, connected device, I think, was a bit stronger than we expected, cloud, a bit in mobility, but it was a broad scatter [gram] (ph). And in terms of the 30 bps upside on margin, again, I just think it's an indication how we're running the business. We got a little bit of a leverage on the $300 million, and then it was really good execution by the team. And touchwood, I think the good execution continues. In terms of the re-imagining, I don't know if I said that or Mike said that, but I think it's an interesting way to think about it. It's - I think we start with Steve, I think it's huge around obsession around our customers. And it's about starting every conversation about what's best for the customers is not necessarily what's best for Jabil, but then we've got to do a lot of processing to be sure that what's best for the customer aligns with our path forward for the next couple of years. Again, if you think about - you've been connected with us a long time. We've been on this three, four year path of really good intentional growth with…

Great. That's super helpful. Congrats on the quarter.

Yeah, thank you.

Thank you. Next question today is coming from Adam Tindle from Raymond James. Your line is now live.

All right, thanks. Good morning. Mark, I just want to start from a high level, you're wrapping up another strong year here. And if I look back over the past five years or so, it's been kind of two different eras. Prior to this, it's been a heavy focus - it was a heavy focus on diversification, adding revenue, while operating margin was kind of flattish hovering in the mid threes and CapEx was a little bit heavier. This recent era has focused on digesting and optimizing margin and cash flow. What inning are we in on that second journey for margin and cash flow? It sounds like you're expecting it to continue into 2022, I'm thinking beyond that. And how do you think about the right timing to perhaps step on the gas [ph] with CapEx for an outsized growth era again?

Yeah. I'm pausing, because I'm thinking. I think it's a great question. I think - I don't want to be dismissive of your question at all. I think that you can hold us accountable to offer some of those details in September. But I don't want to duck the question altogether. I think what inning are we in? I don't separate the - or bifurcate the journey. I think it's all - I think it's a holistic journey. So I look at it and say, you know, this strategy, this whole path started in around fiscal '16, something like that. Where we're at today and heading into fiscal '22, I don't know. To use an American phrase, I guess, maybe seventh inning, something like that. But I wouldn't want to take that it's over. Like, if we do our job right with the margins - by the way, we're still going to press on growth. I think sheer numbers and math on that, Adam, is I said on the JPMorgan thing, I said I can envision us being a $40 billion company at some point. So that would suggest continued growth. But with the sheer math, I think the top line growth starts to attenuate a little bit, although still grow. If we can control our overhead costs, continue to get leverage on the factory network, scale matters for sure, we continue to be really selective in the customers we serve. And I go back to something I said in Steve's comment, every single dollar of revenue we bring in, if we stress test that around, are we or are we not providing great value for the customer? Again, it takes some of the friction out in the relationships. I don't know. I would think that in '22, we'll see margins greater than '21, and I would think in '23 we'll see margins greater than '22. And the one thing about our business is, especially if top line growth, let's say, hypothetically, and this is a complete hypothetical. But let's just say top line growth for the next five years normalizes at 4%, 5%, 6%. And I don't know what that's going to be. I think '22 will be greater than that. But let's just say longer term, you know, this machine now, with this portfolio, the cash flows look awfully good in the modeling that store and I sit around and play with. So, I don't know where we're at. But it's been a lot of hard work and pretty excited about the next couple of years, Adam.

Understood. I wanted to follow up on that cash flow question for Mike. Mike, Mark mentioned the composition of balance sheet in his remarks is a key positive. Net leverage is tracking the multi-year lows as EBITDA continues to build. And I think Mark mentioned perhaps a seven handle on cash flow next year. So, maybe just talk about how you think about optimal capital structure and timing and priorities for deployment of capital to create shareholder value. Why not just return all that 700 plus next year?

So Adam, that's a great question. I think we'll provide a lot more color in September around our capital allocation. I think it will be a balanced capital allocation methodology as we've done in the past. We're committed to returning to shareholders. And I absolutely think it's on the cards to look at that seven handle and see how much we can return to shareholders. Having said that, the discipline we're seeing in our working capital, the discipline we're seeing in our CapEx spend, et cetera, just gives me a lot of comfort that there's a lot of optionality, I think, was the word Mark used going forward in terms of what we can do with our free cash flow. And returning to shareholders will be, in my opinion, will be number one, for sure.

Understood. Congrats on the results.

Thank you.

Thanks, Adam.

Thanks. Our next question today is coming from Jim Suva from Citigroup Investment Research. Your line is now live.

Thank you. And I just got to say, wow, congratulations on the results and the recovery of your teams through COVID. Looking ahead, both for the next quarter and maybe further out, how should we think about seasonality of your reporting segments? I know we've been a long time since it's been normal. But how should we think about seasonality and maybe strip out the layer of the consignment?

So it sounds like there is two questions there, Jim, and thanks for the kind comments. Seasonality and consignment. For sure us transitioning to consignment in some of our business distorts the seasonality because it has an impact on top line, which is just fine, by the way, because our – again, our focus is on bottom line margin and cash flow. In terms of seasonality, externally, so if I try to net out the impact of consignment, I think that as long as the portfolio exists the way it exists today, so things like automotive and transport and health care and packaging and mobility and connected devices and then the digital print, retail, industrial, semi-cap, wireless, et cetera, network storage, I would say that as the company grows depending on where that growth comes from, and again, I think we're doing - I think the team is doing an exceptional job of what they're saying yes to and what they're saying no to. I would guess as we go from, say, a $30 billion company to maybe a $34 billion, $36 billion company, what you think of as historical seasonality going back to say, the shape of the year in fiscal '17 or '18, that probably flattens a bit. So I think the seasonality, I think there will be some of that there. But if you went from peak to trough, it probably narrows. I think that's happening a bit this year. So - but with that said, I think this fiscal year, if you take the mid point of our guide we just presented for Q4, I think the op income we just provided mid point was 3.10 [ph] Q1 was around 3.65 [ph] Q2, 2.85 [ph] So Q3 was a soft quarter. And I think that aligns a little bit with historical, although going forward, again, I think the shape of the year really starts to flatten, and quarter-to-quarter, I think demand narrows.

Great. Thank you so much for the additional details.

Yeah. Thanks, Jim.

Thank you. Our next question today is coming from Shannon Cross from Cross Research. Your line is now live.

Thank you. My first question is with regard to 5G and cloud, can you just provide some more details? Does it seem like, especially from cloud, ignoring consignment, that this is people buying to, sort of, I don't know, pre-buy for capacity needs in the future or fulfill what's the hole that they have right now? I'm just, kind of, curious about how you see this trend? And if you think there's any pull-through from fiscal 2022?

I don't know that there's pull-through for – so by the way, thanks for the question, Shannon. I don't know that there's pull-through for '22. I think hyperscalers, I think cloud and I think 5G wireless, I think all of that has good runway. So, I'm not overly concerned about demand evaporating as long as, again, we go back to - we're providing a great service with great quality to the customers. I see the - although they're different, they're the same, I see both the cloud markets as part of now a robust ecosystem that the world is heavily relying [ph] on. And I see 5G much the same, although a bit different. So, if we were to take a look at - and don't hold me to these numbers, Shannon, but 5G wireless cloud for us as we exited last year was a little over $5 billion. And I think as we go into '22, you know, we'll see a reasonable uptick to that. Again, I just think it's a great fit to our portfolio. I think the solutions and the technologies that we're providing, both on the design side and the process side and the configuration and distribution side, they just fit that marketplace today. So, that's my thinking on the 5G cloud wireless stuff.

Okay. Thanks. And then I was just wondering in theory we're coming out of COVID and things are opening up at least in some geographies, how have the conversations with customers sort of changed? And I'm wondering, is it - are people focused on on-shoring, diversity of supply chain, looking more to outsource? Or I don't know, how have things changed maybe when you discuss potential new business versus conversations you would have had in 2019? Thanks.

I want to make a comment that I'm not sure is linked to your question, so bear with me. And I just think that maybe a bit unrelated to COVID, but maybe related to COVID, I'm really not sure. But I do believe I'm sure in my next comment, which is when you get to be our scale, and you think about the OpEx we spend in IT, and I think about the OpEx we spend in terms of automation and data analytics and artificial intelligence and machine-learning and all the things that are going off every day in our ecosystem. I think we, for sure, have the most efficient IT system of any manufacturing services provider out there because I don't think anybody else has the holistic connection that we have of their IT systems factory-to-factory and then linked in with supply chain and ops, by the way, huge, huge advantage. But I think about the expertise, I think about the experience, I think about our lessons learned, mistakes we've made. And then I think about the global reach or people and everything else, I think because of that, there is just less and less people in the world that want to take on the task of building stuff. Customers still want it for sure, and they're expert in this, by the way. Our customers are expert in branding, marketing, and they're expert in product design. But there's just less interest. The capital intensity of the business, sometimes people look and go, geez, you guys run a business at 4% to 5% operating margin with huge barrier to entry. I think in some weird way, I think building stuff is a secular trend at scale because again, the barrier to entry is way, way high. And it's just really, really hard, but it's what we do, and we do it well. So I think that's a general comment. I'm not sure it has much to do with COVID, although maybe COVID has slowed people down a little bit to think and figure out are they doing the right things for their businesses strategically versus tactically. So maybe there's a little bit of a catalyst there, Shannon. In terms of on-shoring, off-shoring, China, yes, China no, Asia yes, Latin America yes, Mexico, US, Northern Europe, Western Europe, Southern Europe, et cetera. I still end up being a big believer that the capital markets are always, over the long term, going to decide where stuff gets built, where the supply chains get designed. And again, there's pockets of friction, whether it be geopolitical or whatever. But however which way that goes, I'll come back to boy, does scale matter. And when you take a hard look at our footprint, our expertise and where that exists around the globe, I think we're in really, really good shape, regardless to how that plays out.

Great. Thank you very much.

Yeah, thanks.

Thank you. Next question today is coming from Mark Delaney from Goldman Sachs. Your line is now live.

Yes, good morning. And thanks for taking the questions and let me add my congratulations to the good results and outlook that the company reported today. I was hoping to talk a little bit more on health care. And the company has built a very good set of capabilities, I think, not just in traditional medical products, but also some things that sit directly with consumers to help with consumer health and wellness. And given everything in the world and some countries still going through, but has gone through over the last year with COVID, I'm interested in what sort of trends Jabil has seen when you talk with your customers and potential strength of the intermediate to longer term around some of those products targeting things like wearables, consumer health and wellness, patient monitoring, those sorts of areas? Thanks.

Well, I think you answered part of your question, Mark. By the way, thanks for the nice comment at the opening. I think Steve and his team, they're the experts. But if we just step back, the reason we're bullish in that area is a lot of what you alluded to. It's a long-term industry that has historically been heavily around kind of pharma, big eye on diagnostics, med device. And in some ways, there's been such amazing focus on the patient that maybe there's been a little bit of a fall behind in some of the technology, whether that be connecting to 5G or whatever it might be, Mark. As we look at it the next couple of years, I think one thing COVID did is it reshaped activity at hospitals around the world. Elective surgeries were kind of put on the shelf. I think as vaccines take hold, there's a pent-up demand for elective surgeries. So, I think that will be goodness for that whole industry for a period of time. And then maybe at a more strategic long-term deal, for sure, personalized medicine, telehealth, prevention in terms of physiological, biological makeup, DNA chains and then monitoring, you know, aging population and on-body monitoring, you know, that started years ago. But the output from the monitoring was poor, unreliable. I think that's gotten substantially better. We're playing in the middle of that, not just with health care customers, but others that want to make a real difference in that space. So I think those are some of the catalysts why we've got a pretty bullish outlook on health care. And then I think the other part that's beneficial for Jabil is, I think the trajectory where Steve Borges and our team are taking health care, whether it be on med, pharma, diagnostics, on-body, off-body, personalized health, they're able to look around the company and say, wow, and I ironically said some of this in my prepared remarks. Steve and his team can weave together lots of interesting capabilities, whether he borrow some capabilities for Mike Loparco's group or Kenny Wilson's group, both on tooling, both on mechanics, both on how to connect to 5G wireless, industrial design, et cetera. So A, we like where the market is going, and B, I think as the term I used in my prepared remarks, I think our library of collective capabilities is going to serve us well as we take solutions to the marketplace.

That's very helpful. Thanks. My second question was on how the tight component and supply chain environment may be impacting some of your customers. And there's been a lot of discussion across various end markets of many big companies unable to get all of the supply that they would like. I'm curious how you think that may be impacting some of the orders and inventory strategy from some of your customers? And how you're trying to plan for that in terms of your operations, financial planning and potentially factor that into some of the comments you gave about what fiscal year may look like? Thanks.

Yeah. We - I don't know, take these as very round numbers. We haircut our Q3 outlook, you know, unconstrained in Q3, just rough numbers was probably $7.1 billion. We cut it to a mid point of 6.9 because of concerns around supply chain components, silicon, passes the whole deal. And we ended up delivering 7.2, which I think is just stellar recognition the job our team has done managing the supply chain. By the way, again, day in, day out, not without challenges. So the challenges are real, and I mentioned it earlier on the call. We – unconstrained, would 4Q be a little bit higher? Probably. Have we haircut it a little bit? Yes. But we got a lot of confidence in our supply chain folks, and we'll see what happens. So I don't want to make a kind of peanut butter vanilla statement on supply chain because truthfully, Mark, there's so many variables that go into it, everything from which end market, what's the construct of the technology, which part of the supply chain are people leveraging, what kind of relationships are there, how quickly and how agile are the design teams to maybe alter some designs, et cetera, et cetera. So it's everything across the board that we're dealing with. The one nice thing about Jabil is because we build a little bit of everything, and we have so many good relationships both on the customer side and the supply side, we have a very good vantage point, we believe, in being able to triangulate what's really going on. And again, I think that allows us to help our customers and again, gives us a bit of a competitive advantage. But as I said before, I don't think we come out of this choppiness of supply chain until the spring or summer of '22. What you can be rest assured is, is as we did on this call for 4Q and as we'll do for September, we'll take all that into consideration and try to handicap that appropriately before we give any forward looking numbers.

Thank you.

Yeah.

Thank you. Next question is coming from Paul Coster from JPMorgan. Your line is now live.

Hi. This is Paul Chung on for Coster. Thanks for taking my questions. So just on the outsourcing versus insourcing, which industries are you kind of seeing a greater priority to outsource? And are those higher margin opportunities as well in terms of the industry? And then what are the kind of margin dynamics when you're working with existing customers that accelerate this move from in-sourcing to outsourcing? Do you see some operating leverage benefits there on that shift as well? And then I have a follow-up.

Okay. I guess, my first answer will be pretty short, which is a great question. It's just the insource to outsource, it's all over the map. It's not - as we sit today, I mean, there are certain industries that are fully outsourced, and we're all aware of what those are. I really do believe, though, that in boardrooms, talking to my counterparts at lots of our customers, again, there's just - there's not a lot of interest in people wanting to build their own stuff because it is capital intensive, it is hard. If you don't have the OpEx and the reinvestments, constantly, you fall behind. And - but I don't - I wouldn't point to any specific end market or sector at this point in time. It's kind of all over the map. And in terms of is it margin rich or not margin rich, that's all speculative on a relative basis. I can tell you for Jabil, again, we'll deliver, again, on a relative basis fairly modest margins, but very good margins for us. At - looking to deliver this year at 4.2%, we're looking to accrete margins and have them be higher in fiscal '22. But in combination with that, Paul, is the importance of the cash flows as well. So I'll say something, like I said earlier, we are spending a lot of time with the very first question being, if we're going to add a single dollar of revenue to our top line, are we or are we not providing great value to that customer? And if we can get by that yes or no question, then it becomes, can we make it work for Jabil, either on the cash flow side or the margin side. And then we try to keep that well balanced going forward. And I would suggest that even though FY '20 was a COVID year, team did a nice job navigating COVID in '20, and I think the team is doing a nice job this year. And if we continue to work hard and do what we think we can do, I think it's setting up for a nice FY ‘'22.

Got you. Thanks for that. And then can you talk about the $250 billion tech bill passed by the Senate recently? Do you expect the firm to kind of participate and here in what magnitude or kind of too early to tell?

You said $250 billion, right?

Yeah.

Yeah. Okay. I didn't - you broke up a bit. I want to be sure we're talking about the same bill. It's too early to tell. We have great relationships around the D.C. area in terms of understanding it. It's just too early to tell. So TBB I can tell you that I think we'll benefit from that indirectly, whether we were to - there's nothing in our forward looking numbers that anticipates us participating in that directly, but we'll see. But again, we're staying well-informed on that because it has the potential to be an important bill for us.

Yeah. Okay. Great. Great quarter. Thanks.

Yeah. Thank you.

Thank you. Our next question today is coming from Matt Sheerin from Stifel. Your line is now live.

Yes. Thanks. And good morning, everyone. Mark, your early outlook for 2022 implies the DMS segment growing faster than EMS. Do you see that coming from all of four key sub-segments as you've seen this year? Or is that from one any particular market? And if you are seeing that broad based strength is that just from underlying demand or are you also seeing share gains or new program wins there?

So your observation on the math is correct. And I know this isn't very satisfying, but it is really kind of across the board. I'd like to be able to point to something, but let's just say on a collective basis, Matt, I think it's a combination of change in technologies, as an example, a higher percentage of vehicles moving more towards electric content, electrification or EV altogether. That's just a broad example. So it's technology. I think it's human behavior in terms of - we just - when Delaney was asking earlier around health care, we talked about personalized medicine, connected health, on-body monitoring. But that doesn't mean that market's getting bigger. It means that the activities in the market are shifting, and some of those activities work well in our favor. So I think it's a technology shift. I think it's lifestyle shift. For sure, some of it's market share gains. And then for sure, some of it is just kind of continued global GDP growth and things like that. So it's a combination of all of the above. And I don't really have a specific sector in DMS I'd point to.

Okay, great. Thanks for that. And question for Mike regarding the inventory situation. Inventory was up sequentially in dollars and also on a days basis, which makes sense, given the strong seasonal guide for Q4. But should we expect you to be at that somewhat elevated levels for a while now? And are customers compensated you in any way such as in the form of deposits or anything else?

Yes. So, Matt, I think the inventory balance you see at the end of Q3 was largely timing. All that disappears or reverts back in Q4. I expect inventory levels by the end of Q4 to be around the 60 day number and in the longer term, mid-50s, for sure, that's what we're working towards.

Okay. Thank you very much.

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