Jabil Inc. (JBL) Q2 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Jabil's second quarter fiscal 2015 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn today's conference over to Beth Walters, Senior Vice President of Communications and Investor Relations. Please go ahead. Beth A. Walters - Senior VP-Communications & Investor Relations: Thank you. Welcome to our second quarter of 2015 earnings call. Joining me today are our CEO, Mark Mondello; and our Chief Financial Officer, Forbes Alexander. This call is being recorded and will be posted for audio playback on the Jabil website, jabil.com, in the Investors section. Our third quarter press release – excuse me, our second quarter press release, slides, and corresponding webcast links are also available on the website. In these materials, you'll find the financial information that we will cover during this conference call. We ask that you follow our presentation with the slides in the website, beginning with slide two, our forward-looking statement. During this conference call, we will be making forward-looking statements including those regarding the anticipated outlook for our business, our currently expected third quarter of fiscal 2015 net revenue and earnings results, the financial performance for the company, and our long-term outlook for the company. These statements are based on current expectations, forecasts and assumption 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, 2014, and on subsequent reports on Form 10-Q and Form 8-K, and our other securities 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. Today's call will begin with opening remarks from Mark. We will then move on to second quarter fiscal results and updated guidance for fiscal 2015 from Forbes Alexander. We will then open it up to questions from call attendees. So I would now like to turn the call over to Mark. Mark T. Mondello - Chief Executive Officer & Director: Thanks, Beth. Good afternoon. I appreciate everyone taking time to join the call today. Before I begin, I'd like to take a minute and recognize all of our people here at Jabil. Thank you. Thanks for all you do and thank you for your dedication. As for Jabil's second quarter, I am really pleased with the results. The revenue for the quarter was $4.3 billion, which was in line with our guidance. From a profit perspective, we exceeded our target, resulting in core operating income of $166 million for the quarter, which is 11% above the midpoint of our guidance. If we step back and look at the first half of the year, cash flow from operations was $525 million. I highlight this because strong cash flows are crucial, as they fuel our ability to grow. Overall, our team delivered a solid quarter. Let me talk a bit about capital expenditures. CapEx for the year looks to remain in the range of $650 million to $750 million. As we sit today, we most likely will be at the high end of this range, which I view as a positive. This is driven by additional investment opportunities, which remain strong. In fact, if things go our way, we may actually increase CapEx during the fourth quarter as we prepare for fiscal year 2016 and beyond. For the full fiscal year, I remain confident in our core earnings per share guidance of $1.85 to $2.15. Let's look at the market. As we look ahead, we're very well positioned in the markets we serve. Most all of them have attractive underlying catalyst mandates that align perfectly with our solutions and broad-based capabilities. We continue to observe dramatic parabolic change across most markets. This is driven by technology and a new generation of consumers; consumers that display an insatiable appetite for instantaneous access to everything and infinite customization. These demands combined with the need for immediate gratification drive massive disruption. Said another way, these expectations spawn additional expectations. When I think about change, change is always present. In fact, change itself is a constant. But today, the rate of change in the markets that we serve is truly unprecedented. These dynamics continue to drive great opportunities for Jabil. As we look internally, we're carrying excellent momentum into the second half of the year as we stay focused on our top priorities, priorities being: exceptional customer care; thoughtful growth of earnings year on year; expansion of our capabilities; and taking exceptional care of our people. I'd now like to look at our business segments. Let's start with our Diversified Manufacturing Services, or DMS, segment. Our DMS business delivered second quarter revenue largely as planned while exceeding margin expectations. The DMS team delivered core operating margins of 6.6%, a 40 basis point increase sequentially quarter on quarter. It was a stellar performance. Looking to the back half of the fiscal year, we anticipate core operating income for our DMS segment to be in the range of $130 million to $160 million. We plan to deliver this core operating income while at the same time incurring roughly $60 million of operating expenses. These operating expenses will support bringing additional manufacturing square footage online, executing various program ramps, and working on a wide range of development activities. The majority of this expense will occur in our fourth fiscal quarter. This reflects what we planned for and communicated at the beginning of our fiscal year. In other words, nothing has changed specific to these expenses. Our plan continues to unfold, as expected. Within our DMS segment, our Nypro brand is delivering on their admirable goal of improving the way in which people live. The team is doing so through their outstanding performance in healthcare and packaging by making our customers' products more accessible, more affordable, and more sustainable. Also within our DMS segment, our Green Point team continues to display terrific engineering aptitude and operational excellence. They continue to lead in areas of material sciences and integrated plastics and metals. When one combines this with their ability to execute high-volume manufacturing, you have a winning team in the areas of mobility, consumer lifestyles, and wearable technology. Let's move and take a look at our Electronic Manufacturing Services, or EMS, segment. Our EMS team delivered second quarter revenue above guidance, although core operating margins were down 30 basis points sequentially. This was largely due to seasonality within our high-velocity sector as well as additional costs incurred as we prepare for a strong second half of the year. Our EMS team is successfully enhancing and reinventing their value proposition while taking advantage of secular trends. These newer secular trends include connected automobiles, digital home connectivity, consumption-based IT solutions, additional bandwidth driven by the Internet of Everything, machine-to-machine interactions, lower-cost sensor technologies, and the ubiquitous use of predictive analytics. In wrapping up my prepared remarks, I want to reiterate that we are certainly on track to deliver a strong quarter – excuse me, a strong year; a year that exceeds the plan we laid out for you back in September. Our business is resilient and very well-positioned for the coming years ahead. We remain thoughtful on our investments. I believe this will keep us front and center in terms of remaining relevant. Said another way, the lack of investment in capabilities and critical assets would have the potential to render Jabil irrelevant over time, especially when one considers the rate of change that's so prevalent in the world today. Jabil's healthier than ever. We have a great team, outstanding customers, and incredible reach, massive scale, and innovative solutions. We'll continue to expand our universe, both vertically and horizontally. This provides a multiplier effect as we deliver more and more products across more and more end markets, while serving the greatest brands in the world. Opportunities remain plentiful. Thank you. I'll now turn the call over to Forbes.

Thank you, Mark. I'll now ask you to refer to slide three to discuss our second fiscal quarter. Net revenue for the quarter was $4.3 billion, an increase of 20% on a year-over-year basis. Our GAAP operating income was $125 million during the quarter. So GAAP net income was $52 million. GAAP net diluted earnings per share was $0.27. Core operating income, excluding the amortization of intangibles, stock-based compensation and restructuring expenses, was at the high-end of our previous guidance at $166 million or 3.9% of total revenue. Core diluted earnings per share were $0.50. Turning to our second quarter segment discussion on slide four. Our Diversified Manufacturing Services segment increased 52% on a year-over-year basis, in line with our expectations. Revenue for the segment was approximately $1.7 billion, representing 39% of total company revenue. I am particularly pleased with our DMS operating income performance during the quarter. At 6.6% of revenue, it reflects improving asset utilization within our mobility, healthcare, and packaging businesses. The Electronic Manufacturing Services segment also performed well during the quarter as revenue increased by 6% on a year-over-year basis or approximately $75 million above our expectations. Relative to our plan, the revenue strength was broad-based with networking and telecommunications leading the way. Revenue was approximately $2.6 billion, representing 61% of total company revenue. Core operating income was 2.1%, reflective of sequential seasonal declines in consumer-facing demand. Turning to slide five. We ended the quarter with cash balances of $966 million, while total debt levels were consistent at $2.2 billion. Cash flows from operations in the quarter were $336 million; and on a year-to-date basis, $525 million. Core EBITDA for the quarter was $287 million or 6.7% of revenue, while our core return on invested capital was 17.6%. Consistent with our previous discussions, we maintain our focus on growth for fiscal 2016 as we've invested in equipment, buildings, infrastructure, and capabilities during the second quarter. Net capital expenditures were $270 million, bringing our year-to-date investments to approximately $464 million. I'd now ask you to turn the slide seven while I discuss our business outlook for the third quarter of 2015. We expect revenue in the third quarter on a year-over-year basis to be in the range of $4.35 billion to $4.55 billion, or at its midpoint an increase of 17%. Core operating income is estimated to be in the range of $145 million to $175 million, with core operating margin in the range of 3.3% to 3.8%. Core earnings per share are estimated to be in the range of $0.43 to $0.53 per diluted share, while GAAP earnings per share in the range of $0.29 to $0.44 per diluted share; this based upon our diluted share count of 196 million shares. Based upon current estimates of production, the tax rate on core operating income is expected to be approximately 25% for the quarter. I'll now ask you to turn to slide eight. The Diversified Manufacturing Services segment is expected to increase by approximately 42% on a year-over-year basis with revenues estimated to be $1.625 billion. The Electronic Manufacturing Services segment is expected to increase 7% or with revenues of $2.825 billion. The second half of the fiscal year remains consistent with that of 90 days ago. Core operating income levels are anticipated to be approximately $310 million at the midpoint of our annual guidance, reflective of ongoing investments across both our EMS and DMS segments with a particular investment focus within DMS. Our expectations for the full year remain. Revenues are anticipated to grow 14% on a year-over-year basis to approximately $18 billion; the DMS segment growing 36% on a year-over-year basis; while the EMS segment is growing at 4%. Core operating income is now $15 million higher than our previous expectations as a result of strong performance in the most recent quarter. As a result of the mix of higher levels of core operating income, our tax rate is now expected to be 26% for the full fiscal year. The earnings per share estimate for the full year remains at $2. In summary, the full fiscal year is on track to be a strong year. Operational cash flows of $1 billion are facilitating investments; investments that are uniquely positioning Jabil for continued strong growth in revenues and earnings in fiscal 2016 and beyond. Now I'd like to hand the call back over the Beth. Beth A. Walters - Senior VP-Communications & Investor Relations: Thank you, Forbes and Mark. Before we begin the Q&A session, I'd like to remind all of our call participants that in customary fashion we will not be able to address any customer or product specific questions; and we thank you in advance for your cooperation. Operator, we're ready to begin the Q&A session.

Your first question comes from the line of Jim Suva with Citi.

Thank you, and congratulations to you and your team at Jabil. One question I have is on the additional capacity that you're adding or CapEx on the higher end and maybe even above that. Can you help us understand about which of the two reporting segments that will be in? And a little bit – a question around that is I believe the DMS business was running around like $1.9 billion in the November quarter, so it seems like you still have plenty of capacity there. So is the capacity being added in that and you expect to just to not be able to contain or maintain that $1.9 billion? I think you'd have some yield efficiencies that would help out so you could go above the November high of $1.9 billion. But help us understand where you're putting in this new capacity. Thank you. Mark T. Mondello - Chief Executive Officer & Director: Hey, Jim. This is Mark. Thanks for the comments. So right now, as we sit, we're still planning on a CapEx range of the $650 million to the $750 million. The issue is, we've provided that back in December. And what Forbes and I got to talking about over the last couple weeks is we've got a number of opportunities that are directly in front of us, and we're evaluating each of those and putting them through, if you will, our evaluation funnel from an ROIC and cash flow perspective. And we think we may end up saying yes to some of those before the end of the fiscal year, and that's what prompted me to put the comments in my prepared statement. With that said, I would think that the high end of our current CapEx range, most of that will be consumed in our DMS business. And if we exceed the limits, I think that'll be heavily weighted to DMS, but there are also some wonderful opportunities for us in the EMS segment as well. On the second half of your question, on the DMS revenue in Q1, the $1.9 billion is accurate. And in the DMS space, we'll be adding square footage in China. And then we'll be, as we talked about in the December call, looking at infrastructure in Malaysia, Indonesia, and then we're also adding some square footage for Nypro as well. So if everything goes as planned, I think we're setting the company up for revenue levels in excess of the $1.9 billion at some point in time.

Great, thank you very much and congratulations to you and your team. Mark T. Mondello - Chief Executive Officer & Director: Thanks, Jim.

Your next question comes from the line of Steven Fox with Cross Research.

Thanks. Good afternoon, two questions for me, please. First of all, on the DMS margins, the 6.6% that you put up, was there anything unusual in those numbers, or would you consider that normal type of margins for the revenues you just posted, and just any other help that improved the margins quarter over quarter? And then secondly, just digging into DMS a little bit, could you talk about where Nypro is versus maybe some of the growth targets you talked about during the last few months of, say, 8% to 10% growth for the year and what's driving it right now? Thanks.

Hey, Steve. It's Forbes. In terms of the DMS, you're right, it's just excellent performance, 6.6% in the quarter. Nothing unusual there, just some really excellent asset utilization in that business; and really all marketplaces from mobility, healthcare, and packaging. So some really strong performance as we're bringing programs up to ramp. If you recall, there's a number of those launched in the September – October timeframe and into November, and the teams really got into their stride during in the quarter. So very pleased with that, and I don't see any reason why that couldn't be achieved on an ongoing basis once we have these additional levels of capacity in place and programs at volume. And the second part of your question, could you remind me?

Just on Nypro, the growth, if you could drill into the growth there and how it's tracking versus your targets.

Historically, that business has grown organically right about 5% in the marketplace. I think as you're aware, our long-term growth rates for the DMS space are 8% to 12%, and certainly Nypro is tracking nicely within that band.

And anything that you would highlight that's growing faster versus the overall growth for Nypro?

No, not really. I think both packaging and the pharmaceutical side and drug delivery are growing very nicely, probably about the same pace.

Great. Mark T. Mondello - Chief Executive Officer & Director: Hey, Steve. One thing to complement Forbes's comments on the DMS business, in my prepared comments I talked about the fact that for the back half of the year DMS will do – I think I said $130 million to $160 million for Q3 and Q4 combined. If you take the center point of that at $145 million, that puts DMS for the year in like the $375 million range for core op income. And what I also talked about is the investments that we're deciding to make towards the back half of the fiscal year. And those investments will be, again, to add some infrastructure as well as prepare some product ramps for fiscal year 2016. But on a normalized basis, if you were to take that $60 million out, and I recognize it's business as usual but it is about preparing some nice product ramps for 2016, the back half of the year, instead of being $145 million, would be closer to $200 million or $205 million. And if you take the first half of DMS, DMS margins I think were 6.2% – 6.3% blended for the first half. The back half with the investments in it will blend out to be 4.3% – 4.4%, with Q4 being the lower quarter. You take out the investments we're making for growth and the back half would also normalize around 6%. So again, it gives you an idea. And I add this commentary only to add some color around what the DMS business looks like on a normalized basis if we weren't making the investments.

Right, got it. That's very helpful, thanks so much. Mark T. Mondello - Chief Executive Officer & Director: You're welcome.

Your next question comes from the line of Amit Daryanani with RBS (sic) [RBC] Capital Markets.

Thanks a lot. Good afternoon, guys, two questions for me. Mark, could you just talk about or elaborate? I think you mentioned that if things go your way, CapEx would be above a $700 million number. Could you maybe talk about what needs to go your way for CapEx to get above $700 million? And just broadly, do you think $650 million to $700 million CapEx is the reality for the next couple of years, or do you think it's more of a fiscal 2015 phenomenon and things should stabilize as you go further out? Mark T. Mondello - Chief Executive Officer & Director: Sure. I think what I said was – is, as we sit today, our CapEx range is still $650 million to $750 million, which is the range that Forbes and I provided in December. And I said that we'd be at the high end of that range, it looks like as we sit today, based on the opportunities that we have. What I also added to that was – is we actually could go above that range, so above the $750 million, if some things fell our way in the back half of the year. And again, where that comes from is we had our call in December, we felt good about the $650 million to $750 million range. And in January, February, the early part of March, conversations that we're having with customers and some of our commercial folks are leading us to believe that we may actually have some additional opportunities that we would end up recognizing both revenue and income in fiscal year 2016 and 2017. And what we don't want to do is, is we want to continue to run the business in the correct fashion. And I don't want to run the business – I want to run the business on a very disciplined platform as far as cost and investment. But I also don't want to pass on what look to be some very good growth opportunities for us long term because we have a CapEx budget, if you will. And our CapEx budget, again, is applied against our business planning. I'm very, very comfortable with the discipline we have around that. But with the liquidity we have today, the balance sheet we have today, there's some really nice opportunities that we're evaluating. If we end up moving forward with those, it would take the overall CapEx for the year, weighted towards the back end, above and beyond the $650 million to $750 million range.

Got it. And then I guess, Forbes, just to make sure I understand this, the guide implies 40 basis points, 50 basis points operating margin drop in the back half versus the first half. That's largely driven by the $60 million of incremental investments in the DMS segment, or is there any other drivers as well? And is there a comfort that the $60 million is a one-time back half investment, or is that something that sustains into the early part of 2016?

No, I think you've described it well in that the margin decline in the back half of the year is solely due to that investment of $60 million, which is just creating a fabulous platform as we move into the first quarter of 2016. So view that, as Mark described in his prepared remarks, the addition of incremental capacity, product development teams, hiring of labor, and pre-positioning that for really multiple product and customer ramps as we move into our fiscal 2016.

Perfect, thank you.

You're welcome.

Your next question comes from the line of Brian Alexander with Raymond James. Brian G. Alexander - Raymond James & Associates, Inc.: So following on Amit's question, it looks like operating income is expected to be down about 11% in the second half versus the first half, if I did my math right; and I think we talked previously about fiscal 2015 playing out pretty similar to how fiscal 2013 did. So if I go back to fiscal 2013 operating income in the second half, it was only down about 2% versus the first half. So I'm just trying to reconcile that with your comments that not much has changed versus what you articulated 90 days ago. It sounds like maybe you've stepped up the investment pace because you overachieved on expectations in the first half. So maybe you could clarify that?

No, the investments haven't changed, Brian. We're still moving at the same pace. Brian? Beth A. Walters - Senior VP-Communications & Investor Relations: Brian, perhaps you could put your line on mute.

Thank you. As I was saying, the level of investments have continued at the pace we were expecting, we talked about on our December call. And so nothing's really changed. I think our overall guidance before had reflected operating income levels of about $310 million in the back half of the year; and that's consistent with the guide we're giving now. With reference to the 2013 comparison, I think what we've got going on this fiscal year is a significant investment in expansion in operations in China, in particular in Chengdu, which really positions us strongly as we move into fiscal 2016 in the September, October timeframe. So really the way we look at this is very much consistent with our thinking in December, and spend's really much on track. Brian G. Alexander - Raymond James & Associates, Inc.: And sorry for the background noise. I'll just ask a quick one and then I'll go on mute. With respect to currency and just the strength in the dollar that we've seen, is that having an impact on demand within any of your segments as your customers are perhaps raising prices in local currency to maintain their profitability? Just wondering if currency has affected demand conditions or your outlook in any way? Thanks.

No, it's not. We're certainly not seeing that. We're seeing stable demand patterns pretty much across all the end markets that we're serving in our customers. And really from our own perspective, we're not seeing currency as a headwind in terms of our performance. A majority of our revenue and cost base is U.S. dollar based. So we're fortunate in that regard. So, overall, I think it's a very much business as usual and some great growth opportunities ahead of us. Brian G. Alexander - Raymond James & Associates, Inc.: Okay, thank you very much.

You're welcome.

Your next question comes from the line of Sean Hannan with Needham & Company. Sean K. Hannan - Needham & Co. LLC: Thanks for taking my question. I have two, if I may. First, if I were to take a look at mobility, some of the business that you do there, and I realize there's a lot related to DMS. At this point last year, you had some early indications into the design cycle for the next round of products and plans at notable customers, and I'm talking about this in a general sense. And it was particularly important at that time because you were working through what was a fairly weak product cycle. Now at this point of the year, can you – at least the calendar year even, can you share some color around what you're starting to look forward to as you look to the summer, your involvement in some of the more notable platforms? And is there a way to give an opinion around whether you're progressing towards share gains, incremental platform adds, any color beyond just being generally positive in the space? Thanks. Mark T. Mondello - Chief Executive Officer & Director: Hey, Sean. It's Mark. I think our visibility – since you're the one that kind of brought up timeframes from last year, I would answer it and say our visibility with our DMS customers, which is inclusive of the mobility space, are very similar to last year. So said another way, I think we've got very good visibility. Unfortunately, can't talk much about it other than to say we're going and investing again roughly $60 million of what I characterize as OpEx towards the back half of the year. And, again, part of that's bringing on additional square footage, but also a significant portion of that is development activities and preparing different product ramps for 2016. So I think that could give you a little bit of insight as to our visibility of what we're planning for in the out years. Sean K. Hannan - Needham & Co. LLC: Okay. And then to follow on that, and I know there are a number of questions around the CapEx spends and intentions. To see, perhaps, if we could drill down a little bit further, there's a lot of business that's tied in under DMS. Is there at least some indication, rank order, where incremental capital spending would go on a market basis, if that would be incrementally biased toward mobility, healthcare, packaging, any sense that we could get there because it's a pretty large business for you folks? Mark T. Mondello - Chief Executive Officer & Director: That's a very fair question. How about we do this? How about for now, I think that the Pareto of CapEx that we broke out for you in December is holding true. And I can't give you any more color beyond that at the moment because we haven't made any of the business decisions we need to make. If we had, we'd actually formally take up the CapEx range. I merely wanted to get it on the docket for all of you to know that we're looking at opportunities, and the opportunities are relatively broad-based. So I think if, and it's a big if, if we decide to take up the CapEx range, I think we'll have better visibility on that for our June call, and we can kind of re-Pareto-ize that for you at that time. Sean K. Hannan - Needham & Co. LLC: Okay, thanks very much for taking my questions. Mark T. Mondello - Chief Executive Officer & Director: Sure.

Your next question comes from the line of Mark Delaney with Goldman Sachs. Mark T. Delaney - Goldman Sachs & Co.: Good afternoon and thanks very much for taking the questions. For the first question, I wanted to talk a little bit on the DMS segment and the management team in some of the recent investor conferences has talked about signing up new customers in DMS; and I think some of that was in the mobility business. Can you give us a sense about how you're progressing with that and how material some of those new customer wins are today?

Hey, Mark. It's Forbes. Yeah, absolutely, the team is doing a really fine job in taking our expertise and knowledge and applying capabilities that we have in place across a number of customers in the mobility space. So we're very pleased with that. I think we talked about in the first fiscal quarter the addition of one particular customer that had got the volume; and that continues to progress as we move through Q2 here and as we head into fiscal 2016. So I think as we start to get this capacity in place and ensure appropriate engineering teams in place, I think you'll see a handful of customers in that mobility space being serviced as we go into 2016 and 2017. So very pleasing with the level of diversity that we're starting to see. Mark T. Delaney - Goldman Sachs & Co.: That's helpful, Forbes. And then for a follow-up question, I was hoping to talk on EMS a little bit more. That segment, the revenues there were a little bit better than what I was expecting. I think there was some end market weakness that impacted some storage and enterprise and networking customers, but Jabil's actually able to grow that business year-over-year and had guided for that growth to continue. Can you just talk about what's helping Jabil to do a little bit better than some of the customers? Are you just on newer programs, are you gaining share? And if you can just elaborate a little bit more between what areas specifically within EMS are driving some of the growth? Mark T. Mondello - Chief Executive Officer & Director: Mark, this is Mark. So as I said in my prepared comments, I really think that a lot of our EMS business for the last four to five years has been a bit stagnant. And in the last 12, 14, 16 months and forward-looking, we're just seeing a lot of what I think are secular changes. And so much of it has to do with everything is changing so darn quickly in regards to everything being connected, everything talking to everything else, cloud, data storage, processing. What we're seeing in the areas of intelligent and predictive analytics is crazy, and we're participating in all of that. The other part is we are really fortunate. Our EMS business is really, really diverse from a customer perspective and a market perspective. And our leadership there has done a really nice job of – I don't know how I'd say it, reinventing how we're approaching the market and the services we're providing. And that's driving market share gain and new opportunities. And we've got a lot of heavy lifting to do in the back half of the year. But if you look first half to second half in EMS alone, I think we're predicting revenues to be up $400 million or $500 million first half to second half, so pretty decent outlook. Mark T. Delaney - Goldman Sachs & Co.: Got it, and then just in terms of any commentary you can give directionally. What's stronger between areas like storage and networking? Is there anything you can call out? Mark T. Mondello - Chief Executive Officer & Director: I'd say it's across the board, and I don't want to get too specific because we typically don't. But I would say we've got really nice opportunities across the board. Mark T. Delaney - Goldman Sachs & Co.: Understood, thank you very much. Mark T. Mondello - Chief Executive Officer & Director: Yes.

Your next question comes from the line of Amitabh Passi with UBS.

Hi, thank you. Mark, can I just follow up on that last question? I was curious. The strength that you see in EMS and the various sort of markets that you participate in, are you also seeing the benefit of maybe your customer base broadening? The reason I ask is there are some big public cloud companies that are kind of doing their own thing, and I'm just wondering. Are you starting to get an opportunity with a new set of customers and a different set of products? I'm just trying to figure out. Or is it still just your core markets that are just doing better over the next few quarters? Mark T. Mondello - Chief Executive Officer & Director: It's a good question. It aligns with something else I said in my prepared remarks that I think is very applicable to our EMS sector or segment, which is we're expanding both horizontally and vertically. And what I mean by that is I'm watching our team expand in a vertical sense with a lot of our existing customers, and then they're expanding horizontally bringing on new customers. So I would suggest that the opportunities that we've already booked and the opportunities that we've talked about earlier on the call are a combination of both. And the neat thing is, even with the current brands that we serve, we are really fortunate to have a portfolio of great companies to work with. And a lot of what you might consider legacy brands in that space are not sitting still and doing some really cool stuff, and we're really fortunate to be a part of that.

Excellent. And then maybe just as a follow-up, the incremental or I guess the total CapEx that you're spending in fiscal 2015, you said towards the upper end of the $650 million to $750 million. Let's say the number is $750 million. Is there a way that you can help us think about the incremental return on this investment you're making; i.e., should we expect maybe over the next two years that the incremental investment of $750 million could add maybe 20% of incremental EBIT? I'm just trying to get some sense of how we should be thinking about this return on this investment that you're making. Mark T. Mondello - Chief Executive Officer & Director: I think that's a very fair question. We don't have the math sitting in front of us. But in rough order – and we can actually provide more color on that. But the way I would think about it is our general pool of overall CapEx; you're going to have a portion of that that's maintenance CapEx. So if we just wanted to use illustratively a $700 million pool and you take out what's maintenance CapEx just to run the business, replace old equipment, et cetera, et cetera, say that's $300 million – $350 million. You end up with a delta of CapEx, which I would characterize either strategic or growth CapEx; and maybe they're one and the same. I would expect at a minimum of 15% to 18% return on that; and that will lay into the business between 2016 and 2017. And I think it's fair to say that the majority of it would lay in 2016 and the balance in 2017. So I think that's a fair way to look at that. And I thought perhaps this is this. Our weighted average cost of capital is 10% – 11% on the business. And at times I made a mistake where I was pushing the team for true ROIC returns, maybe 22%, 24%, or 26%; and we do have businesses that return that. But in some areas where the risk profile, the relationships and/or the opportunities are a little lower, Forbes actually was pressing me, believe it or not, to look at businesses that may have a 16% or 18% ROIC. The nice thing is that's still 600 to 800 basis points above our cost of capital, and it's triggering some growth for us in absolute cash flows, which I think is the right thing to do. So that's how I would think about it at a high level.

That's helpful. Can I just ask a clarification, Forbes? The $60 million of incremental cost, did you say that is that just a second half 2015 event and should we then be thinking about things normalizing as we enter fiscal 2016?

Yes, that's correct. Absolutely, and a majority of that cost will be in the fourth fiscal quarter.

Okay, thank you. Mark T. Mondello - Chief Executive Officer & Director: There's no intent of that investment leaking over into the first half of 2016.

Thank you.

Your next question comes from the line of Shawn Harrison with Longbow Research.

Hi, good afternoon. This is Gausia Chowdhury calling on behalf of Shawn. I just wanted to go back to EMS. Previously, you've highlighted the possibility of potentially growing sales about $400 million to $600 million over the first half, and today it looks like it's closer to $400 million to $500 million. I just wanted to see what's the likelihood of maybe reaching the high-end of that previous range of $600 million and how much of the margin improvement is possible if you do reach at the high-end of that range? Will any of the costs from HVS be repeated in the second half of the year?

So in terms of EMS, yeah, our guide suggest about a $500 million or about 10% incremental growth second half over first half of the year. I think in the December call, we had a range of $400 million to $600 million. So we're still, if you will, right up the middle of the fairway there in terms of our guidance. The margin contribution that that should bring, we should see margins return back into the 2.5% to 3% range in the back half of the year. So some nice leverage as we ramp these programs. In terms of incremental margin beyond our guidance, we'll see how those ramps go. It's pretty significant across the broad base of customers, and broadly based around a number of factories also. So certainly there may be some opportunity, but, say, at this stage, we should solidly see margins in the 2.5% to 3% range in the back half of the year, which essentially would put us at a 2.5%, 2.6% range for the full fiscal year.

Okay, thank you.

Your next question comes from the line of Nikhil Kumar with Stifel. Nikhil Kumar - Stifel, Nicolaus & Co., Inc.: Yes. Hi. This is Nik Kumar for Matt Sheerin. Just a quick question on cash flow from operation, I know like for 2015 you're expecting about $1 billion, but can you provide any color on like for FY 2016 how you think cash flow should pan out?

We certainly expect at least $1 billion of operational cash flow for 2015 well on track there. For 2016, we'll see how that goes. Obviously, we're making significant investments this year. We're being on a solid growth mode in 2016. But I think our working capital efficiency is really, really good. So I would certainly expect operational cash flows to be at least $1 billion next year, if not higher. Nikhil Kumar - Stifel, Nicolaus & Co., Inc.: Okay, that's helpful. And finally, if you can talk about your M&A pipeline and where you're focused right now?

M&A pipeline, we continually review opportunities. So I don't expect us to be making acquisitions of the size of our last one, being Nypro, which was in excess of $600 million. But, as we said before, certainly opportunities out there for us, more tuck-in in size, maybe $100 million to couple of hundred million dollars type of scale. And those will be focused in areas of capability. We're looking to enhance to serve the markets we're performing well in. And certainly as we move through the balance of the calendar year, we'll see what comes to fruition. But it's certainly part of our growth strategy, and we have liquidity in place to make that happen. Nikhil Kumar - Stifel, Nicolaus & Co., Inc.: That's helpful, thank you.

Your next question comes from the line of Sherri Scribner with Deutsche Bank.

Hi, thanks. I just wanted to ask a little bit on the Nypro business. You guys are seeing really good growth there that you talked about, Mark, faster than the market. How much of that additional growth is coming from opportunities that you're seeing being able to use those capabilities with your existing customers; and how much of it is share gains related to just being part of you just being more aggressive? Mark T. Mondello - Chief Executive Officer & Director: I'd say it's a little bit of both. One of the things that we're seeing within the Nypro business – and again the Nypro business is carved out into two distinct independent businesses. We've got a rigid packaging business in healthcare. In the healthcare market today, kind of along the lines of the theme of change, we're seeing on the OEM or brand side a significant amount of consolidation. So if you just go back and look in the last 24 months of the different brand companies either combining or buying segments of different businesses from each other, or some of them selling off parts of their business to private equity, the deal flow in that area of our space, so the healthcare space, is pretty dramatic. So that's driving opportunity. So some of that's with our current customers and some of that's with new potential customers. I would say that Nypro, as kind of an independent business, really does a nice job with their value proposition. They do work – Courtney Ryan, who heads that up – his team works closely both with our EMS group and our Green Point group as far as sharing capability and potential, what would I call it, I guess capability or engineering technologies to bring different value propositions forward. And we also – the one thing that's worked out very well for us is we've combined all of our healthcare business into Nypro. So the holistic approach that that team is taking has proved to be pretty powerful. So we've got everything from single-use devices, to drug delivery type of efforts going on along with the electronics portion. So, again, looking at the fact that we closed that business right at not quite two years ago, but the performance has been very, very good.

Great, thanks. And then, Forbes, I just had a question in terms of where we are with the restructurings? It looks like based on your guidance we shouldn't have much more restructurings in the third quarter and going forward. And then also, other accounting housekeeping items, the discontinued operations, how much more do we have of that? Thanks.

So let me deal with the last piece first. Discontinued should be pretty much cleaned up, and you shouldn't see much of that going forward. That was the tail on some of the divestiture of our aftermarket services business closing in phases. So that's pretty much done. In terms of restructuring, we're on track. I'd remind everyone we talked about $188 million of charge over really six quarters to seven quarters. So we're pretty much done there. Maybe a little bit of tail here as we move through the back half of the year. And I'd remind everyone that we're seeing about $65 million of benefit of that this fiscal year; and that should continue into next year. So restructuring, very much on track.

Thanks.

We have reached our allotted time for questions. I would now like to turn the conference back over to Beth Walters for any closing remarks. Beth A. Walters - Senior VP-Communications & Investor Relations: Great, thank you very much. We appreciate you all dialing in for the call today. As usual, we will be available after hours tonight and the next few days of the week for any follow-on questions that you might have. Thank you again for joining us. Have a good evening.