Jabil Inc. (JBL) Q2 2021 Earnings Call Transcript

Jabil Inc. (JBL 0.02%)
Q2 2021 Earnings Call
Mar 16, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Jabil second quarter of fiscal-year 2021 earnings call. [Operator instructions] 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.

Adam Berry -- Vice President of Investor Relations

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 li -- 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.

Mark Mondello -- Chief Executive Officer

Thanks, Adam. Good morning. I appreciate everyone taking the 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. In 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 during 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 and 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 the year gives us excellent momentum as we push toward the back half of fiscal '21. It also sets a firm foundation for further margin expansion as we look to FY '22. As customary, Mike will provide more detail around our second-quarter results during his prepared remarks. I'd now like to share a pie chart which is indicative of our commercial portfolio.

Slide 6 underscores the effectiveness of our approach and the base from which we operate. Today, our business is wide-ranging and resilient. This is especially true when any individual product or product family is faced with a macro disruption or cyclical demand. Furthermore, our current business mix provides a unique set of capabilities, innovative capabilities openly shared across the enterprise with speed and precision as we simplify the complex for our customers.

It's a proven formula that's trusted by many of the world's most remarkable brands. Moving to Slide 7, I'll address our updated outlook for the year. We now believe core earnings will be in the neighborhood of $5 a share, an increase of 25% from what we anticipated back in September, with top-line revenue coming in around $28.5 billion. This incremental revenue improves our portfolio as evidenced by another 10-basis-point increase to core operating margin, which we now forecast to be 4.2% for the year.

Lastly, we remain committed to generating a minimum of $600 million in free cash flow, a testament to how we're managing our capital investments. As I wrap up the outlook, it's notable that our strategy is working, our path is well understood, and how we go about producing results is important. On this last point, when we think about the how, we think about purpose. A purpose that guides us in our journey.

A purpose which is grounded in a series of behaviors. Behaviors such as keeping our people safe, servant leadership, ensuring a fully inclusive environment, and giving back to our communities around the world. I'm just so proud that our team is hitting the mark in all of these areas. As we transition to my final slide, I want to once again say thanks to our team.

Their efforts over the past two to three years have allowed us to reshape the business as we've targeted growth in select markets. Markets that largely align with secular trends. A few example of these being 5G, personalized healthcare, electric vehicles, digital learning, cloud computing, clean energy, and eco-friendly packaging. Our team continues to develop deep domain expertise in concert with these secular tailwinds.

I like the decisions we're making and what we're doing. And we do what we do while respecting the environment and safeguarding our workplace. We're committed to a workplace which encompasses tolerance, respect, and acceptance. We encourage each and every employee here at Jabil to be their true self.

We strive to make the world just a little bit better, a little bit healthier, and a little bit safer each and every day. One factor that makes good companies great is possessing a value system which allows them to solve problems over and over again. We embrace this way of thinking and welcome the challenges put forth by our customers. Thank you.

And I'll now turn the call over to Mike.

Mike Dastoor -- Chief Financial Officer

Thank you, Mark, and good morning, everyone. As Mark has detailed, our second-quarter performance was outstanding, driven by the combination of broad-based end market strength and associated leverage, an 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 to 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 the 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 for the segment came in at an impressive 5.1%, 210 basis points higher than the previous year. An incredible performance by the team.

Revenue for our EMS segment was $3.2 billion, also reflecting strong broad-based demand. Core margins for the segment were 3.1%, 80 basis points over the prior year. Turning now to our cash flows and balance sheet. Cash flows provided by operations were $20 million in Q2 and capital expenditures net of customer co-investments total $152 million.

We exited the quarter with a cash balance of $838 million. We ended Q2 with committed capacity under the global credit facilities of $3.8 billion. With this available capacity, along with our quarter-end cash balance, Jabil ended Q2 with access to more than $4.6 billion of available liquidity, which we believe provides us ample flexibility. During Q2, we repurchased approximately 1.9 million shares or $82 million.

At the end of the quarter, $254 million remain outstanding in our current stock repurchase authorization and we intend to complete this authorization during the second half of FY '21 as we remain committed to returning capital to shareholders. Turning now to our third-quarter guidance. DMS segment revenue is expected to increase 19% on a year-over-year basis to $3.5 billion. This is mainly due to the strong end-market outlook.

EMS segment revenue is expected to be $3.4 billion, an increase of 1% on a year-over-year basis. It's worth noting, our EMS business remains strong and healthy. The modest increase is reflective of our previously announced transition to a consignment model in the cloud business. We expect total company revenue in the third quarter of fiscal '21 to be in the range of $6.6 billion to $7.2 billion for an increase of 9% on a year-over-year basis at the midpoint of the range.

Core operating income is estimated to be in the range of $220 million to $270 million. Core diluted earnings per share is estimated to be in the range of $0.90 to $1.10. GAAP diluted earnings per share is expected to be in the range of $0.69 to $0.89. Next, I'd like to take a few moments to provide an update on the long-term secular trends under way across our businesses, which we believe will drive sustainable growth across the enterprise in FY '21 and beyond.

In healthcare today, the industry is undergoing tremendous change due to rising costs, aging populations, the demand for better healthcare in emerging markets, and the accelerated pace of change and innovation. Consequently, we are witnessing healthcare companies shifting their core competencies away from manufacturing toward innovative and connected product solutions. We're in the early days of outsourcing of manufacturing in the healthcare space. On top of this, we're also seeing the impact of connectivity and digitization across healthcare.

I expect these trends to accelerate over the next few years. Our deep domain expertise within the healthcare industry uniquely positions us to both technology-enabled products that help our customers excel in today's evolution of healthcare. Another end market experiencing a rapid shift in technologies is the automotive market. Today, electric vehicles account for less than 2% of total vehicles in the market.

Climate change, fuel efficiency, and emissions are ongoing concerns, and regulatory policies worldwide are beginning to mandate more eco-friendly technologies. As a result, OEMs are making a substantial investment into vehicle electrification effort. Jabil's long-standing capabilities and over 10 years of experience and credibility in this space has positioned us extremely well to benefit from this ongoing trend. Turning now to 5G.

5G will transform the way we live, work, play, and educate. As the underlying infrastructure continues to roll out, 5G adoption is accelerating. Jabil is well-positioned to benefit from both the worldwide infrastructural labs and with devices which would be needed to recognize the full potential of a robust 5G network. 5G is also accelerating secular expansion of cloud adoption and infrastructure growth.

This, coupled with the value proposition Jabil offers to cloud hyperscalers, is helping us gain market share in an expanding market evidenced by the significant growth over the last three years. The value proposition that continues to resonate with our customers is our design to those capabilities, which incorporates engineering, manufacturing, and eco-friendly decommissioning of servers, all within co-located facilities. This is incredibly powerful as accelerating cycle times, security, and transparency at every step of the hardware lifecycle become continually more important to our U.S.-domiciled hyperscalers. Shifting now to packaging.

We are uniquely positioned to benefit from the global shift to smart and eco-friendly packaging. As consumers become more informed about the environmental impact of plastic waste, demand for sustainable packaging solutions is accelerating. And then finally, within semi-cap, the demand for semiconductors has never been higher with the accelerated convergence of technologies and the associated data generation and storage needs. Nearly every part of the economy runs on silicone today.

Jabil serves the semi-cap space with end-to-end solutions spanning the front end with design and complex fabrication equipment, along with the back end, the validation, and test solutions. In summary, I'm extremely pleased with the sustainable broad-based momentum under way across the business which has allowed us to deliver much better than expected results in the first half of FY '21. As we turn our attention to the back half of the year and beyond, we fully expect the long-term secular tailwinds that are driving our business to continue. This, coupled with our improving portfolio mix and lower interest and tax expenses, has given us the confidence to meaningfully raise our FY '21 estimates for revenue, core operating income, core margins, and core earnings per share.

We now expect core operating margins to be 4.2% on revenue of approximately $28.5 billion. This improved outlook translates to core earnings per share of approximately $5. And importantly, despite the stronger growth, we remain committed to delivering free cash flow in excess of $600 million for the year. We've been working extremely hard as a team to grow margins, cash flows, and positively impact our interest in tax.

I am very pleased with our team's exceptional execution of our strategy on all fronts. With that, I'll now turn the call over to Adam.

Adam Berry -- Vice President of Investor Relations

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.

Questions & Answers:

Operator

Thank you, sir. At this time, we'll be conducting the question-and-answer session. [Operator instructions] One moment please while we poll for questions. Our first question today is from Ruplu Bhattacharya of Bank of America.

Please proceed with your question.

Ruplu Bhattacharya -- Bank of America Merrill Lynch -- Analyst

Hi. Thanks for taking my questions and congrats on the strong results. You know, I had a couple of questions, maybe Mark. The first question on the EMS side of your -- you're guiding now to $13.4 billion, that's almost $1 billion higher than the previous guidance.

But the operating margin is still guided at 3.6%. So, just -- just curious, I mean, you know, why -- 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.

Mark Mondello -- Chief Executive Officer

Yeah. Thanks, Ruplu. I feel good about -- I feel good about where the -- where the margin, you know, if -- if -- I think you're right. We -- we look at the overall corporate margin for the year, we think we'll be around 4.2% and the EMS will be in the range of, I would guess, 3.6% to 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 were below that and I acknowledge that was a COVID year with -- with excessive COVID expenses. But boy, I feel pretty good about that business overall.

I -- I think we're doing the right things in cloud. I'd look at that business today in terms of a mix of legacy business. Some businesses that we've gotten a bit of a nudge your help with -- with COVID, but most importantly, Ruplu, I think about things that Mike was talking about in his prepared remarks in terms of the 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 -- we continue to make opex investments as well in the EMS segment, but I think we're on a good trajectory. I don't, you know, of the things I obsess about and worry about, you know, the condition of the EMS business in the next two to three years isn't one of them.

Ruplu Bhattacharya -- Bank of America Merrill Lynch -- Analyst

OK. OK, 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 maybe at a high level just talk about how prepared Jabil is this year versus in prior years about handling mobility-related, you know, the volatility that -- that can come up in the rest of the year?

Mark Mondello -- Chief Executive Officer

I don't want to speculate on any configuration changes or anything like that. Our -- our relationship in that space with -- with our -- our main customer there is -- is super solid.And when I just think back about the last two or 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 I'm losing a lot of sleep over.

Ruplu Bhattacharya -- Bank of America Merrill Lynch -- Analyst

Great. Thanks -- thanks for the details and again congrats on the -- on the quarter and the -- and the strong guide. Thank you.

Mark Mondello -- Chief Executive Officer

Thanks, Ruplu.

Operator

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

Adam Tindle -- Raymond James -- Analyst

OK, 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-part 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 some 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 debt and rebound in Q4. And secondly, you mentioned longer term as you exit this year with the 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.

Mark Mondello -- Chief Executive Officer

Yeah. Thanks, Adam.Q3 is always a little bit of a debate for us. And you know, as much as -- as much as we take a lot of, I don't know if the word is pride, we -- we feel really good about -- about the overall mix and of the business, what we've done the last two or three years. But again, we always see a little bit of a soft spot in terms of enterprise-level, in terms of op 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, but it's up substantially year on year. I'm going off memory but I -- I got to believe that if we -- 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 the reflection of the business other than for certain parts of our business, as -- as you know, Q3 tends to be more of an investment quarter on an opex line than -- than the other quarters.

The thing that I'm focused on more than anything is -- is beginning to year -- so we've had -- we've had -- we've strung together. I don't know, Adam, four or five years where the overall enterprise op margin line has been bouncing around 3.5%. That's as we've really been focused on, adding good quality growth to the company. And in September, we -- we gave an outlook that said for the year we do a four handle on -- on op margin.

90 days ago in December, we took that up to four-one, and now we're taking that up to four-two. So, I -- I feel I'm more focused on that trajectory than the quarter -- quarter-on-quarter results. And in terms of your comment, forward-looking beyond '21 what we'll give more detail around that in the Investor Day in September. I had -- I had said something in my prepared remarks today around the fact that we're very focused on continuing in a positive direction with margins as we get into fiscal '22 and that would be relative to the -- to the four-two that we -- we hope to post this year.

Adam Tindle -- Raymond James -- Analyst

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 capex investments to achieve that operating margin improvement? And maybe you can just tie in your cap allocation priorities as you've answered that question.

Thank you.

Mike Dastoor -- Chief Financial Officer

Thanks, Adam. Yeah, de -- definitely free cash flow will -- I think we've said more than $600 million for this year. As we continue in FY '22, I expect that to continue to grow. Well, again, we said this before, capex is something that would be extremely disciplined on in that 2.9% to 3% range.

So, free cash flow next year, again, we'll give guidance in September, but I expect that to go up on a similar run rate as it's done in halfway '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 $54 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 -- that shows that were extremely committed to the buyback program and that will continue into '22, '23. I don't want to pre-empt anything now but I'm sure we'll be continuing that progress from a buyback standpoint.

Most of the -- I -- I think we laid out a few quarters ago the capital allocation percentages roughly half phase in -- into buybacks dividends. Some of it -- the balance that goes into debt sort of debt restructuring and the balance would be opportunistic sort of M&A as well. S,o well-balanced capital allocation continues going forward, Adam.

Adam Tindle -- Raymond James -- Analyst

Very helpful. Thank you both.

Mark Mondello -- Chief Executive Officer

Thanks, Adam.

Operator

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

Jim Suva -- Citi -- Analyst

Thank you and good results. If I look at your updated guidance on the by segments, am I correct that the 5G wireless and cloud is the one that kind of is giving you the -- 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 -- and items needed? Thank you.

Mark Mondello -- Chief Executive Officer

Thanks, Jim. I assume you're talking about our eight sectors on the blue-green slide?

Jim Suva -- Citi -- Analyst

Yes. Correct.

Mark Mondello -- Chief Executive Officer

Yeah. So, I'm not quite sure what do you mean in terms of surprise, in terms of the uplift for sure. So, I -- 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 -- some component shortages and constraints but we've been very bullish on the 5G wireless infrastructure and cloud area of our business.

So, whether surprising or not, it's certainly an area where we continue to see strength, and -- 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, I feel really good about -- about that area of the business. In terms of supply constraints, I would say that -- we talked about this a bit in December.

It's a -- nine months ago or so, you know, there was -- 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 silicone, whether it be around passives, whether it be around mechanicals, all that's handicapped into our numbers.

And I would -- 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 are some slight upsides to what we've put out today, assuming that the supply constraints don't worthen -- worsen. And the other thing I would say is I think -- I think the procurement team at Jabil is 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 teams knowledge of the marketplace, the knowledge of the commodities, knowledge, and technologies, and then the long-standing relationships we have is really allowing us to navigate what otherwise is a is -- 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.

Jim Suva -- Citi -- Analyst

Thank you so much for the details.

Mark Mondello -- Chief Executive Officer

Yeah. Thanks, Jim.

Operator

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

Steven Fox -- Fox Advisors -- Analyst

Thanks. Good morning. Two questions if I could please. First, Mark, could you just give a little more color on where the healthcare solutions business is on its margin journey and how it did in the quarter? You know, maybe referencing back to when you first did the J&J deal and what you were thinking for next year.

And then secondly and just so I'm 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 are there other puts and takes? Thanks.

Operator

Please stand by the presentation will begin again momentarily. Please continue to stand by the presentation will resume momentarily.[Commercial break]

This is the operator. The presenters have been rejoined, please presume.

Mark Mondello -- Chief Executive Officer

Hey, Steve. Somehow -- somehow you cut off.

Steven Fox -- Fox Advisors -- Analyst

Sorry, sorry for breaking the conference call. Did you hear any of my questions or should I repeat them?

Mark Mondello -- Chief Executive Officer

If you could repeat them, that would be great.

Steven Fox -- Fox Advisors -- Analyst

Yes, sure. So, the first question again was on the healthcare 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 targets 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.

Mark Mondello -- Chief Executive Officer

Yeah. Thank you. So on the healthcare side, I think we were -- I think we continue to hit on all cylinders. Steve Borges and his team have run that business.

You know, we -- we started talking about the JJMD relationship, I don't even know how long ago now. Two -- two and half years ago, we kind of laid out a roadmap there and -- and our healthcare team has executed nearly flawlessly to the roadmap that we laid out, so we feel good about that. And then, the business around the JJMD -- and I talked in my prepared remarks about, you know, different trends and the team is really focused on things like core healthcare, like personalized health, like digital health. You know, 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 -- that our healthcare teams are making and I feel really good about that. Our healthcare and packaging business, Steve, last year I think was in the neighborhood of $4.1 billion, $4.2 billion, and I would guess as we exit this year healthcare and packaging will 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 -- 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 -- we have been working diligently to continue to shape the portfolio. Our number one focus in the leadership team is cash flows and management over the next two, three, four years. I think if we ever get to a point where -- 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 so with that, with the additional top line, with the way the teams managing working capital, the way the teams managing capex, and then Mike alluded to the fact that we're 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 a stronger cash flows as we get into the Investor Day in September.

Steven Fox -- Fox Advisors -- Analyst

Great. I appreciate all that color. Thank you.

Mark Mondello -- Chief Executive Officer

Yeah. Thank you.

Operator

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

Paul Coster -- J.P. Morgan -- Analyst

Yeah, thanks for taking my question. You talked earlier of, you know, improved mar -- or a platform for, you know, better margins in the future and they're already 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 it is under your control? What is it you are doing today that makes you feel sure that you're locking in higher margins in the sort of medium-term?

Mark Mondello -- Chief Executive Officer

I don't -- I don't -- I don't know that it's structural to the -- to -- to our industry. Yeah, I hope so. I -- I think -- I think if our competition can lock in higher margins, that's always good. But, you know, we're pretty inwardly focused, Paul.

I think about -- I think about first and foremost, you know, we -- we obsess about customer care and -- and customer solutions. And I think if we -- 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 are followed. If I step back and I look at this fiscal year, I was noticing something over the weekend, you know, this would be along with the -- along with the margin trajectory, I think this would be the first -- 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 -- $1 per share.

And that just kind of jumped off the page. But in terms of -- in terms of margin expansion, you asked about, you know, is it structural. I think so. That's our plan and that's what I'll 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 -- and again, now I'm coming at it a little bit more from an EPS perspective. But since you asked the question around -- around is it structural, our balance sheet continues to improve, net debt is going down, interest expense is going down, overall liquidity has gone up. And then I take a look at the business and I -- I -- I look at things like -- I think we have very, very good overhead and -- and -- and overhead costs. I think about overall demand, I think about the secular trends that we've talked about.

And 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, you know, the whole COVID thing, it's not behind us yet. But with the vaccine being here, we -- we hope to have 70%, 80% of our employees globally have access to the vaccine over the next six to eight months. It just -- and -- and then -- and then I think lastly, and we've been talking about this for 10 to 12 quarters is the mix of our business is as healthy as it's ever been.

So, I think you shake all that stuff up together, and again, I -- I take a look at the last couple of years, margins have been around 3.5%. I -- 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% -- 3.5% base.

Paul Coster -- J.P. Morgan -- Analyst

Well, maybe the follow-up then, Mark, is what is it that you're not doing? Are -- are you able to -- you -- you essentially have 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 nonchalant perspective. So, can you talk to us a little bit about how you shape the portfolio and what you do at the front end to prevent a, you know, low-margin business coming in and hurting your overall business model?

Mark Mondello -- Chief Executive Officer

I -- I think it starts with -- I think it starts with absolute clarity of communication to the troops internally. You know, I -- I can tell you this, I've been with the company a long time. When I screw things up is -- 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 is on the reciprocal of that is -- 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, you know, two, three, four years and that's continued expansion of cash flows and continued expansion of margins. So -- and -- and I -- and -- and -- and by the way, our portfolio is -- is, you know, we kind of refer to it as a portfolio for a reason. We have -- we have some businesses that -- 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 -- and other areas. But when you blend all that together, boy, I -- 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 internal -- internally, people are pretty clear on, you know, 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 -- 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.

Paul Coster -- J.P. Morgan -- Analyst

Got it. Thanks so much yeah.

Mark Mondello -- Chief Executive Officer

Yeah. Thanks, Paul.

Operator

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

Shannon Cross -- Cross Research -- Analyst

Thank you very much. I wanted to dig a bit more into the 5G wireless and cloud outlook, the increase. I'm -- I'm just curious, you know, specifically, maybe you can give some more details on -- on what's driving that. And -- and what I'm trying to figure out is, is this demand that would have come in the future but is being pulled in now as people start to ramp 5G? Or are you seeing market share gains and, you know, actual -- I don't want to say actual end-market growth because obviously, the market is growing.

But, you know, how much of it is being driven by increased end demand overall? And then I have a follow-up. Thank you.

Mark Mondello -- Chief Executive Officer

Shannon, I'd say -- I'd say -- and I -- I -- I don't want to be -- I -- I don't want to be offensive by not getting into details. I -- I would -- I would -- I would say this with a -- with a high degree of confidence. For sure, we're seeing sec -- secular trends and trends that are very positive in terms of cloud and -- and finally, what looks to be reasonable plans in terms of the 5G wireless rollout. So, that's going to be helpful and -- and we think that's -- we think that's here to stay for not a number of months but a number of years.

And -- 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 under way in terms of derivatives to other parts of our business. And then I think I'd complement that by saying there's just been -- there's just been good acceptance of our solutions and our services in -- in the space both on the design side, I think Mike alluded to -- he was using some fancy terms around, you know, what we call a kind of design to dust and repurposing older servers. And -- and he did a nice job explaining it. It -- It sounds a little -- I don't know, overly technical or whatever but we've got -- we, you know, when we -- when we talk about the design side all the way to repositioning and -- and -- and disposing of -- 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 have been received quite well.

And I would also suggest that there is -- there is some market share wins in there as well.

Shannon Cross -- Cross Research -- Analyst

Great. That was helpful. And then my second question is just on stimulus. If you think back to last summer and -- and maybe what you've -- I know it -- it's -- 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 -- the guidance for this year in terms of the -- the checks that are going to be heading in the next few weeks.

Thank you.

Mark Mondello -- Chief Executive Officer

Yeah, thanks. Let me break up the back half of '21 with -- with '22 and '23. I can't make sense -- I can't make sense of the U.S. equity markets anymore because I -- I -- I don't know -- 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 -- maybe into 1Q of -- of '22. But the nice thing is -- so, as -- as we -- as we navigate '21, I see -- I see two things. I see certain parts of our business being driven by -- by what I would call COVID-type behaviors.

Some of those will dissipate, some of those have maintained. I see certain parts of our business that are stimulus-related. You know, in certain parts of the United States right now, you go and you try to buy a truck, a car, an appliance, whatever it may be, there's backlogs everywhere and I think that stimulus-related. But as the impact of stimulus and the impact of COVID start to -- to attenuate a bit and -- and fall off a bit, I -- 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 -- I think those -- those specific trends certainly will be a driver for our business for the next two, three, four years. So, it's not like I'm sitting here going, geez, when stimulus abates, when COVID types of hardware either go away or reduce, that there's not going to be other elements that continue to give us a little bit of an uplift. So, I don't know if that -- that helps or gets at your question but that's how I see it.

Shannon Cross -- Cross Research -- Analyst

Yeah. Very helpful. Thank you very much.

Mark Mondello -- Chief Executive Officer

Yeah. Thank you.

Operator

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

Matt Sheerin -- Stifel Financial Corp. -- Analyst

Yes, thank you, and good morning. Mark, your -- your commentary across end markets are extremely positive. One area that you're -- you're still guiding down year over year is networking and storage. It 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, you know, weakness in on-prem spend and expectations of that improving as the recovery continues post-COVID?

Mark Mondello -- Chief Executive Officer

Yeah, sure. So, the -- 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 -- it's -- it's a reflection of some -- some of the legacy business may be starting to lose footing and lose a little traction out in the marketplace. Number two is -- is again, as we continue to think about our portfolio for fiscal '22 and '23, there's 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 -- is -- is from the September timeframe to the 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 -- and we'll continue to serve those customers, serve them well, and -- 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, dipped down $2.2 billion in the last, I think, December. And -- 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 -- 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 -- other seven sectors.

Matt Sheerin -- Stifel Financial Corp. -- Analyst

OK. 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 -- of a growth driver for Jabil?

Mark Mondello -- Chief Executive Officer

Well, it won't be much of a growth driver this year. You know, we -- we have to be very, very, very selective in our M&A. We are -- we are committed to returning capital to shareholders. But at the same time, and I made this comment around -- 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 -- is -- is almost all of our material growth is -- 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.

The company call it ecologic. We are very excited about the platform that they've developed and, you know, 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 -- 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 -- a second or third step for us. We believe that we'll be able to take that technology. And as we look toward fiscal '22, '23, give that technology its 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.

Matt Sheerin -- Stifel Financial Corp. -- Analyst

OK. Thanks very much.

Mark Mondello -- Chief Executive Officer

Yeah. You're welcome.

Operator

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

Mark Delaney -- Goldman Sachs -- Analyst

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 ship -- shipping costs and some of those component -- component shortages that the whole industry is having to -- to -- to deal with. Can -- can you talk about how much of a headwind that the company may -- may be seeing from some of those supply chain types of costs this year? And if -- if we were to add that back, do you -- do you think that's more representative of the underlying margin levels that the company can hopefully build off -- off going forward? Or are there any other temporal factors that we should be thinking about that's influencing margins this year?

Mark Mondello -- Chief Executive Officer

Well, thanks, Mark. You know, I -- I -- geez. I -- I -- I said earlier, you know, we've -- we've certainly handicapped the business for Q3 and Q4 and I think our handicap has been appropriate. So, I -- 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 -- I wouldn't get much ahead of that. But I -- I also mentioned earlier, Mark, the -- the method -- the method to our madness in terms of supply chain management, it's -- it's -- it's wonderful. And, you know, just listening to others, either a few customers, suppliers or -- or folks in our industry, we're navigating this thing beautifully. And it's, you know, it's a -- it's a -- it's -- 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 '22 and for sure as we get into calendar '22. So, to frame out that time frame, 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 -- of '22. With that said, again, we gave the guidance we gave to -- today for Q3 and Q4 and it's something we feel confident in.

And as I mentioned earlier, when you look at margins at 4.2% for the year, I think -- I think we're going to continue the effort to have an upward trajectory of that as we get into '22, even with considerations of -- of near-term supply changes.

Mark Delaney -- Goldman Sachs -- Analyst

That's -- that's very helpful. My -- my follow-up question was on the EV opportunity and automotive has been a -- a -- a growing business for Jabil and an area, I realized, that Jabil has a lot of capabilities. And already, Foxconn is moving to divert or brought -- brought it out its -- its business and -- and -- and doing full-electric vehicle architectures and -- 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.

Mark Mondello -- Chief Executive Officer

I think it's smart for us to think that we're all set up for automotive factories. You know, the -- the capital intensity of that is enormous and -- and I don't want our people to focus away from what we do really, really well which is sensors, components, sub-assemblies for -- for the entire automotive space, and thank you for the compliment on that. We do have a -- a very good track record in automotive. You know, one of the strategic decisions we made two and a half, three years ago was -- is all-hands-on in terms of -- of really focusing hard on -- 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. You know, when you -- when you think about the term electrification, that -- 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, you know, 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, you know, we look at that -- the eighth-sector chart in -- in FY '20, automotive transport was about $1.7 billion. 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 that the trajectory -- trajectory of that sector as we move through '22 is going to continue to be up and to the right.

Mark Delaney -- Goldman Sachs -- Analyst

Thank you.

Mark Mondello -- Chief Executive Officer

Yeah. Thank you.

Adam Berry -- Vice President of Investor Relations

This now concludes our call. Thank you for your interest in Jabil.

Operator

[Operator signoff]

Duration: 65 minutes

Call participants:

Adam Berry -- Vice President of Investor Relations

Mark Mondello -- Chief Executive Officer

Mike Dastoor -- Chief Financial Officer

Ruplu Bhattacharya -- Bank of America Merrill Lynch -- Analyst

Adam Tindle -- Raymond James -- Analyst

Jim Suva -- Citi -- Analyst

Steven Fox -- Fox Advisors -- Analyst

Paul Coster -- J.P. Morgan -- Analyst

Shannon Cross -- Cross Research -- Analyst

Matt Sheerin -- Stifel Financial Corp. -- Analyst

Mark Delaney -- Goldman Sachs -- Analyst

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