Ladies and gentlemen, thank you for standing and welcome to the Jabil's First Quarter 2017 Fiscal Year 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. [Operator Instructions] 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.

Great, thank you so much. Welcome everyone to our first quarter of 2017 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 investor section. Our first quarter press release, slides and corresponding webcast links are also available on our website. In these materials, you will find the financial information that we will cover during this conference call today. We ask that you follow our presentation with the slides on 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 second quarter of fiscal 2017 net revenue and earnings results, the financial performance of the company and our long-term outlook for the company. These statements are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes results and 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, 2016, 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. We will begin today, with opening comments from Mark on the business and outlook for the company and then hear from Forbes on our first fiscal quarter results and guidance for our fiscal second quarter 2017. Following our opening remarks we will open it up to questions from call attendees. I'll now turn the call over to Mark.

Thanks, Beth, good afternoon. I appreciate everyone taking time to join our call today. As always, I'd like to thank our people here at Jabil and offer my sincere appreciation for their continued focus on keeping our employees safe, while serving our customers with the utmost dedication and care. Now I'll begin today by addressing our first quarter results. The execution by our team was exceptional during the quarter as they delivered $0.69 of core earnings per share and $5.1 billion in revenue. Our financial results were strong than management anticipated, reflecting the second best quarter in Jabil's 50 year history in terms of both revenue and core operating income. The core operating margin for the first quarter was squarely in line with management's expectation of 4.1%. Throughout the quarter certain product volumes in our mobility sector were softer than expected. While the balance of our business performed at or above plan. I'm pleased with the results and believe they accurately reflect the potential and overall effectiveness of our strategy. A strategy grounded by increasing the diversification of our core earnings. Lastly we remain highly confident in our ability to deliver $3 in core earnings per share for fiscal year '19. Our management commitment communicated by Forbes during our Investor Day back in September. Forbes will speak more in detail to our business outlook and provide more color around our first quarter results during his prepared remarks. I'll now offer some thoughts as to what's driving our business as we look into the second half of the fiscal year and beyond. Let me start with some key businesses within our DMS segment. Our healthcare and packaging businesses are extremely well positioned to prosper in coming years, as our aptitude and approach solidly align with positive market trends. These businesses are…

Thanks, Mark. Good afternoon, everyone. I'd ask you to turn to slide three, where I'll review our first quarter of fiscal year 2017 results. Net revenue for the first quarter was $5.1 billion, a decrease of 2% on a year-over-year basis. GAAP operating income was $166 million, while GAAP net income was $88 million. GAAP net diluted earnings per share were $0.47 for the quarter. Core operating income excluding the amortization of intangibles, stock-based compensation and restructuring charges was $210 million and represented 4.1% of revenue. Core diluted earnings per share were $0.69. Turning to slide four on our segment discussion, in the quarter revenue for our diversified manufacturing services segment was $2.4 billion, a reduction of 3% on a year-over-year basis and represented 47% of total company revenue. Operating income for the quarter was 5%. Revenue exceeded our previous guidance as we experience strong year-over-year performance from healthcare, packaging and consumer lifestyle sectors. Our electronics manufacturing services segment revenue was $2.7 billion, a decrease of 1% on a year-over-year basis and in line with expectations. This represents a 53% of overall revenues and the core operating income for this segment was 3.3%. We ended the quarter with cash balances of $747 million. Net capital expenditures for the fiscal quarter totaled $162 million, with customer contributions of some $30 million. Net expenditures for the full fiscal year remained in the range of $500 million to $600 million. The first fiscal quarter track to expectations in terms of cash flows from operations and totaled $152 million. We continue to be very well positioned to deliver annual cash flows from operations of at least the $1 billion and free cash flows of at least $450 million. Our core return on invested capital was 17.6% in the first quarter. Turning to our capital…

Great. Thank you, Forbes and thank you Mark. Operator we are ready to begin the question-and-answer session, but before we begin I’d like to remind our call participants that we will not be able to address customer specific or product specific questions. So we thank you in advance for your cooperation.

[Operator Instructions] Your first question comes from the line of Steven Fox with Cross Research.

First question just on the EMS business, Mark you mentioned that some of the solutions and services are increasing in relevancy, could you talk about maybe some of the highlights from the quarter, where your value preposition is improving. And then towards getting to the 4% what would be the key drivers in terms of the value preposition helping that in terms of mix going forward? And then I had a follow-up.

Yeah, sure Steve. So I think it starts with the fact that our EMS business is just so well diversified and I think between our enterprise and infrastructure business and our engineering solutions group and all of the sub-businesses below that we probably got to 200 customers in that space. And it’s everything from the automotive world driving more electronic content to what we are doing in our StackVelocity business, what we are doing in terms of optics now on a component side versus just building the circuit boards, the semi-cap business, the semi-cap world has been a bit of a cyclical industry for the last six, eight, ten years. I think there is really good secular trend there in terms of the type of assembly work, the type of assembly work with silicon and intricacies there. So that’s an area that that we have made some fairly significant investments on and we are getting extremely good paybacks on that and we see that continuing to move forward the next three, four, five years and then we continue to move out into new markets. So, I think today, I don’t know the exact number Steve, but we’ve probably tripled the amount of product that we ship out of the company today that has to do with much more than just core electronics so kind of complete products versus circuit boards electronic module. So, I think that’s where we are getting sustainability around the value preposition and the value add portion of the business.

Great, that’s really helpful. And then just understanding that you obviously can’t talk about customers, but you mentioned that the fiscal fourth quarter could be unusually strong, I mean, how much of that would you attribute to gaining print position, expand the capabilities on the mobility side? Any color you can provide on how that DMS ramp is Jabil specific? Thank you.

Yeah, I think so we feel -- as we sit today, we feel good about our 4Q and it’s a combination of things; one is, we feel good about the EMS business. So in my prepared comments I talked about here is a business that back two years ago we were making 2.5 points in margin and as we close out this year, we’re looking at margins up near 4%, so that’s one area. Number two is for the last couple of years we have been making significant investments in the healthcare and packaging arena and those investments are starting to take hold and they both will have reasonable contributions in the fourth quarter as well. And then as I mentioned we got our typical investments on the OpEx side in Q3 and we’re pretty excited about the mobility roadmap that we see in the fourth quarter. And another area of the business that I highlighted in my prepared comments is our consumer lifestyles business, so we’re doing some pretty cool stuff there with material science, two wing solutions, miniaturization and then optics and camera modules. So, I think all of that combined gives us a pretty good outlook for the fourth quarter.

Great, thank you very Much.

Your next question comes from the line of Sean Hannan of Needham & Company.

Yeah, thanks very much for taking my question here. Just to follow on the last response you had their Mark and talking about the optics and camera modules. Can you expand on that in terms of the efforts within the material science piece of the business? How you see the consumer lifestyles stuff being kind of evolving from here? And then specifically as we talked about particularly optics I think we are talking more within a handset were kind of a small footprint type of product application and if there is anything else surround that that you might want to add into it or clarify that would be helpful. Thanks.

Yeah, It’s an area for us where we’ve made some fairly substantial investments, we acquired Kasalis, which is an active alignment business and the team has done really nice job of taking a look at the marketplace and really taking a look at the next four, five, six years on how folks are going to interact with the environment around them whether it be virtual reality type of gaming or augmented reality and that has a lot to do with again miniaturization, power management, material science and a lot to do with optics. So your read on the camera modules and optics is correct, it’s more miniaturization, but it’s also a solution that we think has good growth to it and another area that we are interested in that we are spending a quite a bit time on is acoustics as well because we also believe that the days of punching on a keypad those will start to get behind us in terms of greater and greater voice recognition. So, that’s another area that we are pretty excited about. We won’t see much return this year or early part of next year in terms of the acoustics, but it’s an area we are pretty excited longer term. So, again the product mix in that group two continues to be more and more diversified every single quarter.

Okay, that’s helpful. And then also as a follow on to that, when you think about where the technology is leading specific to really just consumer side of the market in consumer lifestyles. The technology progression that you are accomplishing that you are moving forward with to what degree is this able to be leveraged in some of the more advanced technology say if we were to think about the medical space, industrial is there any application there that’s either on the conversation table today or how do you think about that type of leveraging move to forward?

I think it’s one of the most interesting things about how Jabil structure. We have these different businesses that serve different end markets. And one of the things that I think the company does a really nice job of is what we kind of call internally we have a lot crosstalk, which means that our healthcare folks spend a lot of time with our material science folks, with our folks on optics and embedded cameras. And so the crosstalk we get both from a capability standpoint and end market standpoint is fabulous. And I think there is a whole area of what we would call kind of consumer electronics or consumer lifestyles that we’ve made a conscious decision to steer away from. So, there is a whole a lot of gadgets out there. There is different type of wearable products and things like that and there is just no income to that it’s all about who can offer up the next penny. And we are really going down the path of kind of higher end products with control points and participation in higher end technology. So I would envision aerospace, defense, automotive, healthcare, those are some markets that I think will end up having some decent crosstalk with our consumer lifestyles group.

Great, thanks so much.

Your next question comes from the line of Herve Francois of B. Rile.

Hi, good evening. Thanks very much. Could you guys talk a little bit and I apologize you mentioned this during your opening remarks in regards to your gross margins and I guess even the guidance as well is the number one factors continue to really to be the mix of business between the two segments. Are there any other kind of material items that impacts that gross margin one way or another?

Herve it’s Forbes, let me take a swing at that. I think as Mark said in his prepared remarks, a lot of that gross margin performance as we think forward here certainly over Q2 and Q3 there is really a run to leverage and utilization of the asset base we have in place within our mobility sector. So as you see those types of volumes come back and certainly as we move in our Q4 you'll see gross margins at least not back there. But I'd also point out is I think we’re doing a really nice job around our SG&A number in return of the OpEx and continue to manage that down having taken some actions in October and those will continue as we move through the balance of the year here. So we should also see some snap coming out of that.

Yeah Herve I'd like to comment a follow up on Forbes. The one thing I think yeah it’s business mix and certainly some sensitivity around the handset market and what not. But the one thing I couldn't be more proud of with the entire leadership team is the amount of aggression and just overall care that the leadership team has given around the cost side. So I think one of the things when I think about why would I think that the EMS margin structure is not going to go back to 2 points is I think the EMS business today benefits from some of the tough decisions we made 18-24 months ago in terms of overall cost platform and cost structures. And I'd envision that the announcement of the restructuring that we're talking about back in September I would envision additional payback on that for the coming 24 to 36 months. So one of the things that the team does a really nice job of is getting after things they control and one of that is overall operating cost and one of them is overhead cost. So the team has done a nice job there.

Got it. So I guess just to that point thank you that's helpful. Outside of the pickup reductions that you had taken you discussed last quarter that was largely SG&A related. When you see over the next couple of quarters are you kind of comfortable where you are with your headcount based on some of the forecast that you’re looking at amongst your business lines that you're pretty much done with that?

Yeah we feel great with it how the company is positioned. On our environment step change is pretty quick, but as kind of we extrapolate out to the $3 a share we're shooting for in fiscal year '19 the cost structure we have in place is superb for that.

Got it, that's helpful. And to your team happy holidays, thank you.

Yeah, you as well.

Your next question comes from the line of Steven Milunovich of UBS.

Thank you. Forbes I think you said at the Analysts Day that free cash flow per share this year could be around $2.50, is that still the case?

Yeah that's correct. It should certainly be $450 million plus yeah.

Okay. And then I just want to clarify a couple of comments about growth. On the EMS you said the plan was for 5% to 6% profit growth that's now 10% to 12% that's for the full year I assume. And then on the healthcare and packaging, I thought at the Analysts Day you said double-digit and then today you said over 20% growth over the next few years. Is that sort of increased at all?

Yeah it has Steve. So let me take those one at a time, I think what I said back in the June call is I gave some numbers around the EMS segment for the first half of '17. And my memory could be off, but the way I recall it is I think in the September call I said that the EMS segment would grow 5% to 6% in terms of core earnings for the full year. And in my prepared remarks today I took that upto 10% to 12% and that's for the full year in absolute income dollars FY16 to FY17. And in terms of the healthcare and packaging, I think in our last call I talked about healthcare and packaging maybe growing at 10% to 15% year-on-year. And I believe I did say at the Investor Day that it would be double-digits and today I talked about healthcare and packaging for the next couple of years growing at a CAGR of 20% plus and we feel pretty good about that.

Okay. And then you do have a pretty wide range for the next quarter, is there any particular reason for that?

Because I mean it’s -- we’re dealing with some high beta businesses in our DMS segment and we feel good about the midpoint, I think the midpoint of the range is around $145 million and I think from a core EPS standpoint it’s around $0.46. But there is a lot of moving parts for the quarter. That’s all.

Okay, thanks.

Yeah.

Your next question comes from the line of Jim Suva of Citi.

Great, thank you very much. Two questions and I will give them kind of at the same time. It looks like your EPS range is larger and I think on the last question you talked a little bit I think you said your answer was because of a lot of moving parts moving around. Can you help us understand about what’s different now because it seems like the past two years you did a lot of CapEx under it and you said you’re very excited about this year. So I am just kind of wondering about kind of what the real reason or not the real reason, but what’s the reason why there is a bigger range? And then my second question is, did you give full year EPS guidance here in the revenues or if not why not, because it seems like you are talking about fiscal Q2, Q3 and Q4 about some variations of what’s going on with the margins and stuff like that. So can you help us out with the EPS guide for the full year or if not why are you not giving full year guidance?

Okay Jim let me try to hit those. So I think the guidance range we have is not all that the similar to the guidance range we gave in going into Q2 last year. So I think it’s like a midpoint plus or minus 12%, 13% and I think that’s pretty consistent with last year and again it’s no more complicated other than we feel good about the broad based EMS business, we feel good about the healthcare and packaging and again I think everybody is aware of the high beta nature of our mobility business. So it’s not to more than that. In terms of guidance for the whole year, I think what we feel good about is, is to talk about things in our control and the things that are in our control or things like cost; things that are in our control is for us to be able to update you real time on activities around product roadmaps and what not in anticipated investments and we end up being more descript around things like cash flows for the years because the cash flows don’t seem to have the same sensitivity as say earning do in terms of potential volatility in certain parts of our business. So that’s the rationale for not giving full year guidance, but I think we gave a decent amount of color in the things that we have reasonable confidence in, if you kind to take the comments you can extrapolate out the EMS business out through the end of the year, I think you can model out some good estimates around healthcare and packaging and then you can kind of back into a Q3 number based on some information I gave in my prepared comments of where we see Q3 relative to Q2 and we gave some background of why that is. And then we’re fairly -- as we sit today we’re fairly bullish around Q4 and if you can imagine Q4 revenue levels on the DMS side maybe being similar to say a Q4 of 2015 you can kind of see how all that will model out for the year.

Okay, great. And after hearing all that, it actually makes a lot of reasonable sense and I sincerely appreciate all the details and wish you and your families and loved ones a happy holidays. Thank you.

Thanks Jim, you as well.

Your next question comes from the line of Amit Daryanani of RBC Capital Market.

Thanks a lot. Good afternoon guys. I guess two questions from me as well. Mark I want to go back to just the number that you talked about DMS getting to the same run rate in Q4 as you were and I guess in August of ‘15 it should be like a $1.9 billion number that would imply that you actually have a stronger DMS quarter than you have had in last four, five years, just want to make sure that that’s sort of what you intent to talk about that this business could be up high 20% sequentially in the August quarter this year.

Yeah let me -- I don’t -- I am not saying that our Q4 would be one of the strongest quarters in the last eight quarters, if you look at we just posted a Q1 number that I think DMS revenues were like $2.4 billion if I have that number right. And we had a really strong Q1 of last year. If you're asking around our anticipation of Q4 for DMS in '17 relative to '16, I do think it will be stronger as we sit today. And yes I said for modeling purposes and kind of helping you understand where our heads at, I think the Q4 '17 in terms of DMS revenue closer to say the fourth quarter of fiscal year '15 probably is reasonable.

Got it. And then I guess just broadly I mean, I think 90 days ago and even at the Analysts Day you guys were more hesitant about talking about full year numbers today you seem to be a lot more comfortable about it. What sort of changed because it's in the context of I think investors have a lot of apprehension around what happens with the new models you’re your largest customer and how much or how little do you play there. Is that what’s changed that you have a much better understanding today in terms of the scope of your engagement with your largest customers that hands the content in August or is there something else that's out there that's giving you more conviction.

Well it's an additional days which in our marketplace like dough years so it's a lot. The other part is we do sense that there is an awful lot of apprehension. And yes, there is still a bunch of risk. You guys all understand the risks around each different element of our business. But the apprehension in some of the thoughts that we're going out the business with our largest customer this is just not factual. So I think that's what you're sensing is I don't want to get ahead of ourselves in anyway there is a lot of work to do between now and the June, July, August timeframe. There is a thousand variables that are going to impact the business. But again as we sit here today and we look in kind of a holistic view of what's going in the EMS space what's going on in the healthcare space what's going on in the consumer lifestyle space what's happening for us in packaging. And then you add to it the mobility space that's what's driving our commentary for the back half of the year.

Got it. And if I can just sneak a really quick question in how do you think about DMS margins as you go through the year. Do you think they will be much more stable as you go through this year or would you see maybe fiscal year '16?

No I don't. I think if you just kind of look at the guidance we just provided for 2Q. And you think about the commentary on EMS side I think you can kind of get an idea of where we think DMS will come in this quarter. I don't think the margins in DMS are going to good in 3Q because as I motioned it's a heavy investment period. And I think DMS on an absolute dollar line loss money in 3Q of '16. And I do think the fourth quarter overall for the company will be good. So I think we'll see some variability to the DMS margins somewhat like last year this year.

Got it. Thank you and good luck in the quarter guys.

Yeah thanks.

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

Hi, thanks. I was hoping to get a little more detail into what you're seeing in the EMS segment specifically in the server and the storage market. And then regarding your longer term guidance to grow more than 3% CAGR through '19, just trying to understand what gives you confidence that that segment can return to growth over the next three years?

Well Sherri I think what we're seeing is in the legacy storage area that business is there is parts of it that are down, there is parts of it that are flat and in the cloud area that's where we're seeing most of the growth. We're also seeing some really good opportunistic place for us both in terms of the legacy area and in terms of picking up market share with current customers, our execution has been excellent. The team is doing a great job in taking care of some great brands. And then in our StackVelocity area and the cloud computing area that's an area for us that our value proposition has changed a little bit and we’re seeing some good wins and they are not huge, but they are in the tens of millions of dollars which is good business. In terms of overall growth for EMS, when you take the puts and takes I think the EMS business over the next couple of years will grow like Forbes said in the Analysts Day, I think he said it would grow sub 5% and we feel that’s a kind of a 0% to 5% growth rate business, but our value preposition continues to change. So if you think about that business over the next couple of years in low single-digit growth, but with better sustained margins, we’re pretty pleased with it, especially if you look at that business from kind of a cash flow or free cash flow basis.

Okay, thanks. And then just Forbes, can you just repeat what you said about the share buyback, how much you spend and how many shares you bought back? Thank you.

Yeah absolutely. So of the $400 million authorization we have in place, we’ve used $208 million to-date. So 10.2 million shares and in the November quarter, we actually used $114 million or 5.3 million shares were retired.

Thanks, happy holidays.

Thank you. Same to you.

Same to you Sherri.

Your next question comes from the line of Adam Tindle of Raymond James.

Okay, thank you. Just wanted to start on DMS, with the revenue upside well above your expectation didn’t really translate to operating margin upside. So could you just talk about why the upside didn’t translate on the operating margin line in the quarter?

Yeah, that one was simple, it was as I mentioned in my prepared remarks Adam, the mobility side was slightly weaker than we expected and there was other parts of the DMS sector that were stronger than expected. So in certain parts of our DMS business, especially when you think about the different sets of assets we have, if we would have generated I think we over shot the midpoint on revenue by roughly $200 million and the vast majority of that was DMS. We would have seen probably 12, 15 points of leverage on that. But it was based on where the additional revenue came from within the DMS sector. So I think our overall leverage on that $200 million was $9 million, $10 million and had it been other business it might have been closer to $12 million or $15 million.

Okay. And then just wanted zoom in on the 3Q DMS guidance, it look like you probably going to near 0% operating margin or so if I am reading this correctly. Understand that there is investments involved there, can you help us with maybe how much investment is implied so we can have a sense for the 4Q upswing. Or maybe another way to ask this is to say that you talked about revenue being similar to fiscal 4Q ‘15 would operating income dollars be similar?

I don’t want to go there, I mean what I would tell you is we’re banking on some fairly significant investments in the third quarter and we view that as a positive. The nice thing is we have been to able to navigate say a tough road map and we’re able to leverage existing fixed assets that we have. So Forbes talked about our CapEx for the year, our net CapEx for the year is still going to be at a very, very good level. We talked about free cash flow for the year being still in the $450 million range, we’re really, really pleased with that, that’s what’s driving again a decent amount of capital return framework. And I also view the level of investments that we’re planning to make in 3Q as a positive because we wouldn’t be making those investments unless we felt good about the products that follow. So I think on the DMS line, again in my prepared remarks I said something along the lines of if you take our midpoint of 2Q, which is $145 million of core operating income and you adjust that down 25% or 30% that probably gets you a core operating absolute dollars for Q3. If you take the EMS business and you start modeling that and running that up towards 4% then I am not sure how the math works, but doing it quickly in my head that would suggest that the DMS space is probably close to zero, maybe even slightly negative.

Right, I guess maybe just following up real quick on that. Help us understand you sound really confident in the $3 in fiscal ‘19 plan that’s predicated on DMS target range of 5% to 7%. Maybe what gives you the confidence for that given these trends and help us kind a bridge what's happening right now versus your confidence around long-term 5% to 7% DMS margin. Thanks.

Yeah actually I think we can get to $3 a share in '19 without being in the 5% to 7% range. And I wouldn't take that as we're not moving off the range. If I think about two to three years out, I think about where we're moving in healthcare where we're moving in consumer lifestyle, we're moving in packaging. And then we've got some other businesses that we don't talk about at all in that space. And again from an ROIC cash flow margin standpoint all of that business has a trajectory to be in the 5% to 7% range. And I think that's why Forbes stated at the Investor Day that the 5% to 7% range in that area is still holds. So I don't know that we need to have our mobility space in 5% to 7%. Although we anticipate it will be. So again I think when I think about $3 a share I think about if you extrapolate out low single-digit on the EMS business if the EMS margin platform is again a little bit secular and let's say that business new normal is 3.5% to 4% margins and then eventually stabilizes around a 4% margin range. It's pretty easy when you think about the core operating income, you think about our interest expense and you think about tax rate and you also think about the share buybacks. If you start modeling the business with shares been around 170 million shares versus 200 million or 210 million shares it's a pretty possible story to see us getting the $3 a share.

Okay, thanks happy holiday.

Yeah you as well.

Your next question comes from the line of Ruplu Bhattacharya of Bank of America Merrill Lynch.

Hi, thanks for taking my questions. My first question relates to your CapEx guidance. It looks like you haven't really taken up the guidance it's still the same as what you had last time. So does that implies that based on what you know the new phones that are coming out, your existing infrastructure or existing equipment is sufficient or could there still be some M&A that you need to do to be able to deal with the new phones.

I think the existing infrastructure in terms of square footage and equipment and capabilities is pretty much in place. Any contemplated additions are included in that net number I've given you. And so as we sit today and knowing what we know today we feel that we're in pretty good shape.

Okay thanks Forbes. And the follow-up is based on what you see in the mobility space in fiscal '18 and beyond, do you think that there is an opportunity for Jabil to increase its content both on the mobility side in for the phones for your largest customer, but also maybe even the non-phone revenue. Do you think you can increase your content in that so just wanted to get your thoughts on content growth for Jabil over the next couple of years.

I don't know how I want to answer that. I think there is an opportunity; I always think there is an opportunity. What I anticipate that our content is going to go up. I think I would think about the business as our content stand in a reasonable band of where it's been. So I can tell you that on the mobility side of our business relationships haven't changed. The stuff we do on a unit price basis the economic profiles haven't changed. The biggest issue there is all around asset utilization and asset efficiency. And we've layered in capacity, our deprecation in Q2 and Q3 year-on-year are going to be up. And again we wouldn’t maintain that additional depreciation or capacity if we didn't think that there would be good leverage on those assets. And if you kind a run all of that on a net present value model, we feel like we made a good decision to keep those assets in place. In terms of non-mobility product, yeah I think there is opportunities there for sure.

Okay thanks for the color Mark, appreciate it.

Yeah, thank you.

Your next question comes from the line of Mark Delaney of Goldman Sachs.

Yes, good afternoon and thanks very much for taking the questions. First question I was hoping to better understand the opportunity on the retail and specifically soft goods manufacturing, I think you eluded to it a bit at the Analysts Day and some headlines about working with Under Armor. So I was hoping you could help us understand what that could mean for your model and how quickly we could see material revenue from that effort?

Yeah thanks for the question Mark. I’d like to just hold off on that until we get further through the year and for a few different reasons. So let us hold off and we’ll potentially talk about that in the March call at the June call, but I want to be sensitive to our customers in that area and what we are doing there. But it’s an area of great interest for us not just because it’s a new potential market, but some ideas we have there around automation and 3D printing, some of the partnerships that we’ve developed I think we have got a really, really nice value preposition and we’ll talk about it more as appropriate.

Okay. So that mean just given the sensitivity, I make sure we think about it as sort of with one person to start and then maybe long-terms it expands to more customers is that fair?

I would think of it as multiple customers in parallel and I would think about it not being relevant until say mid fiscal year ‘18 in terms of what we see ahead of us.

Okay, that’s helpful. And then follow-up question, just trying to better understand the restructuring program, I think Forbes you reiterated the $20 million or $30 million this year, maybe can you help us understand how much of that’s already been realized with the guidance that you gave for 2Q and 3Q around EBIT levels? And then how quickly do you get to that full $70 million to $90 million.

Yeah, so let me answer the last part first. The $70 million to $90 million we previously said that would really be as move into fiscal ‘19 in fact given the proposed timing of some adjustment of some assets in ‘18 the long pull in the stand if you will there some higher cost regions. But as we think more near term in terms of fiscal 2017 a lot of these actions we took were late in the first quarter, so there is little impact in the first quarter that with just printed. But you probably see $3 million, $4 million of that reflected in Q2. And then add layer in from there with the majority of that between Q3 and Q4.

Thank you very much.

You’re welcome.

Thanks, Mark.

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.

Okay great. Thank you everyone for joining us today and I’ll reiterate hope everyone has a safe and happy holidays and we will certainly be available through the balance of the week to talk to any investors or analysts anybody for that matter who has questions on the quarter and the fiscal year. So thanks again, happy holidays.

Thank you for participating in today’s conference. You may now disconnect.