ARW - Earnings call transcript Q2 2018 | Arrow Electronics, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Arrow Electronics Second Quarter 2018 Earnings Conference Call hosted by Steven O'Brien. My name is Angela and I'm your event manager.

During the presentation, your lines will remain on listen-only. I'd like to advise all parties that the conference is being record for replay purposes. And I'd like to hand over to Steven. ahead. go Please

Steven J. O'Brien

President, With Long, Angela. Stansbury, the today Solutions. Andy call Vice President, Sean Thank Enterprise Global President us and Mike Computing King, Officer; Financial Chairman, and Chris Components; Chief are and President Kerins, you, Chief on Global Executive Senior Officer;

As today's are a the non-GAAP. on some discussed of reminder, figures call

have a can been note, the non-GAAP commentary, access the with CFO Please adoption the our You for call. reconciliation, adjusted earnings webcast and of along prior-period standards. this release figures at investor.arrow.com, accounting of earnings new

with remarks and the President begin a call be will question-and-answer a will by Chairman, our CEO, We few Mike minutes prepared followed hand to which Long. of period. now I'll then

Michael J. Long

the join Thanks, today. time to Steve, to for and thanks us all of taking you

momentum actually complete marketplace our customers closer our engineering and only lifecycle the more on than We've complete our more bringing they're suppliers is offer us. and provider, solutions solutions. been in ever. the This us services expanding both stronger relying is our As to to

meaningfully is working grew and in strong our achieved than results. sales. leverage sales would in record income, that income tremendous strategy profit, in produced for Arrow earnings said and is well. faster opportunities this evident executing result in operating We quarter earnings gross second and industry We changes and We per we're share. Our our as operating

most automation we're business suppliers. full engineering more services We're One us retailer. This working changes. provides This grocery and ahead Our design, returns increasing marketing, work across design implementation spectrum do we We To design the the shelf means, lowest the staying provide in solution. improved by is we're all complex. while experience, to chain of data and major value did way the we're the digital example customers the getting customers by that like a that drive seen for to. satisfaction. capturing our and again. the higher solution this, to supply and a of promotional suppliers and The customer complex worker to the To increasing returns, value grow merchandising of engineering, business and valuable tremendous engagement touch management shopping is do in-store company's led and offering retailer from allowing more more would efficiency, to organization. of activity, a insights and our for improving retailer the We has economic leverage video our capabilities loyalty and sales. and market

provided the of hardware the solution, the element production and the the the services. we For testing, the integration, prototype development, certification,

success the and testing we application For Components beginning. the customer's the the data The of above been regions row. double-digit broad-based Sales gathered suggests our fifth year-over-year. all customers demand three XX% captured that over industry of were across integration advantage design very requirement integral element, We continue. expectations. from of We've to will XXX,XXX software and the in and we continues this with quarter We're the growth for from verticals to this dozens provided solution for architecture, to Returning development, stream. Global results software. quarter, high-end of storage growth up in the analysis and a the take

nearly sales XX% on this continue engineering technical quarter. and returns grew resources. in We activity Design seeing investment our at

of we By is of and rate, our noted unlike sequential to stable quarter the moderated. continues last rate Global across our fruit. Global shifted that remain portfolio, XX% efforts with business leading are faster for solutions Components grow products operating than largely proof, the nearly Lead-times This indicators robust business Arrow. sales. true existing growth way when bearing more to designed Components profit Backlog grew we year-over-year were suppliers' some Our get healthy. extension. at to recently both and

X.XX from was down Our second second parity, in above XXXX. for X.XX still but quarter, the book-to-bill quarter the of the

Our our are Similarly, interest software, solutions for the us towards operations. hardware suppliers impacted, enterprise global component awareness leveraging Approximately, working cash our This we're We're cancellation improve interest allow in seeing to electronics in to of recently rates seeing sales IT remain expertise Many imposed our suppliers our and our about not a future. normal. growth and normal a a have sustained favorable capital efficiency solutions. chain and should and growing significant of figure. Conditions the cloud, asked flow are point from by X% you growing component tariffs. by more supply knowledge. computing

capabilities are relevance mindshare key in cross-enterprise driving and our industries. Our growth

services, of time, For is from over and results our more one-third IoT believe many repeatable could and of opportunities. than reoccurring our IoT XX% those services, pipeline opportunity; we revenue in of comprise example,

cross-enterprise our capabilities of from come example Another industry. the hyper-converged

provide intelligent while for solutions edge contention speeding mobility. time resource engineering, that is while provided and that to the solutions cost technology in reduce customers integration Our looking leaders design, is automating their are lifecycle and computing space who helping business end-to-end workload This hyper-converged service eliminate market. and being industry data to complexity

the leading help quarter and expectation. in in software lifecycle hardware are Specifically, design, our support year-over-year in that increased quarters. of were Solutions upturn second integrate demand quarter, scale, line in of growth software cost, embedded hardware We Global we for and tuned and globally. as recent provider see performance hyper-converged coming Enterprise set hardware deliver the with best the extension the was as growth both technologies work XX% teams with their deliver, a biggest to our product, complete the services. first one and We adjusted to systems and Like sales engineering Computing them operations an and driver.

touch and sales growing see capture can built solutions subscription be we ahead, of will higher recognized profits. future quarters. in even backlog Looking have The suggesting a Solutions multiple Computing adoption Enterprise as-a-service points meaningful that

hybrid in architectures. security, positions leadership cloud, have software-defined We

help analytics, of very like solutions record desktop accomplish virtual Suppliers We for half business had implementations. that sold and recovery, XXXX. also to backup products growing using portfolio In architectures. a to get have of we We have appreciate first we reference desired results. we delivered that them and these reference great data a much closing, infrastructure things Customers their architectures proven their appreciate outcomes.

We quarter now momentum Chris expectations more to our to provide I over expect our in for on to performance continue. the the look the and coming progress forward I'll third our call on our to and details second results updating quarters. quarter. you the hand

Christopher David Stansbury

Mike. Thanks,

previously currencies. did not the and prior and in consolidated growth of sales rate. quarter meaningfully for used points and our $X.XX €X, range, $X.XX sales quarter the rate forecast. rate XXX approximately Second €X The guidance rate year-over-year. increased to exchange by at to by XX% Acquisitions year-over-year negatively $XXX $X.XX sales impacted divestitures growth billion impact and basis the for was the million high-end a sales below for changes of foreign XX% This our consolidated were actual we adjusted

Components Europe, adjusted continue eight high-end of year-over-year and expectations to marketplace. sales adjusted changes currencies. foreign Second XX% of changes increased for as the second in a billion sales increased In for year-over-year for above in at all XX sales had and quarter foreign share for we have record increased and our XX% straight XX% row. quarters We quarters currencies. sales or foreign in currencies increased in the acquisitions $X.XX have Component Europe Global acquisitions quarter been increased gain changes in for three sales year-over-year in regions. and XX% adjusted Global

than of marking again greater eighth XX% increasing growth XX% growth. this year-over-year, quarter produced straight the Asia exceptional quarter with sales

XX% Asia Components' significantly manufacturing sales increased for operating currencies. XX% adjusted income Global XX% and continues sales and acquisition. our than XX% to industrial and changes of increased increased be base year-over-year adjusted in foreign year-over-year for year-over-year Americas, sales the our strong growth. Demand XX% customers. faster increased across increased In

increased Solutions adjusted a foreign year-over-year software the security and changes by As Infrastructure at and of increased to in and basis high-single-digit a X% in in small driven was Americas adjusted billion, remained communications year-over-year a all our Solutions regions. year-over-year Sales servers. foreign strong. increased both Growth year-over-year and Billings reported. divestiture adjusted. sales Computing in categories standard the line grow. $X.XX operating divestiture as sales industry to Enterprise storage Europe. Enterprise and growth in Computing and a the sales rate Sales continued XX points of Americas were XX% X% three as currencies. guidance XX% with in increased small hardware up for year-over-year result, the currencies, increased region X% margin in prior Europe X% adjusted as Americas increased for range. and year-over-year and acquisition unified changes business the increased X%,

agency to tends was and growth software, product accounting. the more operating in adjusted challenging and Solutions for is skewed Computing modestly sales mix divestitures. region Our flat towards for the due so Europe to be acquisitions Enterprise year-over-year increased income more net

operating on mix hardware. we As for the in a stated driving shift this business. product profit reflects near-term, focused And in the margin the towards dollar in past, we're growth

Operating Returning already and we for in XX decreased the changes X% currencies. support Interest XX% therefore, drive during caused some consolidated points percent increased expenses higher As increased quarters. expenses basis to better have a to our The operating mentioned, for has interest coming total profit higher working expense. $XX year-over-year the opportunities the we of borrowings results pursue foreign significantly a and, growth growth quarter, expense to organic in company sales quarter. chose basis. as was to adjusted to needed year-over-year on due average actions million rapid year-over-year capital

on live we quarter. during from In addition, of during interest capitalization successfully Components Americas the the that second interest arising implementation the ERP expense first went booked quarter, end our

We in range XXXX. the tax XX.X%. second million of rate was for effective the quarter per the mid-$XX for expect low quarter interest balance The expense to

our rate lower effective the to was higher range. rate the target tax quarter tax XX.X% of Our range. end end effective the target first our of Recall, was towards XX.X% towards

we of quarter-to-quarter throughout range last year-over-year. quarter was due we per strengthening earnings $X.XX. were growth guidance by impacted expect service estimate mentioned in to rate diluted discrete for record approximately levels. more by percentage second share we growth $XXX compared high-end per driven million, year-over-year. rates our guidance. of working As XX% our to somewhat by when prior on $X.XX was a negatively earnings Earnings share our the million, quarter to we timing the $X.XX cash tax of impacted XX% share increased issued the We negative per need dollar to Net variance capital $X.XX basis, and per of Earnings the flow approximately up Operating $XXX negatively last points used additions the income the and items. X at year, share

quarter on third increases. million. quarter million was We're of the entirely years. more and mismatch This approximately last organic flow. quarter, of related of $X.X new related of to results. a approximately capturing positions in last inventory $XXX Return and $XX We share and year-over-year, Entering quarter returns basis financial XXX-basis-point under is our customer over the by the first capital third be our high-level to higher addition, authorization receivables repurchase investments reversed over XX billion will months million repurchased the of stock, program In few on XXX our third cash third the is approximately $XXX days of $XXX than summary million the five points our a row remaining business. during a the that decline timing the increased invested engagement in captured approximately

segment For the morning. business the results, to refer more please this detail commentary CFO regarding published

Solutions adjusted Solutions Solutions be total that Components between Computing the communications with would and divestiture. believe We In quarter This the quarter $X.XX tax within Computing Enterprise or business. first quarters. of sales $X.XX million one expect for mix third agency guidance. issue will net billion to growth and At settle up $X.XX due Computing billion billion of dampens the sales between midpoint and between quarter, the unified to a billion billion. to Global third the expense software approximately of our a year-over-year $X.XX third will accounting and treatment. the Enterprise sales sales in during Global a we entities recognize $X.X sales guidance the turning X% that sales be $X.X of richer compared in and $X.XX to per international the $X we guidance, Included share second billion Now, Enterprise

the quarter this in we our this will to adjusted fully issue We and concluded expense third results, in be expect third quarter. include

result, expense quarter. interest $X.XX. the we basis expect in $XX earnings share any diluted the on range million to be third per of as to excluding a We to approximately a And be charges in $X.XX expect

XX.X%. non-GAAP XX.X% to Our guidance assumes average rate an of tax

U.S. average rate July. diluted average the shares of of million expect and is We average $X.XX to €X, euro forecasting is we're the the to through the dollar rate which for XX using month outstanding exchange purposes

Steven J. O'Brien

you up this time? the Thank Angela, please at questions Chris. would call you, open to

Operator

Certainly.

from Research. We from Shawn first have our ahead. Longbow which Harrison comes question Please go

Shawn M. Harrison

Good morning, Hi. everybody.

Michael J. Long

Good morning, Shawn.

Christopher David Stansbury

Shawn. Hey,

Shawn M. Harrison

The the year. as the growth could leverage in EBIT just see question the creation is Components of half business Does first stay accelerate pace platform? have you in digital business the and first at demand back half seen it same in in we've improved more I the the or the that

Michael J. Long

much Pretty in one demand of see said, that was XX% the did as reasons you the increase creation. we acceleration

the of catch additional to that. We a to execute favorable, we see believe piece long I it the to And to ways you with you that. of long for able be as to And engineering will So, continue business, if had on up said as the the we're fee would top remember, supply as the business mix continue had additional be we (XX:XX), believe go the coming to don't continues chain server we at can still We go. continue to that. in. think that we

Shawn M. Harrison

operations And you to June of expect cash working back in Would from in million a still be generating positive to challenges the through? the usage are $XXX have quarter. of or the then follow-up, year you I there guess, of cash that you've work half converted, as Chris, the capital management terms flow flow in

Christopher David Stansbury

Yes, Shawn.

below, flow the that's talked growth when would to it But see expect cash get positive or the to operations. depends a is. about you where obviously, XX% from in start as So, where on we rate we've to past,

positive. in point, plateau quarter; it will term, turn at think it I and near the for a start that should to

yes. of expect current by would end year growth positive, I the expect level as at of some you So, see would to we rates the guided,

Shawn M. Harrison

results. Thank Okay. on the congrats you and

Michael J. Long

Thank you.

Christopher David Stansbury

Thanks.

Operator

Thank you.

from Please comes Joe Quatrochi ahead. question go Fargo. Wells next Your from

Joe Quatrochi

I the Thanks lot (XX:XX) been question this on great. the question of referencing a Okay, side. for had congrats a have on MLCCs. the companies component of and taking quarter. I that know of kind

kind demand curious, negatively components? of exposure about was do availability impacting think there, what's you those for So of then other components your I how and the the

Michael J. Long

that? Andy, to would like you take

Andy King

Yeah. Yeah.

on still have MLCC. product We more marketplace, fairly and through Joe. right, the outstripping quite that. You're to situation There's is out actually a the constrained supply but coming demand

getting things At are our we very, supplier to very more our supply are are continuing manage built, to chains getting we're So with point, partners market. carefully. this – more things

So that pace suppliers. a we're sort demand, of and tabs the close customers our with with keeping on very it's but process we keep and carefully very work

Joe Quatrochi

of and And Okay. margin of Thanks. the through of follow-up know the you the this guide, want go Chris. what's guidance quarter for is kind to of I and this gross don't puts a quarter? kind but in for – takes kind embedded just September I for

Christopher David Stansbury

But year higher come example. fulfillment is we margins. to then the of it in talked, on around as digital, about So margin transition in, start last to behind that business work new the really addition would creation one things that the as activities demand for believe, in I we we could

So margin we we move a year as result. back gross as into the to continue would of half that would expect improve the

Joe Quatrochi

Perfect. Okay. Thank you.

Michael J. Long

Joe. Thanks,

Operator

Thank you.

comes from from Matt Please ahead. question Stifel. Next go Sheerin

Matthew John Sheerin

Yeah. Thanks.

basically guys, whether at like OEM number it following the of basis. highs pointed question been a extended look in on inventories are be at a situation, MLCC every if chain, Just days you've levels quarters, components. just out yourself, recent regarding you distributors on the multi-year Joe's of in lead-times up but not the there And EMS part elevated supply have the on as

start customers commensurate adjust you're the to capital down sort any effect working happens, that inventory it in? ripple So the coming do like, And and things expect lead here. in to of stabilize lead-times would their you as And chain? supply Mike, with seeing seems that correction to

Michael J. Long

what things with you see we a were softer others very different out did Yeah, we clear growth is I I products, more at bit landing. suppliers we of sort a was Thanks. of right on going the good which a of had What one to Matt. been guys customer little slower to balance a of and but Obviously, comments that it that's pace. And satisfy our and my we're of that now a I orders has a thing. the well beginning sure good with to that from different place in make think of Remember wider uses inventory. the in but is I in prepared range time was continued that expect that seeing our cash this advance us allowed to sort indicated a base

You we it see will we we we there growth levels the also be inventory the do like the exactly with down customers, know in sort which because double double what monitor by while they specific looks allowed and catch-all continues figure too. to ordering as their the customer come that not we're their to changes are it, businesses, the expecting growth have out have and has moderates, manufacturers. very of and of be big When to us process with it. try needs sort get a ordering the And don't

is cleaner you to this seeing when We're things also which expect when start strong to So, and design things getting go time. that new developed. products first much pullback. That's see I things the of still activity expect softer still us tells continue. are chugging landing. the a I market one along you a are that

So slower not a just expecting growth. expecting a pullback, little Matt,

Matthew John Sheerin

were driving sort you you some from of up the as about enough. any standpoint, favorable And creation margin of environment? sort that nicely But environment the that. then a environment lift did get or any business favorable strong the into pricing in playing demand a and margins Fair fairly follow-up, talked helpful. and just components of That's your Okay. seller's demand from

Michael J. Long

prices We our didn't raise customers. the on

into had We orders I from were customers. this, think as chain bringing supply going I told you over. we business

take So customers and up off. we sort lived and to not made the that paid We we to in the up the think was has of it prior trouble. a did increase I that in sale, customer if commitments to

seeing margin design upon products. entire change design the in and activity versus fulfillment products As is you're the benefit, mix of that a increase based

a do I we to And we add so, the market when because more margin in little we it And when do into design don't. when for that downturn expect us don't expect a cost something, softens. than we continue we the obviously

Matthew John Sheerin

Okay. Mike. Thanks,

Michael J. Long

Yes.

Operator

Thank you.

Next from question ahead. he's Tindle and Adam Raymond Please go comes from James.

Adam Tindle

Good afternoon. it wanted Chris, start first dollars, Thanks. flow. a does but Okay. growing that to north important now. cash just probably acknowledge improving ROIC, cyclical should But profit I there's like of XX% suppressing while on number of are items more is your sound which probably flow cash

generation So, increase anything reasonable net reverses when that of XXX% that you previously of more I assume muted cash more north wanted number becomes ask cash for this and would that to income positive than the will there's to if keep materially of where flow were is it And years. structural converting a buyback level?

Christopher David Stansbury

Adam. Yeah,

GAAP of growth this we to terms But cash operations. from be should First think return that the about about the That's of net more comments. delivering of rates, normalized on when feeling things for is all, we it. way kind thanks income flow in XXX% our do

that, and board, we'll suppressed. about a do with continue we really we structural to anything exactly believe it is receptive your and got the below to a will are. buy from now point. changed. that, absorbing we stocks for room where of What today's us very well We value there's intrinsic all do valuations, It's continues rate expanding that expect think don't in we I under So, back growth that's we're when stay think lot the if and to that's lot authorization that board the to We've buybacks. there's to

key but past, we've with of down that are debt what do in we a we'll little As the bring part a also mentioned will buybacks cash. bit,

Adam Tindle

now. quarters computing you Okay, growth very we the profit that mentioned minimal areas improve do or I in you been business the that divest for trend? subtract seven strategically? I how think has know maybe wanted ask, But here. in even Thanks. so And, should dollar some just the improvements to or or clear add and portfolio Are Mike, to there helpful. either business operating see you about could that

Michael J. Long

been we through Yeah. rotating practice. to through of going Actually, the on what building a And time, change We were software there. through we our must went went We solid remember the at we state. disk servers. no-growth have scenario same

the all at is that issues themselves now. right look reversed today, have where to you of If – business those

continue business to improve So forward. I this going expect to

what And backlog than The bookings so, there's business sustainable. pretty is good. different The we've exposed The looking nothing is the in past. good. are

and note just Just rates really the to don't we conversion that it's take obviously about something but talk in much, you Europe.

up is Europe like think XX%... something I

Christopher David Stansbury

Currency.

Michael J. Long

adjusted. ...currency

are seeing growth. So we the

improve. it's will sort is a to of that. to that matter believe the that line of getting we care that take business made in of those opening that growth think bottom comments session and going Now the I why the That's I

Adam Tindle

Thank Okay. you.

Operator

Thank you.

question Fox ahead. from Please Next Research. from comes go Cross Steven

Steven Fox

I that afternoon. that be understanding your of a a could you and in the sort follow-ups. see is couple tariffs indirect But are that mentioned you chain. little are My what X% impact you a about – talk sales. to had impact Good a then new prices bit you globally Thanks. the raising can talk impact the suppliers place lot about channel. that your of into I of what in supply And are may know the might

Michael J. Long

just Steve, a Yeah. few things.

that taking There's tax So the number not. of a that a are are there's suppliers few themselves. suppliers of care

to tax It's don't, do. for don't them they that up that our their the not make on. So suppliers ones to we'll pass job competitive to more make want pick that sales where

minimal we to make the sort supply and that are moves by it why balance. to reroute by supply more chains overly will concerned us now less said, it I today. off I even suppliers I'm that. and stuff information is There based and speculate right just keep of that's with that minimal So some the we're on say of favorable chain about, can't have. even to some of we it's than could And it's talking not where the be think as us impact going. I

Steven Fox

That's helpful. traction secondly, the over threw quarter-over-quarter as of then a lot are or And XX services the last very sort you out back months. Okay. that of you gaining Mike, go

sort If call quarters? of some would to terms drivers now, the changing do highlight see capabilities what of that how you your the biggest of had expanded in next out and you couple of you right over

Michael J. Long

I'll Sean, since that driving you've been put that, one on you.

Sean J. Kerins

Yeah. Sure. No, absolutely, Steve. more cross enterprise We're doing from more a and perspective.

So as Mike I with script, opening suppliers partner much major pointed major Andy and and the IT component our more closely our out in now suppliers. with

an So we IT help production efficient of around will engineering, big Where reverse, about growing an and pipeline of we look have if what strictly there's find more once themselves. go lot and where from ways themselves sales people whole people, a that we opportunity my talked lot I a partner chain more choose more talk it call, a up we the DTAM systems those and or now go-to-market to go-to-market, whole that strictly about we case they we down would find use edge the in do on like of we that to in after. just supply once And with benefit sort kind IoT design, of team much talk not a And diversify now case capture and that about rely to to, their in actual and try they fashion, use we team a kind things things our two-tier Andy's chain relationships. sales can supplier IoT at to that to for a us supply introduce to where you opens us emerges related fashion. intelligent the to team

and the we're will across feel making continue So, dividends pay the it good time. enterprise we to to I think collaborate about progress over

Steven Fox

said for color was – there special or was lastly, large? that this that of number quarter, last really Great. any $XXX that a you the it I sort yeah. type color. the appreciate of provide And related million one Is And in Is Thanks. to working one that? you engagement the capital drag of other That's Chris, so on then, can was why customer. me.

Christopher David Stansbury

an think be offering talked that kind that, of it I do relates expect this keep to going be working-capital-neutral, services forward, relatively that so want I Yeah. to No, don't level. that should services about category. expanded at It's really the recurring. it we've in would offering. We it

Michael J. Long

And, to cost Steve, we type, fully some I most might lot and And collect these to a we're engagement money. some within money out it of that were started us of period that this have deals We being see that of today. there add the to some to But offering uncommon one It up. these for the time. services working would engagements customers now the to a bigger bigger late got us. attractive able not it. Obviously, customers, of the are the become this first of exist it in quarter. We that have more the expect around some set capital-neutral program be of

I that one-timers expect really quarters of the really lot was So when future don't that. going that set things to be we're this, I highlight a just seeing it and we up to got in that wanted caused like

Steven Fox

Understood. Thanks color. for the all

Michael J. Long

bet. You

Operator

from question Please Lynch. Singh ahead. go from Next Param Merrill comes

Param Singh

taking you Great. question. Thank my for

to you back X.X this parity downtrend I for actually the underlying channel quarter and year-over-year of concern backlog, that given might sequential strength book-to-bill go you've side. distributors do – and in strength. come the has strength mean, what are to the your – changed to have backlog? might again There wanted possibly or from I below your that down are on X.XX the given that towards any the cause thoughts strength backlog given in that and have component parity, or trend firstly, that the belie private So, commented but that other

Michael J. Long

No. and us And in so lap building remember, place. increasing inventories harder really for a quarters, first during our we the it's sales started our the upcoming

is at seeing even very parity it to is I place good don't seen a the tells growth then. than the seen us for We've economy our We've we're better we That customer sales on second And what increase in before. growth The thought seen that bookings. continue backlog. opportunities. expect thing go was in demand X.XX. that We've generation higher increase plans while. the we saw like still

So I over you happening look have others quarters, growth rates see compared tell can to and look rates the I what's you five our happened good to growth tell like shape. you and last others. to guess at what's can't the what in I only but just we're

Param Singh

some few think that but patterns? because you you strong quarters a with at the an book-to-bill have backlog pause over not you strength vein, could in customers Do is this any briefly order that that? now view on again, because reach on point such issue that do have parity So next might

Michael J. Long

Well, continue shipments negative. we would the go the go look, and to had does faster positive would a get on. really they really be you inventories because you off you it it indicate would if current had And that a and parity if did soft much and bleed would that even wouldn't landing would it because there

that little be pattern order would bit just probably You to future got a bringing until parity. in you your

cash we've level now in off So we that means for it's fact, to thrown negative. grown company pretty history. lot at off started a more right positive because which good a not we've than a ever big in a cash me throwing some size would That, be because the

So it bad. isn't

Param Singh

impact? $X and similarly can what to cost margins? mix mentioned impact ECS was next impact And this the the hardware for higher you versus your software different switching ECS between quarter mix and FX impacting your follow-up, in you to my as margin that FX that how higher And to revenue that's due delineate side, quarter, million and – it. Got much any

Michael J. Long

Yeah.

So go what with there individual Sean you do because tax is, and have talk about let I'll the issue. I'll the then a was Chris here I'll through products change mix

Param Singh

Thank you.

Sean J. Kerins

Yeah.

and of of is a sales that like our certainly a compare. a as-a-service federal hardware in reverse a the the to Chris if an one to the of recurring solution our lighter fact, strong of season business from and a thought. because of will And But to in periods a orange. expect be things we'll business pipeline you're size the of the meaningful us bill is software seeing This better We our got return QX, that. So we services. sector bigger margin but the We or look think normal, look in We that an which what contribute government we that. year-over-year, contributed some sticky bit apple little to software at quarter buying little different more and decidedly expected guidance that's looking software, relationships tend of had it versus help seeing will that little bit we mentioned. certainly build pointing see We and for you bit mix at a surrounding one But to a year-over-year less public business top the overweighted as than and kind call, hardware in factors so out pressure. very that's which to we would in as to a mix we more a differently of our, in to quarters ultimately creates good you're I revenue thing are kind software growth the future future. a and unbilled software that's mix QX line

Param Singh

on in billings underlying the any FX your impact ECS your assumption what's there or was guide growth maybe then guide? And

Christopher David Stansbury

guidance QX in Yeah. that tell flat FX (XX:XX) is We $X.XX the relatively (XX:XX) the don't would provide billings. in obviously around and $X.XX I the quarter-on-quarter, you QX.

Param Singh

Thank guys. Great. you,

Operator

comes question Colby from Deutsche from go Adrienne ahead. Please Next Bank.

Adrienne Colby

and European the taking already. stronger have got mix just of the side with wanting just understand business, to bit Asian geographically the my which Most could just Hi. and you lower component been margins how to operating going for back is. better, margin, sales on asked of a margin talk again diverse your about wondering design how X% are to typically questions little target that you if Thanks activity I'm But the the question. of

Michael J. Long

there become is have Well, anybody my obviously, it's thank get But sort the some even was waiting, let me answer I our you a ago going off, X%. here, noticing going I've of first the we goes basically, learned sort businesses is acknowledge, of for back do if more which sort of prize we think, question, year – was no. today and, of efficient. sitting to I all get to

work been in services. We to it's us all We've the combined seen businesses are raise seen that us in have design largely to of the for driven helped doing us the number and Asia of Asia. much and America, more because we've design has change which Europe, mix profits of in those in same the really North same

and we I to We all the of that the other any aren't stabilize in to think sure you around special we There of we to was quarters had but because not same to heroics this. to did indicated that business to plan no not a that commit – sure I sure exactly ready to you all we make know there. for to along. number I'm is guess get was was need There It nothing how reacting it. couple

beatings to to So, specific to it. if when said we finally be it I'm change, X%, along – price continue. And, only no more future about the I quarters, it to X% I But got going there'll be expect in don't and way. get there'd we'll also I expect

of kind I'm where are. comfortable we So, with

Adrienne Colby

to then, no that last lift that's so the that ERP you benefit an system that As a front on quick example, follow-up rollout for from or there's going give a expectation completed so (XX:XX)? quarter,

Michael J. Long

think yeah. that our can also Oh, quarters, grow That you're profits do That more. system, the going productivity. yeah. which us means in more we makes future in better That that us happens gives to is more we means higher. engineers I can even to Yeah, ERP What with efficient. invest see

in to from there put that So, reroute to It's the anything that our towards to there's are money be of all going need of a drain we the can big that or lot it or now no changes that put But to do take we either efficiency. right in investments going is there business line. side. bottom the go-to-market

Adrienne Colby

me the X% on be let And Thanks. hitting to congratulate first (XX:XX) that you Great. target.

Michael J. Long

good. you. Thank Thank Very you.

Operator

Stein William from comes SunTrust. question from go Please ahead. Next

William Stein

hitting taking If want how will I particular on was any have me from (XX:XX). changes supplier to Can one ask model gains reauthorizing X% margins. from they're supplier dislocations something change was question. at last first, sort you be you. you've (XX:XX) Great. that there an on The promise you to Thank going would heard of mentioned only cease update beatings segment, you on competitors. over I you Thanks going week op earlier, announcement on. I to that I about congratulate one additional you additions of but they that it couple the one for I to in Any now that had and that the perspective? called some do But my of owing just a influence bigger from the this expect earlier. cut to out of your think just us additional forward? them going that past years

Michael J. Long

Yeah.

place. with was The you've like us much you referenced acquisitions supplier don't it seen I in first things. be think exclusive past, to the deal. I not change in expect the big a sometimes

chain in don't go going honest that's performing it piece change is going is we where We for don't would the stronger change as it have So their massive validate performance us. you're you, and because I love that's right certainly, any we're you well. be And competitor another go-forward to forward. of we've We our decision. to what been changes all to will don't they'll on business just a see entire the supply any see now with going be any ultimately telling basis. I see to what along. this. Again, The think gets

performing are. stay Our we engineers they well. expect much are And to like things pretty

William Stein

me. for it That's Thanks.

Michael J. Long

you Thank Okay. for asking about X%. the

Operator

go Sachs. Goldman Delaney, Mark from comes Please ahead. question Next

Mark Delaney

taking have margins. EBIT one Components Global the on actually the for questions. Thanks I another Yes.

see yeah, also hard an organization nice you level. worked at there. X% that to coming you I get as So, to in know

Christopher David Stansbury

say (XX:XX) Everyone's going to that...

Mark Delaney

quarter components shift just margins is typical coming some changes. with seasonality But be down as increased in regional EBIT the tailwinds a in may it this usually though for some the design of slightly There's work. third mix flatter,

maybe about Is third quarter. the trying to I some coming there sense these normal how in So that tailwinds level? X% that at stay can you the get the just the thinking just for is in segment for of seasonality some was enough there or margin you're

Michael J. Long

Yeah. to. expecting Actually we're

quarter. design I activity the guidance flat of us continues. to the up rates third win think the a And for growth sort going the into suggests continue,

So you're correct. absolutely

thing. third quarter expecting to parity up, saying We're like it close down to same to If we're you pretty that, go parity always of of or couple something was back a much X% years, the was and kind now pretty the like down.

Mark Delaney

Got follow that understand. indirect the That's helpful was comments on that impacts. all to appreciate to company But it. the up I of the And trying helpful. a these had, potential understand better tariff just some topic,

escalate have to So and costs, some for potential may of forward of to try tariff talk get customers extra of any these demand when occur? do any you that ahead to potential you pulled customers, your and situation tariffs the given think potential the these

Michael J. Long

customers any pulling any seeing We're Yeah. demand not ahead.

In we pretty I start game, fact, playing just all it's a figure is I it think game – ludicrous think it's which at most just should to customers are out. and this this thing, looking that

of matter the right anything I a like it's None coming businesses tell None not of solved. in for I'll is are senators, hurt that Chinese like of now. these the us get quarters told do American all to you doing think These this and tariffs. They're tariffs thing I thing the to they tariffs. businessmen. they same

the I to only message that's get So wanted across.

material the electronics think this as these I'll right now, But have I back, crazy. go So we not are tariffs said, what to at do they're to point. And industry we'll do. I

I than do. came that thing the supplier every same out said virtually X%. They less think are I

than Some know that sitting deal in aren't you of you're purchasers you kind anyway. customer, there a it. couple and a problem There's upturn, do going have to of if at so of X% But a you're an your them – going of less to going absorb that are it with are them looking it. that to absorb to

world So in like chain. might I slowness We're ripples that seeing you increase or business today. I a seeing their don't not we're bringing it frankly, guess you're demand. of now, how see that, supply through manufacturers all mean, over the steel bending if right But not or are and, an see people in know. I and it us. don't with something the I aluminum

they the the of And in redirect up, over world. the something U.S. if moment's totally can a have plants and want chain completely tariffs. to notice So start they eliminate all out we supply

worried. not I'm So

Mark Delaney

Thank very you much.

Michael J. Long

You bet.

Operator

Next question Please comes Citi. from Suva from go ahead. Jim

Jim Suva

just you congratulations very again good on and much overall as X% as well margins Thank results. the

Michael J. Long

know, You day. the best you, of the comment that's coming from Jim, like

Jim Suva

that. with And I'm sincere very

Michael J. Long

it. appreciate know. I I

Jim Suva

for I strategy more question have then a for Chris. question of financial Mike and a

Michael J. Long

Okay.

Jim Suva

the has there broad-based the it was been has geographically very across ever in The and a the or need components segment why of and in quarter to all all your computing Mike, this America, business regions. consistently strong focused? go very have is into very it regions been reason just Asia also. Europe breadth of Asia with various Is I different strong asked your the North is grown most

can impact something correct that's that. or cumulative $X.XX multiple onetime I like item you have made or it you to wrong there quarters think, that on and reaches we there maybe just me So sales and time different And $X.XX a a of a rolled side, then, I'm not up I is tax or know then a comment on forward impact. that you to conditions. if finance point it if see going of don't I just was the assume didn't Chris, footprint it business where need completely about, or

Michael J. Long

I'll Jim, start with piece. Asia the

components we being favorable favorable, ECS business when and favorable don't components our doing but, are business not so there, we bringing conditions the ECS the that because are We Asia doing. migrate that What enjoy together conditions just that from First they really of Asia benefit not ECS expansion in doing off, is in ECS we the do in about Asia anybody have the two see was Asia the is conditions say that saw other regions hardware for what same are well, opportunistic expand software Asia places pieces either. in can IoT of a the few we Asia. did basically, type to need, into to to is the to

I'm certainly make rate just monitor we it see it return a of it So makes to that see over model it we lot and money investing as investors the never is expansion. something see don't pieces. a working a on don't benefits into not the But do of business success return, that continually at kind see there. worth we will do IoT And what be the that the been. have We into to of our see I I time,

work. So, and our work product cloud our work and and question. of some hyper-converged the Yeah, we the work answers your an as the edge expansion of do that card components software-defined of specific and seeing some hopefully line moving that

Jim Suva

does. Indeed, it

Christopher David Stansbury

guidance To in our Yeah. we perspective, it be And then, Jim, $X.XX resolving. of quarter. in midpoint is It that one-time third issue just that a on are will including the thing, the that sales issue. tax contained yes, it's put

the excluding is midpoint at other that way looking is underlying really So, $X.XX. at at the issue, business of

Jim Suva

of Okay. like, future doesn't tax And, rate as anything. a follow-up. just Chris, or your, impact a... It's kind corporate That

Christopher David Stansbury

No.

Jim Suva

and (XX:XX) then low I correct? forward. ... dilution move Am

Christopher David Stansbury

entities, we're that. acquired a our a tax issue resolving over and one sales It's of Correct. dispute in

Jim Suva

Again, results. you good for you. to and Thank you. very team congratulations Okay. your Thank

Michael J. Long

Thanks.

Operator

question Group]. Daiwa (XX:XX) ahead. Next comes Research from from Lou (sic) Miscioscia Please [Pivotal go

Lou Miscioscia

lately business call. soon if and you. done have what I'm Well, or last the But be, as you me sure I'm not for not. Thank we're to Okay. with it might done as back

good So, for (XX:XX). luck

and just it little mentioned and material the a level are what on is about bit you Maybe you it specifically possibly it? bit mentioned a ECS you at since detail, side, of subscriptions. that what going So is

Michael J. Long

off, at mention little have know, don't we a you record we anything of – least normally until as around it. a First bit we here track

it's color So, more little okay you to give for I Sean probably that. think a on

Sean J. Kerins

absolutely. Yeah,

And accelerate part so pure accelerate. it that closer attention to if levels related seen the it. we've is we've it number we're think of paying And cloud to year-on-year, it I growth. seen meaningfully, at of look I

of from take portfolios. example to it recurring are it going revenue of IT without to fact the consumption-based looking that benefits the reflects part necessarily of licensing build I Part think cloud. suppliers advantage to looking of the customers for comes for software

to we with it and because modest QX ultimately, But a us sales did periods. our impact it still So, it's results. it future recognize in noted have we'll

I it solution motion, our time. sort about an it's because we expect over selling again, feel and further good grow it So of to extension of

Lou Miscioscia

or general, are upgrade the also servers Okay. Intel's doldrums from hanging as then half sticking view to well with necessarily we And probably back how mentioned drivers very particular the finishes of are this your flash just guys cycle storage up, doing and either area, the you obviously with any not are heading September as and and summer, in there, guidance?

Michael J. Long

Yeah.

year-over-year. said anything business. – expecting we in we're our diminishes fourth as not to Right we what the We're before, although things the think software I more have seeing we from said that, you don't Amazon quarter apart, frankly, go expecting product too. for going tear improve now, us circumstance, improve guidance and that to is out any is going not of – to kill hey, we're change that far. But this we're not in line, go-to-market. Cloud us. us bad news business with a

we're think going pretty here. stable forward I

Lou Miscioscia

of on year. Okay. the the rest Good Thanks, luck guys.

Michael J. Long

you. You Thank got it.

Christopher David Stansbury

Thanks, Lou.

Operator

now hand O'Brien to back to I'd closing like remarks. for Steven

Steven J. O'Brien

Safe review Arrow's closing, Thank will you, Harbor In I statement. Angela.

results revise obligation uncertainties of forward-looking included for actual update filings. SEC a results. or materially statements. reasons, facts to and of Some subject and statements of comments any in of undertakes from such the risks company publicly about these Arrow's made statements information number could to is cause variety differ a Detailed the or today's statements, no future the These may addressing include on forward-looking financial statements call are including risks that to

to any Electronics please you questions you in If your Thank for free interest today, have about Arrow feel information a day. have presented me. nice the and contact

Operator

and your call for Ladies you. concludes that today. gentlemen, Thank

good Thank you now joining. a for may day. You Have disconnect.

Arrow Electronics (ARW) 2 Aug 182018 Q2 Earnings call transcript