ARW - Earnings call transcript Q1 2021 | Arrow Electronics, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Arrow Electronics First Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Steve O’Brien, Vice President of Investor Relations. Please go ahead.

Steve O’Brien

Thanks, Denise. Good day, and welcome to Arrow Electronics first quarter 2021 earnings conference call.

Financial are Kerins, Chairman, Chris Chief Vice and today Executive and Stansbury, call President Sean Officer; Operating Chief the Mike President Long, Chief Senior On Officer. Officer; and

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

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

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

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

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

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

Mike Long

Thanks, Steve. of Thanks us for to today. joining all you

prove business. Let had have been months. our by are the stability and demand me hallmarks strong of opportunity the saying begin the and both last XX strength and this to weak over under We’ve conditions

demand deliver that market what’s I our supply pandemic. electronic that first quarter, outstripping report get statements. across and chain the well their business to did utmost pleased the to before components and And respond such in optimistic Europe, up that, extend We consumer, enabled as we have we manage to to global return industries first Clearly, correction. as across this Americas sales as the customers industries. our of said both During the saw need. results growth. current regions those flexibility components year-over-year. to Asia seen quarter, customers from it P&L our This so dedicated their in all model capitalized team could were on help industrial. demand post-pandemic strong key were of I the also production demand we quarter they Last transportation, ramping the I’m is communications, quarter the strong regions that supply could us many and seeing can did electronics flexible said levels to challenge with that rebound components business the to XX%

in sales components is company’s global billion, reached record all-time history. an result, a As the which $X.X

pricing our favorable And Turning from greater year-over-year. the XX% to operating sales all improvement Operating enterprise with expectations. computing increased by delivered expect investors expense and due was higher importantly, significant This our operational global line leverage we that income volumes solutions. than in we from more regions. have. Sales were from components leverage to to in

optimistic cycles our nearly from I business that happen strong experienced Stepping at increasing amount grow back, could all to led landing income our expect as We’ve toward semi key the this of operating vibrant. that revenue of our a Europe mix is verticals. greater diversification. further platform shifts industry smoother been to years We ended a when and The reasons Americas have for component healthy content remains badly, for sales. all everything We time. semiconductor a also the us higher-value proportion and as a to and recover our demand past regions saying regions why tailwind tracked us has the look and across electronic for I’m continue

lastly, causing like driving orders There the complementary is all don’t one managing no see And and than there’s and that’s customers’ cooperation past, expectations. in proactively we, Our Capacity surge with visibility is been currently and better we just our product stockpile. suppliers, PCs additions at have in no phones supply demand shortages fabs so ever. are limited, products longer to coming.

income, of growth with billings in sales. computing across Turning growth which for in solutions, is were deliver expectations that the again for quarter, growth to our enterprise first Operating measure again in expect drove the the experienced our and the Sales infrastructure demand increased we computing pleased portfolio, performance at rate operating solutions. and quarter. in truest second server enterprise to computing software once income line we’re year-over-year and year-over-year. a We the solid

of priorities continue While are IT that complex Europe. signs being Electronics spending further closing, seeing many company’s has work computing that even aligned transformational in in we see shifting performance, value-added are we regions, related more news the decades focus. solutions to good are change toward Europe, our to The better and our the tend business. restrictions recently improvements strong potential and across In half pleased with the and variable XXXX. Rules enterprise to pleased for over in is both to we’re second on-site in overcome with be report of especially Arrow I’m that challenges, projects that

is experiencing tremendous problem. demand, which a We’re first-class currently

continues Our customers enhanced and solutions deliver for drive so can to our value innovate, we our shareholders. for team possible the best

We’re call more look momentum capitalizing provide positive now first Chris quarter our I’ll even our over of results that, improve and optimistic second quarter. expectations the details further. to about hand to tailwinds the future, strong to for and the and forward build With our to on the performance our

Chris Stansbury

Mike. Thanks,

weaker a expectations certain year-over-year our A $X.XX our meant as items exchange on discrete anticipated. was was foreign average rate rate First basis. effective for to we the for to due of growth had tax we The regional well euro to increased non-GAAP made the a quarter XX% €X euro-dollar compared rate $X.XX below exchange mix. as The smaller than to forecasting. quarter slightly timing sales of used profit that contribution

to year to end be of effective of rate the range full now XX%. at we expect the For long-term our XXXX, tax low our XX%

changes lower to will there corporate this maintain ability in our tax whether U.S. effective on depend XXXX, the rate Beyond law are

and sheet balance the to flow. cash Turning

operating quarter flow normally quarter and was is our negative. lowest often cash First

anticipated. quarter cash to First was than million demand we stronger $X burn approximately due substantially

XX cycle performance XX days approximately improved the year. significantly last This improvement days of cash to demand. in capital Our cash working face flow of aided compared

first five notes. quarter, off remaining paid the maturing we of X/X During million the $XXX

position in Our of the is best history company liquidity to our the and continues improve.

confident over U.S. is shareholders During extended our debt-to-EBITDA program by Leverage, the expanded share through The as lowest billion quarter, are We of five to our we of excess measured are the level $XX is asset financial a repurchases repurchase remaining years. that We and by results. approximately million mind our XXXX. to plan. capital first use improving. as high-level during keep returned in $XXX return capital, our measured I’ve on call during million. securitization invested existing million best $XXX by approximately return that the both is quarter $X.XX under the remain information to Please the which in authorization significantly and share of summary it this working cash plan on shared

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

turning second guidance be all-time to would sales guidance. Now and quarter records. EPS Midpoint

and first quarter. that profits implies the would slightly above forecast sales second be Our quarter

quarter positive has Our the our quarter. supply above the second to close and principally the expectations, strength, lastly, and the later bottoms-up first usual which due of forecast first constraints quarter level was not longer shown to seasonality

leverage income strong from year-over-year continued profit continued guidance solutions enterprise on for global growth global basis. computing Our components operating and a reflects

October information we unlike fourth quarter quarter the XX, XXXX, last that, on This shorter in as year fourth over turn fourth Finally, as fiscal quarters. includes dates And always. With the note for XX. X, ends than affected. I’ll the for second makes the please CFO for In not the on quarters calendar starts call discussed December quarter, commentary We believe the third year-over-year when on closing are started year to operator XXXX on it and Q&A. our fiscal XXXX. our prior comparisons September

Operator

[Operator question from comes William Stein Instructions] Securities. Your Truist first from

Your line open. is

William Stein

Great. Congrats outlook. question. and Thanks good for taking quarter on the my

inventories. First, maybe about

versus Given further where inventory, supply it replenishing. channel think, you pretty have happens tight I a delivering. out open Semi in is basis. of future? line direct terms into in QX? think suppliers that the your if have they’re you wonder sight inventory shrank environment, about been of Or on I the prioritizing Do day’s

Mike Long

Yes. Thanks, Will.

on. we improve it the see would that as goes think year I

I because of second little tempered seeing quarter our supply. – with out think forecast a you’re is we just came

we’re second quarter clear that demand. the demand. seeing made Our orders tempered is times yes, we’re we’re is lead The customers levels. time, on coincide they’re the lead inventory fair still better visibility with because that that point But bills industries, very I live us are of not of because sure giving the are make going. Still, that forecast within meaning a amount seeing the want across I books still strong. the of to

any is we in We’re think to that And this going come in out quarter very in. clear time, right would at would upside go the door. where come second the point

William Stein

XX if characterization really And comment comparison that experienced any I human ordering, that condition. usually this you most just prior if case wonder are to I Mike, we you. demand very the Maybe this this you sure cycles over things have pretty that are could nature, a Thank we’ve in to you know both last feels every is and just right? those supply know we lines fight view had your terms this We gracefully. it, we’re some case of cycles a don’t one there there’s every landing. the interesting customers So most. tight I follow-up, would know soft one be cycle, the and conditions about these like maybe don’t very in try be of can. can provide Unlike several or helpful. end along if trying but that double can in conditions. years. demand hopeful supply and could to XX, do We identify

Mike Long

Well.

off, my [indiscernible]. age for First thanks acknowledging

up In what’s hit, the the off of been I is there’s able because were they happened cycles have think generated their production and supply/demand several gear the past, Secondly, own then have to manufacturers of the fabs. things.

semiconductors difference you do So now. there is fabs today. what right More today own a their and than have see

years the easy in really to years increasing as as just XX XX say, production start XX, So ago. isn’t ability ago, was, come it and

products. all one. It sure the those a So decided they are I’m to toward ship that yes, is, not build time Number inventory two they manufacturers automotive, to quarter. there’s but of wasn’t first that’s still had reprioritizing this like lead the in number

in And shelf, had to it They to this. of it’s they’re second quarter. going some the and now so ship on the build

on So already you the how are been work and really manufactured. how consider prioritization things if going has fabs

see bit, So back a a bounce seeing little we’re and that you’ll there.

get And period to you to at going is a we’re going But stuffing product We’re point time guide if up likely getting more into we’re where a why the least all this which backlog get to as very it this that ability product, indication at not not that is. consider is of fabs, and this getting short is shift our in an that. of less for of everybody year. result indications not catch current the we’re

So things like there’s that I now, I that you for into I teeth orders. this would tell double more improving year. to from say also customers, anything lot don’t and see go combat a will in and those But ordering

factories But controlled what’s their ordering. to helping little ordering, in major had weeks there even a right dealing the different manufacture out change somebody going And that you when what also record in the is than seen having that’s take factory. with these a is constrained, really inventories that we better I’m double because take trying producing is That’s ordering. you’re there’s to the now. to up they And if So everything in I’m being companies past a their now. manufactured that’s to sure aren’t the profit. the customers ability take customer is going their earnings, happening are. what also lie, there XX that’s we’re with not seeing to right from

issue economic you? just chain right Did shortened thing, I not a this So that supply is think help now. an

William Stein

Yes. Appreciate Thanks I Mike. color, it. for the

Operator

with Quatrochi Wells next question Your Fargo. Jo from comes

line open. is Your

Jo Quatrochi

taking cycle this this structural something was little question. always whether have talking your kind like they is and curious forward. for. up Mike, on industry. build more to there’s inventory you’ve my a Yes. great coming, is you’re a Or narrative and was curious, your insight there going in on with had the memory that’s inventory that, and definitely out still a it’s industry about thoughts the Thanks practices that a holding customers and I maybe short real something there’s Maybe going get of in around an bit this. I planning change kicked is for on maybe to into maybe always

Mike Long

they a the and in and the you, – orders general, Last shut I’ll that manufacturers, comment ones the take their They’re automotive shutting And closing Well, were factories. said February, everybody as of were right? anything, supplies. shut couldn’t here. didn’t just down they they let’s their their get called tell because that down because COVID. down factories They their want didn’t they factories

they now buffer the big rest able of a for manufacturing. of good slave There you to just big, but of time good product. chain. protection it corporate inventory That’s needs want And up. of takes a a supply to of that So off, function to a good use sudden, type of to back you’re all there’s the sudden, distribution. a takes risk in up, be no then, time sort for That’s start the all then, the to into a them back be and That’s when market of function of to get start a build dollars.

times lead extending, So you’re now stuck.

automotive that. now. actually us the attempting What through now work are we’re by coming that right time is companies and being seeing more to So lead guys to pressed

services world goes, as to in is benefit that matter had of little longer-term So the to companies a our going a biggest in they’ve to the want be this go, we past. now as more Arrow some than starting the flexibility because far are

Jo Quatrochi

talk that passed And about some puts curious little of of margin. just that’s That’s what about assume gross to really I you think takes of there? out-quarter kind guide, then with pricing the Can most helpful. on should was maybe on just the of we and benefit I through Arrow?

Mike Long

No, I wouldn’t say that.

to America little see pick you’re up think Europe a North going and I more.

We’re already demand to the through that. seeing starting come

it, margin. these risk, is So services for pricing. gross companies. of to inventory, can to But of see you’re able And pass-through going you some, in requiring to yes, added I the production continue new like the there sure make the carrying with call our they’re balance most improvement would being some deals,

not So say this right value-priced – in a market a would is now. what commodity-priced we’re There’s market. a I is

our margin here. to up to So over the year go we fully expect continue gross

Jo Quatrochi

helpful. Super Thank you.

Operator

with next Loop question Williams Your comes from Capital. David

Your line open. is

David Williams

Hi. for question. Thanks my the on quarter. taking Congrats

Just the orders maybe part trended and you through then wanted that second the talk little velocity maybe of could to the you saw a through that’s first see of if bit quarter about how quarter. the

Mike Long

result the the grow because first Manufacturers go. their that law inventory economics. needed more but Well, was velocity trading the because of surprise, was you first everybody the it truly the quarter, you not product. the of saw business will in ability like to and it the shipping quarter, that make tell were to a I

we hit that customers. could So our working facilities over sure get for were to that our time make out product the any in dock

also orders saw But now are still booking, we’re We’re better come in prepared I I a we quarter. state. the It’s of improvement will steady for second mean March that more elevated. orders you April. tell at in seeing that in the the

May, the to in more right But in seeing would accelerate that added in the has stock accelerate, and And continued that one reasons kind North is I Europe. and say they’ve industries. now. around of continued large far, more America spot booking now accelerated so we’re to And of orders Asia path they’ve

little, America in a slowing in is North growth but the Europe and picking So up. Asia the growth

economic first did in your that broad-based more now we seeing we’re questions. So Hopefully, recovery answers quarter. the than

David Williams

quick. Certainly very it. That’s And real last Yes. appreciate one one then helpful.

been appropriate the of XX here? place do do of we maybe you forward you kind days be your your as levels Or a terms inventory about inventory we Is to is think good in on what to past? as how where in an begin ideal? level think Just you’ve normalize at here levels, move

Mike Long

and of I think time lead from is because How turns about you’ll historically over times visibility. better the possibility more? A can that lot Seriously, what more. were inventory see they here what improve

visibility comes at further times extended, lead going we’re are to as orders as customer, So the more get the out.

our to or be they with in basically, manufacturers than, time a work direct way relationship the with a we’ll more distant for suppliers. was customers So able it on if could the

the at Asia been turns say, I going the because to chain now, over this operate be I willing that a where are It don’t you operate the in So their inventories to what is going the even is to years are better all market little has and But down. remember are now think risk factory, that would turns operating they could entire coming supply at mean are service I up to XX guess, they that service, inventory is correction customers Asia the are and that terms. a to the era provided. want where going pay XX in sort and depends to less need they I’m to for. more customers going and need little of the need going prices given

this change the industry. actually for a So is structural

we’re hadn’t have with going service. or their keep before. it we to have and dealt like customers of going reup dealing would that for pay think I what to with I to think customers protected inventory inventory be And that forgot are sort

good So think the it’s a for I thing industry.

David Williams

much. so you Thank Great,

Operator

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

is line Your open.

Ruplu Bhattacharya

my questions. taking for Thanks Hi.

component wanted been talking ask Most one, and about supply the companies shortages you component seeing. I challenges For far, from the about so into expect end to the current we’ve extending in says as demand with was But the in coming press and XXXX. seeing challenges looking that I the the transitory quarters. sentence release, balance a into maybe supply that more first heard shortages you’re these which they’ve of even at year, you’re

than different? wanted to ask you near Are term? what just a you competitors? that others. So you seeing I really supply think your mean this to seeing hearing do I on just like better thoughts as you is the are we’re from anything So

Mike Long

was No, quarters. I think that coming

I So of longer. this that see need fast they little which would the next year. anything extend as things than because dramatically cycle inability improving people there on what said was don’t before increase I improving, a production. to which for I a as might that, others net would end fabs means build the year believe we’re longer of as suggest to the before, into

throughput fabs So to capacity think does much as a for something never going might three of some slow, year things running can. can to year time. out. had the as guys, on that. or fit get is of lot other been really of look transitory is to any is like I out restrictions them and the like think a trying in everybody they And It next the take production it a wafers to with more see really that’s teller don’t next they to faster half of And why still But they you than going going them. in two. right first millimeter than have now and sort they just I like be you’re fortunate turnover going fab but I’ve or squeak we’re be

we’re I easy. would put that So out a year in here looking

Ruplu Bhattacharya

operating for Mike. clarification maybe, the to you about the I’d thanks like And margins. Okay, Chris, ask on that,

you level? points June quarter? Thank less seeing basis a And Asia back X% so And a more can much. year? would can are somewhat How you you’re So strong more that or in do any margin line get also you sequentially. bit with that components expectations. saw on pullback I for when And could XX to if talk guess you color progression remain in So in we see the strong? be guiding or given the flat – But revenues segment. you appreciated. in the the ECS margins. little less about a growth over operating That the see was margins

Chris Stansbury

Yes.

expecting So look relatively the we’re at and if margins quarter-on-quarter I you components, think flattish.

a fact going you’re sales, relatively components. you’re we’re year-over-year, to sequentially movement flat the great leverage. margin lot But operating that in sequentially see to continue reporting not to So see going of given

see to Mike’s moves time think West As continue earlier, I strengthen. on, we’ll the to point

to leg in And margin but obviously forward, So I I kind to that’s margin the to we and, continue Again, to we’ll there. as selling and the we that increases. broader of going that’s say the obviously, the is side, small some expansion at would more ECS as ability our get of be see solutions, be come. move on environment dependent slower next think really prem our supply end back on complex on

predict As right we that. QX the and to it were when, you we again, show it, and the to and able relates in But QX we feel about X% amount is X% the that’s on and, I’m obviously, tell in stay think goal. would going of I do to driving. not I improvement We’ll good really year-over-year to continue returns the focused things. that

Ruplu Bhattacharya

for Okay. details. appreciate Thank Thank it. you you. all the I

Operator

next question with comes Stifel. Sheerin from Matt Your

Your line open. is

Matt Sheerin

afternoon. Good you’ve looks and snapback regarding A Hello. It certainly we’re the not side. component there seen seeing just on like your the question guidance. that ECS gradual improvements

slow We’re give customers in year? there’s some and as hearing through more there you’re just in the terms our of as trends color get a from that vendors Could of you booking of outlook as what reseller on the on-prem. us we improvement seeing gradual terms well

Mike Long

Matt, to the own Coming little and business than I’ll thought. move to people to give think, as slower first work. has Yes. seeing swing back then I Sean. work the at it of come we’re back I’ll a seeing us been, I think our take it, we’re most

as year quarter right to at going that than we say, are now at-home of know We’re now investing here projects a home less that do the believe seeing last first to people going and fourth think when sent come here get I have here, quarter. more in and XX,XXX products got work. we still people typically great we’re back were, type the we I to that’s third fourth like them in up be gradual the But you into going as quarter speed. do around to I business. we’re

don’t know. to Sean, want going it’s I that Just be add? do pent-up demand, to extent you what to

Sean Kerins

quarter, Mike trends enjoyed the did would just Matt, little At and if at our but bit. some you is it. we did traditional we we evidence than starting work- year. some from I a of I first center add, at learn-from-home rate benefit slower up think last the look time, data the still same environment that to see Yes, nailed a perk

Intel grew and Our But server good environments hardware That’s proprietary the that and subdued. am year-on-year, application people data optimistic somewhat certainly, storage. I up server, the well. access both us business as a traditional an business year, operating offer sign. center, still the to say are things get traditional for open I growth would more that you’re of as piece leverage does opportunity going And better to that our see and normalize. throughout

Matt Sheerin

their on new Okay. largest customers business to not of are question the Great. the attracting where transition think just wondering terms those opportunities share just I impact TI. some a then seeing I particularly And not to to key, supplier the projects your of of you is materials with and on I’m positive gains market or adding continue And to gain this seeing or first in whether you because components full saw, quarter relationship. share bill analog that relative whether you’re you’re had since that had in.

Mike Long

Yes.

Matt. design you for know, just win do not TI, bad because, it’s Our – wins as don’t relationship design we

They their manage and function our service part That’s all company. say widely So known. that do relationship. isn’t of that we’ll about provide. really we been That’s that then

XX%, were for we’re is X%, of year-over-year designs bode saw of good. corporation which designs in mix terms We overall the growth March in quarter. up products well the in That out in shipping. months that of Our does

do we So those new designs. see

We’re of a the actually at rate at seeing saw we more than COVID. the had design beginnings activity dramatic increase

we’re what’s know what exceeding all a see like industry the I it. I out time. right for So you now, in looking don’t that companies think mean earnings even And are are healthy but there. I can manufacturers some guys is pullback, at most all, looking the

of in there’s consumers are on, to are a I predict definitely So looks is. what lot to people type go buy back there’s I what a products. they do again. products shift going But work going something here. buying as think and And like But it that their can’t

Matt Sheerin

Yes.

Fair Okay. Mike. so much, enough. Thank you

Operator

Fox comes with from Steven Advisors. next Your Fox question

Your line is open.

Steven Fox

Thanks. if Good afternoon. I Two could. questions,

Mike, First, of services couple times. touched on you a

customers maybe a Just or your prioritize those this mix drives way environment, and maybe higher. there’s margin where I anything and there mix that are sort design the Is that curious where cycles? in a your previous services the engagements control companies destiny if had more And of then to with own helps and – follow-up. than

Mike Long

Yes. by production. order into a on do current with of design products wins, they get they fit then registration And in there’s Well, nature as of to start schedule and lead design, – times to them, you design plenty you time come. the them

right designed So not being is go that’s the anything now to probably at best. until going into production fourth quarter,

be fine. to So that seems

there. database our seeing semiconductor business, we’re uptick We’re an seeing – in

to semiconductor a every digital to own general, designs lot ancillary expect business In that that more that continue to great. grow. is are and customers service business on don’t in growth half much business anything growth I doing ancillary online was that. but in think growing we quarter, a here the work almost that as using seeing We’re their high-mode not maybe or as that rate, have have that’s The have this under we we is

a So good it’s really story.

Steven Fox

But produce Thanks. on And mind. high-growth the just not any quarters was of further Chris, continuing help ago, cash to high-growth I’m sure this like you free year flows free talked cash environment a flows play you helpful. for That’s had the how in if out even in might Great. about environment. this couple environment? then, a in

Chris Stansbury

strong in predicted of be certainly performance kind I Typically, we’d this lot I XX% Steve, QX would say, have our in Yes, growth, negative. of wouldn’t right. more indicator you’re that. is a QX. a

the will I right is demand, that up to Mike supply would Mike’s reality is like inventory the any the take again, us inventory. comment near back said, comes start point, think to as And to at see term, will in you gap and out. we some In going earlier, narrow more bit. inventory a

opportunity the that go inventory near term flow. as to But the point, magnitude. to at of look believe up. the I through us So might different that do But there’s reasons generating past this, in for we earlier, that, some navigate of I think, terms lots will its gives in has think it cash be than comments

now, in balance to we the and comes. great The to sheet ammo that right feel it us So day need good. able when is gives we react be shape,

Steven Fox

helpful. you. That’s Thank really Great.

Operator

Your comes with Suva next Jim question Citigroup Investments. from

is line Your open.

Jim Suva

team. so. on great which to business. rightfully of Thank the the full If just A much, and on components, question your you you was side of focused ECS a I execution ask commentary and very could lot the

coming As to customers to ordering there some at what little society of that, this and gets a changes You office at of your future or the mostly indications, and some that a behavior. point? the in mentioned are or variation putting the in there’s of a early point growth bit back stabilization

you’re the Just curious about most RECs things seeing that the are the on what side. typical you. for Thank ECS

Sean Kerins

I little saw Thank a you, about more in QX. can bit what we Jim. talk

what look solutions be companies – that portfolio. have are past this harden things to to the year. their about very new that XX remain the to expect is we that us continued healthy at to do over the up environments our continue That’s for pipelines of and been months, to for of working other One we when set you strong security-related having think our balance

accelerating is and before. even that that’s rates cloud thing it really year at business did other year the even faster is than last The our encouraging

faster yes. subset and business we look nicely, our an at And that’s both that derive of piece at it, of digital platform is even when growing that through back growing you recurring beyond. step the clip, revenue from So and that, our

feel what margins at to do in out. and development our as pointing more cloud means have work We to build good add the we our So efforts still our that card for contribution base. to future. well will software it customer we’re line expand our as But about that business

come up, given on-premise like have said, earlier, the the and the Jim, traditional And as So back and piece when there’s center strong I all fully well. until also the to again, not broader that we in a market opens pace hardware play I more enough as feel data market. software think cloud rate of said signals, see more positive good in as environment well. more It of that you’ll we start that’s adoption. and may But we

Mike Long

Mike. is this Jim,

Just to to that. add

things sort this the One huge was we of proprietary a increase globally quarter of in see did server sales.

you’ve standard that back seen things industry same which coming that – think, path. increase, typically, I proprietary an under the So further come of indication But in-house. servers would shows things of be in, server are continuing

for increase the data that a and go. the I for seeing huge percentage balance expect are to We of continue the center quarter, And that year. activity probably was

Jim Suva

thank And Great. you all members. team you to and and congratulations your

Mike Long

Thanks.

Operator

with question next from James. Tindle Your comes Raymond Adam

is open. line Your

Adam Tindle

And about because pricing to gross margin little all talked for there’s in you regions. I across Mike, company total see favorable afternoon. is mix Good reasons still Thanks. it’s but know hard bit a that. some decline, regional

how up much all So in on maybe Is margin to on regions? gross the favorable And improvement? contributing regional pricing margin you could is that the touch if impact basis. like-for-like a

Mike Long

Yes. seen region. Gross won’t obvious show every the in I up amount improvement. but reasons, margins we’ve are for go every region exact into

at when company. saw just So like some Europe, those grow overall much we’re If rates, in every going growth and in what’s take North should and your the happen to Europe what to total region, every to country America I to not up And just was those but go give model grew really into for mix, let’s XX%; starting just the of albeit you back of America, of North how we This mean, only every that sort go past. the in of the And is region. idea us. sort XX%. board Asia you something see strengthening reiterate up the the within continue first across

Adam Tindle

And How you play to maybe do your pricing and longer being versus of more this transitory? you the allows scale out think this keep more time? favorable that time for size around does over

Mike Long

it. coming customers is are protection. want suspicions what And next think year going customers to as this seeing more the But more will Oh, more of that be cost. protection that is with to that part will I us. we’re going And increase are that into comes continue? continue and That a the my in

industry, right chain solve way pricing us for And problems of is good we’re general. count supply good them complex new commodity and the activity customer And distribution to up. as for I now. going that’s, said, They’re coming us Our helping for aren’t to coming in for people problems, those.

So probably that that’s a chain say supply fastest-growing in-house supply our now. what services. business I we to we’re right with chain question earlier neglected the services. I guess the our seeing is business And know I was about have just there

Adam Tindle

for in lowest at just the And how the Chris me. maybe level years. leverage Okay. covered five one over last is

the accretive. disagree. I that decided share it’s You to best that could even at I there’s not now. EBITDA you I why options, M&A in be liquidity just right over is But something significantly factoring a and not could of decided have, going But get on to because lower big know you problem stretching so a evaluated those sizable press wanted high-class world ECS wanted ask, assuming to repurchase multiples, synergies, suggesting on, maybe you I’m $X without do to target there. potential just against billion in

Mike Long

stopping said you right we Well, do it all that. can There’s problem to of first. anything do, now. beauty at sheet. right of we It’s I’ll a share that at to nothing things. and whatever And evaluating a we to do high-class our leave very room want There’s But this do repurchases that’s we’re the our that’s in having balance lot of kinds want moment. it

Adam Tindle

Fair enough. Thanks.

Operator

comes last Nikolay from with question Your Longbow Todorov Research.

Your line open. is

Nikolay Todorov

was out, components? bit – on how going And the only surprised it higher you is pricing a it’s about why quarter from little in Yes. benefited widespread Thanks the as how last and your I can if believe increase fall-through prices. March as in. bit partially the GC quarter, I mentioned component is wide it’s spreading you the think improving not little I’m in line for a overstated. that squeezing Because talk Mike, me operating

Mike Long

it? high. growth in was was How know much earnings. total pretty it don’t I It was XX% of the

it yes, big. – it So pretty was was

Chris Stansbury

basis margin up yes, our mean, and operating year-over-year. was I XX points X.X%

And answered ago, or two number. Asian that’s significant question so in Mike that a mix with

that, impact as that the back I the comes seeing to to you’ll see continue overall. think, life, you’re so improve. And And West

Mike Long

I little think a has what Chris you’re been – modest.

where at our with had we Asia You’re But XX% XX% And the Asia X.X%. were records five been. than of five records being or The our total. the less hovering of XX% space. in are same total, you’re and now is

increases at be So costing steady. be to doing And are And costs to manufacturers what They’re seem part as are are can would the that say, not just price into, start evaluating as happen, are costs of I to what’s it right everybody their coming now you the to almost are learn once. to produce, getting I think into them saying on. through that that isn’t products the what industry The in anybody pricing going this. going inflation about more going they anything. those as absorb passed such they’re

to expect all I continue So the price increases year.

Nikolay Todorov

asking flattish you misstated No. why you expect the was said quarter asking Maybe is on my I’m I fall-through more which margins. that... second regarding not question. margin, operating I

Mike Long

Yes.

If you...

Nikolay Todorov

from only partial benefited price what quarter thinking. March the I’m increases. That’s So

Mike Long

think piece we how and mean, second showed we an is think of is to guideline flattish because quarter EPS, which we’re the to which going business; see demand there market. the increase. going we’ve I of And it too, is the you and view Europe why as North of of the – if product out put – that a the forecasted I not again, that’s much You’re based picking on the up get, sort America more

don’t supply Does demand you purely It’s answer with issue the you? not on ship help this. want isn’t was second It So product a confuse what that to if quarter constrained. the QX. I That’s give could we a issue. for

Nikolay Todorov

Yes, It does. it does.

America a then question And components. Okay. on

is an COVID it’s you it this there is in Europe at look think better and situation year relative America comparisons and to COVID, in relative up can to about now. Europe anything bit Europe? recovering, versus it’s us indication coming what to while nice compared right? June give an right Europe And little Because relative from if it’s I bit versus having a little But holding is a growth, I March guess a see. quarter. As I to easier last lagging growth

Mike Long

U.S. is about know. don’t tell pretty get last in I tariffs mean to think so. blatant good I were I don’t look produce. at for and The that. I U.S.? mean the me. policies, you I manufacturing in was you

longer. about think year ago I a even or all It’s manufacturing policy.

you make to frigging here. convenient them for make manufacture, difficult. want it You manufacture Don’t it to people

companies day. a to moving don’t nobody listen to. production here? I I How on you but every So come go can need these soapbox, is

answer. that know already You

it leave I’ll So alone.

Nikolay Todorov

Okay. question. Got it. Last

about impact know I Just the components that shortages on component any side. talked ECS business? you on the on

Mike Long

some the the other guess Yes. Well, expect I I’m base. hearing do going product already that to on talking calls you’re at from your are of that about manufacturers lower shortages. end more

I pay expect going something huge forward. think a attention now the us in going centers, to I problem on fact that for there’s to don’t that’s coming it’s to. be to But be going on-prem some nonetheless, design data

Nikolay Todorov

Okay. Got it. Thank you.

Operator

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

Steve O’Brien

for in Thanks, for And Electronics. Arrow joining Have us you nice of today. Denise. thanks day. all Thanks interest to a your

Operator

This concludes today’s conference call.

You disconnect. may now

Arrow Electronics (ARW) 9 May 212021 Q1 Earnings call transcript