ARW - Earnings call transcript Q4 2020 | Arrow Electronics, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Arrow Electronics Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to turn the call over to your speaker today, Steve O’Brien, Vice President and Investor Relations. ahead. go Please

Steve O’Brien

Chief day, and and Good on to Electronics Stansbury, President Arrow call Operating Kerins, Thanks, and Financial Officer; XXXX and Officer. earnings quarter Chris and Chairman, Long, year-end are Vice us Officer; conference fourth Sean today Chief President Denise. Senior Mike welcome Executive Chief call. the With

of which During today. and strategies and outlook, about our this call, business predictions we our will financial make are results, forward-looking expectations on as statements, including statements based future

could our Our to filings number XX-K results revise undertake due actual differ the of or a publicly We XX-Q any of materially including no the uncertainties, risk and update statements. obligation with SEC. risks most and the factors to in recent forward-looking

some today’s the discuss of will we call non-GAAP. reminder, on figures As are a

have for the those our be release. directly These financial intended GAAP GAAP measures our to results. a earnings comparable to measures are not in non-GAAP substitute reconciled We most

You non-GAAP along can call. access our CFO of reconciliation a earnings commentary, this investor.arrow.com, replay the with and earnings release at the

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

Mike Long

operating But didn’t the today. to be about you all Not we Thanks, the period a late cash Steve, return true a incredible record to office a to only of today short in not in customers quarterly it’s work and hard very how unfold, have testament of our XX,XXX thanks spoke and about record year. for When did joining of is strengths. XXXX, to fourth record our choice. a for and time, here And the the to months debt of cash by to of in reduced we do to of a go which right our but year. we true why is of know the would work-from-home. of there that this after It’s earnings sales flow, much had talking had mention, quarter, that, generated day, quarter testament shareholders record amount from was us dedication XXXX, the I and the people work coming almost Every April in team. you our we first

trust We’re continue engineering, well-received design their be proud and They Arrow. supply products on to marketplace. manufactured designed place and their chain in they Customers to us efficiently choose to rely ensure services. are the in Arrow’s

success. into to our to design market. sell, the their coming Arrow to and most and important to critical continue They are products choose suppliers market components Our some of innovative

and speaks putting like While I’d our year move customers in our continuing to consistency a first. to Once to for deliver for itself, our for thank forward people technology again, extreme of comes challenges. team our reputation from

While these in business foundation we’ve seen obstacles the cycles we’ve followed upgrade the The some of -- stronger. major has had same of upgrades been the while major device of sales. never our by and strong some past,

cautiously of in we’re an pandemic many occurred of percentage our optimistic the in inventory in the and backlog to Americas customers are industries, showed Europe prior return line While and that that can up all our to increase short the dynamic, across in Customers and that with levels shortage customers regions. in environment conditions ramping are prior inventory up are in this, Orders excess survey Americas production customer a and correction demand the some decrease business have an that segment inventory. are components industry In for supply. with growth. means

solutions business. computing our to Turning enterprise

operating margin for income growth to performance this fourth truest continues in highest income its since measurement We’re Operating be basis. growth the reached pleased addition, a level XXXX. of to operating on quarter deliver business. the year-over-year of And

further in our for we strong see with potential results, were Enterprise pleased Solutions XXXX. Computing we improvements While

widespread strong spending them. we industries security mostly of work. to major cloud past, First, see continue who We serve meantime, on-site further markets a to from followed pandemic. policies restrictions upgrades by remain infrastructure benefits been support have recovery customers, serve the the the work-from-home and challenged to solutions. VARs and lockdowns some both by enterprise In by and special impacted drive to the we’ve computing, the MSP In that continued seen by related

their to customers, restaurant helping design who data the multi-site from customers. retail, medical have should profits sell solutions by XXXX. on-site so our and We benefit service at our end drive and even value compared volumes customers in secured Our hybrid business work inability the industries, complexity, and hampered an to cloud hospitality, been these

advanced closing, Chief Before our has Operating team our We succession track ideal of Sean proactive planning. across and share marketing valued both business Officer. at new been as sales, I’d the our to record him of businesses operations. XXXX. words member global the few lead to make thought longstanding now of in appointment commitment innovation I since Kerins Sean Arrow a and leaders leadership Arrow’s Company’s a proven His developing announced executive recently and

industries and and now component the that, semiconductor, technology results operational in of growth the confident for over his to quarter electronic to I’ll our more the to and our Arrow We’re call increasing first ability expectations from the help with fourth details information on Chris With provide value hand quarter. industries. capture convergence

Chris Stansbury

to X%, dollar This expense to in had mainly billion. quarter boosted we’ve $X.XX relative and to XX all sales by and $X.XX efficiency the XX% sales of prior was end was demand a guidance, saw up margin greater components guidance. we to the were points billion. prior million €X sales exchange was Global operating regions non-GAAP operating forecasting. higher Thanks, to euro basis. leveraged quarter Sales compared euro-dollar year-over-year. $XX compared our were most in were improving as non-GAAP the on approximately across Mike. for Strengthening $X.XX year-over-year due of above we of Global used our volumes. component for The we rate average basis sales high regions Sales Fourth $X.XX industries. the what increased rate improvement the anticipated

see and further for continue continue higher improving mix as foreign of component our quarter and Fourth recover. opportunity Enterprise changes billings regions an operating solutions increased to and expected substantial of capture of the for leverage as income value was portfolio, We prior income adjusted regions above sales consolidated and range. highest to all year-over-year currencies, in effective can sales were to we Americas Europe growth by midpoint computing $X.XX basis billion the storage the due security, industry-standard Global enterprise certain computing points year-over-year the expectations increased experienced items. since software results for timing XXXX. across our XX non-GAAP Returning tax the operating discrete below level X.X%, to servers. infrastructure of the rate margin in solutions quarter, to

effective tax full the our low of XXXX, year the was rate end range to long-term For our near XX% of XX%.

see prior $X.XX to target upside to Non-GAAP $X.XX, continue forward. of share our rates. attributable as going diluted expectation. were our high favorable per XX% to exchange range the appropriate to guidance more $X.XX prior was Approximately earnings XX% end the We of above

Operating than anticipated. Turning cash to the demand was we flow despite substantially and flow. stronger sheet cash $XXX million, balance

capital through improved XXXX, days year. in cash This in I’ve the over of a the in the to shared level Inventory lowest the working flow The approximately to years. keep the million. this shareholders two at Leverage, and call share $XXX as our summary by our decreased XXXX. to measured plan improvement days since that last remaining million $XXX lowest million cycle Our generation was under cash during to fourth debt-to-EBITDA, compared quarter returned $XXX information XXXX. the authorization quarter Please significantly of face demand. XX level fourth five existing financial by plan. the compared Ending of results. aid approximately third our mind quarter were by compared is high-level days repurchase debt We is during

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

the as first the we The guidance. EPS will whole. products customers provide Now, Midpoint all-time stability business a and helps sell and we turning and to our be records. diversity sales serve quarter of for guidance industries

Our global on improvement in a year-over-year basis. guidance the operating and solutions computing enterprise components margins global both, reflects continued

enterprise call have much XXst, Q&A. on note are a the we fiscal includes unlike September in impact components, on commentary as quarters to on I’ll closed for third as and on date closing operator discussed Xrd, solutions global the closing greater closed June for calendar Xnd, year turn comparisons March quarter, XX fiscal and the and CFO second XXXX. XX. Xrd December that, ‘XX ends our and full July over as information not respectively, on computing affected Finally, last With dates always. the first, XXXX, please they April on XX, XXXX, In where October and These

Operator

with & Sachs Your first Instructions] Company. from [Operator question Toshiya Hari Goldman comes

Toshiya Hari

side customers, Hi. thank if shortage one, taking Good the describe at the to your I will, of My wanted Thank strong the you delta you. from guess, to broad in between so results. I on as from, the up your about first for supply very and suppliers afternoon, you demand you the supply and catch both what what as would on sort supply? question. And you’re how based ask expect well the year situation. hearing Congrats demand is to how much you demand? Can point shortage and intense, on today, the

Mike Long

Yes.

I our So, the thing middle not comments, for specialty a typically hearing disconnect sort in automotive and and lot business type are because are is, they’re parts, shortages of the that in people they’re you’re the first will things of. automotive, of my about

but by they So, seeing to accounts, past. longer probably of we is, this because time business, Tier when X still And tell accounts, you what out an increase in point, What yes, of some placing mean little book-to-bill. have would I that shortages. types we the are have yes, customers too, X in the runs overblown. It’s a their take those good automotive the typically I in Tier a you that seen I at is, overall, things. than orders about it’s we’re book-to-bill believe sort do out, it talk

more we’re past XX days. So, getting visibility

Our quarter not sales increased. percentage of backlog within has the

forecast out. would suggest turn in that term it so that go ordering, suppliers them manufacturing So, a double help and as giving longer not things can us but view, we customers share it’s with their really are

the many on be to going quarter. widespread but right always of too to shipments we like that. be to our hard visibility. about or suppliers give that greater of And also Short minimize being term, asking talked them lot that the to well We’re is us market don’t are problems I believe see the parts there. reacting that shutdowns a There’s there’s that a restrictions couple get, seeing first are out for that. expect now going don’t can And anything to we

and So, question hopefully, perspective little that helps on your it. you gives a

Toshiya Hari

the Thanks great guys does. much improving for profitability the very business, of just did quarter. on context. then, the job it margins a in Yes, December follow-up, And as you my the

As you Thank the you. guess, outside U.S. I Europe the look out levers part normalizing, the mix to some pull the into, ‘XX of back I and are that improve of half of can what regional margins of i.e., in ‘XX, and business? recovering, middle you guess, your

Mike Long

or think, of even handling already has some our to our sales, have terms of the through. in put we’ve margin the cost done I more that of manufacturing work come components, Well, you’re facilities. getting completed. that investments are cost business been to Most We into margin seeing in efficient that our close certainly with improvements of

benefits you too. want we’re the down there. lever really, to big seeing get to So, But

progressing of that’s America last been, and -- and really focus be all years. by North That North better And the you a little more the in America, of a hammer bit on growth in the couple infrastructure of with difference, this can volumes volumes. way terms, But, around so, the so see of those get out North again. America for of can our will is a our like that Europe economy. piece economy. because American terms it’s looks anemic. than we get a see And rope It’s efficient is And So, neck. will a North hugely pie. growing crack our probably make there, little real you’ll

Operator

Fox with Steven Your question from comes Advisors. Fox next

Steven Fox

you’re question, flows generate For was I wondering, to while last XX%. first you over talked continuing just the Chris, cash about growing quarter,

are placing mentioned obviously now levels seen XXXX, orders. guys you at you just that But that. since inventories You customers extended then, haven’t are and did longer

a XX to level follow-up. I just to dynamics can days? lot So, your confidence that of to then, have And as to the have you last sort continue of the in supply do changed talk a seem chain

Chris Stansbury

we’re record super and with two last flow of in the Really, the months, $X.X billion years. Yes. last pleased and cash the business the over XXXX over XX generation cash XX

that’s in In think, as ours, remain. the short of growth. obviously little I So, a that the we’ll support near will clearly Steve, But, diligently. that’s working run very build look term, to focus a the and we capital more challenging do that to

forward, over the we’ve look though, anything on the I course And, don’t cash be conversion very XXXX. cash flow cycle generating changes. I As think, We’ll think that really I focused of now got us right our going we we But, will around do is It the where for best move that. to maintain quarter-to-quarter. time. to target we’re over are, like and from

Steven Fox

some Americas or going to component sales that mix the And in that, Asia, Europe. us that of meaningful a side industries your Thank you’re behind would of be That’s conversations Mike, optimistic just that. quarters? from in follow-up. examples hopeful to you customer in you’re and a couple helpful. some mentioned is returning the helpful. cautiously you. And that then, either demand of you what’s as whether Can remarks, for Thanks give That on over about result In shift maybe prepared different about? growth your the next

Mike Long

the for growth the too, first that EMEA gives that be design of thing Americas wins. for only think, but not me sort I optimism, would in the

pretty and North some in under seen we’ve good XX% wins design So, Europe. in XX%, around seen the just America, in growth XX% up we’ve range,

the down months good seeing so next seen or pipe we’ve that’s an increase as a should coming that design business So, be six in grow, about within we’re of what the the the wins usually past. indicator

-- us of think, the think, been opinion back my that’s I tariffs, I a holding quite bit.

I whole burden the think companies and it’s put think, tariffs. backfired the the American to -- plan I on pay

figuring still anything And, seen sort how there’s around seen and consumer. those, to demand haven’t We’ve business out lifting in I there uptick the out in think, that. but We’ve of there. uptick some and aerospace I are So, some maneuver is people defense. seen

industrial You seeing in guys have point. that. surprisingly, manufacturing we’re And at life this seen little a

of comes will So, when that’s cautious in come the things shape you the politicians be early say, together economy to of next work for But, curve on put I optimism see I those it in sort better. where would are good together, they for don’t say back. coming. the better? it as and conditions And our do, I But, pretty me make if the to reason sort couldn’t any duck what’s ball

that that’s where So, I Steve. hate on one

Operator

Longbow next Your question Research. comes from Nikolay Todorov with

Nikolay Todorov

component you congrats Thanks, can profit and look But, guys operating remind business? America the margin do and guys between a Yes. talk your medium-term execution. the where you on as driven scale. great you you by to in that Asia North there eventually the can seems done like us have great delta and progress forward, It component the delta Mike, see Asia in getting Europe business future? you

Mike Long

you how give there’s are margin couple bit numbers, when you that scale. things Europe reduction a a can economy what in by while had things size America and have of The That’s just think, won’t improved. specifically, Yes. and North little negative I I has of deduce operating I the Asia just and think, shrink happens the operating. mean, I

confident back sitting improved why thing Asia think to that doing of the their and is do. off here math. than And be. really we’re And, to good where right up if the those is because take inside end we’re Company, we we’re rightful the which see we need leverage good, mix two going be more with which they sort you you reduced, has a have really that’s

sight. a how for line of share a So, that’s conditions that to have that question is, real can gains? gains and through The ourselves economy general we have either view. we North And do America the fast get up, We exist. we through Europe have do need back really or

Nikolay Todorov

and is the can exclude what And do then, components the you same side, the mentioned you those? you and talk pricing great. you about the to expect that you Okay, through your last maybe you you about low see? can environment seeing, profit. I side auto what start a do on X% are follow-up ability talk think, and that, think approaching And X% the the about see you pass or I that you in to business can levels of Do that prior still operating quarter, think component high as XXXX? believe as

Mike Long

consistently is we going to in be we terms Yes. can there. We believe economy on dependent can But, not the actually the there? XXXX. we issue believe can in be That’s there Company. we of Obviously, an be get

the suppliers pricing enough are we to. that. those like that suppliers environment, won’t your fabless a and of We ones prices. first. schedule. to better price increases are hesitate more have they the product. price raising They’re of margin are raise have doing visibility see more demanding absorb really the prices, firmer requiring In They’re doing don’t And two a terms We things. increases to are And that

seeing of are business. the nature I been to half the price year. continue hasn’t of it There expect a it. a increase in the we first So, long through time. It’s the

just really immune this is nobody So, going new. be is But from something it, comment. to

Nikolay Todorov

us on XXXX? side ECS, shifted that has Okay. software and the in It hardware quite of favorably the for any computing of can percentage lastly color expecting mix? on like mix are you enterprise then, towards And an just Maybe security. business And update the you on give what on business seems segment. the

Mike Long

and why take Yes. that go ahead don’t Sean, you one.

Sean Kerins

we that typically agency kind Yes, been cloud, driving it of we the and sure things like And intentionally a treat like, to shift software mix things accounting. have read you thing. kind of services, through

reported going operating And for to of there’s in future good little We course. creates it. it’s sales, think so, gross sometimes stay that margins. very And a we’re bit that favorable for while headwind a a and

and In you a third the a But, on forward, of at terms disappearing. means if It of sort hardware a outlook little the is is no mix, roughly ebbs look overall still hardware of bit. just going total. by volume flows basis, our

storage when ultimately we’ll future. In business will We a market can’t little in back there’s full tells sweat come forever. but big centers from saw happen. I good for fact, a does a that And IT thing to growing broader business assets reopen, be still you do me and data that the XXXX. believe our to that need we that bit on-premise a year-on-year in the benefit year it

Operator

from your And with next question Raymond comes Adam Tindle James.

Adam Tindle

on just I start global trends right supply how now. wanted to Mike, is the demand component and above

but there’s that with could benefit that of You number talked and wanted this decline is just about been turn a historically, some cover point. potentially so how idea different margin, price be a can this seeing double increases what on inflation and maybe you eventually for to that in time during I’d years, inflation gross imagine cycle? I Western impacts becoming regions coming around you some that’s to help in component revisit could back supplier theme. distributors a and click and here inflation that

Mike Long

Yes.

right? over lot efficiency it’s a I the to companies expect efficiencies. that own then, fabs, pricing And off, the have declines, think, a slow. been the sort inflation, they the and going but semiconductors I more the part a to how most in materials You would just you’ve fabs. to on our their you the that’s depend got of first inflation with you’re pricing basic decline slow, didn’t to get in largely the does times one years. the hits to But, running what in the board economics, market, outrun see have clearly right? largely of seen have third-party that’s who industry. business and used thing, going The across eventually raw has of that certainly Efficiency and has the

they to third-parties are too. running Now, have needing The money the fab. more fabs make

is it have And manufacturing end right now before you’re curve I go to to that’s at going sort in they’re ball see looking the think, The inflation the So, hits priced that. in that starting largely, to for. market. hit the looked to use the manufacturers another equation. They’ve just first of sort what products it of And products.

I I midyear delayed reaction, be So, we’ll the increases price price there it happens. in will as not think, that question largely But, now. think have still XXXX. that is are that coming to think by And or if happen? in whether a I will

Adam Tindle

helpful. Sean. That’s it. for And just follow-up Got one

congrats of on First all, I wanted to ask ECS. just question the on you And role. strategic new a

You’ve consolidate each I’d in strategic well, of one competitor the Chinese and changes their moves from make ownership. firm to new ownership in long-term curious to a of other does like kind you’re just call that kind splitting consolidate your does those to in chessboard where let’s at PE five sense What to three competitors it it? you changing to continue business of view determined now that and stay bigger as And entity. and be make seems had some at? level, the the or get to can perhaps ECS look years,

Sean Kerins

Sure, I thing. for and that. very all, the changed. the least fact structure has the finance of Well, the for thank or structure that aware of I’m competitors capital at -- our congrats, you some the of appreciate first

private, to of got for what and continue competitors. answer. market focus think go-to-market But respect a public that you In to means them are strategies, for hybrid probably or promising their be it all going for solutions. what is intentionally, multi-cloud a healthy of imagine to But better we we’ve our terms we for can on

open apart. going end the We’re that us markets of keeping regard continue we players industry a stand consolidation for that always the in think to that offer us we think return. overall, will our value-based more the and With we’re sort eyes and to in stay spectrum, complex of to IT

I in those. would no But our the environment, make look it do intention is sense. near made I term, compete to we here the end as largely I’ll more time. although something we’ll And By differently the means, to over of our if continue there, said. stay space so, like not And we in we’re -- obviously, IT sure complex at that think we enterprise,

at go-to-market investments among make others. we’ll in motion you the If look our cloud

Mike Long

I’ll thing the of billion range Mike. billion, We have $X computer business our components and to This add customers. is core that. business overlap our in one of $X.X now between

business So, movement over that to start those. couple we in with designs that talked our of the the the doing not and was together in we’re to now to of are supply we but to sort see consolidation, coming, that really build coming we’ve but ourselves through now the these seen last but years. starting specialized knew manufacturer about, and not the customers consolidation the we’re there or in. big that it trend a We chip that gap was knew also a there, to appliances the that -- design And had only and the OEM contract from computing of seeing

can So, from see that our that does and in together give working us numbers these efficiency playing here. better you that in sandbox, the a synergy are businesses two

it’s splitting anything far. So, anything, of yes, change believe we a have strategy. us We have no don’t or well any believe changing that. desire We we strategy. off, there’s selling so And good served to intentions our

Operator

Tim next question comes with Citi. Yang Your from

Tim Yang

the potential destocking learned there What this to component some And shortages XXXX, benefited Back you risk destocking. and to after protect what that differently were this cycle headwinds you have in doing you But, XXXX shortage? you experience? due are from in XXXX, and that. from in experienced

Sean Kerins

Yes.

the from hopefully that up were best of a Because have help their with was would ordering crash recently, as we that book-to-bill, from they that in current We’ve a and the ending our and this, lead there now being them. a certainly at time asking there big way level is are time, we you they suppliers. being smoother think, flow would that for into orders their that level better handled, is around it. of that not expected coincide keep before. product better asking going to being double end some talk the for But, a flow, panicked guys a as that them in everybody us you on with downturn. at customers have visibility way spent times not shortage the this once. I which haven’t have ending in the with we don’t truth products But than to a will see out lot get it go doubling helps all a of themselves and seen that help just orders past, never of inventories planning typically keeps at And something sort think that the I like the for in on because rough had something. a XX we’re this shortage almost the years before, or it And of they’re

if learned visibility So, going much we’ve we’ll but see to how helps the solve, I it’s believe to.

Tim Yang

Got it. That’s very helpful.

that’s like American your XX% two quite we what quarters. year-over-year. but reflected segment? markets? previous the demand talk down ECS recovery, you’re And in seeing have And that’s not consistent with As a some maybe Can SMB revenue think ECS seems I end think, just on in ECS, I you was about follow-up heard the it

Sean Kerins

sure. Yes,

some still of this benefits And multiple work legs. the trends in has technology our regions. market we pieces if just in that saw generally is initiative, that the of technology for of still you seeing QX, remote I But, and of some will, from all and portfolio. terms some So, think, true benefit we’re our

centers is technology And remarks, all then, you exposure data I right Mike the yet. there good a where those in can’t got of good news little talk And think, reality the sets. now, we’ve and get cloud, a both demand. his I cybersecurity all is, to heard good think opening you inside remain things bit in

with that application And so, that to be environments. tends work existing to on-premise needs done slow

of market we regard think, And time. saw back, again, comes bit in we should depending that when little on over more the of improvement broader I see in a that QX.

Operator

Your next Sheerin Matt question Stifel. with comes from

line is Your open.

Matt Sheerin

on business Yes. versus that much The XX-plus strong as year-on-year. was share very other TI? Thank everyone. component the up base and which gains And And, going? customer Asia you, transition and said, serving specifically hello, not how regarding have and you of been underlying been was you seeing that for percent semiconductors comment you question, a where that cross-selling has How previously? that are you opportunities into may additional from could your Mike, components business

Mike Long

Pac. you new seen new So, much this, get don’t business guys the have opportunity. of overall has Matt? business COVID. Well, in out to you other but come any the really the sales I before, have Right, we an see a were we Asia transition -- transfer they components a nice It that customer, some also that there’s first expected, the thing said of alluded play of know we’ve and with in in increase did to was time even

So, to back out come one sort the this thing. of second Europe they’re of is to cover on. turn starting

it, really is expect has I that We’re And seeing in see we’ll pre-COVID, on hopefully, all And to increase time, to think North to as Asia what are of that fully but continue see that starting I ahead on the a we’re you’re play finally here. America. grow. America hoping back turn North that on and different turning at economies believe for will turns that’s these

with And and parcel We in have region. added goes that lot the the growth. salespeople a of Asia part

if I believe just we’re to can. we’re North that And change in to everything Asia now we with we’re and still faster? in think, Europe operating do the naturally. and We we is anything really this has way And grow in we we Asia. to should America, America. There’s with we’re biggest America the way there, to it, to do should and do time, the has believe hindrance out at where make do You there figure North that’s strategy we operating North do going have, no can focusing Matt, we nothing like

Matt Sheerin

Okay. got to given just North mean, Chris, down for particularly? about margin, now, still year-on-year. that. pretty the Thanks Asia in some the to growing gross be And related and America here. you’ve is should that, gross but have business been your outsized trending thinking fast I mean, margins exposure we I Asia Europe, what improvements

margin? So, we how be gross modeling should down

Chris Stansbury

see to as continue said. we look think mean, improvement come we’ll Mike as and as I EMEA Americas out Yes. I of forward, COVID,

And, worth. you’ll see thing our think, services see in offerings ultimately the think that leverage. can you’ll I is that continued customers And about we bring talked in that and other in obviously help growth have past them GT. operating I we the value-added

in do. So, the of of tough expect fully stronger all of with, XXXX, that going than of we margins those as to over see kind of predicting to year, result exit course things. the terms exited as you’re a XXXX we I But, that

on a leverage operating driving how in near it. about I focused So, that’s level as mix think the we’re the term, high the improves. And

Operator

of next comes Bhattacharya America. from question Ruplu Bank Your with

Ruplu Bhattacharya

I have Chris. for two

you XQ us sequential that -- give The the How services, first is improving one a on much was ECS ago should was in then, to certainly margins. us XXX part understand the ECS But, at help year looking you type was margins? the much next it of was Can Fourth your what XQ. strong, into How quarter, now if sense I How that of business we’re first quarter, And from bps this higher of volumes? typically can ECS steep the of and you X.X%. had mix? expect decline mix software of quarter higher that sequentially at and we to a the much is in that FX? decline improvement? quarter, look of is, that

Chris Stansbury

the mentioned at really, you So, if Ruplu, key look Sean driver as was earlier. mix, QX,

to are portfolio, So, as and we shift higher our see those software more services margin.

talked right? sales growth, we but accretive. well obviously that to the place, a And got As trend and past expansion margin net lot as that we takes that year-over-year, accounting margin is look we’ve impacts to expect we continue. as of because the it to that QX, about in gross said, We’ve

trends mix are on as mix that. -- the business a big And focus our So, hybrid to product trends Sean are mentioned And that’s earlier, reason continue. multi-cloud going behind that in environments and positive. very

Ruplu Bhattacharya

into then, just the dates And a bit comments deeper closing for wanted my it. to that got Okay, question, maybe quarter second had. you little I delve

we to the if quarter? more we And should a fourth about? is bit one talking one is what are week less the impact the because be kind are there’s in quarter stronger net and fourth the quarter in and of So, the so, quarter takeaway -- going first first be dollar weaker, that little

Chris Stansbury

Yes.

beneficial I quarter-end think calendar the way calendar it’s the that to -- we so, look EPS business look in when of much dependent. the the at change you year-over-year, impacts is because at of so

picked in quarter. up we QX, year last big So, calendar And quarter what happened a end. was is QX really

relatively QX. see take offset and you’re the year-on-year, place shift QX, will stronger in QX will think I where So, to a be going QX

Operator

Your from Fargo. with next comes Quatrochi Joe Wells question

Joe Quatrochi

more catch passes it’s time? think ASIC On component you time the do do to seems time more that how this approach it the from your versus side ability you And, do I’m you curious, about think Mike, this up last was it approach, supply any around, MLCCs. differently? that about that how and shortages, like just about side on

Mike Long

though goes start but chain there’s still you that, the say It things chain, was seeing COVID, some looks before Well, good uptick. kind was that supply you’re basically, Europe can that’s not looking XX%, shortages said, It’s as when after of shortfalls as a that I up, there. there. So, largely coming up, if some has already. given put fourth quarter, to been a quarter on, of sales look on number the at just typically it more for the out increased. a supply out a of seeing are business a right? the the you everybody in It increasing if the And surprise want given we

of And, need the So, How there the is much can during quarter. the same. North we’re really what we we the give hoping trick America visibility manufactures does visibility.

of be X in book-to-bill said, glob the certain and stuff amount they amount manufacturer, everything February, past, need into we’d This went would is right our time I’ve we a and did in in January, amount big We a this for active measured. need now. March. as So, see we the in certain

can quarter. that. We’re you and about We after know April, May to then talk getting June, we next and the

but for didn’t see further. go that book-to-bill well, we that That’s because that QX. goes has asked QX industry the this and you portion of an a starts where would publish into without into one big is responded there explanation we’ve reasons quarter, the So, our a book-to-bill, them big of out to place actually their to orders

hand be digging I So, my think it for everybody make make a I view while, to is, mouth going it but little things largely yes, through to they are happen, is to and could will. the that night. And, believe

Joe Quatrochi

then, year? partnership if about how curious That’s revenue our what you perspective talk from then, you business, I was recently the or last could opportunity. side, extension that a can an us your of is you And with helpful. maybe announced And big maybe on that AWS. ECS remind cloud was

Sean Kerins

Thanks. Sure.

of So, recurring what business we piece I cloud but can you are is, it our at and to and able substantially. to with be I’ll actual that the work the And I think, lining specific I invest continue overall up Chris, still revenue growing then tell time, it right And we’ll nicely. in get we’re trend. market and more about numbers, think we to Steve

to supplier continue we add it. As to for portfolio, solutions cloud the

the AWS. with the supplier You talk specifically of we called But, size any relationship. partnership about out wouldn’t

the market the value world, go see be Mike’s now cloud earlier portfolio. the that and IoT we with and channel. associated to is IT five particular the we largest our or working with hyperscalers in the going point, space really to help meets sort think, our pleased over That of are way they We in full the relationship OT, the to in us potential to time, given

Operator

Stein And William with question your last from Truist Securities. comes

William Stein

get more that to suppliers the to that ask and back couple improve of was the of whole or of normal refill does level sort to through delivery expected, Arrow see the like given That just your was do something at decrease and year inventory. stats What such. being a many from in certainly perspective for the quarters, protracted longer? about see the in shortages customers? that even levels this comments the maybe I’d about Is as that to you from potential something you think could lower of

Mike Long

I’m not level. sure lower it’s protracted

we’re $XX talking think, about, I $XX million. what, million,

Chris Stansbury

flat. It’s relatively

Mike Long

It’s basically flat.

flat inventory that seeing saw inventories, just finished come we you a the level big and of out number We’re with.

I said, you’re I seeing to to think mouth. be As more going hand

able can you up per of month just it’s And, of an inventory a getting I to shipments be We at this that that be for deliver don’t that. forecast in that just We the to has better expect going for now you than the is gave as be number. a sort that to to, do -- manufacturers. believe brought the first quarter fourth that than diligence for said, is don’t more That’s quarter guess, And point. obstacle we probably largely believe components. level problem. on be sort to I I quarters few we We’re from us that that

So, your hopefully, that answers question.

Operator

closing to Okay. turn O’Brien I’d the now call over like back for Steve to remarks.

Steve O’Brien

for us joining everybody, today. Thanks,

reach a our interest to have day. me. you about or have your And earnings in free to If Arrow nice any questions out materials, the call Electronics. for feel Thanks

Operator

call. concludes This conference today’s

disconnect. may now You

Arrow Electronics (ARW) 4 Feb 212020 Q4 Earnings call transcript