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For Q1, we expect a sales decrease between 17% and 20% compared to the prior year. This outlook assumes continued declines across our major product categories, particularly printing and a 50 basis point favorable impact from FX. We anticipate Q1 adjusted EBITDA margin to be approximately 18%, driven by expense deleveraging from lower sales volume, partially offset by lower premium supply chain costs. Non-GAAP diluted earnings per share are expected to be in the range of $2.30 to $2.60. Q1 sales and profitability are expected to sequentially increase from Q4 as distributor inventories and end market demand has stabilized, and we have realized incremental benefits from cost actions.
For the full year 2024, we expect sales to be in the range of a 1% decline and 3% growth.
17-20 dowm in Q1 , 1-3 down FY
Transcript
2023 Q4
16 Feb 24
We entered 2024 with distributor inventory levels aligned with recent demand trends and improved backlog driven by modest year-end budget spending into January from certain retailers.
distributotr levels aligned with demad tremds
Transcript
2023 Q4
16 Feb 24
Although we are seeing some improvement in order activity, we are not yet seeing any signs of a broad market recovery and remain cautious in our planning.
no sign of broad market recovery
Transcript
2023 Q4
16 Feb 24
the declines in our larger customers were larger than the declines in our mid-tier and small, run rate business as we would call it. And that helps us understand this better because we track, of course, we have direct contact with our large customers and we see what's happening to individual deals there.
Now what we've been seeing is that a lot of those deals hundreds of millions of dollars have pushed out of the first half into the future or in some cases have disappeared as deals altogether. I'll give you some examples of those, but before I do this behavior has accelerated in the second quarter.
So, for example, in North America, the amount of push-outs that we've seen relative to the first quarter has tripled.
Now let me give you just a few examples, right? So you can -- you see what's driving this and what's happening, right? At the beginning of Q3, we had a grocer who came to us and said, I want to buy $4 million worth of your mobile computers. And midway through the quarter they said, we're not going to do this deal in Q2, we're going to do it in Q3. I'm sorry, I said Q3 at the beginning, my mistake.
So they came at the beginning of Q2, said, we want to buy this. And midway through the quarter they said we now want to do this deal in Q3 rather than in Q2.
So a good example of what we would call a push-out.
But we also had another grocer who at the beginning of the quarter was indicating that they're going to buy over $5 million worth of mobile computers. And they came and said, we now want to do take these $5 million of mobile computers, but we want to buy them over the next five quarters equally distributed, which of course, delays our revenue trajectory.
We also had a DIY retailer who wanted to buy $7 million at the beginning of Q2 and came to us during the quarter and said, my budgets have been cut. I can't do this project right now anymore. We'll do it sometime in the future, but I can't tell you when.
So these are three different examples that all impact our Q2 revenue and indicate that our customers' budgets are under pressure to the extent that they're trying to extend out when they buy from us, which diminishes our revenue. Hopefully that's helpful.
colour on trading
Transcript
2023 Q2
29 Aug 23
And we see this as really broader global macro weakness, but we've seen particular impact from that in EMEA and in China and China we expected more recovery out of COVID that we haven't seen in slower economic factors within China.
china weaker than expected
Transcript
2023 Q2
29 Aug 23
But the reason you see that the uptick there is really because we're seeing an oversize effect of our distributors destocking inventory levels as their end demand continues to slow.
So ultimately our sales out of distribution, when that slows, they hold a specific days on hand inventory and they need to buy less from us because they're selling less out. They need less in inventory. And I think that the -- we see an oversize effect when end demand slows.
So in fourth quarter, we're seeing less of the destocking than we were in Q3.
The destocking is also driven by the fact that our delivery times have shortened and their cost of capital's gone up.
So there's pressure on inventory and to lower those inventory levels really as their end demand is slowed and we're seeing a bit less of that in fourth quarter.
So that's really the trajectory we're seeing around. We believe ultimately we're seeing -- in the process of seeing really the bottom in Q3 and Q4 and do see an inflection point in 2024. But the difference between Q3 and Q4 is really predominantly based on inventory destocking levels. And we expect to exit year-end with the right levels of inventory for what is the end demand that our distributors are seeing.
So we see destocking taking place through the second half year, and then being really at the right levels for the demand that our distributors are seeing as we exit the year.
destocking comtinues into q4 , inflection in 2024
Transcript
2023 Q2
29 Aug 23
think overall that we've said that what we've seen in the market is that as the goods economy is clearly weaker than the service economy, which is resulting in we're seeing more of our customers really absorbing the capacity that they bought through the pandemic, and that extends beyond just the largest e-commerce retailer we've talked about in the past, but to other e-commerce even our retail customers and into transportation logistics customers as well. And we've seen softness now spread into other markets.
But specific to your question, I think that I guess maybe a good example of that is recently we've seen a large logistics company talk about really what's been detrimental to their volumes, right? And I think it is this idea that the overall industrial economy is slowing, right? Clearly focused on goods and not services. And they've said, look, that's slowing obviously because of all the macroeconomic indicators, right?
Inflation interest rates slowdown in global trade. It's also being driven by consumers buying less, right? And then this reset of e-commerce coming out of the pandemic to the levels of purchases of goods slowing down transportation logistics package delivery as well, which has really been detrimental to the entire industry overall from a volume perspective.
So we're seeing this additional capacity built out in e-commerce players. We're seeing it in retail, and I wouldn't say it as much as excess capacity is really, they have what they need for now, and as the goods economy slows, they eventually will come back and buy more.
But for today, they've got what they need. We're seeing it move into parcel delivery with transportation logistics, but also spread into other markets as well.
As you know, in first quarter we talked about slowing down of large orders and large customers. We've seen that move into mid-tier and smaller customers as well.
So it's more broad-based than we had seen in the past. And we think it really is the two years of very strong demand we've seen, especially in mobile computing across our entire customer base is now being absorbed and into the marketplace and then ultimately, that's why we're seeing the decline in the short-term. And that will come back as the macro indicators come back, as people buy more goods than services, as you know they use this excess capacity within their environment. They will buy more from us. And we'll see that inflection point at some point, but right now we're not seeing it. We're clearly seeing our demand be pressured because of it.
colour on retail/e-cmmerce weakess
Transcript
2023 Q2
29 Aug 23
While customer spend is pressured near-term, over the long-term, we believe we're well-positioned to benefit from secular trends to digitize and automate workflows.
near term, pressure
Transcript
2023 Q2
29 Aug 23
However, we now expect minimal inventory reduction in 2023 due to our lowered sales outlook.
minimal inventory reduction
Transcript
2023 Q2
29 Aug 23
Our Q3 sales are expected to decline between 30% and 35% compared to the prior year. This outlook assumes double-digit declines across each of our core product categories with distributor destocking accounting for approximately one-third of the decline. We anticipate Q3 adjusted EBITDA margin to be between 10% and 12% driven by expense de-leveraging from lower sales volume, partially offset by higher gross margin from cycling $30 million of premium supply chain costs in the prior year period. Non-GAAP diluted EPS is expected to be in range of $0.60 to $1.
Given our Q2 results in the continued challenging demand environment, we are significantly reducing our full-year outlook, expecting a sales decline between 20% and 23%. This assumes the Q3 sales trajectory continues through the remainder of the year. We're seeing broad-based declines across our end markets as we enter the second half with significant uncertainty in this environment.
big decline in expectations
Transcript
2023 Q2
29 Aug 23
On our last quarter call, we discussed the broader softening of industry demand as customers tightened their CapEx budgets and IT device spending slows.
During the second quarter, those trends accelerated as we saw more cautious spending behavior by our customers of all sizes across our vertical end markets and regions.
While all end markets declined, demand was weakest in retail and e-commerce and transportation logistics as many customers are absorbing capacity they build out during the pandemic. These dynamics have been exacerbated by our distributors focus on reducing their inventory levels, which accounted for approximately 20% of our Q2 sales decline.
Our distribution channel has been aggressively driving down inventory as end user demand has slowed, product lead times have recovered, and the cost of holding working capital has increased.
weak end markets
Transcript
2023 Q2
29 Aug 23
We continue to see enterprise customers defer large orders and are also realizing lower sales into the channel as distributors adjust to softer demand trends as well as our improved product lead times and their higher cost of capital.
defer of orders
Transcript
2023 Q1
19 May 23
As the risk of broader softening of industry demand has materialized, we have reduced our full year outlook. Late in Q1 and into Q2, demand trends softened across our end markets, particularly for mobile computers in EMEA and North America as customers' CapEx budgets tightened and IT device spending contracts.
weaker than expected
Transcript
2023 Q1
19 May 23
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